Q2 2024 Teladoc Health Inc Earnings Call

Hello all and welcome to Teladoc House second quarter 2024 earnings call. My name is Lydia and I'll be your operator today.

Michael Menchak: After the prepared remarks, there'll be an opportunity to ask questions. If you'd like to ask a question during the Q&A, you can do so by pressing star followed by one on your telephone keypad. I'll now hand you over to Michael Menchak, Head of Investor Relations at Teladoc House, to begin. Please go ahead.

Unknown Executive: Thank you and good afternoon. Today, after the market closed, we issued a press release announcing our second quarter 2024 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 Chuck DeVita, Chief Executive Officer, and Mala Murthy, Chief Financial Officer.

Michael Menchak: Thank you and good afternoon. Today, after the market closed, we issued a press release announcing our second quarter 2024 financial results. This press release and the accompanying slide presentation are available in the Investor Relations section of the TeladocHealth.com website.

Speaker Change: On this call to discuss the results are Chuck DeVita, Chief Executive Officer, and Mala Murthy, Chief Financial Officer.

Unknown Executive: During this call, we will also discuss our 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.

Speaker Change: During this call, we will also discuss our outlook, and our prepared remarks will be followed by a question and answer session.

Speaker Change: Please note that we will be discussing certain non-GAAP financial measures that we believe are important in evaluating Teladoc Health's performance.

Speaker Change: 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.

Unknown Executive: 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 to risks, uncertainties, and other factors that could cause the actual results of Teladoc Health to differ materially from those expressed or implied on this call. For additional information, please refer to our cautionary statement in our press release and our filings with the SEC, all of which are available on our website. I would now like to turn the call over to Chuck.

Speaker Change: 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.

Speaker Change: 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 in our press release and our filings with the SEC, all of which are available on our website.

Unknown Executive: Thanks, Mike, and good afternoon, everyone. Let me start by saying how excited I am to have joined Teladoc Health and to lead the organization going forward. The company has many strengths to build upon and to drive higher levels of execution and performance. I'll comment on the quarter's results, but I also want to share some early thoughts since joining the company in June. I've had the opportunity to engage with employees across the organization and visit with many customers and stakeholders, including recently attending our annual forum event, which brought together healthcare leaders, virtual care advocates, and innovators. These discussions have further reinforced my optimism about the future.

Speaker Change: I would now like to turn the call over to Chuck. Thanks, Mike, and good afternoon, everyone. Let me start by saying how excited I am to have joined Teladoc Health and to lead the organization going forward.

Unknown Executive: The company has many strengths to build upon and to drive higher levels of execution and performance.

Unknown Executive: I'll comment on the quarter's results, but I also want to share some early perspectives since joining the company in June .

Unknown Executive: I've had the opportunity to engage with employees across the organization and visit with many customers and stakeholders, including recently attending our annual forum event, which brought together healthcare leaders, virtual care advocates, and innovators.

Unknown Executive: These discussions have further reinforced my optimism about the future.

Unknown Executive: I've been impressed by the depth of talent and resilience of our employees and the level of commitment to serving our customers, members, and patients. I'm also gratified to see such a strong focus on patient safety, clinical quality, and health equity as well as an organizational understanding of the importance of more holistically supporting the physical and mental health needs of people. Not only are these important aspects from a care perspective, but they also represent key points of differentiation in the marketplace to build upon.

Unknown Executive: I've been impressed by the depth of talent and resiliency of our employees and a level of commitment to serving our customers, members, and patients.

Unknown Executive: I'm also gratified to see such a strong focus on patient safety, clinical quality, and health equity, as well as an organizational understanding of the importance of more holistically supporting the physical and mental health needs of people.

Unknown Executive: Not only are these important aspects from a care perspective, but also represent key points of differentiation in the marketplace to build upon.

Unknown Executive: From a technology perspective, we have important capabilities that will be essential to driving the business going forward, including our member-to-provider matching engines, our ability to effectively manage millions of patients and provider interactions, and investments we've made in the areas of data science and artificial intelligence. Together with other capabilities that we're working towards, this will position us well to meet the evolving needs of our customers and the healthcare system, and it further underscores the need to ensure we're achieving the expected impact of these investments, which is an area I expect us to further strengthen in short order.

Speaker Change: From a technology perspective, we have important capabilities that will be essential to driving the business going forward, including our member to provider matching engines, our ability to effectively manage millions of patients and provider interactions, and investments we've made in the areas of data science and artificial intelligence.

Speaker Change: Together, with other capabilities that we're working towards, this will position us well to meet the evolving needs of our customers and the healthcare system.

Speaker Change: And it further underscores the need to ensure we're achieving the expected impact of these investments.

Unknown Executive: We also have a skilled business and leading brands that are well recognized in the marketplace. Over 92 million people in the U.S. have access to one or more of our products today, and we intend to increase our ability to serve additional needs over time. I'm also excited about our success and market potential internationally, including the strong results and momentum that our international teams are delivering. All of that said, this is a company that is not yet delivering on its fullest potential.

Speaker Change: which is an area I expect us to further strengthen in short order.

Speaker Change: We also have skilled business and leading brands that are well recognized in the marketplace.

Speaker Change: Over 92 million people in the U.S. have access to one or more of our products today, and we intend to increase our ability to serve additional needs over time.

Speaker Change: I'm also excited about our success and market potential internationally, including the strong results and momentum that our international teams are delivering.

Speaker Change: All of that said, this is a company that is not yet delivering on its fullest potential.

Unknown Executive: Since joining the company seven weeks ago, I've been evaluating, together with the team, all aspects of our business, our strategic direction and priorities, our product offerings in terms of current performance and market potential, the outlook for our business units, and where we can drive improved performance and long-term shareholder value, and we will be acting on opportunities accordingly. From an operating perspective, I see an ability to strengthen execution, streamline the organization, and further raise the bar on performance.

Speaker Change: Since joining the company seven weeks ago, I've been evaluating, together with the team, all aspects of our business.

Speaker Change: Our strategic direction and priorities, our product offerings in terms of current performance and market potential, the outlook for our business units, and where we can drive improved performance and long-term shareholder value.

Unknown Executive: For example, the challenges noted earlier in the year had a real impact on our business at that time but can also continue to influence results after resolution. This is what I mean by raising the bar on performance, and we're working with focus and urgency to ensure that we execute with a higher level of precision going forward. In terms of streamlining the organization, actions are already underway, including making changes to ensure that we are organized to best serve our markets.

Speaker Change: And we will be acting on opportunities accordingly.

Speaker Change: From an operating perspective, I see an ability to strengthen execution, streamline the organization, and further raise the bar on performance.

Speaker Change: For example, the challenges noted earlier in the year had a real impact on our business at that time, but can also continue to influence results after resolution.

Speaker Change: This is what I mean by raising the bar on performance, and we're working with focus and urgency to ensure that we execute with a higher level of precision going forward.

Speaker Change: In terms of streamlining the organization,

Speaker Change: Actions are already underway, including making changes to ensure we are organized to best serve our markets.

Unknown Executive: Clarifying and reinforcing accountabilities and deliverables, and scrutinizing our cost structure with an eye towards greater cost efficiency as we deliver for both customers and shareholders now and into the future. With respect to cost savings initiatives that we've already shared previously, the company is on target for achieving both 2024 and 2025 commitments, which Mala will comment on further. Through these and other actions, we intend to strengthen decision-making, accelerate the pace of innovation and speed to market, and unlock greater value over time. This has been, and continues to be, a key area of focus since joining the company, and I look forward to providing further updates going forward.

Speaker Change: clarifying and reinforcing accountabilities and deliverables and scrutinizing our cost structure with an eye towards greater cost efficiency as we deliver for both customers and shareholders now and into the future.

Speaker Change: With respect to cost savings initiatives that we've already shared previously, the company is on target for achieving both 2024 and 2025 commitments, which Mala will comment on further.

Speaker Change: Through these and other actions, we intend to strengthen decision making, accelerate the pace of innovation and speed to market, and unlock greater value over time.

Mala Murthy: This has been, and continues to be, a key area of focus since joining the company, and I look forward to providing further updates going forward.

Unknown Executive: I'll turn to our second quarter results and provide some brief comments before handing over to Mala for more detail. In total, we reported consolidated revenues in the second quarter within the company's previous guidance range, along with overall adjusted EBITDA above the range. Our integrated care business achieved solid business and financial results, including on both a top line and adjusted EBITDA basis. In the US, integrated care members have grown by nearly 3 million people since the beginning of the year, including 600,000 on a sequential quarter basis.

Mala Murthy: I'll turn to our second quarter results and provide some brief comments before handing over to Mala for more detail.

Mala Murthy: In total, we reported consolidated revenues in the second quarter within the company's previous guidance range, along with overall adjusted EBITDA above the range.

Mala Murthy: Our integrated care business achieves solid business and financial results, including on both a top-line and adjusted EBITDA basis.

Unknown Executive: International business continues to grow and create further expansion opportunities. I'm also pleased to see additional ways that our teams are working together across our various businesses to create new areas of differentiation for Teladoc Health. From a commercial perspective, three-quarters of our bookings in the second quarter came from cross selling into our existing book of business, continuing the momentum we've seen over the past several quarters, with the remainder coming from new clients.

Mala Murthy: In the U.S., integrated care members have grown by nearly 3 million people since the beginning of the year, including 600,000 on a sequential quarter basis. International business continue to grow and create further expansion opportunities.

Mala Murthy: I'm also pleased to see additional ways that our teams are working together across our various businesses to create new areas of differentiation for Teladoc Health.

Mala Murthy: From a commercial perspective, three quarters of our bookings in the second quarter came from cross-selling into our existing book of business, continuing the momentum we've seen over the past several quarters, with the remainder coming from new clients.

Unknown Executive: Our chronic care bundled solutions are generating solid interest from new and existing clients, and we remain focused on increasing our product penetration to serve more people. Shifting to BetterHelp, we're proud of the work the BetterHelp team is doing to support the mental health and well-being of people.

Mala Murthy: Our chronic care bundled solutions are generating solid interest from new and existing clients, and we remain focused on increasing our product penetration to serve more people.

Mala Murthy: Shifting to better health, we're proud of the work the team is doing to support the mental health and well-being of people.

Unknown Executive: The business is serving well over 1 million unique individuals on an annual basis and has a net promoter score of over 70. While it is resonating with consumers, who are paying out of pocket for the services today, the operating environment remains challenging, and elevated customer acquisition costs continue to impact both top and bottom line results; we see better help as a business in transition. One with a market-leading position but needing to find additional ways to reach more people who could benefit from the service, while also balancing scale, growth, and financial performance.

Mala Murthy: The business is serving well over 1 million unique individuals on an annual basis and has a net promoter score of over 70.

Mala Murthy: While it is resonating with consumers who are paying out-of-pocket for the services today, the operating environment remains challenging, and elevated customer acquisition costs continue to impact both top and bottom line results.

Speaker Change: We see BetterHelp as a business in transition.

Speaker Change: One with a market-leading position, but needing to find additional ways to reach more people who could benefit from the service, while also balancing scale, growth, and financial performance.

Unknown Executive: Several initiatives are being pursued to positively impact results going forward, ranging from furthering international expansion, pursuing insurance coverage access in the U.S., and Continued Product Enhancement. We'll provide a further update on the actions we're taking for the business in the third quarter call but also believe it's appropriate at this point to modify our guidance approach as we navigate through these changes and challenges. Mala will comment more on better health in a moment.

Speaker Change: Several initiatives are being pursued to positively impact results going forward ranging from furthering international expansion, pursuing insurance coverage access in the U.S., and continued product enhancements.

Speaker Change: We'll provide a further update on the actions we're taking for the business in the third quarter call, but also believe it's appropriate at this point to modify our guidance approach as we navigate through these changes and challenges.

Unknown Executive: In closing, let me say that we are operating with a strong sense of urgency and have intensified our efforts on both the opportunities ahead of us and in strengthening execution and performance. Through our leadership position in the marketplace, our talented and committed employees, and our value proposition, we expect to deliver for our customers and drive the long-term potential and success of the organization. With that, I'll turn the call over to Mala to review our second quarter results and our outlook. Thank you, Chuck, and good afternoon, everyone. Second quarter consolidated revenue of $642 million decreased 2% year over year.

Speaker Change: Mala will comment more on better health in a moment.

Speaker Change: In closing, let me say that we are operating with a strong sense of urgency.

Mala Murthy: and have intensified our efforts on both the opportunities ahead of us and in strengthening execution and performance.

Mala Murthy: Through our leadership position in the marketplace, our talented and committed employees, and our value proposition, we expect to deliver for our customers and drive the long-term potential and success of the organization.

Mala Murthy: With that, I'll turn the call over to Mala to review our second quarter results and our outlook.

Mala Murthy: Second quarter adjusted EBITDA was $89.5 million, which was above the high end of our guidance range and up 24% year over year, representing a margin of 13.9%. Consolidated net loss per share in the second quarter was $4.92 compared to a net loss per share of 40 cents in the second quarter of 2023. The second quarter net loss per share included a non-cash Goodwill impairment charge of $4.64 per share.

Mala Murthy: Thank you, Chuck, and good afternoon, everyone.

Mala Murthy: Second quarter consolidated revenue of $642 million decreased 2% year-over-year.

Mala Murthy: Second quarter adjusted EBITDA was $89.5 million, which was above the high end of our guidance range and up 24% year-over-year, representing a margin of 13.9%.

Speaker Change: Consolidated net loss per share in the second quarter was $4.92 compared to a net loss per share of $0.40 in the second quarter of 2023.

Speaker Change: Net loss per share in the second quarter included a non-cash goodwill impairment charge of $4.64 per share.

Mala Murthy: Amortization of acquired intangibles of $0.38 per share and stock-based compensation expense of $0.25 per share. The Goodwill impairment testing was triggered by the decline in Teladoc Health's share price, with the impairment amount impacted by a higher discount rate and lower forecasted cash flow, and particularly the impact of the challenges of better health. Second quarter free cash flow was $60.9 million compared to $64.6 million in the second quarter of 2023. Excluding a non-recurring non-income tax refund in the prior year quarter, free cash flow was up approximately 25%.

Speaker Change: Amortization of Acquired Intangibles of $0.38 per share and Stock Based Compensation Expense of $0.25 per share.

Speaker Change: The Goodwill impairment testing was triggered by the decline in Teladoc health share price.

Speaker Change: with the impairment amount impacted by a higher discount rate and lower forecasted cash flows.

Speaker Change: and particularly the impact of challenges of better health.

Speaker Change: Second quarter free cash flow was $60.9 million compared to $64.6 million in the second quarter of 2023.

Speaker Change: Excluding a non-recurring, non-income tax refund in the prior year quarter, free cash flow was up approximately 25%.

Mala Murthy: We ended the quarter with $1.2 billion in cash and equivalents on the balance. Turning to our segment, integrated care segment revenue increased 5% year over year to $377 million in the second quarter. Chronic care was a key contributor to this year-over-year revenue growth. We ended the quarter with chronic care program enrollment of 1.17 million, up 9% year over year and up 5% sequentially. The largest drivers of chronic care enrollment growth versus the prior year period were our diabetes prevention and weight management programs, followed by hypertension.

Speaker Change: We ended the quarter with $1.2 billion in cash and equivalents on the balance sheet.

Speaker Change: Turning to our segment results.

Speaker Change: Integrated Care Segment Revenue increased 5% year-over-year to $377 million in the second quarter.

Speaker Change: Chronic care was a key contributor to this year-over-year revenue growth.

Speaker Change: We ended the quarter with chronic care program enrollment of 1.17 million, up 9% year-over-year, and up 5% sequentially.

Speaker Change: The largest drivers of chronic care enrollment growth versus the prior year period were our diabetes prevention and weight management programs, followed by hypertension.

Mala Murthy: As an example of the continued success we are seeing with our Land and Expand strategy, we recently upgraded the fully insured population at a large regional blues plan from our Diabetes Management Solution to Diabetes Plus and expanded it to all fully insured members while also securing a hunting license for a newly launched advanced bait management solution for their self-insured population. In addition to enrollment growth, we also saw a benefit in the quarter from performance-based revenue in our chronic care programs, where we are earning fees for successfully delivering on outcomes. While these types of arrangements currently represent a smaller portion of our business,

Speaker Change: As an example of the continued success we are seeing with our Land and Expand Strategy, we recently upgraded the fully insured population at a large regional blues plan from our Diabetes Management Solution to Diabetes Plus.

Speaker Change: and expanded it to all fully insured members while also securing a hunting license for our newly launched advanced bait management solution for their self-insured population.

Speaker Change: In addition to enrollment growth, we also saw a benefit in the quarter from performance-based revenue in our chronic care programs, where we are earning fees for successfully delivering on outcomes.

Speaker Change: While these types of arrangements currently represent a smaller portion of our business

Mala Murthy: We believe that our ability to deliver positive results in value-based arrangements will remain an important lever going forward. International was also an important contributor, with strong revenue growth in the quarter driven by our B2B business. While we are also seeing success in leveraging our hospital and health systems offerings to unlock new public health system opportunities, US integrated care segment membership at the end of the quarter was 92.4 million members, increasing by 8% year over year, and up by approximately 600,000 members sequentially in line with our guidance range. Average integrated care revenue per U.S. member of $1.36 decreased by $0.05 versus the prior year's second quarter.

Speaker Change: We believe that our ability to deliver positive results in value-based arrangements will remain an important lever going forward.

Speaker Change: International was also an important contributor, with strong revenue growth in the quarter driven by our B2B business.

Speaker Change: While we are also seeing success in leveraging our hospital and health systems offerings to unlock new public health system opportunities.

Speaker Change: U.S. integrated care segment membership at the end of the quarter was 92.4 million members, increasing by 8% year-over-year.

Speaker Change: and up by approximately 600,000 members sequentially in line with our guidance range.

Speaker Change: Average integrated care revenue per U.S. member of $1.36 decreased by $0.05 versus the prior year's second quarter.

Mala Murthy: This is driven by MIPS, as we have onboarded a significant number of new members within our general medical product, and typically, they contribute less materially to our average revenue per member. As we have said, based on our land and expand strategy, we see significant runway to cross-sell additional higher revenue products over time, including our chronic care. Second quarter integrated care adjusted EBITDA was $64 million, a 69% increase over the second quarter of 2023.

Speaker Change: This is driven by MIPS, as we have onboarded a significant number of new members within our general medical product, and typically they contribute less materially to our average revenue per member.

Speaker Change: As we have said, based on our Land and Expand strategy, we see significant runway to cross-sell additional higher revenue products over time, including our chronic care services.

Speaker Change: Second quarter integrated care adjusted EBITDA was $64 million, a 69% increase over the second quarter of 2023.

Mala Murthy: Adjusted EBITDA margin of 17% was well above our guidance range of 12 to 14% and represented growth of approximately 640 basis points versus the second quarter of 2023. Three factors help to contribute to the upside versus the guidance range in the court.

Speaker Change: Adjusted EBITDA margin of 17% was well above our guidance range of 12 to 14% and represented growth of approximately 640 basis points versus the second quarter of 2023.

Speaker Change: Three factors helped to contribute to the upside versus the guidance range in the quarter. The first was the performance-based revenue in our chronic care programs.

Mala Murthy: The first factor was performance-based revenue in our chronic care program. The second factor was adjustments to compensation accruals in line with current year performance, including lower-than-expected performance in our better health business. And the third factor is related to timing, as certain marketing and other operating expenses were pushed into the second half of the year.

Speaker Change: The second factor was adjustments to compensation accruals in line with current year performance, including lower-than-expected performance in our Better Health business.

Speaker Change: And the third is related to timing, as certain marketing and other operating expenses were pushed into the second half of the year. In aggregate, these three factors accounted for over 300 basis points of benefit to year-over-year margin expansion.

Mala Murthy: In aggregate, these three factors accounted for over 300 basis points of benefit to year-over-year margin expansion. Turning to the BetterHelp segment, revenue was $265 million in the second quarter, down 9% versus the prior year period and slightly below our guidance range of down 4 to 8%. Additionally, revenue was down one and a half percent versus the first quarter of 2024, as average paid users declined by 1.9% sequentially.

Speaker Change: Turning to the BetterHelp segment, revenue was $265 million in the second quarter, down 9% versus the prior year period, and slightly below our guidance range of down 4-8%.

Speaker Change: Revenue was down 1.5% versus the first quarter of 2024, as average paid users declined by 1.9% sequentially.

Mala Murthy: With average revenue per user generally stable and churn in the first half of 2024 improving versus the second half of 2023, the decline in revenue and users versus the first quarter was a result of fewer user additions to the platform. We've talked about how a variety of factors influence the revenue yield on advertising spend, including the cost of media, the overall health of the consumer, and dynamics within the advertising channels themselves. In the first quarter, we saw challenging customer acquisition costs through early Q1, which caused us to pull back on our advertising dollars in the quarter in keeping with our goals to balance growth and margin.

Speaker Change: With average revenue per user generally stable and churn in the first half of 2024 improving versus the second half of 2023.

Speaker Change: The decline in revenue on users versus the first quarter was the result of fewer user additions to the platform.

Speaker Change: We've talked about how a variety of factors influence the revenue yield on advertising spend, including cost of media, the overall health of the consumer, and dynamics within the advertising channels themselves.

Speaker Change: In the first quarter, we saw challenging customer acquisition costs through early Q1.

Speaker Change: which caused us to pull back on our advertising dollars in the quarter in keeping with our goals to balance growth and margin.

Mala Murthy: Although we entered the second quarter with lower paid users, creating headwinds to our top line performance, we did see signs of advertising costs stabilizing at Q1 levels in the first few weeks. However, we saw a further deterioration from those levels in May, with that trend continuing into June. To help put this in context, We saw a double-digit percentage increase in customer acquisition costs in May versus what we had seen exiting the first quarter.

Speaker Change: Although we entered the second quarter with lower paid users, creating headwinds to our top-line performance, we did see signs of advertising costs stabilizing at Q1 levels in the first few weeks.

Speaker Change: However, we saw a further deterioration from those levels in May with that trend continuing into June .

Speaker Change: To help put this in context,

Speaker Change: We saw a double-digit percentage increase in customer acquisition costs in May versus what we had seen exiting the first quarter.

Mala Murthy: In line with our strategy to constantly optimize for return on advertising spend, we made the decision to pull back during the second quarter to ensure the appropriate level of return for marginal dollar spend. This led to fewer gross additions and a lower paid youth account, which drove the revenue decline in the quarter.

Speaker Change: In line with our strategy to constantly optimize for return on advertising spend, we made the decision to pull back during the second quarter to ensure the appropriate level of return per marginal dollar spent.

Speaker Change: This led to fewer gross additions and a lower paid user count, which drove the revenue decline in the quarter.

Mala Murthy: We believe higher customer acquisition costs in the US are being driven by several factors. First, we are seeing customer acquisition cost pressure broadly across many of our advertising channels, which suggests some broader macro weakening of the consumer. Next, better health growth is dependent on our ability to efficiently deploy marketing dollars to acquire new customers. Our scale makes us the largest advertiser of virtual mental health.

Speaker Change: We believe higher customer acquisition costs in the U.S. are being driven by several factors.

Speaker Change: We are seeing customer acquisition cost pressure broadly across many of our advertising channels, which suggests some broader macro weakening of the consumer.

Speaker Change: Next, data health growth is dependent on our ability to efficiently deploy marketing dollars to acquire new customers.

Speaker Change: Our scale makes us the largest advertiser of virtual mental health.

Mala Murthy: And while our spending is diversified across various channels, there is only so much incremental ad spend we can drive in a short period of time without further inflating our customer acquisition costs. At our scale, and at these elevated levels of customer acquisition costs, we are making a conscious decision not to chase inefficient customer acquisition to points below an appropriate return. So this balanced approach and focus on driving ROI and margin is going to come at a lower overall rate of top-line growth as long as customer acquisition costs in our key advertising channels remain elevated.

Speaker Change: And while our spending is diversified across various channels, there is only so much incremental ad spend we can drive in a short period of time without further inflating our customer acquisition costs.

Speaker Change: At our scale, and at these elevated levels of customer acquisition costs, we are making a conscious decision not to chase inefficient customer acquisition to points below an appropriate return.

Speaker Change: So, this balanced approach and focus on driving ROI and margin is going to come at a lower overall rate of top-line growth as long as customer acquisition costs in our key advertising channels remain elevated.

Mala Murthy: As we have noted, BetterHelp is a business in transit. We are undertaking several strategic pivots to address these challenges and expand our addressable market. As Chuck discussed, we are actively working on bringing the Better Health Value proposition to the insurance market. In addition, we're also moving forward with further international expansion beyond our current markets, with a focus on certain non-English speaking markets. Consistent with our prior commentary, we have seen much healthier customer acquisition costs in non-US markets, which is translating to strong international revenue growth at that rate. Better Help Adjusted EBITDA was $25 million in the second quarter, representing a 26% year-over-year decline.

Speaker Change: As we have noted, BetterHelp is a business in transition.

Speaker Change: We are undertaking several strategic pivots to address these challenges and expand our addressable market.

Speaker Change: As Chuck had discussed, we are actively working on bringing the Better Health Value proposition to the insurance market.

Unknown Executive: In addition, we are also moving forward with further international expansion beyond our current footprint.

Unknown Executive: with a focus on certain non-English speaking markets.

Speaker Change: Consistent with our prior commentary, we have seen much healthier customer acquisition costs in non-U.S. markets, which is translating to strong international revenue growth at Bell Health.

Speaker Change: Better Health Adjusted EBITDA was $25 million in the second quarter, representing a 26% year-over-year decline.

Mala Murthy: The Adjusted EBITDA margin of 9.6% was just above the midpoint of our guidance range of 9-10% and decreased 210 basis points versus a prior year quarter. As we faced higher than expected customer acquisition costs, we made the deliberate decision to moderate advertising spend in certain channels during the quarter, which allowed us to meet our adjusted EBITDA margin target and was consistent with our focus on managing the business to an appropriate return on ad spend.

Speaker Change: Adjusted EBITDA margin of 9.6% was just above the midpoint of our guidance range of 9-10% and decreased 210 basis points versus the prior year quarter.

Speaker Change: As we faced higher than expected customer acquisition costs, we made the deliberate decision to moderate advertising spend in certain channels during the quarter, which allowed us to meet our adjusted EBITDA margin target, and was consistent with our focus on managing the business to an appropriate return on ad spend.

Mala Murthy: Now, let me turn to guidance. For integrated care, we continue to expect 2024 revenue growth in the low to mid-singleton age. We are narrowing our range for adjusted EBITDA margin expansion, which we now expect to be up 150 to 200 basis points.

Speaker Change: Now, let me turn to guidance.

Speaker Change: For integrated care, we continue to expect 2024 revenue growth in the low to mid-single digits.

Speaker Change: We are narrowing our range for Adjusted EBITDA margin expansion, which we now expect to be up 150 to 200 basis points.

Mala Murthy: Our guidance reflects the first half performance offset by a floor ramp in chronic care enrollment primarily related to client-driven delays in the launch of certain member populations, which will likely lead to chronic care enrollment being relatively flat on a sequential basis in the third quarter. We are raising the lower end of our U.S. Integrated Care member guidance range and now expect 92.5 million to 94 million members at year end. For the third quarter, we expect integrated care revenue to be down 1% to up 2% and adjusted EBITDA margin between 14.5% and 16%. US integrated care members are expected to be in the range of 92.5 to 93.5 million.

Speaker Change: Our guidance reflects the first half performance, offset by a slower ramp in chronic care enrollment, primarily related to client-driven delays in the launch of certain member populations, which will likely lead to chronic care enrollment being relatively flat on a sequential basis in the third quarter.

Speaker Change: We are raising the lower end of our U.S. Integrated Care member guidance range and now expect 92.5 million to 94 million members at year-end.

Speaker Change: For the third quarter, we expect integrated care revenue to be down 1% to up 2%, and adjusted EBITDA margin between 14.5% and 16%.

Speaker Change: U.S. integrated care members are expected to be in the range of 92.5 to 93.5 million members.

Mala Murthy: We note that the deceleration in year-over-year revenue growth in the third quarter is due in part to a tougher comp due to the realization of performance guarantees in the third quarter of 2023, which added approximately 100 basis points of growth and adjusted EBITDA margin in the prior year period, as well as impacts from lower chronic care enrollment. For better help, customer acquisition costs have continued to trend higher over the past few quarters.

Speaker Change: We note that the deceleration in year-over-year revenue growth in the third quarter is due in part to a tougher comp due to the realization of performance guarantees in the third quarter of 2023.

Speaker Change: which added approximately 100 basis points of growth and adjusted EBITDA margin in the prior year period, as well as impacts from lower chronic care enrollment.

Speaker Change: For better help, customer acquisition costs have continued to trend higher over the past few quarters.

Mala Murthy: And there is limited visibility on the near-term path, which, as we have discussed, could be further affected by the unknown impact of the upcoming presidential election on ad prices. Based on actions we are taking as we actively manage the business for an appropriate return on ad spend, while at the same time positioning the business and brand for long-term success, this is leading to an atypically wide range of potential outcomes. Therefore, we are choosing not to provide segment revenue or adjusted EBITDA guidance for the third quarter, and we are withdrawing our full year guidance for both metrics in our BetterHelp segment at this time.

Speaker Change: And there is limited visibility on the near-term path, which, as we have discussed, could be further affected by the unknown impact of the upcoming presidential election on ad pricing.

Speaker Change: Based on actions we are taking as we actively manage the business for an appropriate return on ad spend, while at the same time positioning the business and brand for long-term success, this is leading to an atypically wide range of potential outcomes.

Speaker Change: Therefore, we are choosing to not provide segment revenue or adjusted EBITDA guidance for the third quarter, and we are withdrawing our full year guidance for both metrics in our BetterHelp segment at this time.

Mala Murthy: We recognize the challenge this presents from a modeling standpoint. Therefore, to provide a baseline, we note that if customer acquisition costs continue at their current level, we would expect second half 2024 revenue to decline by the low double. Consistent with our decision to not provide guidance for the BetterHelp segment, we are therefore not providing guidance for the consolidated company revenue, adjusted EBITDA, net loss per share, or free cash flow for the third quarter or full year 2024.

Speaker Change: We recognize the challenge this presents from a modeling standpoint.

Speaker Change: Therefore, to provide a baseline, we note that if customer acquisition costs continue at current levels, we would expect second half 2024 revenue to decline in the low double digits.

Speaker Change: Consistent with our decision to not provide guidance for the BetterHelp segment, we are therefore not providing guidance for the Consolidated Company Revenue, Ejacity Vida, Net Loss Per Share, or Free Cash Flow for the third quarter or full year 2024.

Mala Murthy: We continue to make progress executing against our cost-saving productivity initiative, and we remain on track to deliver $43 million in cost savings on a gap basis for our business in 2024 and a total of $85 million in 2025. As we look to 2025 and beyond, There are a number of initiatives that will inform our longer-term outlook, including the areas mentioned by Chuck. While our focus remains on driving sustainable financial performance and value creation, we are not in a position to provide a longer-term forecast for our segments or an outlook for the full company, including for 2025, at this time. With that, I will turn the call back. Thanks, Mala.

Speaker Change: We continue to make progress executing against our cost-saving productivity initiatives.

Speaker Change: And we remain on track to deliver $43 million in cost savings on a gap basis for our business in 2024 and a total of $85 million in 2025.

Speaker Change: As we look to 2025 and beyond.

Speaker Change: There are a number of initiatives that will inform our longer-term outlook, including the areas mentioned by Chuck.

Unknown Executive: While our focus remains on driving sustainable financial performance and value creation, we are not in a position to provide a longer-term forecast for our segments or an outlook for the full company, including for 2025 at the current time.

Unknown Executive: The decision to withdraw our long-term guidance comes as I continue to evaluate all aspects of the business, including our strategic priorities, our cost structure, investments in the business, our product offerings, and capital allocation. I look forward to sharing further details on our third-quarter earnings call in October. With that, we will open it up for questions. Operator. Thank you. Please press star followed by the number one if you'd like to ask a question and ensure your device is unmuted locally when it's your turn to speak.

Unknown Executive: With that, I will turn the call back to Chuck.

Unknown Executive: Thanks, Mala. The decision to withdraw our long-term guidance comes as I continue to evaluate all aspects of the business, including our strategic priorities, our cost structure, investments in the business, our product offerings, and capital allocation.

Unknown Executive: I look forward to sharing further details on our third quarter earnings call in October . With that, we will open it up for questions. Operator?

Speaker Change: Thank you. Please press star followed by the number one if you'd like to ask a question and ensure your device is unmuted locally when it's your turn to speak. We kindly ask that you limit yourself to one question only.

Unknown Executive: We kindly ask that you limit yourself to one question only. Our first question today comes from Lisa Gill with J.P. Morgan. Please go ahead; your line is open. Thanks very much.

Speaker Change: Our first question today comes from Lisa Gill with J.P. Morgan. Please go ahead, your line is open.

Lisa Christine Gill: Good afternoon. Chuck, I want to start with a comment that was in the press release, and that was, you know, unlocking greater value across the entire company. As I listened to your comments and Mala's comments around better health, should I think that better health is maybe not a strategic component of the company going forward? And, you know, potentially, this would be in better hands of somebody else owning this.

Lisa Christine Gill: Thanks very much. Good afternoon. Chuck, you know, I want to start with a comment that was in the press release, and that that was, you know, unlocking greater value across the entire company.

Lisa Christine Gill: As I listen to your comments and Mala's comments around BetterHelp, should I think that BetterHelp is maybe not strategically a component of the company going forward and, you know, potentially this would be in better hands of somebody else owning this?

Speaker Change: And if that's not the way to think about it, what are some of the other things we should be thinking about, you know, in that comment of, you know, this greater opportunity across the company?

Unknown Executive: And if that's not the way to think about it, what are some of the other things we should be thinking about in that comment of, you know, this greater opportunity across the company? Yeah, thank you for the question. I think with respect to BetterHelp, you know, it's important to note that the company has really built a great capability. It's the largest of its kind, serving well over 1 million people, and it has great results with consumers who are paying out of pocket. So all of that is, you know, terrific.

Speaker Change: Yeah, thank you for the question.

Speaker Change: I think with respect to BetterHelp, you know, it's important to note that the company has really built a great capability. It's the largest of its kind.

Speaker Change: Serving well over 1 million people. Great, you know, great results with consumers. We're paying out of pocket. So all of that is, you know, terrific. I think the operating challenges, Mala's touched on and you're well aware of. I think at this point, you know, better help is...

Mala Murthy: Important part of the company. We're primarily focused right now on managing through this transition period.

Unknown Executive: I think the operating challenges Mala's touched on and you're well aware of. I think at this point, you know, BetterHelp is an important part of the company. We're primarily focused right now on managing through this transition period, advancing the deliverables that Mala touched on in terms of international expansion, the insurance market, other enhancements, and balancing the scale and financial strength of the company and financial performance. With that said, like any business, we're going to continue to evaluate what we're doing, where we're operating, in a way that creates long-term shareholder value. There are opportunities, and there are already some synergies being realized today, but there are opportunities to do more.

Speaker Change: Advancing the deliverables that Mala touched on in terms of international expansion, insurance market, other enhancements, and balancing the scale and financial strength of the company and financial performance. With that said...

Speaker Change: Like any business, we're going to continue to evaluate what we're doing, where we're operating, in a way that creates long-term shareholder value. When I'm talking about unlocking value, when you look across our businesses,

Speaker Change: There's opportunities and there already are some synergies being realized today, but there are opportunities to do more You've got a consumer business that has resonated well, and we have need for engagement in our b2b business

Unknown Executive: You've got a consumer business that has resonated well, and we have a need for engagement in our B2B. We have a scale B2B that can benefit from other parts of the organization as well. So what I'm looking for is each individual business to meet market needs and realize its own potential.

Speaker Change: We have a scale B2B business

Speaker Change: that can benefit from other parts of the organization as well. So what I'm looking for is each individual business to meet the market needs and realize its own potential. But as part of the broader company, where are those opportunities to unlock new value and differentiate? And I think there's a number of areas that we're going to explore.

Unknown Executive: But as part of the broader company, where are those opportunities to unlock new value and differentiate? And I think there's a number of areas that we're... Thank you. Our next question is from Stephanie Davis with Barclays. Please go ahead.

Speaker Change: Thank you. Our next question is from Stephanie Davis with Barclays. Please go ahead.

Stephanie July Davis: Hey guys, thank you for taking my question. Chuck, Mala, you both talked about Pursuing Insurance Coverage for Better Health in your prepared remarks, so I'd like for you to talk a little bit more about that. What are the steps that you'll need to take to make an insurance reimbursed product versus your current out-of-pocket construct?

Stephanie July Davis: Hey guys, thank you for taking my question.

Speaker Change: Chuck, Mala, you both talked to Pursuing Insurance Coverage for Better Health and you have a pair of marks, so I'd like for you to talk a little bit more about that.

Unknown Executive: How is that going to compare to my strengths? And what are the approximate timelines for taking these steps? Thanks. I'll start, and then Mala can add to this.

Speaker Change: What are the steps that you'll need to take to make an insurance reimbursed product versus your current out-of-pocket construct? How is that going to compare to my strengths? And what are the approximate timelines for taking these steps?

Speaker Change: Thank you.

Unknown Executive: From my perspective, this is what I see as the next logical step for BetterHelp. We've got a lot of eyes on the product, but as people work through the process, a significant number, a significant percentage of those consumers that don't choose to move forward cite high out-of-pocket costs as well as having insurance coverage. So we want to be able to offer those consumers the ability to access their coverage where we can.

Unknown Executive: Yeah, I'll start and then Mala can add to this.

Mala Murthy: You know, from my perspective, this is...

Speaker Change: What I see as the next logical step for better health.

Mala Murthy: You know, we've got a lot of eyes on the product, but as people work through the process...

Mala Murthy: A significant number, a significant percentage of those consumers that don't choose to move forward cite high out-of-pocket costs as well as having insurance coverage.

Mala Murthy: So, we want to be able to those consumers.

Mala Murthy: to offer the ability to access their coverage where we can.

Unknown Executive: In terms of timeline, we're working on deliverables right now to have at least what we call the technical capabilities by year end to be able to deliver. Thank you all for that. Obviously, with insurance contracting and, and so forth, that will be rolling out over the course of 2025. As you note, there are some additional requirements, additional credentialing, there are other requirements, operational, contracting, et cetera.

Mala Murthy: In terms of timeline, we're working on deliverables right now to have at least what we call the technical capabilities.

Mala Murthy: by year end to be able to offer that. Obviously with insurance contracting and so forth, it'll be rolling out over the course of 2025.

Speaker Change: As you note, there are some additional requirements.

Speaker Change: additional credentialing, there's other requirements, operational, contracting, etc.

Mala Murthy: The way we're approaching that, I think, in a very thoughtful way where areas where we want to control the experience, which are key to the experience, we're handling those, but we're also leveraging third-party partners for areas that we don't see as core to that experience. It increases the speed of market entry, and reduces the investments we need to make to bring it live, so we see that as a manageable up-front investment in terms of building out the capability.

Speaker Change: The way we're approaching that, I think, is a very thoughtful way, where areas where we want to control the experience, which are key to the experience, we're handling those, but we're also leveraging third-party partners.

Speaker Change: for areas that we don't see as core to that experience, that increases the speed of market.

Speaker Change: reduces the investments we need to make to bring it live.

Speaker Change: So we see that as a manageable upfront investment in terms of building out the capability.

Mala Murthy: But we do see this as a logical progression, but again, I would underscore it's primarily focused on meeting that consumer need: we have their eyes on the product now, but they want to be able to access it. Yeah, and Stephanie, what I'd add to what Chuck said is, if you take a step back and think about our efforts to offer insurance, look, our mission has always been to make mental health care more accessible, and affordability is. Transcripts by Transcription Outsourcing, LLC, about the macro, about, you know, softening consumer spend, inflation, etc. We have an opportunity to actually expand our cams quite significantly if we were to and Beyond Cash.

Speaker Change: But we do see this as a logical progression, but again, I would underscore it's primarily focused on meeting that consumer need, that we have their eyes on the product now, but they want to be able to access their insurance coverage.

Stephanie July Davis: Yeah, and Stephanie, what I'd add to what Chuck said is, if you take a step back and think about our efforts for offering insurance, look, MED-EL's mission has always been to make mental health care more accessible to everyone.

Stephanie July Davis: And affordability is the main reason.

Speaker Change: Users, as they go through sort of the path to enroll, with better health, don't convert. And it's honestly the number one cause for customer churn. If you think about the macros that we are dealing with.

Speaker Change: If you think about softening consumer spend, inflation, etc., we have an opportunity to actually expand our TAN quite significantly if we were to sort of expand beyond

Mala Murthy: So, that's sort of the, you know, we are being very thoughtful about how we approach this. We are looking thoughtfully at the modality, and to make sure that from an investment standpoint, we are getting the appropriate return on investment. Oh, well, Matt. Our next question comes from Jess Tassan with Piper Sandler. Your line is open.

Speaker Change: So that's sort of the, you know, we are being very thoughtful on how we approach this. We are looking thoughtfully into the modalities each

Speaker Change: step of what we do to implement and execute this with precision, with rigor, and to make sure that, from an investment standpoint, we are getting the appropriate return on investments that we will make in this phase.

Speaker Change: So thank you much.

Speaker Change: Our next question comes from Jess Tassan with Piper Sandler. Your line is open.

Jessica Elizabeth Tassan: And thanks for taking the question and congratulations Chuck on starting in the role. I wanted to get maybe your perspective just having come from a health plan. How would you kind of rank the Teladoc chronic care platform today among competitors in the market, and what are the kind of the biggest issues or like low-hanging fruit that you think you can address? And then a quick follow-up would be: of the people who have access to a Teladoc chronic care solution, how many are actually eligible for enrollment? So have a condition that can be resolved or ameliorated by the chronic care platform? It was easy when Livongo was just diabetes, you know, 12 percent.

Jessica Elizabeth Tassan: Thanks for taking the question, and congrats, Chuck, on starting in the role. I wanted to get maybe your perspective, just having come from a health plan, how would you kind of rank the Teladoc chronic care platform today among competitors in the market, and what are kind of the...

Speaker Change: biggest issues or or like low-hanging fruit that you think you can address

Speaker Change: And then a quick follow-up would be...

Speaker Change: Of the people who have access to a Teladoc chronic care solution, how many are actually eligible for enrollment? So have a condition that can be resolved or

Speaker Change: ameliorated by the chronic care platform. It was easy when Livongo was just diabetes, you know, 12%, but I'm curious what that number is today. Thanks.

Unknown Executive: But I'm curious what that number is today. Thanks. Yeah, I'll take a stab at it, and then Mala can comment further. You know, from a market perspective, and from a former customer perspective, I think the company's chronic care products are effective, and we were a purchaser of them in my prior role. I like the way that the company approaches a more comprehensive model, as opposed to targeting just a specific situation; they're really being thoughtful in terms of what else that member needs. As you know, with chronic conditions, in a lot of cases, there is more than one condition in play, and like most things with people, it's bigger than just one matter that they're wrestling with.

Speaker Change: Yeah, I'll take a stab at it and Mala can comment further.

Speaker Change: You know, from a market perspective, from a former customer perspective.

Speaker Change: I think the company's chronic care...

Speaker Change: products are effective.

Speaker Change: and we were a purchaser of that in my prior role.

Mala Murthy: I like the way that the company approaches...

Mala Murthy: A More Comprehensive Model

Mala Murthy: As opposed to targeting just a specific situation, that they're really being thoughtful in terms of

Mala Murthy: What else that member needs. As you know, with chronic conditions, a lot of cases, it's more than one condition in play. And like most things with people, it's bigger than just one matter that they're wrestling with. So I like the comprehensive approach that the company takes.

Unknown Executive: So I like the comprehensive approach that the company takes, and that resonated with me. In terms of where I see our position relative to others, I would highlight that. I would say that we have more opportunities to create services that can benefit those patients, and I think the journey the company's been on in terms of where it's headed with its weight and obesity management. I think, ultimately, you've got a sophisticated buyer, if you will, out there, and they're looking for demonstrated value. They're looking for measurements against that. I think we've done a nice job with both our chronic care models in terms of ROI and our new cardiometabolic health value model. This was validated by Milliman.

Speaker Change: And that resonated with me. In terms of where I see our position relative to others, I would highlight that. I would say that we...

Mala Murthy: We have more opportunities to create services that can benefit those patients, and I think the journey the company's been on in terms of...

Mala Murthy: Where it's headed with its weight and obesity management is a good example of that. I think ultimately, you know, you've got a sophisticated buyer, if you will, out there, and they're looking for demonstrated value.

Mala Murthy: They're looking for measurements against that. I think we've done a nice job with both our chronic care models in terms of ROI and our new cardiometabolic health value model that was

Unknown Executive: So I guess I would say that I think we've got a nice approach, it's responding in the market, it's comprehensive, and it is demonstrating value.

Mala Murthy: Validated by Milliman. So I guess I would say that I think we've got a nice approach, it's resonating in the market, it's comprehensive, and it is demonstrating value. And the last thing I would say, Formal, if you want to add anything, if you look at the impact we're having on the patients that do engage,

Unknown Executive: And the last thing I would say, for everyone, if you want to add anything, if you look at the impact we're having on the patients that we treat, it's pretty impressive. So I think we're in a good position there, but obviously, more to come. Yeah, and to answer your second question, Jess, look, here's the good news, right?

Mala Murthy: It's pretty impressive. So I think we're in a good position there, but obviously more to build upon.

Mala Murthy: Yeah, and to answer your second question, Jess, look, here's the good news, right? We are continuing to see strength in the number of recruitables that we have, right?

Mala Murthy: We are, in the number of recruitables that we have right, and I would say, you know, that is testament to our product offerings, the fact that we are. If you think about our overall chronic care bookings, more than half of them were chronic care. The reason I mention this is, think about your question around, you know, how are we converting those recruitables into chronic care. We don't give the actual number in terms of enrollment, but it continues what you quoted as the enrollment numbers in the Levant.

Speaker Change: The Recruitables momentum continues and I would say, you know, that is testament to our product offerings. The fact that we are seeing strength in selling chronic care bundles increasingly.

Speaker Change: If you think about our overall chronic care bookings, more than half of it was chronic care bundles.

Speaker Change: The reason I mention this is, if you think about your question around, you know, how are we doing in converting those recruitables into chronic care enrollees,

Mala Murthy: We don't give the actual number in terms of enrollment.

Mala Murthy: But it continues to be strong and increase relative to what you quoted as the enrollment numbers in the Livongo days. And the reason for that is, if you think about our ability increasingly to sell chronic care bundles to clients,

Mala Murthy: And the reason for that is, Think about our ability. Cell Chronic Care Bundle. What happens when you do that is you will, Essentially, enroll in multiple conditions, use multiple of our programs rather than, say, one diabetes, etc., and all of that helps. Thank you. Our next question comes from Jailendra Singh with Truist Securities. Please go ahead.

Mala Murthy: What happens when you do that is, you know, you will see enrollees essentially enroll into multiple conditions.

Mala Murthy: use multiple of our programs rather than say one diabetes program etc and all of that health from an enrollment perspective.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Jailendra Singh with Truist Securities. Please go ahead.

Jailendra P. Singh: Thank you, and thanks for taking my questions. Given we are in the heart of the selling season, I was wondering if you could speak to what you're seeing in terms of RFP activity in your integrated care segment and employer interest. Last year, I believe employers were likely caught off guard, primarily because of GLP-1 costs, which likely resulted in sales cycles generally getting elongated. Curious what you guys are seeing this year.

Speaker Change: Thank you. And thanks for taking my questions. Given we are in the heart of the selling season, I was wondering if you could speak to what you're seeing in terms of RFP activity in your integrated care segment, employer interest. Last year, I believe employers were likely caught off guard primarily because of GLP-1 costs.

Speaker Change: It likely resulted in sales cycle generally getting elongated. Curious what you guys are seeing this year and maybe spend some time on your provider led weight measurement program and traction that is getting given GLT1 still remains on top of mind for most employers.

Unknown Executive: Maybe spend some time on your provider-led weight measurement program and the traction that is getting given GLP-1 still remains on top of mind for most employers. Yes, thank you for the questions. A couple things in terms of the selling season, if you will. I think we're feeling really good about that. At this point, overall, the sales teams are progressing on both bookings, as well as actively managing pipeline opportunities. And as I mentioned before, I think what we're seeing in the market generally is good activity, but, you know, a sophisticated buyer base that's looking for, again, raising the bar in terms of demonstrated value, they are definitely looking for ways to reduce fragmentation. So I think at least having a more effective experience versus all these point solutions. So that's definitely a trend and theme out there.

Speaker Change: Yes, thank you for the questions.

Speaker Change: A couple things. In terms of the selling season, if you will, I think we're feeling really good about that at this point overall.

Speaker Change: The sales teams are progressing on both bookings as well as actively managing.

Speaker Change: Pipeline Opportunities.

Speaker Change: And as I mentioned before, I mean, I think what we're seeing in the market generally is good activity, but, you know, a sophisticated buyer base that's looking for, again,

Speaker Change: Raising the bar in terms of demonstrated value. They are definitely looking for ways to reduce fragmentation. So I think at least having a more effective experience versus all these point solutions. So that's definitely a trend and theme out there. I think that, so we're seeing good activity across the board.

Unknown Executive: I think that we're seeing good activity across the board, and we'll continue to go after that. I think with respect to weight and obesity management, obviously, as you know, that's a significant area of focus, particularly with employers, not just with GLP-1, but just how to manage this issue more holistically. I think there's a range of approaches out there, and I think it's a little early to see kind of how those all play out.

Speaker Change: And we'll continue to go after that.

Speaker Change: I think with respect to the weight and obesity management, obviously as you know, that's a significant area of focus, particularly with employers.

Speaker Change: Not just with GLP-1, but just how to manage this issue more holistically.

Unknown Executive: I think what we're trying to do is a place where we can create, you know, customized options for employers, depending on what they're trying to solve. And as you note, all the way up to, you know, our most advanced program, which includes physician access, a Teladoc physician that's trained in obesity management. So I think we're seeing a lot of interest there, maybe even perhaps more than we probably think. The approach we're taking and the impact we're making is something that's sustainable versus something that's maybe perhaps... Thanks, Jack. Our next question comes from Richard Close with Canaccord Genuity. Your line is open.

Speaker Change: I think there's a range of...

Speaker Change: approaches out there. And I think it's a little early to see kind of how those all play out.

Speaker Change: I think what we're trying to play is a place where we can...

Speaker Change: Create, you know,

Speaker Change: Customized options for employers, depending on what they're trying to solve.

Speaker Change: And as you note, all the way up to, you know, our most advanced.

Speaker Change: program, which includes

Speaker Change: Physician Access, a Teladoc physician.

Speaker Change: that's trained in obesity management. So I think we're seeing a lot of interest there, maybe even perhaps more than we probably thought coming into the year.

Speaker Change: But it's early in this whole process. And I think what we're trying to do is make sure we're there for the long haul so that the

Speaker Change: Thank you very much.

Jack: Thanks, Jack.

Speaker Change: Our next question comes from Richard Close with Canaccord Genuity. Your line is open.

Richard Collamer Close: Yes, thanks for the questions. And it's good to talk with you, Chuck. In your first call here, Mala, I was curious about the charge, if you could just go into a little bit of the details on the BetterHelp component of that, just that process. And then my follow-up question is on BetterHelp. And if you get insurance coverage, are you thinking about leveraging that into the existing employer book of business, which I would assume would be really low acquisition costs for BetterHelp?

Richard Collamer Close: Yes, thanks for the questions and good to talk with you, Chuck.

Richard Collamer Close: in your first call here. Mala, I was curious on the charge, if you could just go into a little bit of the details on the BetterHelp

Richard Collamer Close: ...component of that, just that process. And then my follow-up is on BetterHelp and...

Speaker Change: If you get insurance coverage, are you thinking about leveraging that into the existing employer book of business, which I would assume would be really low acquisition costs for better health?

Mala Murthy: Yeah, So, let me do it in reverse order, Richard. Thank you for your question. Um, you know, when Chuck talked earlier about Lisa's questions around where we are, you know, what we do, and Chuck spoke about better help, you know, leveraging the side of the What you just said is one of the examples that I would cite in terms of, you know, going to market for how we are thinking about better health with insurance and what I. The fact is, look, if you think about the strength of the planet, we have.

Speaker Change: Yeah, so let me do it in reverse order, Richard. Thank you for your questions. You know, when Chuck talked earlier to Lisa's questions around where is, you know, what do we mean in terms of synergies across the business?

Speaker Change: and Chuck spoke about BetterHelp, you know, leveraging the B2B side of the business.

Speaker Change: What you just said is one of the examples that I would cite in terms of, you know, go-to-market for how we are thinking about better health with insurance, and what do I mean by that?

Speaker Change: The fact is, look, if you think about the strength of the client relationships we have, we have talked about our client retention rates being over 90%.

Mala Murthy: We have talked about our clients. We have long-standing good relationships with our clients, and this is an opportunity for us to actually use that to your benefit. Transcripts provided by Transcription Outsourcing, LLC. Transcription by Trans-Expert at Fiverr.com, for. So that's on your second question around the charge.

Speaker Change: You know, we have longstanding good relationships with our clients.

Speaker Change: And this is an opportunity for us to actually use that, to your point, in a smart, efficient way.

Speaker Change: With the BetterHelp product, obviously, there are things that there are things we need to do to make sure that the BetterHelp platform and product is suitable for the B2B space. And we just talked about that a few minutes ago.

Speaker Change: So, that's on your second question. On your first question around the charge...

Mala Murthy: Um, look, as I said in the prepared remarks, the impairment charge essentially was the catalyst for us to take a look at impairment. It's really triggered by the, And then it's sort of, as I said, the drivers for the impairment charge really are the discount rate as well as cash flows. And if you think about the better health business and the fact that our revenues are lower, and our adjusted EBITDA is lower than we had expected,

Speaker Change: Look, as I said in the prepared remarks, the impairment charge essentially was, for us to take a look at impairment, it's really triggered by the decline in share price.

Speaker Change: And then it's sort of, as I said,

Speaker Change: The drivers for the impairment charge really are the discount rate.

Speaker Change: As well as cash flows, and if you think about the better health business and the fact that our revenues are lower and our adjusted EBITDA is lower than what we had expected,

Mala Murthy: It's not really a surprise that, you know, have those things. So those are the factors that really went into us. The last thing I would say is, maybe one of the things that is implied in your question is... How is it sort of on the better health side, if you think about it...

Speaker Change: It's not really a surprise that, you know, we do have, you know, to take the impairment. So those are the factors that really went into us coming to the impairment charge that we did. The last thing I would say is...

Speaker Change: You know, maybe one of the things that is implied in your question is...

Mala Murthy: Transcripts provided by Transcription Outsourcing, LLC. And, you know, that is the reason why. Okay, thank you. Our next question is from Elizabeth Anderson with Evercore ISI. Please go ahead.

Speaker Change: How is it sort of on the better health side? If you think about it from an accounting perspective, when we broke out into segments a couple of years ago, we essentially allocated the goodwill across both the segments, you know, based on value. And, you know, that is the reason why you're seeing the goodwill charge on the better health side.

Speaker Change: Okay, thank you.

Elizabeth Hammell Anderson: Hi guys, thanks so much for the question. I was wondering if you could comment on current Better Health CACs as we are in the third quarter, and if not, I was also wondering if you could talk about the lower member growth that you talked about due to delays in enrollment and integrated care in the second half of the year. Can you give us a little bit more color on sort of what's causing those delays and what are your updated expectations for when those members come on board? Yeah, so I'll take them in order, Elizabeth.

Speaker Change: Our next question is from Elizabeth Anderson with Evercore ISI. Please go ahead.

Elizabeth Hammell Anderson: Hi guys, thanks so much for the question. I was wondering if you could comment on current Better Health CACs as we are in the third quarter. And if not, I was also wondering if you could talk about the lower member growth that you talked about due to delays in enrollment and integrated care in the second half of the year. Can you give us a little bit more color on sort of what's causing those delays and what are your updated expectations for when those members come on board? Thank you.

Speaker Change: Yeah, so I'll take them in order, Elizabeth.

Mala Murthy: In terms of the customer acquisition cost for better health, the reason we sort of, The reason we've moved away from giving guidance is as we've talked about, as we've been through the court, relative to the expectations. You know, the CAC was certainly a lot higher; we've talked about double-digit relative growth relative to the first. So the customer acquisition costs for a lot, and we are not seeing, at this moment, a lot of improvement or... Relative to that,

Speaker Change: In terms of the customer acquisition cost for BetterHelp, the reason we sort of

Speaker Change: moved away from giving guidance is, as we have talked about,

Speaker Change: As we went through the quarter in Q2...

Speaker Change: Relative to the expectations that we had about customer acquisition costs upon entering the quarter.

Speaker Change: You know, the CAC was certainly a lot higher. We've talked about double-digit relative growth relative to the first quarter.

Speaker Change: So the customer acquisition costs were a lot higher, and we are not seeing at this moment a lot of improvement or change.

Mala Murthy: For all of the reasons that we cited in the prepared remarks, We are diversified. Transcribed by https://otter.ai, We are the large. Advertisers in this space, you know, we are the more scalable business, and for us to drive revenue growth, we would have to deploy incremental ad spend, but it is harder and harder to do that efficiently as the [inaudible] We are. We continue. We have limited visibility into how those will play out as we go through the rest of the year. You combine that with softening macros, and so we felt the results were very good.

Speaker Change: Relative to that trajectory.

Speaker Change: for all of the reasons that we cited in the prepared remarks, right?

Speaker Change: We are diversified in terms of channels within the better health business, but we are the largest.

Speaker Change: advertiser in this space. You know, we are the most scale business.

Speaker Change: and for us to drive revenue growth.

Speaker Change: We would have to deploy incremental ad spend.

Speaker Change: But it is harder and harder to do that efficiently, and more importantly, profitably. And as we balance...

Speaker Change: Top-line growth with return on ad spend and efficiency. That certainly increasingly becomes a challenge. So we continue to see elevated levels of customer acquisition costs.

Mala Murthy: [inaudible] So that's sort of on the chronic care enroll. There are a couple of. One is, the client, the launch, the delays in client launches really are... And so we would continue, we would expect. Transcript by Transcription Outsourcing, LLC. Transcribed by https://otter.ai. The other thing I would just comment on and add more of, you know, your. I do think there is an opportunity for us to continue to get better at conversion and enrollment. [inaudible] better and better as we get more data, do this for. And that is also something that we certainly are taking a very hard look at.

Speaker Change: One is the client, the launch, the delays and client launches really are into 2025.

Speaker Change: The other thing I would just comment, and maybe Chelsea wants to add more to this in terms of, you know, your mindset and philosophy from an execution standpoint.

Chelsea: Get more data. Do this for an increasing amount of time. And that is also something that we certainly are taking a very hard look at from an execution point of view.

Unknown Executive: Yeah, I think you said it well. I think this is an example of what we mean by raising the bar. In this space, one example, is taking an end-to-end look at how we're performing. How do we get, how do we leverage it? How do we reach out and engage? How do we measure each step of that process so that we are maximizing our potential?

Chelsea: Yeah, I think you said it well. I think this is an example of what we mean by raising the bar on performance and execution.

Chelsea: In this space, as an example, is taking an end-to-end look.

Chelsea: at how we're performing.

Chelsea: you know, measure each step of that process.

Unknown Executive: Eligibles that are in front of us. So I think that's something you're going to see from us. We just continue to make sure that the processes we have... The Operating Model.

Chelsea: So that we are maximizing our potential in terms of the eligibles that are in front of us. So I think that's something you're going to see from us is just continue to make sure that the processes we have and the operating model is delivering and performing as we expect.

Sarah Elizabeth James: Delivering and performing as we expect. Our next question comes from Sarah James with Canter Fitzgerald. Please go ahead.

Speaker Change: Thank you.

Mala Murthy: Thank you. Can you clarify if the increase in advertising pricing is increasing evenly across all of the channels, or if there are outliers where maybe a mixed shift could be beneficial?

Chelsea: Thank you.

Speaker Change: Can you clarify if the increase in advertising pricing is increasing?

Mala Murthy: And then when you talk about your strategy of not chasing customer acquisitions, does that mean that you're prioritizing holding the ratio of advertising and marketing to revenue flat from the level here? Or should we think of it as more of a direction on your total dollar spend on advertising being more flattish? Thank you.

Speaker Change: The ratio of advertising and marketing to revenue flat from the level here, or should we think about it as more of direction on your total dollar spend on advertising being more flattish? Thank you.

Mala Murthy: The thing that I would say on, Transcribed by https://otter.ai What we saw through the second quarter is the following. [inaudible] in our non-auction. So if you think about podcasts like that, we did see an elevation relative to where we did see quite a bit of an elevation in our customer acquisition cost. You know, if you think about the dynamics of how ad spend works across these different channels, Sarah. The non-auction channels are typically somewhat gated.

Speaker Change: Yeah, so let me address them in turn. The thing that I would say on the channels, the various channels,

Speaker Change: In our non-auction channels, so if you think about podcasts, channels like that, we did see elevation in pricing in those channels.

Speaker Change: To some extent, relative to the first quarter.

Chelsea: Where we did see quite significant increase in our customer acquisition costs was in the auction channels.

Chelsea: If you think about the dynamics of how ad spend works across these different channels, Sarah, the non-auction channels typically are somewhat gated in terms of capacity.

Mala Murthy: And so where we really have a lot more flexibility in deploying ad spend is in Auction Channels and Paid For, so that is really where we saw quite low costs. But we did see some elevation even in Non-Auction Channels.

Sarah: And so where we really have a lot more flexibility in deploying ad spend is in the auction channels, paid search, etc.

Sarah: So that is really where we saw a quite significant increase in our customer acquisition costs. But we did see some elevation even in the non-auction channels. And that's one of the things I cited in my prepared remarks.

Mala Murthy: And that's one of the things I cited in my prepared remark that the elevation in pricing across all of these channels leads us to believe that certainly there is. Transcription by CastingWords In terms of how we are essentially managing this business for better health, you know, I'm not going, Transcribed by https://otter.ai on our guidance. What I would say is the following. We are, it's not like we are leaving profitable revenue dollars on the table. What we are is essentially optimized, so that when you think about the returns on the marginal dollar of revenue, it is not... So that is what we say when we say we are not chasers.

Sarah: That the elevation in pricing across all of these channels leads us to believe that certainly there is consumer pressure, there are macro softening because we are seeing that pressure across all of the channels.

Sarah: In terms of how we are essentially managing this business for better health, you know I'm not going to speak to adjust the EBITDA for the back half or for the full year just given the fact that we have withdrawn our guidance and we've chosen to withdraw our guidance

Sarah: What I would say is the following.

Sarah: We are, it's not like we are leaving profitable revenue dollars on the table. What we are attempting to do and doing is essentially optimize return on ad spend.

Sarah: So that if you think about the returns on a marginal dollar of revenue, it is not unprofitable.

Mala Murthy: Revenue for revenue's sake. We are balancing top line and revenue with the bottom line. Thank you. The next question today comes from Sean Dodge with RTC Capital Markets. Please go ahead.

Sarah: So that is what we mean when we say we are not chasing revenue for revenue's sake, we are balancing top line and revenue with bottom line.

Speaker Change: Thank you.

Speaker Change: The next question today comes from Sean Dodge with RPC Capital Markets. Please go ahead.

Sean Wilfred Dodge: Yep, thanks. Mala, you mentioned three factors benefiting margins in the quarter. The first one you called out, I think, was a performance fee you received related to the chronic care business.

Sean Wilfred Dodge: Jeff, thanks. Mala, you mentioned three factors benefiting margins in the quarter. The first one you called out, I think, was a performance fee you received related to the chronic care.

Sean Wilfred Dodge: Business. Can you quantify for us how much that contributed? And then I think you also mentioned the timing of a shift in ad marketing spend related to what you were just talking about that was pushed from Q2 into the back half of the year. I was wondering if you could quantify that for us as well.

Mala Murthy: Can you quantify for us how much that contributed? And then, I think you also mentioned the timing of a shift in ad marketing spend related to what you were just talking about that was pushed from Q2 into the back half of the year. I was wondering if you could quantify that for us as well. Yeah, so, um, look, what we've said in the prepared remarks is, um, you know, we were, we saw an adjusted even done margin expansion. The three factors that we cited. Microsoft Office Word Microsoft Office Word Document MSWordDoc Word.

Speaker Change: Yeah, so, look, what we've said in the prepared remarks is, you know, we were, we saw an adjusted EBITDA margin expansion of 640 basis points year-over-year. The three factors that we cited contributed to roughly about 340 basis points.

Mala Murthy: Document.8, still very healthy. The only thing I would say, Sean, is off that $340,000 basis, the factor of performance-based revenues was roughly... Call it about half of that or slightly less. So about 150 basis points was around. Okay, that's helpful. Thank you. The next question comes from Charles Rhyee with TD Cowan. Please go ahead.

Speaker Change: [inaudible]

Sean: The only thing I would say, Sean, is off that 340 basis points, the factor of performance-based revenues was roughly, call it about half of that or slightly less than half of that. So about 150 basis points was around performance-based revenues.

Sean: Okay, that's helpful. Thank you.

Sean: The next question comes from Charles Rhyee with TD Cowan. Please go ahead.

Charles Rhyee: Yeah, thanks for taking the question. Mala, I know you've mentioned you're not providing guidance here on BetterHelp, but just, you know, historically, if you think about the cadence that we've seen over the last couple years, you know, you've talked about, in sort of using ad spend from the second and third quarters, kind of ramping that down in the fourth and fourth quarter, then to sort of harvest the And so historically, at least over the last couple of years, the fourth quarter has been sort of the biggest EBITDA quarter in terms of dollars.

Charles Rhyee: Yeah, thanks for taking the question. Mala, I know you've mentioned you're not providing guidance here on BetterHelp, but just, you know, historically, if you think about the cadence that we've seen over the last couple years, you know, you've talked about

Speaker Change: In sort of using ad spend from the second and third quarters, kind of ramping that down in the fourth quarter then to sort of harvest the margin.

Speaker Change: And so historically, at least over the last couple of years, fourth quarter has been sort of the biggest EBITDA quarter in terms of dollars for better health.

Charles Rhyee: But given sort of what you're seeing now in terms of CAC, customer acquisition costs, which looks like it will be in 3Q as well, should we still expect sort of that seasonal pattern for EBITDA, or should we think about EBITDA maybe being a little bit more sequentially flattish in the fourth quarter? Would you expect sort of that historical pattern still to be evident? Yeah. Thank you, Charles. Here's what I would say to you.

Speaker Change: But given sort of what you're seeing now in terms of CAC...

Speaker Change: Customer Acquisition Costs in...

Speaker Change: It looks like in 3Q as well, should we still expect sort of that seasonal pattern for Ibadaw or should we think about Ibadaw maybe being a little bit more sequentially flattish in the fourth quarter? Or would you expect sort of that historical pattern still to sort of be evident?

Charles Rhyee: I think that given the fact that we typically historically have pulled back on ad spend in the fourth quarter for an important holiday price for AdSense. And I would say if you combine that with what may happen, you know, leading up to the election. Again, this is.

Speaker Change: Yeah, thank you, Charles. Here's what I would say to you. I think that given the fact that

Speaker Change: We typically, historically, have pulled back on ad spend in the fourth quarter for an important reason. The holiday pricing season

Speaker Change: for AdSense tends to be relatively inefficient, and I would say if you combine that with what may happen, you know, leading up to the elections,

Speaker Change: Again, this is, we have limited visibility into how customer acquisition costs are going to go. But, you know, if you look at what has happened in terms of holiday pricing,

Speaker Change: I would expect that, obviously, to continue this year, and that certainly will weigh in on our decision on how much to spend in the fourth quarter.

Speaker Change: I would also say, as always, we would balance that with...

Mala Murthy: Transcripts provided by Transcription Outsourcing, LLC. I would say our thinking would be along those lines. Our next question comes from Michael Churney with Lear Inc. Partners. Please go ahead, in a very disciplined way to balance top line and bottom line, not chase revenue growth for revenue growth sake. Really look at optimizing return on ad spend, have as we went. You know, we are making progress and going deeper. Some non-core

Speaker Change: Setting ourselves up for 2025 in a reasonable manner from a top-line growth perspective and a user perspective. So, again, what I'm saying is no different from the different considerations we put into the mix every single year. I would say our thinking would be along the same lines as we go through the year.

Speaker Change: Our next question comes from Michael Churney with Lear Inc Partners. Please go ahead.

Michael Churney: Good afternoon, and thanks for taking the question. Maybe if we can go back relative to the removal of the multi-year targets.

Speaker Change: I understand.

Michael Churney: Given all the commentary you've had so far regarding better health, why you would do that. That being said, is the intention still to run the business as if those were the targets you were pushing for?

Speaker Change: Using this as a potential pivot point to make any drastic changes. I know someone earlier had asked about the long-term future of better health. I'm just thinking about operationally how you're thinking about...

Speaker Change: Running the organization, managing the organization, given this elevated level of uncertainty, what I'm hearing is still a little bit lack of visibility in terms of when it can turn around.

Speaker Change: Yeah, so we'll address that in two ways, specific to BetterHelp and then, you know, what it means, obviously, BetterHelp is an important contributor to our overall financial, you know, revenue, profit, as well as free cash flow.

Speaker Change: So, as it relates to BetterHelp, look, it's a business in transition.

Speaker Change: And because we have limited near-term visibility, I think what's important for us to do is to really manage the business.

Speaker Change: In a very disciplined way to balance top line and bottom line, not chase revenue growth for revenue growth sake. Really look at optimizing our return on ad spend.

Speaker Change: While preparing the business to make the strategic pivots that we need to make.

Speaker Change: Those include the International Expansion, which

Speaker Change: is going well relative to our expectations that we had as we went into the year.

Speaker Change: We are making progress in going deeper into the English-speaking markets. We are looking into judicially expanding into some non-English-speaking markets.

Michael Aaron Cherny: So far, are in line with line with what we had gone Adjusted EBITDA Margin Expanded, And that's the process that's going to take a little bit of time. So, we wanted to just give him the ability..., updated outlook over the No, I'll just hit the first part of your question, Daniel. Look, the issues and the challenges that we had at the, because it certainly does...

Speaker Change: So far, the revenue per user and customer acquisition costs that we are seeing are in line with expectations, in line with what we had gone into this expansion with.

Speaker Change: So that's on international. We've talked about better health with insurance.

Speaker Change: We are looking at other strategic pivots in this business and I think it is important for us to balance the shorter term of how we stabilize what I call the U.S.

Speaker Change: consumer business, the core business with managing all of these pivots from a leadership perspective, from a bandwidth perspective of the management team at Better Health, as well as from an investment perspective.

Speaker Change: So that is, I would say, on the better health side.

Speaker Change: I would say more broadly, you know, from an integrative care standpoint,

Speaker Change: We've reaffirmed our 2024 guidance on revenue.

Speaker Change: You've talked about bringing down the low end off the.

Speaker Change: Adjusted EBITDA Margin Expansion, you know, still a healthy margin expansion year-over-year, 150 to 200 basis points.

Speaker Change: and Undershock Leadership.

Speaker Change: We are, you know, taking a serious look at many different things from a

Speaker Change: structure and a management perspective of the business. We are clarifying accountability. And that's really going to help us prioritize our investments for growth.

Speaker Change: So, you know, Chuck has spoken in his remarks on how he's taking a comprehensive look across all aspects of the business.

Unknown Executive: And that's the process that's going to take a little bit of time.

Speaker Change: So, we wanted to just give him the ability to go through that, to complete that in a thoughtful way and, you know, we will come back to you all in terms of what that means in terms of an updated outlook over the coming months.

Speaker Change: Our next question comes from Daniel Grosslight with City. Please go ahead.

Daniel R. Grosslight: Hi, thanks for taking the question. I just wanted to clarify that the chronic care enrollment delay, that's separate from the technical issue you mentioned last quarter. And then my real question is on how you're thinking about performance guarantees and really value-based care and population health going forward. I understand it's a small part of the business right now, but given your experience building out value-based care assets at

Daniel R. Grosslight: at GuideWell. I'm curious how you're thinking about leveraging that experience to take a more clinical risk, not necessarily this year, but maybe 2025, 2026 and beyond. Thanks.

Daniel R. Grosslight: Yeah, well, I'll hit the second part and then Mala can comment. Yeah, and I do think, back to the customer base and the sophisticated buyers,

Speaker Change: and expecting more and more in terms of, you know, performance measurements and outcomes, that aligns well with what we've been doing as a company and what we are and will be building out in terms of a more complete picture to manage patients.

Speaker Change: So I think those things are going to converge where you're going to see, one, our capabilities expand, which are already strong today, but there's additional elements as we move forward.

Speaker Change: and a convergence with the customer base in the marketplace that is expecting and demanding.

Mala Murthy: more value-based measurements and willing to put more of the economics in play, if you will, and allow a company like ours to participate in the value that we are able to create. So I think both of those are going to be an important part of the future for us and for other organizations like us. Mala, would you add anything?

Mala Murthy: No, I'll just hit the first part of your question, Daniel. Look, the issues and the challenges that we had at the beginning of the year were really related more to client mapping, you know, data mapping on our client hierarchy.

Mala Murthy: That is really, we've solved for that, that's behind us.

Mala Murthy: What I will say is, and Chuck sort of mentioned this in his prepared remarks,

Speaker Change: I do think that as we move forward, it is important that we don't have execution missiles like that.

Speaker Change: because it does certainly mean that we have to get over the, you know, the challenges it creates from a results perspective relative to the plans that we have. And so

Unknown Executive: As we are beginning to work with Chuck, we are certainly spending time as a leadership team.

Speaker Change: Looking at our internal structures, our governments, etc. That is really going to prevent us from having those kinds of mistakes.

Speaker Change: Got it. Thank you.

Unknown Executive: Thank you. We're now out of time for any further questions, so this concludes the Q&A session, as well as the conference call. Thank you everyone for joining us. You may now disconnect your line.

Speaker Change: Thank you. We're now out of time for any further questions so this concludes the Q&A session as well as the conference call. Thank you everyone for joining, you may now disconnect your line.