Q4 2024 Teladoc Health Inc Earnings Call
and Peter Holt.
Brika: Q4 2024 Earnings Call. My name is Brika and I will be your moderator for today.
Speaker Change: All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to your host Michael Minchak, Vice President Investor Relations at Elladoc Health. Thank you, you may proceed.
Speaker Change: Thank you and good afternoon. Today, after the market closed, we issued a press release announcing our full year and fourth 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 Divita, Chief Executive Officer, and Mala Murthy, Chief Financial Officer. 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-GAP measures to the most comparable GAP measures and reconciliations thereof can be found in the press release that is posted on our website.
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.
Chuck Divita: I would now like to turn the call over to Chuck.
Thanks, Mike.
Chuck Divita: We report a solid finish to 2024 and continue to make progress on our strategic priorities.
Chuck Divita: Mala will comment more on our results and initial 2025 guidance in a moment.
Chuck Divita: As we close out the year and look forward, I would also like to provide some updates on the business and areas of focus.
Chuck Divita: As you know, we operate in a complex and dynamic healthcare market, which continues to be impacted by macro factors such as medical cost inflation, disease prevalence, mental health challenges, pressures on healthcare providers, and regulatory matters, amongst others.
Chuck Divita: We believe virtually enabled care can play an important and constructive role in supporting the needs of our customers in this regard, and that we are uniquely positioned given our scale, experience, and range of products and services.
Chuck Divita: To strengthen our ability to pursue opportunities in this environment and navigate through respective challenges, we've taken several actions over the past several months to streamline the organization, deepen market focus, and advance important initiatives.
Chuck Divita: These changes are well aligned with our priorities, have driven significant cost savings, and created additional capacity to invest.
Chuck Divita: With respect to integrated care, we're building on these and other efforts to enhance our competitive position and pursue important growth factors focused on four strategic priorities.
Chuck Divita: First, is net growth in customers and membership, and the engagement and usage of our services.
Chuck Divita: In 2024, we added over 4 million members in the U.S. and grew underlying visit volumes by 6%.
Chuck Divita: A key metric as the market continues to move towards visit-oriented arrangements.
Chuck Divita: and we recently implemented new technology at the point of care to support additional services for our customers.
Chuck Divita: We see this as an important element of our value proposition and differentiation going forward.
Chuck Divita: We also grew Chronic Care Management enrollment by 4% in 2024, and we see opportunities to further innovate in this space as well, including through our recently announced agreement to acquire Catapult Health. More on that in a moment.
Chuck Divita: From a selling season perspective, we saw some nice winds to close out the year, including the strongest year of booking since 2020 in our employer channel and the important addition of TRICARE in the government space.
Chuck Divita: We've also had some key client expansions with respective chronic care programs, including weight management, which is seeing continued interest in the market.
Chuck Divita: Of note, one of our largest customers added our solution for 2025, and we expect their enrollment to ramp over the year.
Chuck Divita: As we mentioned in the third quarter call, we are seeing pressures in the health plan channel given some of the broader challenges.
Chuck Divita: With that said, we expect to have opportunities during 2025 across our various channels, and we will remain focused on managing through these uncertainties as well, both of which are reflected in the guidance ranges that Mala will cover.
Chuck Divita: I am pleased to report that we had a very successful implementation season.
Chuck Divita: with over 800 new clients launched on January 1st. This was a critical priority given earlier challenges and I'm proud of how the team collaborated and delivered for our customers.
Chuck Divita: Another important priority is deepening our impact on patient care and outcomes.
Chuck Divita: For example, in addition to the point of care technology I mentioned earlier, we're also excited about a new capability we'll be bringing to market soon that provides the ability for external ecosystem partners to efficiently integrate with us to support longitudinal care needs and other strategies of our customers.
Chuck Divita: We're also focused on driving greater impact through our suite of products, and we're looking forward to jointly leveraging the capabilities of Catapult, including an initial focus on patients with chronic conditions.
Chuck Divita: And with Catapult's approach to preventative care, including convenient testing, screening, and nurse-led engagement model, as well as an impressive net promoter score of 80, we see opportunities to further complement our solution set.
Chuck Divita: From a revenue growth perspective, we intend to leverage our scale distribution to offer catapult services into our customer base.
Chuck Divita: And for Catapult's patients that are also eligible for our other services, we'll be creating a seamless enrollment pathway for our chronic care management and additional entry points for services such as mental health and primary care based on patient needs and preferences.
Chuck Divita: As context, roughly half of the people engaged by Catapult have one or more chronic conditions.
Chuck Divita: Many indicate challenges with depression and anxiety. And nearly one-third share that they don't have an established primary care relationship.
Our products and services align very well with these needs.
Chuck Divita: Through these and other initiatives, we're looking to extend our clinical care capabilities and ultimately to further participate in the value we can create for customers.
Another important priority is expanding our international integrated care business.
Chuck Divita: I recently had the opportunity to meet with our international team and hear from some key clients as well. I was highly impressed with our team and how they are building strong and sustainable positions in their respective markets.
Chuck Divita: and their efforts drove another strong year in 2024 delivering mid-teens revenue growth and continuing to expand markets and services.
Chuck Divita: For example, in France, we're partnering with the public health system to provide virtual psychiatry services in places with a scarcity of providers. And in Canada, we are combining virtual services with the proprietary devices and software of our hospital and health system solutions to serve needs across several provinces.
Chuck Divita: These are great examples of organizational collaboration and differentiation in the market.
Chuck Divita: Finally, a priority of increasing access to virtual mental health services through our scaled position.
Chuck Divita: In addition to BetterHelp, we also have a scaled B2B mental health offering in Integrated Care, where we offer digital tools, coaching, therapy, and psychiatry services.
Chuck Divita: We completed nearly 1 million visits in 2024, a 10% increase from 2023.
Chuck Divita: Over 60% of our membership base in the U.S. has access to our mental health offering, and at an enterprise level, B2B Mental Health generated approximately $150 million in revenues in 2024.
Chuck Divita: We will continue to assess synergies across our mental health offerings going forward.
Moving now to the BetterHelp segment specifically.
Chuck Divita: The business continues to be the largest of its kind, serving an unmet need in a way that resonates with consumers as evidenced by its high consumer net promoter score above 70.
Chuck Divita: And in January of 2025, we surpassed a historical milestone by having served over 5 million people across dozens of countries.
Chuck Divita: With that said, the business continues to operate in a challenging environment, which impacted financial performance in 2024 and our expectations for 2025.
Chuck Divita: We remain highly focused on stabilizing results and returning to a long-term growth posture.
And we aim to do this through four key priorities.
Chuck Divita: The first is growing the user base and levels of engagement.
Chuck Divita: During 2024, BetterHelp served over a million unique paid users, supported by a broad and diverse therapist network.
Chuck Divita: We were encouraged to see sequential growth in average paying users in the fourth quarter versus the third quarter, but we have not yet reached the level of stability we are striving for.
Chuck Divita: This includes ways to improve affordability and accessibility, such as a pilot we launched in the third quarter of 2024 to test a weekly pricing model.
Chuck Divita: Initial results were positive and the model was subsequently expanded and now widely available.
Chuck Divita: We'll continue to monitor performance on key measures such as conversion rates, retention, and net user growth.
Chuck Divita: We are also pursuing new features and other offerings, including furthering international expansion through new localized country models with respect to language, content, and therapists.
Chuck Divita: This includes a recent launch in France and additional markets in Europe over the course of 2025.
Chuck Divita: And International was again a bright spot for better help in 2024, accounting for approximately 20% of segment revenues.
Chuck Divita: Finally, BetterHelp's initiative to provide consumers with an ability to access their mental health benefits coverage continues to progress.
Chuck Divita: Operational capabilities are now in place and initial network discussions with select health plans have begun.
Chuck Divita: As shared previously, we don't expect any material contribution during 2025 in this area, and we'll also continue to explore additional ways to accelerate our progress consistent with our broader mental health strategy.
In closing, I'm gratified by the way we finished 2024.
Chuck Divita: and how the organization is aligning around our strategic priorities which are focused on delivering long-term sustainable growth.
Chuck Divita: While there is more work ahead, we are operating with appropriate urgency and a strong commitment to driving performance across our business.
With that, I'll turn it over to Mala.
and Adam Vandervoort.
Thank you, Chuck, and good afternoon, everyone.
Speaker Change: Fourth quarter results were generally in line with our previously discussed expectations.
Net loss per share was $0.28
Speaker Change: Full year 2024 consolidated revenue of $2.6 billion decreased 1% versus 2023, while adjusted EBITDA of $311 million represented a 12.1% margin.
Speaker Change: Net loss per share of $5.87 included a non-cash goodwill impairment charge of $4.63 per share pre-tax.
Speaker Change: Amortization of acquired intangibles of $1.35 per share pre-tax Stock-based compensation expense of $0.86 per share pre-tax
Speaker Change: Fully or free cash flow was $170 million and we closed 2024 with nearly $1.3 billion in cash and cash equivalents on the balance sheet.
Turning to segment results.
Speaker Change: Fourth quarter integrated care revenue increased 2% year-over-year to $391 million above the midpoint of our guidance range, driven by virtual care visits, chronic care, and international.
Speaker Change: We added 4.2 million U.S. Integrated Care members versus the prior year period and ended the fourth quarter with 93.8 million members, up 5% year-over-year.
Speaker Change: Chronic care program enrollment was just over 1.2 million at quarter end.
growing by 4% versus the prior year period.
Speaker Change: Fourth Quarter Integrated Care Adjusted EBITDA was $53 million, representing a 13.6% margin.
This was near the upper end of our guidance range.
and down 95 basis points versus the prior year period.
Speaker Change: Recall that based on upside in the third quarter, we discussed incremental investments in the fourth quarter to advance our key priorities.
which drove a headwind to adjusted EBITDA margin.
Speaker Change: For the full year, integrated care segment revenue increased 4% to $1.5 billion.
Speaker Change: Revenue benefited from double-digit growth in U.S. virtual care visit revenue.
with volume up by 6% year-over-year.
Speaker Change: A mid-teens increase in our international business and growth in chronic care.
Integrated Care Adjusted EBITDA grew 21% over 2023.
Speaker Change: driven by revenue growth, as well as cost and productivity initiatives.
Speaker Change: Adjusted EBITDA margin increased by about 215 basis points versus 2023, landing in the upper half of the initial guidance range we had provided last February.
Speaker Change: Shifting to better health, fourth quarter revenue was $250 million, down 9.5% versus the prior year period, reflecting a modestly lower rate of decline versus the third quarter.
Speaker Change: Fourth quarter average monthly paying users grew by 2,000 users over the third quarter to 400,000.
Speaker Change: marking the first sequential increase since the second quarter of 2023.
Speaker Change: and driven by continued international growth and a net benefit from the weekly pricing model.
Speaker Change: An adjusted EBITDA margin of 8.7% compared to 5.9% in Q3.
Speaker Change: This was consistent with commentary on our 3rd quarter call regarding a much smaller sequential step-up in 4th quarter adjusted EBITDA.
Speaker Change: For the full year, BetterHelp revenue was $1 billion, a decline of 8% versus the prior year, while adjusted EBITDA of $78 million represented a margin of 7.5%.
and Adam Vandervoort.
Now, turning to guidance.
We expect full year 2025 consolidated revenue.
Speaker Change: to be in the range of $2.47 billion to $2.58 billion.
Speaker Change: We expect full year free cash flow of $190 million to $220 million, which represents year-over-year growth of 12% to 30%, driven mainly by networking capital benefits.
Speaker Change: We project stock-based compensation expense of $120 to $130 million in 2025.
Speaker Change: down by about $20 million at the midpoint versus 2024 and 38% lower versus 2023 levels.
Speaker Change: For the first quarter, we expect consolidated revenue in the range of $608 million to $629 million.
Speaker Change: and Adjusted EBITDA in the range of $47 million to $59 million.
Looking at the segments.
Speaker Change: For integrated care, we expect 2025 revenue to be flat to up 3% year-over-year on an as-reported basis.
Speaker Change: This assumes 0.5% to 3.5% constant currency growth and a roughly 50 basis point headwind from foreign exchange.
Speaker Change: Constant currency growth includes about 200 basis points of contribution from the catapult acquisition.
which is expected to close at the end of February.
Speaker Change: We are guiding to an adjusted EBITDA margin of 14.8%, plus or minus 50 basis points.
Speaker Change: inclusive of a roughly 40 basis point headband from the catapult acquisition.
Speaker Change: which we expect to be dilutive to adjust the EBITDA margin in 2025.
Speaker Change: excluding Catapult, our adjusted EBITDA margin guidance for 2025 would be roughly flat year-over-year at the midpoint.
Speaker Change: And this is consistent with our preliminary 2025 outlook where we said we endeavor to maintain adjusted EBITDA margin in line with 2024 levels.
FX is neutral to integrated care adjusted EBITDA margin.
Speaker Change: There are several factors that are impacting the first quarter and quarterly cadence.
Speaker Change: First, we expect a slightly greater sequential revenue decline in the first quarter versus prior years.
Speaker Change: While typical seasonality is driven in part by enrollment dynamics within our chronic care business,
Speaker Change: Two additional factors are contributing to a lower 2025 starting point.
Speaker Change: The first is the selling season, which we had previously discussed, and the second is an FX headwind due to currency movements since our October earnings call.
and Adam Vandervoort.
Next.
Speaker Change: While we continue to expect increased membership to drive visit growth over time,
Speaker Change: Based on recent trends, we now expect a more extended visit ramp at TRICARE, as it takes time for the contractors to implement the new program.
impacting what is typically a strong quarter for visit volumes.
Speaker Change: In addition, we have some key expansions in our chronic care business in 2025 with enrollment
Speaker Change: expected to grow over the course of the year. However, tempering this benefit is an incremental impact from attrition.
Speaker Change: As we were informed by a client earlier this month of plans to transition a portion of their business during the second quarter.
Finally,
Speaker Change: We expect a full quarter of contribution from Catapult Health beginning in the second quarter.
Speaker Change: while the fourth quarter is typically their seasonally strongest of the year.
Taken together, these factors are expected to lead to
Speaker Change: to a first-half, second-half revenue split in 2025 that would be slightly more back-half weighted relative to 2024.
Thank you. Thank you. Thank you.
From an Adjusted EBITDA standpoint,
Speaker Change: The expected ramp in chronic care enrollments and TRICARE visits will have a more significant positive impact on adjusted EBITDA in the second half, while we also will be comping against some discrete benefits in the second and third quarter of 2024.
Speaker Change: We are guiding to first quarter integrated care revenue down 0.5% to up 2% versus the prior year period on an as-reported basis.
Speaker Change: A year-over-year tailwind from catapult and an FX headwind, largely offset.
Speaker Change: Adjusted EBITDA margin is expected to be in the range of 11.25% to 12.75%.
Thank you.
Moving to the Better Health segment.
Speaker Change: We are guiding to 2025 revenue, down 3.75% to down 9.75% versus 2024 on an as-reported basis.
Speaker Change: This assumes a decline of 3% to 9% on a constant currency basis and a roughly 75 basis point foreign exchange headwind.
Speaker Change: Based on what's currently known, we are comfortable near the midpoint, while the wider range reflects uncertainties given the early stage of the year, including traction from growth initiatives, as well as the macro backdrop, demand levels, customer acquisition costs, and churn rate.
Speaker Change: We are guiding to an adjusted EBITDA margin of 6.25% to 7.75%.
Speaker Change: Excluding an FX headwind of roughly 50 bpms, adjusted EBITDA margins would be generally flat at the midpoint vs. 2024.
Speaker Change: For the first quarter, we are guiding the Better Health segment revenue down 9 to 13.5% year-over-year on an as-reported basis.
Thank you.
Speaker Change: This assumes an 8.25% to 12.75% decline on a constant currency basis.
and a 75 basis point FX headwind.
Speaker Change: We expect an adjusted EBITDA margin of 2% to 4.25% with a roughly 60 basis point headwind from foreign exchange in the first quarter.
Speaker Change: Higher conversion rates related to the weekly offer has led to a year-over-year improvement in customer acquisition costs and we expect it to remain at current levels over the balance of the year.
Speaker Change: While churn is higher, we expect the weekly offer to remain a net positive.
Speaker Change: We are also assuming an increase in users and revenue as we roll out our localized offering to additional markets in Europe.
Speaker Change: Although we are being methodical as we learn and refine our approach in each market.
Speaker Change: As a result of these factors, we are targeting modest sequential revenue improvement beginning with the second quarter and continuing through the balance of the year.
and as year-over-year comps ease as we progress through 2025.
Speaker Change: We are targeting better health fourth quarter revenue to be relatively flat on a year-over-year basis.
Speaker Change: I'll now provide an update on our Cost Savings and Productivity Initiatives.
Speaker Change: We continue to execute against our previously discussed program and are exceeding those targets modestly.
Speaker Change: This is helping fund investments in the business to position the company for long-term success.
Speaker Change: We remain focused on managing to an appropriate level of performance.
and are committed to taking additional actions accordingly.
Speaker Change: Our focus will be on optimizing technology and development and G&A costs.
as well as lowering stock-based compensation expense.
Speaker Change: Finally, we closed the year with $1.3 billion in cash on our balance sheet, and our business is generating solid free cash flow.
Speaker Change: which we believe provides us a high degree of financial flexibility.
As it relates to our capital allocation priorities,
Speaker Change: First and foremost, we intend to maintain a strong balance sheet.
Speaker Change: This is a key area of client interest, ensuring continuity and demonstrating an ability to invest in innovation.
Speaker Change: We continue to expect to retire our convertible bond due in June 2025, but cash.
Speaker Change: We are evaluating our long-term financing and believe we have options as we look ahead to the June 2027 maturity.
Speaker Change: Second, we will focus on investing in the business to support our strategy, both on an organic and inorganic basis.
Speaker Change: As we further expand our capabilities, we can leverage our large customer base and scale distribution platform further executing on our land and expand strategy.
Speaker Change: And third, shared buybacks remain a potential use of excess cash.
With that, I will turn the call back to Chuck.
Chuck Divita: Thanks, Mala. To wrap up, we are continuing to make progress against the key strategic priorities that we have laid out, although there is more work ahead.
Chuck Divita: Despite some likely near-term headwinds from macro and other factors, we are focused on execution and delivering on our commitments to all stakeholders.
Chuck Divita: I am confident that the actions we're taking this year will provide a strong foundation for us to deliver improved performance over the longer term.
We look forward to sharing more in the coming months.
With that, we will open it up for questions. Operator?
Speaker Change: Thank you Chuck. We will now begin the question and answer session. If you would like to ask a question you can do so by pressing star followed by one on your telephone keypad.
Chuck Divita: And if for any reason you would like to remove that question, please press star then T.
Chuck Divita: and please note we do ask that you please limit yourself to one question and if you don't have any more please rejoin the queue.
We will pause here briefly whilst questions are registered.
Speaker Change: Your first question comes from Lisa Gill with J.P. Morgan. Please go ahead.
and many more. For more information, visit www.fema.gov.
Lisa Gill: Thanks very much. And Chuck and Mala, thank you for all the detail. Chuck, I want to go back to a comment that you made when you were talking about net customer growth and talked about some of your contracting.
Speaker Change: be more focused on visits. Can you talk about how contracts have changed, if at all, in 2025?
Speaker Change: And it looks like at the midpoint, you're adding about 8% growth in integrated members based on the guidance that you're giving. What are you seeing as far as utilization trends?
Speaker Change: The flu season started much later than we've seen in the last couple of years, but historically the flu has been good for Teladoc, so just curious what you've seen more recently on the overall utilization trend.
Speaker Change: Thanks and I'll make some comments and then certainly Mala if you want to jump in.
Speaker Change: So, a few things that I would say, you know, as, you know, many years ago in this space,
Speaker Change: I think there was a lot of PMPM models because it was sort of new to the buyer and new to organizations such as ourself.
Speaker Change: So that provided a level of predictability, and there's still a predominance of that out there.
Speaker Change: As you know, the rest of the healthcare system primarily works on a visit basis, on a utilization basis. So, you've seen over time...
Now that this, that virtual visit space has matured.
Speaker Change: more and more interest in moving more toward the rest of the delivery system looks like. So that's not a new trend. That's been going on for a while. And that continues. So that's why we highlight the importance of the visit volumes, because ultimately, that's a driver of revenue, but it's also a signal of the level of engagement that we have.
Speaker Change: And as we add those members that you mentioned, we should, and we expect, as we have,
Speaker Change: It's also important because those visits are more than just a visit for that particular event, they're engagement points.
Speaker Change: And I think part of our strategy is how do we activate those.
Speaker Change: One last thing I would say before asking Mala to comment.
Speaker Change: I was very proud of the way that our team responded.
Speaker Change: to the surges this year. You know, you think about the volumes that we experience, which are massively larger than others. You think about the holiday season and making sure that we can match providers with patients throughout all of that.
Speaker Change: nail our SLAs and do it at scale I think is pretty remarkable, but maybe Mala, if you want to comment more on the flu season and other matters. Yeah, so I would say Lisa, just addressing your borrower question on trends, you know, as we spoke about at J.P. Morgan Review,
Mala Murthy: This certainly is a shift we have been seeing over time.
Mala Murthy: To be crystal clear, it isn't as if this is a shift on loss across all of our clients. We have plenty of clients who are still in the traditional structure of access fee plus a visit fee.
Mala Murthy: But certainly we are seeing some amount of interest and migration towards visit fee arrangements.
Mala Murthy: And I'd characterize this as the shift has been happening for a time, we continue
Mala Murthy: As it relates to the flu season and utilization trends, to the point that Chuck made,
Mala Murthy: This is why the strategic pillars we talked about at J.P. Morgan really are important, right? Making every visit count more, driving more value with every visit. You know, Chaplain has prepared remarks, talked about...
Mala Murthy: investments we have made and capabilities we have added to do exactly that, right, to drive the value in the business.
Mala Murthy: Our utilization trends have remained generally stable, but that is absolutely a point of focus for us from an investment standpoint. Both that, as well as driving increased enrollment, which is the other way we accrue revenue.
In terms of flu, I would say the following.
Mala Murthy: I'd comment more, not just on flu, but overall visit volumes and revenue. We talked about 6% growth last year in our visit volume. That actually translated from a visit revenue perspective to high single-digit revenue growth.
Mala Murthy: And, you know, we felt the benefit of the visit mix as a part of that, that drove that kind of visit revenue growth. I would expect that momentum to continue this year, both in the first quarter, but also as we go through the rest of the year.
Thank you for watching.
Thank you.
Your next question comes from Jessica Tatam with Piper Sanzer.
Jessica Tatam: Hi guys and thanks again for the for the detail I just have a question on the the better health efforts to expand to expand payer coverage I guess
Speaker Change: Can you just give us a little bit of qualitative detail around what...
Today, what behavioral health
offerings exist within the integrated care segment and then just
Speaker Change: What, you know, incremental capabilities or network access would an employer or a payer be gaining by bringing better health in network? If you could just kind of qualitatively describe the nature and difference between those two offerings.
Speaker Change: Yeah, happy to. And on the B2B side, on the integrated care side...
Speaker Change: You know, as I mentioned, we have a scaled mental health position there, and it's been growing nicely. About 60% of our installed base has access to our services, which is...
So that's, you know, scaling well.
Speaker Change: I think when you step back from this issue, you know, mental health has actually been one of the most widely adopted in the virtual care setting post-pandemic, and continues to have a lot of secular trends around that, and we see that continuing.
Speaker Change: I think when you get into network contracting, there's two pieces.
Speaker Change: One is getting a network and meeting those requirements and so forth, and the other is actually utilization. It's one thing to be a network, but you need to actually...
have a brand and resonate and people use your services.
Speaker Change: And that's what BetterHelp really brings. They not only do they have a strong consumer brand and well-known brand, but massive amounts of volume. And so you've seen.
Speaker Change: Post-pandemic, a lot of players were able to get into network arrangements.
Speaker Change: and so forth, but some are struggling to get the volumes because you have to activate the membership and so I think both are important.
Speaker Change: patients with providers, you know, 95% within 48 hours, a diverse therapist network. So there's a lot that brings to the table notwithstanding, you know, the challenges that it takes to get into that space.
Thank you.
Speaker Change: Thank you. Your next question comes from David Roman, with Goldman Sachs on the line.
Thank you.
Thank you and good afternoon, everybody.
Speaker Change: Maybe you could help us break down a little bit beyond the guidance, just some of the operational factors as you look at 2025 compared to 2024. Can you maybe walk through how some of the key business dynamics are evolving on a year-over-year basis?
Michael Minchak, Mala Murthy, Charles Divita, Adam Vandervoort
Speaker Change: the weekly pay model, I think, and then the evolution of the business model. But how are you going to sort of land the plane on what a sustainable direction is in that business as you look forward?
Thank you.
Speaker Change: Let me address those questions in order and Chuck, chime in please.
Let me start with integrated care.
Speaker Change: As I think about revenue growth for integrated care, you know, we have essentially on a constant currency basis guided up 0.5% to 3.5%.
and Revenue Growth on a Year-Over-Year Basis.
Speaker Change: The way I think about the drivers and the components of that are as follows.
Speaker Change: Number one, international within that growing in the low double digits.
on a crimp and currency basis. So that's one.
seconds
In the U.S., if I think about our B2B business,
Speaker Change: There are certain things that are informing that growth. Number one, we have assumed 10 months of catapult. We expect to close that transaction shortly.
So that is number one.
Speaker Change: The second is, as we just talked about, you know, we are seeing visit revenue growth, as I just talked about, showing nice momentum.
and I expect TRICARE as we ramp through the year.
to add to that visit momentum as well.
Speaker Change: You know, we did talk about an extended grant for TRICARE. That said, we should expect to see TRICARE momentum in the back half of the year. So that is number two.
Number three.
Speaker Change: As always, chronic care, enrollment ramps through the years, so certainly
Speaker Change: a slower start in Q1 because of the selling season challenges and dynamics we talked about in the October and influential talked about, you know, that in his prepared remarks.
Speaker Change: But enrollment in chronic care happens through the year and so that will contribute as we go through the year.
Speaker Change: and included within that is the traction that we are seeing from weight management.
Speaker Change: I would say the couple of headwinds offsetting all of these are first, we have talked about the foreign exchange dynamics overall from a revenue growth standpoint.
Speaker Change: and then the second I would say is you know we as we said in our prepared remarks are incorporating in our guidance the impact of a client loss that we were informed about earlier this month.
Speaker Change: So those are the different puts and takes that essentially are informing our overall revenue growth momentum.
Speaker Change: From an Adjusted EBITDA standpoint, I would say, you know, in integrated care, we typically will see Adjusted EBITDA margins ramp as we go through the year, as revenue ramps, especially in chronic care. Now, keep in mind, Adjusted EBITDA margins are impacted seasonally by stronger visit volumes in 1Q and 4Q.
you but after that you know it is
Speaker Change: advancing through the year. The only other thing I would say for Jealousy Without Margins is, you know, we are comping benefits from Q2 and Q3 of 2024 for different reasons that we have spoken about in those quarters.
So it's just something to think about.
keep in mind on that.
and Adam Vandervoort.
Speaker Change: We are looking for stabilization as we go through the year. What does that mean?
Speaker Change: It means a few things. One, we have to keep monitoring the customer acquisition cost landscape. You know, we are assuming that it stays relatively stable in our guidance.
Speaker Change: But the reason we have provided a relatively wide guidance is because, you know, we have learned in the last 18 months to 2 years that this can be very volatile and can change quickly.
Speaker Change: So that is sort of customer acquisition trends are an important driver.
Speaker Change: The second is, you know, we have talked about our international efforts and our international growth. That is an important contributor to our growth, revenue growth this year.
Speaker Change: and you know we have talked about within international growth we are making efforts at localizing our product and platform experience.
Speaker Change: We have, for example, launched a localized experience in France, early days yet, you know, going well thus far, but, you know,
Speaker Change: We have plans to localize in other countries, we don't want to be public with which countries but we do have plans.
Speaker Change: So I would say international growth and efforts remain an important initiative for better health.
Speaker Change: What we've also talked about is just continuing to improve the core platform and user experience across the board and in the U.S. You know, this is a product and a platform with high NPS.
Speaker Change: We need to continue to invest in it and nurture it and so, you know, making sure that the core experience is good and continues to be good is an important driver for us.
Speaker Change: So, I would say to you, it is all of those things, we are making efforts on driving benefit coverage. We have always said we do not expect it to be a material revenue growth driver in 2025. We expect it to be material, you know, in the years ahead as we ramp up in future years.
Speaker Change: So that's a little bit of a longer answer to your question on the dynamics across the different segments.
Speaker Change: I appreciate all the detail and thanks for letting me sneak a multi-part one in here.
and many more. Thank you.
and Adam Vandervoort.
Speaker Change: Thank you. We now have Sean Dodge with RBC. Please go ahead.
Sean Dodge: Yeah, thanks. Maybe just staying on better health. Chuck, as you mentioned, it's encouraging to see
Sean Dodge: But it looks like the average revenue per user declined sequentially. Is that just a function of the rollout of the weekly membership offering you mentioned? Or is it growth and international? Is that price lower?
than in the U.S.
Sean Dodge: First, just to be very clear, right now, the weekly pricing is really no different on a versus the monthly in that our weekly is essentially our monthly pricing.
Sean Dodge: I will tell you, based on the tractions that we are seeing with our weekly offer in better
Sean Dodge: And that is something that is, you know, on docket for us to look into for 2025.
Sean Dodge: But so far, any change that you see in our average revenue per user on a monthly basis is really not driven by weekly being different from monthly.
Sean Dodge: What you said Sean is absolutely right. We have talked about the fact that our international headline price is lower and I would also say to you, you know, this is where the fact that we are in international markets and we do pay international taxes on our revenue
Sean Dodge: does matter to our overall revenue per user because it's a contra revenue, it's an offset of our revenue.
Sean Dodge: Again, this is something that has been factored into our overall international economics. But that is the reason why you are seeing our revenue per user going down.
Sean Dodge: and suddenly as international growth has been growing you will see that impact.
Michael Minchak, Adam Vandervoort, Charles Divita, Adam Vandervoort
Okay, that's great. Thanks for the detail, Mala.
Thank you.
We have Richard Close with Canaccord Unity.
Please go ahead.
Speaker Change: Yeah, thanks for the question. Maybe a follow-up on the International Better Health. Mala, if you could remind us what that was last year.
Speaker Change: And then a follow-up for Chuck, if you could just talk about the health plan channel.
Speaker Change: You said it's, you know, slow. Obviously, there's some issues there. Does it have anything to do with your product set, or how are you thinking about that channel evolving this year?
Chuck Divita: Yeah, let me let me start with the last part first. So I think there's a few things going on. Obviously, you know, everyone on the call is familiar with all the dynamics and health plan marketplace that they're navigating through. And they will, these are sophisticated organizations, and they're, they're adept at doing that. But you know, if you're a player in the Affordable Care Act, you've got the subsidies.
Chuck Divita: ending enhanced subsidies at the end of 2025. If you're heavy in Medicaid, you've got some questions going back and forth around that and Medicaid expansion.
Chuck Divita: If you're in the commercial business, you've got some inflationary trends working their way through the system. So there's a variety of things at the health plans.
are working through.
Chuck Divita: We continue to have business with Health Plans. We've grown business with Health Plans.
Michael Minchak, Mala Murthy, Charles Divita, Adam Vandervoort
or, you know, focusing on other strategies.
Speaker Change: I will say this though, the secular tailwinds around, unfortunately, the medical cost, inflation, the disease prevalence, the reason why I highlighted all those things...
in my prepared remarks is because those haven't gone away.
Speaker Change: How do we make our chronic care management programs even more impactful in terms of cost of care and so forth. So I don't think it's necessary, I mean our products.
Mala Murthy: Companies like us always have to innovate our products, but we continue to resonate in the market. Having said that, I do think that we've got this near-term headwind that I think, you know, is reasonable for us to sort of navigate through. Mala, do you want to cover the better health? Yeah, so
and that's up from the teens in 2023.
Speaker Change: Thank you. We have Daniel Grosslight with City on the line now.
Speaker Change: and many more. For more information, visit www.fema.gov. For more information, visit www.fema.gov.
Speaker Change: Thanks for taking the question. You know, as we think about chronic care growth for this year, can you rank
which programs are growing the fastest.
Speaker Change: And with respect to the weight loss program, it sounds like you've had nice traction there for this year. We've heard from some employers a little.
Speaker Change: of Trepidation, adding in utilization management to GLPs as that could put rebates at risk. Can you also just speak to how you work with PBMs and employers to help control GLP-1 costs without necessarily impacting rebate dollars? Thank you.
Speaker Change: Yeah, a couple things. You know, what we're seeing the most traction in right now is in our bundled services where, you know, we have a variety of things that we can offer for
Speaker Change: a set price and then we activate those members, certainly weight management is on the mind and a source of interest and a source of growth for us.
Speaker Change: I think the challenge with the GLP-1s, and you've mentioned it, is, you know, there's a lot of... Well, first of all...
Speaker Change: employers are trying to figure out their strategy so there's not a sort of monolithic view of how they're approaching that but generally speaking
Speaker Change: You know, and I think that's something that we're just going to have to work through. I think the rebate, you know, question in my mind is, if I'm an employer and those rebates are their dollars, they're not the PBM's dollars, and I think the employer should have the ability
Speaker Change: to design programs that are best for their employees and their dependents and not be sort of held hostage in terms of rebates. Now, that's up to individual employers and how they want to approach that, but from my perspective as a former health plan person, the rebates are the employers, not the PBMs.
Thank you.
Speaker Change: We now have Gyanendra Singh with Tuist. Please go ahead when you're ready.
Speaker Change: Thank you. This is Jalendra Singh from Truist. Thanks for taking my question. I actually wanted to follow up on your comment around your client planning to transition a portion of their business in second quarter. Can you provide any more color there in terms of drivers behind that change? Was it a health plan and what offerings were they using? Any color on membership revenue will be helpful. And how do you feel about the confidence in, looks like you still work with them on other offerings, but just curious, help us with confidence in retaining that client for other offerings.
and Adam Vandervoort.
Speaker Change: Yeah, look I'm not going to comment on specific clients in that regard But I will say a lot of the comments that I've already made in terms of the macro factors
Speaker Change: are in play here. It was in the Health Plan Channel.
Speaker Change: And I think it's just a sign of the times in terms of some of the pressures that health plans are under, and some are making decisions, you know, in certain ways like that. But again, I'll go back to what I said. We continue to have significant business with health plans. We've expanded our services with health plans. The conversations that we're having now and that we're participating in.
Speaker Change: They're really looking for new types of solutions and how can we better support their strategies in a variety of ways. So I feel very comfortable that we've got a strong offering, including the investments that we've been making in terms of how we can create more value for customers.
Great. Thanks, Chuck.
Speaker Change: Thank you. We now have a question from George Hill with Deutsche Bank.
Speaker Change: and I'm going to be talking about the the the the the the the the the the the the the the
Speaker Change: Hey, good evening guys and thanks for taking the question. Mala, my question is on BetterHelp, but if you look at the full year guidance...
Speaker Change: It looks like there's significant discretionary cost cuts that will have to come out of the business to hit your EBITDA targets. So I guess I would just love to hear you talk about like, as costs come down, as the business kind of comes down a little bit,
Speaker Change: Is there more, like, I guess, is there more, should we see more, like, pressure on the gross margin line or in the discretionary cost base, and I just, I would love to hear you talk about where costs come out of that business.
Yup.
So, um...
Sean Dodge: What I would first give context on the BetterHelp business is, and we have said this before, George, this is a business that runs from a fixed OPEX and infrastructure point of view relatively lean.
It's a largely variable margin business.
Sean Dodge: and I would say if I think about the key expense items in that P&L
Sean Dodge: It really is around advertising and marketing spend because that is an important driver of user acquisitions, the yield on that and the efficiency on that are important as we think about the bottom line, the adjusted EBITDA margin for that business.
Sean Dodge: One thing that we are looking to do, as we have now talked about for a while, is balancing top-line growth with bottom-line growth.
and I want to say, um...
Sean Dodge: If I think about the A&M as we go through the year, it will not be as hockey stick as it has been in certain years past. You actually saw that, in fact, in.
Sean Dodge: Q4 of this year. You know, Q4 adjusted EBITDA in better health was largely in line with our expectations.
Sean Dodge: Because we wanted to invest in international markets, you know, that is an area of growth for us. That is an area where we are going to be acquiring users and new users. So we made those investments in the fourth quarter in the better health business.
That said, though, I will say we expect to...
Sean Dodge: you know, relatively judicious and prudent on how we are going to spend advertising and marketing in the better health business in 2025 and even going beyond. And that is certainly going to be a key factor in the overall better health adjusted EBITDA margins, you know.
and many more.
Sean Dodge: and the other 25. But I'll remind you this is largely a variable margin business and you know it will continue to be so.
Speaker Change: Okay, and if I can have a quick follow-up, is just the gap between the EBITDA guidance and the cash flow guidance, the CAP software, are there any other big moving pieces there?
Speaker Change: If you think about our adjusted EBITDA growth, we look at it internally in terms of what are the actual segments delivering, and then we also look at our internal compensation in terms of what it takes to drive those results.
We certainly are picking up from a cash flow perspective.
Speaker Change: Sum your over your benefit in 2025 relative to 2024 in terms of compensation, cash based compensation.
Speaker Change: and look that is based on our results for 2024 and that has you know a consequence on our overall compensation.
Speaker Change: The second is we are driving and focusing on working capital improvements, collections, DSOs, etc. So you see those two things essentially resulting in the cash flow dynamic that you see.
and many more. Thank you. Thank you.
Thank you.
Speaker Change: Thank you George. We now have the next question from Charles Rye with TD Cowan.
Speaker Change: Yeah, thanks for taking the question. Maybe just asking about sort of TRICARE and sort of like how should we think about the offering into the TRICARE membership and talk a little bit how
Speaker Change: More specifically, you know, you plan to market directly to this population, what kind of requirements does that require in terms of either investments or investments you've already made?
Speaker Change: because you made the comment earlier that customer acquisition cost has been moderating or falling and certainly that's a function I think of right marketing spend versus sort of the
conversion of that dollars into paying members.
Speaker Change: at least on the better help side. Just trying to think through the different avenues, sorry, it's really kind of two questions. It's really sort of what are you doing for better conversion and how are you kind of applying that as we think about TRICARE generally in the business?
Speaker Change: and Michael Murch. This is a production of WGBH. We're sorry. We can't be here. We can't be here. We're sorry. We can't be here. We're sorry. We can't be here.
Speaker Change: I wouldn't necessarily single out Tricare. I think our strategies around activating visits are pretty
Speaker Change: are pretty consistent, and obviously with the brand that Teladoc has and the reach we have in terms of our marketing campaigns, you know, we think we've got that covered. So I don't want to talk about specific tactics on a particular account, but I will say it's a pretty broad-based approach and been effective at generating visit volume.
Speaker Change: If I could just have one quick follow-up and if we think about the the new visit type of model contract versus your existing old contracts on a like-for-like basis is that similar profitability and similar revenue to you from the old access model?
Speaker Change: So, you know, that's a slightly nuanced question. I would say the following.
Speaker Change: Typically when we have these conversations with our clients in transitioning from the traditional model to visit the model
Speaker Change: We are looking to structure the pricing such that it is gross margin neutral over time.
Speaker Change: It may not be so right at the outset from the point of transition, but typically when we have these conversations, it will be in the context of
the expand part of Land and Expand.
Speaker Change: So Charles, what will happen is, you know, we will talk about revenue accretive products.
Speaker Change: that we will now be selling into the population, or other factors that will essentially allow us, in most instances, to essentially be gross margin neutral or gross profit dollar accretive.
But it really does depend on a case-by-case basis.
and many more. Thank you for watching.
Got it. That's helpful. Thank you.
Thank you.
Speaker Change: Thank you Charles. We now have Michael Churney with Learink Partners.
Speaker Change: Thank you for watching. Please subscribe to my channel. See you in the next video.
Speaker Change: Afternoon. Thanks for taking my question. Maybe if I can just go back to George's a bit on the dynamics on the cost side. And Mala, I know you mentioned numerous times the idea of balancing
Michael Minchak, Mala Murthy, Charles Divita, Adam Vandervoort
Speaker Change: Revenue contribution versus profit dollars versus through discretionary cost cuts. What should the philosophical model look like going forward?
Speaker Change: Yeah, it's a great question. So here's what I would say and let me start with better health. I'm assuming your question is for better health or is it broader than that?
I'll address it for both segments.
Speaker Change: The sequential progression in the business and stabilization in the business as we go through the year Because what matters for a variable margin business like Better Health is revenue growth
So that is what we are looking to do.
to see as we think about the longer term.
Speaker Change: for better health. Now, I will say, you know, that model and the comments I made is certainly going to be different when we think about benefit coverage that has different unit economics, that has different margins, etc.
Speaker Change: On the integrated care side, it really is about two things. One is, it is about driving revenue growth, because what we have always said is, the integrated care segment is the one that has operating leverage.
Speaker Change: So, the more revenue growth and growth profit dollars you drive, the more leverage you drive.
Chuck Divita: and the way we are looking to drive revenue growth and gross profit dollar growth is certainly by all the strategic things, the priorities that Chuck mentioned in his prepared remarks, right? It is driving member engagement and greater utilization and enrollment. It is driving greater value in every visit and making it more impactful.
Chuck Divita: because that allows us to sit down with our clients and certainly earn a greater share of their spend wallet.
Chuck Divita: So it's things like that that is going to drive greater top line growth.
Chuck Divita: We will continue to drive productivity in our cost of goods sold and we will continue to drive productivity in our opex items
Chuck Divita: specifically I would say around technology and development and and GNA and then you know we have shown some really nice discipline in SOC-based comps and I expect that to continue on.
Chuck Divita: as well. So hopefully that gives you some color on how we think about, you know, us progressing on our, on driving profit. But it's a combination of top line growth and driving and maintaining discipline on our cost structure.
Thanks, Mala. I'm sorry to get ahead on the question.
and Adam Vandervoort. Thank you.
Thank you.
Speaker Change: I can confirm that does conclude today's question and answer session and I can confirm that does conclude today's conference call here. Thank you all for joining and please enjoy the rest of your day. You may now disconnect from the call.
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