Q1 2025 Teladoc Health Inc Earnings Call
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Cole: Good afternoon. Thank you for attending today's Teladoc Health's first quarter 2025 earnings call. My name is cole and I'll be the moderator for todays call all lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end if you'd like to queue for a question you can do so by pressing star one on your telephone keeps.
Pat.
Mike: I'd like to hand, it over to Mike mentioned <unk> head of Investor Relations Teladoc Health. Please go ahead.
Speaker Change: Thank you and good afternoon today after the market closed we issued a press release announcing our first quarter 2025 financial results. This press release and the accompanying slide presentation are available in the Investor Relations section of the Teladoc health Dot Com website.
Speaker Change: We also issued a press release today announcing the acquisition of virtual mental health company uplift supporting the strategic priorities of our better health segment.
Speaker Change: On this call to discuss the first quarter results and this acquisition are Chuck Davita, 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 our performance details on the relationship between these non-GAAP measures and the most comparable GAAP 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 our actual results to differ materially from those expressed or implied on this call for additional information. Please refer to our cautionary statements in our press release and our filings with the SEC all of which are available on our website.
I would now like to turn the call over to Chuck.
Chuck Davita: Thanks, Mike I'm.
Chuck Davita: I am pleased to report a solid start to the year on.
Chuck Davita: On a consolidated basis, we reported revenues and adjusted EBITDA at the higher end of our first quarter guidance ranges with integrated care results exceeding our ranges for both measures and better health in the upper half of our ranges as well.
All of them to provide more details on our first quarter results and our outlook later in the call.
Chuck Davita: We also continue to make progress towards the strategic priorities that we've spoken about previously.
Chuck Davita: And I would like to highlight some important developments in that regard beginning with our better health segment.
Chuck Davita: After the market close today, we announced that we have acquired uplift and innovative and tech enabled provider of virtual mental health therapy, psychiatry and medication management services.
Chuck Davita: This transaction aligns with our key priority of advancing our position in virtual mental health, including our ability for our better health segment to support consumers seeking to use their covered benefits.
Chuck Davita: Uplift as an in network provider to health plans and has arrangements totaling over 100 million covered lives.
Chuck Davita: With a strong team important capabilities and an existing network of over 500 mental health professionals. We view uplift is a great addition to the organization.
Chuck Davita: And we see significant business synergies with our current better health segment, which will enable us to serve a broader population seeking mental health care.
Chuck Davita: Specifically, we intend to leverage better helps deep consumer expertise and market position to provide more options for people to address their mental health needs, including the ability to access their benefits coverage through better helps relationship with uplift as.
Chuck Davita: As well as continued access to direct pay options in the U S and internationally.
Chuck Davita: Today, better help as the largest direct to consumer virtual therapy business of its time and served over 1 million unique users globally in 2024 with 40% of those users new to therapy.
Chuck Davita: It's high net promoter score of over 70 is reflective of its consumer orientation, including the ability to match over 90% of users with a therapist in 48 hours or less through a network of over 35000 therapists.
Chuck Davita: And whether direct pay or through covered benefits the ability to activate consumers at scale is essential in virtual care.
Chuck Davita: Illustrate this further 4 million people in the U S registered with better health in 2024.
Chuck Davita: While often more affordable than traditional in person therapy out of pocket cost is a key reason cited by those not ultimately subscribing to better health and many expressed an interest in accessing their covered benefits.
Chuck Davita: And this transaction will accelerate our ability to offer this choice to consumers and capture a larger portion of the scaled funnel that we have built with better health.
Chuck Davita: As part of Teladoc and better help segment uplift will continue to manage and oversee the network of mental health professionals accepting benefits coverage, including quality assurance clinical performance and in network administration functions.
Chuck Davita: Airbus serving better help will also have an opportunity to be considered for inclusion in this network based on the respective requirements needs and interests we.
Chuck Davita: We see this as important to meet market demand as we scale benefits coverage and continue supporting direct to consumer access as well.
Chuck Davita: In addition, we continued to advance other priorities of our better health segment, including growth in international markets and pricing models and other product enhancements. We believe that these and other actions will drive improved performance.
Turning to the integrated care segment.
Chuck Davita: We're pleased with our performance in the quarter as well as the progress we're making on key priorities for the segment, including our focus on growing customers members and usage of services in the U S. We surpassed 100 million members a significant milestone and grew by $8 7 million members sequentially.
Chuck Davita: And compared to the prior year's quarter U S. Virtual visit volumes grew 7% and chronic care enrollment increased by 3%.
Also a key priority for integrated care, our international business continues to grow.
Chuck Davita: With a team again delivered strong results, including revenue growth in the mid teens on a constant currency basis with notable successes in both <unk> and public health channels and across various geographies as well.
Chuck Davita: We are also actively working on several initiatives to better leverage our clinical strength and range of products to impact patient outcomes.
Chuck Davita: I'll share a few updates there as well.
Chuck Davita: At the end of February.
Chuck Davita: Closed the acquisition of catapult health to expand further into preventative care.
Chuck Davita: Integration is well underway, including activating cross selling opportunities and creating seamless ways for catapult to connect patients with our chronic care management programs and other services based on eligibility and patient interest while early the value proposition is resonating with the market and we're excited about our prospects will catapult.
Chuck Davita: Regarding chronic care, we recently introduced our next generation solution for cardio metabolic health delivered through an integrated program and member experience.
Chuck Davita: It builds on our successful programs with new features to support a healthy lifestyle, including member specific nutrition support from a registered dietitian at home diagnostic testing for certain measures and even includes a premium subscription to a better sleep app among other enhancements.
Chuck Davita: And in the weight management space, We recently announced our relationship with Lilly direct Eli Lilly self paid pharmacy program and its pharmacy integration partner gift health.
Chuck Davita: The arrangement will allow us to further support numbers without <unk> one coverage for obesity that are enrolled in our comprehensive weight care program or in our primary care offering.
Chuck Davita: If clinically appropriate at Teladoc licensed provider can prescribe GOP, one medications as part of our broader support programs and at a reduced price points for the member.
Chuck Davita: We also continue to invest in technology and other capabilities to support patient care.
Chuck Davita: Including enhancements to our Teladoc health Prism care delivery platform.
Chuck Davita: For example, we've added new point of care functionality to support product features we intend to bring to market later this year.
Chuck Davita: And we implemented additional AI enabled clinical documentation tools to better support our care teams using the platform <unk>.
Chuck Davita: Additionally, we have broadened our ability for customers to leverage our scale connecting our solutions with other ecosystem partners through prism.
Chuck Davita: All of this is aimed at driving greater value from virtual care, creating a more connected experience and further differentiating us in the marketplace.
Chuck Davita: Before I hand, it over to Molla, Let me briefly touch on the operating environment.
Chuck Davita: As you know the healthcare industry continues to be impacted by medical cost trends disease prevalence pressure on providers and mental health challenges among others.
Chuck Davita: These factors continue to impact the markets, we serve including health plans as they adjust to higher cost trends and other developments.
Chuck Davita: These dynamics and represent both opportunities and challenges for us and we're committed to being a company that plays a constructive role through our solutions.
Chuck Davita: We believe the actions, we're taking will provide additional opportunities to serve customers in this dynamic environment as well as improve the performance of our business.
Chuck Davita: Beyond health care of the broader economic environment plays a role as well.
Chuck Davita: With respect to tariffs, we do source certain equipment from various global markets, including our connected devices and equipment used for patient monitoring and virtual consultations in the hospital setting.
Chuck Davita: While the tariff situation is fluid.
Chuck Davita: To offset potential impacts to our business, we're implementing mitigation strategies, such as pursuing exemptions pricing actions and assessing alternative sourcing.
Malo will comment more on this in a moment.
Speaker Change: It also remains unclear how tariffs and trade negotiations will impact the broader economy in the coming months.
Speaker Change: Recent macroeconomic data has shown signs of weakening business and consumer sentiment and we're closely monitoring our business in this fluid economic and policy backdrop.
Speaker Change: As we mentioned in the last quarter, we are running modestly ahead of our prior targets for cost savings and productivity initiatives and we've made progress across many areas, including technology and development administrative costs and stock based compensation.
Speaker Change: We further streamlined our cost base in the quarter and we will continue to look for ways to drive greater efficiencies in our business and.
Speaker Change: In closing, we're pleased with the start of the year and we remain on track with our 2025 revenue outlook Rick.
Speaker Change: We're excited about completing the catapult health acquisition and the significant opportunities that lie ahead with better help an uplift joining forces to expand access to virtual mental health services we.
Speaker Change: We see many opportunities ahead to further strengthen our position and unlock future growth potential despite.
Speaker Change: Despite uncertainties in the macro environment, we are focused on what we can most impact and we're executing with urgency against the strategic priorities. We previously outlined with that I'll turn it over to Mala.
Mala Murthy: Thank you Chuck and good afternoon, everyone.
First quarter consolidated revenue was $629 $4 million down 3% year over year and at the high end of the guidance range.
Mala Murthy: Adjusted EBITDA of 50.
Mala Murthy: Eight $1 million with near the high end of the guidance range and represented a margin of nine 2%.
Mala Murthy: Consolidated net loss per share was <unk>.
Mala Murthy: <unk> three <unk>.
Mala Murthy: Compared to a net loss per share of 49 in the first quarter of 2024.
Mala Murthy: Net loss per share included a non cash goodwill impairment charge of 34 cents per share pretax which occurred after the issuance of our prior guidance and what's not included.
Mala Murthy: Excluding this charge net loss per share in the quarter would have been the upper end of our guidance range.
Mala Murthy: As discussed in our 10-K, the integrated care reporting unit's fair value was below its carrying value based on the results.
Mala Murthy: Goodwill impairment test in the fourth quarter of 2024 and continued to be at the time of the catapult acquisition as a result, any goodwill recorded in the integrated care southbound could require immediate impairment.
Mala Murthy: Net loss per share also included amortization of intangibles.
48 cents per share pretax.
Mala Murthy: Stock based compensation expense of 14 per share pretax.
Mala Murthy: These items were partially offset by a discrete tax benefit.
Mala Murthy: Related to an R&D tax credits of 12 cents per share.
Mala Murthy: First quarter free cash flow with a net outflow of $60 million.
Mala Murthy: <unk> of $11 million versus the prior year period.
Mala Murthy: We ended the quarter with nearly $1.2 billion in cash and cash equivalents for the balance sheet.
Mala Murthy: Turning to our segment results.
Mala Murthy: Integrated care segment revenue of $389 5 million.
Mala Murthy: Increased three 3% over the prior year period.
Mala Murthy: And exceeded the top end of our guidance range.
Mala Murthy: Factors that contributed to the upside versus the guidance range included timing shifts related to favorable performance on risks these deals in chronic care.
Mala Murthy: Well as FX.
Mala Murthy: Growth over the prior year was driven by visit revenue internationally in our chronic care business.
Mala Murthy: As well as the addition of catapult, which contributed approximately 90 basis points to segment growth.
Mala Murthy: U S integrated care segment membership at quarter end was $102 5 million members above the high end of our guidance range and up.
Mala Murthy: Up 12% year over year.
Mala Murthy: I'll use the virtual visit volume increased by 7%.
Mala Murthy: Chronic care ended the quarter with total program enrollment of 1.15 million.
Mala Murthy: Approximately 3% year over year as the enrollment gains from existing and new clients were partially offset by the slightly higher attrition that we have previously discussed.
Mala Murthy: Our integrated care segment continues to show strong momentum internationally with.
With related revenue growth in the mid teens on a constant currency basis.
Mala Murthy: First quarter integrated care, adjusted EBITDA with $54 million.
Mala Murthy: 6% increase over the first quarter of 2024.
Mala Murthy: Adjusted EBITDA margin of 12, 9% was up approximately 30 basis points year over year.
Mala Murthy: Our guidance range of 11, five to $12 75%.
Mala Murthy: Driven by flow through from the revenue upside from performance on a risk based deal partially offset by a pull forward of paid media spend.
Mala Murthy: We continually seek to optimize them.
Mala Murthy: Throughout the year.
Mala Murthy: Turning to the battery segment first quarter revenue of $239 $9 million was down 11% versus the prior year and above the midpoint of our guidance range.
Mala Murthy: In the quarter, we continued to see improved stability in average paying users, which declined by less than 1% sequentially. While total users at March month end exceeded back in December.
Mala Murthy: Overall customer acquisition costs have remained relatively stable since our prior update.
Mala Murthy: And retention rates were generally consistent with the fourth quarter.
Mala Murthy: Over the next several years, we believe the unification of the customer acquisition funnel between cash pay and benefits coverage will allow us to leverage better health marketing budget more effectively resulting in a lower acquisition cost per user.
Mala Murthy: But I hope adjusted EBITDA was $7 $7 million in the first quarter.
Mala Murthy: Versus $15 5 million in the prior year period.
Mala Murthy: Adjusted EBITDA margin was three 2% compared to five 7% in the prior year.
Mala Murthy: Now, let me turn to guidance.
Mala Murthy: For full year 2025.
Mala Murthy: We expect consolidated revenue of $2 $4 7 billion to $2 five 8 billion.
Mala Murthy: Which is unchanged versus our prior outlook.
Mala Murthy: We now expect adjusted EBITDA in the range of $263 million to $304 million.
Mala Murthy: Full year free cash flow of $117 million to $200 million Boe.
Mala Murthy: Both of which have been updated to reflect the impact of the uplift acquisition, which I will discuss in a moment.
Mala Murthy: Stock based compensation expense is now expected to be in the range of $105 million to $115 million.
Mala Murthy: Approximately $15 million below our prior estimate.
Mala Murthy: For the second quarter, we expect consolidated revenue in the range of $614 million to $633 million.
Mala Murthy: Adjusted EBITDA in the range of $56 million to $17 million, which includes the uplift acquisition.
Mala Murthy: Moving to the segments.
Mala Murthy: For integrated care.
Mala Murthy: We are maintaining our full year 2025 revenue guidance of flat to up 3% year over year.
Mala Murthy: We continue to expect catapult to contribute roughly 200 basis points to full year revenue growth.
Mala Murthy: Our funding our 2025 adjusted EBITDA margin guidance of 14, 3% to 15, 3% is unchanged.
Mala Murthy: And as previously discussed includes a roughly 40 basis point headwind from the catapult acquisition.
Mala Murthy: Excluding catapult adjusted EBITDA margin would be roughly flat year over year at the midpoint of the guidance range.
Mala Murthy: We are also confirming our full year member guidance range of 101 to 103 million members.
Mala Murthy: Importantly, given the fluidity of the situation.
Mala Murthy: We have not included the impact of announced tariffs and our comp guidance.
Mala Murthy: However, we feel that it is important to size the potential impact to the current year.
Mala Murthy: Based on the start dates current rates by country, including the 145% China tariff.
Mala Murthy: And our mitigation efforts.
Mala Murthy: Which includes the amount of inventory on hand.
Mala Murthy: We estimate a potential $5 million to $10 million headwind to adjusted EBITDA in 2025, largely in the second half.
Mala Murthy: We will continue to monitor developments and explore additional mitigation opportunities.
Mala Murthy: For the second quarter, we expect integrated care segment revenue growth of two 5% to 275% and adjusted EBITDA margin between $13, two 5% and 14, 75%.
Mala Murthy: This includes a full quarter of contribution for catapult, which is expected to add approximately 240 basis points to growth.
Mala Murthy: As well as a sequential decline in chronic care program enrollment in the second quarter due to the previously discussed contract law.
Mala Murthy: Importantly, we expect sequential growth in chronic care enrollment to resume in the third quarter driven in part by growth from our new weight management contract with one of our largest customers.
Mala Murthy: Also recall that our adjusted EBITDA margin in the second quarter of 2024 included a roughly 340 basis point tailwind due to several discrete factors, including performance based revenue compensation accruals and the timing of certain marketing and operating expenses.
Mala Murthy: Moving to better help.
Mala Murthy: I wanted to start by providing some additional color on uplift.
Mala Murthy: Echoing chucks thoughts.
Mala Murthy: Im very excited about the transaction and believe it has the opportunity to advance our strategic priorities.
Mala Murthy: And drive a material improvement in segment performance overtime.
Mala Murthy: In terms of background, we have acquired uplift for $30 million in cash with up to $15 million and additional contingent earn out consideration based on certain performance related milestones.
Mala Murthy: Uplifts generated approximately $15 million in revenue in 2024.
Mala Murthy: We have completed approximately 114000 sessions.
Mala Murthy: Adjusted EBITDA was a loss of roughly $6 million, which reflected investments to build out the operating infrastructure.
Mala Murthy: But that is the starting point.
Mala Murthy: Let me provide some additional detail on several factors.
Mala Murthy: We believe that access to benefits coverage.
Mala Murthy: Lead to significantly higher conversion rates relative to better helps cash pay business.
Mala Murthy: Driven by greater affordability as prospective users would incur relatively low or potentially no out of pocket costs to access mental health care based on their particular benefits.
Mala Murthy: Next week.
Mala Murthy: We expect increased member duration relative to the current that'll help model.
Mala Murthy: As many cash pay users that pass subscriptions site costs as the primary factor.
Mala Murthy: For color benefits, we initially assume that sessions per user will be 30% above that are cash pay which is conservatively below uplift historical utilization rates.
Mala Murthy: How did they progress through the remainder of 2025.
Mala Murthy: We will advance business plans at an appropriate pace with increased scaling over time.
Mala Murthy: Means that for users coming through the <unk> platform, we will enable access to insurance benefits coverage in a staged manner as we scale uplifts operations, including the provider network to ensure access and a high quality consumer experience.
Mala Murthy: Therefore, we expect a ramp in revenue contribution from benefits coverage as we enable more access over the next six to 12 months.
Mala Murthy: Consistent with other accepting benefit coverage.
Mala Murthy: Gross margin for therapy covered by insurance benefits to be lower and that of the cash pay business with our resolve to reflect a shift in mix over time.
Mala Murthy: We expect this mix shift to be driven by new users accessing benefits coverage as well as the potential shift of a portion of existing better help cash pay users to end network arrangements.
Mala Murthy: However.
Mala Murthy: We expect higher conversion rates to lead to an increase in users in visit volume.
Mala Murthy: And higher gross profit dollars should more than offset the lower gross margin profile for benefits coverage.
Mala Murthy: We expect to achieve this increase by leveraging existing advertising and marketing spend and activation expertise.
Mala Murthy: Given consumer demand and preferences and our market leading position, we do expect to maintain a sizable direct to consumer cash pay business I've got a house.
Mala Murthy: Which will include users without benefits coverage those with the health plan that is not in our network and also users who prefer a direct pay arrangement.
Mala Murthy: As a reminder, that'll help the international business is cash pay.
Mala Murthy: Our better sleep consumer offering if cash pay today as well.
Mala Murthy: In terms of how this translates to our outlook.
Mala Murthy: We anticipate approximately $10 million of incremental benefits coverage related revenue in 2025.
Mala Murthy: Net of any shift from the existing cash pay business.
Mala Murthy: We expect a more material revenue contribution in 2026, as we continue to methodically scale operations and the therapist network to meet demand and enable access.
Mala Murthy: Returning the better health segments to a growth trajectory.
Mala Murthy: These estimates will be further refined as we progress through the year and move into 2026.
Mala Murthy: To support the scaling of the insurance business, we expect additional opex investments in areas such as provider recruitment credentialing support functions and technology.
Mala Murthy: These investments combined with some dilution from the legacy uplift business are expected to lead to an incremental headwind of approximately 10 to 15 million to 2025 adjusted EBITDA.
Speaker Change: With a better health segment and overall.
Speaker Change: Moving to our updated outlook for better health.
We continue to expect full year 2025 revenue to decline, 375% to 975% versus 2024.
Speaker Change: Which includes the incremental contribution from benefits coverage.
Speaker Change: And reflects updated views on the cash pay business.
Speaker Change: Recent softening consumer sentiment and increasingly uncertain macroeconomic backdrop.
Speaker Change: Demand for mental health services remained resilient in the first quarter as we delivered revenues in the upper half of our guidance range.
Speaker Change: Having said that we observed a slight uptick in churn rates more recently, something we are monitoring closely and factoring into our guidance range.
Speaker Change: However, providing customers with the ability to access benefits coverage can help to ease this risk over time.
Speaker Change: For adjusted EBITDA margin, we now expect a range of $4 75 to $6 two 5% for the full year, which is down 150 basis points versus our prior outlook.
Speaker Change: And includes the impact of the uplift acquisition and increased investments to support the insurance business.
Speaker Change: For the second quarter, we are guiding to better help segment revenue to be down seven 5% to 11, two 5% year over year.
Speaker Change: But at the midpoint, reflecting modest sequential revenue improvement over the first quarter.
Speaker Change: We expect an adjusted EBITDA margin of two 5% to five 5% for the second quarter, both reflect uplift from the closing date forward.
Speaker Change: Lastly from a balance sheet standpoint, we continue to have a high degree of financial flexibility with nearly $1 2 billion in cash and cash equivalents on the balance sheet as of the end of the first quarter.
Speaker Change: Our 2025 convertible bond comes due in June, which we will retire with cash on hand at maturity.
We continue to evaluate our long term financing, although we believe our strong cash position cash flow generation and business position provides us with optionality in the future.
Speaker Change: With that I will turn the call back to Chuck.
Chuck Davita: Thanks, Mala before we open it up for your questions I wanted to highlights an exciting recognition we recently received.
Chuck Davita: Teladoc was named to Newsweek's, most trustworthy companies in America for 2025 and ranked number one in the health care and life Sciences industry.
Chuck Davita: We were also included in USA today's inaugural list of America's most trusted brands and one of just five companies to earn a top five star rating in the pharmacies health and wellness category.
Chuck Davita: We are honored to be recognized for the trust. We earned from members clients and partners and I could not be more proud of the entire team and their commitment to integrity and excellence.
Chuck Davita: That we will open it up for questions operator.
Chuck Davita: Okay.
Chuck Davita: If you'd like to queue for a question you can do so by pressing star one on your telephone keypad.
Chuck Davita: If for any reason you'd like to remove your question its star two.
Chuck Davita: But again to join the question queue. Please press star one.
Chuck Davita: And it's been ask that you hold yourself to one question with a follow up question.
Speaker Change: Our first question is from Jessica <unk> with Piper Sandler Your line is now open.
Jessica: Hi, guys. Thanks for taking the questions and congratulations on the acquisition and bringing behavioral health and network or expanding that.
Speaker Change: That offering.
Speaker Change: Wondering if you guys can talk a little bit about the shorter duration.
Speaker Change: Contacts that were made available and better help I think in the fourth quarter. So like weekly billing. It doesn't look like that had too much of a percent impact on an average P. M P and in the first quarter, which is good and but just if.
Speaker Change: And you can think a little bit to the impact of that offering on turn and then the expectations embedded in the next three quarters as well that'd be helpful. And then just a quick follow up would be and have you done any evaluation or assessment as to why the core better health network was not able to ultimately get payer coverage and.
Speaker Change: And an upfront obviously was just just kind of any of the things that you want to make on.
Speaker Change: On the <unk> and.
Speaker Change: Thanks.
Speaker Change: Thank you Jessica I'll start with your first question. So I'll take them in order. So we have been talking about the weekly offering now for several months just.
Speaker Change: To recap the activities we've had there we started essentially in September.
Speaker Change: With the weekly offer prior to that our better help offering was only a monthly subscription.
Speaker Change: What we did do then is to start this weekly offer with a price point that is essentially a fourth of the monthly subscription price points. So we didn't really do any kind of discounting.
Speaker Change: We have essentially taken that price point and quite a bit at a fourth of that what we are seeing and I won't say a lot of our acquisitions now is around the weekly offer courses Montreal fourth.
The trends that we have been seeing over the past several months is as follows.
Speaker Change: Because the weekly offer or is that a more accessible price point on surprisingly, we're actually seeing stronger conversion I'd say much stronger conversion.
Speaker Change: The second though is because the user is.
Speaker Change: Is reminded on a weekly basis.
Speaker Change: We are also seeing higher churn.
Speaker Change: Of which we expected.
Speaker Change: What is important though is that net of the two it is still possible.
Speaker Change: So what we are essentially seeing is it is still a net positive relative to the monthly offer.
Speaker Change: And we are continuing to evaluate how the LTV plays out over time LTV.
No.
Speaker Change: Something that we measure and watch over time.
Speaker Change: So we are essentially saying that you know that.
Speaker Change: The the metrics that we're looking at.
Speaker Change: Main stable we are pleased with what we're seeing and we will continue to assess and evaluate the one thing I would also say is we.
Speaker Change: We have to be careful about when we think about the revenue per member of where the revenue per user.
Speaker Change: Because we are acquiring these customers add that the more we can price point, you will see an impact quite naturally on the revenue per member.
Speaker Change: Remember we are also getting a lot more members so.
Speaker Change: Lot more users. So those are essentially the trends that we are seeing Chuck do you want to comment on the second yeah. I would just as a reminder, what we talked about getting into the benefit coverage space.
Chuck Davita: Really through the end of the year, our focus was on the technical capabilities around that the team has made really good progress as we shared on our last call we were.
Chuck Davita: We were ready operationally to do that we had hired talent and we were going after and still are going after.
Chuck Davita: Are your contracts that really started in earnest in the first quarter.
Chuck Davita: Fly to over a dozen.
Chuck Davita: Payers in terms of getting a network coverage and I had a couple that we're at the finish line when the uplift transaction started to really gain momentum and we pause things there with those payers. So we didn't and mixed signals.
Chuck Davita: Felt like this was a way to accelerate what we're doing so it wasn't about the better health network itself. Its about this was an opportunity to accelerate we were 35000 therapists in the network.
Chuck Davita: And we have extensive we believe his extensive numbers in there that would be interested and meet the requirements for payer coverage and that's what we're going to activate over time. So again I think the sequencing was as I just mentioned and we're excited about this opportunity.
Speaker Change: Awesome. Thank you.
Speaker Change: Our next question is from David Roman with Goldman Sachs. Your line is now open.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: David We cant hear you.
Speaker Change: Okay can you hear me now yes.
Speaker Change: Yes.
Speaker Change: Sorry about that I, just wanted to come back to the better health business here a little bit.
Speaker Change: And if we if we can you guys hear me.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Sorry, I got that guys can you hear me okay.
Ken: Hey, Ken.
Ken: Okay I wanted just to come back to the better health business and specifically look at the the member trends actually improved quite a bit you mentioned Q1 to Q.
Ken: First Q4 down very marginally.
Ken: Sequentially, but if you look at the revenue numbers Youre seeing a pretty significant decline either in <unk> revenue per member can you maybe help us understand the declines that you're seeing both in the integrated care business I think you've noted an 8% decline in revenue per member there, but obviously the down 4%.
Ken: Members in better help compared to the.
Ken: Down 11% in revenue, maybe help us bridge that gap.
Ken: Yeah.
Ken: So all the integrated care side, yes.
Ken: What we did see is the decline that we spoke off on a year over year basis on revenue per member.
Ken: Remember that what that is showing is a very significant increase in number of members. We also reported a 12% increase in member so on a year over year basis, David of over 8 million members. So if you just think about what that means.
Ken: You're onboarding, a big cohort of members.
Ken: And that is essentially in the in the ratio, we haven't really had time yet.
Ken: To sell into that member population all of the more revenue accretive services that we offer such as chronic care et cetera. So what you see here as they typically will come in so take <unk> is a great example, right.
Ken: <unk> on boarded 9 million members essentially starting the beginning of the year.
Ken: So what you will see is them coming in with essentially core telehealth services over time, we will have an opportunity to cross sell and upsell to them additional products and services.
Ken: So the that that dynamic is essentially what is causing a depression in the year over year metric I will say if you were to look at it on a single pad on a same store sales basis you.
Ken: You would actually see a slight increase in our revenue per member on the integrated care side.
Ken: And the fact that they are adding all of these members is a perfect opportunity for us to actually put in action, our land and expand right. They are blended these members and now as an opportunity for us to expand into additional products and services, which will happen over time. So that's on the integrated care side.
Ken: On the Hep side, what I would say is the.
Ken: <unk>.
Ken: The.
Ken: Fact that you are seeing the revenue per user or <unk>.
Ken: You are is a combination of a few things first is we.
Ken: We have said in terms of our priority International growth is certainly an area of focus for us in better health and we have said that international revenue per user is lower than in the U S. Now keep in mind that in.
Ken: In international the positive acquisition is also lora so from a margin perspective, it's it's slightly lower than the U S.
Ken: Net margin, but only slightly lower but certainly if you look at the headline revenue per user is Laura. So you are partly seeing a mix effect. If you look at the revenue per user. So that is one dynamic and then the other dynamic that youre seeing is what I spoke about a few minutes ago.
Ken: About the weekly price we are acquiring users at a price point that is lower but we are also acquiring more users. It's just so that we.
Ken: We will be able to over time.
Ken: I would say that as our acquisition.
Ken: <unk> become more efficient and we are able to use our advertising spend to actually be more efficient and effective.
Ken: That should essentially resolved in greater revenue growth overtime.
Speaker Change: Okay. That's very helpful perspective, and thank you for the detail maybe just a follow on follow up on that as you think strategically I think one of the themes check that you've talked about over the past year is increasing their profitability per member and really focusing in on profitable member growth.
Speaker Change: Do you kind of contrast that with sort of the continued focus on member growth. The dilutive impact of that are you sure you're being focused enough in this strategy here and maybe any color you can give us on what in your mind, the signposts that you're watching to give you confidence that you can really return this business to growth.
Speaker Change: Right.
Speaker Change: Are you speaking about members on the better health side or you're talking about there.
Speaker Change: And then.
Speaker Change: Tony.
Speaker Change: Total.
Speaker Change: It is a focus.
Speaker Change: Better help there, but you're still talking about 8% growth in the integrated care side, you have over 100 million members that that's a giant number.
Speaker Change: How do you make sure youre extracting the value there. So we're still not seeing total company revenue churn in any meaningful way. So as you think about the strategic changes youre, making any acquisitions how does this all fit together for you.
Speaker Change: What are the signpost Youre, Washington should give you confidence that you can get the company back to revenue and EBITDA growth.
Speaker Change: Yes, Okay got it just want to make sure I was clear on the question. So a couple of things are in play here first of all the.
Speaker Change: Growth in customers growth in members will translate into growth in usage of services and as our business and integrated care side, we've seen more movement from subscription based models to visit fee based models that membership and the activation of that membership to visit is how you get paid that is the revenue.
Speaker Change: <unk> so the growth is important there as well and why.
Speaker Change: I talked about this a couple of quarters ago, but why it's such a priority for us to make our visits more valuable what do I mean by that was that as that mix shift changes we need those visits we need the activation when you do a great job for our customers great job for our members to have a visit and we need those visits to be able to do more services on behalf of our customers.
Speaker Change: So that's why we are putting the technology in place.
Speaker Change: And in my prepared remarks that allow us to activate and take the next best action for that remember that all of that is underlying the importance.
Speaker Change: Of that in terms of how we're going to see growth. So I think the headline metric of revenues divided by members I think has historically made some sense, but I think their business is evolving and I would just highlight that so so that's one second I've talked about the need to make our chronic care management programs and use our clinical strength in <unk>.
Speaker Change: <unk> growth to drive more value well, what do I mean by that we have over a million people that we serve a massive number of people that we serve in chronic care. These are people with diabetes hypertension with weight and obesity issues and so we're doing a great job in terms of engaging with those members, helping them with their conditions et cetera, we have.
Speaker Change: A further opportunity to drive more I would say outcomes with respect to cost of care, which is a major issue that our health plan customers are facing in our employer customers are facing and so that's where a lot of the innovation in the product.
Speaker Change: Roadmap is headed which is how do we take those programs next level. It's those things that are going to drive the future growth of the company both from a top line as well as from a user perspective. So hopefully that's some additional color for you David one other thing I would add is.
Speaker Change: On the better health side, we have for a while now been talking about balancing top and bottom line growth.
Speaker Change: We are managing our return on AD spend such that we are not chasing unprofitable revenue.
Speaker Change: One thing I would add as we thought about the rationale the strategic rationale for the uplift acquisition.
Speaker Change: <unk> is the fact that if you think about the enormous funnel that better health has with its scale.
And that scale and the funnel is supported by the advertising and marketing spend that we have and the better health business.
Speaker Change: We're talking about close to 4 million users at the top of the funnel who are essentially interested in at least looking into a better help service right.
Speaker Change: Now the fact is as they go through the funnel and they come to a cash pay auction many of them choose not to avail themselves off the surface. So.
Speaker Change: Do you think about the conversion factor for the amount of AD spend we have.
Speaker Change: We now with offering the covered benefits auction with uplift or allow our essentially leveraging our AD spend to capture those some of those hopefully many of those users over time with the insurance option. So it actually allows us to capture.
Speaker Change: There are more users through that funnel leverage our AD spend in a much more effective way and that should help not only top line growth, but that should also translate to bottom line growth.
Speaker Change: Our next question is from Daniel gross light with Citi. Your line is now open.
Speaker Change: Thanks for taking the question.
Speaker Change: I was hoping to get a little bit more detail on the cadence of better help margin improvement in the back half of the year.
Speaker Change: Our guidance implies nearly $20 million or so improvement from one half to second half and you noted that there is around I think you mentioned $10 million to $15 million of additional costs due to uplifts in some additional investments youre, making in the insured products.
Speaker Change: Help us think through <unk> and <unk> as those two dynamics play out.
Speaker Change: Yeah. So the way I would think about the dynamic playing out.
Danielle: The following way Danielle our you know that the better health business.
Danielle: <unk> is essentially largely variable margin business.
Danielle: There is a relatively low amount of fixed cost.
Danielle: We do as we said half investments proposed for the integration and the.
Danielle: Just getting a quick start on.
Danielle: Realizing the strategy that we have with the uplift acquisition, having said that what I would say is the following simple.
Danielle: The ramp for the second half to be driven by a few things. One is if you think about revenue. We will continue to advance on revenue growth as we go to the second half on the back of all of the priorities for the better help business that'd be have already talked about including insurer.
Danielle: <unk>.
Danielle: As far as including international.
Danielle: Continuing to make progress on our international efforts, both English speaking countries as well as the yeah. The localized market launches that we are at we are in.
Danielle: In process, we've done France, we are doing Germany, and Netherlands next so we are making progress on advancing those international priority.
Danielle: For the second half ramp is essentially conditioned on the revenue.
Danielle: Those fr.
Danielle: And then we are also as we talked about looking to advance the insurance efforts in the second half.
Danielle: The last thing I will say is as always we have talked about pulling back on AD spend in the fourth quarter and we will do so again. This year just like we have done in prior years I will say I do expect the AD spend in the fourth quarter of this year.
Danielle: To be slightly sequentially greater from a pullback standpoint relative to last year.
Danielle: Last year, if you remember we had very very little pullback in AD spend in the fourth quarter I do expect it to be a little bit more pronounced this year.
Danielle: And those are essentially the various factors playing into the second half.
Speaker Change: Got it Okay, and then on the uplift pricing model is that subscription based and visit base or is it.
Speaker Change: Based only and talk a little bit about how that may integrate with the mental health solution.
Speaker Change: Integrated care side of things.
Speaker Change: Yeah. This is this is in network coverage. So it's there'll be visit based its not subscription base. So that that model is there and we expect as we've seen with others, but also our own experience.
Speaker Change: More of it more extended usage more visits because it's covered by insurance. So that's the model there the integrated care mental health offering, which is which is quite scaled over 1 million visits.
Speaker Change: Visits a year, it's really an offering that is somewhat different it's got a lot of content a lot of different kinds of tools and it's it's really sort of sold and integrated with our various other offerings on that side.
Speaker Change: We have looked at and it moved a bit on some synergies between integrated care and better health. For example, how we were doing some of the sales and go to market of the better help for business offering theres. Some products. Some joint products that we're exploring right now that we think could be a interesting development for the company don't want don't want.
Speaker Change: To speak about that too much now, but so I think that they are somewhat different markets, they're serving different use cases for customers, but again the macro theme of.
Speaker Change: Virtual mental health care.
Speaker Change: Being an important priority for Teladoc.
Speaker Change: What's most important it's a space that is widely adopted post pandemic that had the highest sort of penetration if you will and virtual care. That's sustained that you think about the shortage of.
Speaker Change: Access.
Speaker Change: Unmet mental health needs that are there both in the U S and internationally, obviously and so we think from a macro perspective. This is the right space to be in we're scaled and integrated care, we have massive scale in the consumer business with better health, we have the most well recognized brand and better health funnel of 4 million people registering that's massively higher than anything.
Speaker Change: One else. So if we have this opportunity to sort of help those consumers access their benefit coverage with the great experience that they're looking for with better health. We think it's the right strategic move for us so.
Speaker Change: Different customer basis, but I think broader theme is right on.
Speaker Change: Got it thank you.
Speaker Change: Our next question is from Julian dressing with tourists. Your line is now open.
Eduardo: Hi, guys. Thanks for the question. This is Eduardo on for Joe.
Speaker Change: Can you speak to what Youre seeing in terms of cat trends and a better health business.
Speaker Change: Is it different than on the domestic and the international side and I noticed the advertising and marketing spend.
Speaker Change: Are there any penalty.
Speaker Change: 30, <unk> hundred 50 bps sequentially. So just curious.
Speaker Change: Are you seeing there.
Speaker Change: Yeah, I would characterize the.
Speaker Change: Trends that we are seeing as stable.
Speaker Change: Stable through the first quarter of this year and I would say Eduardo we are actually seeing it.
Speaker Change:
Speaker Change: More favorable relative to the last many quarters for an important reason.
Speaker Change: Because we are seeing good conversion rates in our from our weekly offer from the acquisitions, we are making on our weekly offer.
Speaker Change: It is the yield is actually better. So if you just think about why we are seeing favorability in our attack. It is really because all the acquisitions that we are making.
Speaker Change: On the weekly offer so those are essentially the the trends that we are seeing.
Speaker Change:
Speaker Change: There we are not seeing any significant differences I would say.
Speaker Change: In U S versus international.
Speaker Change: I'll say customer acquisition costs have remained relatively stable thus far in two in 2025 across the board.
Speaker Change: So that's sort of what we are factoring into our guidance now one thing I will obviously always caveat is.
Speaker Change: We started in February with a wide range within our guidance for better health.
Speaker Change: We are continuing with that wide range for better health and part of the reason we have that wide range out there is.
Speaker Change: Macros are uncertain.
Speaker Change: Humorous sentiment is certainly uncertain to softening.
Speaker Change: And I would say overall, what we have also learned over the past couple of years is.
Speaker Change: This space can move very dynamically, including in AD costs in that pricing. So we have given ourselves room to navigate through these uncertainties as best we can.
Speaker Change: Our guidance range being as why does it does.
Speaker Change: Alright. Thanks.
Speaker Change: Yeah.
Speaker Change: We have a question from Elizabeth Anderson with Evercore. Your line is now open.
Speaker Change: Hi, Thanks for the question.
Speaker Change: Alan Chan umbrella is about I have a question on cost savings I believe on the Q4 call. You mentioned about increased focus on tech and G&A costs can you share more color on how you're thinking about additional opportunities in those areas.
Speaker Change: Yeah.
Speaker Change: So we.
Speaker Change: We had talked about the fact that in the February call.
Speaker Change: We expected the cost savings this year to be modestly higher than what we had originally.
Speaker Change: For 2025, we continue to make efforts in fact, I would say to you in the first quarter.
Speaker Change: We took out a little bit of additional cost.
Speaker Change: And we were expecting earlier in the year.
Speaker Change: And we have accounted for increased restructuring costs and severance costs as a result of that as we have put out the EPS guide point being we continue in the uncertain macroeconomic economic environment.
Speaker Change: It's prudent for us to.
Speaker Change: Think about continuously looking at our cost base and look at streamlining rationalizing our cost base as appropriate.
Speaker Change: If you look at the results we delivered Q1I would say we have demonstrated good control over our overall cost base.
Speaker Change: Technology and development spend is down.
Speaker Change: On a year over year basis, we have spoken about the fact that we are quoting scrutiny on this line item, we expect that to continue and I would say I would expect overall candy dollar spend from an opex basis to be down in absolute levels.
Speaker Change: Oh year over year as we go through this year.
Speaker Change: On the G&A side, we did have a couple of we had some accruals that we took reserves on so you will see that in our numbers for the fourth quarter, but I do expect us to continue to demonstrate with range.
Speaker Change: And discipline as we go through the year and as you saw in our prepared remarks, we have brought it down.
Speaker Change: Stock based compensation.
Speaker Change: Our outlook for the year by $15 million and it is considerably lower than 2024 and 2023. So again, it's a point of focus for us and will continue to.
Speaker Change: Pain control exercise control over that.
Speaker Change: Got it thanks.
Speaker Change: Okay.
Charles: We have a question from Charles <unk> with Cowen. Your line is now open.
Speaker Change: Yes. Thanks, Thanks for taking the question.
Speaker Change: I guess, firstly, if we think about.
Speaker Change: Sort of the path here.
Speaker Change: I guess I just wanted to talk about uplift here to pay about two times revenue up to three times, depending on the contingent.
Speaker Change: Payments into the future, but if you go back to kind of pool. If you paid about two times revenue as well and I get both of these bring to you guys. Some important capabilities and certainly with uplift getting sorry.
Speaker Change: So insurance based coverage here.
Speaker Change: But when you start treating.
Speaker Change: Less than one times in a closer to one five times.
Speaker Change: Revenue.
Speaker Change: Can you talk about more about why why the board is not more arguably perhaps looking at sure.
Speaker Change: <unk> understanding of the converts coming due or you're going to you're going to pay down in cash.
Speaker Change: But when you look at overall leverage is not that drastic and we certainly have a lot of financial capacity as it stands.
Speaker Change: Can you can you talk to a little bit about your capital deployment.
Speaker Change: Strategy at this point and maybe why share buyback is not a perhaps the biggest part of that thanks.
Speaker Change: Yeah.
Speaker Change: So it's a it's a very fair question Charles.
Speaker Change: Unsurprisingly. This is a point of active discussion amongst the management team internally.
Speaker Change: And you know as we think about the various options we have to deploy our capital.
Speaker Change: First we are looking to deploy capital to amass capabilities that we need for us to be able to drive sustained top line growth as we move forward over the next two.
Speaker Change: <unk> to 36 months.
Speaker Change: You know when Chuck came onboard middle of last year, one of the things that we talked about then and since on earnings calls is the fact that we are a company looking to reposition and turn around our performance that takes capital deployment that can be oral.
Speaker Change: Panic that can be inorganic as you have seen us using organically over the past couple of quarters. So we are looking to as we have always done to look at adding.
Speaker Change: Adding to our capabilities, whether it be services, whether it be other capabilities.
Speaker Change: So that we can drive sustained.
Speaker Change: Topline and bottom line growth in the months and years ahead. So that's number one number two.
Speaker Change: We definitely are looking at our overall leverage and our debt.
Speaker Change: We talked about in our prepared remarks, we'll pay down the upcoming note that you. We are looking at the 2027 notes that is outstanding.
Speaker Change: And we know that it's trading below par. So we are assessing that the third and we have never taken this off the table, we are absolutely looking at buybacks as well.
Speaker Change: So it's a matter of and we have been talking to the board about all of this so as you know as a part of normal course of conversations that the leadership team has the board.
Speaker Change: I would say to you.
Speaker Change: None of these is off the table.
Speaker Change: It's a matter of us at this moment because off looking too.
Speaker Change: Accrete to our topline growth and bottom line growth in the years ahead.
Speaker Change: There are opportunities that are coming our way.
Speaker Change: You know we are with the scale we have in the space.
Speaker Change: We do tend to get a lot of inbounds and you know we look at them in terms of what it will do for our future performance.
Speaker Change: So the fact that we are going out with catapult and we have just gone up with the uplift acquisition.
Speaker Change: He is a reflection of the fact that we had these interesting opportunities that we were looking at and you know that came to us.
Speaker Change: And we felt that it was really important for us to move forward with that Chuck.
Speaker Change: Just the only thing I would add as well.
Speaker Change: We need to invest in those key strategic priorities, our biggest opportunity as a company and for our shareholders is to leverage this scaled position that we have with the 100 million lives with this really unparalleled position over 12000 customers.
Speaker Change: The international business. So we.
Speaker Change: We need to invest in those capabilities are going to really achieve the outcomes against the scale. That's been built and on the better help side. The acquisition you mentioned the two times. This is.
Speaker Change: A company that had invested in their capabilities as a really strong team.
Speaker Change: Limited in terms of their ability to activate it.
Speaker Change: At the end of the day, you need to activate the consumer make them aware of what youre doing and activate them into your solution. That's what better helped us better help us experts at massive scale. So that's how we looked at that acquisition and we're really excited about the fact that we can accelerate our progress obviously you were going to do it in a mess.
Speaker Change: <unk> way as Malo said, we want to build it for the long term, but it really is an unparalleled opportunity to take something is massively scaled as better health and to start to bring that consumer orientation.
Speaker Change: Inactivate with that benefit coverage. So that's how we're looking to capital obviously, all the things that most that are on the table, but we also want to make sure. We're investing in this business for the future.
Speaker Change: Okay.
Speaker Change: Oh, a question can I just ask.
Speaker Change: So.
Speaker Change: Honestly, you talked about getting into the car care population at the start of this year looking to activate on that side cross sell products.
Speaker Change: Above the basic sort of telehealth offering to start.
Speaker Change: You're talking about here better help here with uplift in trying to transition that a little bit away from direct to consumer model can you talk about sort of.
Speaker Change: The capacity internally at the management level to kind of handle these processes because.
Speaker Change: They seem very distinctly different challenges that you're facing.
Speaker Change: <unk> been facing over the last year, plus and I guess fundamentally just to the question.
Speaker Change: The strategic value of having both of these assets under.
Speaker Change: A single roof here and whether you are.
Speaker Change: Management attention and resources are being kind of pulled in different directions, and perhaps a more focused strategy on one or the other might might move things along quicker. Thank you.
Speaker Change: Yeah, I think it's a fair question.
Speaker Change: One of the very first things when I came on board and we've spoken about this in prior quarters was that we needed to take a look at the way. We were organized I think we were organized in a way that we're not as close to the customer as we needed to be and we've made a number of changes to streamline the organization and focus them on their markets that not only did it save on a call.
Speaker Change: <unk>, if you will it improved agility in and put the right leadership and management structure in place. So that we can activate on each one of these strategies. So we are organized to execute against this feel comfortable that we have the ability to kind of drive those forward I think the importance of we had these two scale businesses that are part of Teladoc. It's incumbent upon us to make sure that we're maximizing the.
Speaker Change: Value out of those we need to make sure that better help us position for the future.
Speaker Change: As we said we think that that's the right thing to do regardless and I think activating against these strategies on the integrated care side are going to yield benefits as well. So it's a fair point, but we feel like we've got it adequately covered.
Speaker Change: We are out of time for questions. So that will conclude today's call. Thank you all for your participation you may now disconnect your lines.
Speaker Change: Yeah.
Speaker Change: Okay.