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Teladoc Health Reports Third-Quarter 2020 Results

Teladoc Health, Inc.
·20 min read

Year-over-year Q3 revenue grows 109% to $288.8 million and total visits increase 206% to 2.8 million

Year-over-year nine months revenue grows 79% to $710.6 million and total visits increase 163% to 7.6 million

Issues 2020 fourth-quarter guidance, raises full-year expectations

PURCHASE, N.Y., Oct. 28, 2020 (GLOBE NEWSWIRE) -- Teladoc Health, Inc. (NYSE: TDOC), the global leader in virtual care, today reported strong financial results for the quarter ending September 30, 2020.

“Our strong third quarter results exceeded expectations, driven by broad-based strength across the business and building on the momentum we saw in the first half of the year,” commented Jason Gorevic, chief executive officer of Teladoc Health. “We are seeing significant market success and consistent growth in member visits throughout all of our commercial channels. With the addition of Livongo later this year, we will be creating a new category of whole person virtual care that will transform how people live healthier lives.”

Teladoc Health recently entered new and expanded client partnerships with industry leaders including GuideWell, Johns Hopkins and Telefonica. The company highlighted continued, sustainable growth bolstered by increases in specialty visits and registrations together with ongoing diversity of visit diagnoses.

Financial Highlights for the Third Quarter and Nine Months Ended September 30, 2020

Revenue

($ thousands)

Quarter Ended

Year over Year

Nine Months Ended

Year over Year

September 30,

Growth

September 30,

Growth

2020

2019

2020

2019

Access Fees Revenue

U.S.

$

194,622

$

92,095

111

%

$

454,582

$

258,604

76

%

International

31,997

27,030

18

%

91,261

77,716

17

%

Total

226,619

119,125

90

%

545,843

336,320

62

%

Visit Fee Revenue

U.S. Paid Visits

35,074

14,142

148

%

105,013

47,473

121

%

U.S. Visit Fee Only

15,874

4,307

269

%

47,931

11,974

300

%

International Paid Visits

96

395

(76

)

%

705

1,051

(33

)

%

Total

51,044

18,844

171

%

153,649

60,498

154

%

Other

U.S.

10,299

0

N/M

%

10,299

0

N/M

%

International

850

0

N/M

%

850

0

N/M

%

Total

11,149

0

N/M

%

11,149

0

N/M

%

Total Revenue

$

288,812

$

137,969

109

%

$

710,641

$

396,818

79

%


Membership and Visit Fee Only Access

(millions except for care locations)

Quarter Ended

Year over Year

September 30,

Growth

2020

2019

Total U.S. Paid Membership

51.5

35.0

47

%

Total U.S. Visit Fee Only Access

21.8

19.0

15

%


Visits

(thousands)

Quarter Ended

Year over Year

Nine Months Ended

Year over Year

September 30,

Growth

September 30,

Growth

2020

2019

2020

2019

Paid Visits from U.S. Paid Membership

682

278

145

%

2,127

934

128

%

Percent of Paid Visits from U.S. Paid Membership

32

%

45

%

39

%

48

%

Visits Included from U.S. Paid Membership

1,447

344

321

%

3,384

1,016

233

%

Total Visits from U.S. Paid Membership

2,129

622

242

%

5,511

1,950

183

%

U.S. Visit Fee Only

261

62

318

%

794

179

343

%

International Visits

445

244

83

%

1,331

770

73

%

Total Visits

2,835

928

206

%

7,636

2,899

163

%

Utilization

16.5

%

8.0

%

854

pt

15.4

%

9.3

%

615

pt

Platform-Enabled Sessions*

986

-

N/M

%

-

-

N/M

%

* Platform-Enabled Session is a unique instance in which our licensed software platform has facilitated a virtual voice or video encounter between a care provider and our client’s patient, or between care providers. We believe platform enabled sessions are an indicator of the value our clients derive from the platform they license from us in order to facilitate virtual care.

  • Net loss was $(35.9) million for the third quarter 2020 compared to $(20.3) million for the third quarter 2019. Excluding $16.0 million of transaction costs related to the pending Livongo merger, net loss was $(19.9) million for the third quarter of 2020. Excluding $25.2 million of transaction costs related to the pending Livongo merger and the acquisition of InTouch Health, which closed on July 1st, net loss was $(10.7) million for the third quarter of 2020.

  • Net loss per basic and diluted share was $(0.43) for the third quarter 2020 compared to $(0.28) for the third quarter 2019. Excluding transaction costs of $0.19 per share related to the pending Livongo merger, net loss per share was $(0.24). Excluding transaction costs of $0.30 per share related to the pending Livongo merger and the acquisition of InTouch Health, which closed on July 1st, net loss per share was $(0.13) for the third quarter of 2020.

  • GAAP Gross margin which includes depreciation and amortization was 63.3 percent for the third quarter 2020 and 68.1 percent for the third quarter 2019.

  • Adjusted Gross margin was 63.7 percent for the third quarter 2020 compared to 69.0 percent for the third quarter 2019.

  • EBITDA was a loss of $(6.8) million for the third quarter 2020 compared to a loss of $(10.3) million for the third quarter 2019. Excluding $16.0 million of transaction costs related to the pending Livongo merger, EBITDA was $9.2 million. Excluding $25.2 million of transaction costs related to the pending Livongo merger and the acquisition of InTouch Health, which closed on July 1st, EBITDA was $18.4 million for the third quarter of 2020.

  • Adjusted EBITDA was a positive $39.5 million for the third quarter 2020 compared to a positive $9.0 million for the third quarter 2019.

A reconciliation of generally accepted accounting principles (“GAAP”) in the United States to non-GAAP results has been provided in this press release in the accompanying tables. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures”.

Financial Outlook
Teladoc Health provides guidance based on current market conditions and expectations. Given the uncertainty of the expected path of the COVID-19 outbreak as well as the broader economic impact, our updated guidance is based on what we know today. As this is an emerging situation, circumstances are likely to change in the coming weeks and months, but we believe our guidance ranges provide a reasonable baseline for 2020 financial performance.

For the fourth-quarter 2020, we expect:

  • Total revenue to be in the range of $294 million to $304 million.

  • EBITDA (loss), excluding transaction costs related to the pending Livongo merger, to be in the range of $(1) million to $2 million.

  • Adjusted EBITDA to be in the range of $21 million to $24 million.

  • Total U.S. paid membership to be in the range of 50 million to 51 million members and visit-fee-only access to be available to 21 to 22 million individuals, including 2 to 3 million members on a temporary basis.

  • Total visits to be between 2.8 million and 3.0 million.

  • Net loss per share, excluding all transaction costs related to the pending Livongo merger, based on 84.4 million weighted average shares outstanding, to be between $(0.36) and $(0.33).

For the full-year 2020, we expect:

  • Total revenue to be in the range of $1,005 million to $1,015 million.

  • EBITDA (loss), excluding all transaction costs related to the pending Livongo merger, to be in the range of $(1) million to $2 million.

  • Adjusted EBITDA to be in the range of $97 million to $100 million.

  • Total U.S. paid membership to be in the range of 50 million to 51 million members and visit-fee-only access to be available to 21 to 22 million individuals, including 2 to 3 million members on a temporary basis.

  • Total visits to be between 10.4 million to 10.6 million.

  • Net loss per share, excluding all transaction costs related to the pending Livongo merger, based on 79.4 million weighted average shares outstanding, to be between $(1.36) and $(1.32).

Quarterly Conference Call

The third quarter 2020 earnings conference call and webcast will be held Wednesday, October 28, 2020 at 4:30 p.m. EDT. The conference call can be accessed by dialing 1-888-869-1189 for U.S. participants, or 1-706-643-5902 for international participants, and including the following Conference ID Number: 2684889 to expedite caller registration; or via a live audio webcast available online at http://ir.teladoc.com/news-and-events/events-and-presentations/. A webcast replay will be available for on-demand listening shortly after the completion of the call at the same web link.

About Teladoc Health

Teladoc Health is transforming how people access and experience healthcare. Recognized as the world leader in virtual care, Teladoc Health directly delivers millions of medical visits across 175 countries each year through the Teladoc Health Medical Group and enables millions of patient and provider touchpoints for thousands of hospitals, health systems and physician practices globally. Ranked Best in KLAS for Virtual Care Platforms in 2020, Teladoc Health leverages more than a decade of expertise and real-time insights to meet the growing virtual care needs of consumers, healthcare professionals, employers and health plans. For more information, please visit www.teladochealth.com or follow @TeladocHealth on Twitter.

Cautionary Note Regarding Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “believe,” “project,” “estimate,” “expect,” “may,” “should,” “will” and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding future revenues, future earnings, future numbers of members or clients, litigation outcomes, regulatory developments, market developments, new products and growth strategies, and the effects of any of the foregoing on our future results of operations or financial conditions.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: (i) changes in laws and regulations applicable to our business model; (ii) changes in market conditions and receptivity to our services and offerings; (iii) results of litigation; (iv) the loss of one or more key clients; and (v) changes to our abilities to recruit and retain qualified providers into our network. For a detailed discussion of the risk factors that could affect our actual results, please refer to the risk factors identified in our SEC reports, including, but not limited to our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, as filed with the SEC.

Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.


CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data, unaudited)

September 30,

December 31,

2020

2019

Assets

Current assets:

Cash and cash equivalents

$

1,187,299

$

514,353

Short-term investments

3,070

2,711

Accounts receivable, net of allowance of $4,661 and $3,787, respectively

85,803

56,948

Inventories

11,578

0

Prepaid expenses and other current assets

22,293

13,990

Total current assets

1,310,043

588,002

Property and equipment, net

20,364

10,296

Goodwill

1,691,355

746,079

Intangible assets, net

386,573

225,453

Operating lease - right-of-use assets

33,933

26,452

Other assets

7,117

6,545

Total assets

$

3,449,385

$

1,602,827

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

21,408

$

9,075

Accrued expenses and other current liabilities

65,130

34,439

Accrued compensation

53,957

34,201

Deferred revenue-current

46,721

12,466

Advances from financing companies

13,609

0

Total current liabilities

200,825

90,181

Other liabilities

1,033

9,239

Operating lease liabilities, net of current portion

30,326

24,994

Deferred revenue, net of current portion

4,884

2,300

Advances from financing companies, net of current portion

9,901

0

Deferred taxes

17,896

21,678

Convertible senior notes, net

953,484

440,410

Commitments and contingencies

Stockholders’ equity:

Common stock, $0.001 par value; 150,000,000 shares authorized as of September 30, 2020 and December 31, 2019; 84,358,345 shares and 72,761,941 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

84

73

Additional paid-in capital

2,835,274

1,538,716

Accumulated deficit

(598,694

)

(507,525

)

Accumulated other comprehensive loss

(5,628

)

(17,239

)

Total stockholders’ equity

2,231,036

1,014,025

Total liabilities and stockholders’ equity

$

3,449,385

$

1,602,827


CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data, unaudited)

Quarter Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Revenue

$

288,812

$

137,969

$

710,641

$

396,818

Expenses:

Cost of revenue (exclusive of depreciation and amortization shown separately below)

104,725

42,799

267,887

129,110

Operating expenses:

Advertising and marketing

52,302

31,321

132,395

84,341

Sales

23,483

16,120

60,110

48,164

Technology and development

29,958

15,746

72,244

48,398

Legal and regulatory

2,812

1,634

6,266

5,239

Acquisition and integration related costs

25,395

1,995

30,686

4,143

General and administrative

56,930

38,681

156,433

113,212

Depreciation and amortization

12,932

9,617

32,535

29,065

Total expenses

308,537

157,913

758,556

461,672

Loss from operations

(19,725

)

(19,944

)

(47,915

)

(64,854

)

Loss on extinguishment of debt

1,227

0

8,978

0

Interest expense, net

17,222

7,700

39,676

21,432

Net loss before taxes

(38,174

)

(27,644

)

(96,569

)

(86,286

)

Income tax (benefit) expense

(2,290

)

(7,298

)

(5,400

)

(6,466

)

Net loss

$

(35,884

)

$

(20,346

)

$

(91,169

)

$

(79,820

)

Net loss per share, basic and diluted

$

(0.43

)

$

(0.28

)

$

(1.17

)

$

(1.11

)

Weighted-average shares used to compute basic and diluted net loss per share

83,607,902

72,151,094

77,821,073

71,601,790


CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)

Nine Months Ended September 30,

2020

2019

Cash flows used in operating activities:

Net loss

$

(91,169

)

$

(79,820

)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

38,029

33,860

Allowance for doubtful accounts

2,320

1,717

Stock-based compensation

61,151

48,245

Deferred income taxes

(4,096

)

(10,288

)

Accretion of interest

29,459

19,422

Loss on extinguishment of debt

8,978

0

Changes in operating assets and liabilities:

Accounts receivable

(16,450

)

(12,386

)

Prepaid expenses and other current assets

(5,906

)

(2,219

)

Inventory

(2,392

)

0

Other assets

140

73

Accounts payable

6,584

(1,976

)

Accrued expenses and other current liabilities

17,269

14,304

Accrued compensation

9,329

(1,813

)

Deferred Revenue

15,348

6,708

Operating lease liabilities

(4,360

)

(1,481

)

Other liabilities

(2,809

)

(2,599

)

Net cash provided by operating activities

61,425

11,747

Cash flows (used in) provided by investing activities:

Purchase of property and equipment

(2,872

)

(2,847

)

Purchase of internal-use software

(14,515

)

(4,658

)

Proceeds from marketable securities

0

39,165

Sale of assets

0

10

Investment in securities

(0

)

(5,000

)

Acquisition of business, net of cash acquired

(159,663

)

(11,204

)

Net cash (used in) provided by investing activities

(177,050

)

15,466

Cash flows provided by financing activities:

Net proceeds from the exercise of stock options

40,627

24,820

Proceeds from issuance of 2027 Notes

1,000,000

0

Issuance costs of 2027 Notes

(24,070

)

0

Repurchase of 2022 Notes

(228,153

)

0

Proceeds from advances from financing companies

1,924

0

Payment from customers against advances from financing companies

(4,427

)

0

Proceeds from employee stock purchase plan

2,473

1,875

Cash received (paid) for withholding taxes on stock-based compensation, net

326

(1,642

)

Net cash provided by financing activities

788,700

25,053

Net increase in cash and cash equivalents

673,075

52,266

Foreign exchange difference

(129

)

(1,013

)

Cash and cash equivalents at beginning of the period

514,353

423,989

Cash and cash equivalents at end of the period

$

1,187,299

$

475,242

Income taxes paid

$

786

$

846

Interest paid

$

5,612

$

6,112


Non-GAAP Financial Measures:

To supplement our financial information presented in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, we use adjusted gross profit, adjusted gross margin, EBITDA income (loss) and adjusted EBITDA income (loss), which are non-U.S. GAAP financial measures to clarify and enhance an understanding of past performance. We believe that the presentation of these financial measures enhances an investor’s understanding of our financial performance. We further believe that these financial measures are useful financial metrics to assess our operating performance from period-to-period by excluding certain items that we believe are not representative of our core business. We use certain financial measures for business planning purposes and in measuring our performance relative to that of our competitors. We utilize adjusted EBITDA as the primary measure of our performance.

Adjusted gross profit is our total revenue minus our total cost of revenue (exclusive of depreciation and amortization shown separately) and adjusted gross margin is adjusted gross profit as a percentage of our total revenue. We believe that it provides investors meaningful information to understand our results of operations and the ability to analyze financial and business trends on a period-to-period basis.

EBITDA consists of net loss before interest, foreign exchange gain or loss, taxes, loss on extinguishment of debt, depreciation and amortization. We believe that making such adjustment provides investors meaningful information to understand our results of operations and the ability to analyze financial and business trends on a period-to-period basis.

Adjusted EBITDA consists of net loss before interest, foreign exchange gain or loss, taxes, loss on extinguishment of debt, depreciation, amortization, stock-based compensation and acquisition and integration related costs. We believe that making such adjustment provides investors meaningful information to understand our results of operations and the ability to analyze financial and business trends on a period-to-period basis.

We believe the above financial measures are commonly used by investors to evaluate our performance and that of our competitors. However, our use of the term adjusted gross profit, adjusted gross margin, EBITDA and adjusted EBITDA may vary from that of others in our industry. Neither adjusted gross profit, adjusted gross margin, EBITDA nor adjusted EBITDA should be considered as an alternative to net loss before taxes, net loss, loss per share or any other performance measures derived in accordance with U.S. GAAP as measures of performance.

Adjusted gross profit, adjusted gross margin, EBITDA and adjusted EBITDA have important limitation as analytical tools and you should not consider them in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:

  • Adjusted gross margin has been and will continue to be affected by a number of factors, including the fees we charge our Clients, the number of visits and cases we complete the costs paid to Providers and medical experts as well as the costs of our provider network operations center;

  • Adjusted gross margin does not reflect the significant depreciation and amortization to cost of revenue;

  • EBITDA and adjusted EBITDA do not reflect the significant interest expense on our debt;

  • EBITDA and adjusted EBITDA eliminate the impact of income taxes on our results of operations;

  • EBITDA and Adjusted EBITDA do not reflect the loss on extinguishment of debt;

  • Adjusted EBITDA does not reflect the significant acquisition and integration related costs related to mergers and acquisitions;

  • Adjusted EBITDA does not reflect the significant non-cash stock compensation expense which should be viewed as a component of recurring operating costs; and

  • other companies in our industry may calculate adjusted gross profit, adjusted gross margin, EBITDA and adjusted EBITDA differently than we do, limiting the usefulness of adjusted gross profit, adjusted gross margin, EBITDA and adjusted EBITDA as comparative measures.

In addition, although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and adjusted gross profit, adjusted gross margin, EBITDA and Adjusted EBITDA do not reflect any expenditures for such replacements.

We compensate for these limitations by using adjusted gross profit, adjusted gross margin, EBITDA and adjusted EBITDA along with other comparative tools, together with U.S. GAAP measurements, to assist in the evaluation of operating performance. Such U.S. GAAP measurements include net loss, net loss per share and other performance measures.

In evaluating these financial measures, you should be aware that in the future we may incur expenses similar to those eliminated in this presentation. Our presentation of adjusted gross profit, adjusted gross margin, EBITDA and adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.

The following is a reconciliation of gross profit, the most directly comparable GAAP financial measure, to adjusted gross profit:

Reconciliation of GAAP Gross Profit to Adjusted Gross Profit and Adjusted Gross Margin
(In thousands, unaudited)

Quarter Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Revenue

$

288,812

$

137,969

$

710,641

$

396,818

Cost of revenue (exclusive of depreciation and amortization shown separately below)

(104,725

)

(42,799

)

(267,887

)

(129,110

)

Depreciation and amortization of intangible assets

(1,149

)

(1,187

)

(4,078

)

(3,279

)

Gross Profit

182,938

93,983

438,676

264,429

Depreciation and amortization of intangible assets

1,149

1,187

4,078

3,279

Adjusted gross profit

$

184,087

$

95,170

$

442,754

$

267,708

Gross margin

63.3

%

68.1

%

61.7

%

66.6

%

Adjusted gross margin

63.7

%

69.0

%

62.3

%

67.5

%

Reconciliation of EBITDA and Adjusted EBITDA to Net Loss
(In thousands, unaudited)

Quarter Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Net loss

$

(35,884

)

$

(20,346

)

$

(91,169

)

$

(79,820

)

Add:

Loss on extinguishment of debt

1,227

0

8,978

0

Interest expense, net

17,222

7,700

39,676

21,432

Income tax benefit

(2,290

)

(7,298

)

(5,400

)

(6,466

)

Depreciation expense

1,272

982

2,983

2,701

Amortization expense

11,660

8,635

29,552

26,364

EBITDA

(6,793

)

(10,327

)

(15,380

)

(35,789

)

Stock-based compensation

20,908

17,354

61,151

48,245

Acquisition and integration related costs

25,395

1,995

30,686

4,143

Adjusted EBITDA

$

39,510

$

9,022

$

76,457

$

16,599

CONTACT: Investors: Patrick Feeley 914-265-7925 pfeeley@teladochealth.com Media: Chris Stenrud 860-491-8821 pr@teladochealth.com