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Teladoc Health Reports Third Quarter 2019 Results

Year-over-year Q3 revenue grows 24% to $138.0 million and total visits increase 45% to 928,000

Year-over-year nine months revenue grows 34% to $396.8 million and total visits increase 63% to 2,899,000

Issues 2019 fourth-quarter guidance and updates full-year expectations

PURCHASE, NY, Oct. 30, 2019 (GLOBE NEWSWIRE) -- Teladoc Health, Inc. (TDOC), the global leader in virtual care, today reported financial results for the third quarter ending September 30, 2019.

“The third quarter marked a continuation of Teladoc Health’s very strong momentum from the first half of the year, as we delivered at the high end of our growth expectations and made progress on our path to profitability,” said Jason Gorevic, chief executive officer, Teladoc Health. As we close out the year, we are confident in our positive momentum and are raising revenue and visit guidance for the full year. Our results serve as yet another affirmation of the expanding role of virtual care globally, and our proven ability to execute at scale.”

Financial Highlights for the Third Quarter and Nine Months Ended September 30, 2019

                                     
Revenue                                    
($ thousands)                                    
    Quarter Ended   Year over Year   Nine Months Ended    Year over Year
    September 30,   Growth   September 30,   Growth
    2019   2018       2019   2018    
Subscription Access Fees Revenue                                    
U.S.   $  92,095   $  72,521    27 %   $  258,604   $  198,607    30 %
International      27,030      24,040    12 %      77,716      49,480    57 %
Total      119,125      96,561    23 %      336,320      248,087    36 %
                                     
Visit Fee Revenue                                    
U.S. Paid Visits      14,142      11,330    25 %      47,473      37,334    27 %
U.S. Visit Fee Only      4,307      2,509    72 %      11,974      8,758    37 %
International Paid Visits      395      562    (30) %      1,051      987    7 %
Total      18,844      14,401    31 %      60,498      47,079    29 %
                                     
Total Revenue*   $  137,969   $  110,962    24 %   $  396,818   $  295,166    34 %
                                     
*Organic third-quarter 2019 revenue, excluding MedecinDirect, increased by 24 percent year over year.
 Organic nine months ended 2019 revenue, excluding Advance Medical and MedecinDirect, increased by 23 percent year over year.


               
Membership & Visit Fee Only Access              
(millions)              
    Quarter Ended   Year over Year
    September 30,   Growth
    2019   2018    
Total U.S. Paid Membership    35.0    22.6    54.6 %
               
Total U.S. Visit Fee Only Access    19.0    9.4    101.0 %
 


                               
Visits                              
(thousands)                     Quarter   Nine Months
                      Year over Year   Year over Year
  2019     2018   Growth   Growth
  Q1 Q2 Q3 YTD   Q1 Q2 Q3 YTD        
Paid Visits from U.S. Paid Membership  365    291    278    934      298    218    202    718    38   %    30   %
Percent of Paid Visits from U.S. Paid Membership 51%   48%   45%   48%     54%   50%   46%   50%    (3 ) %    (5 ) %
Visits Included from U.S. Paid Membership  353    319    344    1,016      256    218    237    711    45   %    43   %
                               
Total Visits from U.S. Paid Membership  718    610    622    1,950      554    436    439    1,429    42   %    36   %
                               
U.S. Visit Fee Only  63    54    62    179      51    37    36    124    75   %    45   %
                               
International Visits  282    244    244    770      1    60    166    227    46   %    239   %
Total Visits  1,063    908    928    2,899      606    533    641    1,780    45   %    63   %
                               
Utilization 11.00%   9.10%   7.98%   9.27%     10.90%   8.04%   7.81%   8.86%    17   pt    41   pt
                               
  • Net loss was $(20.3) million for the third quarter 2019 compared to $(23.3) million for the third quarter 2018.
  • Net loss per basic and diluted share was $(0.28) for the third quarter 2019 compared to $(0.34) for the third quarter 2018. The third quarter 2019 includes a $0.11 per share non-cash income tax benefit.
  • Gross margin was 69.0 percent for the third quarter 2019 compared to 69.2 percent for the third quarter 2018.
  • EBITDA was $(10.3) million for the third quarter 2019 compared to $(6.0) million for the third quarter 2018.
  • Adjusted EBITDA was a positive $9.0 million for the third quarter 2019 compared to $6.3 million for the third quarter 2018.

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.

For the fourth-quarter 2019, we expect:

  • Total revenue to be in the range of $149 million to $153 million.
  • EBITDA loss to be in the range of $(9) million to $(5) million.
  • Adjusted EBITDA to be in the range of $11.5 million to $15.5 million.
  • Total U.S. paid membership to be approximately 35 million members and visit-fee-only access to be available to approximately 19 million individuals.
  • Total visits to be between 1.0 million and 1.2 million.
  • Net loss per share, based on 72.5 million weighted average shares outstanding, to be between $(0.37) and $(0.31).

For the full-year 2019, we have updated our expectations as follows:

  • Total revenue to be in the range of $546 million to $550 million.
  • EBITDA loss to be in the range of $(45) million to $(41) million.
  • Adjusted EBITDA to be in the range of positive $28 million to $32 million.
  • Total U.S. paid membership to be approximately 35 million members and visit-fee-only access to be available to approximately 19 million individuals.
  • Total visits to be between 3.9 million to 4.1 million.
  • Net loss per share, based on 71.9 million weighted average shares outstanding, to be between $(1.49) and $(1.43).

Quarterly Conference Call

The third quarter 2019 earnings conference call and webcast will be held Wednesday, October 30, 2019 at 4:30 p.m. EDT. The conference call can be accessed by dialing 1-833-241-4255 for U.S. participants, or 1-647-689-4206 for international participants, and including the following Conference ID Number: 5049316 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

A mission-driven organization, Teladoc Health, Inc. is successfully transforming how people access and experience healthcare, with a focus on high quality, lower costs, and improved outcomes around the world. The company’s award-winning, integrated clinical solutions are inclusive of telehealth, expert medical services, AI and analytics, and licensable platform services. With more than 2,000 employees, the organization delivers care in 130 countries and in more than 30 languages, partnering with employers, hospitals and health systems, and insurers to transform care delivery. 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,
    2019     2018  
           
Assets            
Current assets:            
Cash and cash equivalents   $  475,242     $  423,989  
Short-term investments      15,633        54,545  
Accounts receivable, net of allowance of $3,287 and $3,382, respectively      53,669        43,571  
Prepaid expenses and other current assets      13,416        10,631  
Total current assets      557,960        532,736  
Property and equipment, net      10,021        10,148  
Goodwill      737,647        737,197  
Intangible assets, net      228,838        247,394  
Operating lease - right-of-use assets      27,596        —  
Other assets      6,367        1,401  
Total assets   $  1,568,429     $  1,528,876  
Liabilities and stockholders’ equity            
Current liabilities:            
Accounts payable   $  6,068     $  7,769  
Accrued expenses and other current liabilities      53,822        26,801  
Accrued compensation      25,312        27,869  
Total current liabilities      85,202        62,439  
Other liabilities      7,156        6,191  
Operating lease liabilities, net of current portion      25,853        —  
Deferred taxes      22,720        32,444  
Convertible senior notes, net      433,760        414,683  
Commitments and contingencies            
Stockholders’ equity:            
Common stock, $0.001 par value; 150,000,000 shares authorized as of September 30, 2019 and December 31, 2018; 72,356,849 shares and 70,516,249 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively      72        70  
Additional paid-in capital      1,510,205        1,434,780  
Accumulated deficit      (488,481 )      (408,661 )
Accumulated other comprehensive loss      (28,058 )      (13,070 )
Total stockholders’ equity      993,738        1,013,119  
Total liabilities and stockholders’ equity   $  1,568,429     $  1,528,876  
                 


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

                         
    Quarter Ended September 30,   Nine Months Ended September 30,
    2019     2018     2019     2018  
Revenue   $  137,969     $  110,962     $  396,818     $  295,166  
Expenses:                        
Cost of revenue      42,799        34,167        129,110        88,707  
Operating expenses:                        
Advertising and marketing      31,321        21,668        84,341        61,554  
Sales      16,120        16,303        48,164        44,645  
Technology and development      15,746        13,577        48,398        40,829  
Legal and regulatory      1,634        807        5,239        2,491  
Acquisition and integration related costs      1,995        1,588        4,143        8,957  
Gain on sale      —        (1,430 )      —        (5,500 )
General and administrative      38,681        30,314        113,212        80,455  
Depreciation and amortization      9,617        9,746        29,065        26,045  
Total expenses      157,913        126,740        461,672        348,183  
Loss from operations      (19,944 )      (15,778 )      (64,854 )      (53,017 )
Interest expense, net      7,700        7,666        21,432        19,449  
Net loss before taxes      (27,644 )      (23,444 )      (86,286 )      (72,466 )
Income tax benefit      (7,298 )      (180 )      (6,466 )      (261 )
Net loss   $  (20,346 )   $  (23,264 )   $  (79,820 )   $  (72,205 )
                         
Net loss per share, basic and diluted   $  (0.28 )   $  (0.34 )   $  (1.11 )   $  (1.12 )
                         
Weighted-average shares used to compute basic and diluted net loss per share      72,151,094        68,247,655        71,601,790        64,363,943  
                                 
Note: The third quarter 2019 includes a $0.11 per share non-cash income tax benefit.
 
 
 


CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)

             
    Nine Months Ended September 30,
    2019     2018  
Cash flows provided by (used in) operating activities:            
Net loss   $  (79,820 )   $  (72,205 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:            
Depreciation and amortization      33,860        26,045  
Allowance for doubtful accounts      1,717        1,535  
Stock-based compensation      48,245        31,086  
Deferred income taxes      (10,288 )      (1,907 )
Accretion of interest      19,422        13,593  
Gain on sale      —        (5,500 )
Changes in operating assets and liabilities:            
Accounts receivable      (12,386 )      (7,535 )
Prepaid expenses and other current assets      (2,219 )      (1,656 )
Other assets      73        (327 )
Accounts payable      (1,976 )      (357 )
Accrued expenses and other current liabilities      21,012        7,561  
Accrued compensation      (1,813 )      1,991  
Operating lease liabilities      (1,481 )      —  
Other liabilities      (2,599 )      340  
Net cash provided by (used in) operating activities      11,747        (7,336 )
Cash flows provided by (used in) investing activities:            
Purchase of property and equipment      (2,847 )      (2,732 )
Purchase of internal-use software      (4,658 )      (2,758 )
Purchase of marketable securities      —        (12,141 )
Proceeds from marketable securities      39,165        79,470  
Sale of assets      10        5,500  
Investment in securities      (5,000 )      —  
Acquisition of business, net of cash acquired      (11,204 )      (282,487 )
Net cash provided by (used in) investing activities      15,466        (215,148 )
Cash flows provided by financing activities:            
Net proceeds from the exercise of stock options      24,820        26,198  
Proceeds from issuance of convertible notes      —        279,147  
Proceeds from issuance of common stock      —        330,856  
Proceeds from employee stock purchase plan      1,875        1,423  
Cash (paid) received for withholding taxes on stock-based compensation, net      (1,642 )      539  
Net cash provided by financing activities      25,053        638,163  
Net increase in cash and cash equivalents      52,266        415,679  
Foreign exchange difference      (1,013 )      (942 )
Cash and cash equivalents at beginning of the period      423,989        42,817  
Cash and cash equivalents at end of the period   $  475,242     $  457,554  
             
Income taxes paid   $  846     $  238  
             
Interest paid   $  6,112     $  4,125  


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 EBITDA and Adjusted EBITDA, 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.

EBITDA consists of net loss before interest, taxes, 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, taxes, depreciation, amortization, stock-based compensation, gain on sale 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 both financial measures are commonly used by investors to evaluate our performance and that of our competitors. However, our use of the term EBITDA and Adjusted EBITDA may vary from that of others in our industry. Neither 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.

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:

  • 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;

  • Adjusted EBITDA does not reflect the significant gain on sale of certain non-core business contracts;

  • 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 EBITDA and Adjusted EBITDA differently than we do, limiting the usefulness of 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 EBITDA and Adjusted EBITDA do not reflect any expenditures for such replacements.

We compensate for these limitations by using 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 EBITDA and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.


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

                         
    Quarter Ended   Nine Months Ended 
    September 30,   September 30,
    2019     2018     2019     2018  
Net loss   $  (20,346 )   $  (23,264 )   $  (79,820 )   $  (72,205 )
Add:                        
Interest expense, net      7,700        7,666        21,432        19,449  
Income tax benefit      (7,298 )      (180 )      (6,466 )      (261 )
Depreciation expense      982        854        2,701        3,118  
Amortization expense      8,635        8,892        26,364        22,927  
EBITDA      (10,327 )      (6,032 )      (35,789 )      (26,972 )
Stock-based compensation      17,354        12,195        48,245        31,086  
Gain on sale      —        (1,430 )      —        (5,500 )
Acquisition and integration related costs      1,995        1,588        4,143        8,957  
Adjusted EBITDA   $  9,022     $  6,321     $  16,599     $  7,571  
                                 

Media:
Courtney McLeod
914-265-6789
cmcleod@teladochealth.com

Investors:
Westwicke Partners
Jordan E. Kohnstam
Office: 443-450-4189
Jordan.kohnstam@westwicke.com