Dive Brief:
- Teladoc Health reported mixed third-quarter results on Tuesday as the virtual care giant announced a “comprehensive operational review” aimed at boosting its bottom line.
- The company beat analyst forecasts on earnings per share in the third quarter but missed on revenue. Revenue increased 8% year over year to $660 million, while net loss narrowed to $57 million from almost $74 million during the same time last year. Teladoc’s stock was down 5% in Wednesday morning trade following the earnings.
- The virtual care giant is “disappointed” with its current stock valuation, CEO Jason Gorevic said on an earnings call aftermarket on Tuesday. To improve its performance, Teladoc’s operational review will focus on aligning products with its whole-person care strategy and honing its cost structure, he added.
Dive Insight:
Teladoc posted improved results over the first half of the year — raising its revenue guidance for two quarters in a row — after a challenging 2022 when it notched a $13.7 billion net loss. The company cut 6% of its workforce, or 300 jobs, in the fourth quarter and early this year in a bid to lower operating costs.
The virtual care giant is honing in on profitability as it exits a period of elevated investment in the business, executives said on the earnings call. Teladoc acquired chronic care management company Livongo for $18.5 billion in 2020, and recently launched an integrated app that allows users to access its services in one place.
“It makes sense for us to really look at a more right-sized organization based on the cost reduction efforts that we took earlier this year, and make sure that all parts of the business are contributing to our profitable growth,” Gorevic said.
Teladoc’s integrated care segment, which includes its business-to-business virtual care offerings, boosted revenue 9% year over year to $374 million in the third quarter, driven by increased enrollment in chronic care management programs, executives said.
Two-thirds of Teladoc’s chronic care deals over the past year have included bundled solutions, where customers purchase multiple products, like diabetes, hypertension and weight management. Company leaders have long argued this “whole-person” care strategy gives Teladoc an edge over other virtual care players, particularly point solution providers that offer limited products.
The bundled solution “positions the company well” to add clients who want to move away from a host of digital health products to one integrated offering, said TD Cowen analysts Charles Rhyee and Lucas Romanski in a note.
In the third quarter, Teladoc added four million lives to its virtual care programs in competitive takeaways from other companies, Gorevic said.
“This is a direct result of other players struggling to deliver for their clients, and, in some cases, fallout from unprofitable business models with weak balance sheets,” he said.
But the company’s direct-to-consumer mental health segment, BetterHelp, missed analyst expectations on revenue and adjusted earnings, as the division reaches “scale that limits revenue growth expectations,” Rhyee and Romanski said. BetterHelp revenue increased 8% to $286 million in the quarter.
Teladoc expects $2.6 billion to $2.625 billion in revenue for 2023, and a net loss between $1.50 and $1.40 per share.
