TELADOC HEALTH, INC. Special Note Regarding Forward-Looking Statements
Many statements made in this Quarterly Report on Form 10-Q that are not
statements of historical fact, including statements about our beliefs and
expectations, are forward-looking statements and should be evaluated as such.
Forward-looking statements include information concerning possible or assumed
future results of operations, including descriptions of our business plan and
strategies. These statements often include words such as "anticipates,"
"believes," "suggests," "targets," "projects," "plans," "expects," "future,"
"intends," "estimates," "predicts," "potential," "may," "will," "should,"
"could," "would," "likely," "foresee," "forecast," "continue" and other similar
words or phrases, as well as statements in the future tense to identify these
forward-looking statements. These forward-looking statements and projections are
contained throughout this Form 10-Q, including the section entitled"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" ("MD&A"). We base these forward-looking statements or projections on
our current expectations, plans and assumptions that we have made in light of
our experience in the industry, as well as our perceptions of historical trends,
current conditions, expected future developments and other factors we believe
are appropriate under the circumstances and at such time. As you read and
consider this Form 10-Q, you should understand that these statements are not
guarantees of performance or results. The forward-looking statements and
projections are subject to and involve risks, uncertainties, and assumptions and
you should not place undue reliance on these forward-looking statements or
projections. Although we believe that these forward-looking statements and
projections are based on reasonable assumptions at the time they are made, you
should be aware that many factors could affect our actual financial results or
results of operations and could cause actual results to differ materially from
those expressed in the forward-looking statements and projections. Factors that
may materially affect such forward-looking statements and projections include,
but are not limited to, the section entitled "Risk Factors" in our Annual Report
on Form 10-K for the year ended
Overview
COVID-19 Update
We believe that favorable existing secular trends in the healthcare industry were accelerated by the impacts of the COVID-19 pandemic, driving greater consumer use of virtual care, and increased adoption by employers, health plans, hospitals and health systems, and healthcare providers. In combination with the expansion of our capabilities, we believe that these trends present significant opportunities for virtual healthcare to address the most pressing, universal healthcare challenges through trusted solutions, such as ours, that deliver convenient, affordable, and high-quality care; empower individuals to manage and improve their health; and enable providers to offer their best care for their patients.
We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business. COVID-19 has increased utilization of our telehealth services, but it is uncertain whether such increase in demand will continue. While the COVID-19 pandemic has not had a material adverse impact on our financial condition and results of operations to date, the future impact on our operational and financial performance will depend on certain developments, including the duration and spread of the pandemic, impact on our customers, consisting of employers, health plans,
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hospitals and health systems, insurance, and financial services companies (collectively "Clients"), and members, impact on our sales cycles, and effect on our vendors, all of which are uncertain and cannot be predicted. Public and private sector policies and initiatives to reduce the transmission of COVID-19 and disruptions to our operations and the operations of our third-party suppliers, along with any related global slowdown in economic activity, may result in decreased revenues, decreased collections, and increased costs. Further, the economic effects of the COVID-19 pandemic have financially constrained some of our prospective and existing Clients' healthcare spending, which may negatively impact our ability to acquire new Clients and our ability to renew subscriptions with or sell additional solutions to our existing Clients. We also may experience increased member attrition to the extent our existing Clients reduce their respective workforces in response to economic conditions. In addition, due to our subscription-based business model, the effect of the COVID-19 pandemic may not be fully reflected in our revenue until future periods. It is possible that the COVID-19 pandemic, the measures taken by the governments and businesses affected and any resulting economic impact may materially and adversely affect our business, results of operations, cash flows, and financial positions as well as our customers.
We have also taken measures in response to the COVID-19 pandemic, and we may take further actions that alter our business operations as may be required by federal, state, local, or foreign authorities or that we determine are in the best interests of our employees, Clients, members, and stockholders. The effects of these operational modifications are unknown and may not be realized until further reporting periods.
Acquisition History
We have scaled and intend to continue to scale our platform through the pursuit of selective acquisitions. We have completed multiple acquisitions since our inception, which we believe have expanded our distribution capabilities and broadened our service offerings.
On
On
Net Income
For the quarter ended
For the quarter and six months ended
Refer to the condensed consolidated results of operations in the MD&A for other supplemental financial measures we use to assess our operating performance.
Key Factors Affecting Our Performance
We believe that our future performance will depend on many factors, including the following:
Number of Members and Revenue per Member. Our revenue growth rate and long-term profitability are affected by our ability to increase cross selling capability among our existing members because we derive a substantial portion of our revenue from access and other fees via Client contracts that provide members access to our professional provider network in exchange for a contractual based periodic fee or access fees derived from our Direct-to-Consumer
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("DTC") members. Therefore, we believe that our ability to add new members,
retain existing members, and increase the revenue generated from each member is
a key indicator of our increasing market adoption, the growth of our business,
and future revenue potential, and that increasing our membership and revenue per
member is an integral objective that will provide us with the ability to
continually innovate our services and support initiatives that will enhance
members' experiences.
Number of Visits and Utilization. We also recognize revenue in connection with
the completion of a general medical visit, expert medical service, and other
specialty visits for contracts where the service is not part of access fees.
Visit fee revenue is driven primarily by the number of Clients, the number of
members in a Client's population, member utilization of our provider network
services, and the contractually negotiated prices of our services. We believe
that increasing our current member utilization rate and increasing penetration
further into existing and new health plan Clients is a key objective in order
for our Clients to realize tangible healthcare savings with our service. Visits
increased by 28%, or 1.0 million, to approximately 4.7 million for the quarter
ended
Number of Platform-Enabled Sessions. A 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. Our Clients completed 1.0 million and 2.2 million
platform-enabled sessions during the quarter and six months ended
Chronic Care Enrollment. Our chronic care programs are one of the key components
of our whole person virtual care platform that we believe position us to drive
greater engagement with our platforms and increased revenue. Chronic care
enrollment measures the number of unique individuals enrolled in one or more of
our chronic care programs. Chronic care enrollment increased by 13% to 0.8
million at
Seasonality. In the past, we have typically seen the strongest increases in consecutive quarterly revenue during the fourth and first quarters of each year, which coincides with traditional annual benefit enrollment seasons. However, as our business has become more diversified across services, channels, and geographies, we see a growing diversification of Client start dates, resulting from growth in mental health offerings, health plan expansions, cross sales of new services, international growth, and mid-market employer growth, all of which are not constrained by a calendar year start. See "Risk Factors-Risks Related to Our Business-Our quarterly results may fluctuate significantly, which could adversely impact the value of our common stock" included in the 2021 Form 10-K.
Critical Accounting Estimates and Policies
Our discussion and analysis of our results of operations, liquidity and capital
resources are based on our condensed consolidated financial statements which
have been prepared in conformity with accounting principles generally accepted
in the
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On an ongoing basis, we evaluate our estimates and judgments, including those
related to revenue recognition, business combinations, goodwill and other
intangible assets, income taxes, and other items. We base our estimates on
historical and anticipated results and trends and on various other assumptions
that we believe are reasonable under the circumstances, including assumptions as
to future events. These estimates form the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from
other sources. By their nature, estimates are subject to an inherent degree of
uncertainty. Actual results may differ from our estimates and could have a
significant adverse effect on our results of operations and financial position.
For a discussion of our critical accounting policies and estimates see Part II,
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations" in the 2021 Form 10-K. In addition, the following updates our
discussion of impairment testing therein as of
Goodwill Impairment Charge
We have experienced a pair of triggering events in 2022 due to sustained
decreases in our share price, prompting impairment assessments of goodwill and
long-lived assets, including definite-lived intangibles, first as of
Both impairment assessments in 2022 reflected a 75%/25% allocation between the income and market approaches. We believe the 75% weighting to the income approach continues to be appropriate as it more directly reflects our future growth and profitability expectations. The table below indicates changes in the most significant inputs to our impairment analysis on each testing date since our last annual test.
Peer Group Revenue
Multiples
(current
year/subsequent % Excess of Reporting Unit Fair Value
Testing dates Discount Rate year) over Carrying Value
December 1, 2021 10.5% 7.0x/5.5x 15.0%
March 31, 2022 12.0% 3.5x/3.0x 0% post impairment
June 30, 2022 16.0% 2.0x/1.8x 0% post impairment
In
As of
In the event there are further adverse changes in our projected cash flows
and/or further changes in key assumptions, including but not limited to an
increase in the discount rate, lower market multiples, lower revenue growth,
lower margin, and/or a lower terminal growth rate, we may be required to record
additional non-cash impairment charges to our goodwill, other intangibles,
and/or long-lived assets. Such non-cash charges could have a material adverse
effect on our condensed consolidated statement of operations and balance sheet
in the reporting period of the charge. Following the
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