Overview

Teladoc, Inc. was incorporated in the State of Texas in June 2002 and changed
its state of incorporation to the State of Delaware in October 2008. Effective
August 10, 2018, Teladoc, Inc. changed its corporate name to Teladoc Health,
Inc. Unless the context otherwise requires, Teladoc Health, Inc., together with
its subsidiaries, is referred to herein as "Teladoc Health" or the "Company".
The Company's principal executive office is located in Purchase, New York.
Teladoc Health is the global leader in providing virtual healthcare services
with a focus on high quality, lower costs, and improved outcomes around the
world.



Teladoc Health solutions are transforming the access, cost and quality dynamics
of healthcare delivery for all of our market participants. Members rely on
Teladoc Health to remotely access affordable, on-demand healthcare whenever and
wherever they choose. Our Clients on behalf of their employees or beneficiaries
as well as direct-to consumer individuals (D2C) purchase our solutions to reduce
their healthcare spending and offer convenient, affordable, high-quality
healthcare to their employees or beneficiaries. Our network of physicians and
other healthcare professionals, or our providers have the ability to generate
meaningful income and deliver their services more efficiently with no
administrative burden.



COVID-19 Update



We believe that favorable existing macro trends were accelerated by the impacts
of the COVID-19 pandemic, driving greater consumer trial and use of virtual
care, and increased adoption by employers, health plans, hospitals and health
systems, and health care 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, high quality
care; empower consumers to manage and improve their health; and enable providers
to offer their best care for their patients.



We are closely monitoring the impact of the COVID-19 pandemic on all aspects of
our business. The outbreak of COVID-19 in 2020 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 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 the
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 the 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, including
temporarily closing our offices and implementing a work from home policy for our
workforce; limiting capacity at our offices that have reopened; implementing
additional safety policies and procedures for employees working in our offices
that have reopened; suspending employee travel and in person meetings; and
adjusting our supply chain and inventory levels. We may take

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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.



Revenue



We have a demonstrated track record of driving growth both organically and
through acquisitions. We increased revenue 98% to $1,094.0 million in 2020,
including an incremental $128.3 million from our InTouch Health acquisition and
Livongo merger. Excluding the impact of the InTouch and Livongo acquisitions,
revenue increased 75%, reflecting the acceleration of the adoption of virtual
care stemming from the COVID-19 pandemic and the Company's broad momentum to
transform the healthcare experience. In 2019, revenue increased 32% to $553.3
million which included an incremental $33.2 million from our Advance Medical and
MedecinDirect acquisitions.



For the year ended December 31, 2020, 79%, 19% and 2% of our revenue was derived
from subscription access fees, visit fees and other, respectively. For both of
the year ended December 31, 2019 and 2018, 84% and 16% of our revenue were
derived from subscription access fees and visit fees. We believe our continued
strong subscription fee revenue is mainly representative of the value
proposition we provide the broader healthcare system.



Membership, Visits and Platform-Enabled Sessions





We completed approximately 10.6 million, 4.1 million and 2.6 million telehealth
visits in 2020, 2019 and 2018, respectively. U.S. Paid Membership increased by
approximately 15.1 million Members to 51.8 million from December 31, 2019 to
December 31, 2020. U.S. Paid Membership increased by approximately 13.9 million
Members to 36.7 million from December 31, 2018 to December 31, 2019. We also
completed approximately 2.1 million platform-enabled sessions associated with
InTouch from July 1, 2020, the date we acquired InTouch, to December 31, 2020.



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 offering.



On October 30, 2020, we completed the merger with Livongo. Upon completion of
the merger, each share of Livongo's common stock converted into the right to
receive 0.5920 shares of Teladoc Health's common stock and $4.24 in cash,
without interest. In addition, in connection with the closing of the merger,
Livongo paid a special cash dividend equal to $7.09 per share to shareholders of
Livongo as of a record date of October 29, 2020. The total consideration was
$13,938.0 million consisting of $401.0 million of net cash, $555.4 million
related to the conversion feature of the Livongo Notes guaranteed by the Company
and 60.4 million shares of Teladoc Health's common stock valued at approximately
$12,981.6 million on October 30, 2020. Livongo is a leading provider to empower
people with chronic conditions to live better and healthier lives.



On July 1, 2020, we completed the acquisition of InTouch for aggregate
consideration of $1,069.8 million, which was comprised of 4.6 million shares of
our common stock valued at $903.3 million on July 1, 2020, and $166.5 million of
net cash. InTouch is a leading provider of enterprise telehealth solutions for
hospitals and health systems.



On April 30, 2019, we completed the acquisition of the Paris-based telemedicine
provider MedecinDirect for aggregate net cash consideration of $11.2 million and
with the potential for additional earnout consideration. On June 19, 2019, we
made a $5.0 million minority investment in Vida Health.



On May 31, 2018, we completed our acquisition of Advance Medical, a leading
virtual healthcare provider outside the United States, for aggregate
consideration of $351.7 million, which was comprised of 1,344,387 shares of our
common stock valued at $68.6 million on May 31, 2018, and $283.1 million of

net
cash.



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On July 14, 2017, we completed the acquisition of Best Doctors, for aggregate
consideration of $445.5 million, which was comprised of $379.3 million of net
cash and 1,855,078 shares of our common stock valued at $66.2 million. Best
Doctors is the world's leading expert medical consultation company focused on
improving health outcomes for the most complex, critical, and costly medical
issues.


Key Factors Affecting Our Performance

We believe that our future performance will depend on many factors, including the following:


Number of Members. Our revenue growth rate and long-term profitability are
affected by our ability to increase our number of Members because we derive a
substantial portion of our revenue from subscription access fees via Client
contracts that provide Members access to our professional provider network in
exchange for a contractual based monthly fee or subscription access fees derived
from our D2C Members. Therefore, we believe that our ability to add new Members
is a key indicator of our increasing market adoption, the growth of our business
and future revenue potential, and that increasing our Membership is an integral
objective that will provide us with the ability to continually innovate our
services and support initiatives that will enhance Members' experiences.



In 2020, Membership increased by approximately 15.1 million Members or 41%, to
51.8 million at December 31, 2020. From December 31, 2018 through December 31,
2019, Membership increased by approximately 13.9 million Members, or 61%, to
36.7 million at December 31, 2019.



Number of Visits. We also recognize revenue in connection with the completion of
a general medical visit, expert medical service and other specialty visits for
the majority of our contracts. Accordingly, our visit revenue, or visit fees,
generally increase as the number of visits increase. 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 156%,
or 6.5 million, to approximately 10.6 million for the year ended December 31,
2020 compared to the same period in 2019. Visits increased by 57%, or 1.5
million, to approximately 4.1 million for the year ended December 31, 2019
compared to the same period in 2018.



Number Platform-Enabled of 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. Over time, we expect platform-enabled sessions to
outpace overall revenue growth as telehealth becomes a bigger part of our
Clients' care delivery strategy. 2.1 million platform-enabled sessions
associated with InTouch were completed from July 1, 2020, the date we acquired
InTouch, to December 31, 2020.



Seasonality. We typically experience the strongest increases in consecutive
quarterly revenue during the fourth and first quarters of each year, which
coincides with traditional annual benefit enrollment seasons. In particular, as
a result of many Clients' introduction of new services at the very end of the
current year, or the start of each year, a high concentration of our new Client
contracts have an effective date of January 1. Therefore, while Membership
increases, utilization is dampened until service delivery ramps up over the
course of the year. Additionally, our business has become more diversified
across services, channels, and geographies. We continue to see a diversification
of Client start dates, resulting from our 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.



As a result of national seasonal cold and flu trends, we typically experience
our highest level of visit fees during the first and fourth quarters of each
year. Conversely, the second quarter of the year has historically been the
period of lowest utilization of our provider network services relative to the
other quarters of the year. However, during the COVID-19 pandemic in 2020, we
did not experience the typical seasonality associated with national cold and flu
outbreaks. 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 elsewhere in this Annual Report on Form 10-K.

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Critical Accounting Policies



Revenue

We generate virtual healthcare service revenue from contracts with Clients who
purchase access to our professional provider network or medical experts for
their employees, dependents and other beneficiaries. Our Client contracts
include a per-Member-per-month access fee and certain contracts also include
additional fees for general medical and other specialty visits on a
per-telehealth visit basis and expert medical service on a per case basis. We
also have certain contracts that generate revenue based solely on a per
telehealth visit basis for general medical and other specialty visits. For our
D2C behavioral health product, Members purchase access to our professional
provider network for an access fee. Accordingly, we record access revenue from
access fees and visit fee revenue for general medical, expert medical service
and other specialty visits. Other revenue is generated from contracts with
Clients for the sale and rental of access to our hosted virtual healthcare
platform.



Revenues are recognized when we satisfy our performance obligation to stand
ready to provide telehealth services which occurs when our Clients and Members
have access to and obtain control of the telehealth service. Revenue is
recognized in an amount that reflects the consideration that is expected in
exchange for the service and this may include a variable transaction price as
the number of Members may vary from the initial billing. We estimate this amount
based on historical experience, which is recorded as a component of revenue. For
other revenue which primarily includes virtual healthcare devices, our
performance obligation is satisfied when the equipment is provided to the Client
and revenue is recognized at a point in time upon shipment.



Access revenue accounted for 79% of our total revenue during the year ended
December 31, 2020, and 84% of our total revenue for both of the years ended
December 31, 2019 and 2018. Access revenue is driven primarily by the number of
Clients, the number of Members in a Client's population, the number of services
contracted for by a Client and the contractually negotiated prices of our
services. Visit fee revenue for general medical, expert medical service and
other specialty visits is driven primarily by the number of Clients, the number
of Members in a Client's population, Member utilization of our professional
provider network services and the contractually negotiated prices of our
services.



Certain of our contracts include Client performance guarantees and pricing
adjustments that are based upon minimum Member utilization and guarantees by us
for specific service level performance, Member satisfaction scores, cost savings
guarantees and health outcome guarantees. If Client performance guarantees are
not met, we record, as a reduction to revenue, an estimate of the amount that
will be due at the end of the respective Client's contractual period.



We have elected the optional exemption to not disclose the remaining performance
obligations of our contracts since substantially all of our contracts have a
duration of one year or less and the variable consideration expected to be
received over the duration of the contract is allocated entirely to the wholly
unsatisfied performance obligations.



Deferred Revenue



Deferred revenue represents billed, but unrecognized revenue, and is comprised
of fees received in advance of the delivery or completion of the services and
amounts received in instances when revenue recognition criteria have not been
met. Deferred revenue associated with upfront payments for a device is amortized
ratably over expected Member enrollment period. Deferred revenue that will be
recognized during the succeeding twelve-month period is recorded as current
deferred revenue and the remaining portion is recorded as noncurrent deferred
revenue.



Deferred Costs and Other


Deferred costs and other consist of deferred device costs and deferred contract costs.





Deferred device costs consist of cost of inventory incurred in connection with
delivery of services that are deferred and amortized over the shorter of the
expected Member enrollment period or the expected device life and recorded

as
cost of revenue.



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Deferred contract costs represent the incremental costs of obtaining a contract
with a Client if we expect to recover such costs. The primary example of our
costs to obtain a contract include incremental sales commissions to obtain
contracts paid to our sales organization. These incremental costs to obtain
Client contracts are deferred and then amortized on a straight-line basis over
the period of benefit which has been determined to be four years. Amortization
expense is included in sales and marketing expenses in the consolidated
statement of operations.



Deferred costs and other that are to be amortized within twelve months are recorded to deferred costs and other, current and the remainder is recorded to deferred costs and other, noncurrent on our consolidated balance sheets.





Business Combinations



We account for our business combinations using the acquisition method of
accounting. The purchase price is attributed to the fair value of the assets
acquired and liabilities assumed. Transaction costs and accelerated grants of
stock-based awards directly attributable to the acquisition are expensed as
incurred. Identifiable assets and liabilities acquired or assumed are measured
separately at their fair values as of the acquisition date. The excess of the
purchase price of acquisition over the fair value of the identifiable net assets
of the acquiree is recorded as goodwill. The results of businesses acquired in a
business combination are included in our consolidated financial statements

from
the date of acquisition.



When we issue stock-based or cash awards to an acquired company's shareholders,
we evaluate whether the awards are consideration or compensation for
post-acquisition services. The evaluation includes, among other things, whether
the vesting of the awards is contingent on the continued employment of the
acquired company's stockholders beyond the acquisition date. If continued
employment is required for vesting, the awards are treated as compensation for
post-acquisition services and recognized as expense over the requisite service
period.



Determining the fair value of assets acquired and liabilities assumed requires
management to use significant judgment and estimates, including the selection of
valuation methodologies, estimates of future revenue and cash flows, discount
rates and selection of comparable companies. The estimates and assumptions used
to determine the fair values and useful lives of identified intangible assets
could change due to numerous factors, including market conditions, technological
developments, economic conditions and competition. In connection with
determination of fair values, we may engage a third-party valuation specialist
to assist with the valuation of intangible and certain tangible assets acquired
and certain assumed obligations. Acquisition-related transaction costs incurred
by us are not included as a component of consideration transferred but are
accounted for as an operating expense in the period in which the costs are
incurred.


Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the
net tangible and intangible assets acquired in a business combination. Goodwill
is not amortized but is tested for impairment annually on October 1 or more
frequently if events or changes in circumstances indicate that the asset may be
impaired. We operate as one reporting unit and the fair value of the reporting
unit is estimated using quoted market prices in active markets of our stock. An
impairment charge is recognized for the excess of the carrying value of goodwill
over its implied fair value.


Our annual goodwill impairment test resulted in no impairment charges in any of the periods presented in the consolidated financial statements.





Other intangible assets include Client relationships, non-compete agreements,
acquired technology, patents and trademarks resulting from business
acquisitions, and capitalized software development costs. We amortize such
definite-lived intangible assets over their estimated useful lives. We also
review the useful lives on a quarterly basis to determine if the period of
economic benefit has changed. Client relationships are amortized over a period
of 2 to 20 years in relation to expected future cash flows, while non-compete
agreements are amortized over a period of 1.5 to 5 years using the straight-line
method. Trademarks are amortized over 3 to 15 years using the straight-line
method. Technology is amortized over 5 to 7 years using the straight-line
method. Patents are amortized over 3 years using the straight-line method.
Capitalized software development costs are amortized over 3 to 5 years using the
straight-line method.

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Definite-lived intangible assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying value of the asset may not
be recoverable. If the carrying value of an intangible asset exceeds its fair
value, an impairment charge would be recognized in an amount equal to the amount
by which the carrying value of the intangible asset exceeds its fair value.
There were no events or changes in circumstances that would indicate that the
carrying value of the definite-lived intangible assets may not be recoverable
during the years ended December 31, 2020, 2019 or 2018.



Convertible Senior Notes



Convertible Senior Notes (the Notes) and the Livongo Notes that we agreed to
guarantee (the Livongo Notes) are accounted for in accordance with FASB ASC
Subtopic 470-20, Debt with Conversion and Other Options. Pursuant to ASC
Subtopic 470-20, issuers of certain convertible debt instruments, such as the
Notes and the Livongo Notes, that have a net settlement feature and may be
settled wholly or partially in cash upon conversion are required to separately
account for the liability (debt) and equity (conversion option) components of
the instrument. The carrying amount of the liability component of the instrument
is computed by estimating the fair value of a similar liability without the
conversion option using an income-based approach. For the income-based approach,
we use a convertible bond lattice model that includes assumptions such as
volatility and the risk-free rate. The amount of the equity component is then
calculated by deducting the fair value of the liability component from the
principal amount of the Notes or the fair value of the total Livongo Notes
assumed on consummation of the merger, as applicable. The difference between the
principal amount and the liability component represents a debt discount that is
amortized to interest expense over the contractual term of the Notes or the
Livongo Notes using an effective interest rate method. The equity component is
not remeasured as long as it continues to meet the conditions for equity
classification. In accounting for the issuance costs related to the Notes, the
allocation of issuance costs, if applicable, incurred between the liability and
equity components were based on their relative values.



Stock-Based Compensation



Stock-based compensation for stock options and restricted stock units granted is
measured based on the grant date fair value of the awards and recognized on a
straight-line basis over the period during which the employee is required to
perform services in exchange for the award (generally the vesting period of the
award). We estimate the fair value of employee stock options using the
Black-Scholes option-pricing model, except as noted. Stock-based compensation
for performance stock units ("PSU") granted is measured based on the grant- date
fair value of the awards and recognized on an accelerated tranche by tranche
basis over the period during which the employee is required to perform services
in exchange for the award (generally the vesting period of the award).  The
ultimate number of PSUs that are issued to an employee is the result of the
actual performance of the Company at the end of the performance period compared
to the performance conditions and can range from 50% to 225% of the initial
grant. For stock-based compensation assumed in the Livongo merger, the Monte
Carlo valuation model was the most suitable for valuation of options for the
replaced and replacement awards from the merger.



Our Employee Stock Purchase Plan ("ESPP") permits eligible employees to purchase
common stock at a discount through payroll deductions during defined offering
periods. Under the ESPP, we may specify offerings with durations of not more
than 27 months, and may specify shorter purchase periods within each offering.
Each offering will have one or more purchase dates on which shares of its common
stock will be purchased for employees participating in the offering. An offering
may be terminated under certain circumstances. The price at which the stock is
purchased is equal to the lower of 85% of the fair market value of the common
stock at the beginning of an offering period or on the date of purchase.



Components of Results of Operations

Cost of Revenue (exclusive of depreciation and amortization, which is shown separately)

Cost of revenue (exclusive of depreciation and amortization, which is shown separately) primarily consists of fees paid to the physicians and other health professionals in our provider network; product cost; costs incurred in connection with our provider network operations and data center activities, which include employee-related expenses



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(including salaries and benefits), costs related to Client support; provider
network, medical records, magnetic resonance imaging, medical lab tests,
translation, postage, medical malpractice insurance, and deferred device costs.
Cost of revenue (exclusive of depreciation and amortization, which is shown
separately) is driven primarily by the number of general medical visits, expert
medical services and other specialty visits completed in each period and are
closely correlated or directly related to delivery of our solutions and monthly
subscription fees. Many of the elements of the cost of revenue (exclusive of
depreciation and amortization, which is shown separately) are relatively
variable, and can be reduced in the near-term to offset any decline in our
revenue. Our business and operational models are designed to be highly scalable
and leverage variable costs to support revenue-generating activities. Cost of
revenue (exclusive of depreciation and amortization, which is shown separately)
does not include an allocation of depreciation and amortization.



Advertising and Marketing Expenses





Advertising and marketing expenses consist primarily of costs of digital
advertisements, personnel and related expenses for our marketing staff and
communications materials that are produced for Member acquisition and to
generate greater awareness and utilization among our Clients and Members.
Marketing costs also include third-party independent research, trade shows and
brand messages, public relations costs and stock-based compensation for our
advertising and marketing employees. Our advertising and marketing expenses
exclude certain allocations of occupancy expense as well as depreciation and
amortization.



We expect our advertising and marketing expenses to increase for the foreseeable
future as we continue to increase the size of our digital and media advertising
and marketing operations including Member acquisition and engagement activities
and expand into new products and markets. Our advertising and marketing expenses
will fluctuate as a percentage of our total revenue from period to period due to
the seasonality of our total revenue and the timing and extent of our
advertising campaigns and marketing expenses. We will continue to invest in
advertising and marketing by promoting our brands through a variety of marketing
and public relations activities.



Sales Expenses



Sales expenses consist primarily of employee-related expenses, including
salaries, benefits, commissions, employment taxes, travel and stock-based
compensation costs for our employees engaged in sales, account management and
sales support in addition to commissions paid to external brokers. Our sales
expenses exclude certain allocations of occupancy expense as well as
depreciation and amortization. We expect our sales expenses to continue to
increase in the short-to-medium-term as we strategically invest to expand our
business and to capture an increasing amount of our market opportunity.



Technology and Development Expenses


Technology and development expenses include personnel and related expenses for
software engineering, information technology infrastructure, security and
compliance, product development and support for our efforts to add new features
and ensure the reliability and scalability of our existing solutions. Technology
and development expenses also include outsourced software engineering services,
the costs of operating our on-demand technology infrastructure, licensed
applications and stock-based compensation for our technology and development
employees. Our technology and development expenses exclude certain allocations
of occupancy expense as well as depreciation and amortization.



We expect our technology and development expenses to increase for the
foreseeable future as we continue to invest in the development of our technology
platform. Our technology and development expenses may fluctuate as a percentage
of our total revenue from period to period due to the seasonality of our total
revenue and the timing and extent of our technology and development expenses.
Historically, the majority of our technology and development costs have been
expensed, except those costs that have been capitalized as software development
costs.


Legal and Regulatory Expenses





Legal and regulatory expenses include professional fees incurred and
settlements. Our legal and regulatory expenses exclude certain allocations of
personnel and related expenses, occupancy expense as well as depreciation and
amortization.



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Acquisition and Integration Related Costs





Acquisition and integration related costs include investment banking, financing,
legal, accounting, consultancy, integration, fair value changes related to
contingent consideration and certain other transaction costs related to mergers
and acquisitions.


General and Administrative Expenses


General and administrative expenses include personnel and related expenses of,
and professional fees incurred by our executive, finance, legal, business
development, operations and human resources departments. They also include
stock-based compensation costs related to our board of directors and our
employees and most of the facilities costs including utilities and facilities
maintenance. Our general and administrative expenses exclude any allocation of
depreciation and amortization.



We expect our general and administrative expenses to increase for the
foreseeable future as we continue to grow our business. However, we expect our
general and administrative expenses to decrease as a percentage of our total
revenue over the next several years. Our general and administrative expenses may
fluctuate as a percentage of our total revenue from period to period due to the
seasonality of our total revenue and the timing and extent of our general and
administrative expenses.


Depreciation and Amortization

Depreciation and amortization consist primarily of depreciation of fixed assets, amortization of capitalized software development costs and amortization of acquisition-related intangible assets.

Amortization of Warrants and Loss on Extinguishment of Debt

Amortization of warrants and loss on extinguishment of debt consists of costs associated with debt refinances including the write off of origination and termination financing fees and recognition of the fair value of warrants included with the loan facilities.





Foreign Currency



The functional currency for each of our foreign subsidiaries is the local
currency. All assets and liabilities denominated in a foreign currency are
translated into U.S. dollars at the exchange rate on the balance sheet date.
Revenues and expenses are translated at the weighted average exchange rate
during the period. Cumulative translation gains or losses are included in
stockholders' equity as a component of accumulated other comprehensive income
(loss). We have not utilized hedging strategies with respect to such foreign
exchange exposure.



Interest Expense, Net



Interest expense, net consists of interest costs associated with our bank, other
debt and amortization of debt issuance costs and costs associated with the Notes
and Livongo Notes, net of interest earned on cash and cash equivalents and
short-term marketable securities as well as foreign exchange gain or loss
related to transactions in currencies other than the local functional currency.



Income Tax Provision



We follow the provisions of the accounting guidance on accounting for income
taxes which requires recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax basis of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse. A
valuation allowance is provided to reduce the deferred tax asset to a level
which, more likely than not, will be realized. We have recorded deferred tax
liabilities arising principally from

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acquired intangible assets in the U.S. and in foreign jurisdictions. We have
provided a valuation allowance for certain of our U.S. and foreign deferred tax
assets at December 31, 2020, 2019 and 2018, as it is more likely than not that
these assets will not be realized in the future. In 2020, we released a portion
of the valuation allowance against the deferred tax assets attributable to our
U.S. NOLs as the acquired intangibles from the InTouch Health and Livongo
acquisitions serve as a source of income for which we, more likely than not,
will be able to realize the benefits of the deferred tax assets against.



Consolidated Results of Operations





The following table sets forth our consolidated statement of operations data for
the years ended December 31, 2020, 2019 and 2018 and the dollar and percentage
change between the respective periods (dollars in thousands):




                                                            Year Ended December 31,
                             2020                                      2019                                    2018
                               $          Variance        %              $          Variance      %             $
Revenue                   $ 1,093,962    $   540,655       98 %     $   553,307    $  135,400      32 %     $  417,907
Expenses:
Cost of revenue
(exclusive of
depreciation and
amortization, which
is shown separately
below)                        390,829        206,364      112 %         184,465        55,730      43 %        128,735
Operating expenses:
Advertising and
marketing                     226,146        116,449      106 %         109,697        24,588      29 %         85,109
Sales                         154,052         89,137      137 %          64,915         5,761      10 %         59,154
Technology and
development                   164,941        100,297      155 %          64,644        10,271      19 %         54,373
Legal and regulatory            8,876          2,114       31 %           6,762         2,781      70 %          3,981
Acquisition and
integration related
costs                          88,236         81,616    1,233 %           6,620       (3,771)     -36 %         10,391
Gain on sale                        0              0       NM %               0         5,500    -100 %        (5,500)
General and
administrative                497,808        340,114      216 %         157,694        40,778      35 %        116,916
Depreciation and
amortization                   69,495         30,543       78 %          38,952         3,350       9 %         35,602
Total expenses              1,600,383        966,634      153 %         633,749       144,988      30 %        488,761
Loss from operations        (506,421)      (425,979)      530 %        (80,442)       (9,588)      14 %       (70,854)
Loss on
extinguishment of
debt                            9,077          9,077       NM %               0             0      NM %              0
Interest expense,
net                            60,495         31,482      109 %          29,013         2,901      11 %         26,112
Net loss before
taxes                       (575,993)      (466,538)      426 %       (109,455)      (12,489)      13 %       (96,966)
Income tax (benefit)
expense                      (90,857)       (80,266)      758 %        (10,591)      (10,709)      NM %            118
Net loss                  $ (485,136)    $ (386,272)      391 %     $  (98,864)    $  (1,780)       2 %     $ (97,084)


NM - not meaningful



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EBITDA and Adjusted EBITDA

The following table reconciles net loss to EBITDA and Adjusted EBITDA for the years ended December 31, 2020, 2019 and 2018 (in thousands):






                                                           Year Ended
                                                          December 31,
                                                2020           2019          2018
Net loss                                     $ (485,136)    $ (98,864)    $ (97,084)
Add:

Loss on extinguishment of debt                     9,077             0     

       0
Interest expense, net                             60,495        29,013        26,112
Income tax benefit                              (90,857)      (10,591)           118

Depreciation and amortization                     69,495        38,952     

  35,602
EBITDA(1)                                      (436,926)      (41,490)      (35,252)
Stock-based compensation                         475,531        66,702        43,769
Gain on sale                                           0             0       (5,500)

Acquisition and integration related costs 88,236 6,620


  10,391
Adjusted EBITDA(1)                           $   126,841    $   31,832    $   13,408

(1) Non-U.S. 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, foreign exchange gain or loss,
taxes, depreciation and amortization and loss on extinguishment of debt. 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. For presentation purposes, foreign
exchange gain or loss is included in interest expense, net in our consolidated
statement of operations.

Adjusted EBITDA consists of net loss before interest, foreign exchange gain or
loss, taxes, depreciation and amortization, stock-based compensation, gain on
sale, loss on extinguishment of debt, 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
terms 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 limitations 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;


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• EBITDA and Adjusted EBITDA do not reflect the significant 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 gain on sale of certain


   non-core Client contracts;



• 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 both 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.


Consolidated Results of Operations





We completed our acquisitions of Livongo on October 30, 2020, InTouch on July 1,
2020, MedecinDirect on April 30, 2019, Advance Medical on May 31, 2018 and Best
Doctors on July 14, 2017. The results of operations of the aforementioned
acquisitions have been included in our audited consolidated financial statements
included in this Form 10-K from their respective acquisition dates.



Revenue. Total revenue was $1,094.0 million including $128.3 million from
InTouch and Livongo for the year ended December 31, 2020, compared to
$553.3 million during the year ended December 31, 2019, an increase of
$540.7 million, or 98%. Excluding the impact of the InTouch and Livongo
acquisitions, revenue increased 75%, reflecting the acceleration of the adoption
of virtual care stemming from the COVID-19 pandemic and our broad momentum to
transform the healthcare experience. The increase in revenue was significantly
driven by an increase in new Clients and the number of new Members generating
additional subscription access fees and visit fees. The number of paid Members
increased by 41% from December 31, 2019 to December 31, 2020. Revenue from the
U.S. subscription access fees was $737.4 million for the year ended December 31,
2020 compared to $356.7 million for the year ended December 31, 2019. We
generated $124.4 million of international subscription access fees for the year
ended December 31, 2020 and $106.6 million for the year ended December 31, 2019.
We completed approximately 10.6 million visits, representing $206.9 million of
visit fees for the year ended December 31, 2020, compared to 4.1 million visits,
representing $90.0 million of visit fees during the year ended December 31,
2019, an increase of $116.9 million, or 130%.



Total revenue was $553.3 million including $33.2 million from Advance Medical
and MedecinDirect for the year ended December 31, 2019, compared to
$417.9 million during the year ended December 31, 2018, an increase of
$135.4 million, or 32%. Excluding the impact of Advance Medical and
MedecinDirect acquisitions, revenues increased 24%. The increase in revenue was
driven by an increase in new Clients and the number of new Members generating
additional subscription access fees and visit fees, as well as revenue from the
acquisitions of Advance Medical and MedecinDirect. The number of paid Members
increased by 57% from December 31, 2018 to December 31, 2019. Revenue from the
U.S. subscription access fees was $356.7 million for the year ended December 31,
2019 compared to $277.1 million for the year ended December 31, 2018. We
generated $106.6 million of international subscription access fees for the year
ended December 31, 2019 and $73.7 million for the year ended December 31, 2018.
We completed

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approximately 4,138,000 visits, representing $90.0 million of visit fees for the
year ended December 31, 2019, compared to 2.6 million visits, representing
$90.0 million of visit fees during the year ended December 31, 2018, an increase
of $22.9 million, or 34%.



Cost of Revenue (exclusive of depreciation and amortization, which is shown
separately below). Cost of revenue (exclusive of depreciation and amortization,
which is shown separately below) was $390.8 million for the year ended
December 31, 2020 compared to $184.5 million for the year ended December 31,
2019, an increase of $206.3 million, or 112%. The increase was primarily due to
higher Membership and general medical visits resulting in increased provider
fees and increased physician network operation center costs, and hiring of
additional personnel to manage our provider network operations centers, and to a
lesser extent, the impact from the InTouch and Livongo acquisitions.



Cost of revenue (exclusive of depreciation and amortization, which is shown
separately below) was $184.5 million for the year ended December 31, 2019
compared to $128.7 million for the year ended December 31, 2018, an increase of
$55.7 million, or 43%. The increase was primarily due to higher general medical
visits resulting in increased provider fees and increased physician network
operation center costs, and hiring of additional personnel to manage our
provider network operations centers, as well as the impact from Advance Medical
and MedecinDirect services.



Advertising and Marketing Expenses. Advertising and marketing expenses were
$226.2 million for the year ended December 31, 2020 compared to $109.7 million
for the year ended December 31, 2019, an increase of $116.5 million, or 106%.
Excluding the impact from InTouch and Livongo of $33.1 million, this increase
primarily consisted of $78.3 million from an increase in Member engagement
initiatives, digital and media advertising, sponsorship of professional
organizations and trade shows and to a lesser extent, the hiring of additional
personnel totaling $5.0 million.



Advertising and marketing expenses were $109.7 million for the year ended
December 31, 2019 compared to $85.1 million for the year ended December 31,
2018, an increase of $24.6 million, or 29%. The increase primarily consisted of
$18.1 million from an increase in Member engagement initiatives, digital and
media advertising, sponsorship of professional organizations and trade shows, as
well as the hiring of additional personnel totaling $5.9 million.



Sales Expenses. Sales expenses were $154.1 million for the year ended
December 31, 2020 compared to $64.9 million for the year ended December 31,
2019, an increase of $89.2 million, or 137%. Excluding the impact from the
recent acquisitions of $78.2 million, this increase primarily consisted of
increased staffing and employee-related expenses including sales commissions of
$14.9 million, partially offset by lower travel and entertainment expenses and
other expenses of $4.0 million.



Sales expenses were $64.9 million for the year ended December 31, 2019 compared
to $59.2 million for the year ended December 31, 2018, an increase of
$5.8 million, or 10%. Including the impact from the recent acquisitions, this
increase primarily consisted of increased staffing and employee-related expenses
including sales commissions of $4.7 million and other expenses of $1.3 million.



Technology and Development Expenses. Technology and development expenses were
$164.9 million for the year ended December 31, 2020 compared to $64.6 million
for the year ended December 31, 2019, an increase of $100.3 million, or 155%.
Excluding the impact from InTouch and Livongo of $74.1 million, this increase
resulted primarily from hiring additional personnel totaling $14.9 million,
professional fees of $8.5 million, and ongoing projects to improve and optimize
our technology platform and other expenses of $2.8 million.



Technology and development expenses were $64.6 million for the year ended
December 31, 2019 compared to $54.4 million for the year ended December 31,
2018, an increase of $10.3 million, or 19%. Including the impact from
acquisitions, this increase resulted primarily from hiring additional personnel
totaling $7.1 million, professional fees of $2.4 million, and ongoing projects
to improve and optimize our technology platform and other expenses of $0.8

million.

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Legal and Regulatory Expenses. Legal and regulatory expenses were $8.9 million
for the year ended December 31, 2020 compared to $6.8 million for the year ended
December 31, 2019, an increase of $2.1 million, or 31%. This increase resulted
primarily from litigation activities largely associated with a class action
complaint.



Legal and regulatory expenses were $6.8 million for the year ended December 31,
2019 compared to $4.0 million for the year ended December 31, 2018, an increase
of $2.8 million, or 70%. This increase resulted primarily from litigation
activities largely associated with a class action complaint.



Acquisition and Integration Related Costs. Acquisition and integration related
costs were $88.2 million for the year ended December 31, 2020 compared to $6.6
million for the year ended December 31, 2019, an increase of $81.6 million.
These costs were incurred primarily with the InTouch acquisition and the merger
with Livongo as well as in connection with integration activities of prior
acquisitions. The 2020 acquisition and integration related costs represent
investment banking, financing, legal, accounting, consultancy, integration, fair
value changes related to contingent consideration and certain other
non-recurring transaction costs related to mergers and acquisitions.



Acquisition and integration related costs were $6.6 million for the year ended
December 31, 2019 compared to $10.4 million for the year ended December 31,
2018, a decrease of $3.8 million. The 2019 acquisition and integration related
costs represent investment banking, financing, legal, accounting, consultancy,
integration, fair value changes related to contingent consideration and certain
other non-recurring transaction costs related to mergers and acquisitions. The
2018 integration related costs represent legal, personnel, re-branding and
professional related fees for the May 2018 acquisition of Advance Medical and
the July 2017 acquisition of Best Doctors.



Gain on Sale. Gain on sale of $5.5 million for the year ended December 31, 2018 consists of the June 2018 sale of certain Client contracts.





General and Administrative Expenses. General and administrative expenses were
$497.8 million for the year ended December 31, 2020 compared to $157.7 million
for the year ended December 31, 2019, an increase of $340.1 million, or 216%.
Excluding the impact from the InTouch and Livongo acquisitions of $283.4
million, this increase was driven in part by an increase in employee-related
expenses of approximately $23.1 million, primarily due to an increase in
stock-compensation expense and growth in overall full time employee headcount
reflecting the acceleration of the adoption of virtual care stemming from the
COVID-19 pandemic and our broad momentum to transform the healthcare experience.
Costs incurred in our provider network operations centers in connection with
enhancing our Member services increased to $14.7 million for the year ended
December 31, 2020 from $5.8 million for the year ended December 31, 2019, an
increase of $8.9 million. Professional fees, increased by $3.1 million for the
year ended December 31, 2020 as compared to December 31, 2019. Other expenses,
which include office-related charges, bank charges, therapist recruiting,
liability insurance and bad debt expenses, increased in total to $51.4 million
for the year ended December 31, 2020 from $29.8 million for the year ended
December 31, 2019, an increase of $21.6 million, reflecting the impact from
business growth, including bank charges, therapist recruiting, credentialing,
liability insurance, bad debt and others.



General and administrative expenses were $157.7 million for the year ended
December 31, 2019 compared to $116.9 million for the year ended December 31,
2018, an increase of $40.8 million, or 35%. Including the impact from
acquisitions, this increase was driven by an increase in employee-related
expenses of approximately $29.7 million, primarily due to an increase in
stock-compensation expense and growth in overall full time employee headcount.
Costs incurred in our provider network operations centers in connection with
enhancing our Member services increased to $5.8 million for the year ended
December 31, 2019 from $2.6 million for the year ended December 31, 2018, an
increase of $3.2 million. Professional fees, increased by $2.5 million for the
year ended December 31, 2019 as compared to the year ended December 31, 2018.
Other expenses, which include office-related charges and bank charges, severance
costs, lease costs and bad debt expenses, increased in total to $29.8 million
for the year ended December 31, 2019 from $24.5 million for the year ended
December 31, 2018, an increase of $5.3 million and primarily reflecting the
impact from the acquisitions.



Depreciation and Amortization. Depreciation and amortization were $69.5 million for the year ended December 31, 2020 compared to $39.0 million for the year ended December 31, 2019, an increase of $30.5 million, or



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78%. This increase was due to additional amortization expense primarily related
to acquisition-related intangible assets that increased from $319.8 million at
December 31, 2019 to $2,183.4 million at December 31, 2020 and an increase in
depreciation expense on an increased base of depreciable fixed assets that
increased from $26.1 million at December 31, 2019 to $50.5 million at
December 31, 2020.



Depreciation and amortization were $39.0 million for the year ended December 31,
2019 compared to $35.6 million for the year ended December 31, 2018, an increase
of $3.4 million, or 9%. This increase was due to additional amortization expense
primarily related to acquisition-related intangible assets that increased from
$305.7 million at December 31, 2018 to $319.8 million at December 31, 2019 and
an increase in depreciation expense on an increased base of depreciable fixed
assets that increased from $22.4 million at December 31, 2018 to $26.1 million
at December 31, 2019.



Interest Expense, Net. Interest expense, net consists of interest costs and
amortization of debt discount associated with our bank debt, the Notes, and the
Livongo Notes, interest income from cash and cash equivalents and short-term
investments in marketable securities as well as foreign exchange gain or loss.
Interest expense, net was $60.5 million and $29.0 million for the years ended
December 31, 2020 and 2019, respectively. The increase in interest expense
primarily is associated with the 2027 Notes issued in May 2020 and Livongo Notes
that the Company agreed to guarantee in October 2020.



Interest expense, net was $29.0 million and $26.1 million for the years ended December 31, 2019 and 2018, respectively. The increase in interest expense primarily is associated with the 2025 Notes issued in May 2018.





Income tax benefit.  Income tax benefit was $(90.9) million for the year ended
December 31, 2020 compared to $(10.6) million benefit for the year ended
December 31, 2019, the increased tax benefit largely reflects the recognition of
current period losses due the partial release of the U.S valuation allowance due
to acquired intangibles from the purchases of InTouch Health and Livongo as well
as increased excess stock-based compensation deductions.



The income tax benefit of $(10.6) million for the year ended December 31, 2019
largely reflects an $(8.5) million income tax benefit associated with the
intercompany transfer of a U.S. subsidiary from a foreign owned subsidiary to
the U.S. parent while the Company was in a significant valuation allowance
position.



Liquidity and Capital Resources

The following table presents a summary of our cash flow activity for the periods set forth below (in thousands):






                                                                    Year Ended
                                                                    December 31,
                                                          2020          2019         2018
Consolidated Statements of Cash Flows Data
Net cash (used in) provided by operating activities    $  (53,511)    $ 29,869    $   (4,860)
Net cash (used in) provided by investing activities      (590,975)      25,013      (257,496)
Net cash provided by financing activities                  859,136      35,094        645,612
Total                                                  $   214,650    $ 89,976    $   383,256




Our principal sources of liquidity were cash and cash equivalents, comprised of
money market funds and marketable securities, totaling $733.3 million, including
restricted cash of $62.6 million as of December 31, 2020. Additionally, we had
short-term marketable securities of $53.2 million as of December 31, 2020.
During 2020 we experienced positive Adjusted EBITDA and we anticipate increasing
positive Adjusted EBITDA results for 2021.



We believe that our existing cash and cash equivalents and short-term marketable
securities will be sufficient to meet our working capital and capital
expenditure needs for at least the next 12 months. Our future capital
requirements will depend on many factors including our growth rate, contract
renewal activity, number of visits, the timing and extent of spending to support
product development efforts, our expansion of sales and marketing activities,
the introduction of new and enhanced services offerings and the continuing
market acceptance of telehealth. We may in the future enter into arrangements to
acquire or invest in complementary businesses, services and technologies and
intellectual property

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rights. We may be required to seek additional equity or debt financing. In the
event that additional financing is required from outside sources, we may not be
able to raise it on terms acceptable to us or at all. If we are unable to raise
additional capital when desired, our business, financial condition and results
of operations would be adversely affected.



Historically, we have financed our operations primarily through sales of equity securities, debt issuance and bank borrowings.


On October 30, 2020, we completed the merger with Livongo. Upon completion of
the merger, each share of Livongo's common stock converted into the right to
receive 0.5920 shares of our common stock and $4.24 in cash, without interest.
In addition, in connection with the closing of the merger, Livongo paid a
special cash dividend equal to $7.09 per share of Livongo's common stock to
shareholders of Livongo as of a record date of October 29, 2020. The total
consideration was $13,938.0 million consisting of $401.0 million of net cash,
$555.4 million related to the conversion feature of the Livongo Notes guaranteed
by the Company and 60.4 million shares of Teladoc Health's common stock valued
at approximately $12,981.6 million on October 30, 2020. Livongo is a leading
provider to empower people with chronic conditions to live better and healthier
lives.



On October 30, 2020, as part of the Livongo acquisition, we agreed to guarantee
Livongo's obligations under its $550.0 million aggregate principal amount of
convertible senior notes due 2025, which had been issued by Livongo on June 4,
2020, prior to our acquisition of Livongo. The Livongo Notes bear cash interest
at a rate of 0.875% per year, payable semi-annually in arrears on June 1 and
December 1 of each year. The Livongo Notes will mature on June 1, 2025.



On July 1, 2020, we completed the acquisition of InTouch for aggregate
consideration of $1,069.8 million, which was comprised of 4.6 million shares of
our common stock valued at $903.3 million on July 1, 2020, and $166.5 million of
net cash. InTouch is a leading provider of enterprise telehealth solutions for
hospitals and health systems.



On May 19, 2020, we issued, at par value, $1 billion aggregate principal amount
of 1.25% convertible senior notes due 2027 (the 2027 Notes). The 2027 Notes bear
cash interest at a rate of 1.25% per year, payable semi-annually in arrears on
June 1 and December 1 of each year, beginning on December 15, 2020. The 2027
Notes will mature on June 1, 2027. The net proceeds to the Company from the
offering were $975.9 million after deducting offering costs of approximately
$24.1 million.


On April 30, 2019, we completed the acquisition of MedecinDirect. The purchase price was $11.2 million cash with additional potential earnout consideration.





On July 26, 2018, we completed a follow-on public offering (the July Offering)
in which we issued and sold 5,000,000 shares of common stock, at an issuance
price of $66.28 per share. We received net proceeds of $330.9 million after
deducting offering expenses of $0.5 million.



On May 31, 2018 we completed the acquisition of Advance Medical. The purchase price was $351.7 million consisting of $283.1 million of net cash, and 1.3 million shares of Teladoc's common stock valued at approximately $68.6 million.


On May 8, 2018, we issued, at par value, $287.5 million aggregate principal
amount of 1.375% convertible senior notes due 2025 (the 2025 Notes). The 2025
Notes bear cash interest at a rate of 1.375% per year, payable semi-annually in
arrears on May 15 and November 15 of each year. The 2025 Notes will mature on
May 15, 2025. The net proceeds to the Company from the offering were $279.1
million after deducting the initial purchasers' discounts, commissions and
offering expenses of approximately $8.4 million.



The Company's Senior Secured Revolving Credit Facility was terminated pursuant
to its terms effective July 14, 2020. There was no amount outstanding as of
December 31, 2019 other than $2.2 million of letters of credit issued for
facility security deposits at December 31, 2019. In addition, the acquired fair
value of the assumed indebtedness of $10.0 million in connection with Livongo
merger was paid in full and there was no amount outstanding as of December

31,
2020.

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See Note 12, "Convertible Senior Notes" of the Notes to the Consolidated Financial Statements of this Annual Report on Form 10-K for additional information on the Notes and the Livongo Notes.

We were in compliance with all debt covenants at December 31, 2020 and 2019.

Cash (Used in) Provided by Operating Activities





Cash flows (used in) provided by operating activities consist of net loss
adjusted for certain non-cash items and changes in assets and liabilities. Cash
(used in) provided by operating activities was $(53.5) million and $29.9 million
for the years ended December 31, 2020 and 2019, respectively. The year-over-year
decrease was substantially driven by higher payment of acquisition and
integration related costs, as well as costs for strategic investments in
personnel, technology and Member engagement. This was partially offset by higher
revenues and improved operating leverage.



Cash flows provided by (used in) operating activities consist of net loss
adjusted for certain non-cash items and changes in assets and liabilities. Cash
provided by (used in) operating activities was $29.9 million and $(4.9) million
for the years ended December 31, 2019 and 2018, respectively. The year-over-year
increase was primarily driven by higher revenues and improved operating
leverage, partially offset by higher costs for strategic investments in
personnel, technology and Member engagement.



Our primarily uses of cash from operating activities are for the payment of cash
compensation expenses, providers fee, inventory, insurance, office expenses,
technology costs, market data costs, interest expense and acquisition and
integration costs. Historically, the payment of cash for compensation and
benefits is at its highest level in the first quarter when we pay discretionary
employee compensation related to the previous fiscal year.



Cash (Used in) Provided by Investing Activities

Cash used in investing activities was $591.0 million for the year ended December 31, 2020. Cash used in investing activities consisted of acquisition of businesses of $567.4 million, net of cash acquired, investment in capital expenditures totaling $4.0 million, investments in capitalized software development costs of $22.0 million, and partially offset by proceeds from short-term marketable securities of $2.5 million.


Cash provided by investing activities was $25.0 million for the year ended
December 31, 2019. Cash provided by investing activities consisted of proceeds
from short-term marketable securities of $52.1 million partially offset by
investment in capital expenditure totaling $3.5 million, investments in
capitalized software development costs of $7.4 million, investment in securities
of $5.0 million and acquisition of businesses of $11.2 million.



Cash Provided by Financing Activities


Cash provided by financing activities for the year ended December 31, 2020 was
$859.1 million. Cash provided by financing activities consisted of $975.9
million of net cash proceeds from the issuance of the 2027 Notes, $91.7 million
of proceeds from sale of the capped call associated with the Livongo Notes,
$54.3 million of proceeds from the exercise of employee stock options, $4.7
million of proceeds from participants in the employee stock purchase plan, $6.0
million of proceeds from advances from financing companies offset by $228.2
million of cash used in the repurchase of 2022 Notes, $8.6 million from a net
change in payments from customers against advances from financing companies,
payment of $10.0 million assumed indebtedness in connection with the Livongo
merger and $26.7 million of timing associated with net cash paid for tax
withholding for stock-based compensation.



Cash provided by financing activities for the year ended December 31, 2019 was
$35.1 million. Cash provided by financing activities consisted of $33.3 million
of proceeds from the exercise of employee stock options and $3.4 million of
proceeds from participants in the employee stock purchase plan, partially offset
by $1.6 million for withholding taxes for stock-based awards.



On June 4, 2020, the Livongo Notes referred to in Note 12 to the consolidated
financial statements were issued on an unsecured basis by Livongo Health, Inc.
In connection with the acquisition of Livongo by Teladoc Health, Inc. on October
30, 2020, Teladoc Health, Inc. became the parent guarantor of the Livongo Notes.
The guarantee is full and

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unconditional and ranks equally in right of payment with all existing and future
unsecured senior indebtedness. As disclosed below, summary financial information
is presented for Teladoc Health, Inc., as Guarantor, excluding its consolidated
subsidiaries (other than Livongo), and Livongo Health, Inc., as the Issuer,
excluding its consolidated subsidiaries, collectively referred to as the Obligor
Group. The summary financial information of the Obligor Group is presented on a
combined basis and transactions between the combined entities have been
eliminated and investments in and equity in earnings from non-guarantor
subsidiaries have been excluded. Financial information for non-guarantor
entities has been excluded. For the year ended December 31, 2020, revenue of the
Obligor Group was $350.2 million, operating loss was $(578.2) million, net loss
before taxes was $(647.4) million and net loss was $(560.8) million. As of
December 31, 2020, current assets of the Obligor Group were $809.8 million,
inter-company receivables were $302.5 million, total assets were $17,459.5
million, current liabilities were $199.7 million, inter-company payables were
$49.5 million and total liabilities were $1,716.3 million.



Contractual Obligations and Commitments





The following summarizes our contractual obligations as of December 31, 2020 (in
thousands):




                                                            Payment Due by Period
                                                      Less than      1 to 3      4 to 5       More than
                                         Total         1 Year        Years        Years        5 Years
Operating leases                      $    63,265    $    14,192    $ 28,106    $  20,967    $         0
Non-cancelable purchase
commitments                                 9,962          8,130       1,832            0              0
Debt obligations under the
Convertible Notes                       1,873,550         46,762           0      826,788      1,000,000
Interest associated with the
Convertible Notes                         128,821         22,522     

42,922       42,236         21,141
Total                                 $ 2,075,598    $    91,606    $ 72,860    $ 889,991    $ 1,021,141




Our existing office and hosting co-location facilities lease agreements provide
us with the option to renew and generally provide for rental payments on a
graduated basis. Our future operating lease obligations would change if we
entered into additional operating lease agreements as we expand our operations
and if we exercised the office and hosting co-location facilities lease options.
The contractual commitment amounts in the table above are associated with
agreements that are enforceable and legally binding and that specify all
significant terms, including fixed or minimum services to be used, fixed,
minimum or variable price provisions and the approximate timing of the
transaction. Non-cancelable purchase commitments include inventory purchases,
cloud-based software contracts and other goods and services. Obligations under
contracts that we can cancel without a significant penalty are not included in
the table above. For abandoned facilities, the above contractual obligation
schedule does not reflect any realized or potential sublease revenue.



Off-Balance Sheet Arrangements





During the periods presented, we did not have, nor do we currently have, any
relationships with unconsolidated entities or financial partnerships, such as
entities often referred to as structured finance or special purpose entities,
which would have been established for the purpose of facilitating off-balance
sheet arrangements or other contractually narrow or limited purposes. We are
therefore not exposed to the financing, liquidity, market or credit risk that
could arise if we had engaged in those types of relationships.



Recently Issued and Adopted Accounting Pronouncements


In December 2019, the Financial Accounting Standards Board, or FASB issued
Accounting Standards Update No. 2019-12, "Simplification of Income Taxes (Topic
740) Income Taxes," or ASU 2019-12. The amendments simplify the accounting for
income taxes by removing certain exceptions to the general principles in Topic
740. The amendments also improve consistent application of and simplify U.S.
GAAP for other areas of Topic 740 by clarifying and amending existing guidance.
ASU 2019-12 is effective for public companies for annual periods beginning after
December 15, 2020, including interim periods within those fiscal years. We
early-adopted ASU 2019-12 in our consolidated financial statements and
disclosures effective January 1, 2020, with no material impact to the financial
statements.



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In January 2017, the FASB issued Accounting Standards Update No. 2017-04,
"Goodwill Simplifications (Topic 350)" or ASU 2017-04. ASU 2017-04 simplifies
the test for goodwill impairment. The new guidance eliminates Step 2 from the
goodwill impairment test as currently prescribed in GAPP. This ASU is the result
of the FASB project focused on simplifications to accounting for
goodwill. The new guidance was effective for the first quarter of 2020 and was
early adopted in the quarter-ended December 31, 2019.



In June 2016, the FASB issued Accounting Standards Update No. 2016-13,
"Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments," or ASU 2016-13. The amendments in ASU 2016-13
introduce an approach based on expected losses to estimated credit losses on
certain types of financial instruments, modify the impairment model for
available-for-sale debt securities and provide for a simplified accounting model
for purchased financial assets with credit deterioration since their
origination. The FASB issued Accounting Standards Update No. 2018-19,
"Codification Improvements to Topic 326, Financial Instruments-Credit Losses,"
or ASU 2018-19, Accounting Standards Update No. 2019-04, "Codification
Improvements to Topic 326, Financial Instruments-Credit Losses," or ASU 2019-04,
Accounting Standards Update No. 2019-05, "Financial Instruments-Credit Losses
(Topic 326): Targeted Transition Relief," or ASU 2019-05, Accounting Standards
Update No. 2019-10, "Financial Instruments-Credit Losses (Topic 326): Effective
Dates," or ASU 2019-10 and Accounting Standards Update No. 2019-11,
"Codification Improvements to Topic 326, Financial Instruments-Credit Losses,"
or ASU 2019-11. The amendments in these ASUs provide clarifications to ASU
2016-13. The Company adopted ASU 2016-13 and the related clarifications
effective January 1, 2020. The adoption did not have a material effect on the
Company's consolidated financial statements.



In August 2018, the FASB issued Accounting Standards Update No. 2018-15,
"Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40):
Customer's Accounting for Implementation Costs Incurred in a Cloud Computing
Arrangement That Is a Service Contract," or ASU 2018-15 Subtopic 350-40, which
aligns the requirements for capitalizing implementation costs incurred in a
cloud computing arrangement that is a service contract with the requirements for
capitalizing implementation costs incurred to develop or obtain
internal-use-software. The standard is effective for fiscal years beginning
after December 15, 2019 and interim periods within those fiscal years. Early
adoption is permitted. We adopted ASU 2018-15 Subtopic 350-40 effective January
1, 2020. The adoption did not have a material impact on the consolidated
financial statements and disclosures.



Consolidated Quarterly Results of Operations

The following table sets forth our quarterly consolidated statement of operations data for the years ended December 31, 2020 and 2019:






(in thousands, except net loss per
share data)                               1Q19          2Q19          3Q19          4Q19         1Q20         2Q20         3Q20         4Q20

Revenue                                $  128,573    $  130,276    $  137,969    $  156,489   $  180,799   $  241,030   $  288,812   $   383,321
Expenses:
Cost of revenue (exclusive of
depreciation and amortization,
which is shown separately below)           44,677        41,634        

42,799 55,355 72,382 90,780 104,725 122,942 Operating expenses: Advertising and marketing

                  26,404        26,616        

31,321 25,356 32,515 47,578 52,302 93,751 Sales

                                      16,212        15,832        

16,120 16,751 17,940 18,687 23,483 93,942 Technology and development

                 15,987        16,665        

15,746 16,246 19,257 23,029 29,958 92,697 Legal and regulatory

                        1,586         2,019         

1,634 1,523 1,222 2,232 2,812 2,610 Acquisition and integration related costs

                                       1,012         1,136         

1,995 2,477 3,664 1,627 25,395 57,550 General and administrative

                 35,982        38,549        

38,681 44,482 45,120 54,383 56,930 341,375 Depreciation and amortization

               9,600         9,848         9,617         9,887        9,710        9,893       12,932        36,960
Total expenses                            151,460       152,299       157,913       172,077      201,810      248,209      308,537       841,827

Loss from operations                     (22,887)      (22,023)     

(19,944) (15,588) (21,011) (7,179) (19,725) (458,506) Loss on extinguishment of debt

                  0             0             0             0            0        7,751        1,227            99
Interest expense, net                       6,521         7,211         7,700         7,581        9,303       13,151       17,222        20,819

Net loss before taxes                    (29,408)      (29,234)     

(27,644) (23,169) (30,314) (28,081) (38,174) (479,424) Income tax provision (benefit)

                742            90       (7,298)       (4,125)        (711)      (2,399)      (2,290)      (85,457)

Net loss                                 (30,150)      (29,324)      (20,346)      (19,044)     (29,603)     (25,682)     (35,884)     (393,967)
GAAP Net Loss per Share                $   (0.43)    $   (0.41)    $   (0.28)    $   (0.26)   $   (0.40)   $   (0.34)   $   (0.43)   $    (3.07)
Weighted Average Common Shares
Outstanding Used in Computing GAAP
Net Loss per Share - Basic and
Diluted                                    70,919        71,721        72,151        72,565       73,279       76,513       83,608       128,298




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Note: We acquired MedecinDirect on April 30, 2019, InTouch Health on July 1, 2020 and Livongo on October 30, 2020. The results of the acquisitions were integrated within our existing business on the respective acquisition dates.

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