- Virtual care company Teladoc Health beat Wall Street's revenue estimates for the second quarter, reporting revenue of $130.3 million (up almost 38% year over year) compared to analysts' forecasted figure of $129.5 million.
- The Purchase, New York-based telehealth provider reported 908,000 virtual care visits in the quarter, up 70% year over year but down slightly from last quarter's figure of 1.06 million, driven primarily by behavioral health visits. Teladoc expects its behavioral health business to grow by 50% this year.
- The company has failed to turn a profit thus far, reporting net loss of $29.3 million in the quarter, but Wall Street expects it could begin generating net income by 2022. Shares were down 3% aftermarket Wednesday.
The global telemedicine market is expected to grow 17% annually to $38 billion by 2022, and telehealth vendors are scrambling to solidify their footing before the market gets too crowded.
Teladoc is no different. In the first half of 2019, the vendor has been working to expand its offerings through a series of service rollouts, acquisitions and partnerships both in and outside the U.S.
In March, it introduced Teladoc Telemedicine Services, a 24/7 virtual care offering for Canadians. The service is in addition to Teladoc's 2017 entry into the country with its Behavioral Health Navigator Services, providing virtual access to mental health providers. In addition, Teladoc snapped up Spain-based Advance Medical last year for $352 million, expanding its market share in Latin America and Asia (and giving it the ability to offer new healthcare options to multinational businesses).
With the closure of its acquisition of Paris-based telehealth vendor MédecinDirect last quarter, Teladoc's reach spans 130 countries including the U.S., U.K., Canada, Chile, Brazil, France, Spain, Portugal, China and Australia. That scale contributed to a 75% year over year revenue growth from international subscription access fees in the second quarter, and a 57% revenue growth from visit fees internationally.
Telemedicine and other partnerships between hospitals, tech companies and private equity investors funding medical innovations are likely to continue, according to Moody's Investors Service analysts. Teladoc is currently in talks with payer giant UnitedHealth Group to offer telehealth as a benefit in some of its plans, and a partnership with CVS Health incorporating Teladoc's platform into its app is slowly rolling out this year.
"I have every expectation that we will be partners with Aetna and CVS for years to come," CEO Jason Gorevic said on a Wednesday earnings call, noting an opportunity down the road for CVS to use Teladoc physicians in its wellness-focused HealthHUB locations, rather than just MinuteClinics, to treat the chronically ill and supplement CVS's own on-site nurse practioners.
Teladoc expects deal volume to only increase moving into the back half of the year. The company is in late-stage contracts with several Fortune 500 companies, Gorevic said. Many of the contracts are for multiple products.
Also driving momentum in the telehealth sector is increased payer interest in offering health plans with virtual care as a first stop for patients. So-called "virtual first" plan designs are meant to reduce premiums by resolving nonacute issues in a less expensive setting, triaging patients when necessary to a brick-and-mortar care facility. Teladoc expects to see proof of the concept play out in the market over the 2020 plan year.
Additionally, the 20 million Medicare beneficiaries in privately run Medicare Advantage plans will have expanded access to virtual care services in the 2020 plan year, thanks to friendly regulatory changes from CMS.
However, it's unlikely this will be a "big bang," Gorevic told investors on the call. "I think it's going to be a gradual rollout."
In the U.S., Teladoc continues to profit from paid membership over visit fees, raking in $26.8 million in the second quarter from paid membership compared to only $9.7 million from visit fees. The company doubled membership between 2016 and 2019 and membership has grown for seven of the past eight quarters.
Year-over-year revenue in the first half of 2019 grew 41% to $258.8 million and total visits increased 73% to 1,971,000.
Teladoc revised its full-year expectations, forecasting revenue around $540 million for the year, and total visits between 3.7 and 4 million. Total U.S. paid membership is forecast to be approximately 30 million and visit-fee-only access at 10 million in 2019.
This is the first earnings release for new Teladoc Chief Financial Officer Mala Murthy, appointed late June, and Chief Operating Officer David Sides, appointed Wednesday. Murthy and Sides filled a joint vacancy left by the resignation of Teladoc's former COO and CFO, Mark Hirschhorn, late last year.