- Virtual care powerhouse Teladoc reported a wider-than-expected net loss in the first quarter, but beat Wall Street estimates on revenue with a topline of $454 million, up 151% year over year, driven by growth in specialty offerings and multi-product contracts.
- The Purchase, New York-based vendor saw particularly strong growth in U.S. subscriptions paid by insurers and employers, more than tripling on a year-over-year basis. Teladoc slightly increased its full-year guidance following the results released aftermarket Wednesday, but membership and visit expectations remained unchanged.
- CEO Jason Gorevic contended he is unworried about mounting competition in the lucrative telehealth space, banking the company's heft and variety of clinical services will fend off entrenched rivals and new entrants like Amazon.
Like other virtual care and digital health companies, Teladoc benefited from a surge in demand for telehealth last year as pandemic-related restrictions and worries about virus transmission caused patients to seek out care in the home. The 19-year-old vendor saw snowballing growth last year, setting record visits and almost doubling its revenue while integrating two major acquisitions, those of provider telehealth company InTouch Health and chronic care giant Livongo.
But now, as state lockdowns ease and vaccines roll out, some skeptics question whether telehealth companies can continue to deliver 2020's mammoth gains. Year to date, Teladoc's stock has declined about 7%, while the S&P 500 is up 13%.
And Teladoc has yet to turn a profit, reporting a whopping net loss of almost $200 million in the first quarter as it invested heavily on its operations and bore various acquisition-related expenses. That's compared to a loss of about $30 million same time last year.
Despite expectations for slowing growth over 2021, Teladoc management maintains they are confident in long-term expansion, especially in specialty areas like mental health, chronic care management and virtual primary care as the vendor embarks on its "whole person" strategy.
A key element of that approach is Livongo, which Teladoc acquired for $18.5 billion last year. Consumers enrolled in more than one of its chronic care programs has tripled compared to the same time last year, according to Gorevic — though Livongo's membership trajectory has slowed considerably since its purchase, analysts pointed out.
Notably in the quarter, Teladoc nabbed a contract with an East Coast regional Blue Cross Blue Shield plan for its full suite of telehealth and chronic care products. The contract, which will launch early next year, should ultimately drive higher revenue per user because beneficiaries are utilizing multiple services, Gorevic said.
The Blues announcement is an "important first step," Jefferies analyst David Windley said in a note on the results. "Selling these solutions direct to providers is an evolution beyond LVGO's selling strategy."
Mental health is another key area of focus, the fastest-growing business in its portfolio, CFO Mala Murphy said. The pandemic exacerbated conditions like depression and anxiety, and Teladoc is banking on that need continuing in 2021: The vendor has now closed several deals for a new integrated mental health product linking its network of therapists and psychiatrists with Livongo's digital health and care coordination capabilities.
The first few months of 2021 have seen a number of high-profile deals and M&A in telehealth, including Cigna's acquisition of telehealth provider MDLive and virtual care provider Doctor on Demand's merger with clinical navigator Grand Rounds.
But on a call with investors aftermarket Wednesday, Gorevic contended he wasn't worried about growing competition.
"There's really nobody in the market who comes close," he said. "We see that in our pipeline, based on the fact it's characterized by larger deals than we’ve ever seen before."
And e-commerce behemoth Amazon announced plans to expand its virtual care pilot program for employers nationwide over the summer. The move sparked initial fears for incumbents though the offering, called Amazon Care, likely doesn't pose a major threat to giants like Teladoc just yet.
Those moves were generally expected and aren't unsettling to Teladoc, Gorevic said.
"I'm not going to call out individual solutions that you mentioned, or competitors ... but for the most part, many of them we almost never bumped into. And some of the new entrants, we're just not seeing gain traction," Gorevic said.
But "Teladoc has capability gaps when it comes to competing with new competitors like Amazon Care," Forrester analyst Arielle Trzcinski said, noting the biggest gap is addressing remote diagnostic needs for things like at-home lab tests. "This is an area I will be watching for either acquisition or partnership by Teladoc in the near term."
The telehealth giant ended the first quarter with total U.S. paid membership of 51.5 million people, compared to 43 million the same time last year. Total quarterly visits jumped 56% to 3.2 million, despite a historically weak flu season.
In February, Teladoc issued softer-than expected full-year guidance, which analysts said could reflect the increasingly saturated virtual care market or simple management conservatism. Following the first-quarter results, the vendor bumped its revenue guidance for the year, expecting to bring in revenue between $1.97 billion to $2.02 billion, about $20 million higher than its last estimate due to expected strong growth in per-member per-month fees, and higher utilization in specialty visits.
Its stock was down more than 5% in aftermarket trading following the results.