Teladoc Health had a better quarter than Wall Street expected, posting $640.5 million in revenue and losing less per share than expected, at $0.19. Quarterly revenue decreased by 3% from 2023 and was down slightly from Q2's $642.4 million.
In the Q3 earnings call, Teladoc executives stressed the stability of the U.S. virtual care segment, which has gained millions of users since last year. It called BetterHelp a "company in transition," as the company pivots hard to offset the cost of a $790 million impairment charge in the second quarter.
BetterHelp, Teladoc's virtual mental health solution, continue to drag down its performance as the segment's revenue fell 10% year-over-year, coming in at $256.8 million in Q3.
The stock traded up 10.3% to $9.76 immediately following the results.
Teladoc Health tapped a new CEO in June to turnaround the business after longtime leader Jason Gorevic stepped away. Chuck Divita joined Teladoc from GuideWell, a health solutions organization and parent company of Florida Blue, Florida's Blue Cross Blue Shield plan.
Mala Murthy, chief financial officer of Teladoc, called 2025 an "important repositioning year" for Teladoc.
"Actions we are taking to position the company for long-term success will require incremental investments as we build out various products and capabilities. These will help enhance our value proposition and more effectively support client objectives as we adapt to evolving market demand and pricing dynamics in the core virtual care business. We expect these investments to ultimately unlock growth opportunities into the future and position the company to deliver sustainable, improved performance," Murthy told investors in the Q3 earnings call.
"I see many strengths to build upon as we advance initiatives aimed at strengthening our business and unlocking future growth opportunities,” Divita said in a statement.
A press release said that access fee revenue decreased by 5% ($555.3 million) and other revenue grew by 9% ($85.2 million). International business accounts for about 16% of Teladoc’s business; international revenue grew by 15% to $104.3 million. U.S. business sank by 6%, to $536.2 million.
Teladoc netted a $33.3 million loss in Q3, or $0.19 per share. Teladoc’s net loss in Q3 was down significantly from last year, when it lost $57.1 million.
In Q3, Teladoc's losses included $3.6 million of restructuring costs, related to severance costs and costs associated with office space reduction. Its free cash flow was $79 million, up 16%, and it reported $1.2 billion in cash and cash equivalents.
Adjusted EBITDA in Q3 was $83.3 million, down 6% year over year.
Teladoc Health Integrated Care —its virtual care business aimed at health plans, employers and health systems—brought in $387.7 million in revenue, up 2.5% from 2023. Revenue was above the top end of its guidance range. On the virtual care side, Teladoc reported 3.7 million more members year over year.
Enrollment in the chronic care management segment increased to 1.18 million users, up 5%.
Murthy said that BetterHelp is a “business in transition.” Teladoc is focusing on international business and international ad spend to stabilize user count.
BetterHelp’s adjusted EBITDA margin was 5.9%, down from 9.6% in Q2. BetterHelp also had 13% less users than last year.
Murthy said that customer acquisition costs remained high during the quarter which is one of the reasons cited for the segment's poor performance. Murthy said the customer acquisition cost isn’t likely to change.
In Q2, Teladoc executives said they were focused on turning around the BetterHelp business by growing international business and expanding insurance coverage access in the U.S.
Divita stressed on the call Wednesday that the company is focused on improving BetterHelp's direct-to-consumer business performance, despite beginning conversations with health plans to move towards plan-sponsored coverage.
"BetterHelp is going to be primarily a direct-to-consumer model for the foreseeable future," Divita told investors on the Q3 call. "What we're trying to do is explore, of those consumers that are wanting to engage with BetterHelp and want to access benefit coverage, how do we most effectively do that? So it's a little bit of a different angle on the challenge."
Divita said Teladoc is "being very methodical" in early negotiations with payers. "There are definitely capabilities that are needed to do that, and that's why we're approaching it, I think, in a pretty smart way, in a methodical way, to develop the capabilities we need internally to make the experience right and work with others to bring other capabilities to bear."
For the first nine months of 2024, Teladoc has brought in 1% less revenue than last year, at $1.9 billion. Thus far in 2024, Teladoc also faced a non-cash goodwill impairment charge of $790 million, $4.65 per share pre-tax, “attributable to changes in estimates of future cash flows related to the company’s BetterHelp segment,” a press release said.
Teladoc also logged a $118.5 million stock-based compensation expense, $14.8 million in restructuring costs and amortization of acquired intangibles of $179.4 million since the beginning of the year.
"In our view, Teladoc is still transitioning to a period of lower growth," Ryan Daniels, an analyst with William Blair wrote in a research note. "While the organization has done a solid job maintaining its profit profile and cash flow generation, shares of the company have remained under pressure, with TDOC shares now down nearly 60% year-to-date. However, with a new CEO in place, we believe management’s vision will emphasize greater operating focus, especially on the BetterHelp side, which could help stabilize shares and perhaps unlock some value-creation opportunities (e.g., continued restructuring, asset sales, novel initiatives that drive a return to sustainably positive growth)."
Last quarter, Teladoc Health withdrew its full year 2024 financial outlook and BetterHelp segment level outlook. In its third-quarter earnings call, company executives reaffirmed Teladoc's full-year integrated care segment outlook. For the full year, the company continues to expect low- to mid-single-digit revenue growth, driving segment-level adjusted EBITDA margins to expand to 14.9% to 15.3%. Teladoc also projects integrated care membership to reach 93.5 million to 94.5 million, up from the previous 92.5 million to 94 million range.