In its first quarter with new CEO Chuck Divita, national telehealth provider Teladoc Health posted a net loss of $838 million in Q2 that included a nearly $800 million impairment charge attributed to falling expectations for its virtual mental health solution, BetterHelp.
On its earnings call, Teladoc said it is withdrawing its 2024 outlook and its three-year business outlook. It now expects low single-digit year-over-year revenue growth for 2024.
BetterHelp’s revenue in Q2 decreased 9% from Q2 2023, to $265 million. The direct-to-consumer mental health service is a $1 billion business with revenue increasing 11% in 2023 to reach $1.13 billion.
Teladoc withdrew its full-year outlook for its direct-to-consumer BetterHelp business based on the unpredictability of customer acquisition costs and advertising, noted Mala Murthy, chief financial officer.
“For BetterHelp, customer acquisition costs have continued to trend higher over the past few quarters, and there is limited visibility on the near term path, which as we have discussed could be further affected by the unknown impact of the upcoming Presidential election on ad pricing," Murthy told investors. "We are choosing to not provide segment revenue or adjusted EBITDA guidance for the third quarter and we are withdrawing our full year guidance for both metrics in our BetterHelp segment at this time.”
The company's net loss skyrocketed in Q2 2024 to $837.7 million, or $4.92 per share, compared to a loss of $65 million, or $0.40 per share, during the same quarter a year ago.
Teladoc brought in $642.4 million in revenue in Q2, a 2% decline from $652 million the same quarter a year ago.
The company reported adjusted EBITDA of $89.5 million in Q2, up 24% year-over-year.
In the first half of 2024, Teladoc's net loss totaled $919.6 million, of $5.44 per share, compared to $134.4 million, or $0.82 per share, for the first six months of 2023.
Teladoc's integrated care segment—its virtual care business aimed at health plans, employers and health systems—brought in revenue of $377.4 million, up 5% year-over-year.
For the half, Teladoc’s total revenue increased by a measly 1% year-over-year to reach $1.29 billion. U.S. revenue decreased by 1% for the quarter, while international revenue grew by 12%.
Teladoc has faced hurdles in recent quarters, with slowing growth, a saturated telehealth market and the abrupt departure of longtime CEO Jason Gorevic in April.
Executives expressed excitement about the international market and said its chronic care bundled solution has been gaining interest boosted by enrollment growth, especially its diabetes prevention and weight management programs. Divita noted that value-based care will be important going forward.
Divita jumped on board at Teladoc Health in June from GuideWell, a health solutions organization and parent company of Florida Blue, Florida's Blue Cross Blue Shield plan. At GuideWell, Divita served as executive vice president of commercial markets.
The telehealth giant, which has been in operation for 20 years, has struggled in the stock market and is facing headwinds as the virtual care market has become crowded with digital health players. Shares of Teladoc dropped 57% year to date.
Since joining the company seven weeks ago, Divita said he’s met with employees and customers across the organization.
“These discussions have further reinforced my optimism about the future. I’ve been impressed by the depth of talent and resiliency of our employees and a level of commitment to servicing our customers’ members,” Divita said on the call.
Divita said BetterHelp is “a business in transition.” He continued, saying he is proud of the work of BetterHelp and that the business is resonating with customers. But, paying out of pocket and elevated customer acquisition costs have affected its top and bottom line.
Murthy said on the call that BetterHelp is going to focus on international expansion into non English-speaking markets, where customer acquisition costs are lower.
Teladoc attributed some of Q2’s decline to the increase of advertising costs, and Murthy said customer acquisition costs doubled in May. Murthy said BetterHelp is the largest advertiser of virtual mental health. The upcoming presidential election has increased ad pricing, the executives said.
With a focus on turning around the BetterHelp business, executives told investors the company will focus on initiatives to grow international business and expand insurance coverage access in the U.S. as well as product enhancement.
Divita said transitioning BetterHelp to accept insurance is the next logical step for the company. Customers that leave the platform cite high out-of-pocket costs and lack of insurance coverage, he noted.
BetterHelp expects to have the technical capabilities for insurance coverage by year-end and expects insurance contracting to roll out over the course of 2025.
If advertising costs remain high, Teladoc expects a low double-digit revenue decline for BetterHelp.
Divita was adamant that BetterHelp is an important part of the company.
"We're primarily focused right now on managing through this transition period, advancing the deliverables that Mala touched on in terms of international expansion, insurance market, other enhancements, and balancing the scale and financial strength of the company and financial performance. With that said, like any business, we're going to continue to evaluate what we're doing, where we're operating in a way that creates long-term shareholder value," he told investors on Wednesday.