Teladoc acting CEO Mala Murthy sought to assure investors Thursday that the virtual care giant is poised for future growth even as it faces pressure in a saturated telehealth market.
Following the abrupt departure of longtime CEO Jason Gorevic earlier this month, Teladoc is focused on boosting its top- and bottom-line performance as its shares have come under pressure, down more than 40% year-to-date.
"Teladoc is in a time of transition. And, as part of this evolution, the board of directors decided that it was time to look for a new leader for our company, someone to help us write the next chapter in our growth story," Murthy, also Teladoc's chief financial officer, said during the company's first-quarter earnings call Thursday.
The board's search for Gorevic's successor is well underway, she said, and a permanent CEO will be named later this year.
"We are not waiting. We have a plan to deliver, we have investments to execute, and that is absolutely our focus," Murthy said of Teladoc's management team.
Murthy also called out Gorevic's 15-year tenure as CEO and his "tremendous legacy having firmly established Teladoc as the industry leader in whole-person virtual care."
She said the executive team continues to focus on building on Teladoc's market leadership position, driving increased product penetration through its large base of more than 90 million virtual care members and accelerating its bottom-line performance, she told investors.
The virtual care company had a "solid start to the year, with strength in both revenue and adjusted EBITDA in the first quarter," she said.
Teladoc brought in $646 million in first-quarter revenue, up 3% from a year ago and beating Wall Street analysts' expectations of $637 million. Access fee revenue grew 1% to $557 million, and other revenue grew 14% to $89 million. The company's U.S. revenue grew 1% to $548 million, and international revenue grew 13% to $99 million.
Teladoc's integrated care segment—its virtual care business aimed at health plans, employers and health systems—brought in $377 million, up 8% from the same period a year ago. Integrated care membership grew 8% to reach 92 million, and membership in Teladoc's chronic care program grew 9% to reach 1.1 million.
"We are also seeing growing interest in our weight management solution from employers who are grappling with rising costs for GLP-1s and employee demand for these products. The addition of approximately 2.2 million members on a sequential basis since Q4 represents additional greenfield opportunity for future cross-sell and product penetration," Murthy said.
But revenue for its BetterHelp virtual mental health segment decreased 4% to $269 million driven by a decline in paying users and higher customer acquisition costs. BetterHelp paying users comprised 415,000 members in the first quarter, down about 11% versus the same quarter the previous year.
The company also had total visits of roughly 4.6 million, which was down compared to the 4.9 million visits during the same period a year ago.
This week, UnitedHealth Group's Optum confirmed it is discontinuing its telehealth business Optum Virtual Care.
In response to a question from an investor about potential opportunities from a competitive perspective, Laizer Kornwasser, president, enterprise growth and global markets, said, "We have a very strong relationship partnership, and we value the relationship that we have with UnitedHealthcare, and we foresee that strong relationship continuing."
Teladoc reported adjusted EBITDA increased 20% to $63 million, compared to $53 million a year ago. Integrated care segment adjusted EBITDA increased 36% to $48 million, and the BetterHelp segment adjusted EBITDA decreased 12% to $15.5 million.
Teladoc's net loss during the first quarter ballooned to $82 million, or a loss of 49 cents per share, compared to $69 million, or a loss of 42 cents per share, during the first quarter of 2023.
Net loss in the first quarter included stock-based compensation of $42 million and restructuring charges, primarily related to severance of $9.7 million and amortization of acquired intangibles of $64 million, Murthy said during the earnings call.
Teladoc provided a light outlook for the second quarter with revenue expected to come in between $635 million and $660 million, versus the consensus estimate from Wall Street analysts of $663 million.
The company projected integrated care revenue to grow 2% to 5% and BetterHelp revenue to decline by 4% to 8%.
"Our second-quarter guidance reflects challenging cost per acquisition through early Q1, which caused us to pull back on our advertising dollars in the quarter in keeping with our goal of balancing growth and margin," Murthy said.
Ryan Daniels, an analyst with William Blair, said Teladoc's first-quarter results highlight the organization’s "continued discipline and focus on profitability."
"We believe the placement of a new CEO could serve as a catalyst for the stock, as well as become a driver of even greater operating focus at the organization," Daniels wrote in a research note.
For the full year, Teladoc expects low to mid single-digit growth for the integrated care segment and flat to low single-digit revenue growth in BetterHelp. "We are seeing signs of stabilization in our cost per acquisition in more recent weeks, which gives us increased confidence in the back half of the year for a BetterHelp business," she said.
The company is eyeing growth for its behavioral health business in international markets, particularly the U.K., Canada and Australia. "We are excited about the international opportunity, particularly in select English-speaking geographies that are relatively underpenetrated compared to the U.S. market, which will allow us to reallocate some advertising and marketing dollars at a higher marginal return as we continue to build out our infrastructure in those markets," Murthy told investors.
BetterHelp brings in $1.1 billion in annual revenue, and Murthy said Teladoc is committed to the direct-to-consumer approach despite market headwinds. "With the scale that BetterHelp has, over $1 billion in revenue, it is by far one of the largest DTC players. There are other competitors in the market who have tried DTC and moved away to B2B. We have built scale in DTC, and I would say we will continue to focus on DTC," she said.
The company also is looking at ways to accelerate top-line growth, she noted. It's driving growth in the much smaller part of BetterHelp, the BetterSleep part of that business, she noted.
Telaodoc is projecting full-year revenue to be in the range of $2.635 billion to $2.735 billion, representing 1% to 5% growth. Integrated care membership is expected to grow to between 92 million and 94 million by year-end.
Teladoc has more than $1 billion in cash and cash equivalents on its balance sheet, Murthy told investors, providing "significant capacity and flexibility to invest and innovate" in the business.
"We also continue to see growing benefits from our early and ongoing commitment to data and artificial intelligence with AI models now integrated across nearly all aspects of our business. From provider matching to enrollment optimization to member engagement, this automation is helping us not only reach our revenue and profitability goals, but also achieve our mission of improving health by reaching more consumers," she said.