Telehealth giant Teladoc Wednesday reported a hefty loss of $3.1 billion that dragged down its second-quarter earnings. The company's share price tumbled in after-hours trading as management set lower expectations for its 2022 outlook.
The company took a $3 billion hit from an impairment charge that pushed the company to a loss of $19.22 per share in the second quarter compared to a loss of $133.8 million, or a loss of 86 cents per share, for the same period a year ago.
In the first quarter, Teladoc took a $6.6 billion hit to write down the value of its Livongo acquisition. With those two impairment charges, the company's losses have ballooned to $9.8 billion in the first half of the year.
Companies opt for impairment when the value of assets or goodwill on their books is no longer fully recoverable.
Teladoc shelled out $18.5 billion for the digital chronic condition management company, a record in digital health. When Teladoc acquired Livongo, it touted the deal as key to its strategy to create one app for primary care, chronic care and other virtual care services.
The $3 billion impairment charge was "triggered by the decline in Teladoc's share price with the valuation and size of the impairment charge primarily driven by an increased discount rate and decreased market multiple for a relevant peer group of high-growth digital healthcare companies," Teladoc's chief financial officer Mala Murthy said during the company's second-quarter earnings call.
Teladoc’s stock is down 54% this year—and 90% from its peak price in February 2021.
Teladoc shares tumbled 25% after-hours Wednesday. Teladoc shares opened at $41 that morning.
The company's sizable second-quarter losses also included stock-based compensation expense of $51 million, or a loss of 32 cents per share, and amortization of acquired intangibles of $49 million, or a loss of 30 cents per share.
Earlier in the year, Teladoc lowered its 2022 revenue guidance from a midpoint of $2.6 billion to $2.45 billion but, based on current trends in the market, management "now expects results to be toward the lower end of that range," the company said in a press release.
"There are scenarios in which our results can be above or below this, due to the increased uncertainty in the broader economic backdrop, particularly as it relates to trends and consumer spending and its impact on our direct-to-consumer business," Teladoc CEO Jason Gorevic said during the earnings call.
In June, the company was hit with a lawsuit alleging it misled investors about the company’s business, operations and prospects as the virtual care company's stock price has plunged in the past year.
But the telehealth services provider reported double-digit revenue growth in the quarter that beat Wall Street analysts' projections.
Teladoc posted revenue of $592 million in the period, up 18% compared to $503 million in the second quarter of 2021. The result beat Wall Street projections as nine analysts surveyed by Zacks Investment Research expected revenue of $587 million.
So far in 2022, Teladoc has brought in $1.1 billion in revenue, up 21% from $956 million in 2021.
Access fees revenue grew 20% to $519 million and visit fee revenue grew 7% to $67 million. U.S. revenues grew 18% to $521 million, and international revenues grew 13% to $71 million.
Adjusted EBITDA came to $46.7 million in the second quarter compared to $66.8 million in the prior quarter.
Teladoc reported 4.6 million total telehealth visits during the quarter, up 28% from 3.6 million during the same period a year ago.
Teladoc's paid membership grew 9% during the quarter to reach 56.6 million members, up by 2.4 million members from the first quarter.
The total number of unique members enrolled in one or more chronic care programs was 798,000 as of the second quarter, an increase of 67,000 enrollees over the first quarter, Murthy said. About 30% of Teladoc's chronic care members are now enrolled in more than one program, she said.
But Teladoc continues to face challenges with higher advertising costs in the direct-to-consumer mental health market and a longer sales cycle in the chronic condition market, Gorevic told analysts Wednesday.
The company reported more than 40% revenue growth with its BetterHelp business, which is the company's direct-to-consumer mental health platform.
"At the same time, BetterHelp performance did come in towards the lower end of our expectations as we continue to experience the decline in yield on marketing spend that we discussed in April. We do see smaller private competitors pursuing what we believe are low- or no-return customer acquisition strategies to establish market share. Although we do not see this as sustainable, it's difficult to predict how long this dynamic may continue," Gorevic said.
The weakening economic environment, rising inflation and declining consumer sentiment is likely having an effect on BetterHelp's performance, he added.
"Given our significant leadership position in the direct-to-consumer marketplace and our substantial scale advantage, we remain confident that we can continue to outperform the industry and drive strong financial performance as we navigate this increased level of near-term economic uncertainty," he said.
Gorevic told Fierce Healthcare in a recent interview that he sees the future of virtual care moving to holistic, integrated solutions that combine services for episodic care, chronic condition management, behavioral health, complex care and primary care.
"We're still continuing to see substantial growth in terms of our volumes and our financial outlook. That's really based on the fact that, coming out of the pandemic, we've really changed the expectations of consumers, providers and payers, whether that's health plans or employers, with respect to the role of virtual care. We've changed the expectation from virtual care being limited and transactional to being holistic and longitudinal," Gorevic said in an interview.
Enrollment in the company's chronic care management program exceeded expectations in the second quarter, executives said.
"While we were pleased to exceed our member enrollment targets during the quarter, we are continuing to see our pipeline of chronic care deals develop more slowly than we anticipated at the start of the year," Gorevic said. "As we discussed in our first-quarter call, it remains early in the selling season. The deals continue to progress at a slower pace, we believe at least in part due to competitive noise as the market transitions from standalone point solutions to integrated whole-person virtual care based on what we're currently seeing in the marketplace."
Market turbulence and heightened economic uncertainty also impact the decision-making process in the employer market, he noted.
Teladoc executives touted the growth of Teladoc's Primary360 virtual primary care service. The company is further building out its primary care offering with newly launched services that enhance care coordination and grow in-home options. Primary360 now provides free, same-day medication delivery from Capsule and in-home, on-demand phlebotomy services backed by Scarlet Health.
For the current quarter ending in October, Teladoc said it expects revenue in the range of $600 million to $620 million.
The company expects a full-year loss of $62 to $61 per share, with revenue ranging from $2.4 billion to $2.5 billion.
Teladoc is expecting EBITDA for the year of a loss of $41 million to $8 million and adjusted EBITDA of $240 million to $265 million.
The company projects full-year 2022 membership to reach between 55 million and 56.5 million. And Teladoc expects total telehealth visits to reach between 18.8 million and 19.3 million, representing growth of between 22% and 25%.