Teladoc reports historic net loss of $13.7B in 2022

Teladoc reports historic net loss of $13.7B in 2022 unknown

Dive Brief:

• Teladoc Health reported a historic net loss in 2022 of $13.7 billion off revenue of $2.4 billion, mostly from an impairment charge related to the shrinking value of its Livongo acquisition. By comparison, the virtual care company reported a loss of $429 million in 2021.
• The non-cash goodwill impairment charge of $13.4 billion reported over the past year reflects the waning market value of Teladoc’s $18.5 billion acquisition of chronic care company Livongo in late 2020. The impairment charge doesn’t impact the company’s financial position or its ability to invest in the business going forward, CFO Mala Murphy said on a call with investors Wednesday.
• The New York-based telemedicine vendor beat Wall Street expectations for revenue but missed on earnings in fourth-quarter earnings released aftermarket Wednesday. Teladoc also issued 2023 guidance below analyst consensus, causing stock to slide in morning trading Thursday.

Dive Insight:

Teladoc, which reaches more than 80 million people across its virtual care products, has been focusing on capturing a greater slice of the healthcare delivery market by addressing whole-person health as the telemedicine industry evolves beyond its urgent care origins.

The company grew exponentially over the COVID-19 pandemic, but has struggled to maintain its growth rate over the past year. As a result, Teladoc is looking to better balance growth with profitability, management said Wednesday.

Teladoc provided an expectations reset in the quarter, in a bid to realign market standards to a more achievable place for 2023, analysts said.

Teladoc expects to bring in between $2.55 billion and $2.68 billion in revenue in 2023. That reflects about 9% growth at the midpoint.

Even though that outlook came up shorter than analysts expected on revenue, the company is putting a stronger emphasis on profitability through cost controlling measures. Market watchers have raised concerns about the long-term solvency of digital health companies, as valuations took a sizable hit last year. Experts don’t expect the market volatility to let up.

Teladoc was the latest digital health company to announce restructuring plans earlier this year, laying off 6% of its global workforce and culling its geographic footprint in a bid to lower operating costs.

“You should expect us to balance growth and margin with an increased focus on efficiency going forward,” Teladoc CEO Jason Gorevic said on the Wednesday call.

Rebecca Pifer/Healthcare Dive; NYSE data

BetterHelp, Teladoc’s direct-to-consumer mental health business, has been the main driver of the virtual care vendor’s revenue growth over the past two years. But the 2023 guidance suggests that Teladoc expects BetterHelp’s growth to slow as well. Management now expects to see low-double digits to mid-teens revenue growth in 2023 — below Wall Street expectations.

That’s compared to mid- to high-single digit revenue growth for Teladoc’s core business.

“While the slowdown is partially due to the law of large numbers, the slowdown is somewhat of a disappointment,” Credit Suisse analyst Jonathan Yong and A.J. Rice wrote in a note on the quarter. “But the segment is expected to see improved profitability,” while Teladoc’s core business is expected to grow to better than 2022 growth, with some margin expansion.

SVB Securities analyst Stephanie Davis said that overall, the 2023 guidance “marks a reset to achievability,” with “a healthy level of macro conservatism baked into the outlook,” especially for BetterHelp.

“At this point BetterHelp is over a billion-dollar business. I don’t think you’ll see this business return to hypergrowth ... but we do think there remains a long runway for growth in this market,” Teladoc’s Murphy said.

Teladoc pulled back on advertising spend for BetterHelp in the fourth quarter, which will pressure margins early in 2023, according to Murphy. As a result, BetterHelp earnings should ramp over the year.

Teladoc’s core virtual care business grew 7% year over year in the fourth quarter. On the call, management were particularly upbeat on growth in Primary360, its virtual primary care offering.

Historically, Primary360 hasn’t been a meaningful driver of growth, but Teladoc is seeing a lot of client demand and expects revenue from the product to triple in 2023, according to Murphy.