Teladoc Well being, Inc. (NYSE:TDOC) Piper Sandler thirty fourth Annual Healthcare Convention Transcript November 30, 2022 3:00 PM ET

Executives

Jason Gorevic – Chief Govt Officer

Mala Murthy – Chief Monetary Officer

Analysts

Jess Tassan – Piper Sandler

Jess Tassan

Hello. My identify is Jess Tassan. I’m — I cowl healthcare tech and distribution at Piper. I’m thrilled to have with me right here at this time Jason Gorevic, CEO of Teladoc; and Mala Murthy, CFO of Teladoc. Thanks each very a lot for becoming a member of.

Jason Gorevic

Thanks for having us.

Query-and-Reply Session

Q – Jess Tassan

All proper. Nice. So we’ve got obtained 25 minutes for Q&A. I received’t direct the questions. You guys can resolve the place every is finest suited. So our chubby thesis on Teladoc relies in your again scale, the integrity of the model and the potential to drive incremental monetization of every life on the platform. Are you able to simply remind us roughly what number of lives Teladoc touches in 2022 throughout every product line or perhaps in mixture?

Jason Gorevic

Yeah. So I respect the idea for the thesis and I believe that’s been precisely the idea for our technique, which is we could have began with digital pressing care. I obtained to the corporate 13-plus years in the past.

However the imaginative and prescient was at all times to be a vacation spot for the buyer and to have the ability to ship on the promise of whole-person digital care such that somebody — we may be the entrance door for somebody within the healthcare system.

And so along with what you described because the model, the dimensions, the depth, I might additionally add the breadth of our medical providers and actually the one ones who can ship on the promise of whole-person digital care, which, after all, we accelerated from any shoppers searching for extra episodic particular person providers pre-pandemic and we quickly surged by means of to the buyer expectation being about — having the ability to get the whole lot for his or her healthcare wants, whether or not it’s acute and episodic or power or complicated, whether or not it’s psychological well being or bodily well being.

And so the place we began many, a few years in the past was to construct a foothold and construct a trusted model, and we’ve got added now tens of millions and tens of millions of individuals to the platform. Do you wish to undergo among the metrics across the scale.

Mala Murthy

Yeah. Jess, I might say, we’ve got entry to over 80 million individuals on our platform at this time and if you concentrate on the chance that presents to us to the purpose that Jason made round, whole-person care and the breadth of services and products and options we’ve got. There’s an unbelievable alternative forward of us to simply penetrate deeper into that inhabitants base that we’ve got of over 80 million individuals with all the services and products that we’ve got, proper?

Simply give it some thought one in 5 of the inhabitants entry to our power care merchandise, one thing like one in three has after your psychological well being merchandise. The purpose being that there’s super alternative for progress simply by penetrating deeper with the prevailing services and products that we’ve got.

And the very last thing I’ll say is, if I take into consideration the income per member alternative, the PMPM alternative, the merchandise we’ve got corresponding to Primary360, which is our digital main care product, the power care merchandise that we’ve got. These are all extremely worth accretive from a income per member perspective relative to the $2 to $3 of PMPM we’ve got at this time. So it’s the bottom, the 80 million plus lives that we are able to entry, mixed with the breadth of services and products that we’ve got that to me is the thesis for progress that we’ve got.

Jess Tassan

In order that $2 to $3 on common PMPM throughout the bottom, the place may that go finally and what’s form of the timeframe for execution towards that chance?

Mala Murthy

Yeah.

Jason Gorevic

Yeah. So we’ve got modeled the prevalence of the power situations that we deal with, the prevalence of shoppers who don’t have a main care relationship and would subsequently be type of the first targets for our Primary360 product, the prevalence of psychological healthcare and the necessity for psychological healthcare available in the market.

And the type of higher certain or the potential is about $68 per member monthly for — and once more not solely — that doesn’t presume that everybody takes our diabetes program, however solely those that would profit from it, for instance.

Now after we have a look at our greatest purchasers at this time, our greatest purchasers at this time are most likely within the 30s by way of {dollars} per member that we’re getting, and subsequently, the — and that’s clearly a small subset of that 80 million member inhabitants.

So to have the ability to go from type of the $2 to $3 vary up into the 30s with an higher certain of 68 offers us with an amazing quantity of alternative with out even going out and promoting new prospects, which, after all, we do every single day.

Mala Murthy

Now to be very it’s going to take time. It’s a journey. That can take time. And I might say, the conversations that we’re more and more having with our purchasers is about how can they be with somebody like Teladoc, how may be all in, proper? The entire answer — the entire private care options is — are the sorts of conversations we’re more and more have.

Jess Tassan

Is the chance you simply framed impartial of BetterHelp, does it exclude BetterHelp and it refers to enterprises alone?

Jason Gorevic

Yeah. That’s actually our B2B merchandise.

Jess Tassan

Okay. That’s very useful. So 2022 has been an enormous funding 12 months for Teladoc as you guys work to execute towards the chance you simply described. Are the investments in gross sales and advertising, R&D and capitalized software program in 2022 one-time or perennial in nature?

Mala Murthy

Yeah. I might say, it’s each, proper? It’s all the above. And the explanation I say that is the next, proper? If you concentrate on our A&M spend, most of which is in BetterHelp. That may be a very conventional direct-to-consumer enterprise.

You’d — as we spend A&M, the enterprise — that helps the enterprise progress, the income progress of that enterprise. So we might — we’ve got seen A&M scaling in that enterprise together with income progress.

If you concentrate on expertise and growth expense although, Jess, these are investments the place we’ve got a really prioritized set of initiatives that we’ve got made our investments in. We’ve got been very clear that T&D is — we’re in a construct section with T&D.

And so if you concentrate on the varieties of initiatives we’ve got invested in we’re — we talked about OneApp, which is the app that may permit for a unified client expertise. In order that’s an instance of an funding we’ve got made.

Consumer reporting programs, claims administration programs, a unified ERP system, CRM programs, all of those are investments that we’ve got put our T&D once more deployed towards. And our expectation very a lot is these are investments which have good ROIs and they’re going to give us a mixture of sustained income progress and effectivity sooner or later and drive leverage. That’s completely the expectation from our T&D.

Jess Tassan

So I’ve a query concerning the unified app, however simply first on the tech and growth spend. So would you anticipate that peaks in 2022 or do the investments form of proceed in 2023?

Mala Murthy

Yeah. I might say, we do anticipate to proceed to spend money on T&D. I talked concerning the progress alternative forward of us. We might be remiss in not capitalizing on the expansion alternative. Now I shall be equally hear and say, we’ll stability income with revenue.

As we talked about on the final earnings name, we’ll proceed to speculate judiciously in T&D. The truth is, we’ve got spent the final a number of weeks on our annual planning conversations, Jason and the management staff, and it’s all been about prioritizing the large bets that we wish to make from a T&D perspective for subsequent 12 months and the years forward.

Jason Gorevic

And our expectation actually throughout all of our value traces is to get leverage as a share of income, proper? So whereas it might not come down on an absolute foundation we anticipate it to say no as a share of income.

Jess Tassan

Okay. That’s very useful. In order that’s the imaginative and prescient of a unified built-in platform with OneApp for enterprise come to fruition in time for calendar 12 months 2023 begins?

Jason Gorevic

So we shall be launching our OneApp firstly of 2023. Simply to perhaps put just a little extra shade on that. That’s the power for somebody to return by means of a single interface, get entry to the whole lot of our product portfolio, see all the medical metrics from all the completely different sources, all of their completely different situations and varied suppliers, coaches, nurse practitioners, therapists, multi function place, proper?

And that’s actually bringing collectively and realizing the imaginative and prescient of delivering on complete particular person care. So after we did the acquisition of Livongo, for instance, in 2020, that was the division. We are going to deliver that to market the start of 2023 and begin to roll that out for our purchasers. We haven’t actually been promoting based mostly on that, since you don’t — we don’t consider in actually promoting the sizzle earlier than the stake is prepared.

So for us it’s about ensuring we ship on it. We shall be migrating purchasers over onto our OneApp platform, and naturally, will probably be in market as a part of the device set for our gross sales groups to promote all through 2023.

Jess Tassan

So does that — the utility of that app is that form of contingent upon the variety of choices {that a} specific employer or well being plan offers entry to or do you — can you form of cater the interface {that a} client sees based mostly on what they have out entry?

Jason Gorevic

Yeah. Give it some thought as being customized to precisely what you will have entry to, proper? So you aren’t going to see providers that you just don’t have entry to and you aren’t going to really feel like you’re lacking out, as a result of it’s customized to you.

Jess Tassan

Okay. And that app isn’t just relevant for Primary360, that’s going to be simply enterprise telehealth or digital medical app?

Jason Gorevic

That’s precisely proper.

Jess Tassan

Superior. So in the course of the first half of the 12 months, Teladoc described the 2023 pipeline that was progressing extra slowly than regular. In 3Q we noticed exercise accelerates and as of 3Q gross bookings had been flat year-over-year, whereas churn was anticipated to be in line to barely higher. How would you characterize the 2023 profit promoting season by way of each pricing and urge for food?

Jason Gorevic

Yeah. So I believe what we’re seeing is extra multiproduct gross sales, so 75% of our gross sales this 12 months have been multiproduct gross sales. Greater offers, so our common deal dimension is up 50% in 2022 versus 2021, and people two go collectively, proper? Once we promote multiproduct extra usually, we’re getting extra income per client, and subsequently, we’re seeing greater common deal set.

Now a part of the slowness or the longer gross sales cycle is due to the elevated complexity, proper? When any individual is shopping for a complete cardiometabolic suite of providers from us, which incorporates diabetes, diabetes prevention for prediabetics, weight administration, hypertension merchandise, and doubtless, a psychological well being product together with it in a collection of cardiometabolic providers. That’s a extra complicated choice for them to make than if we’re simply promoting diabetes by itself, proper?

It’s a greater program. It offers us entry to an even bigger inhabitants. It delivers higher medical outcomes and larger impression on value. However it’s a longer gross sales cycle. And so, I believe, these are the dynamics happening, greater common deal dimension, extra elements to the sale, however it elongated within the gross sales cycle.

Jess Tassan

Okay. And that’s truthful, as soon as the deal is booked, is there any change within the implementation schedule or does that form of proceed because it at all times has traditionally?

Jason Gorevic

That tends to proceed similar to it has traditionally.

Jess Tassan

Okay. Has the momentum you skilled in 3Q endured or dived down 4Q to-date, ought to 2022 bookings momentum translate to progress in 2023?

Jason Gorevic

So we’re nonetheless mid-This fall by way of promoting pipelines creating as we anticipated it to. So no surprises. The income will trans — and the bookings in 2022 will translate to income in 2023 and so that’s type of the purpose of us providing you with comparables, proper? So by means of Q3 we had been roughly flat year-over-year by way of gross bookings, one quarter to go, so we’ll see how that shakes out. I’m not going to say mid-quarter how we’re doing.

Jess Tassan

Okay. That’s truthful. So the expectation, once more, is simply that the deployments proceeded as they did in 2022 most likely…

Jason Gorevic

Effectively, look, in 2022…

Jess Tassan

…timeframe?

Jason Gorevic

In 2022, you’ll recall that we had one massive consumer who delayed from the start of the 12 months to the center of the 12 months…

Jess Tassan

Proper.

Jason Gorevic

… by way of implementation. In order that was an anomaly based mostly on that consumer’s capability to roll out their very own inner capabilities. I might anticipate us to return to extra of a standard cadence and the one wildcard is that if we shut a deal that we haven’t closed but with a midyear begin date.

Jess Tassan

Okay. Are any offers that you just may signal for the rest of the fourth quarter more likely to be midyear begins?

Jason Gorevic

Actually. That’s attainable.

Jess Tassan

Okay. I’d love to change to — change gears just a little bit to BetterHelp. The BetterHelp was run ranking at about $1 billion of world income as of the third quarter. How ought to traders take into consideration the expansion charge and margin profile of that enterprise for the stability of 2022 after which past?

Mala Murthy

Yeah. So we’ve got given you all sufficient info so that you can know, we’re more than happy with the expansion of this BetterHelp enterprise over the previous few years. And as we’ve got mentioned earlier than, not solely have we seen the expansion to be very strong, we’re additionally happy with the margins of this enterprise.

And so Jess, as I take into consideration how we’re run ranking and exiting, I’ll say a few issues. One is, we’ve got talked concerning the advert spending primarily across the BetterHelp enterprise, moderating in 4Q, proper? We’ve got talked about that extensively, and as a reminder, it’s primarily going again to the way in which life was for BetterHelp pre-COVID, proper?

The advert spending dynamics in — as we strategy the vacation season are actually dearer and difficult. And it is a enterprise the place we do plenty of optimization round each inside the completely different promoting channels and throughout the completely different promoting channels. So it is smart for us to primarily pull again after we discover the ROIs for the advert spend to be suboptimal.

And so what we’ve got talked about is to anticipate A&M to sequentially decline in 4Q similar to what it was once. I might say the final two years have primarily been an anomaly away from a standard seasonal sample. And so if you concentrate on what which means for progress, the impression of that may actually be extra a 1Q of subsequent 12 months somewhat than a 4Q, as a result of we’re primarily comping over, it’s a tougher comp.

Jess Tassan

Okay. That is smart — and that is smart. So simply form of extra broadly on BetterHelp, it’s now, I believe, the undisputed chief in DTC psychological healthcare, is your precedence in 2023 and 2024 form of shifting from progress to margins?

Mala Murthy

Yeah. I might say that’s true for BetterHelp. I might say that’s true general for our enterprise, primarily balancing income and revenue. And when you suppose particularly about BetterHelp and the way we’ll do it? The factor concerning the direct-to-consumer enterprise is, it’s one thing that the place you’ll be able to shift up and down comparatively simply.

If you concentrate on how we do our advert spending in that, we are able to select the place on the effectivity curve, we wish to be as we stability progress and revenue, proper? We may resolve we wish to make investments extra in advert spend, however that final greenback shall be marginally extra inefficient relative to the primary greenback of advert spend.

However we’ll get extra income progress out of that. That’s a selection that we are able to make, proper? And that’s a selection that we do make very, very dynamically, as we take into consideration the advert spend in every of the completely different channels.

I imply the one — the dimensions of our BetterHelp enterprise and the advantage of that scale is that we’ve got a variety of our panels and the pricing dynamics, the ROI dynamics throughout the completely different advert channels are completely different. So we’ll issue all of that as we take into consideration balancing progress and revenue.

Jess Tassan

What’s the minimal — the bottom return on advert spend in BetterHelp that you’d be keen to think about because the enterprise matures in 2023?

Mala Murthy

We is not going to get into these sorts of specifics. I believe we’ve got — perhaps I strive.

Jason Gorevic

Okay.

Mala Murthy

I do know. I do know. Good strive.

Jason Gorevic

I believe the opposite factor to say is that, we don’t make that call about the place on the effectivity curve we wish to be in isolation, proper? We make that as a — that may be a operate of how are we doing relative to consumer retention, lifetime worth, pricing, proper, as a result of all of these go in collectively to find out what the general yield of that advert greenback is — spent is.

Jess Tassan

Proper. That is smart. That is smart. So I might love to simply contact on the 2022 information. On the midpoint, adjusted EBITDA has elevated from about $51 million in 3Q to $93 million in 4Q. The ramp, as I’m certain you already know, it’s been the topic of intense debate all 12 months. What are people who find themselves skeptical not understanding concerning the achievability of that 2022 adjusted EBITDA information, how do you get there?

Mala Murthy

Yeah. It’s what I simply mentioned. It’s a sequential pullback in advert spend and we’ve got talked about how that’s primarily returning to regular seasonal dynamics. When you truly flip again to 2019 and have a look at A&M as a share of income, it declined from 3Q to 4Q in 2019 by one thing like 650 foundation factors.

So my level being that what we’ve got now talked a few pullback in advert spend is returning to primarily the way in which it was once pre-COVID and that is likely one of the vital drivers of the total 12 months adjusted EBITDA that we’ve got guided to, that’s actually a big a part of what it’s.

I will even say, simply because we’re pulling again in advert spend, doesn’t imply that we aren’t spending in any respect, proper? Prefer it’s not that we’re going removed from that. So we proceed to have advert spend within the BetterHelp enterprise and we’re primarily trying to the advert costs and deciding the place we wish to get.

Jason Gorevic

When you take heed to podcast, we’ve got finished…

Jess Tassan

Yeah. Precisely. Outdoors of podcast, the place do you proceed to spend 4Q regardless of the seasonal dynamic?

Mala Murthy

Yeah. Hear, it’s — I received’t go in to spend by channel. However as we’ve got talked about earlier than. The — in our BetterHelp enterprise, there isn’t a one specific channel take a look at that accounts for greater than 25% of our general member acquisitions, proper? So it’s throughout paid search, TV, print, podcast, so it’s social media, Fb, et cetera.

So we’ve got a large variety of channels and we proceed to optimize inside the channel and throughout the completely different channels. And as to the purpose Jason made, it’s not formulaic, proper? We have a look at this hourly and each day.

Jess Tassan

In order that’s very useful. When it comes to simply the BetterHelp promoting and advertising price range, how a lot of that price range on an annual foundation is dedicated to form of large model degree initiatives?

Jason Gorevic

Most of it isn’t.

Jess Tassan

Okay.

Jason Gorevic

Most of it’s extremely focused efficiency advertising. We’re doing extra in bigger media type of mass media shops and a few of that’s simply in response to the truth that the worth of promoting in these mass media channels has come down.

So while you hear about, oh, the worth of promoting is coming down, that tends to be about mass media channels, as a result of among the firms who’re extra impacted by provide chain points, for instance, are pulling again on promoting.

Effectively, which will make TV and print extra inexpensive now, and subsequently, it flips it over to being worthwhile and excessive sufficient yield for us that now we’re going to lean into that versus traditionally the place that didn’t actually make sense.

Mala Murthy

What’s attention-grabbing is, although…

Jess Tassan

Yeah.

Mala Murthy

… when you have a look at the model consciousness of BetterHelp, it’s very, very excessive. And I believe that’s a testomony to each the dimensions, proper? The dimensions of BetterHelp vastly out instances all of its opponents and the truth that individuals who have used it and when you have a look at the working metrics round churn, retention, LTV, they proceed to be very wholesome.

Jess Tassan

It offer you some extent of confidence within the restoration charge in 1Q and 2Q of subsequent 12 months following the advert pullback. My final query is simply Teladoc hasn’t issued 2023 steerage, however Mala, you will have supplied some fairly useful constructing blocks. So are you able to simply remind traders what you mentioned about progress charges throughout the enterprise traces exiting 2022 and into 2023?

Mala Murthy

Yeah. I give it some thought in primarily two elements. So, initially, I’m not going to present particular steerage, clearly, you all will take heed to our fourth quarter earnings name and we provides you with extra particular steerage.

However simply shade or commentary the way in which I give it some thought is, for BetterHelp, it comes down to some various factors. One is, what’s client sentiment wanting like as we exit the 12 months and we go into subsequent 12 months, proper? The Fed got here out with some commentary at this time, the market responded like this appears to be a each day characteristic now.

And if the buyer feels well being — the sentiment is wholesome and so they wish to spend on a discretionary foundation, that shall be useful for the BetterHelp enterprise, it’s out-of-pocket spend, proper? So it’s — so there are macro components that may impression the enterprise subsequent 12 months.

I might say aggressive advert spending dynamics proceed, proper? As a result of it’s — the advert spending dynamics are actually on a micro channel foundation. After which the very last thing is the stability of progress and revenue. That may be a selection that we’ll make and we’ll speak about that as we give steerage. In order that’s on the BetterHelp aspect.

On the power care aspect, I might say, on the B2B aspect, if you concentrate on power care, we’ve got talked concerning the dynamic of the promoting season, proper? We’ve got talked about our bookings and the dimensions of that.

I might say if you concentrate on power care exiting this 12 months, consider it as high-single digits and so I might anticipate type of progress subsequent 12 months to be in that vary. Jason, I don’t know if you wish to add something to it on the B2B aspect?

Jason Gorevic

Yeah. I believe — and I believe the swing components are, we noticed enchancment in our engagement charges, that means quantity of people that enroll in a power care program as a share of the full recruitable inhabitants. So we noticed enchancment in that this 12 months.

If we are able to — we’ll proceed to spend money on the machine studying engines beneath that that assist us optimize how we interact shoppers. And so to the diploma that we are able to see enchancment there, that might be upside for us.

After which, lastly, I’d simply spotlight Primary360 continues to achieve traction. We’re nonetheless early within the evolution and the type of life cycle of that product. However we’re seeing plenty of curiosity from each well being plans, in addition to from massive employers with Primary360.

Jess Tassan

Would that be the commentary associated to Primary360, is that extra associated to 2023 income impression or 2024?

Jason Gorevic

2024, it’ll have an even bigger income impression. This was the primary promoting season…

Jess Tassan

Proper.

Jason Gorevic

… the place we had been actually available in the market promoting it.

Jess Tassan

Okay. Superior. That was very useful. Thanks, each. I respect you being right here. Thanks a lot.

Mala Murthy

Thanks, Jess.

Jason Gorevic

Thanks, Jess.



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