Teladoc Health Reports Second Quarter 2024 Results PURCHASE, NY

Teladoc Health Reports Second Quarter 2024 Results

PURCHASE, NY, July 31, 2024- Teladoc Health, Inc. (NYSE TDOC), the global leader in whole-person virtual care, today reported financial results for the three months ended June 30, 2024 ("Second Quarter 2024"). Unless otherwise noted, percentage and other changes are relative to the three months ended June 30, 2023 ("Second Quarter 2023").

Financial and Operational Highlights for Second Quarter 2024

Second Quarter 2024 revenue of $642.4 million, down 2% year-over-year

Second Quarter 2024 net loss of $837.7 million, or $4.92 per share, including a goodwill impairment charge of $790.0 million, or $4.64 per share

Second Quarter 2024 adjusted EBITDA of $89.5 million, up 24% year-over-year

Integrated Care segment revenue of $377.4 million, up 5% year-over-year and adjusted EBITDA margin of 17.0%

BetterHelp segment revenue of $265.0 million, down 9% year-over-year and adjusted EBITDA margin of 9.6%

"I am excited to have joined Teladoc Health and for the opportunity to lead the company going forward, building on our strengths while driving higher levels of performance. Our scaled position, core capabilities, and talented employees position us well in this regard," said Chuck Divita, Chief Executive Officer of Teladoc Health.

"I also see opportunities to strengthen execution and to streamline the organization to ensure we are delivering for our customers and stakeholders. While we achieved solid performance in the Integrated Care segment, continued headwinds in the BetterHelp segment impacted overall results. We are focused on addressing the work ahead of us with urgency to unlock greater value across the company over time," Divita added.

See note (1) in the Notes section that follows.

N M - not meaningful

Revenue decreased 2% to $642.4 million from $652.4 million in Second Quarter 2023. Access fees revenue decreased 3% to $559.6 million and other revenue grew 8% to $82.8 million. U.S. revenue decreased 4% to $540.8 million and International revenue grew 12% to $101.6 million.

Teladoc Health Integrated Care ( Integrated Care ) segment revenue increased 5% to $377.4 million in Second Quarter 2024 and BetterHelp segment revenue decreased 9% to $265.0 million.

Non-cash goodwill impairment charge of $790.0 million was recorded in Second Quarter 2024 and was attributable to changes in estimates of future cash flows related to the company's BetterHelp segment. The non-cash charge had no impact on the provision for income taxes.

Net loss totaled $837.7 million, or $4.92 per share, for Second Quarter 2024, compared to $65.2 million, or $0.40 per share, for Second Quarter 2023. Results for Second Quarter 2024 included a non-cash goodwill impairment charge of $790.0 million, or $4.64 per share, stock-based compensation expense of $42.1 million, or $0.25 per share, and amortization of acquired intangibles of $64.1 million, or $0.38 per share. The amortization of acquired intangibles increased over the prior year period reflecting a change in the useful lives of certain intangibles in the third quarter of 2023. Net loss for Second Quarter 2024 also included $1.5 million, or $0.01 per share, of restructuring costs, primarily related to severance payments.

Results for Second Quarter 2023 primarily included stock-based compensation expense of $55.7 million, or $0.34 per share, and amortization of acquired intangibles of $52.8 million, or $0.32 per share. Net loss for Second Quarter 2023 also included $7.5 million, or $0.05 per share, of restructuring costs related to the abandonment of certain excess leased office space.

Adjusted EBITDA(1) increased 24% to $89.5 million, compared to $72.2 million for Second Quarter 2023. Integrated Care segment adjusted EBITDA increased 69% to $64.0 million in Second Quarter 2024 and BetterHelp segment adjusted EBITDA decreased 26% to $25.5 million in Second Quarter 2024.

GAAP gross margin, which includes amortization of intangible assets and depreciation of property and equipment, was 66.7% for Second Quarter 2024, compared to 67.5% for Second Quarter 2023.

Adjusted gross margin(1) was 70.7% for Second Quarter 2024, compared to 70.8% for Second Quarter 2023.

Six Months Ended June 30, 2024

Revenue increased 1% to $1,288.6 million from $1,281.7 million in the first six months of 2023. Access fees revenue decreased 1% to $1,116.8 million, and other revenue grew 11% to $171.8 million. U.S. revenue decreased 1% to $1,088.4 million, and International revenue grew 12% to $200.2 million for the first six months of 2024.

Revenue increased 6% to $754.5 million for the Integrated Care segment in the first six months of 2024 and decreased 7% to $534.0 million for the BetterHelp segment.

Non-cash goodwill impairment charge of $790.0 million was recorded in the first six months of 2024 and was attributable to changes in estimates of future cash flows related to the company's BetterHelp segment. The non-cash charge had no impact on the provision for income taxes.

Net loss totaled $919.6 million, or $5.44 per share, for the first six months of 2024, compared to $134.4 million, or $0.82 per share, for the first six months of 2023. Results for the first six months of 2024 included a non-cash goodwill impairment charge of $790.0 million, or $4.68 per share, stock-based compensation expense of $84.4 million, or $0.50 per share, restructuring costs of $11.2 million, or $0.07 per share, and amortization of acquired intangibles of $128.3 million, or $0.76 per share.

Results for the first six months of 2023 primarily included stock-based compensation expense of

$101.8 million, or $0.62 per share, and amortization of acquired intangibles of $103.0 million, or $0.63 per share. Net loss for the first six months of 2023 also included $15.6 million, or $0.10 per share, of restructuring costs related to the abandonment of certain excess leased office space.

Adjusted EBITDA(1) increased 22% to $152.6 million, compared to $124.9 million for the first six months of 2023. Integrated Care segment adjusted EBITDA increased 53% to $111.7 million in the first six months of 2024 and BetterHelp segment adjusted EBITDA decreased 21% to $40.9 million in the first six months of 2024.

GAAP gross margin, which includes depreciation and amortization, was 66.2% for the first six months of 2024, compared to 67.6% for the first six months of 2023.

Adjusted gross margin(1) was 70.3% for the first six months of 2024, compared to 70.3% for the first six months of 2023.

Cash flow from operations was $88.7 million in Second Quarter 2024, compared to $101.2 million in Second Quarter 2023, and was $97.6 million in the first six months of 2024, compared to $114.3 million in the first six months of 2023. Capitalized expenditures and capitalized software development costs (together, "Capex") were $27.7 million in Second Quarter 2024, compared to $36.6 million in Second Quarter 2023, and were $63.3 million for the first six months of 2024, compared to $82.2 million for the first six months of 2023. Free cash flow was $60.9 million in Second Quarter 2024, compared to $64.6 million in Second Quarter 2023, and was $34.3 million for the first six months of 2024, compared to $32.1 million for the first six months of 2023.

Teladoc Health is withdrawing the financial outlook for the Full Year of 2024 for its Consolidated operations and its BetterHelp segment that was last provided on April 25, 2024. It is also withdrawing its three year outlook on its Consolidated operations and its operating segments that had last been reaffirmed on April 25, 2024.

The outlook provided for the Integrated Care segment is based on current market conditions and expectations and what we know today. Accordingly, we believe our outlook ranges provide a reasonable baseline for future financial performance.

Earnings Conference Call

The Second Quarter 2024 earnings conference call and webcast will be held Wednesday, July 31, 2024 at 4 30 p.m. E.T. The conference call can be accessed by dialing 1-833-470-1428 for U.S. participants and using the access code #453227. For international participants, please visit the following link for global dial-in numbers https www.netroadshow.com conferencing global-numbers confId 68682. A live audio webcast will also be available online at http ir.teladoc.com news-and-events events-and-presentations . A replay of the call will be available via webcast for on-demand listening shortly after the completion of the call, at the same web link, and will remain available for approximately 90 days.

About Teladoc Health

Teladoc Health empowers all people everywhere to live their healthiest lives by transforming the healthcare experience. As the world leader in whole-person virtual care, Teladoc Health uses proprietary health signals and personalized interactions to drive better health outcomes across the full continuum of care, at every stage in a person's health journey. Teladoc Health leverages more than two decades of expertise and data-driven insights to meet the growing virtual care needs of consumers and healthcare professionals. For more information, please visit www.teladochealth.com.

Cautionary Note Regarding Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "anticipate," "intend," "plan," "believe," "project," "estimate," "expect," "may," "should," "will" and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding future financial or operating results, future numbers of members, BetterHelp paying users or clients, litigation outcomes, regulatory developments, market developments, new products and growth strategies, and the effects of any of the foregoing on our future results of operations or financial condition.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following (i) changes in laws and regulations applicable to our business model (ii) changes in market conditions and receptivity to our services and offerings, including our ability to effectively compete (iii) results of litigation or regulatory actions (iv) the loss of one or more key clients or the loss of a significant number of members or BetterHelp paying users (v) changes in valuations or useful lives of our assets (vi) changes to our abilities to recruit and retain qualified providers into our network (vii) the impact of and risk related to impairment losses with respect to goodwill or other assets and (viii) the success of our operational review of the company to achieve a more balanced approach to growth and margin. For a detailed discussion of the risk factors that could affect our actual results, please refer to the risk factors identified in our SEC reports, including, but not limited to, our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, as filed with the SEC.

Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

TELADOC HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data, unaudited)

Stock-based Compensation Summary

Compensation costs for stock-based awards were classified as follows (in thousands)

See note (3) in the Notes section that follows.

Summary Operating Metrics

See notes (2), (4), (5), and (6) in the Notes section that follows.

Operating Results by Segment (see note (7) in the Notes section that follows)

The following table presents operating results by reportable segment for the periods indicated

TELADOC HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

The following table presents the selected cash flow information for the following quarters (in thousands, unaudited)

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data, unaudited)

Non-GAAP Financial Measures

To supplement our financial information presented in accordance with generally accepted accounting principles in the United States ("GAAP"), we use certain non-GAAP financial measures to clarify and enhance an understanding of past performance, which include adjusted gross profit, adjusted gross margin, adjusted EBITDA, and free cash flow. We believe that the presentation of these financial measures enhances an investor's understanding of our financial performance, and are commonly used by investors to evaluate our performance and that of our competitors. We further believe that these financial measures are useful financial metrics to assess our operating performance and financial and business trends from period-to-period by excluding certain items that we believe are not representative of our core business, and that free cash flow reflects an additional way of viewing our liquidity that, when viewed together with GAAP results, provides management, investors, and other users of our financial information with a more complete understanding of factors and trends affecting our cash flows. We use these non-GAAP financial measures for business planning purposes and in measuring our performance relative to that of our competitors. We utilize adjusted EBITDA as a key measure of our performance.

Adjusted gross profit is our total revenue minus our total cost of revenue (exclusive of depreciation and amortization, which are shown separately) and adjusted gross margin is adjusted gross profit as a percentage of our total revenue.

Adjusted EBITDA consists of net loss before provision for income taxes other expense (income), net interest income interest expense depreciation of property and equipment amortization of intangible assets restructuring costs acquisition, integration, and transformation cost goodwill impairment and stock-based compensation.

Free cash flow is net cash provided by operating activities less capital expenditures and capitalized software development costs.

Our use of these non-GAAP terms may vary from that of others in our industry, and other companies may calculate such measures differently than we do, limiting their usefulness as comparative measures.

Non-GAAP measures have important limitations as analytical tools and you should not consider them in isolation, and they should not be considered as an alternative to net loss before provision for income taxes, net loss, net loss per share, net cash from operating activities or any other measures derived in accordance with GAAP. Some of these limitations are

adjusted gross margin has been and will continue to be affected by a number of factors, including the fees we charge our clients, the number of visits and cases we complete, the costs paid to providers and medical experts, as well as the costs of our provider network operations center

adjusted gross margin does not reflect the significant depreciation and amortization to cost of revenue

adjusted EBITDA eliminates the impact of the provision for income taxes on our results of operations, and it does not reflect other expense (income), net, interest income, or interest expense

adjusted EBITDA does not reflect restructuring costs. Restructuring costs may include certain lease impairment costs, certain losses related to early lease terminations, and severance

adjusted EBITDA does not reflect significant acquisition, integration, and transformation costs. Acquisition, integration and transformation costs include investment banking, financing, legal, accounting, consultancy, integration, fair value changes related to contingent consideration, and certain other transaction costs related to mergers and acquisitions. It also includes costs related to certain business transformation initiatives focused on integrating and optimizing various operations and systems, including upgrading our customer relationship management (CRM) and enterprise resource planning (ERP) systems. These transformation cost adjustments made to our results do not represent normal, recurring, operating expenses necessary to operate the business but, rather, incremental costs incurred in connection with our acquisition and integration activities

adjusted EBITDA does not reflect goodwill impairment and

adjusted EBITDA does not reflect the significant non-cash stock-based compensation expense which should be viewed as a component of recurring operating costs.

In addition, although amortization of intangible assets and depreciation of property and equipment are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and adjusted gross profit, adjusted gross margin, and adjusted EBITDA do not reflect any expenditures for such replacements.

We compensate for these limitations by using these non-GAAP measures along with other comparative tools, together with GAAP measurements, to assist in the evaluation of operating performance. Such GAAP measurements include net loss, net loss per share, net cash provided by operating activities, and other performance measures.

In evaluating these financial measures, you should be aware that in the future we may incur expenses similar to those eliminated in this presentation. Our presentation of these non-GAAP measures should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.

The following is a reconciliation of gross profit, the most directly comparable GAAP financial measures, to adjusted gross profit

Reconciliation of GAAP Gross Profit to Adjusted Gross Profit

(In thousands, unaudited)

The following is a reconciliation of net loss, the most directly comparable GAAP financial measure, to adjusted EBITDA

Reconciliation of GAAP Net Loss to Adjusted EBITDA

(In thousands, except for outlook data, unaudited)

The following is a reconciliation of net cash provided by operating activities, the most directly comparable GAAP financial measure, to free cash flow

Reconciliation of GAAP Net Cash Provided by Operating Activities to Free Cash Flow

(In thousands, unaudited)

1.A reconciliation of each non-GAAP measure to the most comparable measure under GAAP has been provided in this press release in the accompanying tables. An explanation of these non-GAAP measures is also included under the heading "Non-GAAP Financial Measures."