- Third quarter revenue grows 81% year-over-year to $522 million, updating 2021 revenue outlook to $2,015 million to $2,025 million.
- Total third quarter visits top 3.9 million – 37% higher than Q3 2020.
- Significant new agreements with CVS Health and Centene to provide Teladoc Health’s Primary360 to deliver greater care access and health engagement.
- Teladoc Health ranked 1st in consumer satisfaction by J.D. Power 2021 U.S. Telehealth Satisfaction Study.
PURCHASE, NY, Oct. 27, 2021 (GLOBE NEWSWIRE) -- Teladoc Health, Inc. (NYSE: TDOC), the global leader in whole-person virtual care, today reported financial results for the quarter ended September 30, 2021.
“Our strong performance in the third quarter reflects our continued success in leading the transformation of healthcare delivery and expanding access for all,” said Jason Gorevic, chief executive officer at Teladoc Health. “By leveraging our unique combination of data, analytics, technology and dedicated healthcare professionals, we are driving growth across our business. The third quarter was notable in expanding relationships with a number of leading national health plans with the successful launch of our Primary360 offering which reimagines the primary care model and delivers increased access and engagement to members.”
“As we look ahead to the rest of 2021 and into 2022, we are confident in our ability to innovate, anticipate and solve for the evolving whole-person health needs of consumers and healthcare professionals globally," Gorevic added.
Financial Results for the Third Quarter and Nine Months Ended September 30, 2021
| Revenue | ||||||||||||||||||||||||
| ($ thousands, unaudited) | ||||||||||||||||||||||||
| Quarter Ended | Year over Year | Nine Months Ended | Year over Year | |||||||||||||||||||||
| September 30, | Growth | September 30, | Growth | |||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||
| Access Fees Revenue | ||||||||||||||||||||||||
| U.S. | $ | 413,594 | $ | 194,622 | 113 | % | $ | 1,161,084 | $ | 454,582 | 155 | % | ||||||||||||
| International | 37,989 | 31,997 | 19 | % | 112,699 | 91,261 | 23 | % | ||||||||||||||||
| Total | 451,583 | 226,619 | 99 | % | 1,273,783 | 545,843 | 133 | % | ||||||||||||||||
| Visit Fee Revenue | ||||||||||||||||||||||||
| U.S. | 59,863 | 50,948 | 18 | % | 173,399 | 152,944 | 13 | % | ||||||||||||||||
| International | 116 | 96 | 22 | % | 368 | 705 | (48 | ) | % | |||||||||||||||
| Total | 59,979 | 51,044 | 18 | % | 173,767 | 153,649 | 13 | % | ||||||||||||||||
| Other | ||||||||||||||||||||||||
| U.S. | 9,583 | 10,299 | (7 | ) | % | 29,617 | 10,299 | 188 | % | |||||||||||||||
| International | 513 | 850 | (40 | ) | % | 1,305 | 850 | 54 | % | |||||||||||||||
| Total | 10,096 | 11,149 | (9 | ) | % | 30,922 | 11,149 | 177 | % | |||||||||||||||
| Total Revenue | $ | 521,658 | $ | 288,812 | 81 | % | $ | 1,478,472 | $ | 710,641 | 108 | % | ||||||||||||
n/m – Not meaningful
| Membership and Visit Fee Only Access | |||||||||
| (millions) | |||||||||
| Quarter Ended | |||||||||
| September 30, | Growth | ||||||||
| 2021 | 2020 | ||||||||
| U.S. Paid Membership | 52.5 | 51.5 | 2 | % | |||||
| U.S. Visit Fee Only Access | 23.6 | 21.8 | 8 | % | |||||
| Chronic Care Enrollment | 0.725 | - | n | /m | |||||
| Visits | ||||||||||||||||||||||
| (thousands) | ||||||||||||||||||||||
| Quarter Ended | Year over Year | Nine Months Ended | Year over Year | |||||||||||||||||||
| September 30, | Growth | September 30, | Growth | |||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| U.S. Visits | 3,354 | 2,390 | 40 | % | 9,114 | 6,306 | 45 | % | ||||||||||||||
| International Visits | 531 | 445 | 19 | % | 1,475 | 1,330 | 11 | % | ||||||||||||||
| Total Visits | 3,885 | 2,835 | 37 | % | 10,589 | 7,636 | 39 | % | ||||||||||||||
| Utilization | 23.7 | % | 16.5 | % | 713 | pt | 21.6 | % | 15.4 | % | 620 | pt | ||||||||||
| Platform-Enabled Sessions* | 969 | 986 | (2 | ) | % | 3,078 | 986 | 212 | % | |||||||||||||
| Total Visits & Sessions Provided & Enabled | 4,854 | 3,821 | 27 | % | 13,667 | 8,622 | 59 | % | ||||||||||||||
* Platform-Enabled Sessions are a unique instance in which our licensed software platform has facilitated a virtual voice or video encounter between a care provider and our client’s patient, or between care providers. We believe platform-enabled sessions are an indicator of the value our clients derive from the platform they license from us in order to facilitate virtual care.
- Net loss was $(84.3) million for the third quarter of 2021 compared to $(35.9) million for the third quarter of 2020. Net loss was $(417.8) million for the first nine months of 2021 compared to $(91.2) million for the first nine months of 2020. The third quarter and first nine months of 2021 include stock-based compensation expense of $71.7 million and $241.0 million, respectively, representing increases of $50.8 million and $179.8 million, respectively, from the third quarter and first nine months of 2020, substantially reflecting higher expense associated with Livongo stock awards that continue to vest after the merger. Net loss also includes amortization of acquired intangibles of $45.1 million and $133.8 million, respectively, for the third quarter and first nine months of 2021, representing increases of $35.0 million and $109.2 million, respectively, from the third quarter and first nine months of 2020, substantially reflecting higher amortization of acquired intangible assets from the Livongo and InTouch Health acquisitions. Net loss also includes loss on extinguishment of debt of $0.8 million and $43.7 million, respectively, for the third quarter and first nine months of 2021, a decrease of $0.4 million and an increase of $34.7 million, respectively, from the third quarter and first nine months of 2020, primarily reflecting the exchange of convertible senior notes in the first nine months of 2021. Net loss also includes non-cash income tax expense of $3.6 million and $93.9 million, respectively, for the third quarter and first nine months of 2021, substantially reflecting the recording of a valuation allowance on stock compensation benefits associated with the Livongo merger recorded in the first quarter of 2021.
- Net loss per basic and diluted share was $(0.53) for the third quarter of 2021 compared to $(0.43) for the third quarter of 2020. Net loss per basic and diluted share was $(2.68) and $(1.17) for the first nine months of 2021 and 2020, respectively. Net loss per basic and diluted share includes stock-based compensation expense of $0.45 per share and $0.25 per share for the third quarter of 2021 and 2020, respectively, and $1.55 per share and $0.79 per share for the first nine months of 2021 and 2020, respectively. Net loss per basic and diluted share also includes amortization of acquired intangible assets of $0.28 per share and $0.12 per share for the third quarter of 2021 and 2020, respectively, and $0.86 per share and $0.32 per share for the first nine months of 2021 and 2020, respectively. Net loss per basic and diluted share also includes loss on extinguishment of debt of $0.01 per share for the third quarter of both 2021 and 2020, and $0.28 per share and $0.12 per share for the first nine months of 2021 and 2020, respectively. In addition, net loss per basic and diluted share includes the non-cash income tax charge (benefit) referred to above of $0.02 per share and $(0.03) per share for the third quarter of 2021 and 2020, respectively, and $0.60 per share for the first nine months of 2021 as compared to a benefit of $(0.07) per share in the first nine months of 2020. The number of weighted-average shares outstanding was 159.4 million and 155.9 million for the third quarter and first nine months of 2021, respectively, up from 83.6 million and 77.8 million for the third quarter and first nine months of 2020, substantially reflecting the impact of the Livongo and InTouch Health acquisitions.
- GAAP Gross margin, which includes depreciation and amortization, was 67.1 percent for the third quarter of 2021 and 63.3 percent for the third quarter of 2020. For the first nine months of 2021 and 2020, GAAP Gross margin was 67.3 percent and 61.7 percent, respectively.
- Adjusted Gross margin was 67.6 percent for the third quarter of 2021 compared to 63.7 percent for the third quarter of 2020. For the first nine months of 2021 and 2020, Adjusted Gross margin was 67.9 percent and 62.3 percent, respectively.
- EBITDA was a loss of $(8.7) million for the third quarter of 2021 compared to a loss $(6.8) million for the third quarter of 2020. EBITDA was a loss of $(72.3) million and $(15.4) million, respectively, for the first nine months of 2021 and 2020. EBITDA includes stock-based compensation expense of $71.7 million and $241.0 million for the third quarter and first nine months of 2021, respectively, representing increases of $50.8 million and $179.8 million from the third quarter and first nine months of 2020, respectively, substantially reflecting higher expense associated with Livongo stock awards that continue to vest after the merger. EBITDA also includes acquisition, integration and transformation costs of $4.3 million and $22.1 million for the third quarter and first nine months of 2021, respectively, representing decreases of $21.1 million and $8.6 million from the third quarter and first nine months of 2020, respectively.
- Adjusted EBITDA was $67.4 million for the third quarter of 2021 compared to $39.5 million for the third quarter of 2020. Adjusted EBITDA was $190.8 million for the first nine months of 2021 compared to $76.5 million for the first nine months of 2020.
A reconciliation of generally accepted accounting principles (“GAAP”) in the United States to non-GAAP results has been provided in this press release in the accompanying tables. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”
Financial Outlook
Teladoc Health provides guidance based on current market conditions and expectations. Given the uncertainty of the expected path of the COVID-19 pandemic as well as the broader economic impact, our updated guidance is based on what we know today. As this is an evolving situation, circumstances are likely to change, but we believe our guidance ranges provide a reasonable baseline for 2021 financial performance.
For the fourth-quarter 2021, we expect:
- Total revenue to be in the range of $536 million to $546 million.
- EBITDA to be in the range of $(8) million to $(3) million.
- Adjusted EBITDA to be in the range of $69 million to $74 million.
- Net loss per share, based on 160 million weighted average shares outstanding, to be between $(0.73) and $(0.53).
- Total U.S. paid membership to be in the range of 52.5 million to 53.5 million members and visit fee only access to be available to approximately 23 million to 24 million individuals.
- Total visits to be between 3.9 million and 4.1 million.
For the full-year 2021, we expect:
- Total revenue to be in the range of $2,015 million to $2,025 million.
- EBITDA to be in the range of $(80) million to $(75) million.
- Adjusted EBITDA to be in the range of $260 million to $265 million, including an estimated $20 million in lower expenses primarily related to Livongo devices as a result of the merger.
- Net loss per share, based on 157 million weighted average shares outstanding, to be between $(3.40) and $(3.20).
- Total U.S. paid membership to be in the range of 52.5 million to 53.5 million members and visit fee only access to be available to approximately 23 million to 24 million individuals.
- Total visits to be between 14.5 million and 14.7 million.
Quarterly Conference Call
The third quarter 2021 earnings conference call and webcast will be held Wednesday, October 27, 2021 at 4:30 p.m. E.T. The conference call can be accessed by dialing 1-833-968-2101 for U.S. participants, or 1-236-714-2089 for international participants, and referencing Conference ID Number: 3489052; or via a live audio webcast available online at http://ir.teladoc.com/news-and-events/events-and-presentations/. A webcast replay will be available 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. Ranked best in KLAS for Virtual Care Platforms in 2020 and #1 among direct-to-consumer telehealth providers in the J.D. Power 2021 U.S. Telehealth Satisfaction Study, Teladoc Health leverages more than a decade 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 or follow @TeladocHealth on Twitter.
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 revenues, future earnings, future numbers of members 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; (iii) results of litigation; (iv) the loss of one or more key clients; (v) changes to our abilities to recruit and retain qualified providers into our network; and (vi) the impact of the COVID-19 pandemic on our operations, demand for our services and general economic conditions, as well as orders, directives and legislative action by local, state, federal and foreign governments in response to the spread of COVID-19. 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. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data, unaudited) | ||||||||
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 823,828 | $ | 733,324 | ||||
| Short-term investments | 2,538 | 53,245 | ||||||
| Accounts receivable, net of allowance of $11,277 and $6,412, respectively | 178,072 | 169,281 | ||||||
| Inventories | 56,937 | 56,498 | ||||||
| Prepaid expenses and other current assets | 95,941 | 47,259 | ||||||
| Total current assets | 1,157,316 | 1,059,607 | ||||||
| Property and equipment, net | 27,027 | 28,551 | ||||||
| Goodwill | 14,470,399 | 14,581,255 | ||||||
| Intangible assets, net | 1,932,012 | 2,020,864 | ||||||
| Operating lease - right-of-use assets | 47,935 | 46,647 | ||||||
| Other assets | 17,890 | 18,357 | ||||||
| Total assets | $ | 17,652,579 | $ | 17,755,281 | ||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 34,655 | $ | 46,030 | ||||
| Accrued expenses and other current liabilities | 106,252 | 83,657 | ||||||
| Accrued compensation | 75,891 | 94,593 | ||||||
| Deferred revenue-current | 72,865 | 52,356 | ||||||
| Advances from financing companies | 12,442 | 13,453 | ||||||
| Current portion of long-term debt | 0 | 42,560 | ||||||
| Total current liabilities | 302,105 | 332,649 | ||||||
| Other liabilities | 1,328 | 1,616 | ||||||
| Operating lease liabilities, net of current portion | 42,729 | 43,142 | ||||||
| Deferred revenue, net of current portion | 4,075 | 2,449 | ||||||
| Advances from financing companies, net of current portion | 9,561 | 9,926 | ||||||
| Deferred taxes | 93,824 | 102,103 | ||||||
| Convertible senior notes, net | 1,211,375 | 1,379,592 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Common stock, $0.001 par value; 300,000,000 shares authorized as of September 30, 2021 and December 31, 2020; 160,013,751 shares and 150,281,099 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | 160 | 150 | ||||||
| Additional paid-in capital | 17,399,023 | 16,857,797 | ||||||
| Accumulated deficit | (1,410,469 | ) | (992,661 | ) | ||||
| Accumulated other comprehensive (loss) gain | (1,132 | ) | 18,518 | |||||
| Total stockholders’ equity | 15,987,582 | 15,883,804 | ||||||
| Total liabilities and stockholders’ equity | $ | 17,652,579 | $ | 17,755,281 | ||||
| TELADOC HEALTH, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data, unaudited) | ||||||||||||||||
| Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue | $ | 521,658 | $ | 288,812 | $ | 1,478,472 | $ | 710,641 | ||||||||
| Expenses: | ||||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization, which is shown separately below) | 169,041 | 104,725 | 475,273 | 267,887 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Advertising and marketing | 111,078 | 52,302 | 303,738 | 132,395 | ||||||||||||
| Sales | 62,602 | 23,483 | 191,251 | 60,110 | ||||||||||||
| Technology and development | 80,250 | 29,958 | 239,017 | 72,244 | ||||||||||||
| Acquisition, integration and transformation costs | 4,340 | 25,395 | 22,084 | 30,686 | ||||||||||||
| General and administrative | 103,016 | 59,742 | 319,404 | 162,699 | ||||||||||||
| Depreciation and amortization | 51,907 | 12,932 | 151,907 | 32,535 | ||||||||||||
| Total expenses | 582,234 | 308,537 | 1,702,674 | 758,556 | ||||||||||||
| Loss from operations | (60,576 | ) | (19,725 | ) | (224,202 | ) | (47,915 | ) | ||||||||
| Loss on extinguishment of debt | 850 | 1,227 | 43,728 | 8,978 | ||||||||||||
| Other expense (income), net | 376 | 252 | (5,493 | ) | 827 | |||||||||||
| Interest expense, net | 18,895 | 16,970 | 61,493 | 38,849 | ||||||||||||
| Net loss before taxes | (80,697 | ) | (38,174 | ) | (323,930 | ) | (96,569 | ) | ||||||||
| Income tax expense (benefit) | 3,643 | (2,290 | ) | 93,878 | (5,400 | ) | ||||||||||
| Net loss | $ | (84,340 | ) | $ | (35,884 | ) | $ | (417,808 | ) | $ | (91,169 | ) | ||||
| Net loss per share, basic and diluted | $ | (0.53 | ) | $ | (0.43 | ) | $ | (2.68 | ) | $ | (1.17 | ) | ||||
| Weighted-average shares used to compute basic and diluted net loss per share | 159,435,165 | 83,607,902 | 155,926,680 | 77,821,073 | ||||||||||||
| TELADOC HEALTH, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, unaudited) | ||||||||
| Nine Months Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows provided by operating activities: | ||||||||
| Net loss | $ | (417,808 | ) | $ | (91,169 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 151,907 | 32,535 | ||||||
| Depreciation of rental equipment | 2,500 | 851 | ||||||
| Amortization of right-of-use assets | 8,185 | 4,643 | ||||||
| Allowance for doubtful accounts | 11,353 | 2,320 | ||||||
| Stock-based compensation | 240,971 | 61,151 | ||||||
| Deferred income taxes | 91,414 | (4,096 | ) | |||||
| Accretion of interest | 46,843 | 29,459 | ||||||
| Loss on extinguishment of debt | 40,631 | 8,978 | ||||||
| Gain on sale of investment | (5,901 | ) | 0 | |||||
| Other, net | 38 | 216 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (19,407 | ) | (16,450 | ) | ||||
| Prepaid expenses and other current assets | (34,566 | ) | (5,906 | ) | ||||
| Inventory | (2,661 | ) | (2,392 | ) | ||||
| Other assets | (3,432 | ) | 140 | |||||
| Accounts payable | (11,115 | ) | 6,584 | |||||
| Accrued expenses and other current liabilities | 15,880 | 17,269 | ||||||
| Accrued compensation | (17,352 | ) | 9,329 | |||||
| Deferred revenue | 20,002 | 15,348 | ||||||
| Operating lease liabilities | (8,202 | ) | (4,360 | ) | ||||
| Other liabilities | 1,502 | (3,025 | ) | |||||
| Net cash provided by operating activities | 110,782 | 61,425 | ||||||
| Cash flows used in investing activities: | ||||||||
| Capital expenditures | (5,611 | ) | (2,872 | ) | ||||
| Capitalized software development costs | (35,402 | ) | (14,515 | ) | ||||
| Proceeds from marketable securities | 50,000 | 0 | ||||||
| Proceeds from the sale of investment | 10,901 | 0 | ||||||
| Acquisitions of business, net of cash acquired | (75,944 | ) | (159,663 | ) | ||||
| Other, net | 3,150 | 0 | ||||||
| Net cash used in investing activities | (52,906 | ) | (177,050 | ) | ||||
| Cash flows provided by financing activities: | ||||||||
| Net proceeds from the exercise of stock options | 22,956 | 40,627 | ||||||
| Proceeds from issuance of 2027 Notes | 0 | 1,000,000 | ||||||
| Payment of issuance costs of 2027 Notes | 0 | (24,070 | ) | |||||
| Repurchase of 2022 Notes | (139 | ) | (228,153 | ) | ||||
| Proceeds from advances from financing companies | 10,677 | 1,924 | ||||||
| Payment against advances from financing companies | (12,053 | ) | (4,427 | ) | ||||
| Proceeds from employee stock purchase plan | 13,996 | 2,473 | ||||||
| Cash received for withholding taxes on stock-based compensation, net | 3,109 | 326 | ||||||
| Other, net | (4,224 | ) | 0 | |||||
| Net cash provided by financing activities | 34,322 | 788,700 | ||||||
| Net increase in cash and cash equivalents | 92,198 | 673,075 | ||||||
| Foreign exchange difference | (1,694 | ) | (129 | ) | ||||
| Cash and cash equivalents at beginning of the period | 733,324 | 514,353 | ||||||
| Cash and cash equivalents at end of the period | $ | 823,828 | $ | 1,187,299 | ||||
| Income taxes paid | $ | 3,114 | $ | 786 | ||||
| Interest paid | $ | 7,973 | $ | 5,612 | ||||
Stock-based Compensation Summary
Total compensation costs for stock-based awards were recorded as follows (in thousands):
| Quarter Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Cost of revenue (exclusive of depreciation and amortization, which is shown separately) | $ | 2,162 | $ | 128 | $ | 6,310 | $ | 128 | ||||||||
| Advertising and marketing | 5,244 | 1,644 | 15,141 | 4,447 | ||||||||||||
| Sales | 17,518 | 3,275 | 57,638 | 9,465 | ||||||||||||
| Technology and development | 22,910 | 2,622 | 77,335 | 7,285 | ||||||||||||
| General and administrative | 23,867 | 13,239 | 84,547 | 39,826 | ||||||||||||
| Total stock-based compensation expense (1) | $ | 71,701 | $ | 20,908 | $ | 240,971 | $ | 61,151 | ||||||||
(1) Excluding the amount capitalized related to internal software development projects.
Non-GAAP Financial Measures:
To supplement our financial information presented in accordance with GAAP, we use adjusted gross profit, adjusted gross margin, EBITDA and adjusted EBITDA, which are non-GAAP financial measures, to clarify and enhance an understanding of past performance. We believe that the presentation of these financial measures enhances an investor’s understanding of our financial performance. We further believe that these financial measures are useful financial metrics to assess our operating performance from period-to-period by excluding certain items that we believe are not representative of our core business. We use certain financial measures for business planning purposes and in measuring our performance relative to that of our competitors. We utilize adjusted EBITDA as the primary measure of our performance.
Adjusted gross profit is our total revenue minus our total cost of revenue (exclusive of depreciation and amortization, which is shown separately) and adjusted gross margin is adjusted gross profit as a percentage of our total revenue. We believe that these measures provide investors meaningful information to understand our results of operations and the ability to analyze financial and business trends on a period-to-period basis.
EBITDA consists of net loss before interest; other expense (income), net, including foreign exchange gain or loss; taxes; depreciation and amortization; and loss on extinguishment of debt. Adjusted EBITDA consists of net loss before interest; other expense (income), net, including foreign exchange gain or loss; taxes; depreciation and amortization; loss on extinguishment of debt; stock-based compensation; and acquisition, integration and transformation costs. We believe that making such adjustments provides investors meaningful information to understand our results of operations and the ability to analyze financial and business trends on a period-to-period basis.
We believe the above financial measures are commonly used by investors to evaluate our performance and that of our competitors. However, our use of the terms adjusted gross profit, adjusted gross margin, EBITDA and adjusted EBITDA may vary from that of others in our industry. None of adjusted gross profit, adjusted gross margin, EBITDA nor adjusted EBITDA should be considered as an alternative to net loss before taxes, net loss, net loss per share or any other performance measures derived in accordance with GAAP.
Adjusted gross profit, adjusted gross margin, EBITDA and adjusted EBITDA have important limitations as analytical tools and you should not consider them in isolation or as a substitute for analysis of our results as reported under 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;
- EBITDA and adjusted EBITDA do not reflect the significant interest expense on our debt;
- EBITDA and adjusted EBITDA eliminate the impact of income taxes on our results of operations;
- EBITDA and adjusted EBITDA do not reflect the loss on extinguishment of debt;
- EBITDA and adjusted EBITDA do not reflect other expense (income), net;
- Adjusted EBITDA does not reflect the 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, 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 the significant non-cash stock compensation expense which should be viewed as a component of recurring operating costs; and
- other companies in our industry may calculate adjusted gross profit, adjusted gross margin, EBITDA and adjusted EBITDA differently than we do, limiting the usefulness of these measures as comparative measures.
In addition, although depreciation and amortization 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, EBITDA and adjusted EBITDA do not reflect any expenditures for such replacements.
We compensate for these limitations by using adjusted gross profit, adjusted gross margin, EBITDA and adjusted EBITDA 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 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 adjusted gross profit, adjusted gross margin, EBITDA and adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.
We have not reconciled EBITDA or adjusted EBITDA guidance to GAAP net loss because we do not provide guidance on the individual reconciling items between EBITDA and adjusted EBITDA and GAAP net loss. This is due to the uncertainty as to timing, and the potential variability, of the individual reconciling items such as the tax impact of share-based compensation, the effect of which may be significant. Accordingly, a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measure is not available without unreasonable effort.
The following is a reconciliation of gross profit and gross margin, the most directly comparable GAAP financial measures, to adjusted gross profit and adjusted gross margin, respectively:
| Reconciliation of GAAP Gross Profit to Adjusted Gross Profit and Adjusted Gross Margin (In thousands, unaudited) | |||||||||||||||||
| Quarter Ended | Nine Months Ended | ||||||||||||||||
| September 30, | September 30, | ||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||
| Revenue | $ | 521,658 | $ | 288,812 | $ | 1,478,472 | $ | 710,641 | |||||||||
| Cost of revenue (exclusive of depreciation and amortization, which is shown separately below) | (169,041 | ) | (104,725 | ) | (475,273 | ) | (267,887 | ) | |||||||||
| Depreciation and amortization of intangible assets | (2,545 | ) | (1,149 | ) | (8,233 | ) | (4,078 | ) | |||||||||
| Gross Profit | 350,072 | 182,938 | 994,966 | 438,676 | |||||||||||||
| Depreciation and amortization of intangible assets | 2,545 | 1,149 | 8,233 | 4,078 | |||||||||||||
| Adjusted gross profit | $ | 352,617 | $ | 184,087 | $ | 1,003,199 | $ | 442,754 | |||||||||
| Gross margin | 67.1 | % | 63.3 | % | 67.3 | % | 61.7 | % | |||||||||
| Adjusted gross margin | 67.6 | % | 63.7 | % | 67.9 | % | 62.3 | % | |||||||||
The following is a reconciliation of Net Loss, the most directly comparable GAAP financial measure, to EBITDA and adjusted EBITDA:
| Reconciliation of GAAP Net Loss to EBITDA and Adjusted EBITDA (In thousands, unaudited) | ||||||||||||||||
| Quarter Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net loss | $ | (84,340 | ) | $ | (35,884 | ) | $ | (417,808 | ) | $ | (91,169 | ) | ||||
| Add: | ||||||||||||||||
| Loss on extinguishment of debt | 850 | 1,227 | 43,728 | 8,978 | ||||||||||||
| Other expense (income), net | 376 | 252 | (5,493 | ) | 827 | |||||||||||
| Interest expense, net | 18,895 | 16,970 | 61,493 | 38,849 | ||||||||||||
| Income tax expense (benefit) | 3,643 | (2,290 | ) | 93,878 | (5,400 | ) | ||||||||||
| Depreciation and amortization | 51,907 | 12,932 | 151,907 | 32,535 | ||||||||||||
| EBITDA | (8,669 | ) | (6,793 | ) | (72,295 | ) | (15,380 | ) | ||||||||
| Stock-based compensation | 71,701 | 20,908 | 240,971 | 61,151 | ||||||||||||
| Acquisition, integration and transformation costs | 4,340 | 25,395 | 22,084 | 30,686 | ||||||||||||
| Adjusted EBITDA | $ | 67,372 | $ | 39,510 | $ | 190,760 | $ | 76,457 | ||||||||
Investors:
Patrick Feeley
914-265-7925
IR@teladochealth.com
Media:
Chris Stenrud
860-491-8821
pr@teladochealth.com
