Teladoc(US:TDOC)2024-02-21 01:39Financial Data and Key Metrics - Consolidated revenue for Q4 2023 grew 4% year-over-year to $661 million, with adjusted EBITDA increasing 22% to $114 million, representing a margin of 17.3% [35][41] - Full-year 2023 revenue was $2.6 billion, up 8% year-over-year, with adjusted EBITDA growing 33% to $328 million and margins expanding 240 basis points to 12.6% [73] - Free cash flow for Q4 2023 was $93.6 million, compared to $11.7 million in Q4 2022, with full-year free cash flow reaching $193.7 million, up from $16.5 million in 2022 [42] - The company ended 2023 with over $1.1 billion in cash and cash equivalents [42] Business Line Performance Integrated Care Segment - Q4 2023 revenue grew 8% year-over-year to $384 million, with segment margins expanding 230 basis points to 14.6% [35][74] - Full-year 2023 revenue for the segment increased 7% to $1.5 billion, driven by chronic care revenue growth [74] - Chronic care enrollment grew by 36,000 in Q4, bringing full-year net enrollment growth to 139,000, with total enrollment reaching 1.16 million, up 14% year-over-year [43] - Approximately 16% of the general medical client base has access to chronic care products, up from 12% two years ago [31][89] BetterHelp Segment - Q4 2023 revenue was $276 million, flat year-over-year, with adjusted EBITDA growing 11% to $58 million and margins expanding 210 basis points to 21.2% [30][44] - Full-year 2023 revenue for BetterHelp was $1.1 billion, up 11% year-over-year, with adjusted EBITDA growing 19% to $136 million and margins expanding to 12% [44] - Marketing yields for BetterHelp were below expectations in the second half of 2023, particularly in social media channels, impacting growth [30][96] Market Performance - The U.S. virtual care business, which accounts for roughly half of the Integrated Care segment, is expected to grow in the low single digits due to market penetration [36] - International B2B business, particularly in Canada, is a steady contributor to revenue growth, with expanded presence expected to drive visibility into 2024 growth [37] - BetterHelp's international revenue accounted for 15% of fiscal 2023 revenue, with efforts underway to expand further into non-English-speaking markets [38] Strategic Direction and Industry Competition - The company is targeting 50 to 100 basis points of annual margin expansion over the next three years, with a goal of reaching at least $425 million in adjusted EBITDA by 2025 [29][53] - Productivity initiatives, including automation and organizational realignment, are expected to deliver $85 million in annual run-rate savings by the end of 2024 [40] - The company is focusing on cross-selling chronic care products to its existing client base, with 75% of bookings coming from upsells or expansions with existing clients [34][89] - Investments in technology, including AI and machine learning, are seen as key competitive advantages to drive engagement and multi-product utilization [39] Management Commentary on Operating Environment and Future Outlook - Management expects mid-single-digit annual revenue growth for the Integrated Care segment and low single-digit growth for BetterHelp over the next three years [37][53] - The company anticipates continued pressure on customer acquisition costs in the first half of 2024, with easier comps in the second half [2][86] - BetterHelp's growth is gated by the ability to deploy capital efficiently at acceptable rates of return, with a focus on profitable growth [69][113] Other Key Information - The company identified a technical issue in mapping new client populations, delaying B2B consumer engagement efforts and impacting 2024 revenue by approximately $20 million [78][84] - Share buybacks are being considered to offset potential dilution from employee stock grants, with $1.1 billion in cash providing flexibility for strategic opportunities [19][80] Q&A Summary Question: Capital Deployment and Debt Management [6] - The company has $550 million in convertible debt due in June 2025 and $1 billion due in 2027, with plans to use cash to pay down debt and consider share buybacks [16][118] Question: BetterHelp Marketing Yields [17] - Marketing yields for BetterHelp remain depressed due to increased competition in the ad space, with no single competitor driving up rates [18][96] Question: Portfolio Assessment [23] - The company is conducting a portfolio assessment to evaluate profitability and growth outlook across customer segments, geographies, and products, with no significant changes expected in the near term [105] Question: Chronic Care Growth and Bundling [57] - Chronic care growth is expected to be mid to high single digits, with bundled programs contributing to higher revenue per client but lower revenue per member [108] Question: Cost Savings Program [93] - The $35 million in cost savings for 2024 is expected to benefit adjusted EBITDA, with most savings coming from the Integrated Care segment [114] Question: Delayed Enrollment Impact [115] - A technical issue in mapping new client populations delayed consumer engagement marketing by three to four weeks, impacting chronic care program enrollment [115]