Teladoc Health, Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. The filing also reports fourth-quarter results; it is an annual report, not a standalone quarterly filing.
Business context and reporting period
Teladoc provides virtual medical care, chronic-condition management, and mental-health services. In Q4 2022, it reorganized reporting into Integrated Care, primarily business-to-business, and BetterHelp, primarily direct-to-consumer. About 87% of FY2022 revenue came from access fees. The company reported 83.3 million U.S. Integrated Care members, 1.02 million chronic-care program enrollments, and 0.42 million BetterHelp paying users at year-end.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $2.407 billion | $2.033 billion |
| Operating loss | $13.653 billion | $265.6 million |
| Net loss | $13.660 billion | $428.8 million |
| Adjusted EBITDA (non-GAAP) | $246.5 million | $267.8 million |
| Cash from operating activities | $189.3 million | $194.0 million |
| Free cash flow (non-GAAP) | $16.5 million | $130.1 million |
FY2022 cost of revenue was $744.0 million; revenue less this cost equates to a calculated gross margin of approximately 69.1%, versus 68.0% in 2021. The reported net loss was dominated by $13.403 billion of non-cash goodwill impairment charges, which were not tax-deductible. Net loss per diluted share was $84.60.
Q4 revenue was $637.7 million, and net loss was $3.810 billion, including a $3.773 billion goodwill impairment charge. At December 31, cash and cash equivalents were $918.2 million; current assets were $1.315 billion and current liabilities $399.8 million. The company reported $1.535 billion in net carrying value of convertible notes; the notes had $1.551 billion aggregate principal outstanding, including $550 million of Livongo notes assumed by Teladoc on January 1, 2023. The company said it was in compliance with debt covenants.
Material changes versus the prior comparable period
- Revenue rose 18%, led by a 21% increase in access-fee revenue. BetterHelp revenue grew 41%; Integrated Care revenue grew 6%.
- Advertising and marketing expense increased 50% to $623.5 million, substantially due to BetterHelp advertising and higher Integrated Care engagement marketing.
- Adjusted EBITDA declined 8%. Integrated Care Adjusted EBITDA fell 6%, with margin decreasing from 11.1% to 9.8%; BetterHelp Adjusted EBITDA fell 6%, with margin down from 16.9% to 11.2%.
- Operating cash flow was nearly flat year over year, but free cash flow decreased as capitalized software development spending rose to $156.3 million from $55.4 million.
- Goodwill declined to $1.073 billion from $14.504 billion following the impairment charges. The remaining goodwill was attributed to BetterHelp.
Outlook, commentary, risks, and unusual items
- Management expected positive operating cash flow to increase in 2023 and said existing cash was sufficient for working capital, capital expenditures, and contractual obligations for at least 12 months. No specific 2023 revenue or earnings guidance is provided in the supplied filing text.
- The company expects approximately $17 million in 2023 pre-tax restructuring charges, including about $10 million of expected cash expenditures. It recorded $7.4 million of restructuring costs in 2022.
- Management identified ongoing risks around achieving profitability, competition and pricing, Client and BetterHelp user retention, provider recruitment, and the pace of virtual-care adoption. Further goodwill or other asset impairments remain possible if forecasts or valuation assumptions weaken.
- Risks also include healthcare regulation and professional-practice rules, privacy and cybersecurity, third-party technology and device suppliers, international operations, and debt service. The company noted uncertainty around the FTC’s investigation of BetterHelp; it accrued a probable $7.8 million loss, but the matter remained unresolved. Securities class-action and derivative litigation was also pending; management said it intended to defend the claims.
- The auditor issued unqualified opinions on the financial statements and internal controls. Management also concluded disclosure controls and internal control over financial reporting were effective as of year-end, while noting continued evaluation of controls affected by an ERP implementation.
Important facts for investors to verify
- Whether recurring revenue growth and member engagement can translate into improving Adjusted EBITDA, margins, and free cash flow.
- How much of 2022’s severe GAAP loss reflects non-cash impairments, and whether further impairment charges are likely.
- The sustainability and returns of BetterHelp’s elevated marketing spend, including user retention and acquisition costs.
- The terms and cash or share consequences of convertible-note maturities and potential conversions, including the Livongo notes assumed in 2023.
- Developments and potential exposure related to the FTC investigation, securities litigation, and other regulatory or privacy matters.