Teladoc Health, Inc. — 2020 Form 10-K
Business context and reporting period. This annual report covers the year ended December 31, 2020; “2020 Q4” refers to the three months ended December 31, 2020. Teladoc provides virtual healthcare services, with most revenue from recurring access subscriptions. The year included the July acquisition of InTouch and the October merger with Livongo; Livongo’s results were consolidated only from October 30. COVID-19 accelerated virtual-care adoption and utilization. At year-end, the company reported 51.8 million U.S. paid Members and approximately 10.6 million telehealth visits for 2020.
Financial and operating metrics
| Metric | 2020 | 2019 | Change / context |
|---|---|---|---|
| Revenue | $1,094.0 million | $553.3 million | Up 98%; up 75% excluding InTouch and Livongo acquisitions |
| Gross profit and margin | $703.1 million; 64.2% | $368.8 million; 66.7% | Calculated as revenue less cost of revenue, excluding separately reported depreciation and amortization |
| Operating loss | $(506.4) million | $(80.4) million | Higher acquisition-related and operating expenses |
| Net loss | $(485.1) million | $(98.9) million | Basic and diluted loss per share: $(5.36), versus $(1.38) |
| Adjusted EBITDA | $126.8 million | $31.8 million | Non-GAAP measure; excludes, among other items, stock compensation and acquisition costs |
| Cash from operating activities | $(53.5) million | $29.9 million | Decrease attributed largely to acquisition/integration costs and strategic investment |
| Cash, equivalents and short-term investments | $786.6 million | $517.1 million | 2020 cash and equivalents include $62.6 million of restricted cash |
| Working capital | $727.0 million | $497.8 million | Year-end balance-sheet measure |
| Convertible-note principal outstanding | Approximately $1,873.6 million | — | Includes the $550 million Livongo notes guaranteed by Teladoc |
Fourth-quarter comparison
| Metric | Q4 2020 | Q4 2019 |
|---|---|---|
| Revenue | $383.3 million | $156.5 million |
| Operating loss | $(458.5) million | $(15.6) million |
| Net loss | $(394.0) million | $(19.0) million |
| Net loss per share | $(3.07) | $(0.26) |
Q4 expenses included $57.6 million of acquisition and integration costs. Quarterly results also reflect the inclusion of Livongo after October 30 and substantial merger-related stock compensation; reported stock-based compensation for the full year was $475.5 million.
Material changes versus the prior year
- Revenue nearly doubled, driven by faster adoption of virtual care, Member growth, increased visits, and the acquisitions. Paid U.S. Membership grew 41% to 51.8 million; visits increased 156% to approximately 10.6 million.
- Access fees remained the primary revenue source but fell to 79% of revenue from 84% in 2019; visit fees were 19% and other revenue 2%.
- Net loss widened to $485.1 million from $98.9 million. Total expenses rose 153% to $1.60 billion, including $88.2 million of acquisition/integration costs and $475.5 million of stock-based compensation.
- InTouch and Livongo were acquired for reported total consideration of approximately $1.07 billion and $13.94 billion, respectively. Goodwill increased to $14.58 billion from $746.1 million; no goodwill impairment was recorded in 2020.
- Operating cash flow shifted from positive $29.9 million to negative $53.5 million, while financing activities provided $859.1 million, including net proceeds from the $1 billion 2027 convertible notes.
Outlook, management commentary, risks and unusual items
- Management said existing cash and short-term investments were expected to meet working-capital and capital-expenditure needs for at least 12 months. It anticipated higher positive Adjusted EBITDA in 2021; the filing does not provide a specific revenue, earnings, or cash-flow forecast.
- Management viewed COVID-19 as an accelerant for virtual care but said continued demand was uncertain. Economic pressure could affect Client renewals, Member eligibility, collections, sales cycles, and costs.
- Strategic priorities include integrating Livongo and InTouch, cross-selling services, expanding clinical offerings and international reach, and investing in technology, sales, and Member engagement. Management cautioned that expected synergies may not be achieved and integration may be costly or disruptive.
- Key risks include changing telehealth and medical-practice regulation, provider licensing and corporate-practice-of-medicine restrictions, privacy and cybersecurity, competition, Client retention, supplier reliance for Livongo devices, and the company’s history of losses.
- Debt includes $1.0 billion of 1.25% convertible notes due 2027, $276.8 million of 1.375% notes due 2025, $46.8 million of 3% notes due 2022, and $550 million of Livongo notes due 2025. Teladoc announced in February 2021 that it had called the remaining 2022 notes for redemption. The filing notes conversion could require cash payments or dilute shareholders.
- Legal matters include a securities class action whose amended complaint followed a dismissal, a pending derivative action, and a TCPA class action. Merger-related class actions were voluntarily dismissed. Management did not expect litigation matters to have a material adverse impact, while noting that estimating litigation outcomes is difficult.
- The auditor issued unqualified opinions on the financial statements and internal control over financial reporting. The control assessment excluded InTouch and Livongo, which represented 12% of year-end assets excluding goodwill and 12% of 2020 revenue.
Important facts for investors to verify
- How much of the 75% acquisition-excluded revenue growth reflects durable demand versus pandemic-era utilization, and how growth and retention evolve after 2020.
- Whether Livongo and InTouch integration delivers the expected cross-selling, cost synergies, and financial returns; monitor goodwill and intangible-asset impairment risk.
- The sustainability and cash-conversion quality of Adjusted EBITDA, considering GAAP losses, negative operating cash flow, and unusually high stock-based compensation.
- Debt service, conversion and redemption terms, potential dilution, and liquidity under less favorable operating conditions.
- Developments in the cited litigation and healthcare regulation, and the post-acquisition internal-control assessment for Livongo and InTouch.