Teladoc Health, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This annual filing reports full-year results; it does not provide a complete standalone Q4 income statement. Amounts below are in U.S. dollars.
Business context
Teladoc provides virtual care, mental health, chronic condition management, and telehealth technology services through business-to-business and direct-to-consumer channels. Its 2021 results include the full-year effects of the 2020 Livongo merger and InTouch acquisition. The company completed approximately 15.4 million telehealth visits and enabled approximately 4.1 million client-provider sessions in 2021. At year-end, it reported 53.6 million U.S. paid members, 24.2 million visit-fee-only individuals, and 0.7 million chronic-care enrollees.
Financial and operating metrics
| Metric | FY2021 | FY2020 | Change / context |
|---|---|---|---|
| Revenue | $2,032.7 million | $1,094.0 million | Up 86%; up 40% excluding acquisition impact, according to management |
| Gross profit and margin | $1,382.4 million; 68.0% | $703.1 million; 64.3% | Calculated as revenue less cost of revenue, excluding depreciation and amortization |
| Operating loss | $(265.6) million | $(506.4) million | Improved; operating margin was approximately (13.1)% versus (46.3)% |
| Net loss | $(428.8) million | $(485.1) million | Loss per share was $(2.73) versus $(5.36) |
| Adjusted EBITDA | $267.8 million | $126.8 million | Up 111%; non-GAAP measure |
| Cash from operations | $194.0 million | $(53.5) million | Turned positive |
| Cash used in investing | $(73.0) million | $(591.0) million | FY2020 included substantial acquisition spending |
| Cash from financing | $40.9 million | $859.1 million | FY2020 included issuance of $1.0 billion of 2027 notes |
Access fees generated 85% of FY2021 revenue, versus 78% in FY2020; visit fees contributed 13% and other revenue 2%. U.S. paid membership increased by 1.8 million. Average U.S. revenue per member rose to $2.32 from $1.12, while utilization increased to approximately 20.1% from 14.5%.
At December 31, 2021, cash and cash equivalents were $893.5 million and short-term investments were $2.5 million. Current assets were $1,225.4 million and current liabilities were $331.0 million. The balance sheet reported $1,225.7 million of convertible notes, net; outstanding principal included $1.0 billion of 1.25% notes due 2027, $550 million of Livongo notes due 2025 (guaranteed by Teladoc), and approximately $0.7 million of 2025 notes. The company reported compliance with debt covenants. Total stockholders’ equity was $16,045.8 million, including an accumulated deficit of $1,421.5 million.
Material changes versus FY2020
- Revenue growth reflected higher access fees, acquisitions, and continued virtual-care adoption. Management attributed much of the organic increase to mental health specialties.
- Cost of revenue increased 66%, slower than revenue growth. Advertising and marketing rose 84% to $416.7 million, principally on direct-to-consumer mental-health advertising and member engagement. Technology and development expense rose 89% to $311.9 million.
- Depreciation and amortization rose 194% to $204.2 million, primarily reflecting acquired intangible assets. Acquisition, integration, and transformation costs fell to $26.6 million from $88.2 million.
- General and administrative expense declined 14% to $438.0 million, primarily because FY2020 included a large acceleration of stock-based compensation related to the Livongo acquisition. Total stock-based compensation remained substantial at $302.6 million in FY2021.
- Interest expense increased to $80.4 million from $60.0 million. Loss on extinguishment of debt rose to $43.7 million, mainly from exchanges, redemptions, and conversions of notes.
- Income tax expense was $44.1 million, versus a $90.9 million benefit in FY2020, primarily reflecting valuation-allowance changes and acquisition-related tax items.
Outlook, commentary, risks, and unusual items
- Management said existing cash and short-term investments should cover working capital, capital expenditures, and contractual obligations for at least 12 months, and anticipated increasing positive operating cash flow in 2022. The filing does not provide a clear numerical revenue or earnings forecast.
- Management believes COVID-19 accelerated virtual-care adoption, but cautioned that the persistence of increased demand is uncertain. It also cited potential client spending constraints, inflation, and supply-chain disruption.
- Goodwill was $14.5 billion, a substantial portion of total assets. No impairment was recorded in 2021, but a December 2021 test found reporting-unit fair value exceeded carrying value by approximately 15%, down from 36% in October. The filing noted a further post-year-end market-capitalization decline below book value; sustained weakness could require further testing and potentially material impairment.
- Key risks include continued losses, intense competition and pricing pressure, client retention and concentration, integration of acquisitions, provider recruitment, and execution of growth initiatives. The top ten clients accounted for 21.8% of revenue in 2021, compared with 16.2% in 2020.
- Healthcare regulation, professional-entity arrangements, privacy and cybersecurity, medical-device requirements, and international compliance create legal and operating risks. Teladoc identified reliance on a single contract manufacturer for its blood glucose meter and single suppliers for certain other device components.
- The company reported ordinary-course legal proceedings. A securities class action relating to the Livongo merger was refiled in New York in January 2022; Teladoc said it considers the claims without merit and intends to defend them. Management did not expect litigation matters to have a material adverse impact, but outcomes remain uncertain.
- Teladoc’s financial statements received an unqualified audit opinion, and management and the auditor reported effective internal control over financial reporting as of year-end.
Important facts for investors to verify
- How much of revenue growth and member economics is sustainable without pandemic-related demand or acquisition contributions; assess client renewal, utilization, and cross-selling trends.
- Whether positive operating cash flow continues, and how cash generation compares with GAAP losses, stock-based compensation, and acquisition-related spending.
- Gross debt obligations, conversion and settlement terms, potential dilution, and the Livongo notes guarantee; reconcile principal amounts with the balance-sheet carrying value.
- Goodwill impairment headroom and sensitivity to share price, discount rates, market multiples, revenue growth, and margins.
- Progress integrating Livongo and InTouch, including whether expected synergies and operating improvements are realized.
- Developments in the Livongo-related securities case, other legal proceedings, and changing telehealth, privacy, and healthcare regulations.