ismagilov/iStock via Getty Images Introduction
Teladoc (NYSE: TDOC ) is leading the emerging whole-person virtual care market. While the COVID-19 pandemic certainly boosted Teladoc’s business in 2020 and 2021, the company is still delivering robust financial performance in the post-pandemic era. As we discussed in the first part of this note, Teladoc’s stock has never been cheaper. Today, we will analyze Teladoc’s Q4 report to assess its performance and future prospects. Analyzing Teladoc Q4 2021 Earnings Report
In Q4 2021, Teladoc delivered strong performance with revenues growing to $554M (up 45% y/y) and the company reporting solid improvement in gross (67.5%) and adj. EBITDA (13.9%) margins. While Teladoc’s stock is experiencing a violent valuation reset, the business is growing rapidly at scale with an ever-improving margin profile. Teladoc Q4 Earnings Presentation Teladoc Q4 Earnings Presentation While paid-member growth continues to slow down in the post-pandemic era, Teladoc’s increasing product adoption is driving solid sales growth at the company. As you can see in the graphic below, Teladoc now has ~53.6M paid-members in the US (~6.5% higher than Q4 2020). However, the monetization of these users is much better as product adoption improves. Teladoc Q4 Earnings Presentation In my eyes, Livongo is a very high-quality asset, but Teladoc’s chronic care enrollment figures of 729K (+4K in Q4 2021) represent an integration and sales issue. The momentum in Livongo’s business seems to have disappeared as Teladoc aims to integrate it into the ‘MyStrength’ platform and the newly launched – ” Chronic Care Complete ” – solution. As investors, we must continue to monitor this data point in upcoming quarters, and for now, I am giving Teladoc’s management the benefit of the doubt, but I am hoping to see a rebound in chronic care enrollment growth over the next two to four quarters.
With the delta variant wreaking havoc during Q4, Teladoc saw stronger-than-expected Visits. As a result of increased usage and greater product adoption, Teladoc’s member utilization (22.7%) continued to improve in Q4. Teladoc Q4 Earnings Presentation Over the last few months, the market has turned bearish on unprofitable growth companies due to concerns around multi-decade high inflation and imminent quantitative tightening. While Teladoc is still not profitable, it is very much free cash flow positive, and with its margins headed higher, there’s a clear path to profitability for the telehealth company. As of the end of Q4 2021, Teladoc had ~$900M in cash and short-term investments, and the company is adding $50M+ per quarter in cash from operations. In short, Teladoc’s balance sheet is getting stronger with every passing quarter. Teladoc Q4 Earnings Presentation For 2022, Teladoc’s management reiterated sales guidance of $2.55B to $2.65B, which translates to 25% to 30% y/y growth. This guidance is predicated on 1-5% growth in US paid-members, 25-30% growth in revenue per US paid-member, and a 20-30% rise in total visits. The COVID-19 pandemic may or may not be around in 2022, but telehealth is certain to become the front door to healthcare services across the globe. Teladoc Q4 Earnings Presentation The depth and breadth of Teladoc’s platform and its newfound focus on data and AI are enabling the company to create category-defining whole-person care solutions – Primary360, MyStrength, Chronic Care Complete, etc. We know that Teladoc’s solutions are highly-differentiated and underpinned by proprietary data and analytics. And so, I am not too concerned about new entrants coming into Teladoc’s primary markets. Teladoc Investor Presentation January 2022 Teladoc Investor Presentation January 2022 While bearish articles continue to lambast Teladoc’s future growth potential and spread FUD around Amazon ( AMZN ) entering the telehealth space as the death knell for Teladoc, the telehealth leader has multiple levers for growth in its armory. With 298M+ total US insured lives, only 92M total lives having access to a Teladoc product means there’s a lot of room to win new clients. Furthermore, Teladoc’s existing clients could be a source of 63M+ additional lives for the company. Teladoc Investor Presentation January 2022 Teladoc Investor Presentation January 2022 In addition to new member growth, Teladoc has a massive opportunity to grow revenues by increasing product penetration/enrollment on its platform. So far, the company has proven its ability to drive multi-product penetration, and with telehealth adoption on the rise, there’s no reason to believe that Teladoc cannot improve product penetration on its platform. Teladoc Investor Presentation January 2022 For the next three years, Teladoc’s management is guiding for 25-30% CAGR growth with a 2024 revenue target of $4B+. Teladoc’s existing solutions represent […]
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