TELADOC HEALTH, INC.
10-Ks and 10-Qs
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________________________________________________________________
Form
10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||||
For the quarterly period ended
March 31, 2025
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||||
For the transition period from
to
Commission File Number:
001-37477
______________________________________
(Exact name of registrant as specified in its charter)
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| (State of incorporation) | (I.R.S. Employer Identification No.) | |||||||
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| (Address of principal executive office) | (Zip code) | |||||||
(
203
)
635-2002
(Registrant’s telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
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______________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
x
No
o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes
x
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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x | Accelerated filer | o | Non-accelerated filer | o | Smaller reporting company |
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| Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
o
No
x
As of April 24, 2025, the Registrant had
175,434,773
shares
of Common Stock outstanding.
TELADOC HEALTH, INC.
QUARTERLY REPORT ON FORM 10-Q
For the period ended March 31, 2025
TABLE OF CONTENTS
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Page
Number |
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1
PART I
FINANCIAL INFORMATION
ITEM 1.
Financial Statements
TELADOC HEALTH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data, unaudited)
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March 31,
2025 |
December 31,
2024 |
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| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ |
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$ |
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Accounts receivable, net of allowance for doubtful accounts of $
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| Inventories |
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| Prepaid expenses and other current assets |
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| Total current assets |
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| Property and equipment, net |
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| Goodwill |
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| Intangible assets, net |
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| Operating lease—right-of-use assets |
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| Other assets |
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| Total assets | $ |
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$ |
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| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ |
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$ |
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| Accrued expenses and other current liabilities |
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| Accrued compensation |
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| Deferred revenue—current |
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| Convertible senior notes, net—current |
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| Total current liabilities |
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| Other liabilities |
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| Operating lease liabilities, net of current portion |
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| Deferred revenue, net of current portion |
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| Deferred taxes, net |
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| Convertible senior notes, net—non-current |
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| Total liabilities |
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| Commitments and contingencies (Note 15) |
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| Stockholders’ equity: | |||||||||||
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Common stock, $
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| Additional paid-in capital |
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| Accumulated deficit |
(
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(
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| Accumulated other comprehensive loss |
(
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(
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| Total stockholders’ equity |
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| Total liabilities and stockholders’ equity | $ |
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$ |
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See accompanying notes to unaudited condensed consolidated financial statements.
2
TELADOC HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share data, unaudited)
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Three Months Ended
March 31, |
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| 2025 | 2024 | ||||||||||
| Revenue | $ |
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$ |
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| Costs and expenses: | |||||||||||
| Cost of revenue (exclusive of depreciation and amortization, which are shown separately below) |
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| Advertising and marketing |
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| Sales |
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| Technology and development |
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| General and administrative |
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| Goodwill impairment |
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| Acquisition, integration, and transformation costs |
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| Restructuring costs |
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| Amortization of intangible assets |
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| Depreciation of property and equipment |
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| Total costs and expenses |
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| Loss from operations |
(
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(
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| Interest income |
(
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(
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| Interest expense |
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| Other expense (income), net |
(
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| Loss before provision for income taxes |
(
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(
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| Provision for income taxes |
(
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| Net loss |
(
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(
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| Other comprehensive loss, net of tax: | |||||||||||
| Currency translation adjustment |
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(
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| Comprehensive loss | $ |
(
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$ |
(
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| Net loss per share, basic and diluted | $ |
(
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$ |
(
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| Weighted-average shares used to compute basic and diluted net loss per share |
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See accompanying notes to unaudited condensed consolidated financial statements.
3
TELADOC HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data, unaudited)
| Common Stock |
Additional
Paid-In Capital |
Accumulated
Deficit |
Accumulated
Other Comprehensive Gain (Loss) |
Total
Stockholders’ Equity |
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| Shares | Amount | ||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2024 |
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$ |
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$ |
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$ |
(
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$ |
(
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$ |
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| Exercise of stock options |
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— | — |
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| Issuance of common stock upon vesting of restricted stock units |
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(
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— | — |
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| Issuance of stock under employee stock purchase plan |
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— |
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— | — |
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| Stock-based compensation | — | — |
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— | — |
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| Other comprehensive income, net of tax | — | — | — | — |
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| Net loss | — | — | — |
(
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— |
(
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| Balance as of March 31, 2025 |
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$ |
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$ |
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$ |
(
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$ |
(
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$ |
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| Balances as of December 31, 2023 |
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$ |
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$ |
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$ |
(
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$ |
(
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$ |
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| Exercise of stock options |
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— | — |
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| Issuance of common stock upon vesting of restricted stock units |
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(
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— | — |
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| Stock-based compensation | — | — |
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— | — |
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| Other comprehensive loss, net of tax | — | — | — | — |
(
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(
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| Net loss | — | — | — |
(
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— |
(
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| Balances as of March 31, 2024 |
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$ |
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$ |
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$ |
(
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$ |
(
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$ |
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See accompanying notes to unaudited condensed consolidated financial statements.
4
TELADOC HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
|
Three Months Ended
March 31, |
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| 2025 | 2024 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ |
(
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$ |
(
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| Adjustments to reconcile net loss to net cash flows from operating activities: | |||||||||||
| Goodwill impairment |
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| Amortization of intangible assets |
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| Depreciation of property and equipment |
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| Amortization of right-of-use assets |
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| Provision for allowances for doubtful accounts |
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| Stock-based compensation |
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| Deferred income taxes |
(
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(
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| Other, net |
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| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable |
(
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| Prepaid expenses and other current assets |
(
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(
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| Inventory |
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(
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| Other assets |
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| Accounts payable |
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(
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| Accrued expenses and other current liabilities |
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| Accrued compensation |
(
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(
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| Deferred revenue |
(
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| Operating lease liabilities |
(
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(
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| Other liabilities |
(
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(
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| Net cash provided by operating activities |
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| Cash flows from investing activities: | |||||||||||
| Capital expenditures |
(
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(
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| Capitalized software development costs |
(
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(
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| Acquisition of business, net of cash acquired |
(
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| Payments for investments |
(
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| Net cash used in investing activities |
(
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(
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| Cash flows from financing activities: | |||||||||||
| Proceeds from the exercise of stock options |
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| Proceeds from employee stock purchase plan |
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| Other, net |
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| Net cash provided by financing activities |
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| Net decrease in cash and cash equivalents |
(
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(
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| Effect of foreign currency exchange rate changes |
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(
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| Cash and cash equivalents at beginning of the period |
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| Cash and cash equivalents at end of the period | $ |
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$ |
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| Cash paid (received) for income taxes, net | $ |
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$ |
(
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| Supplemental disclosure of non-cash investing activities | |||||||||||
| Accruals related to Property and equipment, net and Intangible assets, net | $ |
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$ |
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See accompanying notes to unaudited condensed consolidated financial statements.
5
TELADOC HEALTH, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1.
Organization and Description of Business
Teladoc Health, Inc., together with its subsidiaries, is referred to herein as “Teladoc Health,” or the “Company,” and is the global leader in virtual care, focused on forging a new healthcare experience with better convenience, outcomes, and value around the world. The Company’s mission is to empower all people everywhere to live their healthiest lives by transforming the healthcare experience
.
The Company was incorporated in the State of Texas in June 2002 and changed its state of incorporation to the State of Delaware in October 2008. Effective August 10, 2018, Teladoc, Inc. changed its corporate name to Teladoc Health, Inc. The Company’s principal executive office is located in Purchase, New York.
Note 2.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements for t
he three months ended March 31, 2025 and 2024, in the opinion of management, reflect all adjustments (consisting of normal recurring ac
cruals) necessary for a fair presentation of the Condensed Consolidated Results of Operations, financial position and cash flows of Teladoc Health for the periods presented. However, the financial results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year or for any other future period.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States (“U.S.”) have been omitted or condensed pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The information in this report should be read in conjunction with the Company’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2024 (the “2024 Form 10-K”), which includes a complete set of footnote disclosures, including the Company’s significant accounting policies.
These consolidated financial statements include the results of Teladoc Health, as well
as
three
professional associations, one of which is associated with the acquisition of Catapult Health, LLC, and
10
professional corporations (collectively, the “THMG Association”).
Teladoc Health Medical Group, P.A. (“THMG”), is party to a Services Agreement by and among it and the professional associations and professional corporations pursuant to which each professional association and professional corporation provides services to THMG. Each professional association and professional corporation is established pursuant to the requirements of its respective domestic jurisdiction governing the corporate practice of medicine.
Total revenue and net loss for the VIE were $
80.2
million and $
0.0
million and $
70.0
million and $
0.0 million
for the three months ended March 31, 2025 and 2024, respectively. The VIE’s total assets, all of which were current, were $
36.4
million and $
29.4
million at March 31, 2025 and December 31, 2024, respectively. The VIE’s total liabilities, all of which were current, were $
85.0
million and $
78.0
million at March 31, 2025 and December 31, 2024, respectively. The VIE’s total stockholders’ deficit was $
48.6
million and $
48.6
million at March 31, 2025 and December 31, 2024, respectively.
All intercompany transactions and balances have been eliminated.
6
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company bases its estimates on historical experience, current business and economic factors, and various other assumptions that the Company believes are necessary to form a basis for making judgments about the carrying values of assets and liabilities, the recorded amounts of revenue and expenses, and the disclosure of contingent assets and liabilities. The Company is subject to uncertainties such as the impact of future events, economic and political factors, and changes in the Company’s business environment; therefore, actual results could differ from these estimates. Accordingly, the accounting estimates used in the preparation of the Company’s condensed consolidated financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment evolves. The Company believes that estimates used in the preparation of these condensed consolidated financial statements are reasonable; however, actual results could differ materially from these estimates.
Changes in estimates are made when circumstances warrant. Such changes in estimates and refinements in estimation methodologies are reflected in the Condensed Consolidated Statements of Operations; if material, the effects of changes in estimates are disclosed in the Notes to Unaudited Condensed Consolidated Financial Statements.
Significant estimates and assumptions by management affect areas including the value and useful life of long-lived assets (including intangible assets), the capitalization and amortization of software development costs, allowances for sales, and the accounting for business combinations. Other significant areas include revenue recognition (including performance guarantees), the accounting for income taxes, contingencies (including earnouts), litigation and related legal accruals, the accounting for stock-based compensation awards, the probability assessment of satisfying vesting conditions for certain investments, and other items as described in Note 2. “Basis of Presentation and Principles of Consolidation" in the Summary of Significant Accounting Policies in the 2024 Form 10-K and as may be updated in this Quarterly Report in Note 2. “Basis of Presentation and Principles of Consolidation."
Fair Value Measurements
The carrying value of the Company’s cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximates fair value due to their short-term nature.
A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:
Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2—Include other inputs that are directly or indirectly observable in the marketplace.
Level 3—Unobservable inputs that are supported by little or no market activity.
The Company measures its cash equivalents at fair value on a recurring basis. The Company classifies its cash equivalents within Level 1 because they are valued using observable inputs that reflect quoted prices for identical assets in active markets and quoted prices directly in active markets.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
Recently Issued Accounting Standards
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvement to Income Tax Disclosures" to enhance the transparency and decision usefulness of income tax disclosures through expansion of disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign jurisdictions. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 on a prospective basis with early adoption permitted. The Company is currently evaluating the impact of this accounting standard update on its financial disclosures.
7
In November 2024, the FASB issued ASU No. 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 requires a public business entity (“PBE”) to disclose information in the notes to financial statements about purchases of inventory, employee compensation, depreciation, intangible asset amortization, and depletion for each income statement line item that contains those expenses. Entities would also have to disclose other specific expenses, gains, or losses that are already required to be disclosed under GAAP in this same disclosure, a qualitative description of the amounts remaining that are not separately disaggregated quantitatively, and the total amount of selling expenses, as well as the PBE’s definition of selling expenses. In January 2025, the FASB Issued ASU No. 2025-01, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)," which clarified that ASU 2024-03 is effective for public business entities for annual reporting periods beginning after December 15, 2026 and interim reporting periods within annual reporting periods beginning after December 15, 2027. Implementation of ASU 2024-03 may be applied prospectively or retrospectively. The application of this new guidance is not expected to have a material impact on the Company’s financial statements, as the guidance pertains only to disclosures.
Note 3.
Revenue, Deferred Revenue, and Deferred Device and Contract Costs
The Company generates access fees from customers, which primarily consist of employers, health plans, hospitals and health systems, insurance and financial services companies (collectively “Clients”), as well as individual paying users, accessing the THMG Association professional provider network, hosted virtual healthcare platform, and chronic care management platforms. Visit fee revenue is generated for general medical, expert medical service, and other specialty visits and is reported as a component of other revenue. Revenue associated with virtual healthcare device equipment sales included with the Company’s hosted virtual healthcare platform is also reported in other revenue.
The following table presents the Company’s revenues disaggregated by revenue source, geography, and segment (in thousands):
|
Three Months Ended
March 31, |
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| 2025 | 2024 | ||||||||||
| Revenue by Type | |||||||||||
| Access Fees | $ |
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$ |
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| Other |
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| Total Revenue | $ |
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$ |
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| Revenue by Geography | |||||||||||
| U.S. Revenue | $ |
|
$ |
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| International Revenue |
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| Total Revenue | $ |
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$ |
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Deferred Revenue
Deferred revenue represents billed, but unrecognized revenue, and is comprised of fees received in advance of the delivery or completion of the services and amounts received in instances when revenue recognition criteria have not been met. The Company records deferred revenue when cash payments are received in advance of the Company’s performance obligation to provide services. Deferred revenue is derived from 1) upfront payments for a device, which is amortized ratably over the expected member enrollment period; 2) upfront payments for certain services where payment is required for future periods before the service is delivered to the member, which is recognized when the services are provided; and 3) upfront payments from third-party financing companies with whom the Company works to provide certain Clients with a rental option, which is recognized over the rental period. Deferred revenue that will be recognized during the next twelve-month period is recorded as current deferred revenue and the remaining portion is recorded as non-current deferred revenue.
8
The following table summarizes deferred revenue activities for the periods presented (in thousands):
|
Three Months Ended
March 31, |
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| 2025 | 2024 | ||||||||||
| Beginning balance | $ |
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$ |
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| Balance assumed as part of business combination |
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| Cash collected |
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| Revenue recognized |
(
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(
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| Ending balance | $ |
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$ |
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The Company expects to recognize $
67.6
million of revenue throughout the remainder of 2025, $
12.7
million of revenue in the year ending December 31, 2026, and the remaining balance thereafter related to future performance obligations that are unsatisfied or partially unsatisfied as of March 31, 2025.
Deferred Device and Contract Costs
Deferred device and contract costs are classified as a component of prepaid expenses and other current assets or other assets, depending on term, and consisted of the following (in thousands):
| As of | |||||||||||
| March 31, | December 31, | ||||||||||
| 2025 | 2024 | ||||||||||
| Deferred device and contract costs, current | $ |
|
$ |
|
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| Deferred device and contract costs, non-current |
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| Total deferred device and contract costs | $ |
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$ |
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Deferred device and contract costs were as follows (in thousands):
| Deferred Device and Contract Costs | |||||
| Beginning balance as of December 31, 2024 | $ |
|
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| Additions |
|
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| Cost of revenue recognized |
(
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| Ending balance as of March 31, 2025 | $ |
|
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Note 4.
Inventories
Inventories consisted of the following (in thousands):
| As of | |||||||||||
| March 31, | December 31, | ||||||||||
| 2025 | 2024 | ||||||||||
| Raw materials and purchased parts | $ |
|
$ |
|
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| Work in process |
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| Finished goods |
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| Total inventories | $ |
|
$ |
|
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9
Note 5.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
| As of | |||||||||||
| March 31, | December 31, | ||||||||||
| 2025 | 2024 | ||||||||||
| Prepaid expenses | $ |
|
$ |
|
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| Deferred device and contract costs, current |
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| Other receivables |
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| Other current assets |
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| Total prepaid expenses and other current assets | $ |
|
$ |
|
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Note 6.
Acquisitions
Business Combination
The acquisition method of accounting is based on ASC Subtopic 805-10, “Business Combinations,” and uses the fair value concepts defined in ASC Subtopic 820-10, “Fair Value Measurements and Disclosures.” The total purchase price is allocated to the net tangible and intangible assets based upon their fair values as of the acquisition date. The excess of the purchase price over the fair values of the net tangible assets and intangible assets is recorded as goodwill.
On February 28, 2025, Teladoc Health acquired full ownership of Catapult Health, LLC (“Catapult Health”) by paying $
64.6
million in cash, which is net of $
0.1
million of cash acquired. Additionally, the Company recognized a $
1.6
million preliminary working capital adjustment and accrued $
3.8
million for contingent consideration. The contingent consideration reflects the acquisition date fair value of potential future payments that are contingent upon the achievement of certain specified targets. Catapult Health will be included as a component of the Company’s Integrated Care reporting segment.
The preliminary purchase price allocations for the Catapult Health acquisition includes $
12.7
million for identifiable intangible assets and $
59.1
million for goodwill. The Company's preliminary estimate is that approximately
73.0
% of the goodwill is tax deductible.
Concurrent with the closing of the acquisition of Catapult Health, the Company recorded a full impairment of the $
59.1
million of acquired goodwill because the Integrated Care reporting unit’s fair value at the time of acquisition was less than its carrying value. See Note 7. Goodwill for further information.
Other Investments
Investments in equity securities may be accounted for using (i) the fair value option if elected, (ii) fair value through earnings if fair value is readily determinable or (iii) for equity investments without readily determinable fair values, the measurement alternative to measure at cost adjusted for any impairment and observable price changes, as applicable. The election to use the measurement alternative is made for each eligible investment.
In the three months ended March 31, 2025, Teladoc Health paid $
27.0
million to acquire shares of common and preferred stock in a private company. In addition, the Company received warrants subject to certain vesting conditions that would allow for the purchase of additional preferred stock of the private company. This investment is included in "Other assets" in the Company's Condensed Consolidated Balance Sheet as of March 31, 2025.
10
Note 7.
Goodwill
Goodwill consisted of the following (in thousands):
|
Integrated
Care |
BetterHelp | Total | |||||||||||||||
| Balance as of December 31, 2024 | $ |
|
$ |
|
$ |
|
|||||||||||
| Addition associated with business combination |
|
|
|
||||||||||||||
| Impairment |
(
|
|
(
|
||||||||||||||
| Balance as of March 31, 2025 | $ |
|
$ |
|
$ |
|
|||||||||||
Concurrent with the closing of its acquisition of Catapult Health, the Company performed a goodwill impairment test on its Integrated Care reporting unit and determined that the carrying value of the reporting unit continued to exceed its fair value. As a result, the Company recognized an immediate impairment of $
59.1
million of goodwill associated with the Catapult Health acquisition in the three months ended March 31, 2025. As the carrying value of the Integrated Care reporting unit continues to exceed its fair value, any future business combinations that would be part of the Integrated Care reporting unit could result in further goodwill impairment charges.
Goodwill is net of accumulated impairment charges of $
14.2
billion, of which $
12.3
billion was recognized prior to the Company reorganizing its reporting structure to include
two
reportable segments, $
1.1
billion was associated with goodwill assigned to the Integrated Care segment, and $
0.8
billion was associated with goodwill assigned to the BetterHelp segment. If the Company experiences sustained significant decreases in its share price, this may result in the need to perform impairment assessments of goodwill and long-lived assets including definite-lived intangibles that could result in future impairments.
Note 8.
Intangible Assets, Net and Certain Cloud Computing Costs
Intangible assets, net consisted of the following (dollars in thousands):
|
Useful
Life |
Gross Value |
Accumulated
Amortization |
Net Carrying
Value |
Weighted
Average Remaining Useful Life (Years) |
|||||||||||||||||||||||||
| March 31, 2025 | |||||||||||||||||||||||||||||
| Client relationships |
|
$ |
|
$ |
(
|
$ |
|
|
|||||||||||||||||||||
| Trademarks |
|
|
(
|
|
|
||||||||||||||||||||||||
| Software |
|
|
(
|
|
|
||||||||||||||||||||||||
| Acquired technology |
|
|
(
|
|
|
||||||||||||||||||||||||
| Intangible assets, net | $ |
|
$ |
(
|
$ |
|
|
||||||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||||||||
| Client relationships |
|
$ |
|
$ |
(
|
$ |
|
|
|||||||||||||||||||||
| Trademarks |
|
|
(
|
|
|
||||||||||||||||||||||||
| Software |
|
|
(
|
|
|
||||||||||||||||||||||||
| Acquired technology |
|
|
(
|
|
|
||||||||||||||||||||||||
| Intangible assets, net | $ |
|
$ |
(
|
$ |
|
|
||||||||||||||||||||||
11
The following table presents the Company's amortization of intangible assets expense by component (in thousands):
|
Three Months Ended
March 31, |
|||||||||||
| 2025 | 2024 | ||||||||||
| Amortization of acquired intangibles | $ |
|
$ |
|
|||||||
| Amortization of capitalized software development costs |
|
|
|||||||||
| Amortization of intangible assets expense | $ |
|
$ |
|
|||||||
Periodic amortization of intangible assets that will be charged to expense over the remaining life of the intangible assets as of
March 31, 2025
was as follows (in thousands):
| Years Ending December 31, | |||||
| 2025 | $ |
|
|||
| 2026 |
|
||||
| 2027 |
|
||||
| 2028 |
|
||||
| 2029 and thereafter |
|
||||
| $ |
|
||||
Net cloud computing costs, which are primarily related to the implementation of the Company's customer relationship management ("CRM") and enterprise resource planning ("ERP") systems, are recorded in "Other assets" in the Company's Condensed Consolidated Balance Sheets. As of March 31, 2025 and December 31, 2024, the cloud computing costs were $
44.6
million and $
44.8
million, respectively. The associated expense for cloud computing costs, which is recorded in general and administration expense, was $
1.9
million and $
1.2
million for the three months ended March 31, 2025 and 2024, respectively. The capitalized cloud computing implementation costs are amortized over the shorter of the term of the related cloud computing arrangement or the period of benefit from the right to access the hosted software. The amortization period will be periodically reassessed to determine if it continues to be reasonable.
Note 9.
Accrued Expenses and Other Current Liabilities
consisted of the following (in thousands):
| As of | |||||||||||
| March 31, | December 31, | ||||||||||
| 2025 | 2024 | ||||||||||
| Marketing and advertising | $ |
|
$ |
|
|||||||
| Franchise, sales and other taxes |
|
|
|||||||||
| Client performance guarantees and accrued rebates |
|
|
|||||||||
| Consulting fees/provider fees |
|
|
|||||||||
| Professional fees |
|
|
|||||||||
| Operating lease liabilities—current |
|
|
|||||||||
| Insurance |
|
|
|||||||||
| Information technology |
|
|
|||||||||
| Interest payable |
|
|
|||||||||
| Lease abandonment obligation—current |
|
|
|||||||||
| Staff augmentation |
|
|
|||||||||
| Other |
|
|
|||||||||
| Total | $ |
|
$ |
|
|||||||
12
Note 10.
Convertible Senior Notes
Outstanding Convertible Senior Notes
As of March 31, 2025, the Company had
three
series of convertible senior notes outstanding. The issuances of such notes originally consisted of (i) $
1.0
billion aggregate principal amount of
1.25
% convertible senior notes due 2027 (the “2027 Notes”), issued on May 19, 2020 for net proceeds to the Company of $
975.9
million after deducting offering costs of approximately $
24.1
million, (ii) $
287.5
million aggregate principal amount of
1.375
% convertible senior notes due 2025 (the “2025 Notes”), issued on May 8, 2018 for net proceeds to the Company of $
279.1
million after deducting offering costs of approximately $
8.4
million, and (iii) $
550.0
million aggregate principal amount of
0.875
% convertible senior notes due 2025 that were issued by Livongo Health, Inc. (“Livongo”) on June 4, 2020 for which the Company agreed to assume all of Livongo’s rights and obligations (the “Livongo Notes;” and together with the 2027 Notes and the 2025 Notes, the “Notes”).
The following table presents certain terms of the Notes that were outstanding as of March 31, 2025:
| 2027 Notes | 2025 Notes | Livongo Notes | |||||||||||||||
| Principal Amount Outstanding as of March 31, 2025 (in thousands) | $ |
|
$ |
|
$ |
|
|||||||||||
| Interest Rate Per Year |
|
% |
|
% |
|
% | |||||||||||
| Fair Value as of March 31, 2025 (in thousands) (1) | $ |
|
$ |
|
$ |
|
|||||||||||
| Fair Value as of December 31, 2024 (in thousands) (1) | $ |
|
$ |
|
$ |
|
|||||||||||
| Maturity Date | June 1, 2027 | May 15, 2025 | June 1, 2025 | ||||||||||||||
| Optional Redemption Date | June 5, 2024 | May 22, 2022 | June 5, 2023 | ||||||||||||||
| Conversion Date | December 1, 2026 | November 15, 2024 | March 1, 2025 | ||||||||||||||
|
Conversion Rate Per $
|
4.1258 | 18.6621 | 13.94 | ||||||||||||||
| Remaining Contractual Life as of March 31, 2025 |
|
|
|
||||||||||||||
(1)
The Company estimates the fair value of its Notes utilizing market quotations for debt that have quoted prices in active markets. Since the Notes do not trade on a daily basis in an active market, the fair value estimates are based on market observable inputs based on borrowing rates currently available for debt with similar terms and average maturities. The Notes would be classified as Level 2 within the fair value hierarchy, as defined in Note 2. “Basis of Presentation and Principles of Consolidation.”
All of the Notes are unsecured obligations of the Company and rank senior in right of payment to the Company’s indebtedness that is expressly subordinated in right of payment to such Notes; equal in right of payment to the Company’s liabilities that are not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities incurred by the Company’s subsidiaries.
Holders may convert all or any portion of their Notes in integral multiples of $
1,000
principal amount, at their option, at any time prior to the close of business on the business day immediately preceding the applicable conversion date only under the following circumstances:
•
during any quarter (and only during such quarter), if the last reported sale price of the shares of the Company’s common stock for at least
20
trading days (whether or not consecutive) during a period of
30
consecutive trading days ending on the last trading day of the immediately preceding quarter is greater than or equal to
130
% of the conversion price for the applicable Notes on each applicable trading day;
•
during the
five
business day period after any
10
consecutive trading day period (or
five
consecutive trading day period in the case of the Livongo Notes) in which the trading price was less than
98
% of the product of the last reported sale price of Company’s common stock and the conversion rate for the applicable Notes on each such trading day;
•
upon the occurrence of specified corporate events described under the applicable indenture; or
13
•
if the Company calls the applicable Notes for redemption, at any time until the close of business on the second business day immediately preceding the redemption date.
On or after the applicable conversion date, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of such Notes, regardless of the foregoing circumstances.
The 2027 Notes and the 2025 Notes are convertible into shares of the Company’s common stock at the applicable conversion rate shown in the table above. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination thereof, at the Company’s election. If the Company elects to satisfy the conversion obligation solely in cash or through payment and delivery, as the case may be, of a combination of cash and shares of the Company’s common stock, the amount of cash and shares of the Company’s common stock due upon conversion will be based on a daily conversion value calculated on a proportionate basis for each trading day in a
25
consecutive trading day observation period.
The Livongo Notes are convertible at the applicable conversion rate shown in the table above into “units of reference property,” each of which is comprised of
0.592
of a share of the Company’s common stock and $
4.24
in cash, without interest. Upon conversion, the Company will pay or deliver, as the case may be, cash, units of reference property, or a combination thereof, at the Company’s election. If the Company elects to satisfy the conversion obligation solely in cash or through payment and delivery, as the case may be, of a combination of cash and units of reference property, the amount of cash and units of reference property, if any, due upon conversion will be based on a daily conversion value calculated on a proportionate basis for each trading day in a
40
consecutive trading day observation period.
For each Note series, the Company may redeem for cash all or part of the Notes, at its option, on or after the applicable optional redemption date shown in the table above (and prior to the
41
st
scheduled trading day immediately preceding the maturity date in the case of the Livongo Notes) if the last reported sale price of its common stock exceeds
130
% of the conversion price then in effect for at least
20
trading days (whether or not consecutive) during any
30
consecutive trading days ending on, and including, the trading day immediately preceding the date on which the Company provides notice of the redemption. The redemption price will be the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any. In addition, calling any 2027 Note or 2025 Note for redemption on or after the applicable optional redemption date will constitute a make-whole fundamental change with respect to that Note, in which case the conversion rate applicable to the conversion of that Note, if it is converted in connection with the redemption, will be increased in certain circumstances as described in the applicable indenture. If the Company undergoes a fundamental change (as defined in the applicable indenture) at any time prior to the maturity date of the Livongo Notes, holders will have the right, at their option, to require the Company to repurchase for cash all or any portion of their Livongo Notes at a fundamental change repurchase price equal to
100
% of the principal amount of the Livongo Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
The Company accounts for each Note series at amortized cost within the liability section of its Condensed Consolidated Balance Sheets. The Company has reserved an aggregate of
8.7
million shares of common stock for the Notes.
14
The net carrying values of the Notes consisted of the following (in thousands):
| As of | |||||||||||
| March 31, | December 31, | ||||||||||
| 2025 | 2024 | ||||||||||
| 2025 Notes | |||||||||||
| Principal | $ |
|
$ |
|
|||||||
| Less: Debt discount (1) |
(
|
(
|
|||||||||
| Net carrying amount |
|
|
|||||||||
| Livongo Notes | |||||||||||
| Principal |
|
|
|||||||||
| Less: Debt discount (1) |
|
|
|||||||||
| Net carrying amount |
|
|
|||||||||
| 2027 Notes | |||||||||||
| Principal |
|
|
|||||||||
| Less: Debt discount (1) |
(
|
(
|
|||||||||
| Net carrying amount |
|
|
|||||||||
| Total net carrying amount | $ |
|
$ |
|
|||||||
| Convertible senior notes, net—current | $ |
|
$ |
|
|||||||
| Convertible senior notes, net—non-current |
|
|
|||||||||
| Total net carrying amount | $ |
|
$ |
|
|||||||
(1)
Included in the accompanying Condensed Consolidated Balance Sheets within Convertible senior notes, net—current and Convertible senior notes, net—non-current and amortized to interest expense over the expected life of the Notes using the effective interest rate method.
15
The following table sets forth total interest expense recognized related to the Notes (in thousands):
|
Three Months Ended
March 31, |
|||||||||||
| 2025 Notes | 2025 | 2024 | |||||||||
| Contractual interest expense | $ |
|
$ |
|
|||||||
| Amortization of debt discount |
|
|
|||||||||
| Total | $ |
|
$ |
|
|||||||
| Effective interest rate |
|
% |
|
% | |||||||
|
Three Months Ended
March 31, |
|||||||||||
| Livongo Notes | 2025 | 2024 | |||||||||
| Contractual interest expense | $ |
|
$ |
|
|||||||
| Amortization of debt discount |
|
|
|||||||||
| Total | $ |
|
$ |
|
|||||||
| Effective interest rate |
|
% |
|
% | |||||||
|
Three Months Ended
March 31, |
|||||||||||
| 2027 Notes | 2025 | 2024 | |||||||||
| Contractual interest expense | $ |
|
$ |
|
|||||||
| Amortization of debt discount |
|
|
|||||||||
| Total | $ |
|
$ |
|
|||||||
| Effective interest rate |
|
% |
|
% | |||||||
Note 11.
Leases
Operating Leases
The Company has operating leases for facilities, hosting co-location facilities, and certain equipment under non-cancelable leases in the U.S. and various international locations. The leases have remaining lease terms of less than
to
eight years
, with options to extend the lease term from
to
five years
. At the inception of an arrangement, the Company determines whether the arrangement is, or contains, a lease based on the terms covering the right to use property, plant or equipment for a stated period of time. For new and amended leases beginning in 2020 and after, the Company separately allocates the lease (e.g., fixed lease payments for right-to-use land, building, etc.) and non-lease components (e.g., common area maintenance) for its leases.
16
The Company leases office space under non-cancelable operating leases in the U.S. and various international locations.
The future minimum lease payments under non-cancelable operating leases were as follows (in thousands):
| As of | |||||
| March 31, | |||||
| Operating Leases: | 2025 | ||||
| 2025 | $ |
|
|||
| 2026 |
|
||||
| 2027 |
|
||||
| 2028 |
|
||||
| 2029 |
|
||||
| 2030 and thereafter |
|
||||
| Total future minimum payments |
|
||||
| Less: imputed interest |
(
|
||||
| Present value of lease liabilities | $ |
|
|||
| $ |
|
||||
| Operating lease liabilities, net of current portion | $ |
|
|||
The Company rents certain virtual healthcare platforms to selected qualified customers under arrangements that qualify as either sales-type lease or operating lease arrangements. Leases have terms that generally range from
to
five years
.
The Company recorded certain restructuring costs related to lease impairments and the related charges due to the abandonment and/or exit of excess leased office space. However, the lease liabilities related to these spaces remain an outstanding obligation of the Company as of March 31, 2025. See Note. 12, “Restructuring,” for further information.
Note 12.
Restructuring
The Company accounts for restructuring costs in accordance with Accounting Standards Codification ("ASC") Subtopic 420-10, "Exit or Disposal Cost Obligations" and ASC Section 360-10-35, "Property, Plant and Equipment-Subsequent Measurement." The costs are recorded to the "Restructuring costs" line item within the Company's Condensed Consolidated Statements of Operations and Other Comprehensive Loss as they are recognized.
The Company recorded $
4.3
million of restructuring costs during the three months ended March 31, 2025, of which $
3.6
million was related to employee transition, severance payments, employee benefits, and related costs and $
0.7
million was related to costs associated with office space reductions, including $
0.2
million of right-of-use asset impairment charges.
The Company recorded $
9.7
million of restructuring costs during the three months ended March 31, 2024, of which $
7.0
million was related to employee transition, severance payments, employee benefits, and related costs and $
2.7
million was for other restructuring related costs.
The portion of these expenses that are to be settled by cash disbursements was accounted for as a restructuring liability under the line item "Accrued expenses and other current liabilities" in the Company's Condensed Consolidated Balance Sheets.
17
The table below summarizes the accrual and charges incurred and cash payments made with respect to the Company's restructurings, with the severance related portion included in the line item "Accrued compensation" and the lease termination and other related portion included in the line item "Accrued expenses and other current liabilities" in the Company's Condensed Consolidated Balance Sheets as of March 31, 2025 (in thousands):
| Restructuring Plan | |||||||||||||||||||||||
| Severance | Lease Termination | Other (1) | Total | ||||||||||||||||||||
| Accrued Balance, December 31, 2024 | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Additions |
|
|
|
|
|||||||||||||||||||
| Cash payments |
(
|
(
|
(
|
(
|
|||||||||||||||||||
| Accrued Balance, March 31, 2025 | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
Note 13.
Stock-based Compensation
The Company regularly issues share-based compensation to its employees and directors who are not employees of the Company. The accounting guidance for share-based compensation requires measurement of compensation cost for share-based awards at fair value and recognition of compensation cost over the service period. For a full description of the Company’s stock-based compensation programs, refer to Note 13 of the Company’s financial statements included in the Company's 2024 Form 10-K.
In the three months ended March 31, 2025, the Company granted a portion of its employees awards in the form of restricted stock units (“RSUs”) and performance stock units (“PSUs”). The total number of units granted was approximately
8.0
million and the aggregate fair value of the awards was $
77.3
million. A portion of the awards granted consisted of RSUs vesting over a
year period, with one-third vesting on the first anniversary of the grant and with the remainder vesting quarterly thereafter. A smaller portion of the awards granted consisted of PSUs subject to the achievement of specific performance criteria that will time-vest over a three year period, whereas the expense will be recognized on an accelerated tranche-by-tranche basis.
In connection with the commencement of employment of the Company's new Chief Executive Officer ("CEO") on June 10, 2024, the Company granted a new-hire incentive equity award to the CEO under the Company’s 2023 Employment Inducement Incentive Award Plan. Such award consisted of PSUs and RSUs. The fair value of approximately one-fourth of the PSUs was determined to be $
3.2
million in the three months ended March 31, 2025 after the performance criteria for those awards was established. The expense recognition for the PSUs began January 1, 2025.
The following table reflects stock-based compensation by award type for the indicated periods (in thousands):
|
Three Months Ended
March 31, |
|||||||||||
| 2025 | 2024 | ||||||||||
| Options | $ |
|
$ |
|
|||||||
| RSUs |
|
|
|||||||||
| PSUs |
|
|
|||||||||
| Employee Stock Purchase Plan |
|
|
|||||||||
| Total stock-based compensation | $ |
|
$ |
|
|||||||
18
Total compensation costs for stock-based awards were recorded for the indicated periods as follows (in thousands):
|
Three Months Ended
March 31, |
|||||||||||
| 2025 | 2024 | ||||||||||
| Cost of revenue (exclusive of depreciation and amortization, which are shown separately) | $ |
|
$ |
|
|||||||
| Advertising and marketing |
|
|
|||||||||
| Sales |
|
|
|||||||||
| Technology and development |
|
|
|||||||||
| General and administrative |
|
|
|||||||||
| Total stock-based compensation expense |
|
|
|||||||||
| Capitalized stock-based compensation |
|
|
|||||||||
| Total stock-based compensation | $ |
|
$ |
|
|||||||
As of March 31, 2025, the Company had unrecognized compensation cost related to outstanding stock-based award as follows (dollars in thousands):
| Award Type | Unearned Compensation |
Weighted Average Remaining Life
(Years) |
||||||||||||
| Options | $ |
|
|
|||||||||||
| RSUs | $ |
|
|
|||||||||||
| PSUs | $ |
|
|
|||||||||||
Note 14.
Provision for Income Taxes
Note 15.
Commitments and Contingencies
Commitments
The Company has contractual obligations to make future payments related to its outstanding convertible senior notes, which are presented in Note 10. Convertible Senior Notes, and its long-term operating leases, which are presented in Note 11. Leases.
Legal Matters
From time to time, Teladoc Health is involved in various litigation matters arising in the normal course of business, including the matters described below. The Company consults with legal counsel on those issues related to litigation and seeks input from other experts and advisors with respect to such matters. Estimating the probable losses or a range of probable losses resulting from litigation, government actions, and other legal proceedings is inherently difficult and requires an extensive degree of judgment, particularly where the matters involve indeterminate claims for monetary damages, may involve discretionary amounts, present novel legal theories, are in the early stages of the proceedings, or are subject to appeal. Whether any losses, damages, or remedies ultimately resulting from such matters could reasonably have a material effect on the Company’s business, financial condition, results of operations, or cash flows will depend on a number of variables, including, for example, the timing and amount of such losses or damages (if any) and the structure and type of any such remedies. As of the date of these financial statements, Teladoc Health’s management does not expect any litigation matter to have a material adverse impact on its business, financial condition, results of operations, or cash flows.
On June 6, 2022, a purported securities class action complaint (Schneider v. Teladoc Health, Inc.,
et al.
) was filed in the U.S. District Court for the Southern District of New York against the Company and certain of the Company’s
19
officers. The complaint was brought on behalf of a purported class consisting of all persons or entities who purchased or otherwise acquired shares of the Company’s common stock during the period October 28, 2021 through April 27, 2022. The complaint asserted violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder based on allegedly false or misleading statements and omissions with respect to, among other things, the Company’s business, operations, and prospects. The complaint seeks certification as a class action and unspecified compensatory damages plus interest and attorneys’ fees. On August 2, 2022, a duplicative purported securities class action complaint (De Schutter v. Teladoc Health, Inc.,
et al.
) was filed in the U.S. District Court for the Eastern District of New York, which was consolidated with the Schneider case in the Southern District court under the caption In re Teladoc Health, Inc. Securities Litigation. The lead plaintiff subsequently filed amended complaints that expanded the alleged class period to February 11, 2021 to July 27, 2022. On July 5, 2023, the court granted the defendants’ motion to dismiss the complaint, and on September 24, 2024 the U.S. Court of Appeals for the Second Circuit affirmed in part, and vacated in part, the Southern District court’s dismissal and remanded for further proceedings. On March 21, 2025, the court granted the defendant's renewed motion to dismiss, and on April 22, 2025 the lead plaintiff filed a notice of appeal of the Southern District Court’s dismissal in the United States Court of Appeals for the Second Circuit. The Company believes that it has substantial defenses, and the Company and its named officers intend to defend the lawsuit vigorously.
On August 9, 2022, a verified shareholder derivative complaint (Vaughn v. Teladoc Health, Inc.,
et al.
) was filed in the U.S. District Court for the Southern District of New York against the Company as a nominal defendant and certain of the Company’s officers and directors. The complaint asserts violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust enrichment, and waste of corporate assets in connection with factual assertions similar to those in the purported securities class action complaints described above. The complaint seeks damages to the Company allegedly sustained as a result of the acts and omissions of the named officers and directors and seeks an order directing the Company to reform and improve the Company’s corporate governance. On September 6, 2022, a duplicative verified stockholder derivative complaint (Hendry v. Teladoc Health, Inc.,
et al.
) was filed in the U.S. District Court for the Southern District of New York. The claims and parties in Hendry were substantially similar to those in Vaughn. The Vaughn and Hendry actions were consolidated under the caption In re Teladoc Stockholder Derivative Litigation, and a consolidated complaint was filed on November 29, 2022. The consolidated complaint also asserts violations of Section 14(a) of the Securities Exchange Act of 1934. The parties subsequently stipulated to transfer the action to the U.S. District Court for the District of Delaware, and on December 22, 2022 the parties agreed, and the Court ordered, to stay all proceedings until final resolution, including exhaustion of appeals, of the motion to dismiss filed in the purported securities class action complaint described above. The named directors and officers have not yet responded to the complaint. On April 11, 2025, the parties agreed, and the Court ordered, to dismiss the action without prejudice.
There have been multiple putative class-action lawsuits filed against the Company's subsidiary BetterHelp in connection with the consent order that BetterHelp entered into with the U.S. Federal Trade Commission in July 2023. The actions have been filed in California federal and state courts and in Canada. The cases are substantially similar, involving allegations of misleading patients as to BetterHelp’s use of patient data and associated alleged violations of law involving privacy, advertising, contract, and tort. The Company believes that it has substantial defenses, and the Company intends to defend the lawsuits vigorously.
On February 13, 2023, Data Health Partners, Inc. (“Data Health Partners”) filed a lawsuit against the Company in the U.S. District Court for the District of Delaware alleging that certain of the Company’s products, including its blood glucose meter, infringe upon certain patents held by Data Health Partners and seeking unspecified damages, attorney’s fees and costs. The Company believes that it has substantial defenses, and the Company intends to defend the lawsuit vigorously.
On May 17, 2024, a purported securities class action complaint (Stary v. Teladoc Health, Inc.,
et al.
) was filed in the U.S. District Court for the Southern District of New York against the Company and certain of the Company’s current and former officers. The complaint was brought on behalf of a purported class consisting of all persons or entities who purchased or otherwise acquired shares of the Company’s common stock during the period November 2, 2022 through February 20, 2024. The complaint asserts violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder based on allegedly false or misleading statements and omissions with respect to, among other things, the Company’s advertising spend on BetterHelp. The complaint seeks certification as a class action and unspecified compensatory damages plus interest and attorneys’ fees. On July 15, 2024, a duplicative purported securities class action complaint (Waits v. Teladoc Health, Inc.,
et al.
) was filed in the U.S. District Court for the Southern District of New York. The claims and parties in Waits were substantially similar to those in Stary. The Stary and Waits actions were consolidated. On December 10, 2024, the District Court appointed co-lead plaintiffs, and, on February 24, 2025 the lead plaintiffs filed an amended complaint that asserts Exchange Act claims for a putative class of shareholders
20
who purchased or acquired stock between July 26, 2023 and February 20, 2024. The Company believes that it has substantial defenses, and the Company and its named officers intend to defend the lawsuits vigorously.
On June 18, 2024, a verified shareholder derivative complaint (Roy v. Gorevic,
et al.
) was filed in the U.S. District Court for the Southern District of New York against the Company as a nominal defendant and certain of the Company’s current and former officers and directors. The complaint asserts violations of Sections 10(b) and 14(a) of the Securities Exchange Act of 1934, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust enrichment, waste of corporate assets, gross mismanagement and abuse of control in connection with factual assertions similar to those in the purported securities class action complaint described in the preceding paragraph. The complaint seeks damages to the Company allegedly sustained as a result of the acts and omissions of the named officers and directors and seeks an order directing the Company to reform and improve the Company’s corporate governance. On October 4, 2024 the parties agreed, and the Court ordered, to stay all proceedings until any motion to dismiss filed in the purported securities class action complaint described above is granted with prejudice and any appeals therefrom are resolved, or any defendant files an answer in the purported securities class action complaint described above. On October 1, 2024, a duplicative verified stockholder derivative complaint (Brigman,
et al.
v. Daniel,
et al.
) was filed in the U.S. District Court for the Southern District of New York. The claims and parties in Brigman are substantially similar to those in Roy, and also alleges insider trading violations and misappropriation of information against certain defendants. On April 7, 2025 the parties agreed, and the Court ordered, to stay all proceedings until any motion to dismiss filed in the purported securities class action complaint described above is granted with prejudice and any appeals therefrom are resolved, or any defendant files an answer in the purported securities class action complaint described above. The named directors and officers have not yet responded to the complaint.
Note 16.
Segments
ASC Subtopic 280-10,
“Segment Reporting,”
establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance. The Company’s Chief Executive Officer is the CODM and is responsible for reviewing financial information presented on a segment basis for purposes of making operating decisions and assessing financial performance.
The CODM measures and evaluates segments based on segment operating revenues, segment expenses, and Adjusted EBITDA.
The CODM reviews annual-operating-plan-to-actual variances for these measures on a regular basis to assess the performance of the segments and to make decisions about allocating resources.
The Company does not include the following items in segment expenses and Adjusted EBITDA: provision for income taxes; interest income; interest expense; other expense (income), net; depreciation of property and equipment; amortization of intangible assets; restructuring costs; acquisition, integration, and transformation charges; goodwill impairment; and stock-based compensation. Although these amounts are excluded from segment Adjusted EBITDA, they are included in reported consolidated net loss and are included in the reconciliations that follow.
The Company’s computation of segment Adjusted EBITDA may not be comparable to other similarly titled metrics computed by other companies because all companies do not calculate segment Adjusted EBITDA in the same fashion.
Operating revenues and expenses directly associated with each segment are included in determining its operating results. Other expenses that are not directly attributable to a particular segment are based upon allocation methodologies, including the following: revenue, headcount, time and other relevant usage measures, and/or a combination of such.
The Company has
two
reportable segments: Integrated Care and BetterHelp. The Integrated Care segment includes a suite of global virtual medical services including general medical, expert medical services, specialty medical, chronic condition management, mental health, and enabling technologies and enterprise telehealth solutions for hospitals and health systems. The BetterHelp segment includes virtual therapy and other wellness services provided on a global basis which are predominantly marketed and sold on a direct-to-consumer basis.
The CODM does not review any information regarding total assets on a segment basis. Segments do not record intersegment revenues, and, accordingly, there is none to be reported. The accounting policies for segment reporting are the same as for the Company as a whole.
21
The following tables present the financial results of the Company's reportable segments, along with reconciliations of the segments' total consolidated Adjusted EBITDA to the consolidated net loss for the periods indicated (in thousands):
| Three Months Ended March 31, 2025 | Integrated Care | BetterHelp | Consolidated | |||||||||||||||||
| Revenue | $ |
|
$ |
|
$ |
|
||||||||||||||
| Cost of revenue, exclusive of depreciation, amortization, and stock-based compensation (1) |
|
|
||||||||||||||||||
| Advertising and marketing, exclusive of stock-based compensation (1) |
|
|
||||||||||||||||||
| Other segment expenses (2) |
|
|
||||||||||||||||||
| Adjusted EBITDA | $ |
|
$ |
|
|
|||||||||||||||
| Less adjustments to reconcile to consolidated net loss: | ||||||||||||||||||||
| Stock-based compensation |
|
|||||||||||||||||||
| Goodwill impairment |
|
|||||||||||||||||||
| Acquisition, integration, and transformation costs |
|
|||||||||||||||||||
| Restructuring costs |
|
|||||||||||||||||||
| Amortization of intangible assets |
|
|||||||||||||||||||
| Depreciation of property and equipment |
|
|||||||||||||||||||
| Other expense (income), net |
(
|
|||||||||||||||||||
| Interest expense |
|
|||||||||||||||||||
| Interest income |
(
|
|||||||||||||||||||
| Loss before provision for income taxes |
(
|
|||||||||||||||||||
| Provision for income taxes |
(
|
|||||||||||||||||||
| Net loss | $ |
(
|
||||||||||||||||||
| Three Months Ended March 31, 2024 | Integrated Care | BetterHelp | Consolidated | |||||||||||||||||
| Revenue | $ |
|
$ |
|
$ |
|
||||||||||||||
| Cost of revenue, exclusive of depreciation, amortization, and stock-based compensation (1) |
|
|
||||||||||||||||||
| Advertising and marketing, exclusive of stock-based compensation (1) |
|
|
||||||||||||||||||
| Other segment expenses (2) |
|
|
||||||||||||||||||
| Adjusted EBITDA | $ |
|
$ |
|
|
|||||||||||||||
| Less adjustments to reconcile to consolidated net loss: | ||||||||||||||||||||
| Stock-based compensation |
|
|||||||||||||||||||
| Goodwill impairment |
|
|||||||||||||||||||
| Acquisition, integration, and transformation costs |
|
|||||||||||||||||||
| Restructuring costs |
|
|||||||||||||||||||
| Amortization of intangible assets |
|
|||||||||||||||||||
| Depreciation of property and equipment |
|
|||||||||||||||||||
| Other expense (income), net |
|
|||||||||||||||||||
| Interest expense |
|
|||||||||||||||||||
| Interest income |
(
|
|||||||||||||||||||
| Loss before provision for income taxes |
(
|
|||||||||||||||||||
| Provision for income taxes |
|
|||||||||||||||||||
| Net loss | $ |
(
|
||||||||||||||||||
_________________________________________
(1)
The significant segment expense categories and amounts align with the information that is regularly provided to the CODM.
(2)
Other segment expenses for the corresponding reportable segment includes:
22
Integrated Care—advertising and marketing expenses, sales expenses, technology and development expenses, and general and administrative expenses, each exclusive of stock-based compensation.
BetterHelp—sales expenses, technology and development expenses, and general and administrative expenses, each exclusive of stock-based compensation.
Geographic data for long-lived assets (representing property and equipment, net) were as follows (in thousands):
| As of | |||||||||||
| March 31, | December 31, | ||||||||||
| 2025 | 2024 | ||||||||||
| United States | $ |
|
$ |
|
|||||||
| International |
|
|
|||||||||
| Total long-lived assets | $ |
|
$ |
|
|||||||
Note 17.
Subsequent Events
On April [30], 2025, the Company completed the acquisition of UpLift Health Technologies, Inc. in an all-cash transaction of $
30
million, with up to $
15
million in additional contingent earnout consideration. UpLift Health Technologies, Inc. will be included in the BetterHelp segment.
23
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Special Note Regarding Forward-Looking Statements
Many statements made in this Quarterly Report on Form 10-Q that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements and should be evaluated as such. Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plan and strategies. These statements often include words such as “anticipates,” “believes,” “suggests,” “targets,” “projects,” “plans,” “expects,” “future,” “intends,” “estimates,” “predicts,” “potential,” “may,” “will,” “should,” “could,” “would,” “likely,” “foresee,” “forecast,” “continue” and other similar words or phrases, as well as statements in the future tense to identify these forward-looking statements. These forward-looking statements and projections are contained throughout this Form 10-Q, including the section entitled” “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We base these forward-looking statements or projections on our current expectations, plans and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances and at such time. As you read and consider this Form 10-Q, you should understand that these statements are not guarantees of performance or results. The forward-looking statements and projections are subject to and involve risks, uncertainties, and assumptions and you should not place undue reliance on these forward-looking statements or projections. Although we believe that these forward-looking statements and projections are based on reasonable assumptions at the time they are made, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements and projections. Factors that may materially affect such forward-looking statements and projections include, but are not limited to, the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Form 10-K”) and in our other reports and U.S. Securities and Exchange Commission (“SEC”) filings. These cautionary statements should not be construed by you to be exhaustive and are made only as of the date of this Form 10-Q. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should evaluate all forward-looking statements made in this Form 10-Q in the context of these risks and uncertainties.
Overview
Teladoc, Inc. was incorporated in the State of Texas in June 2002 and changed its state of incorporation to the State of Delaware in October 2008. Effective August 10, 2018, Teladoc, Inc. changed its corporate name to Teladoc Health, Inc. Unless the context otherwise requires, Teladoc Health, Inc., together with its subsidiaries, is referred to herein as “Teladoc Health,” the “Company,” or “we.” The Company’s principal executive office is located in Purchase, New York. Teladoc Health is the global leader in virtual care focused on forging a new healthcare experience with better convenience, outcomes, and value around the world.
We were founded on a simple, yet revolutionary idea: that everyone should have access to the best healthcare, anywhere in the world on their terms. Today, we have a vision of making virtual care the first step on any healthcare journey, and we are delivering on this mission by providing virtual care that includes primary care, mental health, chronic condition management, and more.
The impact that the imposition of tariffs and changes to global trade policies will have on our consolidated results of operations is uncertain. We expect tariffs on goods imported into the U.S. from Canada, Mexico, and China, and other countries upon which tariffs may be imposed, to continue to be met with retaliatory tariffs from those countries which would impact our consolidated results of operations as we import components for assembling welcome kits, refill kits, and replacement components for our chronic care management solutions and virtual healthcare devices manufactured for sale or lease as part of our hosted virtual healthcare platform solution. The extent and duration of tariffs and the resulting impact on macroeconomic conditions and on our business are uncertain and may depend on various factors, including negotiations between the U.S. and affected countries, retaliation imposed by other countries, tariff exemptions, negative sentiment toward U.S. companies and products, and availability of lower cost inputs that may be sourced domestically or in other countries with no or lower tariffs. We will continue to evaluate the nature and extent of the impact to our business and consolidated results of operations. For further information, see “Risk Factors—We depend on a limited number of third-party suppliers for certain components of our medical devices, and the loss of any of these suppliers, or their inability to provide us with an adequate supply of materials, could harm our business,” and “—Our international operations pose certain political, legal and compliance, operational, regulatory, economic, and other risks to our business that may be different from or more significant than risks associated with our domestic operations, and our exposure to these risks is expected to increase” included in our 2024 Form 10-K.
24
Key Factors Affecting Our Performance
We believe that our future performance will depend on many factors, including the following:
As it relates to the Integrated Care segment:
Number of U.S. Integrated Care Members.
U.S. Integrated Care members represent the number of unique individuals who have paid access and visit fee only access to our suite of integrated care services in the U.S. at the end of the applicable period. Our revenue growth rate and long-term profitability are affected by our ability to increase cross selling capability among our existing members over time because we derive a substantial portion of our revenue from access and other fees via Client contracts that provide members access to the THMG Association professional provider network in exchange for a contractual based periodic fee. Therefore, we believe that our ability to add new members and retain existing members, and to increase utilization and penetration further into existing and new health plan and employer Clients is a key indicator of our increasing market adoption, the growth of our business, and our future revenue potential. We further believe that increasing our membership is an integral objective that will provide us with the ability to continually innovate our services and support initiatives that will enhance members’ experiences. However, certain health plans that have historically promoted our services to our employer Clients have developed, and may in the future continue to develop, solutions that replicate our services or offer competitive services at discounted prices to our current or prospective Clients, which could result in a loss of members. For further information, see “Risk Factors—Risks Related to Our Business and Industry—We operate in a competitive industry, and if we are not able to compete effectively, our business, financial condition, and results of operations will be harmed,” and “—A significant portion of our revenue comes from a limited number of Clients, the loss of which could have a material adverse effect on our business, financial condition and results of operations” included in our 2024 Form 10-K. U.S. Integrated Care members increased by 10.7 million, or 12%, to 102.5 million at March 31, 2025, compared to the same period in 2024.
Chronic Care Program Enrollment
. Chronic care program enrollment represents the total number of enrollees across our suite of chronic care programs at the end of a given period. Our chronic care program enrollments are one of the key components of our virtual care platform that we believe positions us to drive greater engagement with our platforms and increased revenue. Chronic care program enrollment increased by 3% to 1.151 million at March 31, 2025, compared to 1.121 million at March 31, 2024.
Average Monthly Revenue Per U.S. Integrated Care Member
. Average monthly revenue per U.S. Integrated Care member measures the average monthly amount of global revenue that we generate from a U.S. Integrated Care member for a particular period. It is calculated by dividing the total revenue generated from the Integrated Care segment by the average number of U.S. Integrated Care members during the applicable period. Approximately 20% of total Integrated Care revenues relates to international and hospital and health systems for which membership is not considered as a management metric. We believe that our ability to increase the revenue generated from each member over time is also a key indicator of our increasing market adoption, the growth of our business, and future revenue potential. Average monthly revenue per U.S. Integrated Care member was $1.27 in the three months ended March 31, 2025, compared to $1.38 in the same period in 2024.
As it relates to the BetterHelp segment:
BetterHelp Paying Users.
BetterHelp paying users represent the average number of global monthly paying users of our BetterHelp therapy services during the applicable period. We believe that our ability to add new paying users and retain existing users is a key indicator of the market adoption of BetterHelp, the growth of this segment, and future revenue potential. Effectively reaching potential paying users through various advertising channels remains critical to our success. BetterHelp paying users decreased by 4% to 0.397 million for the three months ended March 31, 2025, compared to 0.415 million for the three months ended March 31, 2024.
As it relates to the Company:
Seasonality.
Our business has historically been subject to seasonality. In our Integrated Care segment, a concentration of our new Client contracts have an effective date of January 1 as a result of many Clients’ introduction of new services at the start of each calendar year. Therefore, while membership increases, utilization and enrollment rates are dampened until service delivery ramps up over the course of the year. In addition, as a result of seasonal cold and flu trends, we historically have experienced our highest level of visit and other fee revenue during the first and fourth quarters of each year.
25
Due to the higher cost of customer acquisition during the end-of-year holiday season, our BetterHelp segment has historically reduced marketing activity during the fourth quarter. As a result of this dynamic, we have typically experienced fewer new member additions and strong operating income performance in the fourth quarter. Conversely, as marketing activity typically resumes at the start of the year, we typically experience weak operating income performance during the first quarter as new customer acquisition and revenue growth lags marketing spend.
Critical Accounting Estimates and Policies
Our discussion and analysis of our results of operations, liquidity and capital resources are based on our condensed consolidated financial statements which have been prepared in conformity with accounting principles generally accepted in the U.S. (“GAAP”). The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities.
On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, business combinations, goodwill and other intangible assets, income taxes, and other items. We base our estimates on historical and anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results may differ from our estimates and could have a significant adverse effect on our results of operations and financial position. For a discussion of our critical accounting policies and estimates see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2024 Form 10-K.
Non-GAAP Financial Measures
To supplement our financial information presented in accordance with GAAP, we use certain non-GAAP financial measures to clarify and enhance an understanding of past performance, which include Adjusted EBITDA (as defined below) and free cash flow. We believe that the presentation of these financial measures enhances an investor’s understanding of our financial performance, and are commonly used by investors to evaluate our performance and that of our competitors. We further believe that these financial measures are useful to assess our operating performance and financial and business trends from period-to-period by excluding certain items that we believe are not representative of our core business, and that free cash flow reflects an additional way of viewing our liquidity that, when viewed together with GAAP results, provides management, investors, and other users of our financial information with a more complete understanding of factors and trends affecting our cash flows. We use these non-GAAP financial measures for business planning purposes and in measuring our performance relative to that of our competitors. We utilize Adjusted EBITDA as a key measure of our performance.
Adjusted EBITDA consists of net loss before provision for income taxes; other expense (income), net; interest income; interest expense; depreciation of property and equipment; amortization of intangible assets; restructuring costs; acquisition, integration, and transformation cost; goodwill impairment; and stock-based compensation.
Free cash flow is net cash provided by operating activities less capital expenditures and capitalized software development costs.
Our use of these non-GAAP terms may vary from that of others in our industry, and other companies may calculate such measures differently than we do, limiting their usefulness as comparative measures.
Non-GAAP measures have important limitations as analytical tools and you should not consider them in isolation, and they should not be considered as an alternative to net loss before provision for income taxes, net loss, net loss per share, net cash from operating activities or any other measures derived in accordance with GAAP. Some of these limitations are:
•
Adjusted EBITDA eliminates the impact of the provision for income taxes on our results of operations, and does not reflect other expense (income), net, interest income, or interest expense;
•
Adjusted EBITDA does not reflect restructuring costs. Restructuring costs may include certain lease impairment costs, certain losses related to early lease terminations, and severance;
26
•
Adjusted EBITDA does not reflect significant acquisition, integration, and transformation costs. Acquisition, integration, and transformation costs include investment banking, financing, legal, accounting, consultancy, integration, fair value changes related to contingent consideration and certain other transaction costs related to mergers and acquisitions. It also includes costs related to certain business transformation initiatives focused on integrating and optimizing various operations and systems, including upgrading our CRM and ERP systems. These transformation cost adjustments made to our results do not represent normal, recurring, operating expenses necessary to operate the business but rather, incremental costs incurred in connection with our acquisition and integration activities;
•
Adjusted EBITDA does not reflect goodwill impairment charges; and
•
Adjusted EBITDA does not reflect the significant non-cash stock-based compensation expense which should be viewed as a component of recurring operating costs.
In addition, although amortization of intangible assets and depreciation of property and equipment are non-cash charges, the assets being amortized and depreciated will often have to be replaced in the future, and Adjusted EBITDA does not reflect any expenditures for such replacements.
We compensate for these limitations by using these non-GAAP measures along with other comparative tools, together with GAAP measurements, to assist in the evaluation of operating performance. Such GAAP measurements include net loss, net loss per share, net cash provided by operating activities, and other performance measures.
In evaluating these financial measures, you should be aware that in the future we may incur expenses similar to those eliminated in this presentation. Our presentation of these non-GAAP measures should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.
27
Condensed Consolidated Results of Operations
The following table sets forth our Condensed Consolidated Statements of Operations data for the three months ended March 31, 2025 and 2024 and the dollar and percentage change between the respective periods (dollars in thousands, except per share data):
|
Three Months Ended
March 31, |
|||||||||||||||||||||||
| 2025 | 2024 | Variance | % | ||||||||||||||||||||
| Revenue | $ | 629,369 | $ | 646,131 | $ | (16,762) | (3) | % | |||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization, which are shown separately below) | 196,829 | 194,538 | 2,291 | 1 | % | ||||||||||||||||||
| Advertising and marketing | 168,185 | 183,329 | (15,144) | (8) | % | ||||||||||||||||||
| Sales | 48,693 | 54,364 | (5,671) | (10) | % | ||||||||||||||||||
| Technology and development | 69,958 | 81,388 | (11,430) | (14) | % | ||||||||||||||||||
| General and administrative | 112,774 | 111,697 | 1,077 | 1 | % | ||||||||||||||||||
| Goodwill impairment | 59,138 | — | 59,138 | N/M | |||||||||||||||||||
| Acquisition, integration, and transformation costs | 2,188 | 373 | 1,815 | N/M | |||||||||||||||||||
| Restructuring costs | 4,347 | 9,673 | (5,326) | (55) | % | ||||||||||||||||||
| Amortization of intangible assets | 84,304 | 95,057 | (10,753) | (11) | % | ||||||||||||||||||
| Depreciation of property and equipment | 3,564 | 2,834 | 730 | 26 | % | ||||||||||||||||||
| Total costs and expenses | 749,980 | 733,253 | 16,727 | 2 | % | ||||||||||||||||||
| Loss from operations | (120,611) | (87,122) | (33,489) | 38 | % | ||||||||||||||||||
| Interest income | (12,674) | (13,942) | 1,268 | (9) | % | ||||||||||||||||||
| Interest expense | 5,765 | 5,649 | 116 | 2 | % | ||||||||||||||||||
| Other expense (income), net | (2,435) | 370 | (2,805) | N/M | |||||||||||||||||||
| Loss before provision for income taxes | (111,267) | (79,199) | (32,068) | 40 | % | ||||||||||||||||||
| Provision for income taxes | (18,255) | 2,690 | (20,945) | N/M | |||||||||||||||||||
| Net loss | $ | (93,012) | $ | (81,889) | $ | (11,123) | 14 | % | |||||||||||||||
| Net loss per share, basic and diluted | $ | (0.53) | $ | (0.49) | $ | (0.04) | 8 | % | |||||||||||||||
| Adjusted EBITDA (1) | $ | 58,093 | $ | 63,140 | $ | (5,047) | (8) | % | |||||||||||||||
___________________________
N/M - Not Meaningful
(1)
Non-GAAP Financial Measure
28
The following table reconciles net loss, the most directly comparable GAAP financial measure, to Adjusted EBITDA for the three months ended March 31, 2025 and 2024 (in thousands):
|
Three Months Ended
March 31, |
|||||||||||
| 2025 | 2024 | ||||||||||
| Net loss | $ | (93,012) | $ | (81,889) | |||||||
| Add: | |||||||||||
| Provision for income taxes | (18,255) | 2,690 | |||||||||
| Other expense (income), net | (2,435) | 370 | |||||||||
| Interest expense | 5,765 | 5,649 | |||||||||
| Interest income | (12,674) | (13,942) | |||||||||
| Depreciation of property and equipment | 3,564 | 2,834 | |||||||||
| Amortization of intangible assets | 84,304 | 95,057 | |||||||||
| Restructuring costs | 4,347 | 9,673 | |||||||||
| Acquisition, integration, and transformation costs | 2,188 | 373 | |||||||||
| Goodwill impairment | 59,138 | — | |||||||||
| Stock-based compensation | 25,163 | 42,325 | |||||||||
| Adjusted EBITDA | $ | 58,093 | $ | 63,140 | |||||||
| Integrated Care | $ | 50,379 | $ | 47,674 | |||||||
| BetterHelp | 7,714 | 15,466 | |||||||||
| Adjusted EBITDA | $ | 58,093 | $ | 63,140 | |||||||
Revenue.
The following table presents revenues disaggregated by revenue source and geography:
|
Three Months Ended
March 31, |
|||||||||||||||||||||||
| ($ in thousands, unaudited) | 2025 | 2024 | Variance | % | |||||||||||||||||||
| Revenue by Type | |||||||||||||||||||||||
| Access Fees | $ | 525,736 | $ | 557,174 | $ | (31,438) | (6) | % | |||||||||||||||
| Other | 103,633 | 88,957 | 14,676 | 16 | % | ||||||||||||||||||
| Total Revenue | $ | 629,369 | $ | 646,131 | $ | (16,762) | (3) | % | |||||||||||||||
| Revenue by Geography | |||||||||||||||||||||||
| U.S. Revenue | $ | 524,970 | $ | 547,600 | $ | (22,630) | (4) | % | |||||||||||||||
| International Revenue | 104,399 | 98,531 | 5,868 | 6 | % | ||||||||||||||||||
| Total Revenue | $ | 629,369 | $ | 646,131 | $ | (16,762) | (3) | % | |||||||||||||||
Total revenue was $629.4 million for the three months ended March 31, 2025, compared to $646.1 million during the three months ended March 31, 2024, a decrease of $16.8 million, or 3%. This decrease in revenue was driven by lower revenue in our BetterHelp segment, partially offset by higher revenue in our Integrated Care segment. Other revenue predominately includes visit fees and, to a lesser extent, revenue from the sales of our telehealth solutions for hospitals and health systems.
Cost of Revenue (exclusive of depreciation and amortization, which are shown separately below)
.
Cost of revenue was $196.8 million for the three months ended March 31, 2025, compared to $194.5 million for the three months ended March 31, 2024, an increase of $2.3 million, or 1%. The increase was primarily driven by higher labor costs, technology costs, and amortization of devices, partially offset by lower physician costs.
Advertising and Marketing Expenses.
Advertising and marketing expenses were $168.2 million for the three months ended March 31, 2025, compared to $183.3 million for the three months ended March 31, 2024, a decrease of
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$15.1 million, or 8%. This decrease was primarily due to lower digital and media advertising costs, partially offset by higher professional fees.
Sales Expenses.
Sales expenses were $48.7 million for the three months ended March 31, 2025, compared to $54.4 million for the three months ended March 31, 2024, a decrease of $5.7 million, or 10%. The decrease reflects lower employee compensation and commission costs, partially offset by higher costs for professional fees.
Technology and Development Expenses.
Technology and development expenses were $70.0 million for the three months ended March 31, 2025, compared to $81.4 million for the three months ended March 31, 2024, a decrease of $11.4 million, or 14%. The decrease primarily reflects lower employee compensation costs.
For the three months ended March 31, 2025 and 2024, research and development costs, which exclude amounts reflected as capitalized software development costs, were $22.9 million and $24.8 million, respectively.
General and Administrative Expenses.
General and administrative expenses increased $1.1 million, or 1%, to $112.8 million for the three months ended March 31, 2025, compared to $111.7 million for the three months ended March 31, 2024. The increase was primarily driven by higher indirect taxes, professional fees, legal costs, and software and infrastructure cost, partially offset by lower employee compensation costs.
Goodwill Impairment.
Concurrent with the completion of the acquisition of Catapult Health, we performed a goodwill impairment test on the Integrated Care reporting unit and determined that the carrying value of the reporting unit continued to exceed its fair value. As a result, we recognized an immediate impairment of $59.1 million of goodwill associated with the Catapult Health acquisition in the three months ended March 31, 2025. As the carrying value of the Integrated Care reporting unit continues to exceed its fair value, any future business combinations that would be part of the Integrated Care reporting unit could result in further goodwill impairment charges.
Acquisition, Integration, and Transformation Costs.
Acquisition, integration, and transformation costs primarily consisted of costs to integrate and upgrade our Customer Relationship Management and Enterprise Resource Planning ecosystem and were $2.2 million and $0.4 million for the three months ended March 31, 2025 and 2024, respectively.
Restructuring Costs
.
Restructuring costs for the three months ended March 31, 2025 were $4.3 million, of which $3.6 million was for employee transition, severance, employee benefits, and related costs and $0.7 million was related to costs associated with office space reductions, including $0.2 million of right-of-use asset impairment charges.
Restructuring costs for the three months ended March 31, 2024 were $9.7 million, of which $7.0 million was for employee transition, severance, employee benefits, and related costs and $2.7 million was related to other restructuring related costs.
Amortization of Intangible Assets.
The following table shows amortization of intangible assets broken down by components for the periods indicated (in thousands):
|
Three Months Ended
March 31, |
|||||||||||||||||
| 2025 | 2024 | % | |||||||||||||||
| Amortization of acquired intangibles | $ | 42,411 | $ | 64,181 | (34)% | ||||||||||||
| Amortization of capitalized software development costs | 41,893 | 30,876 | 36% | ||||||||||||||
| Amortization of intangible assets expense | $ | 84,304 | $ | 95,057 | (11)% | ||||||||||||
Amortization of intangible assets was $84.3 million for the three months ended March 31, 2025, compared to
$95.1 million for the three months ended March 31, 2024, a decrease of $10.8 million, or 11%. The decrease was primarily driven by the lower amortization associated with the Livongo trademark, partially offset by an increase in the amortization of capitalized software development costs related to our investment in platforms.
Depreciation of Property and Equipment.
Depreciation of property and equipment was $3.6 million for the three months ended March 31, 2025, compared to $2.8 million for the three months ended March 31, 2024, an increase of $0.7 million, or 26%.
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Interest Income.
Interest income consisted of interest earned on cash and cash equivalents. Interest income was $12.7 million for the three months ended March 31, 2025, compared to $13.9 million for the three months ended March 31, 2024. The decrease was driven by lower interest rate yields.
Interest Expense.
Interest expense consisted of interest costs and the amortization of debt discounts primarily associated with the convertible senior notes. Interest expense was $5.8 million for the three months ended March 31, 2025, compared to $5.6 million for the three months ended March 31, 2024.
Other Expense (Income), net.
Other expense (income), net was an income of $2.4 million for the three months ended March 31, 2025, compared to an expense of $0.4 million for the three months ended March 31, 2024, primarily reflecting the impact of foreign currency exchange rate fluctuations.
Provision for Income Taxes
.
We recorded an income tax benefit of $18.3 million for the three months ended March 31, 2025, compared to $2.7 million income tax expense for the three months ended March 31, 2024. The tax benefit in 2025 resulted primarily from a discrete benefit of $20.1 million related to completion of a research and development tax credit study. The tax expense in 2024 was primarily due to a shortfall related to stock-based compensation awards that vested in the quarter.
Segment Information
The following tables set forth the results of operations by segment for the three months ended March 31, 2025 and 2024 (dollars in thousands):
|
Three Months Ended
March 31, |
|||||||||||||||||||||||
| Integrated Care | 2025 | 2024 | Variance | % | |||||||||||||||||||
| Revenue | $ | 389,468 | $ | 377,111 | $ | 12,357 | 3 | % | |||||||||||||||
| Cost of revenue, exclusive of depreciation, amortization, and stock-based compensation | 131,008 | 120,313 | 10,695 | 9 | % | ||||||||||||||||||
| Other segment expenses (1) | 208,081 | 209,124 | (1,043) | — | % | ||||||||||||||||||
| Adjusted EBITDA | $ | 50,379 | $ | 47,674 | $ | 2,705 | 6 | % | |||||||||||||||
| Adjusted EBITDA Margin % | 12.9 | % | 12.6 | % | |||||||||||||||||||
(1)
Other segment expenses includes advertising and marketing expenses, sales expenses, technology and development expenses, and general and administrative expenses, each exclusive of stock-based compensation.
Integrated Care total revenues increased by $12.4 million, or 3%, to $389.5 million for the three months ended March 31, 2025. The increase in revenue was primarily driven by higher chronic care program enrollment and adoption, as well as higher telemedicine product revenue, and to a lesser extent, driven in part by the acquisition of Catapult Health.
Integrated Care cost of revenue, exclusive of depreciation, amortization, and stock-based compensation, increased by $10.7 million, or 9%, to $131.0 million for the three months ended March 31, 2025. The increase was primarily driven by higher labor costs, technology costs, and amortization of device costs, partially offset by lower physician costs.
Integrated Care other segment expenses decreased by $1.0 million to $208.1 million for the three months ended March 31, 2025. The decrease was primarily driven by lower employee compensation, partially offset by higher indirect taxes, professional fees, advertising costs, and legal and regulatory costs.
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|
Three Months Ended
March 31, |
|||||||||||||||||||||||
| BetterHelp | 2025 | 2024 | Variance | % | |||||||||||||||||||
| Therapy Services | $ | 234,438 | $ | 263,712 | $ | (29,274) | (11) | % | |||||||||||||||
| Other Wellness Services | 5,463 | 5,308 | 155 | 3 | % | ||||||||||||||||||
| Total Revenue | 239,901 | 269,020 | (29,119) | (11) | % | ||||||||||||||||||
| Cost of revenue, exclusive of depreciation, amortization, and stock-based compensation | 65,248 | 72,830 | (7,582) | (10) | % | ||||||||||||||||||
| Advertising and marketing, exclusive of stock-based compensation | 132,972 | 146,998 | (14,026) | (10) | % | ||||||||||||||||||
| Other segment expenses (1) | 33,967 | 33,726 | 241 | 1 | % | ||||||||||||||||||
| Adjusted EBITDA | $ | 7,714 | $ | 15,466 | $ | (7,752) | (50) | % | |||||||||||||||
| Adjusted EBITDA Margin % | 3.2 | % | 5.7 | % | |||||||||||||||||||
(1)
Other segment expenses includes sales expenses, technology and development expenses, and general and administrative expenses, each exclusive of stock-based compensation.
BetterHelp total revenues decreased by $29.1 million, or 11%, to $239.9 million for the three months ended March 31, 2025, driven by a 4% decrease in average monthly paying users.
BetterHelp cost of revenue, exclusive of depreciation, amortization, and stock-based compensation, decreased by $7.6 million, or 10%, to $65.2 million for the three months ended March 31, 2025. The decrease was primarily driven by lower therapist costs.
BetterHelp advertising and marketing, exclusive of stock-based compensation, decreased by $14.0 million, or 10%, to $133.0 million for the three months ended March 31, 2025, primarily reflecting lower spending on digital and media advertising, partially offset by higher professional fees.
BetterHelp other segment expenses increased by $0.2 million, or 1%, to $34.0 million for the three months ended March 31, 2025. The increase was primarily driven by higher legal and regulatory fees, software and infrastructure costs, and professional fees, partially offset by lower indirect taxes and therapist recruiting and retention costs.
Liquidity and Capital Resources
The following table presents a summary of our cash flow activity for the three months ended March 31, 2025 and 2024 (in thousands):
|
Three Months Ended
March 31, |
|||||||||||
| Consolidated Statements of Cash Flows - Summary | 2025 | 2024 | |||||||||
| Net cash provided by operating activities | $ | 15,919 | $ | 8,920 | |||||||
| Net cash used in investing activities | (123,268) | (35,512) | |||||||||
| Net cash provided by financing activities | 769 | 1,751 | |||||||||
| Effect of foreign currency exchange rate changes | 1,585 | (899) | |||||||||
| Total decrease in cash and cash equivalents | $ | (104,995) | $ | (25,740) | |||||||
Our principal source of liquidity is our cash and cash equivalents, totaling $1,193.3 million as of March 31, 2025. We anticipate continuing positive operating cash flows for 2025.
We believe that our existing cash and cash equivalents will be sufficient to meet our working capital, capital expenditure, and contractual obligation needs for at least the next 12 months. Our future capital requirements will depend on many factors including our growth rate, contract renewal activity, number of visits, our ability to retain and/or obtain new members, the timing and extent of spending to support product development efforts, our expansion of sales and marketing activities, the introduction of new and enhanced services offerings, the continuing market acceptance of
32
telehealth, and our debt service obligations. We may in the future enter into arrangements to acquire or invest in additional complementary businesses, services, technologies, and intellectual property rights. We may be required to seek additional equity or debt financing to fund working capital, capital expenditures and acquisitions, and to settle debt obligations. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all, which would adversely affect our business, financial condition, and results of operations.
Historically, we have financed our operations primarily through sales of equity securities, debt issuance, and bank borrowings.
An aggregate principal amount of $550.7 million of our convertible senior notes is due within the next quarter. See Note 10. “Convertible Senior Notes” to the condensed consolidated financial statements for additional information on our convertible senior notes.
We routinely enter into contractual obligations with third parties to provide professional services, licensing, and other products and services in support of our ongoing business. The current estimated cost of these contracts is not expected to be significant to our liquidity and capital resources based on contracts in place as of March 31, 2025.
Cash from Operating Activities
Cash flows provided by operating activities consisted of net loss adjusted for certain non-cash items and the cash effect of changes in assets and liabilities. Net cash provided by operating activities was $15.9 million for the three months ended March 31, 2025 compared to net cash provided by operating activities of $8.9 million for the three months ended March 31, 2024. The year-over-year change was primarily driven by lower incentive compensation payments.
The primary uses of cash from operating activities are for the payment of cash compensation, provider fees, engagement marketing, direct-to-consumer digital and media advertising, inventory, insurance, technology costs, interest expense and acquisition, integration, and transformation costs. Historically, cash compensation is at its highest level in the first quarter when discretionary employee compensation related to the previous fiscal year is paid.
Cash from Investing Activities
Cash used in investing activities was $123.3 million for the three months ended March 31, 2025, and $35.5 million for the three months ended March 31, 2024. We paid $64.6 million, net of cash acquired, to complete the acquisition of Catapult Health and paid $27.0 million to acquire securities of a private company during the three months ended March 31, 2025. The remaining change drivers primarily related to lower amounts paid for capitalized software development costs associated with ongoing projects to continuously improve and optimize our products and services.
Cash from Financing Activities
Cash provided by financing activities for the three months ended March 31, 2025 was $0.8 million and $1.8 million for the three months ended March 31, 2024, primarily reflecting lower proceeds from the employee stock purchase plan.
Free Cash Flow
The following is a reconciliation of net cash provided by operating activities to free cash flow (in thousands, unaudited):
|
Three Months Ended
March 31, |
|||||||||||
| 2025 | 2024 | ||||||||||
| Net cash provided by operating activities | $ | 15,919 | $ | 8,920 | |||||||
| Capital expenditures | (2,726) | (1,149) | |||||||||
| Capitalized software development costs | (28,859) | (34,363) | |||||||||
| Free Cash Flow | $ | (15,666) | $ | (26,592) | |||||||
Free cash flow was an outflow of $15.7 million for the three months ended March 31, 2025, compared to an outflow of $26.6 million for the three months ended March 31, 2024. The year-over-year change was driven by decreases
33
in incentive compensation payments and lower payments for capitalized software development costs, offset by higher capitalized expenditures.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk and Foreign Currency Exchange Risk
Our cash and cash equivalents are subject to interest rate volatility, which impacts the amount of interest income earned, and represents our principal market risk. A 1% change in interest rates would result in a change of interest income generated from our cash and cash equivalents by approximately $7.2 million over the next 12 months. We do not expect cash flows related to our convertible senior notes to be affected by a sudden change in market interest rates as they bear fixed interest rates. We do not enter into investments for trading or speculative purposes.
We operate our business primarily within the U.S. which accounts for approximately 83% of our revenues. We have not utilized hedging strategies with respect to our foreign currency exchange exposure, however we may begin to do so.
Concentrations of Risk and Significant Clients
Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. Although we deposit our cash with multiple financial institutions in the U.S. and in foreign countries, our deposits, at times, may exceed federally insured limits. Our cash equivalents are primarily invested in institutional money market funds.
No single Client represented over 10% of consolidated revenues for the three months ended March 31, 2025 or 2024. For the Integrated Care segment, a significant portion of our revenue is derived from large enterprises, mainly health plans. Revenue from the five largest customers was 31% of total Integrated Care segment revenue for the three months ended March 31, 2025 and 2024. For further information, see “Risk Factors—Risks Related to Our Business and Industry—We operate in a competitive industry, and if we are not able to compete effectively, our business, financial condition, and results of operations will be harmed,” “—A significant portion of our revenue comes from a limited number of Clients, the loss of which could have a material adverse effect on our business, financial condition and results of operations” included in our 2024 Form 10-K.
For the BetterHelp segment, there is no significant concentration risk as substantially all revenue is generated from individuals in the direct-to-consumer market.
Item 4. Controls and Procedures
Management’s Report on Internal Control over Financial Reporting
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2025, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
34
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As allowed by SEC guidelines, this evaluation excludes the operations of Catapult Health, which was acquired during the three months ended March 31, 2025.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are subject to legal proceedings, claims and litigation arising in the ordinary course of our business. Descriptions of certain legal proceedings to which we are a party are contained in Note 15. “Commitments and Contingencies,” to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q and are incorporated by reference herein.
Item 1A. Risk Factors
For a discussion of potential risks and uncertainties related to our Company see the information in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in the “Special Note Regarding Forward-Looking Statements” section in Part I, Item 2, of this Quarterly Report on Form 10-Q.
Item 5. Other Information
During the three months ended March 31, 2025, none of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934)
adopted
,
terminated
or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933).
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Item 6. Exhibits
Exhibit
Index
| Incorporated by Reference | ||||||||||||||||||||||||||||||||||||||
|
Exhibit
Number |
Exhibit Description | Form | File No. | Exhibit |
Filing
Date |
Filed
Herewith |
||||||||||||||||||||||||||||||||
| 3.1 | 8-K | 001-37477 | 3.1 | 6/2/22 | ||||||||||||||||||||||||||||||||||
| 3.2 | 10-K | 001-37477 | 3.2 | 2/23/24 | ||||||||||||||||||||||||||||||||||
| 10.1 | 10-K | 001-37477 | 10.25 | 2/27/25 | ||||||||||||||||||||||||||||||||||
| 31.1 | * | |||||||||||||||||||||||||||||||||||||
| 31.2 | * | |||||||||||||||||||||||||||||||||||||
| 32.1 | ** | |||||||||||||||||||||||||||||||||||||
| 32.2 | ** | |||||||||||||||||||||||||||||||||||||
| 101.INS |
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the
Inline XBRL document. |
* | ||||||||||||||||||||||||||||||||||||
| 101.SCH | XBRL Taxonomy Extension Schema Document. | * | ||||||||||||||||||||||||||||||||||||
| 101.CAL | XBRL Taxonomy Calculation Linkbase Document. | * | ||||||||||||||||||||||||||||||||||||
| 101.DEF | XBRL Definition Linkbase Document. | * | ||||||||||||||||||||||||||||||||||||
| 101.LAB | XBRL Taxonomy Label Linkbase Document. | * | ||||||||||||||||||||||||||||||||||||
| 101.PRE | XBRL Taxonomy Presentation Linkbase Document. | * | ||||||||||||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File – The Cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |||||||||||||||||||||||||||||||||||||
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___________________________
*
Filed herewith.
**
Furnished herewith.
37
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| TELADOC HEALTH, INC. | ||||||||
|
Date: May 1, 2025
|
By: | /s/ CHARLES DIVITA, III | ||||||
| Name: | Charles Divita, III | |||||||
| Title: | Chief Executive Officer | |||||||
|
Date: May 1, 2025
|
By: | /s/ MALA MURTHY | ||||||
| Name: | Mala Murthy | |||||||
| Title: | Chief Financial Officer | |||||||
38
TABLE OF CONTENTS
Part IItem 1. Financial StatementsNote 1. Organization and Description Of BusinessNote 2. Basis Of Presentation and Principles Of ConsolidationNote 3. Revenue, Deferred Revenue, and Deferred Device and Contract CostsNote 4. InventoriesNote 5. Prepaid Expenses and Other Current AssetsNote 6. AcquisitionsNote 7. GoodwillNote 8. Intangible Assets, Net and Certain Cloud Computing CostsNote 9. Accrued Expenses and Other Current LiabilitiesNote 10. Convertible Senior NotesNote 11. LeasesNote 12. RestructuringNote 13. Stock-based CompensationNote 14. Provision For Income TaxesNote 15. Commitments and ContingenciesNote 16. SegmentsNote 17. Subsequent EventsItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II - Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 5. Other InformationItem 6. Exhibits