Teladoc Health, Inc.

To the Teladoc third quarter 20 earnings conference call. All lives now placed on mute until the end of the conference for the speaker's remarks. At the end of the conference, the speaker's remarks are concluded. You will now have a question and answer session. At that time, we'll ask you to hit star one on your telephone keypad in order to ask a question. If your question has been answered or you'd like to remove yourself from the queue, please press pound. At this time, I'd like to turn the call over to Patrick Felix for his opening remarks. Thank you very much.

Thank you, and good afternoon. Today, after the market closed, we issued a press release announcing our third quarter 2020 financial results. This press release is available in the investor relations section of the TeladocHealth.com website. On this call to discuss the results are Jason Gorovic, our Chief Executive Officer, and Mala Murthy, our Chief Financial Officer. During this call, we will also provide our fourth quarter 2020 outlook, and our prepared remarks will be followed by a question and answer session. Please note that we will be discussing certain non-GAAP financial measures that we believe are important in evaluating Teladoc Health's performance. Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliations thereof can be found in the press release that is posted on our website. Also, please note that certain statements made during this call will be forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties, and other factors that could cause the actual results for Teladoc Health to differ materially from those expressed or implied on this call. For additional information, please refer to our cautionary statement in our press release and our filings with the SEC, all of which are available on our website. I would now like to turn the call over to Jason.

Thanks, Patrick, and thank you, everyone, for joining us this afternoon. After the market closed, we reported another quarter of significant outperformance across all key financial and operational metrics, driven by broad-based momentum across the entire business. The ongoing pandemic has highlighted the critical role of virtual care within the overall healthcare system, and we continue to see increasing adoption by consumers, clients, and providers. This broad-based strength drove record revenue of $289 million in the third quarter, an increase of 109% from the prior year period, including organic revenue growth of approximately 90%. The strength demonstrated across our diverse channels, products, and geographies, combined with a robust pipeline of new opportunities, continues to give us tremendous confidence in the forward outlook for the business. As a result of our third quarter performance and the continued momentum across the business, we are increasing our full-year revenue guidance to $1.005 to $1.015 billion. During the third quarter, we also announced a combination with Livongo Health. We could not be more excited for this deal to close later in the fourth quarter. And we've already made significant progress toward integrating our two teams, as I'll discuss in more detail later on the call. Turning to visit volumes, our network of providers delivered over 2.8 million virtual visits in the third quarter, more than triple the number of visits provided in the same period last year. We were pleased to see visit volumes increase sequentially despite the COVID-driven volume we experienced in the second quarter, as well as the seasonally lower volumes typically experienced during the third quarter. We continue to see strong evidence of sustained utilization increases for virtual care. While CDC figures and our own internal data point to overall declines in infectious disease transmission in the United States due to social distancing and the use of personal protective equipment, our overall volume growth remains strong, as evidenced by both our third quarter results and our fourth quarter outlook. One clear driver of this strength has been a steady and broad-based acceleration in our non-infectious disease-related visits. Visits for conditions such as hypertension, back pain, anxiety, and depression represent over half of our general medical visit volume, up from approximately one-third a year ago, as our comprehensive portfolio of services enables us to meet the increasing consumer demand for virtual care. New registrations also continue to grow at a rapid pace, increasing more than 80% compared to the third quarter of 2019, while visit growth from newly registered individuals continues to outpace existing user visit growth. These new registrations will continue to benefit us in the future as they create new opportunities to engage with members. Taking a closer look at the volume trends in specialty care, demand for dermatology and behavioral health services continues to significantly outpace overall volume growth. In the B2B channel, for example, visits in these specialties grew over 500% compared to the prior year. Demand for mental health care, in particular, continues to build both through our B2B channel as well as through our direct-to-consumer brand, BetterHelp. Utilization of mental health services has continued to grow in each successive month of the year, which is very encouraging given the high repeat usage profile of the service. On the heels of World Mental Health Day, we are also reminded of the critical role our providers are playing for individuals around the world. At a time when the global pandemic and economic hardship are driving increased need for mental health services, we continue to provide much-needed access for those in need. In fact, 40% of the individuals note that they would not have otherwise sought care if not for access to Teladoc Health. Together, this momentum in specialty visit growth, combined with the broadening diversity of diagnoses and robust overall registration growth, continues to give us a high degree of confidence in the sustainability of our volume growth. It also reinforces our strategy of consistently expanding the clinical scope of our services. which will take a quantum leap forward when we incorporate the Livongo capabilities focused on helping people who live with chronic conditions. Turning to the international channel, we continue to see new and innovative opportunities for growth outside the U.S. Just last week, we launched an exciting new partnership with Telefonica, one of the largest telecom providers in Europe and Latin America, including over 14 million customers in Spain. As part of this partnership, Telefonica will distribute our virtual care offering on a D2C and B2B basis to individuals and employers across Spain. We're optimistic that the results of this partnership will pave the way for similar initiatives in other geographies around the world. Last quarter, we also spoke about new geographic expansion into the Nordic region with a significant new client partnership with a large financial institution in this area. We've already leveraged that foothold with multiple new sales during the quarter, demonstrating the strong demand for a comprehensive virtual solution around the world. Our hospital and health system channel, which now includes InTouch, also continued to experience tremendous growth as health systems and physician practices adopt our technology as a secure, effective, and efficient way to provide care. In addition to the 7.6 million member visits provided by the Teladoc network of clinicians year to date, the combined Teladoc and InTouch technology platform has enabled our clients' own clinicians to provide nearly 3 million consultations for their patients. The pipeline of new opportunities in this channel also continues to expand. It's only four months since we closed the InTouch acquisition, but we've already completed over a dozen cross-sales as health systems are increasingly looking for enterprise-wide integrated solutions. And we're well on our way to achieving both our revenue and our cost synergy targets. Staying with the hospital channel, we're pleased to announce a new partnership with Johns Hopkins. one of the most prestigious academic medical centers in the world. As a fully integrated health system, Hopkins will be implementing the Teladoc Health Platform to provide their patients, health plan members, and their own employees with access to on-demand, 24-7 virtual care. Johns Hopkins selected the Teladoc platform based on our steadfast commitment to quality, our position as the most comprehensive end-to-end solution in the industry, and our innovative approach to advancing virtual care. Finally, before I turn the call over to Mala, I want to provide an update on the Livongo transaction. With each passing day, I become more and more excited by the combination of these two leaders in healthcare and technology. The opportunities in front of us are boundless, and together we will be uniquely positioned to improve the health of millions of people around the world. Our integration teams have made tremendous progress, meeting regularly to map out the integration process and demonstrating impressive collaboration. From a commercial standpoint, we will be working to integrate both teams, so that we have one go-to-market strategy and one unified interface to the client. Clients are increasingly looking for a single integrated solution that brings all of the assets of the two companies together for episodic, chronic, and complex care. We've seen tremendous interest from our clients around the world, and we've already successfully closed our first major cross-sale to GuideWell Health, the parent of Florida Blue, Florida Blue has been a longtime client of Teladoc Health, and we're extremely excited to expand that relationship and bring Livongo's platform to 50,000 of Florida Blue's members living with diabetes. To ensure an easily accessible pathway for the consumer, we will create a seamless user experience where all of the services are integrated into one experience. creating a single access point for all of the consumer's care needs. As we've gone through the planning process, we're encouraged to find that the high level of technological sophistication on both sides will make the integration even smoother than many of our prior acquisitions from a technology perspective. And the teams are actively working to map the APIs and create that unified consumer experience. Our teams have also begun to plan the integration of the unmatched datasets and capabilities of our two organizations, combining the 750 million elements from the Livongo dataset with the data generated by the 10 million plus virtual visits we will provide this year. By applying the Livongo data science to this combined dataset, we will be able to deliver a level of patient insight that has been previously unavailable. Combining meaningful, data-driven insights with clinical expertise will enable better care delivery, better outcomes, and lower costs. As part of the new leadership structure announced earlier this month, we are also in the process of creating a new integrated research and development organization. We're incredibly excited to bring together the product innovation, data science, technological expertise, and clinical excellence from across both companies under one roof. There's a tremendous talent pool in both organizations, and we're eager to continue investing in the development of innovative solutions to improve the lives of consumers and extend our leadership role in the virtual care marketplace. The similar mission-driven cultures and shared vision of the two organizations has become apparent through this process. And the more time our teams spend together, the clearer this has become. I was fortunate to spend some time with several of the Livongo commercial leaders last week. And although it was an outdoor, socially distant setting, I can say that the level of enthusiasm for what we were building together was palpable. In combining these two organizations, we are truly creating something entirely new while extending our position as the global leader in virtual care. With that, I'll turn the call over to Mala for a review of third quarter financials as well as detailed 2020 guidance.

Thank you, Jason, and good afternoon, everyone. During the third quarter, total revenue increased 109% to $289 million, or approximately 90% on an organic basis. Global access fee revenue for the quarter of $227 million grew 90% versus the prior year, demonstrating continued momentum. Total international revenue of $32.9 million grew 20% versus the prior year. Visit fee revenue for the quarter increased to $51 million, representing growth of 171% over the prior year. Visit fee revenue comprised 18% of consolidated revenue as compared to 14% of revenue in the prior year's quarter. The increase in visit fee revenue as a percent of revenue is a result of the considerable increase in utilization realized year-to-date, offset in part by the inclusion of in-touch help in our consolidated results. Turning to membership and access. U.S. paid membership increased to 51.5 million members during the third quarter, an increase of 47% versus the third quarter of last year. Individuals with visit fee only access was 21.8 million at the end of the third quarter, an increase of 2.8 million versus the prior year. As previously discussed, Visit fee-only access includes approximately 2.5 million individuals on a temporary basis that we anticipate will roll off at the end of the year. Total visit volume provided by Teladoc's own network of providers exceeded 2.8 million visits in the quarter, representing 206% growth versus the prior year. you will see a new operating metric in our press release, platform-enabled sessions, which represents encounters facilitated by our licensed software platform and delivered by clients' own care providers. Total sessions enabled were 986,000 in the quarter, which is more than triple the number of consultations provided in the same period last year. pro forma for the acquisition of InTouch Health. Visit volume from paid members in the U.S. grew 242% to over 2.1 million visits, which represents an analyzed utilization rate of 16.5%, more than double the utilization rate of last year's third quarter, and a 50 basis point increase sequentially. PMPM was $1.18 in the third quarter, up from $0.98 in the prior year's quarter. Adjusted gross profit adjusted to exclude amortization of intangibles increased by $89 million to $184 million, an increase of 93% as compared to the prior year's third quarter. Adjusted growth margin was 63.7% compared to 69% in the third quarter of 2019 and 62.3% in the second quarter of 2020. The year-over-year decline in growth margin is attributable to the robust visit growth and increase in visit fee revenue mix versus the prior year. Operating expense for the quarter totaled $203.8 million or 70.6% of revenue compared to 83.4% in the third quarter of 2019. Excluding non-cash charges such as depreciation and amortization, stock rate compensation, and one-time acquisition and integration related expenses, Quarterly adjusted operating expenses were $145 million or 50.1% of revenue compared to 62.4% in the third quarter of last year. Contributing to the operating expense outperformance in this quarter was lower than anticipated advertising and marketing expense as some engagement campaign spending began later in the quarter than previously planned. As discussed in the past, we seek to optimize advertising and marketing channel spending to maximize the value of our investment in membership engagement. As a result, some engagement spending that is expected to take place at the end of the third quarter was actually deployed early in the fourth quarter, contributing to lower A&M expense in Q3. As a result, we expect to see a sequential increase in reported A&M spent in the fourth quarter. As we have consistently said in the past, we expect A&M expense growth to approximate revenue growth, and we continue to expect that to be the case for the full year of 2020. Adjusted EBITDA increased to $39.5 million in the quarter, compared to $9 million in the third quarter of 2019. Third quarter adjusted EBITDA margin of 13.7% increased by over 700 basis points year-over-year. As noted above, the significant adjusted EBITDA outperformance in the quarter was in part driven by the timing of advertising and marketing activities between the third and fourth quarters. Net loss in the quarter was $35.9 million compared to a net loss of $20.3 million in the third quarter of 2019. Excluding $16 million of transaction costs related to the pending Livongo merger, net loss was $19.9 million for the third quarter. On a per share basis, net loss was 43 cents for the third quarter compared to a loss of 28 cents in the third quarter of last year. Excluding transaction costs of 19 cents per share related to the pending Livongo merger, net loss per share was 24 cents. We ended the quarter with $1.2 billion in cash and short-term investments, while our total debt outstanding as of September 30th was $1.3 billion. Now, turning to forward guidance. Note that until the Livongo transaction closes later this quarter, all guidance represents expected standalone Teladoc health results. For the fourth quarter of 2020, We expect total revenue of $294 to $304 million, representing growth of 88% to 94% over the prior year's quarter. We expect total paid membership of $50 to $51 million, which is net of the approximately 1.5 million temporary members we have discussed in prior quarters. We anticipate total visits during the fourth quarter of between 2.8 million and 3 million visits. We expect fourth quarter adjusted EBITDA to be in the range of $21 to $24 million, and net loss per share, excluding Livongo transaction-related costs, to be between $0.36 and $0.33, based on 84.4 million shares outstanding. For the full year 2020, we now expect revenue to be in the range of $1.005 billion to $1.015 billion, up from our prior $980 to $995 million range, representing 82% to 83% growth over the prior year. We expect total visits to be between 10.4 million and 10.6 million visits, representing total visit growth of approximately 151 to 156% over the prior year. We expect adjusted EBITDA to be in the range of $97 to $100 million, up from our prior $85 to $92 million range, representing growth of over 200% as compared to 2019. Net loss per share, excluding transaction costs related to the pending Livongo merger, is expected to range from a loss of $1.36 to $1.32 per share, based on 79.4 million weighted shares outstanding. We expect cash flow from operations to grow consistent with our adjusted EBITDA growth. With that, I will turn the call back to Jason for closing remarks.

Thanks, Mala. I'm incredibly excited about the opportunities that lie ahead of us. The pipeline for new opportunities has never been more robust. And as we continue to differentiate our offering with innovative products and services, the value proposition we provide to the marketplace is only getting stronger. Together with Livongo, we will create an unmatched combination of scale and insights. driving improved outcomes, lower costs, and a better consumer experience to meet the growing needs of clients and consumers all around the world. As always, thank you for your continued interest in the Teladoc health story. And with that, we'll open the call for questions. Operator? Operator?

And at this time, if you'd like to ask a question, simply press star then the number one on your telephone keypad. We'll pause for just a moment while we compile the Q&A roster. Our first question comes from the line of Lisa Gill of JP Morgan. Your line is open. Please go ahead, Ms. Gill. Please go ahead, Michelle, your line is open.

Okay. Good afternoon, Jason. Can you hear me okay?

Yep. Hi, Lisa.

Okay. Hi. Congratulations on another great quarter. I just want to focus on just a couple of things. I know it's early to give us any numbers around 2021, but as we think about a few things, one, unemployment trends as we go into the back half of the year, to the selling season for 2021. Just curious as to how you're seeing things. Do we need to wait? Are people signing up for a start date of 1-1-21? Are you continuing to just see it kind of flow throughout the quarters, would be my first question. And then secondly, you've said several times that there's a robust pipeline of new opportunities. Is there any way to maybe quantify that in any way? I know you've talked in the past of only a 25% overlap between your customer and the Livongo customer base, but any kind of number that you could put around that in the timeline of those opportunities?

Sure. Thanks, Lisa. Appreciate your comments and question. And before I start, apologies to everyone for the technical difficulties at the beginning of the call. We weren't trying to keep you in suspense and, you know, and we're happy to get into it. So, first of all, with respect to 2021, as you've heard us say, you know, we feel comfortable organically in the 30% to 40% range. And, you know, we've been – I think we've been disclosing a lot through the process relative to the Livongo transaction. And so I think together we feel very strongly about the growth prospects in front of us. Just as we were getting on the call, I actually got a note about another successful Livongo cross-sell to a large Teladoc employer client. And I think the market demand and the traction that we're getting incredibly strongly and early is very encouraging to me. When we look at our pipeline, you know, we would actually say we expect at this point for our bookings in the fourth quarter to be at least two times what they were in the third quarter based on what we've already closed and what's in the late stages of the pipeline. So, again, that gives us tremendous confidence in our 21 outlook. The selling season continues to be robust. We see both first quarter starts as well as starts that we're already talking about over the course of the year for expansion opportunities with clients. And then lastly, I would say that that is true across all of the channels that we have, both domestically among employers and health plans, as well as among hospitals and health systems, and internationally. And that's true sort of across all of our various channels. You asked about unemployment. We really, you know, we had modeled in some conservatism in the beginning of the year for unemployment in the back half, and we haven't seen that impact our numbers in any large degree. So, you know, we continue to monitor that closely, and, you know, and we also benefit from the fact that many people who end up rolling off the employed ranks get COBRA coverage, and along with their COBRA coverage, they get Teladoc as a benefit. So, you know, I would say that the impact of that on us is pretty dampened relative to others.

And our next question comes from the line of Sean Weiland of Paper Sandler. The line is open. Sean Weiland Hi.

Thanks very much. Jason, you called out that your B2B DERM and behavioral business was up 500%, and I was just hoping you could unpack that a little bit. Was that organic within InTouch, or were there revenue synergies there? And what does a typical workflow look like there, in particular with B2B DERM?

Yeah, Sean, I appreciate the question. When I was talking about B2B, DERM, and behavioral health, that means through our B2B channels where we're selling into a health plan or an employer. And so that's entirely through the health plan and employer channel, not really through the in-touch or hospital and health systems channel. And I think it really points to what we're seeing across the board, which is multi-product sales, right? So, you know, at this point, two-thirds of our sales are multi-product and that frequently includes both behavioral health and dermatology alongside our general medical services. And, you know, that's an exciting opportunity for us because it takes us that much further toward whole person care, which is really augmented by the addition of the Livongo portfolio. So, you know, it bodes very well for us as we start to do that cross-selling that I just talked about. And, you know, we now have a large health plan and a large employer who have already adopted the Livongo product line.

And thank you. Your next question comes to the line of Richard Close of Canaccord Annuity. Your line is open.

Richard Close Great. Congratulations. Mal, I was wondering if you could just help us with respect to the fourth quarter adjusted EBITDA margins, implied margins there. Is the sequential step down from the third quarter just a function of that marketing spend that you highlighted in your comments?

Yeah, thank you, Richard. Here's how I would think about the adjusted EBITDA and adjusted EBITDA margin. Think of it as the third quarter and the fourth quarter combined. So think of it as second half. And as you saw, relative to the earlier guidance we had given in July, at the end of July, we have taken up our adjusted EBITDA, expected adjusted EBITDA outlook by roughly about $10 million, right? And the way I would unpack it is as follows. You know, we are, as we've talked about in our prepared remarks, there is a timing shift versus what we had earlier thought about from an advertising and marketing perspective. You know, it was the right thing to do based on the returns we were seeing. So we were very judicious about how we spent A&M. The other thing I would also say is we are looking to lean into our investments in the fourth quarter on things such as R&D. In InTouch, you know, there are investments that we have wanted to make and we are making in the fourth quarter. So it's really about leaning into our investments in the fourth quarter such that we execute on the momentum that we see in the business and get a quick start for next year. So that's really how I would think about sort of our adjusted EBITDA, the third and the fourth quarter combined. And the A&M shift from the third to the fourth quarter, think about it in the $4 million to $5 million range.

And our next question comes from the line of Stephanie Davis of SVB Lernick. Your line is open.

Hey, guys. Congrats on a good quarter.

Thanks, Stephanie.

So utilization surprised us the most this quarter in that it only moderated a touch sequentially despite a pretty sharp shift in the broader environment towards in-person versus virtual care. Could you walk us through the puts and takes that are driving this, such as maturation of new members from the prior year or anything else that's keeping it so strong?

Yeah, I think there are a few things there, and I appreciate that observation. You know, we did see in many parts of the country office visits return to near normal levels. And at the same time, you're seeing people access Teladoc for online a broader array of clinical services. So, you know, as we mentioned, about 55% of our general medical visits were for noninfectious diseases. So, you know, there's a moderating of overall infectious disease in the market by about 25%, according to the CDC. And yet our volume was up substantially. And so what we're seeing there is that our multi-product and broad clinical array of services strategy is paying dividends. It's providing more services and more capabilities for consumers. the awareness increase of virtual care overall is bringing more people to our front door. And I think that's evident by the increase in new registrations of roughly 80%. And then the last part I would say is that we are seeing just tremendous increase in visit volume for other specialties. So both non-infectious diseases, the role of virtual care, other specialties and the fact that we're seeing new people come to our front door all work to offset the overall market decline in infectious disease. So just sort of the last punctuation mark I'll put there is if you then play it forward a year to where we have a more normal infectious disease cycle, I think you'll continue to see those overall utilization rates increase.

And our next question comes from Ryan S. Daniels of William Blair. Your line is open.

Yeah, thanks for taking the question. Jason, a two-fold strategic question for you. I'm curious what the integrated offering that you're going to go to market with with Livongo, if that gives your payer partners an opportunity to effectively launch an entirely new type of insurance offering to consumers, maybe at a lower cost, virtual digital front door? And if so, second question is, do you think that will eventually open up the opportunity for expansions within the payer client base to offer that or maybe even market share gains with some of the bigger payers you're not working with? Thanks.

Yeah, thanks, Ryan. It's a really good question, and the short answer is yes. We're already talking with our large payer clients and large employers about what we talk about as virtual primary care. which is the full credit, whole person answer that is a virtual solution that brings the entire breadth of our products and services to bear. And we're talking about doing that and wrapping a new benefit design, a new insurance product around that, that really changes the benefits and sense the usage of that virtual first and sort of holistic virtual capability set. And I think that gives the health plan to embrace it a competitive advantage to deliver better care and a better consumer experience at a lower price. And it gives us the opportunity to share in the upside that we create, the savings that we create, the better outcomes that we create, the better, you know, star ratings and HEDIS metrics that we can drive. And we're seeing those results already in our virtual primary care pilots where we are seeing a very broad array of clinical diagnoses, over 70 clinical diagnoses. A lot of those are for things that we have solutions for, things like obesity and hypertension, diabetes. you know, anxiety, depression, and a shocking, for me, number of initial first diagnoses of some of those chronic conditions like hypertension and diabetes or prediabetes. So the opportunity for us to take care of the whole person with our complete set of services does open up those new opportunities.

And thank you. Your next question comes from the line of Charles of Cohen. The line is open.

Yeah, thanks for taking the question and congrats on the quarter. Jason and Mala, you know, obviously a strong quarter and I think you touched on it earlier about sort of the dynamics that propel still a very strong quarter in the third quarter when we saw some of the metrics externally look like there was some pullback from the peak. When we look at the fourth quarter guide, Mala, maybe you can help us unpack a little bit some of the assumptions going into the fourth quarter. When you look at it, it looks sequentially flat to slightly up when seasonally you would think fourth quarter is a strong quarter for health care services in general. Can you maybe help us understand a little bit of the underlying assumptions? I know previously you guys did not assume a second wave in terms of COVID. Maybe give us a little thoughts on sort of what goes into that. And then, you know, you've given us this affiliated platform visits kind of number going forward. Could we expect maybe as you integrate in touch more, given that it's more of a provider-focused business, that you'll break that out separately on the subscription line as well? Or how can we think about modeling that going forward? Thanks.

Yeah, so great question, Charles. Let me address them as follows. So on your second question around InTouch and HHS, you know, as we talked about in our prepared remarks, we have talked about the platform-enabled sessions. You know, one of the reasons we provided that metric is that it is a great proxy for the engagement that our clients have with the platform. And we believe that that is the engagement that drives value for our clients. So that is definitely something that we think will, as this business continues with the strong momentum it is showing, it will outpace revenue growth, but it is something that we think will really fuel the continued expansion of the business. In all candor, we have looked at other metrics. You talked about providers. We have looked internally at other metrics. Remember, we are still in the process of integrating our ERP systems, our CRM systems. So what I would say is look for us as we continue on to next year to provide transparency on other metrics in the hospital and health systems business that we think will give clarity on the true underlying momentum of the business. You know, the platform-enabled sessions is a great start. At this point in time, we don't plan to break out the revenue for the HHS business beyond what has already been provided. As you saw in the results we put forth, we have broken out one piece of business in our revenue, the other revenue, which actually shows the hardware revenue, both purchased and leased. That is separate, broken out separately. But at this point in time, we don't plan to do any further breakouts. We'll just provide more transparency on the operating metrics of the business. On your other question in terms of the assumptions, Here's what I would say. First of all, you saw in our results a continuation of the very broad momentum that we are seeing across our business, right? So it is across all channels, whether it be on the commercial side, whether it be on our DTC side, or whether it be on our HHS side. We are seeing broad momentum across the business, and that is translating into the strength you're seeing in year-over-year growth. on access revenue as well as visit revenue. In terms of the fourth quarter guide, the way we have modeled it and thought about it is, you know, we are looking at the robustness of the pipeline we have. We are looking at, from a visit perspective, we are expecting a relatively weak flu season. The shelter in place and the use of PPE has been factored into our forecast. I would not expect to see an incremental upside versus what we have guided on from a second COVID surge. We have factored in all of those into our guide. And I would also say in terms of the adjusted EBITDA margin, as I've said in my prior remarks, we have reflected the fact that we really do want to invest and lean in into our investments ahead of the strong momentum we expect in our outlook for next year, as we have already shared in terms of the 30% to 40% on an organic basis.

Thank you. And your next question comes from Jill Andresen of Credit Suisse. Your line is open.

Thank you. So CMS update in late September pointed out that over 94% of Medicare Advantage plans will offer telehealth benefit next year. versus like 58% this year. Jason, you have talked about telehealth rollout by Medicare Advantage plans being like more three-year phenomena. So this seems to be trending better than those expectations. Do you agree with that? And the second, if you can provide any update on Teladoc's success with MA plans for 2021 for telehealth benefit.

Yeah, what I can tell you, Jalendra, is that we're seeing quite a bit of interest from all of the government programs at this point, both managed Medicaid as well as Medicare Advantage. We're up over 2.5 million Medicare Advantage members. at this point, which is about a million more than I think the last time we gave you a number. I'm not going to give an outlook for 2021 at this point. I think the The adoption continues to be strong, and I think with the Livongo set of capabilities and the prevalence of hypertension, diabetes, prediabetes among the MA population, that's going to make our products and services that much more attractive. And we're working on a set of additional capabilities that I think will increase the value of our overall portfolio to MA plans. So I feel good about the progress we're making there, and I think that that will continue through 21 and beyond.

And your next question comes in the line of Daniel Gross, right of Citibank. Your line is open.

Hi, guys. Thanks for taking the question, and congrats on the continued momentum here. We've seen some payers still waiving cost shares for telehealth, while others have reverted to the pre-pandemic benefit design. For what it's worth, I still check in every week with my insurer to make sure they're still waiving cost share, and they are. But what was just curious, of your commercial book, both for those who are getting Teladoc through their employer as a carve-out or through their insurer, do you have a number of what percent of your clients are still waiving the cost share?

Well, Daniel, I appreciate your checking in with your payer, and I would suggest you continue to do that and encourage them to continue their zero copay. We haven't disclosed what percentage of our payers. What I can tell you is it's a mix. Among our payers who make the decisions for themselves, there are some who have returned to charging a copay for virtual care services. There are others who have extended through the end of the year. And then among the employers, we're seeing the employers, the large self-insured employers who are making those benefit decisions for themselves, really stick with that zero copay. And we expect them to stay with that at least through the end of the year, if not beyond.

And our next question is from George Hill of Deutsche Bank. Your line is open.

Good evening, guys, and thanks for taking the question. Jason, I've got a question for you on how you think about market share. If we look at the almost 52 million members where you guys ended the quarter and we kind of put your 30% growth number on it for 2021, that'll put you to call it 62 to 67 million members, which is like 40% of people with employer-sponsored coverage, a little close to 30% of people if we include everybody with risk-based coverage, probably in the low 20s if we include Medicare Advantage members. So I guess, how do you guys think about your market share and kind of what is the right way to think about Teladoc's market share and how you guys approach what share of the market you guys want to have on a normalized basis?

Yeah, so, George, first, I just I guess I want to just start by saying We've given some outlooks relative to revenue growth. We've given outlooks relative to sort of margin expansion, but we haven't given, at least to my knowledge, outlooks in terms of annual membership growth. So I want to not jump to what our 21 membership will be until we give guidance, which will probably be in February-ish. With respect to our market share, you know, we think about market share among in sort of a few different dimensions. First of all, We're looking at multiple different channels, right, whether it's employers or health plans, whether it's hospitals and health systems domestically and internationally, and, of course, we're selling direct to consumer. It's also for different products, so we have such a diverse product line. And we still have, as we look at our greenfield opportunity just among our existing clients, there's north of 70 million people who are still what we would call white space among our existing clients. So tremendous opportunity for continued growth domestically among those populations. I THINK IT'S IMPORTANT TO Every year we sell more products and services into those populations, you know, as I mentioned with our multi-product bookings, with now the opportunity to bring the Livongo product set to bear. So it's a bit of a complicated question because, you know, of course, the last dimension is what share of visits are we getting? And, of course, we generate additional revenue from both new members as well as additional incremental visits.

And our next question has a line to Matthew Gilmore of Baird. Your line is open.

Hey, thanks. I was hoping you could take a moment to update us on where things stand from a physician supply standpoint within your network. You know, obviously offices are opening back up, and this is a time of year where utilization is normally higher. But I was curious if you were seeing any pressure with respect to recruitment or compensation or, you know, maybe what's in place today versus wasn't there at the beginning of the year.

Thanks, Matt. I appreciate the question. The innovation that we put in place in the March timeframe as we were experiencing the incredible increase in volume has really paid tremendous dividends for us over the course of the year. And that's helped us to expand our population of physicians. It's helped us to onboard physicians more quickly and in a streamlined fashion. It's helped us to make the physicians work more efficient so that for each physician's hour that they're spending with us, they can be more productive. And so the combination of all of those things has really resulted in just tremendous efficiency gains and greater productivity. And as a result, you know, we are operating at significantly higher levels of utilization, as we've reported, and yet our, you know, response times are down in the, you know, low single digits minutes. to speak to a physician really across the country. So I'm really proud of the team's work on those areas. And it was both workflow changes, it was technology changes, it was process innovation, and all of that has come together in a really meaningful way.

And our next question comes from Robin Musra of Barringer. The line is open. All right.

Thanks for taking the question. So just a little question on the competitive environment now that you have another kind of public company in your space. Just curious, how are you kind of accounting for churn or any kind of competition in the selling season? Are you seeing any commentary there would be helpful? And then just on the Livongo deal, how should we think about that long term in terms of the value extraction that you've spoken about? Can that kind of be converted to a PNPM uplift? And is that factored into the synergy guidance that we've gotten? Thanks.

Sure, I'll take the first on competition and client retention, and I'll hand it to Mala for the Livongo Synergies discussion. With respect to the competitive landscape, we were already by far the leader, which I think has become that much more clear as other data has become public. And now, with the combination with Livongo, we're really creating an entirely new category and distancing ourselves from any of the legacy telehealth players. And with respect to how that shows up in our pipeline, our client retention rates continue to be very, very strongly in the 90s. Our takeaways are actually increasing in velocity, our competitive takeaways. And that's happening across multiple channels, you know, in the health plan and employer segment, as well as in the hospital and health system channel. And as a result, You know, I think I've never felt better about the competitive landscape and our competitive position. Molly, you want to talk about Livongo and the synergy?

Yeah. So, you know, we have been very clear in terms of how we are getting at and thinking about our revenue synergies. We've talked about, you know, the buckets that we have seen a quantified line of sight to being cross-sell, cross-referral, and international, as you know. We've also talked about other buckets of synergies that we have not quantified, whether it be you know, how this will facilitate and even bolster our virtual primary care offering, et cetera. The thing I would say is, you know, we are just in the beginning stages of really doing deep, deep integration planning. You know, the two sets of teams came together a couple of days ago. We spent all day looking at integration from every possible function and within every function, every possible sub-function. You know, we are starting to think through from a pricing architecture standpoint your question, how is this going to work together? You know, how are the bundles going to work together? So stay tuned in terms of how we will go sell this in the marketplace. I don't want to get ahead of our skis and talk about it yet. That is thinking and planning that we are literally doing as we speak.

And thank you. Your next question comes from Jonathan Young of Barclays. Your line is open.

Thanks. I just had a question in relation to Livongo. I think with the GuideWell deal, Livongo is already in discussions with them and with the Teladoc-Livongo merger. That really accelerated things. I was wondering if that was the same case with the large employer that you signed. Is this a key factor for your kind of revenue synergies moving forward? or where you're able to expedite some of the deals because of these relationships? And are those revenue synergies already in Livongo's pipeline and you're just expediting it?

Yeah, I think there's definitely an acceleration that happens. And the acceleration is for a number of reasons. One, because it's easier to contract with a company you already have a contract with. right, so you don't have to go through the entire procurement process. Two, people appreciate having a single relationship manager, a single team. And three, and maybe most importantly, the value proposition of an integrated suite of products for the consumer is so much stronger. And so the ability to do that, to bring a single solution, not only accelerates the process, but also, very importantly, increases the value proposition. And specifically to your question about whether the large employer I mentioned earlier was already in discussions with Livongo, they weren't even talking to them. So the answer is no. That was a de novo sale. And so, you know, you can appreciate how quickly that has progressed and therefore how strong the value proposition of the combined offering is.

The one other thing I would add is, as we thought about the revenue synergies and quantifying the revenue synergies, to be very clear, what we had already factored into the calculus was the fact that, of course, Livongo has a momentum of its own and it was going to have its own strong pipeline that fed their own organic growth. So we've been very careful about not double counting and factoring those. We have kept them clear and distinct as we modeled out the synergies.

Thank you very much, everyone. And with that, this concludes today's Q&A session as well as today's conference call. Thank you for your participation. You may now disconnect.