Teladoc Health, Inc.

Good day and thank you for standing by. Welcome to Teladoc third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's prepared remarks, there will be a question and answer session. To ask a question during the session, you will need to press star and then the number one on your telephone keypad. Please be advised that today's conference is being recorded. And if you require any further assistance, please press star zero. Thank you. I would now like to hand the conference over to your first speaker today, Mr. Patrick Philly, head of the investor relations. Sir, please go ahead.

Thank you and good afternoon. Today, after the market closed, we issued a press release announcing our third quarter 2021 financial results. This press release and the accompanying slide presentation are 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 and full year 2021 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 the 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.

Good afternoon and thank you for joining us. This afternoon, I'm pleased to report another strong quarter marked by solid financial performance, more care delivered, and deeper member relationships. Today, I also want to highlight two areas where we've made meaningful high impact progress toward our goal of transforming healthcare. One, becoming the consumer destination of choice for virtual care, and two, gaining significant commercial traction for our integrated whole person primary care approach. Consumers and clients are demanding a single integrated virtual healthcare solution that seamlessly takes care of all of their healthcare needs, redefines the care experience, and leverages data to improve care at scale. During the third quarter, we continued to demonstrate on our unique ability to meet those demands with a whole person care approach that continues to fuel our sustained growth. Our broad portfolio of capabilities drove excellent financial results, producing revenue of $522 million in the third quarter, an increase of 81% over the prior year. including organic revenue growth of 32%, which excludes revenue from acquisitions completed over the past 12 months. With our third quarter results and increased visibility to Q4 revenue, we're updating our full year revenue guidance range to $2.015 to $2.025 billion, representing growth of 85% over the prior year. While these financial results quantify our ability to deliver on our promises and sustain the success of our work to transform healthcare, validation came in a number of forms. And we're very proud that Teladoc Health has once again been named number one in consumer satisfaction by J.D. Power. We've always viewed our outstanding consumer experience as a key differentiator for us. but also as one of the unique ways in which we expand our role in an individual's healthcare journey. For example, we find that the Net Promoter Score for someone's first visit is a strong leading indicator of future usage, and a positive initial experience creates stickier relationships with our members. The recognition by J.D. Power is proof positive that we're delivering on our promise to our members. and the strong utilization increases in spite of the waning pandemic are the results. Our global network of clinicians provided 3.9 million visits in the quarter, an increase of 37% over the third quarter of last year. Even as pandemic restrictions continue to ease and vaccination rates improve, consumers are increasingly relying on Teladoc Health's virtual care. we're now on track to provide more than 14 million visits for the year. As has been the case all year, the strength and utilization has been driven by growth in visits related to non-infectious diseases and specialty care, as consumers are turning to us for a broader array of conditions. During the third quarter, more than 75% of member visits in the employer and health plan channel were related to non-infectious diseases, versus approximately 50% in the pre-pandemic period. Growth in mental health visits in particular continue to outperform across the direct-to-consumer, employer, and health plan populations. And B2B mental health visits remain on pace to double this year as compared to fiscal year 2020. While we continue to see lower than typical transmission of infectious diseases across the country due to social distancing and PPE usage, our infectious disease volumes have continued to increase throughout the year. The combination of building momentum in infectious diseases and continued strength in non-infectious disease and mental health volumes gives us great confidence in our outlook for 2021. We have also made substantial commercial progress with our Primary 360 product, which represents a key pillar of our whole person care strategy. Primary 360 reimagines primary care by delivering a fully integrated virtual solution of mental and physical health, leveraging technology and data, bringing together a full care team for the consumer, and connecting into the physical delivery system to get consumers the right care at the right time. Over the last few months, we've signed several new agreements for Primary 360, including two notable health plan deals. First, as announced earlier in the quarter by CVS, we signed an agreement to bring Primary 360 to Aetna's self-insured employers nationwide beginning next year. Earlier this month, we also expanded our relationship with Centene. to partner on its new and better virtual first health plans on the healthcare exchanges, beginning with four states in 2022. Each of these agreements provides members with access to our virtual care team, including a virtual primary care physician of their choosing and care extenders such as nurses, zero copays for virtual visits, unlimited messaging, integration with our virtual specialties such as dermatology and mental health, and navigation to local in-network providers when needed. We expect these partnerships, along with deals signed across our suite of whole person solutions with HCSC and other Blues plans over the past several months, to contribute meaningfully to growth over the next few years as we drive adoption of our whole person virtual care solutions. Another key on ramp to our full set of products and capabilities is Teladoc's integrated suite of chronic care solutions. The number of individuals enrolled in our suite of chronic care solutions grew 31% year over year to 725,000 at the end of the quarter. In the third quarter, we continued to drive growth in multi-program enrollment. 24% of our chronic care members are now enrolled in more than one program, up from 8% in the third quarter of last year. The growth in chronic care enrollment, combined with the greater number of individuals enrolled in multiple programs, such as members enrolled in both our diabetes and hypertension programs, resulted in a 45% year-over-year increase in the total number of chronic care programs in which our members are enrolled. Before I pass off the call to Mala, I want to provide some initial perspective on our expectations for 2022. As you know, it's not our typical practice to comment on forward outlook at this point in the year, but we believe the additional color is appropriate given our insights at this stage of the selling season and our outlook on consolidated revenue growth for next year. First, we are as confident as ever in our multiple levers for growth in 2022 and beyond. Our unique ability to deliver longitudinal whole-person care is a significant competitive advantage, and our leading position in all B2B and DTC channels enables us to fuel continued growth. Given our insights at this stage of the selling season, our preliminary outlook for consolidated revenue next year is approximately $2.6 billion. We plan to provide additional details around the building blocks to that outlook at our investor day in three weeks. Chronic care is just one of those levers for growth and is increasingly converging with others. For example, through the integration of our capabilities into new high value products like Primary 360 and My Strength Complete. So far this year, chronic care has grown in line with our initial expectations. However, as we work through the 2022 planning process, we expect to be more conservative about growth expectations for standalone chronic care. Our preliminary outlook assumes standalone chronic care revenue will grow approximately 25 to 35%. And we believe strongly that our chronic care capabilities will also continue to unlock growth across our integrated suite of products and solutions. Our whole person care approach is clearly resonating with clients and consumers as their expectations for virtual healthcare delivery continue to move up the value chain and expand from transactional episodic demand toward integrated longitudinal care. As the only virtual care provider capable of delivering the full credit answer at scale, the breadth and depth of our solutions uniquely positions us to meet the market's evolving expectations and demonstrates why our clients are turning to Teladoc Health to satisfy a wider set of consumer healthcare needs. We hope this insight provides helpful context, and we look forward to sharing more at our investor day on November 18th, where we plan to provide an update on our progress toward creating the integrated virtual front door to whole person care, as well as detail on our long-term growth outlook. With that, I'll turn the call over to Mala for a review of the third quarter, as well as detailed guidance.

Thank you, Jason, and good afternoon, everyone. During the third quarter, total revenue increased 81% to $522 million, or 32% excluding acquired revenue. Total US revenue for the quarter was $483 million, representing growth of 89% over the prior year's quarter. total international revenue of $39 million increased 17% over the prior year. Access fee revenue for the third quarter increased 99% year over year to $452 million and represented 87% of total revenue, up from 78% in the prior year's quarter. The increase in access fee revenue as a percentage of total revenue is primarily due to the acquisition of Livongo, and growth in direct consumer mental health, which is sold on a subscription basis. Visit fee revenue for the third quarter of $60 million increased 18% year over year. Turning to membership and access, we ended the quarter with US paid membership of 52.5 million members, an increase of 500,000 members sequentially over the prior quarter. Individuals with visit fee only access was 23.6 million at the end of the third quarter. Total unique members enrolled in one or more of our chronic care programs was 725,000 members as of the third quarter, a 31% increase over the 553,000 unique members as of the prior year's quarter, pro forma for the merger with Livongo, and an increase of 16,000 members sequentially which was in line with our expectations. Average revenue per member per month was $2.57 in the third quarter, up from $1.18 in the prior year's quarter, and $2.47 in the second quarter of 2021. The primary driver of the sequential increase in revenue per member was growth in direct-to-consumer mental health revenue. Now turning to visits, During the third quarter, we provided 3.9 million visits through our network of clinicians, representing 37% growth over the prior year's quarter. We saw strong growth in both direct-to-consumer visits and visits through our enterprise relationships with health plans and employers on a year-over-year and a sequential basis. Platform-enabled sessions, which represents encounters facilitated by our licensed platform, and provided by our clients' own clinicians were an additional one million in the quarter. The analyzed utilization rate for our members was 23.7% in the third quarter, a 720 basis point increase over the prior year's quarter, and a 210 basis point increase sequentially. Adjusted gross profit, which excludes depreciation and amortization of intangibles, increased to $353 million. Adjusted gross margin was 67.6% compared to 63.7% in the third quarter of 2020. The 390 basis point improvement in adjusted gross margin is primarily attributable to the increased mix of subscription fee revenue versus the prior year, Gross profit and adjusted gross profit in the third quarter of 2021 include the benefit of approximately $5.7 million in lower expenses on Livongo devices attributable to purchase accounting adjustments related to the merger. Adjusted EBITDA was $67.4 million in the third quarter compared to $39.5 million in prior year's quarter. Adjusted EBITDA in the third quarter of 2021 includes a benefit of approximately $5.7 million attributable to purchase accounting adjustments mentioned previously. Better than expected, adjusted EBITDA in the quarter was driven in part by a slower ramp in technology and development spending versus plan. We continue to make material investments in technology and data science to deliver on the full promise of whole person care at scale. and we are anticipating a material ramp-up in investment in the fourth quarter and into next year. Net loss in the third quarter was $84 million compared to a net loss of $36 million in the same quarter last year. The wider net loss was primarily attributable to increased stock-based compensation and amortization of acquired intangibles. On a per share basis, net loss was 53 cents for the third quarter compared to a net loss of 43 cents in the prior year's quarter. Net loss per share includes stock-based compensation expense of 45 cents, loss and extinguishment of debt of 1 cent, and amortization of acquired intangibles of 28 cents. We ended the quarter with $826 million in cash and short-term investments, while our total recorded debt outstanding as a quarter end was $1.2 billion. Operating cash flow in the quarter was $77 million. Now turning to forward guidance. For the full year 2021, we now expect revenue to be in the range of $2.015 to $2.025 billion. We expect adjusted EBITDA in 2021 in the range of $260 to $265 million. As discussed previously, We are reinvesting cost synergies back into the business to fuel long-term growth, including the rollout of new capabilities and new products, such as MyStrength Complete and Primary 360, continued integration of Livongo, enhancements to our integrated data platforms, and expansions into new markets. We now expect total visits in 2021 to be between 14.5 and 14.7 million visits. representing growth of 37 to 39% over the prior year. For the fourth quarter of 2021, we expect revenue of $536 to $546 million, representing growth of 40% to 42% over the prior year's quarter. We expect total paid membership in the range of 52.5 to 53.5 million, and anticipate total visits during the fourth quarter of between 3.9 and 4.1 million visits, which represents year-over-year growth of 32% to 39%. We expect fourth quarter adjusted EBITDA to be in the range of $69 to $74 million. With that, I will turn the call back to Jason for closing remarks.

Thanks, Mala. Finally, I'd like to add that in the midst of all the third quarter efforts we just shared, Teladoc Health, as a combined company, earned certification as a great place to work. As some of you may know, this premier organization evaluates a company's cultural health through both objective measures and employee surveys before conferring its designation. And we were excited to get this positive report card in the wake of fully integrating our teams. As always, thank you for your continued interest in Teladoc Health. We look forward to sharing more at our Investor Day on November 18th. And with that, we'll open the call for questions. Operator?

Thank you, Jason. As a reminder, to ask a question, you will need to press star and then the number one on your telephone keypad. To withdraw your question, just press the pound key. Given time constraints, please limit yourself to one question. Thank you. Please stand by while we compile the Q&A roster. Our first question comes from the line of Lisa Gale from JP Morgan.

Please proceed with your question. Thanks very much and good afternoon. Jason, I just want to go back to your comments around whole person and that'll be meaningful over the next few years. So just to understand this a little bit better, can you help me around how to think about virtual primary care versus traditional when we think about both revenue and profit. And when you say meaningful over the next several years, is that a meaningful driver in 2022?

Yeah, so thanks, Lisa. I'm really excited about our whole person suite of capabilities. And let me go sort of first with what we mean by whole person and then lean into a deeper discussion of Primary 360. So when we talk about a whole person, we mean the philosophy of taking care of the entire person, both their physical health and their mental health, their acute episodic needs, as well as their chronic and complex needs, as well as taking care of them on a preventive basis. Things like making sure that they're getting their screenings, making sure that they're eating properly and have the counsel of a registered dietitian in our nutrition programs, and that they have both digital and human interactions. So a model that brings digital modules to them when that's appropriate, as well as a full care team that's there for them. And we've proven our ability to do that and the appeal of that with the number of people who are now enrolled in multiple chronic care condition programs for us, as well as our ability to sell mental and physical health together. And we continue to see very, very strong results in multi-product sales into our clients. And so what we see is that that whole person approach really resonates with the market, both with clients at the purchasing level as well as with consumers at the utilization level. As I go deeper into Primary 360, we're very excited to have announced relationships with CVS for their Aetna self-insured clients. and virtual first plan designs that we'll be rolling out in that market nationally, as well as with Centene and their Ambetter programs on the exchanges, again, with a virtual first plan design. The economics are greater than our traditional general medical programs. or the combination of a general medical and mental health program because we're bringing the full credit answer, so to speak, to bear for the consumer that takes advantage of our entire suite of capabilities. When we talk about a meaningful impact, we expect to see substantial growth off of an admittedly small base in 22. And in 23 and beyond, we expect that to have a meaningful impact on our overall financials as a company. And maybe last, before I hand it to Mala for any additional commentary, I'll just preview that we're going to do a deeper dive into our primary 360 product, as well as the opportunity for us to enter into more value-based arrangements to capture a bigger part of the savings that we generate when we host our investor day in three weeks.

Yeah, and I was going to save that question for the analyst day, Jason, but Mala, if you want to comment at all from a value-based perspective, just listening to everything that you just said and thinking about value-based programs that are out there, thinking about capitation, this all sounds like this is very well-suited for as we think about some of those new programs that are coming to the market. So, you know, Malik, if you can add any commentary around the financial impact, but I'm just curious, Jason, do you see Teladoc taking risk in this area? And maybe that's something you're going to talk about at the analyst day.

I do see us taking risk and I think we'll step into that and I'm thinking of a slide that we're going to show at our investor day that demonstrates the degrees of risk and the progress that will make going from first clinical measures. to then risk corridors to ultimately full capitation. Of course, you have to draw a box around that to make sure that we're taking credit for the savings we're generating where we're generating it, and we're not taking risk outside the scope of where we can have an impact. So I think you'll see a lot more depth on that at our analyst day.

Yeah, and I would add to the point Jason just made. You know, the fact that we have the data and the data science capabilities that we have, and the integrative data that we are hard at work on, all of those types of capabilities, along with the scale of technology that we have, is what we will bring to bear as we, you know, go on the journey in expanding Primary 360 The only other thing I wanted to say, Lisa, and again, we'll talk more about this and other sort of levers of growth on Investor Day. You know, as we think about the opportunity for us to penetrate deeper into our member base and think about revenue per member expansion, You know, we are excited about Primary 360 as one of the many levers we have to expand our revenue per member. Again, I still go back to what Jason said. We expect this to be a multi-year journey, you know, with meaningful increase in the three to four years ahead.

Thank you. Your next question comes from the line of Shawn Whalen from Piper Sandler. Please proceed with your question.

Thanks very much. I wanted to ask about some of the changing privacy landscapes out there, limiting apps' ability to track us all over the place. What impact do you think this will have in your DTC marketing strategy and marketing costs?

Sean, I don't think that that'll have an impact at all. You know, one of the things that I'm really proud of relative to our DTC efforts is number one, our focus on privacy and compliance, but number two, also our focus on diversifying the channels through which we acquire new members and attract new members. And I know that there are plenty of companies that are very focused on one or two channels. We've done an excellent job over the last several years of diversifying into multiple channels and always doing it in a way that focuses on sort of the member first. So I don't think it'll have an impact at all, Sean.

Thank you. Your next question comes from the line of Jay Lender Singh from Credit Suisse. Please proceed with your question.

Yeah, thanks. Hello, everyone. Jason, I wanted to follow up on your 25% to 35% standalone chronic care revenue growth commentary for next year. I know it is difficult to parse out, but is that before any synergies you expect from Teladoc-Livongo combination? And you also mentioned that you are taking a conservative view there. Can you help us understand what is driving that? Are you taking a conservative view around enrollment and adoption of Livongo offering, or is it more around expectations around multi-products enrollment?

Yeah, so I'll comment on the second part. When we talk about chronic care management and our outlook, we've done a lot of work to make sure that we're very focused on the discipline that we bring and have always brought to our management of the pipeline and our forecasting process. When we look at the chronic care pipeline, I sort of break it into the different customer channels. We've, I would say, been very successful in selling into the health plan channel over the course of this year, and our pipeline still looks strong with new opportunities. Many of those opportunities, either the existing sales that we've made or the ones in our pipeline, are the permission and the partnership with the health plan to go sell to their self-insured clients. That takes a couple of years to unlock the full value of it because you have to go through the renewal cycle and the selling cycle to those self-insured clients. And so we're trying to be very realistic about the sort of on-ramp of those clients in the health plan segment. With respect to the employer market, that's a market where our products are extremely attractive and historically we've been very successful at selling into the employer market directly when we sell directly to large employers. That's a market where the benefits managers have, I would say, paused over the course of this year, more than we've seen it in the past. And it's really due to COVID and then being focused on the pandemic and return to work. As I talked to our employer sales team, They see that picking up substantially as we get to the end of the year and people are starting to get back to the office and the benefits managers are starting to think about more of a return to normal. And so they're optimistic as we look into next year's selling cycle. And then there are two channels that I would say are just moving a little more slowly than we had originally anticipated. And again, we want to be conservative in our outlook. The broker channel, we had high expectations, and we're just starting to see that pick up now. It took a while to educate the brokers. We have a large distributed broker network, and it took a little while to educate them on a product set that they really didn't have access to before. We're now starting to see that pick up substantially and we're excited about next year's selling season for that. And then lastly, international. You know, I think the international markets, we have to go through some both regulatory hurdles in terms of local certifications and approvals, but also, you know, localizing our products to various international markets. And we're doing that in a fairly methodical approach market by market. So I think we will see growth internationally, but we don't have really anything in our plan for next year on a substantial basis. And then maybe the last thing I'll say is that's been, I would say, positively offset by our growth in the hospital and health system market. where we've noted before that we've seen especially risk-bearing hospitals really lean into the chronic care solutions, and that's going better than we had expected. So when you put all of that together and we take a, I would say, critical look at the pipeline and our forecast, that's where we landed on that 25% to 35% outlook. Again, that's a contributor to our overall outlook. of approximately $2.6 billion in revenue next year.

Thank you. The next question comes from the line of Stephanie Davis from SVP Lering. Please proceed with your question.

Hey, guys. Thank you for taking my question. I was hoping you could give us a broader view on the new primary 360 offering and how it ties into the existing health system. Is it something we could see it tie into your existing hospital solution, or should we think of it as a standalone play that almost competes with the traditional health system?

We see our role, and this has always been the case. We believe that we can transform the healthcare experience and transform how people get care by working with the healthcare system and the physical delivery system and integrating into it. You know, I've been quoted many times as saying I don't think healthcare is ripe for disruption. We actually don't use that word when we talk about what our role is. But rather, we think our role is to work with the physical delivery system to improve the care that's ultimately delivered. Now, look, we have certain advantages over the physical delivery system. I mean, we have 2 billion data points in our data platform. of chronic care measurements from our chronic care tools. We're delivering over 25,000 personalized health nudges every day. And that's because we have this depth of data. We're providing over 30,000 virtual visits on average every day. So when you put all of that together, we have this incredibly rich set of data. And so we believe that we can really transform the primary care experience and the health outcomes from primary care, but we also recognize that we can't do everything. There's care that has to be delivered in person, and that comes in a number of forms. We'll integrate with certain partners for the last mile delivery, whether that's in-home lab testing or in-home care that can be done in the home, but needs a physical interaction. or referring into the most efficient parts of the delivery system. And Stephanie, to your exact question, I think the places where that will happen most seamlessly is the providers who are using our technology platform because we can make a seamless handoff to them and really act like a concierge for the consumer. But we also recognize that we have to be responsive to our health plan partners and refer into the most efficient parts of their delivery network. So I'm not looking to compete with it. I really think that there's an opportunity for us to improve the overall performance of the healthcare system and work with the healthcare system.

And the other thing I would also ask Stephanie is, you know, we are beginning to open the door to conversations with health system leaders around creating virtual front doors within their markets. So it's health plans, as Jason talked about. It's also around health systems. You know the role that primary care plays within their ecosystem, and this is where our primary 360 product can also be relevant.

Thank you. The next question comes from the line of Richard Close with Canaccord. Please proceed with your question.

Yeah, thank you. Jason, I was wondering if you could give us an update on My Strength Complete that I think you rolled out here recently over the last quarter. So just an update there. I didn't hear anything in your comments.

Yeah, we're really excited about My Strength Complete. So Richard, you know this, but just to recap. My Strength Complete really brings together the mental health assets of Livongo and Teladoc to deliver a true stepped care model where we bring digital solutions that enable digital modules for the consumer around things like cognitive behavioral therapy and dialectical behavioral therapy and mindfulness and other skills. Combined with the Legacy Livongo coaches and the network of PhD psychologists and master's level social worker therapists and psychiatrists from Teladoc into really the full continuum of care on the mental health front. We're excited about how the pipeline is building. I think we mentioned that we had made several sales even before the product was launched in the market. The pipeline is showing continued momentum, you know, up strong double digits in terms of a percentage quarter over quarter and contributing to our overall outlook as we look into next year. I think the other thing I would just say is I expect MyStrength Complete to really complement the rest of our other sort of physical health products. So we're very excited about it, seeing good momentum in the market. And it's also a product that we're just beginning the rollout of internationally. So I don't think that that will be limited to the U.S.

The next question comes from the line of Ryan Daniels from William Bear. Please go ahead.

Yeah, great. Thank you for taking the questions. Jason, this is something you're asked probably every two to three quarters, and I want to give you another shot at this. But I'm curious what you're seeing more broadly in the competitive environment, in particular, you know, with some of the onsite health clinics starting to offer more telehealth solutions and a lot of coalescence around digital healthcare with entities like the patient navigation companies that are integrating things like second opinion services and telehealth and trying to sell that through brokers directly to employers. So can you provide a little bit of a state of a union, if you will, on what you're seeing in the competitive landscape as it sounds like your win rate and retention remains very strong? Thanks.

Yeah, thanks, Ryan. Maybe I'll start with the last point you made and just confirm that. Our win rates are staying very similar to prior years. So as we look at sort of doing the pipeline review now and where our win rates are, we're staying very similar to where we were in prior years, in spite of the fact that everyone knows there's been a lot of investment in this space. Second, our retention rates are extremely strong. And third, we're seeing really good multi-product sales. So 70% of our bookings this year were multi-product sales as compared to about 50% last year, which I think really gets to the reason that we're winning, right? We're winning because of the full suite of our products and services And the truth is that the point solutions, I would say, are really struggling at this point. And if you look at our late stage pipeline, it's nearly double the size of what it was last year. And I look at all the various players in the market. I wouldn't probably want to be an on-site sort of work site um clinic provider at this point since a lot of companies are talking about going virtual uh and so you know that has its limitations um the the similarly uh when i look at the navigation companies you know i would say honestly um having been a a health plan president The administrative side of that is fairly low value. I really want to, and we have always focused on making a big clinical impact using our data and our clinical expertise to improve the health of consumers and really focus on the healthcare and not the administrative portion. As I said, I do think we will play a big role, especially with our primary 360, in helping to get the consumer to the best site of care based on who the most efficient provider is in their local geography. And we can do that in a way that is untethered because we don't have financial incentive to refer to any specific provider in the market. which is not the case for a lot of the sort of hybrid models that are out there. So I think we can be really pure to our mission of improving care and reducing the cost of care. And then last thing I'd say is, you know, there was a recent conference where the team that came back said that, you know, the big sentiment there was pretty anti-payer in the conference. And a lot of the earlier stage companies were very anti-payer. And, you know, we recognize the role of the payer in the market, and we really want to partner with the payers and the employers to bring the best care to the consumer. It's always been our position in the market. And again, we think we're uniquely positioned to do that in partnership with the delivery system rather than antagonistically.

The next question comes from the line of Charles Lee from Calvin. Please proceed with your question.

Hey, guys. This is Gwen Chi on for Charles. When talking about your DTC mental health offering, even though we know that an average subscription might be, say, three or four months long, how often does someone come back and say they start a new subscription later on? In other words, even if we're seeing higher customer acquisition costs, Are you seeing a level of customer retention so that you don't necessarily have to spend the CAC each time to gain that same user back? Thanks.

Yeah, so I'll start. I'm incredibly proud of our DTC team and the progress they've made. First, they've done a tremendous job based on some of the comments I made earlier. about diversification and optimization around our customer acquisition costs. And the team is constantly testing new, more efficient models and then rolling out those models on the customer acquisition side. So our cost of customer acquisition has come down very consistently. Second, as we look at our revenue to customer acquisition cost ratio, that's improved substantially over time. And it's because of what I would say, the first thing I mentioned, of course, customer acquisition costs coming down, but also that the team has done a phenomenal job with lifetime value of a member and improving the LTV of a member. They do that, obviously, both, there are two levers for that, of course. One is pricing optimization and continuing to test different models for that. But the other one is to roll out value-added services and retention strategies such that one example of those is that a consumer can go to a lower cost, lighter version of the product on an interim basis sort of as they're in a better place in their lives or not going to lean into as much active therapy over a period of time. But it keeps them engaged with the platform and getting some level of mental health care and support such that they can reignite a more intensive therapy period and of course at a higher price at some later date. We've also rolled out things like groupinars and worksheets that a consumer can use in order to track their own progress and work on things between interactions. So your point is an excellent point and I'm glad you asked it because you know, in order to make a business like that continue to improve, you have to be pulling a lot of different levers. And I would say we are very, very good at test, learn, and lastly, when you get to the kind of scale that we have, when you make small improvements, it can have a big impact.

Yeah, and you know, when we say this business is about execution, which it is, that is the things that Jason talked about is what we need, right? It is test and learn and scale it. And that is what we mean in terms of execution and is fueling both the growth that we are seeing as well as the margins that we are seeing in the business.

And we'll spend some time on our mental health programs, both B2B as well as direct-to-consumer at our analyst day on November 18th.

Thank you. The next question comes from the line of Sean Dodge from RBC Capital Markets. Please proceed with your question.

Yes, thanks. Good afternoon. Maybe staying on BetterHelp, Jason, earlier in the year, you had said that that was expected to grow at least 50% this year. And it sounds like from the tone, and I think you even said it directly, that DCC has continued to outperform. Can you give us a progress report or update on how much that business is contributing now or how much it has outperformed that kind of initial 50% growth expectation you have?

Yeah. So, Sean, give us three weeks, and we will – Satisfy all the questions you asked in the curiosity you have around that, but the headline I would say is we are very pleased with the growth of this business. And you're right, the the growth expectations we had set out is is what you just said, and I would just say at this point that we are very pleased with how this business has grown. Again, as I said, on the revenue from a revenue growth standpoint as well as from a margin standpoint. And we will talk to, you know, where the business is in terms of scale and also, importantly, how we are thinking about the growth of this business in the future when we get to invest today.

The next question comes from the line of Daniel Grossleit from Citigroup. Please proceed with your question.

Hi, guys. Thanks for taking the question. I have a similar question to Ryan on the competitive dynamic, but specifically focused on the virtual first primary care plans that have come out. It seems like every large MCO now has announced a virtual first pilot in some regard. So I'd love to get your thoughts on just the competitive dynamic there with the third-party vendors. In particular, I'd like to get your thoughts on the potential for managed care organizations to utilize their own provider networks, like what we're seeing with United and what they're doing with their Optum Virtual Care Group, rather than partnering with folks like you guys for your virtual network. Thanks.

Yeah, so I think there are relatively few health plans in the country who have the capability and the owned provider assets. that the United has with its Optum-owned, you know, OptumCare-owned providers. And, of course, they're rolling out that product in the markets where they own those, you know, substantial number of primary care providers. You know, we believe a virtual first health plan should be a national product and be available, you know, in all geographies. And we've got a great relationship with United, and we have a number of new opportunities in the pipeline right now across United in multiple parts of their business. When it comes to other health plans, quite frankly, we see a benefit to some of the big plans making announcements about virtual first plans because local plans, quite frankly, have to respond. And so we're seeing that as a catalyst for activity, RFP activity with our primary 360 product, new pipeline opportunities, and a sense of urgency from multiple plans across the country in response to that. quite frankly because of the breadth of our product portfolio and the scalability of our platform will win more than our fair share of those opportunities. And as we've talked about, those tend to be compelling economics because we play a bigger role with the consumer.

The next question comes from the line of George Hill with Deutsche Bank. Please proceed with your question.

Hey, good afternoon, guys, and thank you for taking the question. I guess, Jason, just as you think about primary 360, I guess, can you talk about how much of it you think as net new growth versus the ability to grow wallet share with an existing client? And then following on that trend, I know this is probably going to be one of those questions that preempts analyst day, but I'd love you to talk for a second about how big you think Teladoc can be inside of the beneficiary wallet share, particularly inside of that employer sponsor spend.

Yeah, so thanks, George. You're right. Some of that we will cover at Investor Day, specifically around sort of the economic opportunity for the full stack of our products and services. When I think about Primary 360, I think the answer is it will be both a driver of net new growth as well as an expansion within existing clients. Obviously, when you talk about somebody like an Aetna, we've had a long-standing relationship with Aetna for many years and many products. This is an expansion of our role there and, quite frankly, a bigger economic opportunity for us due to that expansion of our role. But I also look at other health plans where we're seeing opportunities both George Malavasic, formal rfs as well as deep strategic discussions about the role of primary 360 and virtual first plan designs and and their new relationships that we haven't had before. George Malavasic, And then, lastly, you know the opportunity that molla mentioned about bringing primary 360 to wrap around a hospital. is a significant opportunity. I can think of a conversation I had with the CEO of a large academic medical center that is multi-site and multifaceted just two weeks ago. And the discussion was about how we can stand up a virtual primary care offering that is essentially the front door to their system and takes care of their patients in a branded way. And we do that almost white-labeled for them. So I think we're going to see new opportunities for that product and that capability that's beyond what we can even imagine today.

Your next question comes from the line of Donald Hooker from KeyBank. Please proceed with your question.

Oh, great. Thank you. Thank you. Thank you very much. I was curious about the sort of maybe the platform-enabled solutions metric that you share, and I was sort of thinking about that metric in the context of kind of all that I hear about with regards to labor shortages and wage pressures with health systems, and I'm wondering if there's any emerging opportunity to kind of work with providers in that context and around that metric?

Yeah, it's a good question. You know, we did see a significant shift as people, as offices closed and both consumers and providers all of a sudden embraced virtual care in a way that they hadn't previously And I think that that is a sustained opportunity going forward. I talked to CEOs even of tertiary or quaternary facilities who are saying that they expect anywhere from 25 to 50% of visits to be virtual over the long term. And that's something that nobody would have imagined previously. I also think it does have the opportunity to break down physical barriers and enable more mobility of the workforce, to your point about sort of the labor market. However, I just caution that, you know, there are state regulatory barriers to doing that, and, you know, many of the states have gone back to requiring in-state licensure in order to deliver the care. Now, we, of course, have always operated in that environment, and so that's not really a barrier for us But it is something that I've heard a number of hospital system CEOs lament because it limits the reach of their own workforce.

Yeah, I would also add on the positive, though, I think what is also increasingly clear, you know, through as we come out to some extent from the other side of the pandemic is the platform we have is purpose built. And, you know, that is differentiated from, you know, just having like a Zoom experience, for example. So there is a difference in the platform we have. And, you know, that is increasingly helping the conversations that we are having with the C-suite of health systems.

You may recall that we announced a partnership with Microsoft to deeply integrate our provider platform into Microsoft Teams, and we're seeing that drive substantial growth in our pipeline. So we're excited about that, and we think that that will have the desired effect.

Your next question comes from the line of Ravi Misra from Barenburg Capital Markets. Please proceed with your question.

Hi, good evening. Thank you for taking the question. So just two for me, both on kind of chronic care. The first one, can you just tease out a little bit on the 25% to 35% chronic care growth, how you think of that in terms of enrollment versus kind of pricing? And then secondly, You know, it's been about almost two years since the Livongo-DEXCOM agreement was announced. Can we get a little bit more color on how that stands today and maybe how you're looking to go forward on that? Thank you.

Yeah, so with respect to the Livongo-DEXCOM partnership, you know, we expanded that last year as we moved more into testing CGM and being able to apply our data science against the data flow that can come from CGM. We haven't published or publicized the results, but we have seen some good early indicators relative to that. I think CGM will be just another data source for us, obviously for certain populations. CGM is more effective than for others and more cost effective than for others. And so this was really testing the impact of CGM on type 2 diabetics. And so, you know, I think you'll see us continue to test new models along that path. With respect to the makeup of the 25 to 35% growth, We haven't broken that out publicly. I don't think we're going to do that here. You will get a deeper dive into the market for chronic care programs as well as our expectations for chronic care at our investor day.

The next question comes from the line of David Larson from BTIG. Please proceed with your question.

Hi, the visit volume growth was very good in the quarter up 37% year over year. Can you provide any color around how much of that came from better help visits, if any? And then also within your membership right now, what percentage do you think would be eligible for like a primary care virtual primary care physician? Is it like 25%? Do you think like the national average? Thanks very much.

Yeah, so with respect to our growth in visit volume, we're really excited about it. And quite frankly, I think there were a lot of naysayers a year ago wondering if we could continue to grow our visit volume after the really astronomical growth that we saw last year. So we're very, very proud of it. We had growth both on direct-to-consumer and a B2B basis. So we don't break those out, but I will say that we saw substantial growth on both of those fronts. I think it's probably, you can see that the data, Our visit revenue was up 18% year over year. And of course, all visit revenue comes really from a B2B channel. So, you know, we're seeing strong growth on both of those fronts. I think the other things that are just sort of worth noting, repeat usage is really strong. We saw repeat usage up 25% year over year in the third quarter. which I think is a good indicator and sort of is supported by the J.D. Power findings of us as the highest consumer satisfaction. And I think the other thing that's really nice is we're getting substantial increases in multi-service usage from consumers. I think all of that and, of course, multi-service is really only available to our B2B clients at this point.

And we are also seeing nice growth, very strong growth in specialty visits, including mental health that we talked about in our prepared remarks. We're seeing growth. You know, we have been seeing continued strong growth in non-infectious diseases. What I will also add is in recent months, we have also started seeing a pickup in infectious disease visit volumes. So all of that is fueling our visit volume growth.

Thank you. And this concludes our question and answer session. I will now turn the call back to Jason Gorvik. Please go ahead.

Thanks, everybody. Appreciate your attention and all your questions. We look forward to seeing everybody in three weeks on November 18th at our Investor and Analyst Day. Take care.

Thank you, ladies and gentlemen. This concludes our conference call. Thank you for participating. You may now disconnect.