Teladoc Health, Inc.

Hello and welcome to today's Teladoc Health Q2 earnings call. My name is Elliot and I'll be coordinating your call today. If you would like to register a question during a presentation, you may do so by pressing star followed by one on your telephone keypad. I would now like to hand over to Patrick Feeney, Vice President and Investor Relations. The floor is yours. Please go ahead.

Thank you and good afternoon. Today, after the market closed, we issued a press release announcing our second quarter 2022 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, Chief Executive Officer, and Mala Murthy, Chief Financial Officer. During this call, we will also provide our third quarter and full year 2022 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 and 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.

Thank you, Patrick. Good afternoon and thank you for joining us. After the close today, Teladoc Health reported strong second quarter results with both revenue and adjusted EBITDA coming in above the midpoint of our guidance range. We entered the second half of the year positioned to expand our market leadership by delivering innovative solutions that transform the way consumers interact with the healthcare system. We do this through a relentless focus on clinical quality that enables us to deliver value to as many people as possible through an integrated whole person care offering underpinned by technology and data. This is made possible by our broad set of capabilities and a model that allows us to integrate with all parts of the healthcare system without misaligned incentives inherent in other parts of the delivery system. Our second quarter outperformance as compared to guidance was primarily driven by chronic care revenue, where enrollment came in ahead of our expectations. As discussed earlier in the year, we expected chronic care enrollment growth to be weighted toward the back half of 2022. However, our team has worked tirelessly during the second quarter to onboard new populations at several clients ahead of schedule, fast tracking new program enrollment and driving over 90,000 net new enrollments during the second quarter alone. That enrollment growth came from both new and existing clients. And importantly, we continue to drive multi-program enrollment with roughly 30% of our chronic care members now utilizing multiple chronic care programs. This is significant not only from a member penetration standpoint, but also serves to improve retention as our members report higher satisfaction with access to more solutions. We found, for example, that member retention after one year is 10% higher for members enrolled in our diabetes program plus at least one other program as compared to those enrolled only in the diabetes program. We're also finding that clinical outcomes improve for members enrolled in multiple programs. For example, A1C reduction improves as our diabetes management members go from a standalone solution to adding two, three, and four programs. All of this combines to help us deliver more value to our clients and members while driving greater revenue per member. While we were pleased to exceed our member enrollment targets during the quarter, we are continuing to see our pipeline of chronic care deals develop more slowly than we anticipated at the start of the year, as we discussed in our first quarter call. It remains early in the selling season, but deals continue to progress at a slower pace, we believe at least in part due to competitive noise as the market transitions from standalone point solutions to integrated whole person virtual care. Based on what we're currently seeing in the marketplace, We also believe heightened economic uncertainty over the past several months is increasingly playing a part in delaying the decision-making process in the employer market. More and more, we're seeing our chronic care clients recognize the value of combining those products with primary care, adopting our whole person approach. And so, Primary 360 continues to be a significant bright spot in terms of commercial momentum. While the market remains in the early part of the adoption curve for virtual primary care, we continue to see indications of strong demand. Our clients are finding that Primary 360 is expanding access to care, as two-thirds of engaged members had not seen a doctor in the last two years prior to Primary 360, and nearly one-third say that they would not have seen a doctor at all if not for access to Primary 360. Patients are reporting high satisfaction and our members are telling us this is the result of our providers actually taking time to listen because our doctors are able to spend time delivering care rather than checking boxes on a chart and dealing with administrative overhead. As a result of the positive experience our clients are having with Primary 360, we now expect to expand our relationship with one of our larger health plan partners to offer Primary 360 to more of its populations. This is a strong validation of the value Primary 360 is delivering. And we're expanding our support of virtual first health plans for this client to several additional states starting next year. During the second quarter, we also signed a new agreement to expand our relationship with one of our larger health plan partners in the Midwest. This expansion is building upon our existing chronic care partnership and will enable the plan's clients to benefit from a comprehensive suite of integrated primary care and chronic care solutions. The agreement represents another example of our ability not only to land and expand horizontally into new client populations, but to expand vertically with new products. In another example of our whole person strategy paying dividends, we recently announced an expanded relationship with Priority Health, an integrated health plan that will bring our primary 360 product bundled together with our suite of chronic care solutions as part of one holistic, comprehensive, integrated solution. I reference these three deals not just because they're important new business signed in the past few months, but because I think they illustrate three different examples of how we drive growth. landing with a client and expanding to serve new populations within that client over time, two, cross-selling new innovative products to existing clients, and three, bringing a new integrated whole person suite of services to bear for a client bundled together into one offering. Finally, we continue to add new capabilities to our Primary 360 offering that enhance value for our members and clients. During the second quarter, we added multiple new last mile enhancements. In-home lab testing is now available at no additional cost to primary 360 members across the nation. And free same-day delivery of prescription medications is being rolled out in the second half of this year, which will increase both convenience and compliance. So while it's still early relative to the ultimate opportunity in terms of adoption and penetration of virtual primary care, we continue to see many reasons to be excited about the momentum for our integrated primary 360 offering. Turning to our direct-to-consumer business, we saw BetterHelp continue to deliver robust revenue growth of over 40% year-over-year, as well as strong sequential growth. At the same time, BetterHelp performance did come in toward the lower end of our expectations, as we continued to experience the decline in yield on marketing spend that we discussed in April. We still see smaller private competitors pursuing what we believe are low or no return customer acquisition strategies to establish market share. Although we do not see this as sustainable, it's difficult to predict how long this dynamic may continue. We also believe that the weakening economic environment and declining consumer sentiment is likely having an effect on BetterHelp performance. Over the past few months, we've seen modest incremental decline in yield on advertising spend, which we believe may be an indication of belt tightening among consumers. With inflation on the rise, consumer confidence has now dropped to multi-decade lows. Given our significant leadership position in the DTC marketplace and our substantial scale advantage, we remain confident that we can continue to outperform the industry and drive strong financial performance as we navigate this increased level of near-term economic uncertainty. Taking these trends in both chronic care and better health into account, as well as the impact of a stronger dollar on our international revenue, we believe it's more likely that our overall financial performance will be toward the lower end of our consolidated revenue and adjusted EBITDA guidance ranges in the second half. However, there are scenarios in which our results could be above or below this due to the increased uncertainty in the broader economic backdrop, particularly as it relates to trends in consumer spending and its impact on our DTC business. We will continue to watch these near-term evolving dynamics and provide updates as appropriate. With that, I'll turn the call over to Mala for a review of the second quarter and our forward guidance.