Teladoc Health, Inc.

Hello and welcome to the Teladoc second quarter 23 earnings conference call. My name is Alex. I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star followed by one on the telephone keypad. If you'd like to remove your question, you may press star followed by two. I'll now hand it over to your host, Patrick Thiele, Head of Investor Relations. Please go ahead.

Thank you and good afternoon. Today after the market closed, we issued a press release announcing our second quarter 2023 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 discuss our third quarter and full year 2023 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 on 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, and thanks, everyone, for joining us. This afternoon, we are pleased to report a strong second quarter with results that met or exceeded all of our financial and operating guidance. It's a reflection of the strength and stability we've seen across the business and why we're raising the low end of our revenue and adjusted EBITDA guidance for the rest of the year. In my remarks today, I'll start with a brief recap of the quarter, but then I'll also want to touch on some of the themes and market trends we've seen through the first half of the year. from continuing economic uncertainty and the growing demand for whole person care to the changing discussion around weight loss drugs and, of course, the explosion of interest in AI. But let's begin with Q2 results. Consolidated revenue grew 10% on a year-over-year basis last quarter and 4% sequentially to $652 million. Our consolidated adjusted EBITDA of $72 million exceeded the high end of our expectations, and both the integrated care and better health segments had a strong quarter. Revenue from our integrated care segment grew 5% year-over-year to $360 million. Compared to the first quarter, revenue grew 3% sequentially, driven in large part by higher enrollment in our chronic care program. At the halfway point, we remain on track for our full year enrollment targets, which is one of the factors giving us the confidence to raise the bottom end of our guidance range. Within the integrated care segment, we're seeing growth across all our chronic care programs year to date. In particular, more clients are taking advantage of our digital diabetes prevention program as they expand their portfolio of solutions within our whole person suite. Today, more than one in every three of our chronic care members is now enrolled in multiple programs. It's an example of the ongoing shift in the market towards whole person strategies, as more and more clients recognize the value and effectiveness of a holistic approach to care. As a company, Teladoc Health remains our industry's clear leader in this shift to a whole person approach. And we're going to keep driving more growth, expanding our offerings and delivering exceptional value to our clients and members. BetterHelp also continues to set itself apart as the leading player in this category. We're happy to report strong performance in the second quarter with segment revenue growing 18% year over year, which was in line with our expectations. This reflects both our ability to successfully execute against our strategies and the continued demand for our mental health services. We've also seen stable customer acquisition costs through the first half of the year. This stability, combined with consistently strong gross margin performance, meant that our margins improved significantly over Q2 last year, a result which was also consistent with our forecast. Consumer demand has proven resilient through the first half of the year, even with the financial pressures that many households are facing. But given the uncertainty in the broader economy, we're continuing to incorporate a more cautious outlook at the low end of our guidance range. Regardless, we'll continue to provide exceptional value to our BetterHelp members. Those are the main headlines from the quarter. Now we'll take a few minutes to talk about some of the themes we're seeing in the marketplace and what we're hearing from our clients. First, the role of virtual care continues to grow. A recent market survey commissioned by Teladoc Health tells us three out of every four employers expect to spend more on virtual care over the next three years. This represents significant opportunities for our business. It also validates our approach Over half of the employers we surveyed said they plan to implement a whole person virtual care strategy over the next three years as they move toward consolidating vendors. And half of the employers said they're interested in health plans that incentivize virtual care. These trends, combined with the fact that consumers are looking for more convenient and affordable options, mean that comprehensive virtual care will be the first stop for more people on their care journeys and will keep leading the way. Clients are also talking to us about the challenges of managing the cost of GLP-1 drugs. These drugs were originally designed to treat diabetes, but have since been found to help patients lose weight. Employers and health plans want to meet rising consumer demand, but in a way that doesn't break the bank. Right now, roughly four out of every five of our clients believe that virtual care programs can help them manage access to these high-cost medications. As a result, we're seeing growing interest in our provider-based care programs, especially our recently announced weight management program scheduled to launch later this year. This program gives patients access to personalized care plans developed in collaboration with a Teladoc health physician. And because we know drugs aren't enough on their own, the program is based on a broader strategy with tailored support to help patients lose weight. It's more effective and it helps our clients manage the runaway costs of GLP-1 medication. We also continue to hear concerns about overall economic uncertainty. As access to capital has become tighter, some startups are struggling and companies of all size are being forced to do more with less. This is yet another factor causing more clients to explore vendor consolidation because they want a strong, stable partner who can drive innovation and deliver real value over the long term. This means working with a partner that has a solid financial foundation. At Teladoc Health, we're providing high quality care and continuing to innovate, all while generating strong free cash flow. As the healthcare landscape continues to evolve, we will keep making investments and leveraging technology to drive better outcomes for our members, clinicians, and clients. Which brings me to another key theme this year, AI. At TauDoc Health, we use AI across our business, leveraging more than 60 proprietary AI models to strengthen our products and create a better experience for our members. For example, our proprietary virtual care queuing system allows us to facilitate tens of thousands of visits every day, connecting patients with the right providers in real time. It's a complex problem to solve at scale and one that requires taking into account provider licensing, availability, geography, specialty, and patient preferences. AI is helping us to grow and become more efficient at the same time. The same is true for better health. When it comes to mental health, finding the right provider can make all the difference. So we use AI to optimize member therapist matching based on over 100 different criteria. On average, we're matching a patient with a provider every 30 seconds, something no one else in the industry can say. Besides making life better for patients and providers, it's also helping to drive our strong gross margin performance and competitive advantage. Finally, AI allows us to deliver personalized content and insights to our members, helping them change their behavior in a sustainable way. We provide customized next best actions on a massive scale, driving better outcomes at lower costs. Because if you want to have a real impact, a one size fits all approach isn't good enough. So we're already taking advantage of AI across our business. And now we're going even further. Last week, we announced that we're expanding our partnership with Microsoft to bring Microsoft's open AI services and nuanced DAX capabilities onto the Teladoc platform. Our goal is to automate more of the clinical documentation during virtual exams, making visits more efficient, improving the quality of medical data, and letting providers focus on what they do best, caring for patients. We're also exploring ways to use generative AI to improve the experience of our members. So that's what we're focused on right now, expanding our competitive advantage, making our business more efficient to drive higher margins, and generating more value for our clients and our members. It puts us in a very strong position today and will allow us to keep setting the pace and delivering strong results for years to come. With that, I'll turn the call over to Mala to review the second quarter and share our forward guidance.