- Third quarter revenue grows 17% year-over-year to $611.4 million
- Net loss totaled $73.5 million, or $0.45 per share
- Adjusted EBITDA totaled $51.2 million
- Cash flow from operating activities was $63.0 million for the quarter and $123.7 million year-to-date
PURCHASE, NY, Oct. 26, 2022 (GLOBE NEWSWIRE) -- Teladoc Health, Inc. (NYSE: TDOC), the global leader in whole-person virtual care, today reported financial results for the third quarter ended September 30, 2022.
“Teladoc Health delivered strong third quarter results, including robust revenue growth, and adjusted EBITDA above the high end of expectations,” said Jason Gorevic, chief executive officer of Teladoc Health. “During the quarter we continued to make progress against our whole person care strategy as the market evolves towards integrated virtual and digital health solutions.”
| Key Financial Data | |||||||||||||||||||||||
| ($ thousands, unaudited) | |||||||||||||||||||||||
| Quarter Ended | Year over Year | Nine Months Ended | Year over Year | ||||||||||||||||||||
| September 30, | Change | September 30, | Change | ||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Revenue | $ | 611,402 | $ | 521,658 | 17 | % | $ | 1,769,131 | $ | 1,478,472 | 20 | % | |||||||||||
| Net Loss | $ | (73,476 | ) | $ | (84,340 | ) | 13 | % | $ | (9,849,460 | ) | $ | (417,808 | ) | N/M | ||||||||
| Net Loss per share, basic and diluted | $ | (0.45 | ) | $ | (0.53 | ) | 15 | % | $ | (61.09 | ) | $ | (2.68 | ) | N/M | ||||||||
| Adjusted EBITDA* | $ | 51,211 | $ | 67,372 | (24 | ) | % | $ | 152,419 | $ | 190,760 | (20 | ) | % | |||||||||
* A reconciliation of each non-GAAP measure to the most comparable measure under GAAP has been provided in this press release in the accompanying tables. An explanation of these Non-GAAP measures is also included below under the heading “Non-GAAP Financial Measures.”
N/M – Not meaningful
Third Quarter 2022
Revenue increased 17% to $611.4 million from $521.7 million in the third quarter of 2021. Access fees revenue grew 20% to $540.1 million and visit fee revenue grew 5% to $65.6 million. U.S. Revenues grew 17% to $534.0 million and International revenues grew 17% to $77.4 million.
Net loss totaled $73.5 million, or ($0.45) per share, for the third quarter of 2022, compared to $84.3 million, or ($0.53) per share, for the third quarter of 2021. Results for the third quarter of 2022 primarily included stock-based compensation expense of $55.7 million, or ($0.34) per share, and amortization of acquired intangibles of $48.8 million, or ($0.30) per share. Net loss for the third quarter of 2022 also included $3.7 million, or ($0.02) per share, of lease abandonment costs related to the abandonment of certain excess leased office space.
Results for the third quarter of 2021 included stock-based compensation expense of $71.7 million, or ($0.45) per share, and amortization of acquired intangibles of $45.1 million, or ($0.28) per share.
Adjusted EBITDA* decreased 24% to $51.2 million, compared to $67.4 million for the third quarter of 2021.
GAAP gross margin, which includes depreciation and amortization, was 68.3 percent for the third quarter of 2022, compared to 67.1 percent for the third quarter of 2021.
Adjusted gross margin* was 69.6 percent for the third quarter of 2022, compared to 67.6 percent for the third quarter of 2021.
Average revenue per U.S. paid member increased to $2.61 in the third quarter of 2022, from $2.40 in the third quarter of 2021.
Nine Months Ended September 30, 2022
Revenue increased 20% to $1,769.1 million from $1,478.5 million in the first nine months of 2021. Access fees revenue grew 23% to $1,550.1 million, and visit fee revenue grew 8% to $200.2 million for the first nine months of 2022. U.S. Revenues grew 20% to $1,546.6 million, and International revenues grew 19% to $222.5 million for the first nine months of 2022.
Non-cash goodwill impairment charges of $9.6 billion were recorded in the first nine months of 2022. The non-cash charges had no impact on the provision for income taxes.
Net loss totaled $9,849.5 million, or ($61.09) per share, for the first nine months of 2022, compared to $417.8 million, or ($2.68) per share, for the first nine months of 2021. Results for the first nine months of 2022 primarily included non-cash goodwill impairment charges of $9,630.0 million, or ($59.73) per share, as well as stock-based compensation expense of $167.1 million, or ($1.04) per share, and amortization of acquired intangibles of $147.3 million, or ($0.91) per share. Net loss for the first nine months of 2022 also included $3.7 million, or ($0.02) per share, of lease abandonment costs related to the abandonment of certain excess leased office space.
Results for the first nine months of 2021 included stock-based compensation expense of $241.0 million, or ($1.55) per share, amortization of acquired intangibles of $133.8 million, or ($0.86) per share, loss on extinguishment of debt of $43.7 million, or ($0.28) per share, and non-cash income taxes charges of $93.9 million, or ($0.60) per share.
Adjusted EBITDA* decreased 20% to $152.4 million compared to $190.8 million for the first nine months of 2021.
GAAP gross margin, which includes depreciation and amortization, was 67.5 percent for the first nine months of 2022, compared to 67.3 percent for the first nine months of 2021.
Adjusted gross margin* was 68.6 percent for the first nine months of 2022 compared to 67.9 percent for the first nine months of 2021.
Average revenue per U.S. paid member increased to $2.58 in the first nine months of 2022, from $2.27 in the first nine months of 2021.
Financial Outlook
Teladoc Health provides an outlook based on current market conditions and expectations and what we know today. Based on what we know today, we believe our outlook ranges provide a reasonable baseline for 2022 financial performance.
For the fourth quarter of 2022, we expect:
| 4Q 2022 Outlook Range | |
| Revenue | $625 - $640 million |
| EBITDA | $10 - $37 million |
| Adjusted EBITDA | $88 - $98 million |
| Net loss per share | ($0.40) - ($0.10) |
| Total U.S. Paid Membership | 57 - 58 million |
| Visit Fee Only Access | ~24 million |
| Total Visits | 4.7 - 4.9 million |
For the full year 2022, we expect:
| Full Year 2022 Outlook Range | |
| Revenue | $2,395 - $2,410 million |
| EBITDA | ($17) - $10 million |
| Adjusted EBITDA | $240 - $250 million |
| Net loss per share | ($61.40) - ($61.10) |
| Total U.S. Paid Membership | 57 - 58 million |
| Visit Fee Only Access | ~24 million |
| Total Visits | 18.4 - 18.6 million |
Earnings Conference Call
The third quarter 2022 earnings conference call and webcast will be held Wednesday, October 26, 2022 at 4:30 p.m. E.T. The conference call can be accessed by dialing 1-844-200-6205 for U.S. participants, or 1-929-526-1599 for international participants, and referencing Conference ID Number: 270257; or via a live audio webcast available online at http://ir.teladoc.com/news-and-events/events-and-presentations/. A webcast replay will be available for on-demand listening shortly after the completion of the call at the same web link, and will remain available for approximately 90 days.
About Teladoc Health
Teladoc Health empowers all people everywhere to live their healthiest lives by transforming the healthcare experience. As the world leader in whole-person virtual care, Teladoc Health uses proprietary health signals and personalized interactions to drive better health outcomes across the full continuum of care, at every stage in a person’s health journey. Teladoc Health leverages more than two decades of expertise and data-driven insights to meet the growing virtual care needs of consumers and healthcare professionals. For more information, please visit www.teladochealth.com or follow @TeladocHealth on Twitter.
Cautionary Note Regarding Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “believe,” “project,” “estimate,” “expect,” “may,” “should,” “will” and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding future financial or operating results, future numbers of members or clients, future numbers of visits, litigation outcomes, regulatory developments, market developments, new products and growth strategies, and the effects of any of the foregoing on our future results of operations or financial condition.
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: (i) changes in laws and regulations applicable to our business model; (ii) changes in market conditions and receptivity to our services and offerings; (iii) results of litigation; (iv) the loss of one or more key clients; (v) changes in valuations or useful lives of our assets; (vi) changes to our abilities to recruit and retain qualified providers into our network; (vii) the impact of impairment losses; (viii) risks relating to impairment losses, including with respect to goodwill; and (ix) the impact of the COVID-19 pandemic on our operations, demand for our services and general economic conditions, as well as orders, directives and legislative action by local, state, federal and foreign governments in response to the spread of COVID-19. For a detailed discussion of the risk factors that could affect our actual results, please refer to the risk factors identified in our SEC reports, including, but not limited to, our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, as filed with the SEC.
Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.
Revenues and Summary Operating Metrics
| Revenue | |||||||||||||||||||
| ($ thousands, except Average U.S. | Quarter Ended | Year over Year | Nine Months Ended | Year over Year | |||||||||||||||
| Revenue Per Member) | September 30, | Change | September 30, | Change | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||
| Access Fees Revenue | |||||||||||||||||||
| U.S. | $ | 465,692 | $ | 386,181 | 21 | % | $ | 1,337,264 | $ | 1,085,325 | 23 | % | |||||||
| International | 74,387 | 62,737 | 19 | % | 212,882 | 176,764 | 20 | % | |||||||||||
| Total | 540,079 | 448,918 | 20 | % | 1,550,146 | 1,262,089 | 23 | % | |||||||||||
| Visit Fee Revenue | |||||||||||||||||||
| U.S. | 62,766 | 59,863 | 5 | % | 191,479 | 176,187 | 9 | % | |||||||||||
| International | 2,800 | 2,690 | 4 | % | 8,748 | 9,131 | (4 | ) | % | ||||||||||
| Total | 65,566 | 62,553 | 5 | % | 200,227 | 185,318 | 8 | % | |||||||||||
| Other | |||||||||||||||||||
| U.S. | 5,555 | 9,583 | (42 | ) | % | 17,856 | 29,617 | (40 | ) | % | |||||||||
| International | 202 | 604 | (67 | ) | % | 902 | 1,448 | (38 | ) | % | |||||||||
| Total | 5,757 | 10,187 | (43 | ) | % | 18,758 | 31,065 | (40 | ) | % | |||||||||
| Total Revenue | $ | 611,402 | $ | 521,658 | 17 | % | $ | 1,769,131 | $ | 1,478,472 | 20 | % | |||||||
| U.S. Revenue | $ | 534,013 | $ | 455,627 | 17 | % | $ | 1,546,599 | $ | 1,291,129 | 20 | % | |||||||
| International Revenue | 77,389 | 66,031 | 17 | % | 222,532 | 187,343 | 19 | % | |||||||||||
| Total Revenue | $ | 611,402 | $ | 521,658 | 17 | % | $ | 1,769,131 | $ | 1,478,472 | 20 | % | |||||||
| Average U.S. Revenue Per Member (1) | $ | 2.61 | $ | 2.40 | 9 | % | $ | 2.58 | $ | 2.27 | 14 | % | |||||||
| Visits | Quarter Ended | Year over Year | Nine Months Ended | Year over Year | |||||||||||||
| (thousands) | September 30, | Change | September 30, | Change | |||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||
| U.S. Visits | 3,445 | 3,007 | 15 | % | 10,461 | 8,191 | 28 | % | |||||||||
| International Visits | 1,128 | 991 | 14 | % | 3,281 | 2,801 | 17 | % | |||||||||
| Total Visits | 4,573 | 3,998 | 14 | % | 13,742 | 10,992 | 25 | % | |||||||||
| Utilization (2) | 22.3 | % | 21.0 | % | 128 | pt | 23.2 | % | 19.2 | % | 401 | pt | |||||
| Platform-Enabled Sessions (3) | 974 | 969 | 1 | % | 3,189 | 3,078 | 4 | % | |||||||||
| Total Visits & Sessions Provided & Enabled | 5,547 | 4,967 | 12 | % | 16,931 | 14,070 | 20 | % | |||||||||
| Membership and Visit Fee Only Access | Quarter Ended | Year over Year | ||||
| (millions) | September 30, | Change | ||||
| 2022 | 2021 | |||||
| U.S. Paid Membership | 57.8 | 52.5 | 10 | % | ||
| U.S. Visit Fee Only Access | 24.3 | 23.6 | 3 | % | ||
| Unique Chronic Care Members (4) | 0.791 | 0.725 | 9 | % | ||
(1) Average U.S. Revenue Per Member measures the average amount of access revenue that the Company generates from a U.S. paid member for a particular period. It is calculated by dividing the U.S. access revenue generated from the Company’s U.S. paid members, excluding certain non-member based access fees, by the total average number of U.S. paid members during the applicable period.
(2) Utilization measures the ratio of visits to total U.S. paid members. It is calculated by dividing visits during a particular period (excluding visit fee only visits) by U.S. paid members in the applicable period and annualizing the result.
(3) Platform-Enabled Sessions are a unique instance in which our licensed software platform has facilitated a virtual voice or video encounter between a care provider and our client’s patient, or between care providers. We believe platform-enabled sessions are an indicator of the value our clients derive from the platform they license from us in order to facilitate virtual care.
(4) Unique Chronic Care Members represent the number of unique individuals enrolled in our suite of chronic care programs at the end of a given period.
TELADOC HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data, unaudited)
| Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Revenue | $ | 611,402 | $ | 521,658 | $ | 1,769,131 | $ | 1,478,472 | |||||||
| Expenses: | |||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization, which is shown separately below) | 185,619 | 169,041 | 555,114 | 475,273 | |||||||||||
| Operating expenses: | |||||||||||||||
| Advertising and marketing | 178,920 | 111,078 | 477,094 | 303,738 | |||||||||||
| Sales | 54,634 | 62,602 | 170,893 | 191,251 | |||||||||||
| Technology and development | 87,815 | 80,250 | 256,053 | 239,017 | |||||||||||
| General and administrative | 112,542 | 103,016 | 328,333 | 319,404 | |||||||||||
| Acquisition, integration, and transformation costs | 1,594 | 4,340 | 8,993 | 22,084 | |||||||||||
| Depreciation and amortization | 62,008 | 51,907 | 180,312 | 151,907 | |||||||||||
| Goodwill impairment | 0 | 0 | 9,630,000 | 0 | |||||||||||
| Total expenses | 683,132 | 582,234 | 11,606,792 | 1,702,674 | |||||||||||
| Loss from operations | (71,730 | ) | (60,576 | ) | (9,837,661 | ) | (224,202 | ) | |||||||
| Loss on extinguishment of debt | 0 | 850 | 0 | 43,728 | |||||||||||
| Other expense (income), net | 1,571 | 376 | 2,607 | (5,493 | ) | ||||||||||
| Interest expense, net | 1,346 | 18,895 | 11,163 | 61,493 | |||||||||||
| Net loss before provision for income taxes | (74,647 | ) | (80,697 | ) | (9,851,431 | ) | (323,930 | ) | |||||||
| Provision for income taxes | (1,171 | ) | 3,643 | (1,971 | ) | 93,878 | |||||||||
| Net loss | $ | (73,476 | ) | $ | (84,340 | ) | $ | (9,849,460 | ) | $ | (417,808 | ) | |||
| Net loss per share, basic and diluted | $ | (0.45 | ) | $ | (0.53 | ) | $ | (61.09 | ) | $ | (2.68 | ) | |||
| Weighted-average shares used to compute basic and diluted net loss per share | 161,727,962 | 159,435,165 | 161,217,033 | 155,926,680 | |||||||||||
Stock-based Compensation Summary
Compensation costs for stock-based awards were classified as follows (in thousands):
| Quarter Ended | Nine Months Ended | ||||||||||
| September 30, | September 30, | ||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||
| Cost of revenue (exclusive of depreciation and amortization, which is shown separately) | $ | 675 | $ | 2,162 | $ | 4,994 | $ | 6,310 | |||
| Advertising and marketing | 3,614 | 5,244 | 10,523 | 15,141 | |||||||
| Sales | 11,064 | 17,518 | 33,845 | 57,638 | |||||||
| Technology and development | 17,660 | 22,910 | 51,532 | 77,335 | |||||||
| General and administrative | 22,649 | 23,867 | 66,204 | 84,547 | |||||||
| Total stock-based compensation expense (1) | $ | 55,662 | $ | 71,701 | $ | 167,098 | $ | 240,971 | |||
(1) Excluding the amount capitalized related to internal software development projects.
TELADOC HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
| Nine Months Ended September 30, | |||||||
| 2022 | 2021 | ||||||
| Operating activities: | |||||||
| Net loss | $ | (9,849,460 | ) | $ | (417,808 | ) | |
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
| Goodwill impairment | 9,630,000 | 0 | |||||
| Depreciation and amortization | 180,312 | 151,907 | |||||
| Depreciation of rental equipment | 2,185 | 2,500 | |||||
| Amortization of right-of-use assets | 9,266 | 8,185 | |||||
| Provision for doubtful accounts | 8,867 | 11,353 | |||||
| Stock-based compensation | 167,098 | 240,971 | |||||
| Deferred income taxes | (5,942 | ) | 91,414 | ||||
| Accretion of interest | 2,496 | 46,843 | |||||
| Loss on extinguishment of debt | 0 | 40,631 | |||||
| Gain on sale of investment | 0 | (5,901 | ) | ||||
| Other, net | 3,677 | 38 | |||||
| Changes in operating assets and liabilities: | |||||||
| Accounts receivable | (45,267 | ) | (19,407 | ) | |||
| Prepaid expenses and other current assets | (39,177 | ) | (34,566 | ) | |||
| Inventory | 13,709 | (2,661 | ) | ||||
| Other assets | (22,854 | ) | (3,432 | ) | |||
| Accounts payable | 24,067 | (11,115 | ) | ||||
| Accrued expenses and other current liabilities | 70,046 | 15,880 | |||||
| Accrued compensation | (32,028 | ) | (17,352 | ) | |||
| Deferred revenue | 12,311 | 20,002 | |||||
| Operating lease liabilities | (8,111 | ) | (8,202 | ) | |||
| Other liabilities | 2,548 | 1,502 | |||||
| Net cash provided by operating activities | 123,743 | 110,782 | |||||
| Investing activities: | |||||||
| Capital expenditures | (10,285 | ) | (5,611 | ) | |||
| Capitalized software | (108,588 | ) | (35,402 | ) | |||
| Proceeds from marketable securities | 2,507 | 50,000 | |||||
| Proceeds from the sale of investment | 0 | 10,901 | |||||
| Acquisitions of business, net of cash acquired | 0 | (75,944 | ) | ||||
| Other, net | 2,514 | 3,150 | |||||
| Net cash used in investing activities | (113,852 | ) | (52,906 | ) | |||
| Financing activities: | |||||||
| Net proceeds from the exercise of stock options | 5,646 | 22,956 | |||||
| Repurchase of 2022 Notes | 0 | (139 | ) | ||||
| Proceeds from advances from financing companies | 6,807 | 10,677 | |||||
| Payment against advances from financing companies | (11,470 | ) | (12,053 | ) | |||
| Proceeds from employee stock purchase plan | 3,386 | 13,996 | |||||
| Cash received for withholding taxes on stock-based compensation, net | 594 | 3,109 | |||||
| Other, net | (2,847 | ) | (4,224 | ) | |||
| Net cash provided by financing activities | 2,116 | 34,322 | |||||
| Net decrease in cash and cash equivalents | 12,007 | 92,198 | |||||
| Foreign exchange difference | (5,856 | ) | (1,694 | ) | |||
| Cash and cash equivalents at beginning of the period | 893,480 | 733,324 | |||||
| Cash and cash equivalents at end of the period | $ | 899,631 | $ | 823,828 | |||
TELADOC HEALTH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data, unaudited)
| September 30, | December 31, | ||||||
| 2022 | 2021 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 899,631 | $ | 893,480 | |||
| Short-term investments | 0 | 2,537 | |||||
| Accounts receivable, net of allowance of $15,311 and $12,384, respectively | 201,701 | 168,956 | |||||
| Inventories | 59,344 | 73,079 | |||||
| Prepaid expenses and other current assets | 126,912 | 87,387 | |||||
| Total current assets | 1,287,588 | 1,225,439 | |||||
| Property and equipment, net | 27,270 | 27,234 | |||||
| Goodwill | 4,846,001 | 14,504,174 | |||||
| Intangible assets, net | 1,854,263 | 1,910,278 | |||||
| Operating lease - right-of-use assets | 45,187 | 46,780 | |||||
| Other assets | 43,656 | 20,703 | |||||
| Total assets | $ | 8,103,965 | $ | 17,734,608 | |||
| Liabilities and stockholders’ equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 70,783 | $ | 47,257 | |||
| Accrued expenses and other current liabilities | 177,111 | 102,933 | |||||
| Accrued compensation | 63,211 | 91,941 | |||||
| Deferred revenue-current | 90,210 | 75,569 | |||||
| Advances from financing companies | 10,086 | 13,313 | |||||
| Total current liabilities | 411,401 | 331,013 | |||||
| Other liabilities | 1,632 | 1,492 | |||||
| Operating lease liabilities, net of current portion | 41,080 | 41,773 | |||||
| Deferred revenue, net of current portion | 3,146 | 3,834 | |||||
| Advances from financing companies, net of current portion | 7,855 | 9,291 | |||||
| Deferred taxes, net | 51,742 | 75,777 | |||||
| Convertible senior notes, net | 1,534,448 | 1,225,671 | |||||
| Commitments and contingencies | |||||||
| Stockholders’ equity: | |||||||
| Common stock, $0.001 par value; 300,000,000 shares authorized; 162,195,790 shares and 160,469,325 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively | 162 | 160 | |||||
| Additional paid-in capital | 17,299,981 | 17,473,336 | |||||
| Accumulated deficit | (11,198,216 | ) | (1,421,454 | ) | |||
| Accumulated other comprehensive loss | (49,266 | ) | (6,285 | ) | |||
| Total stockholders’ equity | 6,052,661 | 16,045,757 | |||||
| Total liabilities and stockholders’ equity | $ | 8,103,965 | $ | 17,734,608 | |||
Non-GAAP Financial Measures:
To supplement our financial information presented in accordance with GAAP, we use adjusted gross profit, adjusted gross margin, EBITDA, and adjusted EBITDA, which are non-GAAP financial measures, to clarify and enhance an understanding of past performance. We believe that the presentation of these financial measures enhances an investor’s understanding of our financial performance. We further believe that these financial measures are useful financial metrics to assess our operating performance and financial and business trends from period-to-period by excluding certain items that we believe are not representative of our core business. We use certain financial measures for business planning purposes and in measuring our performance relative to that of our competitors. We utilize adjusted EBITDA as the primary measure of our performance.
Adjusted gross profit is our total revenue minus our total cost of revenue (exclusive of depreciation and amortization, which is shown separately) and adjusted gross margin is adjusted gross profit as a percentage of our total revenue.
EBITDA consists of net loss before interest; other expense (income), net, including foreign exchange gain or loss; provision for income taxes; depreciation and amortization; goodwill impairment; and loss on extinguishment of debt. Adjusted EBITDA consists of net loss before interest; other expense (income), net, including foreign exchange gain or loss; provision for income taxes; depreciation and amortization; goodwill impairment; loss on extinguishment of debt; stock-based compensation; lease abandonment costs; and acquisition, integration, and transformation costs.
We believe the above financial measures are commonly used by investors to evaluate our performance and that of our competitors. However, our use of the terms adjusted gross profit, adjusted gross margin, EBITDA, and adjusted EBITDA may vary from that of others in our industry. None of adjusted gross profit, adjusted gross margin, EBITDA, nor adjusted EBITDA should be considered as an alternative to net loss before provision for income taxes, net loss, net loss per share or any other performance measures derived in accordance with GAAP.
Adjusted gross profit, adjusted gross margin, EBITDA, and adjusted EBITDA have important limitations as analytical tools and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
- adjusted gross margin has been and will continue to be affected by a number of factors, including the fees we charge our clients, the number of visits and cases we complete, the costs paid to providers and medical experts, as well as the costs of our provider network operations center;
- adjusted gross margin does not reflect the significant depreciation and amortization to cost of revenue;
- EBITDA and adjusted EBITDA do not reflect goodwill impairment;
- EBITDA and adjusted EBITDA do not reflect the interest expense on our debt;
- EBITDA and adjusted EBITDA eliminate the impact of the provision for income taxes on our results of operations;
- EBITDA and adjusted EBITDA do not reflect the loss on extinguishment of debt;
- EBITDA and adjusted EBITDA do not reflect other expense (income), net;
- adjusted EBITDA does not reflect significant lease abandonment costs. Lease abandonment costs may include certain lease impairment costs and certain losses related to early lease terminations;
- adjusted EBITDA does not reflect significant acquisition, integration, and transformation costs. Acquisition, integration and transformation costs include investment banking, financing, legal, accounting, consultancy, integration, fair value changes related to contingent consideration and certain other transaction costs related to mergers and acquisitions. It also includes costs related to certain business transformation initiatives focused on integrating and optimizing various operations and systems, including upgrading our customer relationship management (CRM) and enterprise resource planning (ERP) systems. These transformation cost adjustments made to our results do not represent normal, recurring, operating expenses necessary to operate the business but rather, incremental costs incurred in connection with our acquisition and integration activities;
- adjusted EBITDA does not reflect the significant non-cash stock compensation expense which should be viewed as a component of recurring operating costs; and
- other companies in our industry may calculate adjusted gross profit, adjusted gross margin, EBITDA, and adjusted EBITDA differently than we do, limiting the usefulness of these measures as comparative measures.
In addition, although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and adjusted gross profit, adjusted gross margin, EBITDA and adjusted EBITDA do not reflect any expenditures for such replacements.
We compensate for these limitations by using adjusted gross profit, adjusted gross margin, EBITDA, and adjusted EBITDA along with other comparative tools, together with GAAP measurements, to assist in the evaluation of operating performance. Such GAAP measurements include net loss, net loss per share, and other performance measures.
In evaluating these financial measures, you should be aware that in the future we may incur expenses similar to those eliminated in this presentation. Our presentation of adjusted gross profit, adjusted gross margin, EBITDA, and adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.
The following is a reconciliation of gross profit and gross margin, the most directly comparable GAAP financial measures, to adjusted gross profit and adjusted gross margin, respectively:
Reconciliation of GAAP Gross Profit to Adjusted Gross Profit and Adjusted Gross Margin
(In thousands, unaudited)
| Quarter Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue | $ | 611,402 | $ | 521,658 | $ | 1,769,131 | $ | 1,478,472 | ||||||||
| Cost of revenue (exclusive of depreciation and amortization, which is shown separately below) | (185,619 | ) | (169,041 | ) | (555,114 | ) | (475,273 | ) | ||||||||
| Depreciation and amortization of intangible assets | (8,482 | ) | (2,545 | ) | (19,768 | ) | (8,233 | ) | ||||||||
| Gross Profit | 417,301 | 350,072 | 1,194,249 | 994,966 | ||||||||||||
| Depreciation and amortization of intangible assets | 8,482 | 2,545 | 19,768 | 8,233 | ||||||||||||
| Adjusted gross profit | $ | 425,783 | $ | 352,617 | $ | 1,214,017 | $ | 1,003,199 | ||||||||
| Gross margin | 68.3 | % | 67.1 | % | 67.5 | % | 67.3 | % | ||||||||
| Adjusted gross margin | 69.6 | % | 67.6 | % | 68.6 | % | 67.9 | % | ||||||||
The following is a reconciliation of net loss, the most directly comparable GAAP financial measure, to EBITDA and adjusted EBITDA:
Reconciliation of GAAP Net Loss to EBITDA and Adjusted EBITDA
(In thousands, except for outlook data, unaudited)
| Quarter Ended | Nine Months Ended | Outlook in millions (1) | |||||||||||||||||||
| September 30, | September 30, | Fourth Quarter | Full Year | ||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | 2022 | 2022 | ||||||||||||||||
| Net loss | $ | (73,476 | ) | $ | (84,340 | ) | $ | (9,849,460 | ) | $ | (417,808 | ) | $ | (65) - ($16) | $ | (9,914) - ($9,866) | |||||
| Adjustments: | |||||||||||||||||||||
| Goodwill impairment | 0 | 0 | 9,630,000 | 0 | |||||||||||||||||
| Loss on extinguishment of debt | 0 | 850 | 0 | 43,728 | |||||||||||||||||
| Other expense (income), net | 1,571 | 376 | 2,607 | (5,493 | ) | ||||||||||||||||
| Interest expense, net | 1,346 | 18,895 | 11,163 | 61,493 | |||||||||||||||||
| Provision for income taxes | (1,171 | ) | 3,643 | (1,971 | ) | 93,878 | |||||||||||||||
| Depreciation and amortization | 62,008 | 51,907 | 180,312 | 151,907 | |||||||||||||||||
| Total Adjustments | 63,754 | 75,671 | 9,822,111 | 345,513 | 75 - 53 | 9,897 - 9,876 | |||||||||||||||
| EBITDA | (9,722 | ) | (8,669 | ) | (27,349 | ) | (72,295 | ) | 10 - 37 | (17) - 10 | |||||||||||
| Adjustments: | |||||||||||||||||||||
| Stock-based compensation | 55,662 | 71,701 | 167,098 | 240,971 | |||||||||||||||||
| Acquisition, integration, and transformation costs | 1,594 | 4,340 | 8,993 | 22,084 | |||||||||||||||||
| Lease abandonment costs | 3,677 | 0 | 3,677 | 0 | |||||||||||||||||
| Total Adjustments | 60,933 | 76,041 | 179,768 | 263,055 | 78 - 61 | 257 - 240 | |||||||||||||||
| Adjusted EBITDA | $ | 51,211 | $ | 67,372 | $ | 152,419 | $ | 190,760 | $ | 88 - $98 | $ | 240 - $250 | |||||||||
(1) We have not provided a full line-item reconciliation for net loss to EBITDA or adjusted EBITDA outlook because we do not provide outlook on the individual reconciling items between net loss, EBITDA, and adjusted EBITDA. This is due to the uncertainty as to timing, and the potential variability, of the individual reconciling items such as goodwill impairment, stock-based compensation and the related tax impact, provision for income taxes, acquisition, integration, and transformation costs, and lease abandonment costs, the effect of which may be significant. Accordingly, a full line-item reconciliation of the GAAP measure to the corresponding non-GAAP financial measure outlook is not available without unreasonable effort.
Investors:
Patrick Feeley
914-265-7925
IR@teladochealth.com
Media:
Chris Stenrud
860-491-8821
pr@teladochealth.com
