Lewisville, Texas-based telemedicine company Teladoc has announced its third quarter results, which, while showing increased revenue, membership and visits, ultimately revealed increased financial losses compared to last year. However, in a call to investors, executives pointed to the fact that it is the company’s first full quarter since acquiring employee health benefits app-maker HealthiestYou, and pointed to several new partnerships that they believe will increase growth and revenue.
Net loss for the company was at $29.8 million, up from $13.2 million last year, which the company said includes a non-recurring, primarily non-cash charge of $6.2 million in connection with the HealthiestYou acquisition. As of the earnings call, HealthiestYou is fully integrated into the Teladoc platform, and the company said it has led to new member growth to the tune of 200,000 new members during the quarter.
“The acquisition of HealthiestYou broadened our exposure and deepened our relationships within the small business market, which as we mentioned on our previous calls is the fastest growing market in terms of telemedicine adoption,” said Teladoc President and CEO Jason Gorevic on the call. “This represents another significant opportunity for us with approximately 50 percent of US employees falling into the small business category.”
Total quarterly revenue for the company was $32.4 million (an increase of 62 percent year-over-year), membership was up by 35 percent to 17.1 million, and total visits were up by 73 percent to 202,566. However, paid visits were down 3 percent. Gross margins for the company were up to 78 percent, an increase of 4 percent from last year, which the company said was due in part to the fact that higher margin subscription revenue accounted for more of the total revenue.
“The third quarter also represented the first full quarter of HealthiestYou revenue, which is comprised of 100 percent high margin subscription-based revenue,” Teladoc Chief Financial Officer March Hirschorn said on the call. “Ultimately, we remain confident that our revenue mix will stabilize at roughly 60 percent subscription access fees and 40 percent visit fees over the next several years.”
Going forward, Teladoc expects visits generated from the visits-included model of HealthiestYou to increase, accounting for half of 2017 visits. They also expect the average price of a paid visit, which was $39.18 in the third quarter, to increase as contracts renew and prices increase, with more expensive behavioral health visits contributing to increasingly higher averages in the next year.
The company also announced it had been endorsed by the American Hospital Association, and added two new hospital clients – Thomas Jefferson University Hospital in Philadelphia and the Parkview Hospital System in Indiana. Teladoc is also now the exclusive provider for AARP’s telehealth services focused on the caregiver market.
Under the program, three-way medical visits can be conducted via Teladoc that include a Teladoc physician, adult caregiver and an aging parent. Teladoc will also market this option to employer and Medicare advantage clients.
“While we expect the ramp on this product to be gradual, I'm very excited about the long-term prospects given the aging population and its unique needs,” Gorevic said on the call.
Additionally, the company pointed to several new accounts that will go live in 2017, listing Memorial Sloan-Kettering, Avis Budget Group, Fannie Mae, Fox Entertainment, L3 Communications, Thermo Fisher Scientific, Abbott Labs, and Phillips 66. They also highlighted progress on behavioral health products.
“Behavioral health is a significant addressable market and a meaningful growth opportunity for us. We believe this segment will generate over $11 million for Teladoc in 2016,” Gorevic said.
The company also shared updates from the ongoing legal battles with the Texas Medical Board. Teladoc sued the TMB in state court way back in April 2015, alleging that because the board was made up of practicing doctors with a financial interest in squelching telemedicine, the board's passing of anti-telemedicine legislation constituted a violation of antitrust laws. But the medical board filed a motion asking for the suit to be dismissed on the grounds that there is, in fact, state supervision of the medical board which would make it a state agency under law and therefore immune to suit. When the judge denied the motion, the medical board appealed to the Fifth Circuit court. Last week, the Board dropped its appeal against Teladoc, but the appeal itself was an unusual move, as the board appealed not the lower court's final decision, but its rejection of the state's motion to dismiss the case.
Gorevic said the underlying trial case will continue, resuming with a scheduling conference before the Federal District Court in Austin, but the company presumes they are still more than a year away from the trial.
“Our position has always been that we’d like to settle this dispute,” Gorevic said on the call. “And perhaps with the recent change in leadership at the TMB, we’ll see some movement in that direction. We’re also very hopeful that the Texas Legislature will take up the issue of telemedicine during the upcoming 2017 legislative session and that a law will get enacted that will resolve this once and for all in our favor, and, of course, that would mute the legal case.”
