Teladoc Stock Falls after Q2 Earnings Then Recovers

Shares of Teladoc Health (NYSE: TDOC) weren’t looking so healthy on Wednesday morning after the company reported second quarter earnings on Tuesday evening.

Sales skyrocketed as demand for telehealth services remained strong, but unfortunately so did Teladoc’s net losses as the company recognized expenses related to the merger with Livongo, which was finalized in late 2020.

The stock opened lower by 11% but has since recovered from the lows. As of 12:30 p.m. EDT, Teladoc shares were flat for the day.

Total revenue grew by 109% to $503.1 million, which was modestly ahead of the consensus estimate of $499.9 million in sales. Paid memberships in the United States were essentially flat, growing just 1% to 52 million.

Total visits worldwide increased 28% to 3.5 million, even as the second quarter of 2020 included the first wave of the COVID-19 pandemic. Chronic care enrollments, which was the impetus for the Livongo transaction, were 715,000 at the end of the quarter.

Adjusted gross margin also expanded from 62.3% to 68.1%, with the strong profitability expansion attributed to a higher mix of subscription fee revenue, according to CFO Mala Murthy. That resulted in adjusted EBITDA of $66.8 million.

Teladoc’s net loss ballooned from $25.7 million a year ago to $133.8 million, or $0.86 per share, in the second quarter. That bottom line was meaningfully worse than the $0.54 per share in losses for which analysts modeled. 

The company noted that a large portion of those losses were related to stock-based compensation expenses related to the Livongo acquisition, as stock awards have continued to vest after the merger. Stock-based compensation expense in the second quarter was $83 million.

There were other merger-related accounting items as well, including $46.1 million recorded for the amortization of acquired intangible assets. Those assets were acquired from both Livongo as well as InTouch Health, another purchase from last year.

“Teladoc Health delivered a strong second quarter, marked by exciting new client wins, product launches, and tremendous progress on our quest to be the category-defining provider of whole person virtual care,” CEO Jason Gorevic said in a statement. “We have solid momentum heading into the second half as the market embraces the unified care experience that only Teladoc Health has the breadth and scale to achieve.”

Raising its 2021 forecast

In terms of outlook, revenue in the third quarter is expected to be in the range of $510 million to $520 million, which is comparable to the current consensus estimate of $513.1 million.

Teladoc expects to lose $0.68 to $0.78 per share next quarter. Total paid memberships in the United States should be 52 million to 53 million.

Teladoc raised its full-year guidance though, with revenue forecast at $2 billion to $2.03 billion, up from its previous outlook of $1.97 billion to $2.02 billion. Net losses per share for 2021 should be $3.35 to $3.60.

“As discussed previously, during the second half of the year, we do anticipate 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 Primary360, continued integration of Livongo, enhancements to our integrated data platform and expansion into new markets,” Murthy added on the conference call with analysts.

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Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Teladoc Health. Millennial Money is part of The Motley Fool network. Millennial Money has a disclosure policy.

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