Teladoc Health, Inc. (NYSE:TDOC) shares are up 5% after the company released first-quarter 2023 earnings on April 26. The quarterly results were boosted by robust growth in access fees and other revenues, as well as improved segmental profitability at Integrated Care. However, the BetterHelp segment’s declining earnings partially offset the positives.

TDOC reported an adjusted loss of 37 cents per share in the first quarter of 2023, which was less than the Consensus Estimate of 51 cents and our estimate of 54 cents. Year on year, the bottom line increased by 21.3%.

Operating revenues increased 11.3% year on year to $629.2 million, exceeding management’s forecast range of $610-$625 million. The top line exceeded the consensus forecast of $613.7 million by 1.9%

Update on Operations

Access Fee revenues (which accounted for 87.6% of total quarterly revenues) totaled $550.9 million, a 12% increase year over year in the quarter under review. The result was 3% higher than expected.

TDOC generated $78.4 million in other revenue, a 6% increase year on year. However, the metric came up just short of our prediction.

Revenues from the United States increased 10% year over year to $541.7 million, accounting for 86.1% of total revenues. The metric outperformed our forecast by 1.2%. In the first quarter, international revenues increased 18% year on year to $87.6 million. The metric outperformed our prediction by 12.3%.

Adjusted EBITDA fell 3% year on year to $52.8 million. However, the figure exceeded management’s estimate of $42-$50 million, and it was higher than our estimate of $48 million.

Teladoc Health’s adjusted gross margin increased 290 basis points year on year to 69.8% in the most recent quarter.

Total expenses of $706.3 million declined by a significant margin, owing mostly to a goodwill impairment sustained the previous year. Sales and technology and development expenses were also lower in the third quarter.

Update for Segments

TDOC reported $350 million in revenue in its Integrated Care division for the quarter under review. Year on year, the figure increased by 5%. The statistic outperformed the Zacks Consensus Estimate of $346.9 million by 0.4%.

The BetterHelp segment’s revenues of $279.3 million increased 21% year on year due to new member growth and consistent customer acquisition costs in the quarter. The statistic outperformed the Zacks Consensus forecast and our forecast of $266.8 million by 4%.

Adjusted EBITDA for Integrated Care and BetterHelp was $35.1 million and $17.6 million, respectively, representing increases of 51% and 41% over the equivalent prior-year quarter’s reported statistics. The metric for Integrated Care outperformed the Consensus Estimate by 31.3%, while BetterHelp fell short by 13.6%.

Memberships and Visits

Total visits were 4.9 million, up 8% year on year in the first quarter. The metric fell 0.5% short of the Consensus Estimate and 2% short of our estimate.

As of March 31, 2023, U.S. Integrated Care Members increased by 7% year on year to 84.9 million (within the expected range of 84-85 million). The metric outperformed our prediction by 1%.

Financial Update (March 31, 2023)

Teladoc Health ended the first quarter with $888.6 million in cash and cash equivalents, down from $918.2 million at the end of 2022. Total assets of $4,309.1 million are down from $4,345.4 million at the end of 2022.

Debt totaled $1,536.1 million, up from $1,535.3 million at the end of 2022. Total shareholders’ equity fell 0.7% from the end of 2022 to $2,291.2 million.  

Net operating cash flow grew roughly 1.5 times year on year to $13.2 million in the quarter under review. Free cash outflows were $32.5 million, down from $62.6 million the previous year.

Guidance for Q2

Teladoc Health expects total revenues of $635 million to $660 million in the second quarter of 2023. The adjusted EBITDA is expected to be between $60 and $68 million. The net loss per share is estimated to be between 55 and 45 cents. The number of Integrated Care Members in the United States is expected to remain between 84.5-85.5 million.

Full-year TDOC management estimates sales in 2023 to range between $2,575 and $2,675 million, with the midpoint representing a 9.1% increase over the $2,406.8 million number in 2022.

Adjusted EBITDA is expected to be in the $285-$325 million range, with the midpoint representing a 23.7% increase over the $246.5 million number in 2022.

The net loss per share is expected to be between $1.25 and $1.70. The number of Integrated Care Members in the United States is estimated to be in the 84-86 million range. 

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