US Market

My Thoughts on Teladoc Health Q4 2021 Earnings $TDOC

Calvin Lo

Teladoc Health reported Q4 2021 and FY 2021 earnings on 22 Feb 2022. Link to the press release here.

Summary

  • Q4 revenue grew 45% to $554M. Still healthy growth but slowing. Might be due to comparison vs last year when Livongo revenue was included, since the merger deal closed on 20 Oct 2020. FY 2021 revenue grew 86% to $2.0B.
  • Q4 net loss narrowed to only $11M, much less than $394M a year ago. Adj EBITDA was up 53% to $77M.
  • Strong cash flow from operations of $83M in Q4 and $193M for 2021, reversing from negative the prior year period.
  • Gross margins expanding to 67.5% from 67.2% (GAAP) and 68.4% from 67.9% (Adjusted) in Q4.
  • Average revenue per US paid member increased to $2.49 in Q4 2021 from $1.63 in Q4 2020.
  • Stock-based compensation declining drastically to $61.6M in Q4 2021 from $414.4M in Q4 2020. I’d expect SBC to drop further as we move further along from the Livongo merger.
  • Management guidance for FY 2023
    • Revenue of $2.55B to $2.65B, only 25-32% increase
    • Not expecting to turn profitable yet, net loss per share -$1.60 to -$1.40 per share
    • US paid membership 54-56M members, only a tad above the 53.6M they ended the year with

My Thoughts

Next quarter Q1 2022 will be key to determining how the combined Teladoc-Livongo entity is performing, since it will be the first full quarter comparison post-merger. In Livongo’s also quarterly earnings Q3 2020 prior to merger, they reported total revenue of $106.1M. Teladoc did not provide ex-Livongo numbers, so we can’t tell easily how Teladoc itself is performing. Most of the growth, margin expansion, and increase in average revenue per US paid member could have just come from Livongo.

I’m also not pumped about the weak guidance management is providing. Member growth is practically expected to be stagnant, and they didn’t provide guidance on how much average revenue per member is expected to grow. If both stay relatively flat, we will likely see a massive slowdown in revenue growth. Even with declining SBC, management doesn’t expect the company to turn profitable next year either.

The silver lining is that the company has turned cash flow positive, which is really important for them to continue to fund their growth especially with interest rates expected to rise.

Where is the growth going to come from? I might have to listen to the conference call to get more insights.

TDOC is now trading at ~$65, a massive -78% decline from its peak of close to $300 and -31% YTD. Tipranks average analyst price target is at $120 (~84% upside).

Personally, I’ve been bag-holding TDOC which has been painful. I trimmed my position and tried buying some protective puts to cushion the declines, but I’m still sitting on a big loss around -62%. My position has shrunk to less than 1% after the declines and trimming.

I’m thinking with TDOC at market cap of ~$10B and only 5x P/S, it might be too late to sell so I’ll probably just hold and wait for Q1 2022 earnings. TDOC is clearly still in a downtrend so I’m not in a rush to pick up any shares to lower my cost basis either.

What do you think of Teladoc Health?

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Disclosure: I’m long TDOC.

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