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Teladoc Inc (NYSE:TDOC)
Q1 2020 Earnings Call
Apr 29, 2020, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to Teladoc Health's First Quarter 2020 Earnings Conference Call and Webcast. [Operator Instructions]

It is now my pleasure to turn the floor over to Patrick Feeley, Vice President of Investor Relations. You may begin.

Patrick Feeley -- Vice President of Investor Relations

Thank you, and good afternoon. Today, after the market closed, we issued a press release announcing our first quarter 2020 financial results. This press release is available in the Investor Relations section of the teladochealth.com website. On this call to discuss the results are Jason Gorevic, our Chief Executive Officer; and Mala Murthy, our Chief Financial Officer.

During this call, we will also provide an update to our forward outlook, and our prepared remarks will be followed by a question-and-answer session. Please note that we will be discussing certain non-GAAP financial measures that we believe are important in evaluating Teladoc Health's performance. Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliations thereof can be found in the press release that is posted on our website.

Also, please note that certain statements made during this call will be forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause the actual results for Teladoc Health to differ materially from those expressed or implied on this call. For additional information, please refer to our cautionary statement in our press release and our filings with the SEC, all of which are available on our website.

I would now like to turn the call over to Jason.

Jason Gorevic -- Chief Executive Officer

Thanks, Patrick, and thank you, everyone, for joining us this afternoon. I want to start by taking this opportunity to thank all of our team members and caregivers around the world for the critical role they are playing in supporting, enabling, and delivering care during this time of need. At our Investor Day back on March 5, we spoke of the importance of our shared values. The last several weeks have demonstrated just how committed our team members are to living those values. I've been consistently impressed by their passion for taking care of people, their commitment to quality and their willingness to rise to the challenge on behalf of our clients and members. Over 90%, of our workforce continues to work from home, although our team members in China and Spain are slowly beginning to return to the office as restrictions in those countries are eased.

After the market closed, Teladoc Health reported strong revenue outperformance in the first quarter of 2020, driven by broad-based momentum across the business and a sharp acceleration in visit volume growth. Total revenue in the quarter grew 41% over the prior year to approximately $181 million. As a result of the increased demand for our services from clients and consumers, we are significantly raising forward guidance, including full-year revenue guidance of $800 million to $825 million, representing an increase of over $100 million relative to our prior range.

We are playing a critical role during the global outbreak of COVID-19 and has seen a significant increase in inquiries from both existing and new potential clients. Our clients are turning to us to expand our service offering to new populations and add new products during this time of need. Requests from new potential clients are increasing as the outbreak of COVID-19 has highlighted the value of access to a comprehensive virtual healthcare solution. During the first quarter alone, we onboarded over 6 million new paid members in the US across government and commercial populations. And we anticipate onboarding an additional 6 million to 7 million new members during the second quarter, culminating in the strongest first half membership growth in Company history.

As discussed on our business update call two weeks ago, the remarkable growth across our platform has been enabled by the tremendous response on the part of our team members and physicians. We responded to the surgeon demand by rapidly expanding the capacity of our physician network, including the onboarding of thousands of new providers, more than doubling the number of licensed physicians in our network. The investments in capacity made during the month of March have positioned us to meet the increased demand from existing members, as well as the new members we are in the process of onboarding.

Turning to visits, we crossed a new milestone as total visits exceeded 2 million in the first quarter, representing growth of nearly 90% as compared to the first quarter of 2019. This is particularly noteworthy as it comes just 12 months after crossing the 1 million visit per quarter mark in the first quarter of last year. While the first two months of the year were strong, visit volume accelerated significantly throughout March and into April as shelter-in-place orders began, $0 copays were implemented and brick and mortar facilities closed. We were experiencing broad-based growth in visits across the portfolio as our diverse product offering has enabled us to step up and meet the varied healthcare needs of patients during the outbreak of COVID-19. While general medical visit growth has increased significantly, demand for specialist care, including behavioral health and dermatology has accelerated even faster, reflecting the diverse nature of the need for care during this challenging time.

The increased behavioral health adoption is particularly encouraging as it creates strong longitudinal relationships generating multiple visits over time, which will help drive visit volume through the rest of the year. We have also seen an increase in new users across the platform with over 60% of visits coming from first time users. This new user growth will have a lasting effect on utilization, since member satisfaction levels are extremely strong and our experience shows that when members use our service once they are much more likely to use it again.

Importantly, new registrations increased 125% over the prior year, outpacing member growth as the outbreak of COVID-19 is driving awareness of virtual care among consumers. This significant increase in activation is particularly important to us as it feeds into the flywheel dynamic that is at the core of our member engagement efforts. Once an individual actively registers with us, it creates opportunities for our engagement team to reach that member and build a relationship. These engagement opportunities serve as the growth engine that drives visit growth and utilization within our populations. And the material growth in new activations we are currently experiencing will continue to benefit us into the future as consumers turn to Teladoc Health for more of their healthcare needs.

We're also seeing an encouraging demographic expansion in our user base. Visit growth rates among our younger cohorts in the range of 18 years to 30 years old and among males have accelerated faster than the overall growth rates, as we increasingly reach populations that have historically been lower utilizers of virtual care.

Demand for our DTC mental health product, BetterHelp, is also rapidly accelerating as conditions such as anxiety and depression are amplified by fear, isolation, and loneliness during the crisis. This increased utilization will continue to benefit us throughout the year given the high repeat usage profile of mental health services. Provider interest in BetterHelp is also increasing. We added a record number of new active mental health providers during the quarter. And provider applications to deliver care to BetterHelp members have increased over 70% in just the last few months. This increased provider activity will allow us to meet the growing need for mental health services throughout the rest of the year.

Similar to the impact on the health plan employer and consumer channels, the COVID-19 outbreak is accelerating the adoption of virtual care among hospitals and physician groups. The Teladoc Health technology platform is enabling hundreds of hospitals and physician groups across the country to continue serving their patients, increasing flexibility and capacity while dramatically reducing physical exposure for both patients and physicians.

As virtual care becomes mainstream within the healthcare delivery system, we are seeing increased demand from new partners for our provider platform. This includes both the Teladoc Health technology platform, as well as the InTouch Health offering, which, as you know, we have a commercial agreement in place to jointly sell the combined offering ahead of the transaction closing. We have now signed multiple new cross-sales, and the pipeline of new opportunities in the provider market for this industry-leading offering continues to grow.

The broad-based demand we are seeing across distribution channels for our comprehensive product offering gives us confidence in the long-term growth opportunity for our business.

Before I turn the call over to Mala to provide full details on quarterly performance and guidance, I would like to make a few comments on our approach to providing forward guidance this year. We know that many companies have withdrawn guidance given the uncertainty of both the expected path of the COVID outbreak, as well as the broader economic impact of the pandemic. However, we felt it important to provide as much transparency as possible. Therefore, we're providing updated guidance based on what we know today. Our guidance ranges assume the significant surge in visit volume that we are currently experiencing eases over the course of the next few months, as $0 copays begin to expire and shelter-in-place orders are lifted. We expect volumes to settle in the second half of the year at a permanently higher level of utilization than pre-COVID levels as we benefit from increased consumer awareness and the impact of our engagement engine applied to newly activated and onboarded members.

As the current path of the virus is unknown, our guidance ranges do not include an incremental increase in volume that could result from the virus reemerging in the fall with the same level of intensity we are currently experiencing. As such, should the virus return in the fall, particularly if it were in conjunction with the typical flu season, it could result in higher-than-expected visit volume and revenue growth.

Finally, our guidance ranges attempt to capture the potential impact of unemployment on the number of insured individuals based on the current macroeconomic outlook. But it remains to be seen how this unfolds. As this is an emerging situation, circumstances are likely to change in the coming weeks and months, but we believe our guidance ranges provide you with a reasonable baseline for 2020 results.

And with that, I'll turn the call over to Mala for a review of first quarter financials, as well as detailed 2020 guidance.

Mala Murthy -- Chief Financial Officer

Thank you, Jason, and good afternoon, everyone. I'd like to echo Jason's comments regarding the impressive response on the part of our team members and caregivers around the world. The collective willingness to step up to serve our clients and members during this time of need has been remarkable.

During the first quarter, total revenue increased 41% to $180.8 million. Global subscription access fee revenue for the quarter of $137.1 million, grew 29% versus the prior year, demonstrating accelerating momentum to start the year. US subscription access fee revenue of $107.9 million, grew 33% in the quarter versus the prior year, and international subscription revenue of $29.1 million, grew 17%. The strength of the dollar versus foreign currencies resulted in a negative FX impact of $1 million in the quarter. International subscription revenue growth was 21% on a constant currency basis.

Visit fee revenue for the quarter increased to $43.7 million, representing growth of 93% over the prior year, in part aided by the surge in volume we began to experience in March as the global pandemic evolved. Revenue from individuals with visit fee-only access was $12.6 million in the quarter, representing over 200% growth versus the prior year, driven in part by rapidly accelerating utilization among new populations added in the back half of 2019. Visit fee revenue comprised 24.2% of consolidated revenue, up notably from 17.6% of revenue in the prior year's quarter as utilization increased significantly.

Turning to membership and access. US paid membership increased to 43 million members, up 61% versus the first quarter of last year, a reflection of the critical role of virtual care within the healthcare delivery system and the accelerating adoption by clients, consumers and providers. As a reminder, the US paid membership includes only members associated with the PMPM and does not include individuals with visit fee-only access. Individuals with visit fee-only access was $19.2 million at the end of the first quarter, up approximately $9 million versus the prior year and stable sequentially.

Total visit volume exceeded 2 million visits in the quarter, representing a 92% growth rate versus the prior year. Visit volume from paid members in the US grew 93% to 1.4 million visits, which represents an annualized utilization rate of 13.4%, a 230 basis point increase over last year's first quarter. Excluding the impact of the large health plan population onboarded over the past 12 months, annualized utilization during the first quarter would have been 17.9%, up 690 basis points over the first quarter of 2019.

PMPM in the quarter was $0.87 compared to $1.03 in the prior year's quarter. As we have previously discussed, we expect to see a dampening effect on average PMPM when we onboard large new health plan member populations. Excluding the impact of the large health plan population added over the past 12 months, which include over 2 million Medicaid managed care members onboarded late in the first quarter, PMPM would be $1.23.

Gross profit increased by $24.5 million to $108.4 million, or 29% as compared to the prior year's first quarter. Gross margin percentage for the quarter was 60% compared to 65% in the first quarter of last year. As discussed on our business update call on April 14, the year-over-year decline in percentage gross margin reflects $4 million in incremental investments made to rapidly expand physician capacity in response to the outbreak of COVID-19 during the first quarter, as well as the robust visit growth and visit fee revenue mix in the quarter.

Operating expense for the quarter totaled $129.4 million, or 72% of revenue compared to 83% in the first quarter of 2019. Excluding non-cash charges such as depreciation and amortization, stock compensation and one-time acquisition and integration-related expenses, quarterly adjusted operating expenses were $97.7 million, or 54% of revenue compared to 64% in the first quarter of last year.

Adjusted EBITDA increased to $10.7 million for the quarter compared to $1.2 million in the first quarter of 2019. Adjusted EBITDA margin expanded 490 basis points over the prior year's first quarter to 5.9%. EBITDA, including stock compensation and one-time acquisition-related costs, was a loss of $11.3 million for the quarter compared to a $13.3 million loss in the same period last year.

Our net loss in the quarter was $29.6 million compared to a net loss of $30.2 million in the first quarter of 2019.

On a per share basis, our net loss was $0.40 for the first quarter compared to a loss of $0.43 in the first quarter of last year.

We ended the quarter with $511 million in cash and short-term investments. Our total debt outstanding as of March 31 was $562 million, which consists of our two convertible notes.

Now, turning to forward guidance. Please note that all forward guidance will exclude the impact of the recently announced InTouch acquisition until the transaction closes, which we continue to expect near the end of the second quarter. For the second quarter of 2020, we expect total revenue of $215 million to $225 million, representing growth of 65% to 73% over the prior year's quarter. We expect to add an additional 6 million to 7 million paid members in the US during the second quarter, including an additional large population of Medicaid managed care members to end the quarter with approximately 49 million to 50 million US paid members. We also anticipate adding visit fee-only access on a temporary basis for an additional 2 million to 3 million individuals during the second quarter. We are providing this temporary access to help certain clients bridge gaps in care during the current outbreak of COVID-19 and expect those individuals to roll off by the end of the year. We anticipate total visits during the second quarter of between 2.3 million and 2.4 million.

We expect second quarter EBITDA to be in the range of a negative $1 million to a positive $3 million, adjusted EBITDA of positive $20 million to $24 million, and net loss per share to be between $0.28 and $0.23 based on 74.6 million shares outstanding. As Jason said, for the full-year 2020, we now expect revenue to be in the range of $800 million to $825 million, up from our prior $695 million to $710 million range, representing 45% to 49% growth over the prior year, which again is substantially all organic.

We expect total US paid members at year-end of at least 50 million members, representing over 36% membership growth as compared to 2019 and visit fee-only access to be available to approximately 19 million to 20 million individuals. We expect total visits to be between 8 million and 9 million, representing total visit growth of approximately 90% to 115% over the prior year. As $0 copay and shelter-in-place requirements are lifted, we anticipate the surgeon visit volumes we are currently experiencing to moderate in the back half of the year. Although, as Jason discussed, we do anticipate visit volumes will persist at a permanently higher level than prior to the COVID-19 outbreak. Our visit outlook does not assume an incremental increase in volume resulting from a second surge of COVID-19, which some experts are predicting will occur in the fall with the same level of intensity we are currently experiencing.

We expect an EBITDA loss in the range of $14 million to $4 million, and adjusted EBITDA in the range of positive $70 million to $80 million, representing growth of over 130% at midpoint. The expected EBITDA improvement reflects the significant growth in revenue in conjunction with our continued focus on operating efficiencies, while still allowing us to continue to make significant investments in growth.

Given the substantial revenue and gross profit outperformance anticipated for the remainder of the year, we expect to increase our level of investment in future growth opportunities, including increased investments to drive the continued adoption of virtual care and capitalize on increased consumer awareness.

Net loss per share is expected to range from a loss of $1.27 to $1.13 per share based on 74.7 million weighted shares outstanding. We expect cash flow from operations to grow consistent with adjusted EBITDA growth.

With that, I will turn the call back to Jason for closing remarks.

Jason Gorevic -- Chief Executive Officer

Thanks, Mala. The recent events have provided an inflection point for the adoption of virtual care and the opportunities in front of us have never been greater. I'm proud of how we've responded and our ability to support our clients and members in this crucial time of need. Our diverse range of product offerings and capabilities, combined with our market leadership across all distribution channels, uniquely positions us to meet the rapidly increasing demands of the marketplace. We look forward to continuing to share updates with you throughout the year. As always, thank you all for your continued interest in the Teladoc Health story.

And with that, we'll open the call for questions. Operator?

Questions and Answers:

Operator

Thank you. [Operator Instructions] Thank you. Your first question will come from Lisa Gill from J.P. Morgan. Your line is open.

Lisa Gill -- J.P. Morgan -- Analyst

Thanks very much, Jason, and for the incremental detail post last week. So, I just -- really just want to focus on an area that you talked about, and it's obviously, membership. As we think about that membership and you talked about a number of the assumptions that you have around this. I just want to dig in two areas. One, you talked about 6 million to 7 million incremental members coming on your platform. Can you talk about if those are brand-new clients or penetration within your existing customer base?

And then secondly, when you touched on unemployment, you said we have something built into our expectations for the full-year guidance. I'm just wondering what you're hearing from your customers today. I mean, there has been a lot of layoffs with this anticipation that perhaps those people are going to be rehired at some point. So they're more furloughed than laid off. How do we think about the conversations that you're having and the impact that unemployment could have in the back half of the year, as well as, as we start thinking about 2021?

Jason Gorevic -- Chief Executive Officer

Yeah. Thanks, Lisa. So, on the 6 million to 7 million members we expect to add in the second quarter, it's a mix of existing clients who are expanding to new populations, as well as new clients who are coming to us for the first time. We've seen that as the pipeline has built over the course of the first quarter, we began to onboard those members in the sort of latter half and really the last third of the first quarter. And that has persisted into the second quarter. So, it's a combination of both existing and new.

With respect to unemployment, we think that we are less affected than other industries due to the fact that COBRA kicks in relative to benefits and therefore, benefits get extended beyond the employment. As you said, furloughed employees frequently keep their benefits. In addition to that, we are expanding our footprint in Medicaid, as well as with the exchange businesses. So, we think that in some cases that'll be a shift from commercial roles to some of the exchange or managed Medicaid roles. But we will still be able to retain those members. Now, in other cases, that won't be the case. And we're not completely immune to unemployment. And as a result, we've factored in some of the unemployment expectations that are being circulated by the economists. And we've looked on a client-by-client basis across, especially our managed care clients to try to understand the puts and takes there.

Mala, I don't know if there's anything you'd add to that.

Mala Murthy -- Chief Financial Officer

The only other thing I would add, Lisa, is that, we are also significantly more diversified today than in years past. So, just keep that in mind in terms of the furlough context.

Lisa Gill -- J.P. Morgan -- Analyst

Great. Well, congratulations. And Jason, it's been phenomenal to watch this the last five years now that everyone is finally onboard here around telehealth. So, again, congratulations on what you've been able to do.

Jason Gorevic -- Chief Executive Officer

Thanks, Lisa. Really appreciate that.

Operator

Your next question comes from Sean Wieland from Piper Sandler. Your line is open.

Sean Wieland -- Piper Sandler -- Analyst

Hi. Thank you and congrats. So, Jason, you said that this has been an inflection in the trajectory of virtual care, and I just want to dig in on that for a minute. Where do you think that this goes long-term? What does healthcare look like in five years because we have had this terrible pandemic where it wouldn't have changed otherwise?

Jason Gorevic -- Chief Executive Officer

Yeah. I think as I look forward, there are three major areas where there have been significant changes. One, among consumers awareness and adoption around virtual care and the willingness to shift how they've done things for generations to a new way of accessing care. And certainly that's not just for healthcare. It's true across the entire spectrum of how people interact. Healthcare just happens to have been a fairly sticky one.

Second is among physicians and hospital systems in terms of their outlook with respect to embracing virtual care as a delivery methodology. And what had been somewhat reluctant in some places has moved to vigorously embracing virtual care. In some cases, it was out of necessity, but what we're seeing is tremendously high satisfaction rates among physicians who were actually engaging in virtual care.

And lastly, health plans and employers are now viewing virtual care very broadly across all specialties. And we're actually seeing significant increases in multi-product sales and among consumers who are using multiple of our clinical products. So I would say those three factors all will end up being part of that inflection. And so if I look out five years, I would say virtual care will be ubiquitous. It'll be just another methodology for how people access care. They're unlikely to see the difference sort of a bright line between one and another. And that opens up tremendous opportunities for us both to deliver that care as well as using our technology to enable that care for providers in the market. And obviously we are with a global footprint uniquely positioned to benefit from that.

Operator

Your next question comes from Stephanie Davis from SVB. Your line is open.

Stephanie Davis -- SVB -- Analyst

Hey guys, congrats on the quarter and thank you for taking my questions.

Jason Gorevic -- Chief Executive Officer

Thanks, Stephanie.

Stephanie Davis -- SVB -- Analyst

Thinking about InTouch Health, you're buying a bit of a different asset than what you originally looked at in January, both in terms of growth and scale. Could you walk us through the growth in new wins in your existing hospital business as a proxy to how we should think about this acceleration InTouch given the demand in the market?

Jason Gorevic -- Chief Executive Officer

Yeah, absolutely. I'll talk about our experience. We're working closely with the InTouch team. So I can speak a little bit about their experience. And of course, we'll be able to give you more detailed financial details, when we get to the closing of that transaction. We immediately saw hospitals, both existing clients as well as new prospects looking to us for technology that could enable them to treat their patients remotely. And to do it in a way, that is sort of purpose built for healthcare workflows. And that enabled us to rapidly respond with our technology platform and stand up over 30 essentially virtual clinics for hospital systems and providers across the country, on-boarding thousands of physicians onto the platform and enabling them to treat their patients.

InTouch Health has seen a similar set of demand where their technology was used from the very beginning. In fact, the first patient who was being treated in Washington State Hospital was treated using an InTouch piece of technology to distance the physician from that patient. And they've continued to see demand and similarly, have seen massive increases in the daily number of transactions on their network. And so I think what you'll see when we bring the two companies together is an unmatched solution that is hitting the market at a time where the market has massively increased its adoption rate.

And so I think when we look back several years down the road, this world have been incredibly fortuitous timing for us to have done the acquisition. Obviously, when we announced it in January, we didn't know that this was coming. We were excited about it then and we're ecstatic about it now.

Operator

Your next question comes from Ryan Daniels from William Blair. Your line is open.

Ryan Daniels -- William Blair -- Analyst

Yeah. Thanks for taking the question and congratulations on all the business momentum. Jason, one for you. Looking beyond the crisis, it seems like one of the other things that's probably occurred is there's a lot of novel players that are entering in the space. I think I was watching CNBC and saw Microsoft commercial from Microsoft Team [Phonetic] just talking about how doctors are using this now. So Team and Zoom and a lot of other kind of non-healthcare players getting into this space, how do you see the competitive dynamic in virtual care panning out over the long-term? Thank you.

Jason Gorevic -- Chief Executive Officer

Yeah. Thanks, Ryan. I think there is no question that the world has changed with respect to the adoption of virtual care and of course, that will bring theirs to the party, who are interested in providing technology solutions, etc. I would say, we differentiate ourselves pretty dramatically among a number of dimensions. One, certainly our technology is purpose built for healthcare. It integrates with the providers' existing systems. It is designed for healthcare workflows with -- for roughly a 100 use cases, clinical use cases between Teladoc and InTouch Health.

And that is very different than using an off-the-shelf video conferencing technology. We've gone up against those for years, so that's not new for us. Those technologies have been in the market before whether that's from Cisco or Verizon or anybody else. And so I feel good about where we are on technology footing.

Second big difference is that we bring physician networks and the ability to actually deliver care with our technology solution. And that is very meaningful to hospitals. The majority of our hospitals use our physician network either completely or to supplement their physicians in delivering virtual care. And that is a critical success factor for us.

And finally our global presence gives us the ability to provide these technology solutions all around the world. And in fact, one of the areas of strength relative to cross-sell that we've seen already with InTouch Health is our ability to close international deals with the InTouch technology and our international team providing that sort of selling horsepower. So I feel really good about our market position. And as you think about the convergence of payers and providers, we're uniquely positioned to provide that capability.

Mala Murthy -- Chief Financial Officer

I would also add, our technology platform is HIPAA-compliant and has shown the ability to scale up through the crisis with pretty high volume levels, so that's important as well as a differentiation factor.

Operator

Your next question comes from Richard Close from Canaccord Genuity. Your line is open.

Richard Close -- Canaccord Genuity -- Analyst

Yeah. Thanks for the questions. On that global front, Jason or Mala, can you talk a little bit about the global growth opportunity? Just looking at the quarterly results, I would have thought that maybe international would be a little bit higher from a visit? Can you just talked about what's going on that front?

Jason Gorevic -- Chief Executive Officer

Yeah. Our international business has continued to perform incredibly well. And we've never seen a pipeline as strong as we see right now. Mala mentioned in the quarter that we were negatively affected by some FX and but for that FX, we would have seen our strongest growth internationally yet. In fact, we just signed a contract with Canada Life to rollout the full suite of our services in the UK to their membership, which, so that includes general medical, behavioral health, nutrition and expert medical services. And that pipeline really -- in many markets, we've always been strong or we've historically been strong in the EU. But we're also seeing other markets, especially in South America emerge with greater growth rates on the heels of this pandemic. I don't know, Mala, if you'd add anything.

Mala Murthy -- Chief Financial Officer

No. So I think that, we are -- on a constant currency basis, it grew over 20%. There is a pretty strong pipeline in place, Richard, that we are methodically working through. Just like in the US, we saw a real big state of requests from clients. We did -- we had the same sort of phenomenon happened internationally. And so I feel pretty confident about our growth prospects internationally, as we look ahead.

Operator

Your next question comes from Jamie Stockton from Wells Fargo. Your line is open.

Jamie Stockton -- Wells Fargo -- Analyst

Hey, good evening. Thanks for taking my question. I guess quickly on the PMPM, it seemed like a decent amount of the bump in visit volume came from kind of all-you-can-eat models. If you could just talk about the timing of when you expect that to really start to show up in the way that you get paid or we're going to see that in Q2. And maybe how durable is it, if we get the step up, do we get it for the rest of the year? Thanks.

Jason Gorevic -- Chief Executive Officer

Mala, you want to take that.

Mala Murthy -- Chief Financial Officer

Yeah. So we should expect to see the step up happen over the next few quarters, Jamie. So it will be in the fairly short term.

Jason Gorevic -- Chief Executive Officer

And Jamie remember that the visits included is both from our medical membership as well as our direct-to-consumer mental health services better health. So those are both in there together.

Operator

Your next question comes from Sean Dodge from RBC Capital Markets. Your line is open.

Sean Dodge -- RBC Capital Markets -- Analyst

Thanks. Good afternoon. Maybe going back to the outlook for longer term utilization, Jason, you touched on it a bit earlier. The pandemic accelerated the use of telehealth, some driven by a version to showing up in person to offices, but a lot too, helped by the subsidization employers and health plans have been doing to remove the out of pocket cost for individuals. I guess, is there a risk over the course of this that we're conditioning, people to expect telehealth to be free to them. And once we get to the other side of this -- of the outbreak, are there longer term implications that can have on things like pricing and utilization?

Jason Gorevic -- Chief Executive Officer

I don't think so, Sean. I think people recognized that this is an unusual situation and that employers health plans and others took unusual actions in order to address it. I think what's interesting is, that we're seeing very strong growth across all of our products, not just general medical, so there's real acceptances.

Our B2B, mental health and dermatology visits tripled in the quarter. And I guess I would also point to, we are not only reporting essentially doubling our first quarter visit volume, but our outlook calls for us to double our full year visit volumes. So our confidence is very, very strong relative to the post-COVID utilization rates. And again, just to echo what we said on the call, in the prepared remarks that does not anticipate a sort of a second wave, if you will of COVID cases in the fall.

Operator

Your next question comes from Charles Rhyee from Cowen. Your line is open.

Charles Rhyee -- Cowen and Company -- Analyst

Yeah, thanks for taking the question. I wanted to go back to, I think it was Sean's question about sort of where you think utilization rates are going to be in. And I think Mala, you kind of said that, if we back out sort of the onboarding of the large managed care client, underlying utilization was almost 18%, up 690 basis points. When we kind of talked about, you expected to kind of drift back a little, but -- and obviously we have a lot of new members also coming on, which I would assume probably have a lower utilization rate, on that kind of same store sales basis, what do you -- what would you expect sort of underlying utilization to look like? Do you think we'll still be sort of at this 18% range or where do you think we might fall back to as sort of a jumping off point as we think about '21 and beyond?

Jason Gorevic -- Chief Executive Officer

So I think we -- I appreciate the question. I appreciate why you're asking it, Charles. I think we were -- we have a lot of discussion about giving guidance in this unusual and uncertain time. And we felt like we had enough visibility to do that through the rest of this year. I think we're going to stop short of trying to give longer-term guidance relative to what's the new normal in terms of utilization rates. We feel very strongly that it will be materially higher than it's been in the past and the satisfaction rates and the net promoter scores that we see from the new members who are using our service for the first time give us tremendous confidence around that.

But we're definitely not prepared to give longer-term utilization guidance. And I think we'll continue to see things unfold over the rest of the year. And as we do, as always, we'll continue to update our outlook.

Operator

Your next question comes from George Hill from Deutsche Bank. Your line is open.

George Hill -- Deutsche Bank -- Analyst

Good afternoon, guys. Thanks for taking the questions. Jason, I want to focus in a little bit on the planned continued investment, the Company talked about making, I guess, where do you see the kind of the biggest bang for your buck from an investment perspective at this point? We talked about kind of high-teens utilization rates, and I guess I'm just trying to figure it out like, it sounds like there's an opportunity here to put money to work. I'm intrigued, like where you think the most attractive opportunities are to spend money and then kind of what do you get for that from a metrics perspective?

Jason Gorevic -- Chief Executive Officer

Yeah. Thanks, George. The -- I guess I would say a few things. One, obviously it's a unique moment where awareness has significantly increased. And we have the opportunity to invest, to drive more engagement, drive more new users to the platform and we know that we get long-term benefits from them, because they come back and become repeat users. So, I think you'll see us invest in those areas that pay lasting dividends and repeat dividends.

We also see the acceptance for multiple products in an integrated -- when we say multiple products that really mean multiple clinical specialties in an integrated fashion. And we've talked before about virtual primary care, I think you'll see us continue to push forward with that and invest in that area. And then we are seeing very, very good strength in some of our specialty businesses. And I think you'll see us continue to invest there. Mala, I don't know if you'd add anything to that.

Mala Murthy -- Chief Financial Officer

Yeah, I'd just go back to what we said during Investor Day, right. We were pretty clear in saying, we'll invest in virtual primary care, we'll invest in membership marketing, we'll invest in our technology platform, continue to put investments into that. So I would say a lot of the PCs that we had on Investor Day against our investments still holds, obviously as Jason talked about, there is investments we have made and rapidly expanding our provider capacity, our network capacity, but I would say a lot of the PCs [Phonetic] still hold.

Jason Gorevic -- Chief Executive Officer

And I guess I would just add one more thing, which is as I mentioned, we were excited about the InTouch acquisition. I think you'll see us invest heavily in that area, because the time is right to capitalize on it. And we think that the return we can get for that is even greater than when we did the deal. So you'll see us continue to invest in that area.

Operator

Your next question comes from Matthew Gillmor with Baird. Your line is open.

Matthew Gillmor -- Robert W. Baird -- Analyst

Hey, thanks. And thanks for all your guys are doing. Jason, I was hoping you could characterize the selling season for employers and health plans. I'm sure it's quite different this year, but could you just sort of talk about activity levels, what types of populations are sort of in the discussion. And then, now that we're hopefully over the COVID hump, are most of these discussions for January 1 start dates or do some of these buyers want to start sooner?

Jason Gorevic -- Chief Executive Officer

Yeah, thanks for the question Matt and your comments. So everything has accelerated. It's a little early still to talk about the selling season for 1/1/21, but everything has accelerated, which I think is reflected in the fact that we'll add 12 million to 13 million new members in the first half of the year. And that broad-based demand across all of our products and distribution channels is showing up in the selling season.

Just to give you a little bit of color, our Q1 bookings over half of them were multiproduct, so that continues to be very, very strong for us. And our average deal size in Q1 was up over 50% year-over-year. So we continue to see larger opportunities across multiple products and that's true across all of our distribution channels. So I think it bodes very well for how we look forward into the second half of the year and 1/1/21 but again a little early to start quantifying what the pipeline looks like for them.

Operator

Your next question comes from Jailendra Singh from Credit Suisse. Your line is open.

Jailendra Singh -- Credit Suisse -- Analyst

Hi, thanks, everyone. So I was actually wondering if you can talk about the implication of this increased awareness and adoption of telemedicine for your annual long-term revenue growth target of 20% to 30% and EBITDA margin expansion target of 200 basis points to 300 basis points over the next five years. And also if you can provide any color on your expectations with respect to near-term and long-term gross margin expectations.

Jason Gorevic -- Chief Executive Officer

So, Mala, I'll let you handle the, how do you want to characterize our long-term outlook now that everything's changed?

Mala Murthy -- Chief Financial Officer

Yeah. Yeah. Do you want to handle -- so let me start first, so what I would say Jailendra is, there were several moving pieces in the first quarter as you saw in terms of our gross margin. As we think about the rest of the year and the dynamics on gross margin, there are a couple of things to keep in mind. The first is, we will continue to see the surge in the second quarter as it relates to visit revenue and that will moderate over the course of the year as the shelter-in-place, etc. eases. I would also say the surge in visits included that we have seen that we have talked about will also expect that to moderate over the year.

I would say for the medium to long term, my expectation is that we will -- we still have confidence in the mid-60s gross margin that we have talked about in the medium to long term. And I would also say we have talked about our gross profit growth as something that we are looking at. And you can see in the quarter, gross profit grew quite healthily at 29%. And we will continue to focus on driving that gross profit growth.

When it comes to overall adjusted EBITDA margin and margin expansion, my expectation is that we will continue to invest in marketing, keeping pace with revenue growth and we will continue to drive opex leverage from all other opex and so my expectation is that the adjusted EBITDA margin expansion of 200 basis points to 300 basis points that we talked about still holds.

Operator

Your next question comes from Matt Hewitt from Craig-Hallum Capital. Your line is open.

Matt Hewitt -- Craig-Hallum Capital -- Analyst

Good afternoon. Thank you for taking the questions. Just maybe to tag on that a little bit, obviously you've done a phenomenal job adapting to the situation. You are able to add physicians and capabilities even despite the search. But there were a couple of hiccups as we -- and you've dealt with those as well. As we look out and given that this situation has driven faster adoption to telemedicine and to your platform, wouldn't it be safe to assume that gross margins should expand maybe at a faster rate than you previously expected? Or is the expectation that you just take those dollars and you're converting them into some of these other newer markets that you've talked about expanding into? Thank you.

Mala Murthy -- Chief Financial Officer

Yeah. So that's right. We will -- we have investments that are attractive and that we need to judiciously make. And so my expectation is that we will just like be proved in the first quarter, we quickly invested in what we needed to through the crisis. And we -- Jason just talked about the investments that we have. We will look at those investments in the medium to longer term and make the right ones, whether it be in the US or whether it be internationally. So again, my expectation is we'll make the right investments, we'll do those that give us attractive returns and support both the top line growth as well as give us the right margin profile.

Operator

Your next question comes from Steve Halper from Cantor. Your line is open.

Steve Halper -- Cantor Fitzgerald -- Analyst

Hi. I know you talked about InTouch a little bit, but can you just update us in terms of your expectations on the close date and where you're at in the process and where you're at in terms of integration planning?

Mala Murthy -- Chief Financial Officer

There's no change in our expectations of close date. We talked about the fact that we still expect it to be near the end of the second quarter. The integration process is going well across all of the teams. There is a -- there are a lot of good quality conversations happening around integration and integration planning. So I have confidence that we will close by the end of the second quarter and we will update our guidance in the middle of the year when we do.

Operator

Your next question comes from Jonathan Yong from Barclays. Your line is open.

Jonathan Yong -- Barclays -- Analyst

Hi, thanks for taking my question. So it's pretty clear telehealth is becoming a ubiquitous benefit design. But I'm curious in your discussion with customers, have they discussed talk -- discuss moving toward a more virtual first benefit design where they may provide the first one or two visits for free to try to help push forward telehealth given how much more prevalent it's become, just curious if you could give us any color on that? Thanks.

Jason Gorevic -- Chief Executive Officer

Yeah. Jonathan, look I think you're exactly right that virtual care has been become ubiquitous and we're seeing it across multiple specialties. So what may have been virtual urgent care years ago is now just virtual care, virtual healthcare. I think we're going to see many different plan designs coming out as employers and health plans realize the benefits of this and the positive impact it can have both on cost of care as well as health outcomes. I think virtual primary care is an example of that. I think $0 co-pays are another example of that. I think encouraging virtual visits, but it doesn't just stop with general medical. I think you'll see plan designs that encourage virtual and mental healthcare that include virtual center of excellence programs. We've seen interest in our virtual center of excellence as people have been unable to physically get to centers of excellence programs for large employers and health plans. So I think you're going to see that across the entire spectrum.

Operator

Your next question comes from Kevin Caliendo with UBS. Your line is open.

Adam Noble -- UBS -- Analyst

Hi, thanks for the question. This is Adam Noble on for Kevin. Congratulations on the great results and guidance. I just wanted to ask about, how you're thinking about the regulatory backdrop in your guidance, obviously there were a lot of changes made, particularly within Medicare. How are you thinking about those changes staying in place or being -- or maybe returning back to normal, but over the course of the year and then for Medicare fee-for-service specifically, could you talk about what type of volumes you've seen and how you're servicing that market? Is it the only or just a little bit more color on how you're capitalizing in that market separately [Phonetic]?

Jason Gorevic -- Chief Executive Officer

Yeah, it's an interesting question because there have been obviously a lot of regulatory changes in the -- with the onset of this crisis. We generally take a conservative view to forecasting. And so when we do that, we include the regulatory environment in those set of conservative assumptions. So we can't assume that all of these regulatory changes persist. And I think some are more likely than others. So our financial outlook and forecasts don't assume that they do. We will continue to work with regulators to provide them with data on where regulatory changes have had a positive impact. And we have very, very good relationships and good dialogue there. But the regulatory environment is not something that that I can sort of rely on in a set of assumptions. So we don't make those -- we don't include sort of positive development there in our assumptions.

With respect to the Medicare population, we did add about 0.5 million Medicare members -- managed Medicare members, Medicare Advantage. In the first quarter we expect to continue to do that. We have a robust pipeline and then for Medicare fee-for-service, most of what has been providers engaging with us to use [Technical Issues] serve their Medicare fee-for-service members. We do think that if that persists, there would be an opportunity for some direct-to-consumer efforts. But there isn't an aggregator there other than the providers and we do think that we will be -- our hospital and health systems business would benefit from continued reimbursement for -- by Medicare fee-for-service.

Operator

[Operator Closing Remarks]

Duration: 61 minutes

Call participants:

Patrick Feeley -- Vice President of Investor Relations

Jason Gorevic -- Chief Executive Officer

Mala Murthy -- Chief Financial Officer

Lisa Gill -- J.P. Morgan -- Analyst

Sean Wieland -- Piper Sandler -- Analyst

Stephanie Davis -- SVB -- Analyst

Ryan Daniels -- William Blair -- Analyst

Richard Close -- Canaccord Genuity -- Analyst

Jamie Stockton -- Wells Fargo -- Analyst

Sean Dodge -- RBC Capital Markets -- Analyst

Charles Rhyee -- Cowen and Company -- Analyst

George Hill -- Deutsche Bank -- Analyst

Matthew Gillmor -- Robert W. Baird -- Analyst

Jailendra Singh -- Credit Suisse -- Analyst

Matt Hewitt -- Craig-Hallum Capital -- Analyst

Steve Halper -- Cantor Fitzgerald -- Analyst

Jonathan Yong -- Barclays -- Analyst

Adam Noble -- UBS -- Analyst

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