Teladoc's (TDOC -1.33%) strong fourth-quarter results certainly reflected how bad the flu season has been this year. Patient visits were up nearly 50%, as the company's telemedicine operations continue to catch on within our healthcare ecosystem.
Teladoc is America's largest provider of virtual medical consultations. Rather than scheduling, commuting to, and waiting at the hospital, they offer doctor's visits to be conducted at home over your computer or smartphone. Wait times are generally less than five minutes, and they offer access to more than 3,000 licensed medical providers 24/7/365. While not meant to replace your primary care doctor, they do offer immediate diagnoses for non-emergency medical issues.
Teladoc obtains revenue in two ways: by charging insurers and employers subscription access fees, and by charging patients per-visit fees (which, for many plans, are also paid by the insurer). The company's fourth-quarter results demonstrated that more customers are joining Teladoc's platform and more patients are actually using it.
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Teladoc results: The raw numbers
| Metric | Q4 2017 | Q4 2016 | Year-Over-Year Change |
|---|---|---|---|
| Revenue | $77.1 million | $37.4 million | 106% |
| Operating income | ($24.6 million) | ($13.2 million) | N/A |
| Earnings per share | ($0.76) | ($0.31) | N/A |
Data source: Teladoc.
What happened with Teladoc this quarter?
Teladoc displayed strong growth, both from the subscription and per-visit segments of its business.
- Subscription access fee revenue was $65.4 million, which was up 115%. Of that figure, $55.4 million came from U.S.-based subscriptions, which increased 36% organically (excluding their recent acquisition of Best Doctors).
- Total U.S. paid membership was 23.2 million, up 33% year over year.
- Patient visits revenue was $11.8 million, which was an increase of 68%. Of that figure, $10.7 million came from general medical visits, and $1.1 million came from specialty visits, which includes behavioral health, dermatology, and Best Doctors' second opinions.
- Total visits were 464,000 in the fourth quarter, which was 49% higher than a year ago. Management noted that the past few months have seen an extremely harsh flu season for much of the country, which lifted visits 5% to 10% higher in the fourth quarter.
- Utilization -- defined as total general medical visits divided by paid U.S. membership -- increased to 8.1% in the fourth quarter. This is up from 7.3% last year.
- Adjusted EBITDA was $2.4 million, up from an $8 million loss in the fourth quarter of 2016.
What management had to say
After recapping Teladoc's strong organic growth rates and successful integration of Best Doctors, CEO Jason Gorevic also noted that favorable legislation could be a boon for future business:
We've also seen positive developments coming out of Washington. Earlier this month, the President signed into law the Bipartisan Budget Act of 2018, which contains an important provision for expanding telehealth access for the over 19 million people currently enrolled in Medicare Advantage plans. Plan sponsors will be permitted to include the cost of telehealth services in their annual bids to CMS beginning with the January 1, 2020, plan year.
Looking forward
Telemedicine is a hot topic that is drawing a lot of attention from both potential customers and competitors. Teladoc's acquisition of Best Doctors last July was an excellent move, adding 50,000 providers onto their network and boosting its international footprint. By also recently making the power of IBM's Watson cognitive computing service available to clients, the company is strengthening its competitive position as it woos larger insurers.
Investors will be watching to see if the 8.1% utilization rate continues to increase, which would indicate that Teladoc's platform is catching on with members. Higher utilization would boost high-margin patient visits revenue, which could help the company exceed estimates in upcoming quarters.
