Teladoc Health (NYSE:TDOC), the global leader in virtual healthcare, reported robust first-quarter 2020 results after the market closed on Wednesday.
Shares closed down 1% in after-hours trading on Wednesday. We can attribute the market's reaction to loss per share coming in somewhat larger than Wall Street's consensus estimate. Revenue, however, crushed initial expectations, fueled by the coronavirus-driven surge in virtual visits in March.
The market's initial reaction was muted because the results were a bit anticlimactic. The company had released preliminary results for several key metrics on April 14, which was followed by its stock popping 9.2% the next day.
In 2020 through Wednesday's regular trading session, shares of the hot healthcare stock are up 109%, whipping the S&P 500's negative 8.5% return.
Here's an overview of Teladoc's first quarter and guidance.
Revenue jumped 41%
Teladoc's sales soared 41% year over year to $180.8 million. Revenue easily beat the company's initial guidance of $169 million to $172 million. That outlook was provided on Feb. 26, or two weeks before the World Health Organization declared the COVID-19 epidemic a pandemic, resulting in nearly all U.S. states and many other countries issuing lockdown orders to help slow the spread of the virus.
The revenue result wasn't a surprise because Teladoc had released preliminary Q1 results on April 14 for revenue ($180 million to $181 million) as well as for adjusted EBITDA (earnings before interest, taxes, and depreciation) and total visits.
For context, revenue in the fourth quarter of 2019 increased 27% year over year.
Here's how revenue broke out:
Q1 2020 Revenue
|U.S. subscription fees||$107.9 million||33%|
|- International subscription fees||$29.1 million||17%|
|Total subscription fees||$137.1 million||29%|
|- U.S. paid visits||$30.9 million||69%|
|- U.S. visit fee only||$12.6 million||205%|
|- International paid visits||$260,000||5%|
|Total visit fees||$43.7 million||93%|
|Total revenue||$180.8 million||41%|
Total visits skyrocketed 92%
Total visits in the quarter rocketed 92% year over year to 2 million. This result came in even better than many investors closely following Teladoc probably expected, as its preliminary results had included total visits of "more than 1.8 million." Moreover, total visits soared 67% from 1.2 million in the prior quarter. This is amazing sequential growth considering the surge in visits came in the last month of the quarter.
For an additional point of reference, total visits last quarter rose 44% year over year.
U.S. paid membership soared 61%
Total U.S. paid membership soared 61% year over year to 43 million members. This huge increase bodes well for the company's long-term growth. The pandemic has greatly increased the public's awareness of telehealth, and it seems to me that folks who have access to the company's services will now be much more likely to use them -- including when the crisis is over.
The company's increase in U.S. visit-fee-only customers was equally impressive. It rocketed 89% year over year to 19.2 million.
Net loss per share narrowed 7%
Net loss narrowed 2% to $29.6 million, which translated to net loss per share narrowing 7% to $0.40. That result fell somewhat short of the $0.36 loss per share Wall Street was expecting.
Cash used in operations fell (improved) 20%
Teladoc used $6.3 million in cash in its operating activities. This metric moved in the right direction year over year, as the company gobbled up 20% more cash in the year-ago period.
2020 revenue is expected to grow 45% to 49%
Teladoc issued second-quarter guidance and updated its full-year 2020 outlook. You might want to focus on the highlighted new 2020 outlook figure.
New Guidance (Loss)
Projected Change YOY
|Q2 revenue||$215 million to $225 million||N/A||65% to 73%|
|Q2 earnings per share (EPS)||($0.28) to ($0.23)||N/A||Loss narrowing 32% to 44%|
|2020 revenue||$800 million to $825 million||$695 million to $710 million||45% to 49%|
|2020 EPS||($1.27) to ($1.13)||($1.19) to ($1.06)||Loss narrowing 8% to 18%|
|2020 total visits||8.0 million to 9.0 million||5.5 million to 5.9 million||95% to 120%|
|2020 total U.S. paid members||At least 50 million||43 million to 45 million||At least 36%|
Going into the report, Wall Street had been modeling for a Q2 loss per share of $0.30 on revenue of $182.3 million. So Teladoc's outlook for both the top and bottom lines is much brighter than analysts had expected.
As for full-year 2020, the Street had been projecting a loss per share of $1.11 on revenue of $743.6 million. So Teladoc's revenue outlook came in significantly better than analysts had expected. This is no surprise to me, as I opined in my recent earnings preview that the Street's 2020 "revenue estimate is going to prove to be too low."
Teladoc's 2020 net loss projection is somewhat wider than the Street had expected. However, this makes sense and is nothing to be concerned about. Analysts had been underestimating 2020 revenue potential, which means they likely weren't factoring in enough spending for Teladoc to ramp up capacity.
A great quarter with continued robust growth expected
In short, Teladoc turned in a super-strong quarter, and, based on its outlook, 2020 is poised to be a powerful year.