Insights

Teladoc’s Stock Is on Life Support — Can It Be Revived?

Leading telemedicine provider Teladoc (NYSE: TDOC) was already experiencing a rough 2022 when it reported its first-quarter earnings on April 27. Heading into that earnings release, shares were down 39% for the year — and it’s only gotten worse from there. The following day, the stock fell another 40%.
At the time of this writing, Teladoc is down 80% from its early 2021 high. Based on nothing other than the share price, one might assume Teladoc is a failing company.
In reality, nothing could be further from the truth. Like most companies, Teladoc has its share of challenges, and the stock price is reflecting that acutely. However, upon a closer look, there are some bright spots in the earnings report. For investors willing to hold for the long term, there’s enough promise in Teladoc’s future to be encouraged. Will that be enough to bring its stock back?
Let’s take a closer look.
Image source: Getty Images.

So what is a goodwill impairment?
The headline number from Teladoc’s Q1 2022 earnings report was the company’s net loss of $6.7 billion. For comparison, in Q1 of 2021, Teladoc posted a loss of $200 million. No that’s not a typo, that’s how large the swing was year over year. The reason for the substantial net loss was a goodwill impairment charge that the company reported this quarter on Livongo, a chronic condition management company it acquired in 2020.
Goodwill is the value of an acquisition that exceeds the sum of the assets purchased. Essentially, it’s the value of the intangible aspects of an acquired business, such as brand recognition or intellectual property. When the value of that intangible asset drops below market value, companies take a goodwill impairment charge. This appears as an operating loss on the income statement as well as a decrease in goodwill on the balance sheet.
In this instance, the impairment resulted in about a 50% reduction in Teladoc’s goodwill. It’s also important for investors to know that this is not a cash expense (no actual cash left the business as a result of this impairment) so it’s added back on the cash flow statement so it doesn’t impact the company’s cash flows.
How concerning is the lowered guidance?
While the goodwill impairment may have been the headline, it didn’t take much digging to find another reason for the extreme market reaction as Teladoc also lowered its full-year guidance.
 

Revised FY 2022 Guidance

Original FY 2022 Guidance

Revenue

$2.4 to $2.5 billion 

$2.55 to $2.65 billion

EBITDA

$(52) to $(7) million

$18 to $48 million

Adjusted EBITDA

$240 to $265 million

$330 to $355 million

Net loss per share

$(43.50) to $(43.00) per share

$(1.60) to $(1.40) per share

Total U.S. paid membership

Unchanged

54.0 to 56.0 million members 

Fee-only access

~25 million

24.0 to 25.0 million

Total visits

18.5 to 19.5 million visits 

18.5 to 20.0 million visits

Source: Company data. EBITDA = earnings before interest, taxes, depreciation, and amortization
The lowering of guidance for the company’s net loss per share makes sense; the impact of the goodwill impairment will obviously be felt for the remainder of the year. However, even with the revenue guidance reduction, full-year revenue at the midpoint would represent a 20% jump over 2021. That’s not a bad result considering how much revenue growth was pulled forward into 2021 from pandemic lockdowns. Additionally, there was very little or no change to paid memberships, fee-only access (those who are not fully covered by an insurance plan but pay per visit), and total visits. This suggests that Teladoc’s original estimates on these important metrics were accurate.
Bright spots from earnings
Putting aside the goodwill impairment and lowered guidance, the results from this quarter were actually quite good. 
 

Q1 2022 Actual

Q1 2022 Guidance

Revenue

$565.4 million

$565 to $571 million

EBITDA

$(10.5) million

$(23) to $(16) million

Adjusted EBITDA

$54.5 million

$51 to $55 million

Total U.S. paid membership

$54.3 million

54.0 to 54.5 million members

Fee-only access

25.2 million

24.0 to 25.0 million

Total visits

4.5 million

4.3 to 4.5 million visits

Source: Company data.
Of particular interest are the results for total U.S. paid memberships, fee-only access, and total visits, each of which exceeded or met the top end of the guidance for the quarter. These three metrics also grew 5%, 14%, and 35%, respectively, compared to the year-ago quarter. Despite the full-year 2022 guidance reduction, management still met its targets for this quarter while posting year-over-year growth. That should be worth something to investors. 
Bottom line for investors
Management mentioned in the earnings call that its direct-to-consumer mental health service, BetterHelp, hasn’t been performing as expected, contributing to the guidance revision. However, the company still expects strong growth and margin contribution from the service, even if it’s at a lower rate than originally forecast.
Even with this news as well as the guidance reduction, Teladoc is still expecting to grow its revenue 20% in 2022, which is strong growth in a growing industry. It’s understandable that Teladoc’s stock has sold off after the Q1 results; you could even argue that the 40% drop was warranted. That said, Teladoc is still the leader in its space, a position that could lead to outsized gains over the long term.
Whether now is the time to buy shares depends on each investor’s assessment of Teladoc’s potential. For those who believe it can be the winner in this space, the shares are at a deep discount. For those who are skeptical, it’s reasonable to keep Teladoc on the watchlist and keep an eye on future quarters for signs the company is heading in the right direction.
Jeff Santoro has positions in Teladoc Health. The Motley Fool has positions in and recommends Teladoc Health. The Motley Fool has a disclosure policy. –

Leading telemedicine provider Teladoc (NYSE: TDOC) was already experiencing a rough 2022 when it reported its first-quarter earnings on April 27. Heading into that earnings release, shares were down 39% for the year — and it’s only gotten worse from there. The following day, the stock fell another 40%.

At the time of this writing, Teladoc is down 80% from its early 2021 high. Based on nothing other than the share price, one might assume Teladoc is a failing company.

In reality, nothing could be further from the truth. Like most companies, Teladoc has its share of challenges, and the stock price is reflecting that acutely. However, upon a closer look, there are some bright spots in the earnings report. For investors willing to hold for the long term, there’s enough promise in Teladoc’s future to be encouraged. Will that be enough to bring its stock back?

Let’s take a closer look.

Image source: Getty Images.

So what is a goodwill impairment?

The headline number from Teladoc’s Q1 2022 earnings report was the company’s net loss of $6.7 billion. For comparison, in Q1 of 2021, Teladoc posted a loss of $200 million. No that’s not a typo, that’s how large the swing was year over year. The reason for the substantial net loss was a goodwill impairment charge that the company reported this quarter on Livongo, a chronic condition management company it acquired in 2020.

Goodwill is the value of an acquisition that exceeds the sum of the assets purchased. Essentially, it’s the value of the intangible aspects of an acquired business, such as brand recognition or intellectual property. When the value of that intangible asset drops below market value, companies take a goodwill impairment charge. This appears as an operating loss on the income statement as well as a decrease in goodwill on the balance sheet.

In this instance, the impairment resulted in about a 50% reduction in Teladoc’s goodwill. It’s also important for investors to know that this is not a cash expense (no actual cash left the business as a result of this impairment) so it’s added back on the cash flow statement so it doesn’t impact the company’s cash flows.

How concerning is the lowered guidance?

While the goodwill impairment may have been the headline, it didn’t take much digging to find another reason for the extreme market reaction as Teladoc also lowered its full-year guidance.

 

Revised FY 2022 Guidance

Original FY 2022 Guidance

Revenue

$2.4 to $2.5 billion 

$2.55 to $2.65 billion

EBITDA

$(52) to $(7) million

$18 to $48 million

Adjusted EBITDA

$240 to $265 million

$330 to $355 million

Net loss per share

$(43.50) to $(43.00) per share

$(1.60) to $(1.40) per share

Total U.S. paid membership

Unchanged

54.0 to 56.0 million members 

Fee-only access

~25 million

24.0 to 25.0 million

Total visits

18.5 to 19.5 million visits 

18.5 to 20.0 million visits

Source: Company data. EBITDA = earnings before interest, taxes, depreciation, and amortization

The lowering of guidance for the company’s net loss per share makes sense; the impact of the goodwill impairment will obviously be felt for the remainder of the year. However, even with the revenue guidance reduction, full-year revenue at the midpoint would represent a 20% jump over 2021. That’s not a bad result considering how much revenue growth was pulled forward into 2021 from pandemic lockdowns. Additionally, there was very little or no change to paid memberships, fee-only access (those who are not fully covered by an insurance plan but pay per visit), and total visits. This suggests that Teladoc’s original estimates on these important metrics were accurate.

Bright spots from earnings

Putting aside the goodwill impairment and lowered guidance, the results from this quarter were actually quite good. 

 

Q1 2022 Actual

Q1 2022 Guidance

Revenue

$565.4 million

$565 to $571 million

EBITDA

$(10.5) million

$(23) to $(16) million

Adjusted EBITDA

$54.5 million

$51 to $55 million

Total U.S. paid membership

$54.3 million

54.0 to 54.5 million members

Fee-only access

25.2 million

24.0 to 25.0 million

Total visits

4.5 million

4.3 to 4.5 million visits

Source: Company data.

Of particular interest are the results for total U.S. paid memberships, fee-only access, and total visits, each of which exceeded or met the top end of the guidance for the quarter. These three metrics also grew 5%, 14%, and 35%, respectively, compared to the year-ago quarter. Despite the full-year 2022 guidance reduction, management still met its targets for this quarter while posting year-over-year growth. That should be worth something to investors. 

Bottom line for investors

Management mentioned in the earnings call that its direct-to-consumer mental health service, BetterHelp, hasn’t been performing as expected, contributing to the guidance revision. However, the company still expects strong growth and margin contribution from the service, even if it’s at a lower rate than originally forecast.

Even with this news as well as the guidance reduction, Teladoc is still expecting to grow its revenue 20% in 2022, which is strong growth in a growing industry. It’s understandable that Teladoc’s stock has sold off after the Q1 results; you could even argue that the 40% drop was warranted. That said, Teladoc is still the leader in its space, a position that could lead to outsized gains over the long term.

Whether now is the time to buy shares depends on each investor’s assessment of Teladoc’s potential. For those who believe it can be the winner in this space, the shares are at a deep discount. For those who are skeptical, it’s reasonable to keep Teladoc on the watchlist and keep an eye on future quarters for signs the company is heading in the right direction.

Jeff Santoro has positions in Teladoc Health. The Motley Fool has positions in and recommends Teladoc Health. The Motley Fool has a disclosure policy.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

  • This field is for validation purposes and should be left unchanged.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US & HK* Trades. Click Here!