I mean, we had one this morning. Then we used—we had a little bit of time to do our own work, internal work, and we have a bunch after class.
All right. I think we can get started here. Thank you, everyone, for being here for the next session here. We're pleased to have Teladoc Health with us today. Presenting for the company is Chuck Divita, CEO, and Mala Murthy, CFO. Both of you, thanks for being here. Appreciate it. Maybe to start, obviously, the big topic is BetterHelp. To start, maybe can you talk about sort of the progress that you've made so far, particularly as we think about driving an in-network solution, and sort of what is left to do on this front? As we think about how do we—how do we get to that point?
Yeah, I'll start. Good morning, everyone. Thank you for attending. Look, we set out four priorities in BetterHelp. I mean, four priorities on our Integrated Care segment as well. They're really around, mostly around just stabilizing the business and sort of where we take it from here. One of those priorities is around benefits coverage and seeing if we can get in network. We've been working on that for several months. At this point, we've got the operational capabilities in place. That was the first thing we wanted to do. Really, to be successful in that business, you have to be able to operationalize it. Second is be in network. We've brought in some resources. We've started those conversations, started those applications to be in network. Then third, you obviously have to activate visits against that.
All of those are progressing. I think the first, in terms of operational readiness, is on target. Now we're in the network stage of things.
You had said on the last call, though, you kind of still foresee BetterHelp being sort of a consumer model. Maybe just to clarify, when you think about what that mix of business looks like then, let's say, a few years from now, would you say it's like an 80/20 consumer to in-network? Or, like, what do you kind of foresee that kind of mix looks like in terms of?
Yeah, I don't want to comment on the mix percentage.
Yeah.
That's pretty, pretty specific. I would say, first of all, the thing that makes BetterHelp unique is its consumer orientation. It's resonating with consumers. It has a very high net promoter score. A million unique users use it. We've got a lot of eyes on BetterHelp. I think what makes it special is its consumer orientation and people's attractiveness to that—to the product, if you will. Having said that, one of the biggest challenges that, and it's not going to be surprising to anyone, that consumers have is around affordability and sort of the pricing pressures that all are experiencing. I do think over time, our ability to reflect benefits coverage and those consumers, should they choose and should they have coverage, want to use their benefits, then that's going to progress along.
There's a lot of people that may not want to access their benefits. I mean, there's—we have a lot of consumers that come to BetterHelp, whether they don't want to necessarily go through insurance or have mental health diagnosis. They trust sort of this other play. I don't know the percentage that it's going to migrate to. Since we're the largest by far, I still think we're going to see a significant consumer business for the foreseeable future.
Can you talk about sort of then what does the, the profitability model look like? Because, you know, one of your peers has talked about, you know, on a subscri—on a consumer model, you know, maybe the average duration is a few months. Obviously, in a in-network model, you can, you know, annually, you can hold people 12 months longer or longer, right? Obviously, a longer—a bigger LTV. That opens up a lot of opportunities to either spend more to acquire members, etc. Just thinking through, when you think about what the future mix looks like.
Yeah.
For BetterHelp, how do you kind of balance then with that?
Yeah.
To drive profitability?
Yeah. If you think about the areas of focus for us in terms of the BetterHelp business, you know, we have talked about insurance. We have talked about international and making progress on international. You know, we are making nice progress on international. We have talked about stabilizing the U.S. business. What I would say is, on international, from a profitability perspective, the pricing is lower. The gross margins are lower. CAC is certainly healthier. The cost of acquisition in our international markets is healthier. Overall, I would expect, relative to the U.S. market, the margins to be on the lower side. That said, though, Charles, you know, if you think about the need for mental health that is global, there is a substantial TAM that is out there in all of these international markets. That is what we are penetrating into.
That is what we are tapping into. I would say, on insurance, once again, I would say, you know, there are comps out there that you all can see. They are just different models. I think what we are focused on is how, as we stabilize this business, how can we make our products more accessible, more affordable with the same user experience that has generated the strong NPS that it has all these years, quality, which is something we pay a lot of attention to. Those are the kinds of things that we are focusing on as we think about stabilizing this business and growing it.
Yeah, I would say, I would say also, you know, if you—if you zoom out, it's not surprising that insurance coverage, whether it's in the mental health space or in the care space, makes a difference, right? There's a—there's plenty of studies out there that people will defer care. If they can't afford it, people will defer prescription drugs. I think that's true in the mental health space, whereas the pressures on consumers that you would see a shorter sort of, LTV on the consumer side. I think that's why you see the longer LTV in the insurance side. They're just two different models.
Yeah.
You know, in one of our recent surveys, it does seem like out-of-pocket costs or cost is becoming a little bit of a bigger concern among consumers. Just curious whether you are seeing some of that in either feedback from your members or not. Can you see in the data that, you know, cost is maybe having some pressure on membership?
Yeah, you know, look, I mean, this isn't new news to anyone. The consumer generally has been under pressure for a while here for a few years, particularly with the inflation and other kinds of things. Yeah, we're not immune to that. Any consumer business is going to experience that. One of the biggest reasons, you know, we've got a lot of people that come to BetterHelp and look at BetterHelp and want to, and even get to the registration process. If you look at those that don't convert, a significant portion of those cites affordability. Yes, we're seeing that pressure. I think that's, again, maybe some of the dynamic we've seen over the last year with BetterHelp, and why these different initiatives we've got going are so important.
I would say that is why, you know, the progress we are making on the weekly offer from a price point and an affordability standpoint is important. As we said on our recent earnings call, you know, we are pleased with the metrics that we are seeing coming out of that initiative. Certainly, I would say we are seeing more acquisitions, gross acquisitions. Churn is also higher because they're reminded of their signing up every week. Both of those entirely expected. The most important thing is, though, on a net basis, from a user growth perspective, it is positive. You know, what we are now paying attention to is, what does this mean more longer term from an LTV perspective?
This is where I would say, from an affordability perspective, we are doing different things to get to a, you know, to address the affordability question.
Certainly, you know, this last quarter was the first one in a while where we've seen BetterHelp membership grow sequentially. Is that all reflective of sort of, like, the weekly offer, as an example, or?
I would say it's a combination of the efforts we are making in international. As we spoke about in the back half of the year, we have reallocated marketing spend towards international. We certainly saw green shoots of that, if you recall, Charles, even in the third quarter earnings call, where we said, right, September end, user growth was stronger relative to June. We have now been seeing those green shoots with our efforts internationally. We are continuing to make progress, as we said, in the U.S. and stabilizing it with the weekly offer.
Got it. Just following up on international, you kind of mentioned sort of the profitability metrics, etc., but that the lower cost, customer acquisition cost. What about, building networks of therapists? You know, what differs in the international market in, you know, are there—I know we talk about a shortage of therapists in the U.S. Is that a similar kind of dynamic, outside of the U.S.? Just anything about when you're trying to build therapy networks, therapist networks in these other countries? How does that work for you guys?
Look, I'll say, first of all, oh, sorry, hot mic. Yes, there are—there's always going to be dynamics in the local market in terms of therapist access. One of the benefits of virtual care, though, is that it provides some additional capacity and flexibility for therapists to offer. I do think that we haven't run into capacity shortages being the barrier for expansion to date.
Yeah, the other thing, Charles, I would say on that is, you know, when we think about our international growth, so far, up until recently, a lot of our international growth in BetterHelp was primarily English-speaking services, right? If you think about our business, it was largely in the U.K., Canada, Australia, and New Zealand. What we spoke about recently on the earnings call is the other way we are expanding internationally is through localization. What that means is localized user experience, therapists who speak the local language, so a much more local customer experience. That is definitely going to have some bearing in terms of our ability to attract more therapists as well. Now, you know, it's early days in France. We are monitoring, which is where we have launched our localized experience. We are watching the metrics very, very closely.
We have plans to do it in other markets. You know, we'll do this methodically.
Got it. Maybe let's switch gears, talk about Integrated Care. On the last call, you highlighted that you're expecting to see a continued migration to more visit-based arrangements, with a portion of customers moving to such arrangements this year. Can you help us understand why customers are looking to make that switch now from the more traditional PMPM basis?
Yeah, I wouldn't say it's switching now. I think it's been evolving over a period of time. You know, if you think about the adoption of this virtual space, years ago, it was sort of to the, to the buyer and to companies like Teladoc, PMPM or subscription models made sense in terms of, I want predictability. Both sides wanted predictability, right? So that was kind of the nature of those arrangements. If you look at the U.S. healthcare system, it's all fee-for-service, absent very small pieces that aren't. What you see now that it's mature, both parties are more comfortable going to what more traditional models, which are volume-based, visit-based models.
You're seeing that over the course of at least the last couple of years, that migration, which has continued, I think it's a reflection of the maturity of the status of virtual care. Another reason why we've highlighted some of the strategies we have in terms of how we make those virtual visits more valuable and more impactful. The good news is, if you look at the underlying volumes of Teladoc, and we've highlighted this in a couple of different places, we're seeing nice growth in visit volume. What that means is that the product is resonating with the end user, and the volumes of the underlying scale of the company continues. You've just got this migration of the top line a bit in terms of subscriptions to visit-based. Subscriptions can cut both ways.
You know, if you have a subscription model and you've got a lot of utilization, that actually pressures margins. Whereas if you've got utilization under a visit-based model, there's revenue generation. They cut both ways.
I would say, Chuck is absolutely right. It's not as if all of our clients en masse are migrating to, you know, out of the traditional model to visits-based. It's, you know, it's sort of happening gradually. I would say we are in the middle innings. There are parts of our business, Charles, like Chronic Care, for example, that is on an enrollment basis that is always going to be subscription-based, right? It's not as if all of our book of business and all of our products are moving to that model.
Got it. That's helpful. You know, you also talked, I think, on the call, right, about how some of this might pressure the near-term economics with some of these arrangements.
Yeah.
but that does set up opportunities for expansion, going forward. Can you maybe just give us some more details around this dynamic and what does, what does that look like in practice?
Yeah, yeah. You know, when we have these conversations with our clients, first of all, it's never formulaic. It's never one size fits all. These are large, sophisticated clients. When we have the conversations, it's generally at the point of renewal, where it is in the broader context of the relationship in terms of what value we bring to bear to the client. It is typically in the context of where and how we are going to expand. You know, we've talked about our land and expand strategy for a while. How are we going to expand and cross-sell other products and services, which, by the way, are generally revenue and margin accretive?
When we do this, you know, if you think about the various pushes and pulls, Charles, you know, we will, as we price, we will think about utilization trends, the population we are serving, what, how engaged the client is going to be, because that does make a difference in terms of utilization. What can we cross-sell? How can we actually take pricing on, on visits, right? All of those go into the mix. This is where, and Chuck will comment, can comment more on this. You know, we talked about how we can, we have a real opportunity to grow the impact and therefore the value of every visit. You know, we do hundreds of thousands of visits every year, millions of visits a year. Every one of those is an interaction point where we can drive value and impact the economics.
The last thing I'll say is, it is fair that when we have these broader conversations about land and expand, etc., there could be some near-term pressure on margins, but our intent always, as we think about the pricing and we think about it in a multi-year way, it is to recover and recoup the margins that we have at the client through the broader, you know, greater utilization or la or expanded.
Maybe, Chuck, to follow on to that. If we think about this kind of a visiting model, it would suggest it's more of taking on risk, right? It becomes incumbent on you to really engage the member. You know, maybe you're thinking back to your time at the health plan side. What are you thinking about in terms of how can we, how do we better engage members to take advantage of these kind of services?
Engagement is one of the biggest challenges, but that, that in healthcare, that the, particularly on the payer side, you know, you can have a lot of great programs that just getting the level of engagement, with the right population. That is always a challenge. And, you know, if you think back to your own experiences, what engages you? Is it relevant to me? Is it at the right time? Is it, do I have a need? Do I trust this thing? You have to run those plays. That is why I think even with us, like the acquisition of Catapult is another place where we can strengthen our value proposition and engagement point. Obviously, it was a source of revenues and, and revenue growth potential, but it was really about the engagement model.
I just wanted to mention, so I didn't forget, we did end up closing that transaction on Friday. We mentioned it on the call, but we did end up closing it. Happy to go deeper on any of that. Engagement is the key, and it's about being relevant, on point, trusted, and that's why we're trying to extend the role that we're playing.
I'm glad you brought it up because I do want to ask about Catapult. Maybe you can kind of give a little bit more detail, sort of what the differentiated capability that Catapult brings for Teladoc and what really motivated the acquisition.
Yeah, there's a few things. One, it's a really interesting company, entrepreneurial, great team, and really passionate around the consumer experience. What they've designed is a really engaging model to have a very simple, sort of home testing, sort of diagnostic, if you will, for you to get your, so they do that. It's very easy. I've done it myself. You send it in, and then the only way you can get your results is you schedule a visit with a nurse. That screening process asks a number of questions around your healthcare conditions and things like that. When you have that visit with the nurse, the nurse will obviously share the results of the screening, but also what additional things the person can do to help them with their healthcare in their situation.
For us, as an example, one of the things we did in due diligence is that we ran a pilot and said, okay, if any of those patients that are coming to you are also qualified for Teladoc's programs and you want to, and you inform them of those programs, obviously, if the patient is interested and wants to activate, then we created a path for them to go ahead and enroll them in our program. 90% enrolled in the program when they were aware of it. If you think about that, that person, that patient, they've engaged on taking the test and the screening. They've engaged in the visit.
Once they have that information with this great model that the nurse-led model has, and they say, hey, we have a program, I know your A1C is high, but you're eligible for this program that we think can really help you. Would you be interested? It is those kinds of things, those kinds of engagement points that was resonating with that patient, and we can activate them into our program. There is a lot of things that we can do with that kind of model, just as it is now. If you think about over time, how to use that relationship that's been built with that nurse for ongoing engagement, that's why we're excited.
How do you think about then scaling Catapult? Because it's a great way to leverage sort of the capabilities on both sides here. You know, maybe talk a little about how does Catapult get to market today, and then how do you see leveraging sort of your relationships to accelerate that?
Yep. If you think about that business, to the point that Chuck made, one is, they will ride our distribution rails. If you think about their sales and marketing efforts as of now, entrepreneurial, smaller scale, there is an opportunity or runway for growth for us and our sales team, who, by the way, are being trained on the product, etc., as we speak, to really use our distribution muscle to grow that business. The second way we see it is what Chuck said, right? Using that nurse practitioner as the point to be able to suggest to the member or the user, we see you have this and this condition based on your test results. Will you be interested in this other program, right?
As an enrollment mechanism into our Chronic Care programs, about a third of them do not have any primary care relationship. Further down the road, there is an opportunity for us to engage them in our virtual care, primary care programs. The point being that the nurse practitioner is a way for us to improve on our engagement efforts. Those are the ways that we see how we can grow this business. You know, there are many other ideas, Charles, that we have, but we have a clear line of sight more to the more immediate synergies as we just articulated.
That's helpful. Thank you. Maybe you want to talk us sort of on the outlook for the year. And obviously for Integrated Care, you guys talked about zero to 3% revenue growth, obviously, 2% coming from Catapult and a little bit of a headwind from FX. You highlighted a few factors that informs the guide, including sort of expecting constant currency growth throughout the year, a customer transition happening in the second quarter, and then some potential impact related to migration towards visit-based arrangements. Can you, maybe not quantifying per se, but maybe sort of rank order which are more impactful to the guide than the others?
Yeah. You know, we said zero to 3%, as you said, for integrated care growth. You know, if I break it up into the tailwinds and the headwinds, I would classify them as follows. Obviously, Catapult is a nice tailwind to us. You know, we had talked about it being roughly in the order of $30 million of revenue, you know, call about 200 basis points of growth. That is an important nice tailwind for us. The second thing I would say is, you know, we gave strong membership growth guidance. If you think about the midpoint of our guidance, it is 9% membership growth for 2025. The reason that matters is that is the source for visit volume momentum. We have showed nice visit volume momentum in 2024. We will expect to continue to see that visit volume momentum.
What we always do every year is ramp chronic care enrollment as we go through the year. You know, we mentioned on the call, we have had an important nice win with a client for our Weight Management Solution, which is part of our overall Chronic Care set that we will expect to enroll. That is sort of on the tailwind side. I would say on the headwind side, if I think about our headwinds outside of the more secular migration that we talked about a few minutes ago towards visits, which does pressure margins, I would say that our headwinds are, we talked about foreign exchange. We did talk about the slower ramp for TRICARE. You know, we had assumed we would get a start in Q1.
And, you know, we were expecting to get visit volume out of that, but obviously with the ramp and the delay, that does have an impact on our overall, on our overall growth for the year. So those are sort of some of the positives and negatives as we think about the year.
Okay. Maybe for BetterHelp, your guiding revenue declining, you know, call it, down 9.75% to down 3.75% this coming year. Maybe within that, you expect sort of continued decline in U.S. users, but growth in international. Maybe help us understand what you're expecting maybe for each business separately.
Yeah.
If you want to break that apart.
Yeah. I'm going to stay away from breaking that apart. You know, you all have the guidance we gave for 2025 from a revenue and an adjusted EBITDA perspective. You know, noteworthy that we have reinstated guidance, right? Albeit we have given a wider bench is because of the way that sector is and, you know, our lessons learned. What I would say is I would expect international certainly to show momentum as it has shown over the last several months. You know, we are certainly going to continue to invest in it from an advertising and marketing perspective. And the U.S. business needs to continue to, you know, march towards stabilization.
You know, we are, as we said on the call and, you know, post-call when we were asked about what are we looking to see out of that business, what we have said is we would be looking to see the continuation of the green shoots of progress we have seen in the last couple of quarters. We would want to see sequential improvement as we go through the rest of this year. That is what we are looking for when it comes to that business overall.
When we think about finding that stabilization point for the U.S. business, more specifically, you know, maybe Chuck, is that a function where we find that balance and mix between, let's say, direct-to-consumer and an insured product? Because I would think that by definition, CAC has to get better if your mix changes to a more insured product, right? So you're converting more people that come to the site, for example. When we think about that, do you envision right now that that is a 2026 event, or do you think that it might be a little bit further out?
The stabilization?
Yeah.
Yeah, what I, you know, I'll just tell you transparently what I'm looking for is I want to see progress each quarter. When we say stabilization, that means like user counts, some of the other metrics, you know, we're coming off of some difficult comps from the prior year, for all the reasons that we've already talked about earlier in the conversation. That's what I want to see. I think that as we exit 2025, you know, our view is that we want to see that stability and starting to move in the other direction. As we go into 2026, we should see some positive momentum there. That's the current expectation.
Got it. Also, maybe I want to talk about margins a little bit. You know, with about $1.5 billion in full year OpEx, it appears there could be a lot of margin opportunities to sort of unlock opportunities, particularly from your cost rationalization efforts. Can you talk about the outlook for undertaking maybe more drastic actions on expense lines over the coming years to kind of expand there?
Yeah, I'll start and then Mala, feel free to jump in. The billion and a half that you mentioned, about half of that is the advertising and marketing expenses, and a lot of that is with BetterHelp. Just understanding that magnitude of the dollars there, the real areas of leverage are really on the Integrated Care side. It's primarily in G&A and technology and development expenses primarily. You've seen in 2024 some significant movements downward, both on a dollar basis as well as a percentage of revenue in G&A, technology and development, CapEx, stock-based compensation. I think we've made some nice moves there, and you're going to see us continue to focus in those areas in 2025, and we'll continue to make progress there. Again, you have to balance with making sure we're making the right investments.
We've got over 10,000 customers, all very dynamic. We've got underlying visit volumes and other things growing that I mentioned. We are going to strike the right balance and making sure that we can serve our customers' needs. The long and short of it is we can continue to see progress on the expense lines really across the board in 2025.
Yeah, I, you know, I would add if you think about the discipline and control we have shown in 2024 in the last few years, we have taken out a fair amount of costs, especially as we have seen the business migrating more towards visits. We have steadily right-sized the cost base. We've talked about the efforts we have made around streamlining, delayering our procurement efforts, some amount of offshoring efforts. We'll continue to lean in on those things. You know, we said we are modestly tracking ahead of our 2025 target. We had talked about taking out $75 million of costs on a cash basis, $40 million of that this year. We are tracking modestly ahead of that. Charles, we will, you know, our work isn't done. We will continue to look at it, continue to exercise control and discipline.
As Chuck said, balance that with the important investments we need to make.
Great. Maybe in the last couple of seconds, obviously half of it is marketing and advertising expense. Have you thought about ways to make that more efficient as well? You know, obviously we've looked at other channels to go into, to market. As you think about what, what do you see on the horizon that you think can help maybe make that even more efficient?
Yeah. Look, if you think about our A&M spend, no surprise, the preponderance of it is on the BetterHelp side, right? For us to get advertising and marketing to be more efficient, it means we need to be more efficient on the BetterHelp side. What I would say is, that is exactly what we are doing, right? If you are able to grow your users, that will drive revenue. If you think about your revenue to cost of acquisition yield, that is improving. If you think about the fact that we are going into markets that have healthier cost of acquisitions, that will help. Last but not least, you know, we are looking at, you know, you talked about insurance and the coverage, efforts that we are making.
Ultimately, at the end of the day, if we are able to get to that, that has better LTV and, you know, longer attention, as you yourself spoke about a few minutes ago, that is also going to make our revenue to cost of acquisition yield more efficient. We are looking at different ways to essentially do exactly that for the, either we bring down the, the amount we spend, or importantly, we are able to drive more revenue so that we are more efficient in getting the yield.
Yeah, that makes sense. With that, we have reached time. Chuck, Mala, appreciate you joining us today and thank you for being here for the session.
Thank you.
Thank you.