Hi, everyone. Thanks for joining. My name's Jess Tassan. I cover managed care and healthcare IT at Piper. I'm really excited to be here with Chuck Divita, CEO of Teladoc. Teladoc is the global leader in digital or virtual care with a comprehensive platform of solutions for physical and mental health. The Integrated Care segment's about 60% of the company's revenue, but almost 90% of earnings. That is where we are going to spend most of our time today. Thanks so much for being here, Chuck. Welcome.
Thank you, Jess. Thanks for having me.
I wanted to kick off with your perspective. How should we think about long-term growth and profitability within the Integrated Care segment?
Yeah, as you mentioned, we have two segments: Integrated Care and BetterHelp. I'm sure we'll touch on BetterHelp a little later. With respect to commenting on growth, we have our fourth quarter earnings call. It'll come up in February. We'll issue 2026 guidance then. I don't want to necessarily get over my skis with respect to that. There's a lot of things still in play, how the selling season goes, a lot of the macro-economic uncertainties in healthcare and things out there. I want visibility there. I do think maybe if we think about low single digits growth, it's in the range of potential outcomes for 2026 for us. I think what I'd like to do is maybe touch on some of the what I call the headwinds and tailwinds for our Integrated Care segment to, I think, give some context on that.
From a tailwinds perspective, for any that have followed the company and maybe heard some of the things we've talked about, we have seen nice growth in virtual visit revenues over the last period of time, and we expect that to continue. That should be a tailwind for the business. I've got four strategic priorities I've talked about, one of which is operational excellence. It doesn't sound as sexy, if you will, but how we execute the business, the complex business we have, matters both in terms of performance for clients, but also revenue generation. That's had an impact on us this year. Expect that to continue. We've got some new products and services that we're launching. We're excited about that for 2026. We've had nice international growth, which has been a nice contributor for us. We have some good underlying momentum in those areas.
From a headwinds perspective, you all that follow healthcare know this, but there's a lot going on in healthcare. You've got significant medical cost trends facing employers. You've got health plans that have had a number of challenges they're working through in different lines of business. That uncertainty is real, and it impacts us. Now, I think longer term could provide some tailwinds for a business like us, but there's some challenges there. There's a number of things like that that are in play in Integrated Care. I think that's really why we're leaning into product innovation, execution, and really controlling what we can control as we head into 2026.
That's helpful. If we think about kind of the drivers in that segment as being live visits and price, or PMPM, or price per visit, how do we think about kind of each of those core components as we build to the low single- digits that you just mentioned?
Yeah. Again, not to talk about growth rates, but just for the audience here, there's a number of drivers to the business, and you mentioned some of them. One of those has been membership. We call it membership. And we've had nice growth historically in our membership numbers. Given the broad adoption of virtual care, I think the raw number of membership is not as relevant as much as it used to be in terms of growth. It's really about usage of services. We've had this transition of our business more from subscriptions to visit-based models to be more like the rest of the US Healthcare system. The utilization and usage of services is an important driver. That's a factor. In terms of price, obviously, price is always a factor out there, and it really speaks to the competitive environment, what value you're bringing.
We've been able to drive price increases in our visit-based revenues over time. I think as we roll out some of these additional enhancements, we'll have that as well. The other part of our business that's in Integrated Care that's a material contributor is Chronic Care Management. We have a broad range of products and services we do there. We've got over a million people enrolled in those, and we've got multiples of that in terms of recruitables. When you look at the sort of fundamental drivers of the business going forward, it's membership, it's utilization, it's pricing power, and it's obviously the penetration of services across the portfolio.
Got it. That's helpful. Just within the $1.575 billion of Integrated Care revenue, obviously, it's growing 3%, 15-ish % margins in 2025. We think of three fundamental businesses: Chronic Care Management, Core Virtual Telehealth, and then there's a Hospital-oriented business as well. Can you maybe comment on just the relative sizes of each of these businesses and then anything you might want to share on just the economics of each of those three?
I think in Integrated Care, there's a lot of things going on inside that segment. Let me just try to pull on that thread a little bit. We have a large US business, which is predominantly what one might think about with Teladoc Health in terms of the history of the company in there. It's where we see the broadest range of services and 12,000+ clients and so forth in the US business. We have a small but growing international business that serves B2B markets as well as public health systems. It's smaller than the US business. We have a third market that we serve, which is in our health systems. We have devices and software that health systems use to advance their Virtual Care strategies. If you go to our website, you might see some pictures of that technology there.
By far, the US business, which includes virtual care, chronic condition management, mental health, is the largest within that, followed by international, followed by a smaller health system business. As a segment, to your point, we've been able to generate solid margins, 15% or so. There is a lot of variation in between the different products in terms of what markets they serve and their financial profile. I think overall, we're generating really good margins for the segment.
Okay. Got it. That's helpful. I mean, I guess just maybe to frame it loosely, would it be appropriate to think about chronic care in hospitals as half of Integrated Care, or is it?
We haven't disclosed those statistics externally. I would say that the hospital part of the equation is much smaller. Certainly, the range of virtual care, chronic care, and mental health, and Integrated Care in the U.S. is really the driver.
Okay. Got it. Just of your members, how many have access to a chronic care solution today, and how would you expect that to evolve over the next year?
Yeah, I don't think we've given the aggregate number, but it's many millions of what we call recruitables. And those are typically cross-sold into the broader membership-based 100 million lives that we talk about. So there's a significant percentage of that business that we've cross-sold the chronic care management programs. And then we need to activate those recruitables and, if it's relevant for them, make sure that they want to engage in the service. That's the way I would think about it. We also have a good penetration of our mental health services and Integrated Care to that base. Over 60 million people have access to mental health services on our Integrated Care side. We've done a good job, I believe, of cross-selling and penetrating with a value prop that's really around integration, really managing populations more holistically across those needs.
That is really what the strategy is for us.
Got it. Can you maybe describe what the engagement rate within chronic care is today or what your hopes for the engagement rate would be in the near term?
Yeah. We've got really good engagement rates. Again, from a percentage standpoint, we haven't necessarily disclosed that. Our penetration rate relative to recruitables is quite good. It's more around activating. There are two things in play. One is just the brand awareness that we have and the ability to reach those consumers, those patients in terms of the services that we offer. That's one. Two, getting them interested in and enrolled in a program that we believe can be beneficial to them. Of course, keeping them engaged in that program over a period of time. All of those contribute to both the enrollment, the penetration, and the revenue generation that comes from that. Most importantly, our ability to drive the outcomes for those patients.
Got it. Is there more room to engage the members that today have access to a chronic care solution, or are we kind of tapped out among existing?
No, we're not tapped out. In terms of our installed base, we have many multiples of recruitables versus the enrollment. There's a variety of reasons for that. There are some people that aren't interested, right? They may be eligible, but it's just not something they're interested in. I think if we continue to approach them with the right value proposition, there's upside to the enrollment penetration.
Okay. That's really helpful. Teladoc's obviously executing this transition within core virtual telehealth from what used to be predominantly PMPM, access fee model to a visit fee or utilization-based model. Can you maybe describe the impetus for the timeline of that transition and then just what are the economics?
Yeah, I think the way I would maybe frame it is there were kind of three major periods in this virtual care space, in my view. There was the pre-pandemic timeframe when a lot of what Teladoc was really a trailblazer in terms of the adoption and scaling of virtual care. It was really around predominantly convenience and access and cost savings to the client. I was a client before I joined as CEO, so I was a customer. A lot of that was around access, convenience. Both parties, the customer and Teladoc, wanted predictability in that model. There were subscription-based approaches. It was predictability from the customer side in terms of what I'm paying for and the access it's providing and predictability to companies like Teladoc in terms of revenues, cash flows, right? Because there's a model there.
The pandemic hit, and obviously, there was broad adoption of virtual care that we've had there. Since the pandemic, you now have this significant penetration of virtual care across. I mean, everyone in here has some access, I'm sure, to virtual care either through their provider or through a company like Teladoc. It's migrating more towards the rest of the US H ealthcare system, which is you get paid when you do something. It's a utilization-based approach. It's not unique to us in terms of getting to a volume or a visit-based approach. It's more of a reflection of the maturity of virtual care. That transition has been occurring because of the market and the realities of that we're going to be acting more like the rest of the US Healthcare system.
How much of the core virtual telehealth business has transitioned to the visit fee model? When that transition occurs, is it neutral from a P&L perspective? Are the new contracts priced neutral to prior PMPM revenues?
The contracts are priced to achieve the margins we want. It's not neutral in the sense that as you go through that migration from the subscription model, there's a different economic construct, right? I can touch on that. Right now, to answer the first part of your question, if you exclude Chronic Care international health system business, over 50% of our Virtual Care revenues in the U.S., are now coming from visit-based arrangements as opposed to subscription-based arrangements. There's been a pretty material move over the last several years. We expect that to continue a bit as we go into 2026 and beyond. I do think there's some view that we could see some moderation in the overall impact of that just because it's mathematically representing more of that. I think that's kind of what's been occurring.
In terms of the economic construct, the subscription model has predictability. From a cash flow, from a revenue standpoint, it's around membership and enrollment, right? The usage of the service can fluctuate your gross margin because the more a service is used, the more you have to pay for the services. The less services are used, maybe the gross margin expands. As we go to more of a visit-based model, we're achieving the right levels of margins for us, but it's going to be more seasonal, and it's going to be more variable in terms of the volume-driven outcomes of that.
Are you referring to a gross margin percent or dollars of gross profit?
Really, gross margin percent. Now, it's going to fluctuate. I'll give you an example. In a subscription model, if you have a bad flu season, I would say, let's say we're right in the middle of the season here. If we have a bad flu season, we'll have more visits, but we won't have more revenues. You would have pressure on the gross margin percentage. The opposite is true too. If you don't have utilization, you have higher gross margin. There's a little bit of a disconnect in terms of that. In the visit-based model, obviously, they correspond relatively the same. The gross margin percentage is more predictable from that standpoint.
Yep. That makes sense. Okay. That's very helpful. Here, December 2nd, I suspect I know the answer to this, but any comments you want to leave us with on the 2026 selling season in Integrated Care? Any qualitative color on retention, expansion, decision timing, RFP size, or volume?
I think I would just pull through what I talked about in October and even the prior quarters. Again, not new to the audience here, but we've had a lot of activity and interest in the employer market channel. We've had good results there and continue to see that because there's a lot of challenges that the employers face in terms of their medical costs and things like that. The health plan channel has been under pressure. If I think back on my own career in healthcare, I'm not sure I can remember a period of time that had this much change going on all at the same time. Typically, you might see pressure on a health plan in Medicare or Medicaid or Commercial, all lines having some kind of impact right now.
That channel, as those companies figure out their strategies, figure out what enrollment's going to look like in 2026 relative to the enhanced subsidies going away, these kinds of things, some carriers are pulling out of Medicare Advantage completely. That has kind of created a little bit of uncertainty with respect to that channel. We've seen that play out. I've been talking about it for the past several quarters, but we've seen that play out. That's very similar. Now, we've had some wins. We've had some expansions in the health plan channel, but net-net, it's been a headwind. I think as we finish the year, we've got a number of opportunities that we're chasing down. I think it's really similar to what I said in October.
Are those headwinds reflected in 2025 membership, or is that yet forthcoming?
No, our membership would be what's relevant at that period of time. As we see the membership roles and enrollment roles in 2026, that's when it would be reflected. Of course, if there's any changes that have been made prior to that, that would be reflected. Most of what I'm talking about here with the health plans is really a one-one and forward kind of dynamic.
That's helpful. Okay. You alluded to it earlier, 60% of Integrated Care members have access to Teladoc's behavioral health solution. What is that behavioral health product within Integrated Care? How is it priced? What network supports this offering?
Yeah. It is something that I have tried to talk about more since I have been in the seat because I thought it was sort of an unmentioned, really good story inside of Integrated Care. There is a lot of unmet mental health need in the U.S. You can see that play out in a variety of ways. In post-pandemic, one of the more broadly adopted modalities around Virtual Care is in mental health because you do not necessarily need to be physically seen, and there is convenience and some anonymity. This virtual mental health space is something that has continued to be a growth engine for us.
Now, the value prop in Integrated Care to our client base in the U.S. is providing a range of services so that your member or the patient has the ability, through one experience, to be able to serve multiple needs, which is why being able to cross-sell mental health in there. It is not just around mental health in its own right. We have embedded that in our Chronic Care Management programs. We have the ability for any point of care to know and be aware of what other services this member may be eligible for. The mental health play in Integrated Care is just that. It is more of Integrated Care. We have over 60 million people, as I mentioned. The economic model is very similar to the historical Virtual Care space for Teladoc. You have some subsets that are in subscriptions.
Actually, mental health, we have the majority and have had the majority of revenues in visit-based arrangements. I think it operates very similar. From a network perspective, we have a broad network. There are credentialed Teladoc credentialed providers across therapy and psychiatry in the mental health space. We also have tools that we support the members with, with digital tools and content, a number of things that can help them with their mental health as well.
Got it. That's helpful. That sounds fairly comprehensive. Are those 60 million members basically covered from a mental health standpoint? Why would they need access to the incremental services or incremental network that potentially BetterHelp is able to offer? We'll get into that.
Yeah. Yeah. I think in Integrated Care right now, it's fairly pure. Now, there are some providers in the Integrated Care network that do some services for BetterHelp, but it's not necessarily by design. Okay? They may be doing some work across that. I think the reason why people come to the Integrated Care is it's a convenient access point, just like the rest of Teladoc. They have a need. It's been made available by their health plan or the employer. It's hard to get therapy out there. There's still a lot of need and a lot of capacity constraints. They like the convenience. They like the access. They like that it's available to them through their offering. BetterHelp, as you know, as we're moving it into insurance, it's a bit more of a pure play mental health offering versus the Integrated Care side.
The customer base is more trying to broaden the services across physical and mental health.
Understood. So the 60 million who have access to a mental health offering within Integrated Care today are effectively covered and do not represent an opportunity for this BetterHelp transition, or do they?
I wouldn't say it doesn't represent an opportunity. One of our, I would say, our first significant foray into crossing over between the segments, if you will, is a product that we're launching in 2026 called Wellbound. It's an employee assistance product that we think is going to be a nice new offering for us. It brings the best of Integrated Care, the things that I mentioned in terms of the ability to service multiple things, and has access to BetterHelp's therapy network because there's a great consumer experience of BetterHelp, the ability to meet all kinds of needs. For example, we can match someone with a therapist 90% of the time, over 90% of the time, in less than 48 hours. We have a big network that can meet a variety of needs specific to that individual.
That's our first, I would say, foray into finding the synergy between the two. I think there may be more to come, but that's, I would say, down the road.
Okay. That's helpful. Can you maybe describe the transformation that's underway at BetterHelp? What does this $950 million DCC mental health business look like three years from now if all goes according to plan?
I hope all goes according to plan. It's always the plan. BetterHelp, let me just comment on that real quick. And for those that may not be familiar with it, it's the largest direct-to-consumer virtual therapy business in the world. It's multiples larger than anything else close to it. However, it's predominantly a consumer-oriented model, meaning that it's a cash-pay consumer-pay model. Okay? It's got a 70 Net Promoter Score, very large therapist network. I mentioned some of the other statistics. So it's got a lot of brand recognition and a lot of usage. The challenge, though, is that we have like 4 million people start the sign-up and registration process at BetterHelp every year. Significant percentage of those, over 80%, drop off, though, because we're asking people ultimately to pay.
Now, there's other reasons they may drop off, but the biggest reason is because it's a financial decision, a cash-pay decision. Our movement into insurance is to say to those consumers that have a need, they're already interested in BetterHelp, we now have an opportunity for you to access your benefits coverage. We do believe that we're going to see some improvements in terms of conversion rates, retention, increased number of sessions, therefore lifetime value, as we're able to offer insurance into BetterHelp. How it plays out over the next year, what we've talked about already is we're now in seven, we're now in nine states as of today, plus Washington, D.C. The ramp continues. We'll be in some additional ones before the end of the year, we believe. We're going to ramp it over the course of 2026.
The market is going to determine where that mix sits, right? The consumer having choices, there may be people that want to use BetterHelp that aren't in network. There may be people that want to use BetterHelp that don't want to use their insurance because of anonymity or other kinds of reasons. There is a variety of reasons why it is still going to have a significant consumer profile. I think we will see where that plays out over 2026 and 2027, where that balancing point is. The strategy that we are employing is to fundamentally stabilize that business, return it to a growth posture, and realize more strategic value out of the asset.
Got it. That's helpful. As we think about just the in-network rates for BetterHelp visits as they occur, is it fair to look at a comp like LifeStance and try to assume that visits are priced at parity, or is there some nuance to the BetterHelp network that we ought to be aware of?
BetterHelp's contracts, we did an acquisition at the end of April called Uplift that really accelerated our progress here. Just like with any contracting rate, there are negotiated rates in predominantly commercial space. I do not want to get into what the rates are or comparison, but there is a supply and demand marketplace out there in terms of the rates. We do believe that the rate structure from a revenue as well as cost structure in delivering the therapy will be able to achieve our margin objectives.
Okay. That's helpful. Just as this transition occurs, how should we think about overall growth and profitability of BetterHelp, again, as this transition to insurance paid occurs? Maybe where should we expect BetterHelp margins to bottom?
Yeah. Again, I'm not going to get into too much in terms of outlook, but I would say there's three main drivers we're going after with BetterHelp. First is this movement into benefits coverage. When I first joined my first earnings call, I said, "I got a lot of questions around BetterHelp and still do questions from you, actually, on that call." I remember around BetterHelp. I said, "Look, we need to move this business into being able to access insurance if we're going to our goal is to stabilize and return this business to growth." That's the journey we're going on there. That's a material one for 2026 and 2027. We've had good international growth. Over 20% of the revenues of BetterHelp are in non-U.S. markets.
There's a lot of unmet need. It's not just specifically in the U.S., is a lot of need and demand out there. That is going to be a driver. Third, the team continues to innovate the product offering. All of that is aimed at stabilizing the user base and, again, ultimately returning it to growth and, again, creating value from this really unparalleled company out there, all of which we have an eye on margin, all of which we have an eye on achieving appropriate financial outcome or we would not be doing it. I think as we go through that process, we will get more visibility in 2026 of how we are thinking about it. As we ramp insurance, there is an investment. There is a little bit changed in the economic construct, not necessarily worse, but different relative to DCC versus insurance coverage.
Okay. Still forthcoming investment needed to support that transition.
Yeah. I think we've made a lot of investments in terms of some of the underlying capabilities. Uplift brought a lot with that. The integration and the teams coming together has been remarkably good. As you ramp up the scale of that business, you have to ramp up the operating costs that go along with that, right? You got to credential the therapist network. You've got insurance requirements you meet. We should expect a ramp up in that. Again, that's all built into the economic model in terms of the lifetime value, gross margin, operating costs, all that comes into play.
Okay. That's helpful. In our last 30 seconds, earlier this year, Teladoc settled about $550 million of 2025 converts in cash. You've got $726 million of cash on the balance sheet and about $1 billion of convertible debt maturing in 2027. First off, how should investors think about Teladoc's need and appetite for additional tuck-in acquisitions? How and when should investors expect Teladoc to address the 2027?
Yeah. Real quick on acquisitions. We've done three tuck-in acquisitions this year, all very highly aligned to the strategic priorities that I've talked about, and all have gone well and are meeting the expectations we have there. Healthcare is complex. It's dynamic. There's a lot we're trying to tackle. M&A should be and continue to be something that we keep our eye on. That's not to replace what we're doing organically. The new products I mentioned, that's all organic development for 2026. We need to be great at organic development and be open to M&A as well to create value. With respect to the balance sheet, you mentioned we have over $700 million in cash. We have a billion dollars of converts out there.
I think the investors should expect a company like us to have some level of debt as part of our overall capitalization structure relative to the size and cash flow generation that we have. We've got our eye on those converts. We're very well aware of those out there. We think we're going to have a lot of good options in terms of how we deal with that. I would say right now, sort of middle to second half of 2026 is when we'll provide maybe a little bit more specificity on that. We're already working on that issue and how we might think about capitalization going forward.
Awesome. Thank you so much, Chuck. Appreciate it. We look forward to hearing from you on the fourth quarter call in February.
Okay. Thank you.