M&A Announcement

Jun 4, 2018

Good morning. My name is Lisa, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Teladoc Investor Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer Thank you. Mark Hirshhorn, Chief Operating Officer and CFO, you may begin your conference. Thank you, operator, and welcome, everyone. With me today is Jason Gorbick, our Chief Executive Officer. This morning, we issued a press release announcing our strategic acquisition of Advance Medical. The release and supplemental slides are posted on our website. We have also filed on Form 8 ks a copy of the slides, relevant financial information and the merger agreement. Teladoc intends to avail itself of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Certain statements made during this call will be forward looking statements within the meaning of that law and are subject to risks, uncertainties and other factors that could cause Teladoc's actual results to differ materially from those expressed or implied by the forward looking statements. For additional information on the risk factors facing Teladoc, please refer to our filings with the SEC. We will also reference certain non GAAP financial measures, which we believe are important in evaluating our performance. For more details on these measures, the most comparable GAAP measures and the reconciliation of the 2, please refer to the press release I just mentioned and also posted on teladoc.com. I will now turn the call over to Jason. Thanks, Mark, and good morning, everyone. Thank you for joining us on such short notice. This is a big day in Teladoc's history, and I'm extremely excited to announce that Teladoc and Advance Medical have agreed to come together to form the only comprehensive virtual care delivery platform addressing the needs of companies and consumers on a global level. If you've watched Teladoc evolve and grow over the past few years, you've seen that we have a track record of identifying, executing and integrating acquisitions that either enhance our solutions offering like BetterHelp in the behavioral health space and best doctors in expert medical opinions or that deepen our relationships in particular segments of the market. As Healthiest U did in the small business market and STAT doctors did in the provider market. Today's acquisition of Advance Medical is particularly exciting because it does both, brings new solutions to our customer base and dramatically strengthens our global footprint. Advance Medical's philosophy of bringing a comprehensive virtual care solution to the consumer aligns closely with Teladox and our combined solution will allow for our complementary suite of offerings to address the needs of a global market. We believe combining the leading international virtual care company with the established global leader provides an offering that is unparalleled in the market today. If you're following along with the presentation available on our website, you'll see on slide 3 the key reasons that this acquisition uniquely accelerates our mission and maximizes value creation. We believe the combination of the leading U. S. And the leading international virtual care companies creates an offering that is unparalleled in the market today. By unlocking global markets, enhancing our clinical capabilities, expanding our existing relationships and creating operational synergies, this highly strategic acquisition is not only accretive to Teladoc's financial performance, but it also accelerates our goal of providing comprehensive virtual care delivery platform worldwide. Before I go into the details of the Advanced Medical business and for those of you who may be newer to the Teladoc story, we thought it would be worth noting the extraordinary growth that our business has seen over the last several years. Teladoc's growth can be attributed to an expanding portfolio of clinical services that meet the needs of healthcare consumers, payers and providers and delivering on our vision of transforming the way people access healthcare. Importantly, our visit volume and consumer engagement has continued to grow at a strong pace, which contributes to my certainty that virtual care has passed the point of inevitability and is rapidly becoming a critical component of the healthcare delivery system. Advance Medical represents an important addition that will help us accelerate this trend globally. Turning to Advance Medical, on Slide 5, you'll see highlights about their business, which has cultivated an impressive client list of over 300 customers who benefit from the consumer centric and global clinical services. These clients fall into 2 primary categories. 1st, the significant majority of their revenue is derived from insurers outside the U. S. Who incorporate advanced medical services into their products similarly to how U. S. Health plans use Teladoc services today. The remaining revenue comes primarily from large U. S.-based multinational employers who turn to Advance to provide care for their employees the world over. Notably with less than 5% customer overlap, we believe there is ample opportunity to cross sell the offerings to both customer bases. Additionally, this acquisition will allow us to be more aggressive in going after Fortune 1,000 companies as we'll now be able to meet the needs of their global workforces by providing the highest quality medical care on a consistent platform around the world. With approximately $63,000,000 in revenue in 2017, Advanced posted top line growth of 15% last year. Similar to Teladoc, their annual or multi year contracts provide for recurring subscription revenue. I'll go into more detail on their product portfolio and geographic footprint later in the discussion, but wanted to highlight their offices and medical staff around the world. As a bit of background, Advance Medical has a very unique history. The company was founded nearly 20 years ago in 1999 by Carlos Nuevo and Mark Subarats as a graduate school project. The 2 founders are still co CEOs and I've been incredibly impressed by Carlos and Mark as I've gotten to know them. And I'm pleased to say that they will both be joining the Teladoc executive team to continue to lead the Advanced Medical business outside of the U. S. On slide 6, we look at the previously untapped opportunity present in the massive global health insurance market that this deal opens up to Teladoc. Advanced Medical provides access into this market where growth is being driven by healthcare consumerism, aging populations, public finance strain and the growing need to supplement national insurance offerings. This is a multi $1,000,000,000,000 market poised to double in the next 10 years and we're incredibly enthusiastic about the opportunity at hand. We're equally excited by the expansion of our addressable employer market. Slide 7 highlights how with the addition of Advance Medical, we become the only virtual care provider who can offer truly global access to healthcare to multinational companies. 1 third of the U. S. Employees of U. S. Multinational employers reside outside the U. S. When you combine this with the proliferation of expats and global travelers, the need for a global solution becomes clear. Advanced Medical has a local presence in the 3 primary markets and Teladoc's largest market outside the U. S. Is Canada where we provide expert medical opinions. And we know that the Canadian market is anxious for a broader array of clinical services. Slide 8 provides a deeper look at the Advance Medical product offering. Advance is the leading provider of virtual healthcare solutions outside the U. S. And we've tried to array their products against the healthcare pyramid that we've described before. Most of you will be familiar with general medical and expert medical opinions which are similar to Teladox, but Advance Medical's other offerings represent an expansion of our portfolio. Advance has taken a unique approach to chronic care management by creating a virtual medical home and pairing a chronically ill patient with a physician who acts as an always available resource to answer questions, curate medical records and coordinate the care for that member. Medication Management is a service in which Advance Medical assists members on certain medication regimens to answer questions, support adherence and ensure compliance. This service is scalable across the combined global footprint. The clinical risk assessment service provides virtual encounters that help insurance companies better understand the medical risk of their prospective and existing members. We believe that this capability will help us meet the demand in the U. S. For clinical risk assessment services associated with the government programs. Of course with respect to the solutions that are common to the 2 companies, we see an opportunity to determine best practices and when appropriate leverage that knowledge across our U. S. Operations. I think Slide 9 really tells the story of this combination. We've been saying for some time that the comprehensive virtual care solution is the winning consumer experience and the best way to optimize engagement. The acquisition of Advance Medical fully realizes our vision on a global level. Looking at our new solution portfolio across the spectrum of care, we can now address the needs of our members from important critical care cases all the way through high frequency episodic care needs around the world. Our core set of solutions is highly complementary providing numerous opportunities where we can learn from one another and roll out best practices across the platform. Further, we'll be able to leverage our solutions to enhance Advance Medical's offering. For example, we can integrate our behavioral health capabilities and oncology insight with Watson into Advance Medical's current offering. Slide 10 goes into greater detail regarding the combined service offerings on a global basis. A critical factor in delivering a global solution is having local capabilities. This slide demonstrates the global product suite but even more importantly our local market knowledge and presence. Clearly scale is a key competitive advantage for Teladoc and this transaction solidifies us as the global leader in the virtual health market. Not only do we now have the ability to provide virtual care on nearly every continent, but our services in each geography complement each other almost to a tee. And for those regions in which there is overlap, we will look to find any and all opportunities for synergies. Turning to Slide 11, the combination of our newly achieved global reach and the breadth of our solution has further strengthened our leadership position in virtual health. In a landscape cluttered by single market point solutions, Teladoc stands alone as the only global comprehensive virtual care platform. Finally, before I turn the call over to Mark, I want to take a moment to address Slide 12 which may look familiar to those of you who joined us at our Investor Day last fall. We proposed a growth strategy at the time of our IPO roadshow nearly 3 years ago and continue to check back to demonstrate our execution of that and I believe shows how truly versatile and beneficial and I believe shows how truly versatile and beneficial virtual health can be to consumers. Next, I'll turn the call over to Mark to review the operational and financial aspects of this transaction. Mark? Thanks, Jason. As Jason mentioned in his remarks, we see great opportunity in terms of synergies from this acquisition of Advance Medical. And if you turn to Slide 13, I'll go a bit deeper into those details. We've touched on the growth opportunities stemming from expanded global reach, the ability to cross sell our broad suite of virtual health solutions around the world and leveraging our newly combined clinical resources into new geographic markets. Additionally, we can apply our best in class approach to marketing to Advance Medical's customers to identify future growth Teladoc has developed world class engagement programs that we can now leverage across the Advance Medical membership base to drive access and utilization improvements. We've also invested heavily into our IT infrastructure and technology platform and have the additional capacity to drive efficiencies throughout the combined organization. In terms of executing on these synergies, we'll start with the low hanging fruit immediately, but we'll have to wait until our Investor Day in late September to provide you with an aggregate total and timeline to realize all of the synergy opportunities at hand. Longer term, you will see evidence of the true value of this transaction in our financials, specifically increasing our revenue per client, continued utilization improvements, cross selling and launching new and innovative products to yield new clients. Again, we'll dig into all of that to a much deeper degree later this year. Finally, I want to review the terms of the transaction before opening the call to questions. As noted in the press release and on Slide 14 of the presentation, the total purchase price is $352,000,000 consisting of $292,000,000 of cash on hand and approximately 60,000,000 dollars or 1,300,000 shares of our common stock. The transaction closed on May 31, so you should anticipate 7 months of contribution from Advance Medical in our 2018 financial statements. While we will be updating the financial outlook for the entire company in conjunction with our Q2 earnings release in August, we anticipate Advance Medical to contribute approximately $40,000,000 in revenues for the 7 months of activity and approximately $2,000,000 in adjusted EBITDA for 2018. We feel this is really impressive combination of complementary businesses, like minded cultures and a perfectly aligned mission to bring a comprehensive suite of virtual solutions directly to the consumer anywhere in the world. I'll now turn it back to Jason to close out our remarks. Thanks Mark. We believe this is the right acquisition at the right time for Teladoc and Advance Medical's clients as well as for our shareholders and employees. Combined, we see an opportunity for significant value creation. And with that, operator, I think we can open the call to questions. Thank you. And our first question comes from the line of Lisa Gill from JPMorgan. Your line is open. Great. Good morning and congratulations. Let me just start on a couple of things. One, I believe, you made the remark that less than 5% overlap between the two companies. Should we think about Advanced Medical, any of that overlap, is it between best doctors and Advanced Medical? And how much of their business today is in the U. S. Versus outside the U. S? Yes, Lisa thanks for the question. So let me start with the second one first because it's easier. About 80% of their revenue is outside the U. S. Today and about 20% in the U. S. Where we have some overlap, it's where we have Teladoc, General Medical Services in a U. S. Multinational employer alongside their expert medical opinion services that's in the same multinational on a global level. It's really don't have much in the way of overlap relative to best doctors and Advance Medical. Okay. And then just secondly, when Mark, when you talked about low hanging synergies is the first that you'll be able to capture. I understand you'll give us a bigger picture at the end of September. But can you give us an idea of what some of those low hanging synergies will be that you'll be able to initially capture? Yes, certainly. We have some overlapping operations and a footprint in the U. S. And in Europe. Additionally, we were looking to expand our services in Canada, the UK, Australia, for the traditional Teladoc services into existing what were previously best doctors geographic locations. Now that we have Advanced Medical suite of solutions, we'll be able to accelerate that advance into those respective countries and of course there will be operating synergies in both the U. S. And in Spain where we where both companies have significant presence. Okay, great. Thank you. Sure. Our next question comes from the line of Jamie Stockton from Wells Fargo. Your line is open. Good morning. Thanks for taking my questions. I guess maybe the first one, if you could give us some sense, I don't know if maybe Slide 9 is the best way to think about it as far as critical care, complex care, episodic care, the advanced medical business, how does it break down between those three buckets? If you could give us some color on that, that'd be great. Yes. Advance Medical's business is sold in a very similar way that our visits included business is sold here in the U. S. So once you contract under the subscription access fee model, again, about 90 I'd say about 98% of Advanced Medical's revenues are under contract, either 1 year or multi year contracts. That affords you the opportunity to access both acute care, the traditional general medical visits that will serve north of probably $2,000,000 this year. But in addition to that, you also get the opportunity for expert medical opinion and a number of other services all under the same contract. So it's a what we would typically refer to as a comprehensive visits included model that gives you the full spectrum of services under the single contract. And about again, probably 98% of this is recurring revenue on a single or multi year basis. Mark, is there a ballpark that we should think about for number of members or what the typical PMPM looks like for their contracts? Yes, we'll get into further detail about that the 1st week of August. But as Jason noted about 20% to 25% of their revenue is outside or is in the U. S. So the rest of that's international and similar to the reporting that we do today, we don't include members as defined for any clients or entities outside the U. S. We'll add most likely 1,000,000 plus members for that 20% to 25% of domestic revenue that they generate. Their clients include some of the largest high-tech clients out in the West Coast, a number of the top airlines in the United States, companies that have 100 of 1000 of employees. So when you think about approximately perhaps $20,000,000 being generated in the U. S, you can do the math and understand that their per member per month or per employee per month is going to be very similar to what best doctors had evidenced in the market for the last several years. Okay, that's great. And then maybe just one more question. The employee number, it looks like they do directly employ some docs on part time basis. The location of those doctors, I think that maybe the presentation said 100 25 countries, I assume it's not that diverse. No. The majority of those doctors are located in Spain and then there are a number of doctors located in country in China, in Brazil, Portugal, Chile, Hungary and a number of physicians in other European countries and then clearly the U. S. As well. But the vast majority is in Europe. Okay. Thank you. Sure. Our next question comes from the line of Sean Wieland from Piper Jaffray. Your line is open. Thanks and good morning. Congrats on getting this thing closed and announced. So on Page 8, maybe just to follow-up on Jamie's question. I'm just trying to get my head wrapped around what's the long pole in this? Is there one of these 5 products that is representing kind of the core of the business? How should we think about that? So let me give you a little history on the company, Sean. They started as an expert medical opinion company similar to how best doctors did. As they saw the need for greater consumer engagement and a demand from their clients for a broader array of services, they expanded into these other areas with General Medical being the first addition to their portfolio and now represents the majority of their transactional volume. But similar to what Teladox sees, you may have a lot more transactional volume with the high frequency general medical services, but greater financial impact for the more critical care things around expert medical opinion or chronic care management programs. When I think about the clinical risk assessment, they use that as a mechanism to get a foot in the door at a lot of international insurance companies, where they help them assess their risk with a virtual encounter between a patient and a physician. And that then opens the door to some of these other products. But the ultimate goal is to have as well as greater revenue potential because they're serving a bigger population with a broader array of services. Does that make sense? Yes, it does. And so, similar to other transactions, are you going to be basically moving the back end infrastructure of this company onto your own? And if so, what kind of cost savings do you think you can pull out of the model? Sean, we will be integrating the service delivery and of course the infrastructure for the app and the platform for physicians as well as members will be integrated in time onto the existing Teladoc infrastructure. We're not going to provide savings synergies at this point. We'll do that most likely either in August to some degree and then to a fuller extent at our Investor Day in September. But you should think about the fact that the number of interactions that Advance Medical has annually is nearly equal to what Teladoc does solely in the United States. So you should think of Advance Medical as the international Teladoc with obviously a very, very significant influence in Europe. But their utilization and their interactions with members hits an extremely high number, principally as a result of their various services that they provide on an integrated basis. So that's something that we will look to join in many countries over the next couple of years. We'll obviously be investing heavily into bringing those services into those countries with the greatest need, the largest populations. All right. And so maybe just slide one last one in. I think you said it was 15% revenue growth. Do you think you'll be able to accelerate that up to Teladoc levels of revenue growth? Yes, we absolutely do. Mark and Carlos, the founders of Advance had bootstrapped their company for nearly 20 years. The first time they took any capital was in January of this year and they were just at the point of beginning to deploy some of that capital. They've been running profitably for many years And now with the, obviously the technological experience, the marketing know how, some of the other, I think, key characteristics that Teladoc can bring as well as available balance sheet will enable them to accelerate their revenue growth and we would expect to bring their revenue growth in 2019 up to the 20% to 30% Teladoc revenue growth. Super. Thanks so much. Sure. Thank you. Our next question comes from the line of Mohan Naidu from Oppenheimer. Your line is open. Thanks for taking my questions. Mark, on the last answer, should we think about any changes to your EBITDA targets or profitability metrics as you make more investments here? I again will provide that greater level of detail into August. But as far as 2018 is concerned, because we'll be reflecting 7 months of the company's results in our consolidated statements for the year, you'll see a contribution of about $40,000,000 of revenue and a couple of $1,000,000 of EBITDA. This combination extends our financial strength into not only the U. S. But will make us even more profitable in Europe. I think we'll end up again having the opportunity to invest a bit more rapidly as we had planned throughout 2017 following the acquisition of BEST Doctors. But we are now going to benefit from the goodwill and the operating experience in multiple large markets like China, like Brazil, and of course with this combination in Europe, we can accelerate some of our internal goals. Thanks Mark and one more quick one around seasonality. Anything specific at Advance Medical that we should know of? Also much less seasonality than what we experienced because we're selling Advance Medical is selling traditionally ex U. S. To private insurers. These sales take place throughout the year. They're not as prone to the seasonal benefits periods of the Q1 of every calendar year. So we'll tend to see greater mid year sales and again a less reliance on anything having to do with the 1st or 4th quarters like we see in conjunction with the flu and other recurring quarterly incidents. Okay. And one more on the physician, I guess, employed physicians under Advanced Medical. Does that change the cost structure for you guys? I mean, I guess, historically, you guys have relied on more non implied physicians versus implied. How does that cost structure impact you guys? It's a great question. We had been telling people in the past that we are getting to a bit of a critical mass in certain areas and we were looking to bring on some employed physicians against certain full time employed physicians and others that we would also economics, the profitability that's been proven out under Advance Medical's model is one that we could clearly replicate in several other countries. The profitability, again the results of their operations have suggested that they could scale and they could scale profitably. We're going to be able to I think continue with their model in certain countries and in fact our model by using a flexible workforce will continue at this point in the U. S. And a couple of other countries. That's great. Thanks a lot, Mark. Congrats again. Thank you, Moe. Our next question comes from the line of Donald Hooker from KeyBanc. Your line is open. Great. Curious how Advance Medical compares to you guys in terms of utilization. I know you guys have put a lot of work into engagement around sort of using different forms of social media and things like that. Where do they kind stand versus you and is that one area where potentially there could be sharing of knowledge? Hey Don, it's Mark. I think you should look at it from 2 perspectives. 1 is utilization in the U. S. Which is consistent with what I would suggest was best doctors utilization in the past because in the U. S. They're really only offering expert medical opinions. And clearly that level of engagement while it's consistent with the pure best doctor side for anything that's been cross sold and clearly for the traditional Teladoc business utilization is much stronger. You get the reverse of that in Europe where traditionally Teladoc has only offered expert medical and advanced medical has offered everything from general medical, Triage and the expert medical. So their level of utilization would suggest that they have multiples on what we had experienced. It's a mirror image of the U. S. So bringing the 2 together is a wonderful combination. And I guess I would just add that where they have done a consumer engagement marketing, it's more traditional in terms of direct mail and relying on their partners to do the communications. So as Mark mentioned in his prepared remarks, there's a significant opportunity to bring our surround sound engagement strategy to base, especially as we roll out the broader solution together. And great, I know you're going to provide more detail on synergies at the Investor Day, but do you guys work with a lot of how many multinational players do you guys work with? I'm just sort of thinking about potential immediate cross sell? Sure. So you should think of Teladoc having 100 and 100 of multinational employers. In addition to that, Advance Medical has probably somewhere in the range of about 50 multinational employers. And I would also suggest about 90% of those 50 clients would be recognizable to everybody on this phone call. They have a pedigree of clients that they've amassed here in the U. S. That's clearly second to none for a company of their size. The fact that we have the opportunity now to offer to our clients, those clients represent millions of lives in Europe and Asia. We've not been able to service those members in the past because of our lack of available services and geographic presence in many countries that Advance Medical brings us today. So it will be immediately accretive to the number of members and hopefully the expansion opportunities within existing Teladoc domestic clients. I was at our recent Employer Client Summit and about 40% of the clients in the room indicated that they had employees overseas. So when you consider that population plus the expat population plus the global traveling workforce. There's a very significant opportunity here. Thank you. Our next question comes from the line of Matthew Gillmor from Robert Baird. Your line is open. Hey, thanks for taking the question. I wanted to ask about the international regulatory dynamics. And I guess in the U. S, we're starting to see some of the government payers embrace telehealth. And I was curious how that stands internationally. Is there a similar trend? There is a significant trend toward the international insurers embracing virtual care. And as I said in my prepared remarks, there are a bunch of single market point solutions, but outside the U. S, Advance Medical really represents the only multi market comprehensive virtual care platform. And with respect to the regulatory environment, there are far fewer constraining regulations in most countries outside the U. S. And I think importantly in the U. S. Where we look at individual state by state regulation outside the U. S. It tends to be national regulation that looks at an entire country with a single regulatory landscape instead of the patchwork quilt that we see here in the U. S. In fact, Advanced Medical would have been more aggressive with the comprehensive virtual care platform here or solution here in the U. S. If it weren't for our complicated regulatory environment, which made it slower for them to expand that offering. So it makes it very, very complementary for us to put the 2 companies together. Okay. And one follow-up on, I guess the international geographic exposure and then specifically asking about foreign exchange exposure. Is it safe to assume that most of the revenue coming in is in euros? And if there's other currencies to mention that would be helpful in terms of understanding that dynamic? Yes, that's correct. So think of 20% to 25 percent of revenues being generated in U. S. Dollars and about 70% of international the remaining, so 70% of that international coming in euros and about 5% coming from Asia and Latin America. Okay, great. Thanks very much. Sure. Our next question comes from the line of Sandy Draper from SunTrust. Your line is open. Great. Thanks so much and congratulations. And most of my questions have been asked and answered. But maybe Jason going on a theme I know I've asked a while on getting doctors or getting enough doctors to having capacity. And when you think about this acquisition in really simple terms, is it putting more pressure on capacity in terms of having enough doctors to service or does it actually ease up some of the capacity because they bring additional doctors in additional relationships? Just think about that as you expand globally, are you adding more capacity to service that or is it going to mean that you've got to work harder and run faster to bring on more capacity expense? Yes, Sandy. So you were breaking up a little bit, but with respect to capacity of our provider network on a combined basis, this provides us with additional capacity. Their model of sort of a combination of employed and contracted physicians, many of whom are on a part time basis, provides us with an additional incremental pool of physicians to tap into. And there's the opportunity for us to combine the international expert networks of the traditional best doctors organization and the advanced medical team and put additional volume through those combined networks. So this certainly increases our overall capacity and we feel really good about sort of the step function opportunity for growth both in driving the demand side, but also as you indicate the supply side. Great. Our next question comes from the line of Richard Close from Canaccord Genuity. Your line is open. Thank you. Congratulations on the transaction. Just had a follow-up maybe to one of Jamie's questions. Mark, you said something about 2,000,000 visits this year. I was wondering if you could clarify that a little bit. And then as we think about the $40,000,000 in revenue that you're targeting for the transaction here in the 7 months. Can you sort of break that down maybe a little bit in terms of where we should be putting that in terms of the buckets of revenue that you have on your income statement? Sure. Let me take that last one first. That $40,000,000 will almost entirely be reflected in subscription access fees. Again, the structure of those contracts are aligned nearly perfectly with our contracts here in the U. S. Which provide for that per member per month or per employee per month fee to cover all of the lives that either these private insurance companies or employers avail the members or employees of the use of Advance Medical Services. We will also see a split clearly and when you think of that 7 months $40,000,000 of revenue, think about approximately 75 percent of that coming from international where of course we break that out today. Also, you should think about this year we'll have a business, an international business of over $100,000,000 again in 2018 and clearly much higher for that in 2019 as we reflect the full 12 months of activity. The first part of your question. The 2,000,000 visits here. The 2,000,000 in visits, right. So we spoke about interactions and the fact that there are multiple hundreds of physicians are interacting with members or employees every single day. When we count our interactions, it's often only expert medical opinions and visits for some of the general medical, dermatology as well as behavioral health. So they measure it very similarly, but their interactions in Europe, in Asia and elsewhere will likely exceed $2,000,000 this year. Okay. So the $2,000,000 isn't necessarily from the completion of the deal to the end of 2018? No, that's going to be full year 2018. Okay, great. Thank you. Congratulations again. Thank you, Richard. Our next question comes from the line of Steve Wardell from Chardan Capital Markets. Your line is open. Hey, guys. Congrats on the transaction. Thanks, Steve. And so I was intrigued by the employed physicians at Advanced Medical. Can you just give us some color on why that was appropriate to the Advanced Medical model? And will you be keeping that going? And I think I saw the figure of 450 physicians on staff and does that mean full time or part time? Yes. So Steve, we completely appreciate and respect the model that Advance Medical has built. We intend to keep that in place going forward. They have proven to us through both existing operations in Spain for nearly 20 years and newer operations in China and Brazil that that model can generate profitably throughout their organization, both in scale and at a relative early startup phase. The fact that their physicians have the flexibility to lever up or decrease the number of hours that they provide, It's clearly one of characterization of whether somebody is truly an independent contractor or viewed as an employee under the different jurisdictions in which we operate. Our focus has been here in the U. S. Where the regulatory environment is far stricter and much more challenging than almost anywhere else in the world. And the way we launched over 15 years ago was by classifying and contracting with our physicians on an independent contractor model. What they have done is while it's different, it is appropriate and it is financially obviously rewarding and it's and we think it's leverageable not only for further growth in the countries where they operate today, but in those new jurisdictions as we mentioned Canada and other countries where we think we'll be expanding relatively quickly. We think their model is replicable and something again more of a hybrid internationally where we'll reflect some traditional Teladoc staffing models, but we'll also continue to use Advance Medical's employee model. Great. Thank you. Our next question comes from the line of Stephanie Danco from Citi. Your line is open. Hey, guys. Congratulations and thank you for taking my questions. Thanks Stephanie. Could you talk to Advances Chronic Care Management solution and maybe how you can leverage it to grow your U. S. Business and that solution domestically? And as a result, could we see a potential for more hiring physicians or a different physician model in the U. S? Yes, Stephanie, it's a great question. We do see this as an opportunity to leverage their chronic care approach to accelerate our development in that area. They've been very pragmatic about an approach and really view it as I said sort of a virtual medical home where you take a membership base that has a certain chronic condition, pair them up with experts in that field and provide them on an ongoing basis as a resource to coach them through their management of that condition. That can be getting them ready for an in person visit. It can be helping them to titrate their medications. It can be answering questions about comorbidities or drug interactions. And we found that this that when we look at their business, it has provided significant value to both their clients as well as the consumers who are availing themselves of this. So we do think that it's an opportunity for us to learn from their model and leverage that both in the U. S. As well as outside the U. S. And then with respect to the employed versus contracted physicians, we think that there is probably an ongoing hybrid approach here. As Mark said, we've been looking at our overall supply dynamics as we get to larger scale and we had been looking at a hybrid model anyway. So I think this will just accelerate that model and we think that can bring it can bring sort of best practices to executing on that. So, I would say continue to look for us to have a hybrid model that optimizes the physician network on a going forward basis. Good. Very good. And one quick follow-up just on the cross sales opportunity. Have you looked at how many of your global clients are a rough percentage today that utilize a separate vendor for their international telehealth? We think very few because we've been hearing from our clients the interest in us developing that solution in their local markets. So we think we can very rapidly bring the advanced medical general medical telehealth solution to those clients to really complete the picture of a comprehensive virtual care platform. Understood. All right. Thank you for taking my questions. Absolutely. Thanks, Stephanie. And we have no further questions in queue. I'll turn the call back to the presenters for closing remarks. So thanks again for everybody for jumping on the call on short notice. As I hope you can tell, we're extremely excited about the opportunity ahead of us. We'll do our best to continue to provide information and transparency. And as Mark said, we'll be able to talk more about the financial impact at our call reflecting the Q2 that we have in August and then even more again at our Investor Day in September. So thank you again and with that I think operator we'll close the call. This concludes today's conference call. You may now disconnect.