Earnings Call: Q1 2018

May 1, 2018

Welcome to Teladoc's First Quarter 2018 Earnings Conference Call and Webcast. At this time, all participants have been placed in a listen only mode and the floor will be open for your questions following management's prepared remarks. It is now my pleasure to turn the floor over to Adam Vandervoort, Chief Legal Officer. You may begin. Thank you, operator, and good afternoon, everyone. We look forward to discussing our Q1 2018 results with you today. Joining me for Teladoc's conference call are Jason Gorevic, our Chief Executive Officer and Mark Hirshhorn, our Chief Operating Officer and Chief Financial Officer. Today, after the market closed, we issued a press release announcing our Q1 2018 results and filed our quarterly report on Form 10Q. The release and the filing are both available in the Investor Relations section of teladoc.com. As a reminder, 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. These forward looking statements 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 risks facing Teladoc, please refer to our filings with the SEC. We'll start today's call with brief prepared remarks followed by Q and A. Today's call will contain certain non GAAP financial measures that we believe are important in evaluating Teladoc's performance. For more details on these measures, the most comparable GAAP measures and a reconciliation of the 2, please refer to the press release posted earlier today on teladoc.com. I will now turn the call over to Jason. Thanks, Adam, and thank you to everyone on the call for joining us this afternoon. We saw a very strong start to 2018 with continued success across the business and another quarter in which we exceeded our expectations for all of our key metrics. Total revenue was $89,600,000 and up 109% on an absolute basis and 47% on an organic basis. Adjusted EBITDA of a loss of $1,400,000 beat our forecasts and compares to a loss of $9,100,000 a year ago. We ended the quarter with 20,800,000 U. S. Paid members, up 41% compared to last year on a pro form a basis. And finally, we conducted 606,000 total visits for the quarter as 554,000 visits came from our U. S. Paid members in the quarter compared to 385,000 last year. Mark will dive deeper into the financial and operating metrics and will provide more granular data than we have historically given as we increase our transparency by providing more detailed information on our membership and visit volume, which we hope will allow you to better track our success across the business. With several months of 2018 behind us, I'm pleased to see that the leverage in our model is clearly contributing to our improved financial and operational performance. While we forecasted this leverage for quite a while, we are pleased to see it come to fruition and happy to report that we're on track to achieve our long term financial targets. During the quarter, every one of our cash based operating expense lines increased less than our top line growth. The best example of this is our G and A, which is our single largest operating expense and is declining materially as a percentage of revenue from 34% in the Q1 of 20 17 to 27% this quarter and we expect this trend to continue. To be clear, the financial side of things isn't the only place that we're seeing proof of this leverage. For example, our current infrastructure can handle several times the volume we see today. This is evident as we performed over 8,000 visits per day during peak season, meeting our SLAs and actually surpassing our 2017 performance in spite of the intensity of this flu season. Mark will give significantly more detail on our utilization metrics in a moment. But first, I'd like to provide some commentary about some positive trends that we're seeing. First, we're very pleased with the early results in our visit fee only populations. The Aetna fully insured population is trending right in line with our projections and the FEP program is off to a strong start. 2nd, although it was an intense flu season in January February, the flu moderated quickly in March. However, our utilization continued at a strong pace. 3rd and perhaps most exciting, we've recently completed an analysis of 15 months of data that clearly demonstrates the value of our comprehensive virtual care platform. Stated simply, the more products serving a population, the greater the engagement by that population. Both average number of visits per user and the number of users per 1,000 increases with more products. Said another way, by adding more clinical services, we get both greater depth and breadth of engagement with the population. This bodes very well as we continue to expand the scope of our offering both in the U. S. And globally. During the quarter, we also continued to make great progress on the integration of Best Doctors, which is on track and proceeding as we anticipated. We are deep in development of the fully integrated guided member experience and are on track to have that in the market later this year. This is the intelligent front end user interface that employs advanced technology to quickly and seamlessly guide the consumer to the most appropriate Teladoc solution, which has gotten tremendous reception as we've previewed it for some of our largest clients. Furthermore, our cross selling teams and commercial organizations are working very well together and showing signs of success. In fact, we recently closed the sale of our complex case management services to an existing health plan client worth nearly $2,000,000 per year. We're seeing sizable interest in our general medical solution in Europe and Canada from our existing customers and feel confident in our ability to leverage those relationships relatively easily as we look to expand our offering into those markets. With deep expertise and established relationships in those markets, we expect to commit additional resources both organically and inorganically to expand our product portfolio to more closely reflect our U. S. Service offerings. Before I turn the call over to Mark, I want to update you on a few more exciting opportunities we're seeing in the market. There continues to be a massive opportunity for Teladoc here in the U. S. As I mentioned on our last quarterly call, the engagement by our health plan clients and prospects is increasing in velocity, scale and scope. We've made very good progress on multiple large opportunities and I feel very good about where we are at this stage in the selling season. Further, as the only comprehensive virtual care platform and with a strong value proposition across all segments of the healthcare market, Teladoc is uniquely positioned to benefit from the large scale consolidation among payers, providers, PBMs and other players. We see this as presenting nothing but opportunity for Teladoc. Finally, given the accelerating pace of adoption for virtual care, Teladoc's continued success in driving engagement and the realization of a comprehensive platform that delivers a multitude of clinical solutions. I believe more strongly than ever that virtual care has passed the point of inevitability as a fundamental component of the healthcare landscape. With that, I'll turn the call over to Mark to review our financial results from the quarter. Thanks, Jason, and good afternoon, everyone. To echo Jason's sentiment, this quarter represented a strong start to 2018, and I'm very pleased with our results across the board. During this afternoon's call, I'll run through the financial results from the quarter and discuss our expectations for the Q2 and remainder of 2018. Turning to the P and L and starting with the top line, revenue in the Q1 was $89,600,000 a 109% year over year increase. On an organic basis, our quarterly revenue grew 47% over the same period in 2017. Revenue from subscription access fees increased 109% in the first quarter coming in at $71,700,000 compared to $34,300,000 a year ago. Looking a bit deeper, when we break out subscription fees between U. S. And international, the U. S. Accounted for $61,000,000 or 85 percent of the total access fees and international generated the remaining $10,700,000 In the Q1, subscription access fee revenue accounted for 80% of Teladoc's total revenue. As of March 31, 2018, we had 20,800,000 paid members in the U. S. That's an increase of 41% year over year when compared to the 14,800,000 members we had a year ago after adjusting for 5,400,000 Aetna and Amerigroup lives. As a reminder, we've refined our definition of members to include just U. S. Paid members that are associated with a PEPM or PMPM or paid U. S. Membership. And under this refined definition, membership totals will not include visit fee only access. At the end of the Q1, we had approximately 9,500,000 individuals with visit fee only access to our services, including those individuals from the Blue Cross Blue Shield Federal Employee Program and Aetna's fully insured population. Last quarter, we mentioned an additional 9,000,000 TRICARE visit fee only members that we anticipated going live in April. While we have launched a small part of this service, the bulk of this program has been slightly delayed and we expect it to go live late in Q2 or early in Q3. In the Q1, our average per employee per month or PEPM was $1 compared to $0.95 in the Q4 of $2,017.58 for the Q1 of 2017 or $0.79 on a pro form a basis. Moving on to utilization, which is a reminder we calculate as total visits divided by Teladoc's paid U. S. Membership for those members with access to our general medical services, we completed 606,000 total visits in the Q1, an increase of 57% over the 385,000 total visits we completed during the Q1 of 2017. This represents an annualized utilization rate of 10.9% in the quarter, which is a 242 basis point increase over the same period last year. We segment our visits into visits from U. S. Paid membership and visits from visit fee only access individuals. Visits from U. S. Paid membership totaled 554,000 visits. Going one level deeper in the U. S. Paid membership visits, 298,000 of these 554,000 visits or 54% of these visits were paid, while the remaining 256,000 visits were delivered under our visits included contracts. In addition to these 554,000 visits I just noted, we also completed 51,000 visits for individuals with visit fee only access. This is the Q1 that the FEP members were live on our platform and we feel very good about the initial uptake and our ability to meet our full year targets for this population. The U. S. Paid membership visits generated $17,900,000 in revenue, a 109% year over year increase. Drilling down a level further, dollars 16,300,000 in visit fee revenue came from general medical visits, representing a 90% increase from the Q1 of 2017. The remaining $1,600,000 in revenue can be attributed to other specialty visits, which is primarily comprised of expert medical services. Gross margins were 70% for the quarter compared to 71.7% for the Q1 last year. We anticipate the trend of gross margins moderating slightly lower as our revenue mix shift continues to evolve. Total operating expenses in the quarter came in at $81,900,000 representing an 80% increase from the Q1 2017 figure of $45,600,000 Eliminating the impact of principally non cash charges such as stock compensation, depreciation and amortization, our Q1 2018 operating expenses less integration related costs were $64,200,000 or 72 percent of revenue compared to 39,900,000 dollars or 93% of revenue in Q1 of 2017. As Jason noted, we are starting to see the operating leverage that we anticipated as we mature as a company and continue to successfully scale. Coming off of our Q1 of positive adjusted EBITDA in the Q4 of 2017, we ended Q1 with an adjusted EBITDA loss of $1,400,000 in the quarter compared to a loss of $9,100,000 in the Q1 of 2017. These results were better than we initially expected. We had guided towards a 1st quarter loss since the quarter represents the busiest in terms of onboarding and marketing and engaging members from newly onboarded clients. We remain confident in our outlook for positive adjusted EBITDA throughout the remainder of 2018. Net loss in the quarter was $23,900,000 compared to a loss of $15,700,000 last year. This quarter's net loss includes a $1,500,000 charge for the abandonment of redundant office space. Turning to the balance sheet, we ended the quarter with approximately $120,000,000 in cash and short term investments. Our total debt as of the end of the first quarter consists solely of the $275,000,000 3 percent convertible notes that mature at the end of 2022. Our GAAP presentation of this debt appears as approximately $210,000,000 as it is presented net of the equity component of this security in our consolidated financial statements. Also, I want to note that the company remediated the material weakness that was noted in our 10 ks filed this past February. We intend to continue to focus on strengthening our control environment throughout this year. With that, I would like to provide our outlook for the Q2 of 2018 in which we currently expect total revenue between $86,000,000 $87,000,000 and EBITDA loss between $8,000,000 $9,000,000 adjusted EBITDA between $1,500,000 $2,500,000 total U. S. Paid membership of approximately 20,800,000 to 21,000,000 members, total visits between 450,500,000 visits and a net loss per share based on 62,600,000 weighted average shares outstanding is expected to range from a loss of $0.35 to a loss of $0.37 per share. For full year 2018, we affirm our previous expectations of total revenue between $350,000,000 $360,000,000 and EBITDA loss between $27,000,000 $30,000,000 adjusted positive EBITDA between $7,000,000 $10,000,000 total U. S. Paid membership of approximately 22,000,000 to 24,000,000 members and visit fee only access available to approximately 19,000,000 additional individuals. Total visits between 1,900,000 and 2,000,000 visits and a net loss per share based on 62,800,000 weighted average shares outstanding is expected to range from a loss of $1.36 to a loss of $1.41 per share. I'm very pleased with how we started 2018 and I look forward to continuing to update you on our progress throughout the year. I also want to thank the entire Teladoc team for their ongoing effort and the outstanding work they do for this organization every single day. Thank you all for joining us this evening. We'll now open the call to questions. Operator? Our first question comes from the line of Lisa Gill of JPMorgan. Please go ahead. Your line is open. Thanks very much and good afternoon. Jason, let me just start with your comments around the virtual care platform. I think it really differentiates Teladoc in the marketplace. I want to understand how it's resonating this selling season. You didn't have best doctors last year at this point in the selling season. So one, what are you hearing in the early parts here of the selling season? And 2, what are the opportunities that you see from a cross sell perspective? And then my second question was your comments around the vertical integration. Maybe if you could just crystallize for us really how you see Teladoc fitting in as we see this incremental vertical integration within healthcare? Sure. Thanks, Lisa. Yes, a couple of things on the virtual care platform. We're seeing that it is truly differentiated in the market and it's changing the discussions that we're having with our prospects and clients to be much more holistic, much more strategic and larger opportunities. That is especially true in the health plan segment where we have much more senior level discussions around an enterprise wide virtual care strategy as opposed to a point solution. And there are plenty of point solutions in the market, But really we are the only ones who can bring this comprehensive platform. Of course, we also see, as you mentioned, the opportunity for cross sell into our employer clients where we already have a relationship for Teladoc and we're bringing in the expert second opinion services and other more advanced services that are addressing the population towards the top of the healthcare pyramid. And we're seeing good traction there. I mentioned in my prepared remarks, we had a health plan who had previously been really more of a telehealth client engage us to provide expert second opinion services for their complex cases. And that's just the first of what we see as many opportunities that we expect to close. With respect to the vertical integration and our opportunity there, we've had great discussions. As you know, both CBS and Aetna are clients of ours. We've had great discussions with them about how Teladoc can be a part of more of a bricks and clicks environment, sort of a seamless continuum of care that's delivered in both the retail setting and an in person basis, but can bring in a virtual component, in our case, especially a virtual interaction with a specialist who can assist the on-site provider and also seamlessly interact with us on a virtual basis and direct the consumer to the right resources that are available to them. So as you think about that becoming a more fluid experience that includes the benefit design, Teladoc plays really well in that environment. And we see that being a benefit for us, but really a way that we can help to change the way that healthcare is delivered. That's helpful. I'm just wondering, going back to the discussion on the selling season, is there any way for you or Mark to quantify anything as far as size goes, as far as the opportunity? I know that telemedicine is new and evolving, but is there a number to think about as far as incremental lives you can add to the platform and the discussions you're having, anything on the number side just because we're analysts? Yes. So I would say too soon to tell about comparing sort of the magnitude of the pipeline. What I will say is it's extremely active, at least as active probably more so than it was last year. Many big opportunities such as the ones that I described especially in the health plan space. We continue to do very well on the provider side and have done extremely well in that market. So yes, I would say, I feel better about where we are now than I did last year, although I'll refrain from giving you a number you can plug into your model. Okay. I'll keep asking for the number, but congratulations on the quarter. Thanks, Lisa. Your next question comes from the line of Ryan Daniels of William Blair. Please go ahead. Your line is open. Yes. Thanks guys for taking the question. Jason, one for you. You mentioned in your prepared comments, you have about 15 months of data indicating that with more products, you see a more engaged workforce and more utilization services. I'm curious, number 1, if you can talk about how you intend to leverage that for marketing purposes or sales purposes to expand that penetration? And number 2, any magnitude of how big of an impact it has as clients add multiple solutions? Yes. Thanks, Ryan. I would say this, it is very much a testament to the value of a comprehensive solution that delivers value sort of across the healthcare or along the entire healthcare And what we see is with each And what we see is with each additional product that we add into the mix, the engagement increases on a frequency of visit basis as well as in terms of the breadth of the population that we serve and who engages with us. So it's pretty unique to see that you get growth on both of those dimensions. You sort of expect to see 1 or the other. Both is really valuable to us. So in terms of how we're going to use that, we want to put that information in front of our clients so that they can see the value of a single multifunctional solution as opposed to a bunch of disjointed point solutions that they may go to get in the market. With respect to the magnitude, I think we're going to sort of hold at giving qualitative guidance on that. And again, I'd reinforce that the benefit is seen with each additional product that we we deliver into a population. So it continues to build with each additional product. Okay. That's helpful color. And then in regards to the TRICARE, you indicated that as opposed to the April 1 kind of full launch, it's getting pushed back a little bit towards the end of the quarter, Q3 early on. Obviously, it didn't impact your guidance, so you must have modest VFO revenue in Q2 assumed for that. But one, can you confirm that? And then number 2, any discussion why that is being modestly delayed? Yes. So, we were prepared for the launch. In fact, we got accolades from our partners on our readiness as well as the implementation process. The government just took a slightly more measured approach to their rollout plan. So they rolled out the global nurse advice line. They just wanted to take a more step by step approach rather than a big bang to rolling out the new components and the virtual care part is really a new component as opposed to a replacement of previous services. So, this has nothing to answer a question maybe that's on your mind, but you didn't ask it. It has nothing to do with the VA that we've heard of from other players in the market. It's simply just a more methodical approach to rolling out the service. Mark, I don't know if you want to talk to the expectations with respect to revenue or impact with respect to revenue. Ryan, we came off a strong quarter, so we're trending ahead of our expected numbers. But we do take a little bit of a hit as we had a guaranteed amount of revenue to be generated from TRICARE from the date they commence their contract with us or go live with us. So each month that gets delayed, obviously, there's a shortfall in the projected revenue from that contract. Okay, that's helpful. One quick one, I'll hop up. Did you give the ARPMPM fee? I may have missed that, I guess, on a second line. We did not I don't believe we did in the prepared remarks, but for Q1, it was $1 compared to $0.58 for Q1 of 2017 and on a pro form a basis Q1 of 2017 would have been $0.79 Great. Very helpful. Thanks guys. Congrats on the strong start to the year. Sure. Thanks Ryan. Your next question comes from the line of Charles Rhyee of Cowen. Please go ahead. Your line is open. Yes. Hey, thanks for the question. Hey, quick question about the visit fee only visits from 51,000, if I sort of annualize that number, it sounds like you're looking at maybe about a 2% utilization. Correct me if I'm wrong, that sounds like that's better than where Aetna was in the old model in terms of utilization. Is that the right way to think about it? You're excluding the FEP lives, Charles, because from a visit fee only access perspective, that would have been yes, those would have been excellent numbers had it just been for the 3,800,000 Aetna fully insured members, but you've got to add to that a little over 5,000,000 FEP members. And those really went live in February. So again, I think you or most people know what the figures are with regard to expectations on the Aetna fully insured. We've spoken throughout the month of March and now as April. We're trending at the levels we would expect to see to remain neutral or slightly above revenues that were generated in 2017 from this population. So then when I was looking at the Q, right, you kind of break out the visit fee only revenue, I think it's about 3,700,000. If I back into the 51,000, it kind of backs into sort of a per visit of $6 to $9 Is that can you talk about the breakdown between FEP versus Aetna pricing? Sure. I can't hear you. I can't hear you. I Aetna pricing? Sure. That's correct. So about $150 for those Aetna visits and in the area of $45 for those FEP visits. So you could likely do the weighting and determine where it came out, but that's where you come out for the Q1. Okay. One last housekeeping. Stock comp for the year, deals and estimate that's embedded in the guidance? We do stock comp. I think that we provided I think we gave around about $32,000,000 For this year? Okay. Correct. Perfect. All right. Thanks guys. Congrats on the quarter. Thank you. Your next question comes from the line of Sean Wieland of Piper Jaffray. Please go ahead. Your line is open. Thanks. And thanks for the for all the transparency on the numbers. So just a follow-up to Charles' question. So what are kind of the strategies or the levers that you're employing to accelerate the visit fee only visits? I know that they're tracking in line, but to drive utilization and to drive growth with those contracts, can you share with us anything that you're doing specifically to drive utilization there? Yes. So we've dramatically improved the set of strategies and communications with the Aetna team regarding collaborative efforts to drive member awareness and engagement. We actually deployed a very talented executive to work with their team at Aetna. And we've seen much more sort of positive direction and movement from both the Aetna Group as well as our own efforts to deploy the surround sound capability that Stephanie's team delivers. So that's been very, very positive. And then on the FEP side, we're doing quite a bit of work with the FEP team, both A, to provide them with best practices and B, potentially to provide them with additional consumer engagement services on a sort of retained basis where they pay us to provide those services for their population. So we're seeing very, very good movement on both of those. And I have I'm pleased with where the Q1 turned out and I have pretty high expectations for the remainder of the year. So can you share with us any insight into what's factored into your guidance relative to that utilization of visit fee only? The visit the only utilization expectation for 2018 will remain below below 1%. Per quarter? For the year. Okay. I'm sorry, wasn't it just 2% annualized? No, it wasn't. When you're looking at the figures for the lives that came in throughout the quarter, we ended the quarter with 9.5 1,000,000 lives. We expect to have 18,000,000 lives by the end of the year. So you should expect to see approximately 1% utilization on that annualized number. Okay, super. Thanks so much. Sure. Your next question comes from the line of Sean Dodge of Jefferies. Please go ahead. Your line is open. Yes, thanks. So maybe staying with utilization for a moment, and more specifically on the surround sound rollout. Do you guys have any updated data on the lift you're seeing in utilization, maybe 6 or 12 months after you implement a client? Yes. What we generally see and I think we've shown this in some of our investor presentations is that 1st year utilization gets off to a strong, but as you would expect from 1st year, not ultimately the sort of objective utilization. So where we started about in an employer population in the 6% range, it usually steps up into the 8% range for year 2 and then up around 12% to 14% for year 3. So we see the benefit of that over time. Now what we're also seeing is that, that 1st year is increasing, because we're becoming more nimble about engaging the population out of the gate with our surround sound capabilities. So that's been an improvement really over the last year to where we're seeing benefit in the 1st year that a population is with us. Got it. Okay. Thanks. And then, Jason, the benefits of cross selling have come up a couple of times now. Do you have anything at your fingertips to give us a sense of the progress you all have been making in cross selling over the last couple of quarters? Maybe how many clients you've cross sold best doctors or behavioral health into or something like the change in average services used per client and how that's trended over the last few quarters? We haven't given any specific numbers about penetration of the multiple products into our book. I would say that we're making good progress in bringing our clients up to speed on the value of the full continuum of services that we offer. The Q1 is always a slower quarter in terms of engaging clients for new services even on a cross sell basis because they're just coming out of the open enrollment period and getting through the implementation and introduction of new benefits. So we would expect to see that continue to increase in velocity over the course of the year. All right. Thank you again. Yes. Your next question comes from the line of Jamie Stockton of Wells Fargo. Please go ahead. Your line is open. Thanks. Thanks for taking my questions. I guess maybe the first one, Mark, the dollar PMPM that you're quoting, I assume that in the calculation there, it seems like you're setting the international aside and not including that in the numerator. Is that right? That's correct. That's only U. S. Paid membership, Jamie. Okay. But in the denominator, as far as the member number is concerned, are you including the international kind of best doctors or is the international best doctors Yes, we're not. That's all it's listed. Okay. All right. Yes, there's no international members or figures included in that calculation. Okay. That's great. And then my other question is around the advertising marketing spend came in a fair amount below what we had expected. It seems like you're seeing some really nice leverage on that line. Can you talk about I think maybe in the last call or 2, you've referenced that you're seeing more visits that people are requesting over the app. I assume that that's leading to better engagement levels without you having to put ads in people's news feeds and whatnot. Can you just talk about any metrics you might have around what kind of engagement you're able to drive without having to actually spend a lot of money to drive it, because it seems like you're seeing some good leverage in that line? I think we've over the past three quarters, we've been experiencing that faster trend away from the traditional means of entering Teladoc, which was through the call center for years. We had projected that there would be a slow and steady trend through the app and through the web. And that actually occurred at a faster pace. That helped us preserve our 70% margin that also kept the price and the costs of customer acquisition down a bit as well because we've shifted to the digital format away from some of the print materials. So we benefited from really 2 prongs. 1 is the service side and the other one was the really the CPI. That's going to continue. The fact that we end up having some available dollars, we'll likely deploy those in areas where either we want to concentrate on clients where we believe we've got a greater opportunity to see increased utilization this year or through some of our cross selling and bringing additional services to clients that were traditionally Teladoc only clients and we're introducing them to the expert medical opinions and other services from best doctors. Jamie, I would add that we've seen improvement in our registration rates over the course of the last year, which once a member has registered with us, we're able to use significantly less expensive means to remind them of our availability and drive utilization. So there is a benefit to that. Is there a lot of runway still there? Or do you feel like you've maybe crossed really the 50% or I don't know what the most relevant penetration would be? No, we're still in the very, very early innings. There's a ton of runway with respect to driving registration. Okay. Thank you. Thanks, Jamie. Our next question comes from the line of Stephanie Demko of Citi. Please go ahead. Your line is open. Hey, guys. Thank you for taking my questions and congrats on the quarter. Thank you, Stephanie. Could you give us an update on recent turnover in the Chief Revenue Officer role? Specifically, how you're heading up the sales and product strategy and maybe any thoughts that you're planning on refreshing the role? When we made the acquisition of Best Doctors, we were fortunate to bring on a great executive in Peter McLennan. And so we really we moved Peter into the role of President. We're very happy to be able to retain him as a member of the leadership team. And to be honest, it would have been duplicative to have a Chief Revenue Officer and the President. Peter really oversees the entire commercial part of the business. And so it was simply a function of putting the 2 organizations together and having 2 executives for 1 position. Okay, understood. And one housekeeping item for me. Could you quantify the utilization uptick you saw from the flu season? Stephen, we likely saw a somewhere between 5% to 10% increase in our projected utilization as a result of the strength in January February. Flu basically ended towards the end of February. We didn't see any incremental uplift in March. April has been coming in as projected and that's why we feel comfortable with our existing range of on the upwards to $2,000,000 for this year. All right. Very helpful. Thank you, guys. Thank you. Your next question comes from the line of Sandy Draper of SunTrust. Please go ahead. Your line is open. Thanks so much. And Madal said, congratulations on a solid quarter and good start to the year. I guess if I want to find one place that gets in my funnel where things were a little bit light, best doctors revenue was up 4% year over year, maybe a tiny bit lower than I thought. Mark, do you still generally view longer term best doctors as a double digit grower and maybe blending it all in, it's going to be tougher and tougher. And to get it by, I'm just trying to get your sense of was there anything how did it perform relative to your expectations and how do you see best doctors playing out for the year? Thanks. Yes. Thanks, Andy. We certainly do see Pest Doctors. I know we set expectations at the beginning of the year that Pest Doctors would generate growth upwards to 15% and hopefully by the run rate Q4 to 20%. The Q1 comparisons to 2017 were a bit strange because they disposed of a small business in Q1. And there were also some clients that didn't return back into that for that business both subsequent or prior to and subsequent to the transaction. I think we have a steadier run rate. We saw far less attrition at the end of the year than we had projected. So I think we'll still end this year with growth that exceeds 15%. And I think we'll bring that the best doctors base business to grow in excess of 20% into 2019. Still very comfortable with where they are today. Okay, great. Really helpful commentary. Appreciate it. Your next question comes from the line of Donald Hooker of KeyBanc. Please go ahead. Your line is open. Great. Good afternoon. One of the a lot of questions, of course, have been asked already, but just maybe on a more detailed question around sort of free cash flow, thinking about that, kind of a great quarter, but there are a couple of sort of working capital items that moved around. I don't typically think of working capital for you guys, but I guess thinking about now we're in our 1st full year best doctors, is there anything to think about with respect to working capital there? And how do you think about free cash flow for the rest of this remaining quarters of the year? Sure. Don, it's Mark. I think we burned a couple of $1,000,000 of cash in this quarter. Working capital requirements, as I noted in the past, would likely be range somewhere between $10,000,000 $15,000,000 We started the year with excess of $120,000,000 in cash. We've told everybody we'll end the year with an excess of $100,000,000 in cash. I think we've also told people that we would look to be free cash flow positive. We're going to aim for that over the next 2 years. We haven't committed to a certain timeframe yet. But as you noted, we have pretty light working capital requirements. And from quarter to quarter, I would see us I'd expect us to be either neutral in cash needs or requiring just a couple of $1,000,000 Got you. And with regards to hospital health system business, obviously, it's a high growth area for you guys. What are the typical contract terms these days? And I know it's early, but have you had any renewal experiences and how have they gone in terms of pricing? We've got most of our contracts are multi year contracts between 2 5 years. So the fact is that, I don't think we've had a renewal to date. Some of those will come up, I believe in 2019. And those contracts range, there could be $50,000 contracts and others that are up to $500,000 and beyond based on the size of the system. Okay, I figured that. And then on the behavioral health revenues, can you disclose that and I'll see the floor? Yes, behavioral health continues to grow dramatically. I know we've set expectations for an excess of $50,000,000 for this year. We're on a run rate to exceed $55,000,000 So they're exceeding our expectations and highlighting the fact that there's still plenty of runway there. Thank you. You're welcome. Your next question comes from the line of Richard Close of Canaccord Genuity. Please go ahead. Your line is open. Great. Thank you. Jason, I was wondering if we could dive deeper into some of your remarks. You talked about committing resources organically and inorganically. I believe you mentioned internationally there. So are you suggesting you're looking out side the U. S. Possibly for a platform? And then I'd welcome any perspective you guys have on the 2 mergers that were announced yesterday in the hospital space with American Well and Avizia and ReachHealth and InTouch and whether you need to do something on the hospital side? Sure. Yes. With respect to M and A and really sort of investment overall, what we've said pretty consistently is that we look for investment opportunity either in build, buy or partner with respect to continuing to expand the product portfolio as well as continuing to expand the markets that we serve and our footprint in attractive markets. So that could include everything from new product capabilities that bring us new clinical services, all the way to existing players who are operating in markets where we're not as strong. So I think that we've been pretty consistent about that and we continue to follow that approach with respect to our strategy. On the 2 recently announced mergers, we're very familiar with Avizia. We have respect for the company, but we almost never run into them in which isn't really aligned with our strategic focus. Which isn't really aligned with our strategic focus. So we don't think that it has a particularly material impact on the competitive landscape. And then with respect to InTouch, sort of the opposite, we're not really surprised by the announcement. InTouch has been trying for a while to move from a hardware based business to more of a software orientation. They acquired Reach, which is a small software business that's been working for some time to find a substantial market for its product. Again, Reach is another company that we really never see in competitive situations. So, and we operate in pretty different space than InTouch. So, we don't think that either of them has a particular impact on our success in the hospital and health system market. Obviously, we always continue to monitor the competitive landscape and look at how we can continue to expand the value of our platform as a service offering, which is where we're going to stay focused, not really with a hardware orientation. Is that helpful, Rich? Yes. No, that is. I also had a question on CVS. I was looking at their website, I guess for Minute there and I was looking to see if there was anything on telehealth. Can you give us an update in terms of the relationship with the CVS and expected launch there for you guys? Yes. So I'm not allowed to give a launch date. We're in active development with CBS of the product. We're really excited about the prospects for that product and we're working very, very collaboratively with the CBS team. So the relationship is very strong. The vision is there. And as I said earlier, I only see opportunity with respect to some of their future as they look to make the acquisition of Aetna. Okay. Thank you. Your next question comes from the line of Mohan Naghu of Oppenheimer. Please go ahead. Your line is open. Thanks for taking my questions. Just had one question around the visits in Q1. So the flow has been great for you guys in terms of the number of visits. But I just want to understand, did you guys see strength in new members trying Teladoc versus visits from members who have used Teladoc before and coming back for flu? And also as a follow-up, just on the new members who tried flu, who tried you guys because of the flu? Did you see a repeat use from those guys? Thank you. Yes. Thanks, Moe. We said on our last call that during the flu season, about 50% of our users were new users. That's a good trend and a slight step up from the year before. That was true for the full quarter. It's too soon to tell about repeat usage, but when we looked back at that for prior years, it wasn't different for members who use us for the flu than it was for other conditions. So we would expect that to play out over the course of the year. All right. Thank you very much, Jason. That's all I had. Okay. Thanks, Mohan. Your next question comes from the line of Matt Hewitt of Craig Hallum Capital. Please go ahead. Your line is open. Good afternoon. Most of my questions have been answered. Maybe just one on the competitive landscape and obviously you just addressed a couple of the more recent news items. But given the deregulation that you've seen over the last few years, has there been anything from a competitive landscape that you've seen some new dynamics or some new opportunities creep up that maybe others are Sure, Matt. Look Sure, Matt. Look, I think that the big change in the competitive landscape is the expansion of our platform to become a much more holistic virtual care solution. We still see and in fact ATA, the American Telemedicine Association conference is going on right now. And as we look at the landscape there, we feel even more bullish about the prospects for the company in contrast to the multitude of point solutions that are in the market. So it's always a good thing to get a sort of competitive check at a large show like that. And it was really an affirmation of our strategy as we scan the landscape. Great. Thank you. Sure. Thanks. Your next question comes from the line of Matthew Gillmor of Robert W. Baird. Please go ahead. Your line is open. Hey, just had one question left as well. I was hoping to get an update on Medicare Advantage. I know there was some discussion on that last call, but it's been couple more months here and we're waiting, I guess, on this regulation to be published. But curious if you've had additional discussions with MA plans and if you have a better sense for how that model will be constructed in terms of PMPM fees or going towards visit only given the success you've had? Yes. So there's a lot of discussion going on. In fact, I just sat on a panel at a conference talking about Connected Care for seniors with a number of other health plans who were engaged in the discussion and thinking about how to serve the MA population. Don't think there will be any material movement in terms of buying behavior until the regs are published by HHS. And so we're watching As we're fortunate to be in a situation where we have more data on the delivery of virtual care than anybody else in the market. So we feel good about where it's likely to go. But until the regs are published by CMS, we're in a little bit of a wait and see. Got it. Thanks, Steve. Yes, absolutely. Your next question comes from the line of Glenn Santangelo of Deutsche Bank. Please go ahead. Your line is open. Yes. Thanks for taking my question. Jason, I just want to follow-up on the comments you made with respect to the selling season. Kind of sounded like you're kind of about where you want to be, but maybe could you just elaborate maybe a little bit on the tone of those conversations as they maybe relate to the different types of contracts you can sign and the different models? For example, are you expecting more visit fee only as we head into 2019 or less? Or what sort of trend changes should we expect? Yes. So, I feel very good about where we are in the selling season. I like the size and volume of opportunities that we're seeing. Mostly to be perfectly honest, I'm excited about the scope of the opportunities that we're seeing and the opportunity for us to bring multiple products to bear for our clients. That's especially true in the health plan space where they tend to be big bites. And then with respect to the fee structure, I think it's all over the board. The good news is that we have a lot of experience now and data that enables us to align our incentives with our clients. And we're seeing all different types of discussions, all of which meet our sort of financial hurdles with respect to pricing. Okay. Thank you. Yes, absolutely. Your next question comes from the line of Stephen Wardell of Tardan Capital Markets. Please go ahead. Your line is open. Hey, guys. Congrats on the quarter. Thanks, Steve. So can you tell us a little more about international? You cited some progress internationally. What would you say are your top countries? And how would contracts how would go to market approaches and contracts differ there? So we're strongest internationally in Canada, the UK and Australia, New Zealand. We have some other pockets where we have pockets of strength like the Netherlands for example. The go to market strategy in those markets is really in partnership with large financial services organizations and insurance companies. And we've been very successful, but really with historically somewhat limited product portfolio. So it's been really focused on experts' second opinion. In Canada, we've done more innovation into behavioral health and specialty pharma and that has borne fruit for us. So we're excited about what we're hearing from our clients in all those markets is interest in expanding the product portfolio to more closely match what we have in the U. S, which is the full continuum of services ranging from general medical all the way up to expert second opinion. So we are actively looking at how we approach that and how we deliver a more fulsome product portfolio. Great. Thank you. Our last question comes from the line of Richard Close of Canaccord Genuity. Please go ahead. Your line is open. Great. Thanks for the follow-up. Mark, I'm just curious, you've outperformed in Q1. The guidance for the Q2 is ahead of our expectations, I believe consensus as well. Can you walk us through the process of maybe not raising the annual guidance? Sure. We just finished the quarter. We haven't even had the opportunity to look at the month of April. We'll feel much more comfortable after we've closed out 6 months, potentially July also, so 7. So when we speak to you again in August with the 1st 6 months results, that's when we'll assess the opportunity to increase the range. But we've got a nice range there now. If we're heading towards the higher end, we'll let you know. And if we need to raise that, we'll let you know as well. As you know, it's common for us not to see much significant movement in Q2 and Q3, but if we've got visibility into what's looking like it's going to come together as a strong Q4, we'll obviously attend to the raise in August. Okay. Thank you. Sure. This concludes today's conference call. You may now disconnect.