Welcome to Teladoc's Fourth Quarter 2019 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 managements’ prepared remarks. [Operator Instructions] It is now my pleasure to turn the floor over to Patrick Feeley, Vice President of Investor Relations. You may begin.

Thank you, and good afternoon. Today, after the market closed, we issued a press release announcing our fourth quarter and full year 2019 financial results. This press release is available in the Investor Relations section of the teladochealth.com website. On this call to discuss the results are Jason Gorevic, our Chief Executive Officer; and Mala Murthy, our Chief Financial Officer. During this call, we will also provide our first quarter and full year 2020 outlook and our prepared remarks will be followed by a question-and-answer session. Please note that we will be discussing certain non-GAAP financial measures that we believe are important in evaluating Teladoc Health's performance. Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliations thereof can be found in the press release that is posted on our website. Also, please note that certain statements made during this call will be forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause the actual results for Teladoc Health to differ materially from those expressed or implied on this call. For additional information, please refer to our cautionary statement in our press release and our filings with the SEC, all of which are available on our website. I'll now turn the call over to Jason.

Thanks Patrick. It’s great to have you on board. And thank you to everyone for joining us this afternoon. 2019 was an important year for Teladoc Health. And today, we're reporting record performance as the robust growth trajectory we experienced in the first three quarters continued through the fourth quarter. The benefit of our diversified growth strategies across multiple channels continues to pay off, enabling us to meet or exceed our expectations across key metrics in 2019. And it gives us great confidence in our ability to deliver even stronger results in 2020. You see that confidence reflected in the guidance that we issued this afternoon, which we'll discuss later in our remarks. We ended 2019 with 36.7 million U.S. paid members, adding another 1.8 million members in the fourth quarter. This brings our total to approximately 14 million new paid members in 2019, the largest number of new member adds in company history, representing a 61% growth rate over 2018. Visit fee only access increased to 19.3 million individuals at year-end, more than double the prior year. The pace of new client wins and expansions reflects how our competitive and comprehensive virtual offerings are resonating in the marketplace. Visit growth was a highlight again in the fourth quarter, with total visits growing 44% over the prior year's fourth quarter, resulting in over 4.1 million visits for the full year 2019. We continued to see accelerating adoption across specialties as our clients are increasingly embracing our engagement strategies. This is particularly evident among our largest clients with multiple products as our diversified product offering help drive over 50% visit growth from our top 10 clients versus the prior year's fourth quarter. Visit volume is also impacted by the flu season, although the flu is not as meaningful to our overall…

Thank you, Jason and good afternoon everyone. I would like to echo Jason's comments regarding the broad based momentum that the business is experiencing and we are very pleased with the 2019 performance. I will now review the fourth quarter and the full year at a more granular level. Total revenue increased 27% to $156.5 million in the fourth quarter, that revenue growth was entirely organic, but for the small impact of the Medicine Direct acquisition. For the full year of 2019, total revenue increased 32% to $553.3 million or 24% on an organic basis. We continue to see a stronger U.S. dollar versus the prior year resulting in an FX adjusted revenue growth approximately 96 basis points above our reported full year revenue growth. Global subscription access fee revenue for the quarter of $127 million, grew 24% versus the prior year and accounted for 81% of our consolidated revenue, with visit fee revenue comprising the remaining 19%. U.S. subscription access fee revenue of $98.1 million, grew 25% in the quarter versus last year and international subscription revenue grew 19% to $28.9 million, demonstrating accelerating momentum as we exited the year. Visit fee revenue for the quarter increased to $29.5 million representing growth or 47% over the prior year. Of which revenue from individuals with visit fee only access was $8 million in the quarter representing 112% growth versus the prior year. Turning to membership and access, as Jason highlighted, U.S. paid membership increased this quarter to 36.7 million members up 61% versus the prior year, reflecting the increased adoption of virtual care and demand for our comprehensive service offering. As a reminder, the U.S. paid membership includes only members associated with a PMPM and does not include individuals with visit fee only access. Individuals with visit fee only access…

Thanks, Mala. 2019 was an important year for Teladoc Health. As we delivered on our commitments and exceeded our expectations across our key metrics. I’d like to thank the team around the world for their commitment to our mission and contributions to another successful year. Our diverse range of product offerings and capabilities continues to expand and are resonating with our clients as they see the unique value that Teladoc Health provides to them and their constituents. We see the pace of virtual care adoption accelerating and we’re well positioned to satisfy the increasing needs of the marketplace. We look forward to 2020 and beyond and are confident in our ability to continue to positively impact the way healthcare is delivered. We also hope you’ll have the opportunity to join us on March 5 in New York for our Investor Day, where you will be able to hear from more of our leadership team as well as see the InTouch Health product offering up close, which will help to demonstrate why we are so excited about this combined opportunity. Before I turn the call over for Q&A, I’d like to take a moment to welcome Cathy Jacobson to our board of directors. Cathy is currently President and CEO of Froedtert Health, a Milwaukee based integrated delivery system. She brings deep insight into the strategic priorities of health systems at a time when virtual care is becoming a key area of focus for these organizations and we’re very pleased to have her join us. As always, thank you all for your continued interest in the Teladoc Health story. Since we’ll be seeing you all next week at Investor Day, we’d like to limit everyone to one question today please. And with that we’ll open the call for questions. Operator?

[Operator Instructions] Our first question is from Lisa Gill with J.P. Morgan. Your line is open.

Thanks very much. Congratulations on a great year, Jason, and the outlook for 2020. I’m surprised in your prepared comments, you didn’t talk at all about coronavirus. I know that the CDC has made comments around the expectation for incremental use of telehealth type services, as people are potentially afraid of being contaminated with others in health care facilities. So can you maybe just start there as to the impact that you would expect to see and then as you think about half of those new customers coming into the system being new to Teladoc. I remember last year, it was kind of something similar as well. What’s the pull-through that you continue to see, like, you’re new, but do they continue to come back again? Just how do we think about those two elements as we think about new people coming onto the platform?

Thanks, Lisa. I’m not surprised in your first question. Clearly, we’ve been closely tracking the coronavirus outbreak from the beginning. Our clinical teams, which are comprised of thousands of physicians around the world have been actively working alongside of our commercial teams and our clients to ensure that our members have the most timely and relevant access to the latest information regarding this unfolding situation and the access to care, if and when they need it. Yesterday’s comments from the U.S. health officials, obviously, signal a potentially significant milestone in the progression of the outbreak. That having been said, there are still several potential scenarios. And at this point, it’s still too early to be able to quantify the impact that the outbreak could have on our business. Our top priority right now is to take care of those people, who are potentially affected, spanning both care providers and individuals around the world. As I said, I’m not surprised by your question and so Mala and I asked our Chief Medical Officer, Dr. Lewis Levy to join us for the Q&A. Maybe Lewis, you can provide just a little bit more perspective on the coronavirus and our role.

Thanks, Jason. As you mentioned, our clinical teams are focused on meeting the healthcare needs of our members in a potential outbreak with the same accessible high quality care they have come to expect from Teladoc Health. As a result of our longstanding clinical quality leadership, there are three key areas, which I’d really like to highlight, where I believe we are uniquely positioned to make a meaningful contribution to already ongoing public health efforts. First, ensuring best practice for virtual care visits for patients, who think they may have been exposed to the COVID-19. All of our global medical directors have provided their teams with the most up-to-date information regarding the appropriate way to evaluate and treat patients at potential risk for this virus. Secondly, we are enabling health systems to provide virtual care at greater scale through the technology and capabilities of both the Teladoc Health, as well as the InTouch Health platform. And thirdly, the last point I’d like to raise is that in the U.S. specifically, we have been actively partnering with the CDC for several weeks now, led by our clinical quality leadership team, we are equipped to provide near real-time disease surveillance data as well as proliferate disease specific clinical practice guidelines.

So Lisa, I think you’ll see us continue to play an active role here depending on which one of those scenarios plays out. I expect that we’ll talk more about this next week at our Investor Day. And then just to answer the second half of your question, we do benefit when we have a severe flu season by bringing new people into becoming active users. The activating new users feeds the flywheel that drives visit growth over time. As we saw last year, each user used the Teladoc Health platform about 1.5 times. And Stephany will shed more on the effect that this flywheel has next week at our Investor Day.

Great. See you next week. Thank you.

Thanks Lisa.

Your next question is from Sean Wieland with Piper Sandler. Your line is open.

Thanks very much. So beyond the cross-sell opportunity with InTouch, can you speak a little bit about the integration of the assets and the capabilities, if you had a Venn – if we could draw a Venn diagram what that would look like, in particular the telestroke market and the behavioral. How does that fit in with your business? And also they’ve got a very strong network backbone. And I wanted to get an understanding of what your thinking is with that.

Yes. Thanks, Sean. There is very little overlap between the two companies’ product portfolios and the services that we provide. Essentially, they are providing software, hardware and the technology network as well as in some cases, the clinical resources for high acuity situations primarily in the hospital. And as you know, Teladoc Health provide software and a platform that enables the hospitals to extend out into the community. And so there is very little overlap. There’s a little bit of overlap for scheduled visits that are done primarily on a provider to provider basis using the InTouch platform, but that is a tiny fraction of the overall use cases. And so I do see a significant opportunity for integration so that the providers, the physicians who are operating on the platform have a single unified interface and the consumers who are receiving care have a single unified interface, regardless of what the services that they’re receiving. And then lastly, when you put the two companies together, you get this really tremendous network effect relative to the physician populations of our collective clients. And by enabling that entire population on the InTouch Health technology network, that really allows for the extension of the provider capacity to the entire client base. So think we’re very, very excited and as I said in my prepared remarks, the teams are actively engaged with each other doing integration planning around all of those areas.

Your next question is from Ryan Daniels with William Blair. Your line is open.

Hey, guys. This is Nick Spiekhout in for Ryan. Thanks for taking my questions. I guess, to start off, it might be a little bit early to tell, but I was curious how kind of utilization trends and activation engagement are tracking for the new United lives so far?

Yes. Thanks, Nick. We’re pleased with the progress we’ve made with the United. Our marketing teams are working very well together. We really kicked off the bulk of our activation efforts in the first quarter. So it was a relatively slow ramp through the fourth quarter. We saw a little bit of a benefit from the United business in the fourth quarter, but it rapidly accelerates as we head into 2020. It’s part of what gives us confidence around our 2020 guidance. And we’re seeing activation occur very strongly as the two marketing teams really work together. And having said that, we’re still at the early stages of that. So I think that’s only going to improve and gain velocity.

Your next question is from Matthew Gillmor with Baird. Your line is open.

Hey, thanks for the question. Wanted to ask about BetterHelp, I think Jason mentioned it’s continuing to outperform and hoping to get some details around that. Is that due to more new signups or are the members on BetterHelp just staying longer on a platform so that the turns lower?

Fortunately, Matt, the answer is both. We’re seeing all three of the key metrics continue to improve, meaning customer acquisition costs continues to come down. Duration of a member or stickiness, so to speak, continues to extend. And therefore, lifetime value of each member continues to improve. So we continue to see that business growing at an incredibly robust pace. And don’t see any end in sight for that.

Your next question is from Jamie Stockton with Wells Fargo. Your line is open.

Thanks for taking my question. I guess, maybe I’ll ask one on the member growth. It seems like you guys saw, more ads there in the fourth quarter than you had originally expected. Just any color on type of customer that was incrementally going live? Is that the MA lives? Or just anything on that front would be great.

Yes, it’s – thanks Jamie. It’s primarily health plan members but across multiple lines of business, both the government programs as well as commercial lives. We did see some sort of early ads if you will from employers who came on in the fourth quarter rather than waiting for January 1. But the predominant population was health plan lives.

Okay. Thank you.

Your next question is from Sean Dodge with RBC Capital Markets. Your line is open.

Hi, this is Thomas Keller on for Sean. Just a question on Virtual First, you all to help launch just kind of the first iteration of this a little over a year ago with the self-insured payer. Can you share any data or any sort of antidotes on how that’s sort of progressed over 2019? And then as you continue to have these conversations with other payers, can you give us a sense of the kind of traction around that concept?

Yes. So I would call Virtual First kind of a capability or a plan design and what we’ve seen is that that is rapidly evolving into a Virtual Primary Care sort of full capability. So you’re now seeing and I’m sure you’ve seen some of the big payers roll out plan designs that encourage virtual care as the first stop for the member. I think when we look at the broader set of capabilities and the bigger trends in the market and we’ll talk about this next week. We really see Virtual Primary Care as stepping forward as a consumer facing capability that looks to truly reimagine how consumers access primary care and think about consuming healthcare overall. And given the broad set of our capabilities and the consumer friendly interface and access, we think that we’re uniquely positioned for that. So I think you’ll see a Virtual First plan design combined with a Virtual Primary Care capability coming from us that both, where we deliver that as well as enable providers in the market to deliver it as well really transforming how consumers get care.

Your next question is from Charles Rhyee with Cowen. Your line is open.

Yes. Thanks for taking the question. Wanted to ask about sort of the – what you’ve kind of seen so far with in Medicare advantage. I guess, in particular, how saturated – maybe that’s not the right word. What percent of plans do you get a sense in the market are starting offer these additional telehealth benefits for their members. And then I guess, particularly to your soft of the 15 MA clients that you have. Can you kind of speak to sort of the marketing push that they are using to encourage their members to turn to telehealth for services? Or do you see that really driving more from the provider side?

Yes. So Charles, I appreciate the question. I think what we said in the prepared remarks was more than 15 clients and more than a million members. And what we’ve always said is this is going to be a multi year phase-in. Our best guests going into this year was a three year rollout. I still feel pretty good about that. We may not get to 100% of MA by the end of three years, but I think we’ll get pretty close, certainly north of 80%. And this is – thus far, not really a provider driven initiative. The reimbursement becomes tricky for a provider, because they don’t generally differentiate what they deliver to a consumer based on the payment mechanism. So they don't deliver different services to an MA member than they would to a Medicare fee-for-service member and Medicare fee-for-service that still doesn't pay. So it is really a plan-driven initiative and we're working with our MA plans almost identically to how we work with our commercial plans, but for the nuances of how we reach the consumer, what the messaging is to the consumer. And of course, the sort of overall integration with the plan from a regulatory perspective. So I would call it, from a marketing perspective, this is much more sort of the plan taking advantage of our activation capabilities.

Your next question is from Donald Hooker with KeyBanc. Your line is open.

Great. Good afternoon. Wanted to ask a question on the InTouch acquisition, I know you're not willing to provide forward-looking guidance on that, but just want to maybe a little bit of clarity, kind of looking back. You've mentioned that I think InTouch had about $80 million of revenues in 2019. So just to confirm that and that revenue growth was up, I think north of 30% year-over-year. Now that revenue growth up 30%, I would believe include some acquisitions and maybe some large one-time deals or does it, I mean, can you maybe help us understand that sort of looking back growth that you – at InTouch Health, how much of that’s like normalized or organic?

So we will give more detailed guidance upon close. What I would say is we are pleased with the momentum of the business. As Jason mentioned in his prepared remarks, we are working pretty closely with them as we go through the integration planning phase, et cetera. What's important is that on both sides of the house, be it InTouch Health or Teladoc Health, we are laser focused on each of our own businesses through this integration period. So that’d be keep up the momentum we have. That's all we'll say for now. And we'll give you much more detailed guidance at the end of Q2.

Your next question is from George Hill with Deutsche Bank. Your line is open.

Good afternoon guys and thanks for taking the question. Jason, I was hoping to revisit the Medicare advantage topic a little bit more. You mentioned that more than 15 clients in the more than 1 million plus members. I guess, can you talk about kind of the broader selling environment, can you maybe – win rate or how many RFPs you've seen in MA? I know it's a little early to talk about utilization in the book. And I imagine this is going to be one of the targets for a chronic care delivery model. As you guys think about the engagement strategy. I know we touched on it a bit, but just kind of thinking of those topics. Would love any more color you'd put around the MA opportunity?

Yes. Thanks George. I understand your interest there. We haven't – and generally don't break down win rates or RFP volume by sort of sub-sector of the market. I think we'll continue that. I will say that we have a very robust continuing pipeline in that area. And as I think I said, last quarter, we expect the MA plans to roll out over the course of the year. Many filed for it and have a sort of place marker for it in their bids to CMS and haven't yet rolled it out into the market. So I think you're going to see that that continues to roll out and expand over the course of the year. This was not a one and done sort of big bang January 1 season for that.

Your next question is from Matt Hewitt with Craig-Hallum Capital. Your line is open.

Good afternoon and thanks for taking the question. Just to follow-up on coronavirus, I'm curious if you have factored any tailwind from that into your guidance. And I guess, it kind of tangentially, you mentioned that you've been in close contact with the U.S. regulators, the CDC. Have you also had contacts with international agencies? Thank you.

So let me take the first part then turn it to Jason. We have not included the impact of that in our forward-looking guidance as Jason mentioned and alluded as well. It's too early for us to know which scenarios will transpire. And so for now, we have not included in our forward-looking guidance.

And we have been in touch with a number of the international agencies. Specifically, we've been in touch with the WHO and as Lew mentioned, we have a global network of medical directors who have been actively involved locally in their markets. So, this is a situation where our global presence really enables us to work collaboratively amongst ourselves. And so as our U.S. team interacts, for example with the CDC, we're able to proliferate that information around the world and similarly gathered the information from the WHO or from local health authorities in market. As you know, we have a presence in China and have for some time. And so, that gives us the ability to have information flow to and from that market and to the rest of our clinical network.

Your next question is from Kevin Caliendo with UBS. Your line is open.

Thanks for the question. This is Adam Noble on for Kevin. Just wanted to ask around the PMPM rate, obviously the 4Q number heavily impacted by the United implementation. Just any thoughts on how PMPM should look next year? Should there be a more typical seasonal ramp throughout the year or does the UNH implementation and some of your other contracts, could that dampen it somewhat?

Yes, thanks for the question. Absent the impact of the large population onboarding, we expect to see PMPM continue to grow in 2020. And what I would say is, we have typically again talked about PMPM growing in the expanding in the $0.05 to $0.10 range. And I would continue to expect PMPM to grow in that range. Again, normalize for the impact of the large onboarding of populations.

Your next question is from Allen Lutz with Bank of America Merrill Lynch. Your line is open.

Thanks for taking the questions. On behavioral health, can you talk about the demand on the B2B side and then how much is that contributing to multi-product bookings?

Yes. So it's our strongest driver of multi-product bookings. There's significant demand, we saw both demand from a B2B client perspective, as well as behavioral health visits coming through that channel increased substantially in 2019. And we would expect to continue to see that into 2020. And multi-product bookings has been a significant driver of our revenue growth, if 50% of our 2019 bookings were multi-product bookings and multi-product sales were on average 50% larger than single product sales. So, and again, behavioral health is the single biggest driver of that.

Your next question is from Jonathan Young with Barclays. Your line is open.

Hey, thanks for the question. Just on the member guidance. I’m curious, so the new members that you're adding, are they single products, largely multi-products, do you have full marketing capability to these members? Just any color there would be helpful. Thanks.

Yes, so about 50% of our bookings were multi-product for 2019. And we're – a long time ago, many years ago when we were sort of scraping for any business that we could get, we would say, yes to a deal where we weren't able to actively market or collaborate for the marketing with our clients. We generally walk away from those now just there's not, it's not worth it for us to go through the implementation in the event that there's not a real activation strategy. And to be honest, most of our clients engage with us and are willing to pay a higher price because of our engagement capabilities because it drives more value and return on investment for them.

Your next question is from David Windley with Jefferies. Your line is open.

Hi, thanks for taking my question. Kind of a related question, your member add guidance is quite attractive on the paid U.S. side. Your visit fee only lives relatively flat. Is that now a reflection that your pipeline, your potential customers are kind of fully bought in on the PMPM model. And those are the kind of exclusively the discussions you're having these days or is it perhaps idiosyncratic to the particular pipeline at this point in time?

Yes, it's a good insight. I would flip it around a little bit and say the visit fee only clients are anomalous. So they're just – each one of the handful of them is a unique, very large client and therefore not representative of the overall trends. Conversely, your statement is exactly right, which is, our clients understand the value that we provide and what the PMPM goes to pay for and the results that it yields. And so we continue to see a strong demand for that revenue model and pricing model. And if I look, I can't ever say anything with absolute 100% but I can't think of a single case in our pipeline. That's a visit fee only case.

Your next question is from Jailendra Singh with Credit Suisse. Your line is open.

Thanks. As you guys talked about some – making some significant investments in 2020. Can you elaborate more on that? Are there any particular areas you are primarily focused on in 2020 and how should we think about the impact on your long-term EBITDA margin target of getting 20%, any color on that?

Yes. So we've given you EBITDA guidance for the full year of 2020, we’ve given you revenue guidance. As you can see Jailendra, based on the guidance we have given. We are expecting a continued expansion of adjusted EBITDA margins in 2020. We had that in 2019 as well for the full year of 250 basis points. We're expecting 350 basis points in 2020. It's on the back of revenue growth as well as nice operating leverage that we expect. But we will continue to invest in our business, as we said. The investments, we will talk more about in our Investor Day next week. But if I were to give you just a few quick highlights of how to think about it, from an A&M and a marketing spend standpoint, you should continue to see that keep pace with revenue growth. And it will be invested in the kinds of things that we do today in customer acquisition, in our membership marketing engine that we have. We will expect to get efficient as we spend it. We are getting smarter in terms of how we manage our channel mix, et cetera. So you should continue to see that. We will continue to make judiciously the technology investments that we need to make. And so we will talk a little bit more about that in terms of our longer term. Again, we'll speak more to that as we come on to Investor Day. So stay tuned.

And our last question comes from Brian Hoffman with Canaccord Genuity. Your line is open.

Hey, thanks for taking my question. This is Brian on for Richard Close. Can you give us an update on your relationship with CVS? How many states are you in now? How has the uptake and visit volume been in those states? And any other commentary you may have on how that rollout is progressing would be great. Thank you.

Sure. Brian. The relationship with CVS on both sides of the house is excellent. I personally spend quite a bit of time with them and we're working on some really exciting strategic opportunities. The growth has continued every month in terms of visit volume and the trajectory is very strong, although, still on the small side. So I don't want to get over my skis in terms of impact and expectations but we're very pleased with their trajectory that that's on. We're currently in 39 states plus D.C. with them. And we look forward to the continued rollout to all 50 states.

Ladies and gentlemen, this does conclude the Q&A and today's conference call. We do thank you for your participation. And at this time, you may now disconnect.