Ladies and gentlemen, thank you for standing by, and welcome to the Teladoc Health Fourth Quarter 2020 Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to Mr. Patrick Feeley, Vice President of Investor Relations. Please go ahead.

Thank you, and good afternoon. Today after the market closed, we issued a press release announcing our fourth quarter and full year 2020 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 2021 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 would now like to turn the call over to Jason.

Thanks, Patrick, and thank you everyone for joining us this afternoon. 2020 was a transformational year for Teladoc Health and for the role of virtual care within the broader health care industry. We delivered needed health care to millions of consumers in the midst of the coronavirus pandemic and completed two significant acquisitions that together, under Teladoc Health, are defining a new category of whole person virtual care. Taken together, we dramatically accelerated our mission to empower all people everywhere to live their healthiest lives by transforming the health care experience. We delivered over $1 billion in revenue for the year, provided over 10.5 million virtual visits. And our license platform solution enabled an additional 3.9 million visits for our clients’ own clinicians pro forma for InTouch. We onboarded a record 15 million new paid members in 2020. And over the last 18 months, we’ve added 25 million paid members and 11 million members with VFO access, a remarkable result. During the fourth quarter, we saw broad-based strength across our business, which drove revenue of $383 million, an increase of 145% over the prior year, and organic growth of 79%, excluding the additions of InTouch Health and Livongo. The strength across our channels, products and geographies, combined with a robust pipeline of new opportunities gives us tremendous confidence in the near-term and the long-term outlook for the business. As we enter a new year, we have never been better positioned to meet the increasingly sophisticated expectations of consumers, clients and providers. We are heartened by the progress that has been made in delivery of the coronavirus vaccines and expect some return to normalcy, coupled with strong continued demand for virtual care, well exceeding pre-pandemic levels. The strategic investments we made during 2020 to expand the breadth and depth of our…

Thank you, Jason, and good afternoon, everyone. Before I get into the details of the results, I would like to note that following the close of the Livongo transaction, we are streamlining some of our reported metrics. Our revenue disclosure will continue to be broken out between access fee revenue, visit fee revenue and other revenue. Each of those revenue buckets is further broken out into U.S. and international. Our visit volume metrics are aligned with our revenue disclosure, including both U.S. and international visit volumes, which is aligned with how we manage the business. We are also adding a new metric, Chronic Care Enrollment, which captures the total unique individuals enrolled in the Livongo suite of chronic care programs. This metric is based on a count of total unique members, so members utilizing multiple solutions are only counted once. Turning to fourth quarter results. Total revenue increased 145% to $383 million or 79% on an organic basis. U.S. access fee revenue for the quarter was $283 million, representing growth of 188% over the prior year’s quarter. Total international revenue of $34 million grew 16% versus the prior year. Visit fee revenue for the fourth quarter increased 80% year-over-year to $53 million, and comprised 14% of total revenue as compared to 19% of revenue in the prior year’s quarter. The decrease in visit fee revenue as a percent of total revenue is due to the acquisitions of Livongo and InTouch Health, both of which generate a significant majority of revenue from subscription access fees. Turning to membership and access. We ended the quarter with U.S. paid membership of 51.8 million members, an increase of 41% year-over-year. Individuals with visit fee only access was 21.3 million at the end of the fourth quarter. Total chronic care enrollment, which includes individuals enrolled…

Thanks, Mala. In closing, I want to thank the entire Teladoc team for their amazing commitment to serving our clients and members around the world during a challenging year. Over the past 12 months, we’ve seen a monumental change in consumer expectations for the way they access and experience health care as virtual care has firmly entered the mainstream. As a company, we’ve responded by significantly expanding our capabilities to meet the rising demands of clients and consumers around the world while extending our leadership position by delivering, enabling and empowering virtual care. As always, thank you all for your continued interest in Teladoc Health. And with that, we’ll open the call for questions. Operator?

[Operator Instructions] First question comes from Lisa Gill with JP Morgan.

Thanks very much. Congratulations on a great year, Jason. I just really want to understand just a couple of really quick things. You gave us so much information. Thank you to you, Mala. But, the first would just be around U.S. paid members, retention rates, competition in the marketplace. I know I usually ask about the selling season, but I know it’s a little early for that right now. But, just really want to understand how you’re thinking about the competitive market right now around what you saw on the retention side, because you clearly added a lot of new business. And then, secondly, you did talk about dozens of cross-sell, Livongo pieces of business in 2021 that are included in 2021. Is there any way to quantify that so we can start to think about reaching that $0.5 billion goal that you set when you made the transaction?

Yes. Thanks, Lisa. Let me start with retention rates and the competitive landscape. And then, I’ll talk a little bit about the cross-selling situation. With respect to retention rates, they continue to be at high levels, consistent with historic levels, which have always been in sort of the low to mid-90s. We can continue to see that. And in fact, what we’re seeing is the pipeline is growing actually faster than we’ve seen in previous years. When I look at our membership opportunities, sort of the growth opportunities in our pipeline, the membership opportunity is up over 50% relative to the same time last year. And I think that that’s really indicative of the market and clients recognizing the value of the full solution that we have and the unique position that we occupy. And I’ve had a number of large client discussions over the last several weeks as we start to move into this selling season and we start to talk about the opportunity of the full credit answer sort of that full solution across all of our product portfolio, and it is truly differentiated. So, I was just talking to a regional blue plan who I believe we will take away from a competitor who has a much narrower set of products and can’t compete in the evolving landscape and sort of the new paradigm that we’ve created. With respect to the cross-selling what I think we said is over a dozen cross sales. Those will roll on over the course of 2021. And I would say, we’ll have some impact on the back half of the year, but relatively small in the back half of this year. What we’re really looking at is impact on 2022. And we still feel very good, in fact, better than we’ve ever felt before about the prospects for our revenue synergies. Just sort of characterizing the cross-sell opportunities, we look at the pipeline today versus the pipeline just sort of the middle of last quarter. And remember, we started commercial collaboration long before we closed the Livongo transaction. And we’ve more than doubled the pipeline of cross-sell opportunities. So, I feel very, very good about it. We’ve taken, I would say, a relatively conservative view of the contribution from the revenue synergies in 2021 and believe that those will materialize much more significantly in ‘22 and beyond.

Next question comes from Sandy Draper with Truist Securities.

Thanks very much. I would also echo congratulations on a very strong year. Jason, from a high level, one of the things I know we used to talk about is you were really focused on the higher visit fee -- or higher visit growth than access fee growth because back this is pre-COVID, you are really showing the power of your ability to drive utilization and show the value of the platform. Post-COVID, I’m just wondering when you think longer-term is really because you ship post-COVID plus the diversity of the model, is it really more about excess de-growth and that will grow faster than membership? I’m just trying to think about how you think and maybe Mala chime in as well, thinking about that growth dynamic because it clearly decoupled with COVID, but would love to just get your thoughts on driving new business and the growth. Is it around the visit volume versus the access fee? Thanks.

Yes. No, I appreciate the question. And it’s a complicated question, right? Because I think visit volume will continue to grow at a more rapid rate than membership will. But, I think, what you’re going to see with the significantly increased sort of per member subscription fees that we get with the Livongo business. You’re going to see the revenue grow faster on the subscription access fees, right? So, there’s a little bit of a mix there. I think, one of the things that I would look at and makes me really bullish on the future of our continued visit volume growth is the fact that this year, we saw visits grow 140% year-over-year, in spite of the fact that infectious disease visits decreased by 17%. So, we have this situation where people are coming to us for a much broader array of reasons. We’re seeing our mental health visits increase dramatically, over 500% through our B2B channel, for example, dermatology, similarly. And yet, we’re facing a historically low flu season because of social distancing and mask wearing. We’ve taken that into account in the guidance that we gave for 2021, and we’re even contemplating it as we look into the first half of ‘22, and because I think it’s really not until the back half of ‘22 that you’re going to see us return to a more sort of normalized flu -- cold and flu season. So, all of that’s taken into consideration as we think about the long-term growth. So, hopefully, that clarifies a little bit, right? Visit volume grows faster than membership and yet subscription access fees are likely to grow faster than visit fees.

Yes. And Sandy, it’s a great question. What I would add is, if you think about the growth of both of those revenues, just to reinforce what I said in our prepared remarks in terms of why do we have confidence in the growth of both access fee revenue and visit revenue, it’s sort of a few different factors, right? One is on the access fee growth, to Jason’s point around, it is a much bigger base with the addition of Livongo and InTouch most of those feed are access fee revenue, as we’ve talked about. And so, the growth there is going to be driven by our strong pipeline of multiproduct sales. We’ve talked about our growth in specialties, continued growth in our chronic condition programs, and then the growth in ATS [ph] and InTouch and our license platform solution, all of that is going to feed our access fee revenue growth. And then, to the point that Jason made around what’s driving visit revenue, it will really be the gains we continue to make in utilization. You saw from our results, we saw a very strong increase in utilization in the fourth quarter, over 800 points relative to fourth quarter of 2019, and sequentially, much over 100 points in relation to the -- with respect to the third quarter. So, we will continue to drive growth and utilization, and that will obviously feed visit revenue growth. The growth in utilization is on the back of the significant increase in growth that we are seeing in noninfectious diseases. It was about 75% of our visit volume mix in the fourth quarter. So, we’re seeing strong growth there. We’ve talked about the growth that we are seeing in specialty, whether it be mental health, would be derm, so that is going to continue to drive the utilization. So, all of those factors is what is underpinning our confidence in both, the access fee revenue growth as well as the visit revenue growth.

Next question comes from Sean Wieland with Piper Sandler.

Hi. Thanks so much. And I guess, a follow-up to Sandy, just to go a little bit deeper. So clearly, membership growth is moderating in the outlook. And I’d just like to know, is that a factor of overall market penetration of virtual care, do you think that there’s opportunities longer-term to continue to grow membership? And then, related to that, you called out, Mala, new registrations. What percent of members today are registered numbers?

So, let me speak first, Sean, to the question of membership growth. We added 15 million members last year and 25 million members in the last two years. That’s a staggering number. And I think, what gives me confidence in the continued membership growth is what I mentioned earlier, which is that if you look at our growth pipeline, the membership growth opportunity is actually 50% larger than it was at this time last year. It’s just that the -- those are earlier in the selling process, right? So, we’ve had to sort of refill the pipeline, if you will, after just an explosive year last year. And so, we take a relatively conservative view of the membership growth, given the earlier stage and yet the growth opportunity is 50% larger than it was at this time last year. So I think that gives me significant confidence over the longer term. We still have 65 million members worth of white space within existing clients. So, I feel very, very good about continued membership growth. And we look at it over sort of a multiyear, not a quarter-by-quarter question.

Yes. And to your second question, Sean, we, as you know, do not break out what you asked. We have given you a lot of information. As was pointed out earlier in the call, we don’t give you every piece of information. So, that’s not something we’ve broken out.

We have talked, as you mentioned, about the increase in first-time registrants and how that contributes to our overall visit growth, not only in the year that they first time register, but also that that enters the flywheel and we get them repeat utilization, especially among multiple products.

Yes. And it’s important that registrations, as we have talked about, is running well ahead of membership addition growth, right? So, that is also important as we continue to drive utilization in ‘21.

Next question comes from Stephanie Davis with SVB Leerink.

Hey guys. I hear everyone else, congrats on the quarter, congrats on the guide.

Thank you, Stephanie.

Jason, you talked about a really strong international dynamic on your prepared remarks. I was hoping that you could talk a little bit more about maybe what pockets of geographies were you seeing the biggest strength, and how the competitive dynamics differ in that market?

Yes, absolutely. I’m really excited about our international products prospects. And we’re just starting to really hit our stride and activate the international channels for the InTouch solutions, and we’re seeing tremendous interest in the international markets for the Livongo products. And you know how large those opportunities are. So, with respect to the geographies, we’re seeing good growth in Europe, both on the continent as well as in the UK, where -- we continue to see the South American markets and especially Brazil as very exciting opportunities. The Brazilian market is characterized by a very tech-savvy population, and it’s a market where private health insurance is rather prevalent. Specifically in Europe, we launched with Telefónica and that continues to be a very, very strong relationship. We’re very bullish on the prospects for that relationship. And then, of course, we launched over the past year, in the Nordic region. So, right now, those are probably our primary growth areas. We continue to have a strong and steady footprint in Canada and Australia and New Zealand. And so, from my perspective, I’m very, very bullish there. I believe that unlocking some of those markets for the Livongo capabilities will be a game-changer in terms of the role of the international markets in our book of business.

Next question comes from Richard Close with Canaccord Genuity.

So, I was going to drill down on membership, but that’s been hammered on here. But, can we talk a little bit about primary care, Jason? And how you’re thinking about that? Obviously, the comments on the pilots were positive. How do we think about the business model for primary care? What metrics you’re focused in on there? And then, does it shift the revenue model more from an episodic type of payment to more recurring, or just overall, how does that model evolve?

Yes. I appreciate the question, Richard. We’re really excited about the prospects for Primary360. We have a very, very large and diverse pipeline of opportunities for that model. And it ranges, honestly, from higher PMPMs, plus a wider variety of visit fees because, of course, a 30-minute introductory visit with a new primary care relationship is going to be worth more than an annual check in or a symptomatic visit, for example. Having said that, we’re also talking to a number of health plans about putting in quality metrics and incorporating more value-based reimbursement associated with our ability to move the needle on quality of care. And I think that will start with small steps along the lines of documented improvement in screening -- rates of screening and appropriate preventative care and move toward more impactful outcomes-based measurement and ultimately the opportunity for us to enter into risk-sharing arrangements or share of savings arrangements with some of the payers. We’re already having those discussions, but we’re also very cognizant that we need to step carefully into that and make sure that we have the right data to be able to enter into those relationships with eyes wide open and know where we can make the biggest impact. So, I think you’ll see an evolution of that model, but in all of those cases, a significantly higher revenue per member for those who were serving with our Primary360 product.

Next question comes from Sean Dodge with RBC Capital Markets.

Maybe on the average PMPM, the sequential change there was pretty significant, even Mala, what you -- excluding the lift from the Livongo inclusion there. If we set Livongo aside, can you give us a sense of how much that was driven by multiproduct sales versus maybe something like the pricing or true-ups related to the visits included contracts?

Yes. So, what we’ve shared with you is, as you said, there was a pretty significant increase in the PMPM, as you saw $1.76 in the quarter compared to $1.18 sequentially, $0.91, so a very significant increase. The way I would think about it is a lot of it was because of the addition of Livongo, to be clear. But, even absent the addition of Livongo, we did see an expansion -- a nice expansion in our PMPM in the quarter. I don’t want to break it out more specifically on how much of it came from a rerating of our visits included contracts, which by the way, we have rerated through the year as we went through the visit volumes through the year. We’ve talked about that. And that definitely did happen. But there are a lot of -- so I don’t want to specifically break out the individual drivers, but what I will say is, even excluding the impact of Livongo for the two months of the quarter, we actually did see a nice expansion in PMPM as we went through the fourth quarter.

Next question comes from Daniel Grosslight with Citi.

I wanted to focus a little bit on Medicare, both on MA and fee-for-service. I think in the third quarter, you mentioned you had around 2.5 million MA lives aboard. And CMS mentioned, I think, that around 21 million beneficiaries for the plan year 2021 will have access to some type of telehealth benefits. So curious, if you can give us an update on the MA progress you’ve made during this past AEP. And then, on the fee-for-service side, there’s been some noise out of the Inspector General’s office about auditing some telehealth visits. And I don’t know, it seems like the regulatory landscape in fee-for-service might be a little more uncertain. So, curious to get your thought on that market in particular, which I suppose would go into your provider segment, and if the direct contracting within Medicare fee-for-service is going to have any impact on your strategy in that market?

Yes. I’ll take the second one first, and then, Mala can speak a little bit to the progress we’re making in terms of our Medicare membership. I continue to think that Medicare fee-for-service is primarily an opportunity for us with respect to our hospital and health systems business, as hospital and health systems continue to lean in harder to providing virtual care for their membership and being reimbursed by CMS. We continue to be very active in terms of working with CMS and various state legislators for that matter, on best practices when it comes to the regulatory environment. And we’re very optimistic, actually. We think that the winds are all blowing in the right direction. It’s a rare bipartisan issue. And we’re collaborative with respect to making sure that there are the right guardrails around it, because we think that it’s important to have best practices proliferate with respect to not only payment models, but also the best care being delivered and to make sure that the consumers needs as well as the payers’ needs, whether that’s the federal government or a private health plan are also being looked after. So, we’re very active on those fronts. We’re actually applying quite a bit of technology to that to be able to do things, like use artificial intelligence to validate that a clinical visit took place and things like that. So, I feel very good about the direction that that’s heading. We continue to make progress in the Medicare Advantage market. I don’t know that we gave numbers updated with respect to our Medicare Advantage population. We’ll continue to keep you apprised of that as we go through the quarters.

Yes. And the only other thing I would add is, as we’ve talked about the 15 million member addition in 2020, we have talked about how we’ve seen nice growth in government, whether that includes Medicare Advantage or Medicaid. So, it’s -- so think of it more as we are seeing strong growth and membership addition across government.

Maybe last thing I’d just mention is, we’re also seeing private Medicare, meaning Medicare populations from within large employers who come through the health plans. It’s a part of the market that frequently isn’t talked about, but we’re seeing growth in some of those populations where the health plans are coming to us for those populations as well.

Next question comes from Charles Rhyee with Cowen.

Just to follow up a little bit on Primary360 as it relates to membership guidance. Is it right to think that Primary360 members of that growth is a conversion of existing U.S. paid membership numbers, or would that be incremental within the membership growth? And then, secondly, on the utilization number, which was quite strong. I know you don’t give this number, but in the past, but can you give a sense on how much of those utilization is from repeat users versus bringing in first time users? Thanks.

Yes. So, I’ll take the Primary360 membership and then Mala can talk a little bit about repeat utilization and registrations, because I think really, it’s a question of new registrations. With respect to Primary360, the answer is actually both. So, in some cases, we’re going to existing clients to existing populations, and we’re making Primary360 available to them. And so, we wouldn’t newly count those members, right? They’re already in our membership count. In other cases, there are new populations where we’re going to them and making our services available for the first time, and the product that we’re bringing to bear for them, maybe Primary360. It may also be Primary360 and other products alongside of it. So, you may get some into our Primary360, driving that revenue, and then, other members may have other versions of the product, either on a sort of as-needed basis and/or they may have our chronic condition management programs. So, I think you’ll see it show up in different ways. What you can be confident though is we’re only going to count a member once.

Yes. And Charles, regarding your other question, we -- as you said, we don’t break it out, but I’ll just give you a few facts. The first is, if you think about our visit volume in the quarter, about half of it actually came from first time users. And as you know, that’s always really helpful as we think about driving future utilization, right? They try it once, and then they will repeat. So, that is something that is also a factor that underpins our confidence in driving utilization as we move forward. So, the fact that we are seeing registrations well outpaced membership registrations, the fact that about half of the volume came from first time users. And then, the only other thing I would say is, when we were at JP Morgan in January, we did talk about how we are seeing the flywheel dynamics fueling durable growth, and we did talk about repeat visits, showing very nice robust growth over the past few years. I don’t want to say more than that. But, I would sort of think about the half of our visit volume coming from first-time users in the fourth quarter.

And that’s true for the whole year. So, that was a trend. That was in the fourth quarter. That was true, and it was true for the whole year as well.

Next question comes from Jailendra Singh with Credit Suisse.

I just wanted to follow-up on BetterHelp, very strong trends there. Revenues in $300 million range, expected to grow 50% in 2021. With that business now becoming very sizable piece of your overall Company, I was wondering if you are willing to talk about margins on that business, how does that compare with overall corporate margins and long-term profitability opportunity there? On a related part, with several employers now expanding telebehavioral and mental health services, do you see that having any impact on your BetterHelp DTC side of the growth prospects?

So, let me answer about the market dynamics around BetterHelp and then Mala can talk to margins and performance. Yes, we really don’t. I think a couple of things, Jailendra. One, we’ve actually started taking BetterHelp into some B2B arrangements, in particular with respect to EAP plans, and that’s turned out to be a very fruitful market for us. The second thing I would say is, most people who are turning to BetterHelp either don’t have adequate coverage or decide that they don’t want to use that coverage, especially for reasons of expenses, honestly. One of the value propositions to BetterHelp is that for a month’s worth of therapy, you can get -- you can get therapy for a month, that would otherwise cost you in person about the same for a single visit or maybe a visit and a half, if you’re fortunate. And so, the value proposition is very, very strong. And it has always been the case and continues to be the case that many of the people who turn to BetterHelp wouldn’t have otherwise gotten therapy, right? And so, we continue to see that market be very, very sort of underpenetrated the opportunity, very significant. And so, we don’t see any slowing down of that in sight.

And from a margin standpoint, Jailendra, I am really pleased with the progression in margins that that aspect of our business has been making over the past few years. I obviously will not break out margins for any part of our business, but there has been really good progress in terms of margins. And it’s really on the back of a few things, right, just to give you a little bit of color on what’s driving the improvement in margins. We are seeing improvement in lifetime value. We are seeing improvement in retention and lower churn. We are definitely looking at constantly innovating when it comes to different channels. We do a lot of product improvements through the year. We test different pricings as we go through the year. So, there are a bunch of different levers that underpin the margin progression we are seeing. And I have to say, if you think about revenue vis-à-vis the cost of acquisition, which is something that we very, very keenly focused on, we’re seeing some very strong improvement in that. So overall, I’m pleased with the margin progression for BetterHelp.

Next question comes from Donald Hooker with KeyBanc.

So, I wanted to revisit the PMPM metric that you gave, ex Livongo, I guess, based on your comments model, it appears it was about $1.30 I think from your comments or somewhere in that neighborhood. That keeps marching up. Is there sort of a point in time where that sort of taps out? Just wanted to think ahead. That’s been kind of a driver for you over time? Is there sort of a full stack of your services where that sort of stops rising somewhere out in the future? Or maybe another way to ask the question, is there a particular client with a very, very high PMPM that you can sort of highlight?

If you think about our PMPM and the way I think about how that progresses, it really is about a couple of things. One is, we have actually shown case studies where as we sell multiple products and services, we actually see a market increase pre, post in PMPM, right? So, I would say the first is, it is about expanding our suite of products and services, which is what we have been doing over the past many years, right? We’ve been steadily expanding our suite of product and services. And then, the second thing I would say is, it’s also about expanding into products and services that are more longitudinal, not episodic because that drives stickiness, it drives expansion in PMPM. So, the way I think about it is, if I look at the progression of our business and where we -- what we have done and where we are headed. And as I think about the growth of the various pieces of our business that underpin the 40% to 43% growth that we talked about, I actually feel we have all the right ingredients to continue to expand the PMPM.

And this does conclude the call for today. You may now disconnect.