Good afternoon. Thank you for attending the Teladoc Health Q1 2024 Earnings Call. My name is Matt, and I'll be your moderator for today's call. [Operator Instructions] I would now like to pass the conference over to our host, Adam Vandervoort, Chief Legal Officer, Teladoc. Adam, please go ahead.

Thank you, and good afternoon. Today, after the market closed, we issued a press release announcing our first quarter 2024 financial results. This press release and the accompanying slide presentation are available in the Investor Relations section of the teladochealth.com website. On this call to discuss the results are Mala Murthy, our acting Chief Executive Officer and Chief Financial Officer; and Laizer Kornwasser, our President of Enterprise Growth and Global Markets. During this call, we will also discuss our 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 Mala.

Thank you, Adam, and thanks, everyone, for joining us today. Before we begin, I'd like to take a moment to reflect on the recent leadership changes at Teladoc Health. First off, on behalf of Teladoc's more than 5,000 employees, Board of Directors and executive leadership team, I would like to extend our deepest gratitude to Jason Gorevic for his accomplishments over the past 15 years. Jason leaves a tremendous legacy having firmly established Teladoc as the industry leader in whole person virtual care. As we mentioned in our February earnings call, Teladoc is in a time of transition. And as part of this evolution, the Board of Directors decided that it was time to look for a new leader for our company, someone to help us write the next chapter in our growth story. The Board's search for a successor is well underway, and our permanent CEO is expected to be named later this year. The Board has appointed me to serve as CEO while they conduct a search, and I'm honored to play this role for a company whose work I believe in so deeply. In the meantime, however, we are wasting no time in identifying and seizing opportunities to leverage our significant assets and capabilities. As an organization, our focus is on accelerating growth on both the top and bottom lines over the medium and longer term. And my focus as acting CEO is to ensure that our strategy continues to be supported by the appropriate level of investment, that our leadership team is executing on our priorities and that we are accelerating the pace of change and innovation across our business. With that, turning now to a review of our first quarter performance. I'm pleased to report a solid start to the year across the business, exceeding…

[Operator Instructions] First question is from the line of Stephanie Davis with Barclays.

Mala, thank you for wearing all of the hats right now. I was hoping you could talk a little bit about some early color on the international strategy and timing for BetterHelp. Can you talk to us about the rollout, how we should be thinking about the cadence of that? And maybe if -- have you seen some of that come through already, which is giving you that confidence in that second half growth rate?

Thank you, Stephanie. Yes, I'm wearing many hats, Happy to be here. So in terms of the growth in International, as we had said on our last call, last year, international as a percentage of our total BetterHelp business was in the mid-teens. It is certainly contributing to the second half ramp of revenue this year. Remember, this is -- it's not as if we are going into international de novo. We are already in a few markets. Several of them are English-speaking markets such as the U.K., Canada, Australia. And the plan we have is for us to continue penetrating into those markets first. And that is what is driving our confidence in the second half ramp because we have been in these markets, we know the dynamics of the BetterHelp business in this -- in these markets. Based on our experience, we have knowledge of the economics of being in these markets. Obviously, as we penetrate these markets and invest more in these markets, we hope to continue to see the return on ad spend as well as the revenue growth. So the balance of both top line growth and bottom line growth that I expect to see.

And for like any follow-up, is there any way to compare the kind of rollout you're seeing on those international markets where you're already in them versus what we're seeing in the U.S.?

Here's what I would say. I expect international to grow faster than the U.S. Certainly, that is something that we saw last year, and I do expect that to continue. From a rollout perspective, Stephanie, I would say we are going to start in the second half and roll out as we do our ad spending in these markets, as we go through the second half. The one thing I will remind you is Q4 typically in the U.S. is always the seasonally weakest quarter from an ad spending perspective, it's the quarter where we will typically pull back our ad spend. And I would say that dynamic is in the U.S. We will evaluate and assess how much of that dynamic also plays out in the international markets.

Next question is from the line of Lisa Gill with JPMorgan.

Trying to understand two things. One, clearly, I understand the change in leadership and what the Board is going through. But just also curious if you're looking at any strategic changes to the business. And once again under pressure on the BetterHelp side. I just heard you talk about international. But are there things that the Board is reviewing would be my first question? And then secondly, I just really want to understand the opportunity around that 8% membership growth, which was really strong in the quarter. We didn't see an increase in either revenue or adjusted EBITDA. Is that just timing? Is there an opportunity for cross-sell? So just really understanding how that's going to play into the numbers.

Thanks, Lisa. Great question. So from an overall Board perspective and what might that imply for changes, obviously, as I said in our prepared remarks, right now, the focus of the leadership team, my focus and I would say the focus of the Board as well is for us to be laser heads down focused on implementing our plans, our investments, our priorities. And frankly, leading our employee base, the 5,000-plus employees we have through this period of transition and change. I would say also that I'm pleased with the solid start we have to the year. Hopefully, we have given you enough transparency and color as -- in our prepared remarks on what is really driving our confidence in our growth both from a top line perspective and our bottom line perspective as we roll through the year. We've kept our overall 2024 guidance as is from a revenue adjusted EBITDA and a cash flow perspective. We continue to make progress on our cost initiatives that we have talked about in February. So all of those are things that require execution, and I would say we are laser focused on that. Beyond that, look, we are always looking at different parts of our business. We are looking at what top line growth they bring in and what bottom line growth they bring in. Certainly, as we said in our prepared remarks, the BetterHelp business has been challenged in recent quarters. And I would say I am focused on the execution of the various initiatives that we talked about that will give us that second half ramp, whether it be improved retention, whether it be the fact that we are driving growth in international markets and the growth in the much smaller part of BetterHelp, the BetterSleep part of that…

The next question is from the line of Jailendra Singh with Truist.

I wanted to ask about Chronic Care program enrollment metric. I understand it was up year-over-year, but it actually declined a little over 3% sequentially. Typically, we see a pickup from Q4 to Q1 due to new contract starts and enrollment increase in the new calendar year. So can you provide some color there, Mala? And then what are your expectations around that metric as the year progresses? And more broadly, anything you can share how you're focused on improving the positioning of your business in Chronic Care longer term in market which seems to be getting very competitive?

Yes. So look, I would say I expect the enrollment to ramp through the year. That is typically always the case in a traditional year and this year would be no different. Now the one thing I would also say is, remember, we had talked about the marketing pause. In the last earnings call, we had talked about $20 million of revenue impact for this year. I would expect most of the impact of that marketing pause to be in the second and third quarters. But despite that, I would expect for our Chronic Care program enrollment to ramp up through the year, just like in prior years. Laizer, do you want to handle Jailendra's question on competitive?

Sure. When you look at what our customers and our clients are looking for, we're happy with where we are in the selling season. We're having productive conversations with both new and existing accounts, as Mala mentioned in her earlier remarks, for the quarter, 2/3 of our existing clients -- 2/3 of our growth in bookings came from existing clients and 1/3 came from new clients. I want to make sure that we highlight that we're happy with the growth in bookings not just in our domestic business, but also in our international business. And what are our clients looking for? Our clients are looking for value. They're looking for a scalable, reputable vendor that they can partner with that has a strong balance sheet that they can continue to partner with to drive value for them and for their consumers. And that hasn't changed. And I think that is feeding into our conversations with respect to our bookings.

And then, Jailendra, just finishing up on your question around the Chronic Care enrollment. Look, this is a function of the fact that typically when we start off the year, we onboard a number of lives. And we also, at the same time, in Q1 is typically the time we would also see enrollees come on and enrollees roll off and the net impact of that is what you're seeing. I would expect as we ramp up the year, despite the marketing pause, I would expect that to continue to go on into the rest of the year.

Next question is from the line of Jessica Tassan with Piper Sandler.

Mala, congrats on the good quarter and guide. I kind of -- I wanted to ask about the 3-year outlook that you all issued on the fourth quarter call and then reiterated today. So the low to mid-single-digit annual consolidated revenue growth, mid-single Integrated Care, low-single BetterHelp, is that target achievable on an organic basis? And just maybe from an Integrated Care perspective, should we think about that growth continuing to be led by Chronic Care? And does it anticipate any new product launches? Just hoping for color around that 3-year guide.

Yes. Thanks, Jess, for the question. Look, when we put that guide outlook out there in February, we had thought about the building blocks to those numbers, that trajectory, both on the Integrated Care side and the BetterHelp side. So let me sort of comment on it one by one. On the Integrated Care side, I would say, as we had stated previously, think of it as a combination of low single-digit growth on the much more well-penetrated telehealth side, and I would say mid- to high single-digit growth in Chronic Care. So yes, we do expect Chronic Care momentum to help us achieve the overall mid-single-digit revenue growth for Integrated Care. On the BetterHelp side, from a revenue growth perspective, we had said low single-digit. Look, here's what I would say on the BetterHelp side. The second half ramp that we have talked about, the initiatives that we have going to help us achieve that second half ramp, again, whether it be retention, international, continued momentum on BetterSleep, these are the inputs into the low single-digit revenue growth for BetterHelp. And I would say we will continue to execute against it, and we will continue to monitor it, again, assuming that we don't have something very, very unfavorable happen from a cost per acquisition perspective, which will impact our advertising yields. So assuming that we see CPAs in a reasonable range, I would say the building blocks that will help us grow in the second half will continue to be contributors into the low single-digit revenue growth for BetterHelp. When it comes to margins, I would say the cost initiative programs that we have that will help us with OpEx leverage, along with the revenue growth that we will see on the top line, particularly on the Chronic Care side, will certainly be contributors into our margin expansion that we have put out there. So what I would say in summary is we have thought of the building blocks that go into the long-term outlook. And we will continue to assess how they perform. And as I said, this year and especially in the second half, BetterHelp will give us a lot more information on that.

Next question is from the line of Sean Dodge with RBC.

Mala, you mentioned in BetterHelp with the new leadership team, having seen some improvement in subscriber retention, can you give us a sense of how long you're retaining BetterHelp users now on average? How much has that changed over the last couple of years? And then how much room and what kind of levers do you have to continue to drive improvements in that? What can you do to lengthen that?

Yes. So we haven't given out KPIs, metrics, et cetera, specifically on retention, Sean. So I don't want to go into specific retention metrics. What I will say is the following. We are looking -- we are seeing improved member retention primarily because of the innovation that we are driving in the platform, in our user experience, frankly, with the help of AI models that are continually improving our matching of consumers with their various needs with providers. So it's never one thing that is driving this improvement in retention, it is many things that are driving this improvement in retention. And I would say that when I talk about the new leadership at BetterHelp, one of the important things to highlight is we are looking now at pressing on more than one lever in the BetterHelp business. We are looking to beyond the traditional focus on CAC. As we've talked about, we're looking at additional geographies, how can we continue to innovate in the user experience. In some instances, and we have talked about this in the past, we're looking at small surgical targeted pricing changes, all of which, in my view, are things that will improve on our revenue growth. And it's the innovation that is helping on our improved member retention, the user retention. Laizer, is there anything you would like to add to that?

Yes. I guess the only thing I would add is historically, in BetterHelp, we've been very focused on the innovation on patient acquisition. And what I would tell you is, we are balancing spending time on increasing the value of that member, and I would say there's not one specific thing other than being very innovative and testing out little things that are driving value so that our return on our advertising dollars increase.

The next question is from the line of Allen Lutz with Bank of America.

Another one on BetterHelp, Mala, have you considered at all moving from just cash paid to participating in health plan networks as a way to drive growth? Is that something that you've considered? And can you kind of talk about the pros and cons of making a move like that?

So I would say, look, we assess various initiatives to continually innovate to drive growth both on the top line and the bottom line. At this point in time, with the scale that BetterHelp has over $1 billion in revenue, it is by far one of the largest DTC players. And look, there are other competitors in the market who have done, tried DTC, moved away to B2B, we have built scale in DTC. And I would say we will continue to focus on DTC. Having said that, I would also say, we are looking for ways to improve and accelerate our growth in different ways. I don't want to comment much more on specifics at this point. To the extent that there is anything relevant to update, we will absolutely do so. But we are looking at various ways to drive top line -- to accelerate our top line growth in BetterHelp.

The next question is from the line of Sarah James with Cantor Fitzgerald.

Mala, I was hoping you could help us a little bit with the pacing of this year, specifically thinking of the items that you have control over, like some of the savings initiatives to get to that run rate of 43 at the end of the year and then the advertising spend. Can you help us pace through how the savings initiatives are going to play out? And then on the ad spend, is there any pull forward of that into 2Q versus your normal cadence? And are you thinking about because of the increased efficiency, just lower overall need for ad spend for the year?

Yes. Thanks, Sarah, for the question. So from a pacing perspective, we would be looking for the cost initiatives. And if you think about what those -- what are underpinning those cost initiatives, things like offshoring, things like automation, savings from our third-party supplier spend. Several of those are initiatives that are evenly paced through the year. Now obviously, if you think about something like offshoring and as we offshore, you will get the incremental impact, the full impact of the offshoring as we go later into the year. But I would say to you several of the others, like third-party supplier spend, et cetera, you will see sort of evenly pace through the year. On your question on ad spend, the way I would think about it is as follows: in Q1 and especially early in Q1, we did see pressure on our advertising yield. We did see pressure on our cost per acquisition. And we did pull back on our ad spend as we sort of rolled through Q1. And I would say as we went later into Q1 and into Q2, we are seeing more stable ad spend -- yield on our ad spend. When I say stable, it's -- the CPA still remain elevated relative to the back half of the -- similar to the back half of last year. But I would say to you that they are -- they have stabilized relative to the early part of Q1. Having said that, I am not satisfied with our BetterHelp segment margins in the first quarter. And so one of the things we are assessing is how do we manage the ad spend in Q2 so that we are getting the balance of top line and bottom line that we are seeking. And we have said this before. That is something that is very dynamic, right? Because we manage the BetterHelp business based on ROIs. We want to make sure that the marginal return on every dollar of spend is getting to the efficiencies we speak and sort of we toggle that to get to the balance of top line and bottom line. If I think about the second half, I would say we are looking to pull back in Q4 as we typically do. And we would be looking to spend a little bit more on ad spend relative to the second quarter, provided again that we see the -- we get to the efficiencies, we see -- we seek. And then the last point I would make is, remember, international typically is slightly more efficient from an ad yield perspective. So as we roll out international in the second half, I would expect to see that spend on international market being more efficient.

Next question is from the line of Kevin Caliendo with UBS.

Mala, this is Dylan on for Kevin Caliendo. Earlier this week, one of your competitors announced that they are winding down their telehealth business. Could you maybe speak to whether or not the guidance today contemplates any tailwinds from a competitive perspective?

Laizer, would you like to address that?

Sure, Mala. So clearly, there's been some noise in the marketplace. And we're really not going to comment on the specifics, and we would refer you to that partner of ours that made that comment. But what I do want to highlight is we have a very strong relationship partnership, and we value the relationship that we have with UnitedHealthcare, and we foresee that strong relationship continuing.

The next question is from the line of George Hill with Deutsche Bank.

Mala, I do like to kind of come back to Lisa's topic, which is, I guess, can you talk about the degree to which the current management team kind of feels empowered to make change at the company as it either relates to margins or growth or strategic direction? And then, because I know we're trying to keep people to one question, if I can sneak in a second one. Just if there's any way you can kind of quantify the success you're seeing in BetterHelp? And what metrics you guys are looking at internally? I think we'd find that helpful.

Yes. Your question on whether the leadership team is empowered to act I would say, absolutely unhesitatingly a big yes. As I said in our prepared remarks, we are not waiting. We have a plan to deliver, we have investments to execute and that is absolutely our focus. We are also reiterating our longer-term outlook. That is certainly going to require us to, as a leadership team as we do every single year, look at our strategy, look at various aspects of that strategy and think about how do we want to stack our investments against those, what's working, what's not working. Again, that is part of what we do every single year. And we will absolutely continue to drive that. So the answer to your question is we are -- I'm empowered to drive this business forward. And we, as a leadership team, as I said in our prepared remarks, are all in, we are leaning in, and we are focusing on driving this business forward. In terms of BetterHelp metrics, the things that we typically will look at from an internal operating perspective is we will look at, obviously, the CAC and where it is. We will look at the ROIs of our ad spend. We will look at retention, churn, the lifetime value of the CAC that we are placing. And we will also look at the users that we are attracting to the platform. So we also -- so that is -- those are things that we look at. And besides that, we look at a number of other things that inform the user experience as well as the provider experience, the provider NPS, the user -- the NPS, all of which, by the way, continue to remain very strong because of the strong experience that people have on the platform. So those are the typical metrics that we would be looking at.

Next question is from the line of Ryan Daniels with William Blair.

This is Jack Senft on for Ryan Daniels. I think in your prepared remarks, you mentioned reallocating some of the dollars in the second half as the international penetration ramps up. So first, did I get that right? And then two, can you just talk a bit more about where you plan to reallocate these dollars? Was it just reallocating dollars to ramp up the international portion? Or is there something else? Just curious if you can dive deeper into this.

Yes. So we've been talking over the last 2 calls about the fact that we do expect international in BetterHelp to ramp. The -- where we are placing our ad spend dollars internationally and BetterHelp is in the markets that we already have a presence in, those are largely English-speaking markets like U.K., Canada, Australia. So these are the markets where we would be putting our ad spend dollars in.

Next question is from the line of Elizabeth Anderson with Evercore.

Mala, when you think about the longer-term growth, I appreciate your commentary, but was there other changes in the international focus, et cetera, how do we think about the component that pricing plays in both the Integrated Care outlook as well as BetterHelp?

Yes. Great question, Elizabeth. So I think about the pricing lever we have on both sides in a couple of different ways. First, if you think about our Integrated Care side and think about Chronic Care and the momentum that we are seeing in Chronic Care, we've spoken about this dynamic in the past couple of calls. Firstly, we are seeing nice momentum in Chronic Care bookings. And if you think about the momentum you're seeing in Chronic Care bookings, part of what's driving that is the fact that we are selling more Chronic Care bundles. And if you think about the pricing that -- with these bundles, it is accretive from a -- on a per client basis from a revenue perspective. And that is certainly something that as we increasingly gaining traction on our land and expand, the fact that we've added over 2 million members in the first quarter, again, that gives us fertile ground for us to cross-sell more of our Chronic Care products into that population. The fact that Chronic Care at the end of the day is still relatively underpenetrated, right? If you think of our overall 90-plus million base, it is still 16% of our overall Chronic Care -- of our overall telehealth base. And so it's things like that, that will allow us to get more revenue accretion. And that certainly is something that we are focused on. On the BetterHelp side, when I think about pricing, I would say it really is us thinking more broadly about how we can do more of targeted surgical pricing as we think about the different, whether it be BetterHelp and BetterSleep, and when I say targeted and surgical, it could be by geography. It could be in other ways. And by the way, that is something that we are doing constantly continuously, right? This is a business that is dynamic in multiple ways, including in pricing.

The next question is from the line of Daniel Grosslight with Citi.

There's been some noise out in the market questioning the cost and efficacy of some digital diabetes management programs. I know it's still pretty early in the selling season for you guys. But I was curious if that report is having any impact on what you're seeing out there in the market. And maybe if you can comment a little bit on where you're currently seeing the greatest uptick from a new sales perspective in terms of indications, that would be great.

Yes. Thanks, Daniel, for the question. Let me start, and then I will turn it over to Laizer for more comments. Look, if I think about the momentum that we are seeing in the market, the things that we are seeing traction on is a few. The first is, obviously, I've talked about our land and expand. The second is when we talk to our clients about both the breadth of our products and solutions and second, the fact that we are able to show value and ROI, that is certainly resonating in the marketplace. And the last is, as I've said before, the strength of our balance sheet relative to many of the other competitors in our markets. And the strength of the balance sheet certainly is compelling if you think about our ability to bring innovation into our products -- into all our products, including chronic care. So those are broadly the trends that we are seeing in the market as we sell. Let me turn it over to Laizer to address your specific questions.

Yes. So with respect to that specific study, I would say we haven't seen any impact from that study on our business. What I would tell you is just some caveats to keep in mind. The first is that report was a review of limited, selected secondary research and the party did not conduct any original testing or any primary analysis of patient data. And I just want to highlight that based on our studies and those of third parties, we believe that our Chronic Care programs provide a clear ROI for our customers. Our programs have demonstrated meaningful reductions in A1c over a sustained period of time, but it's more than just A1cs. We also have shown improvements in blood pressure, and in weight and the whole concept of value is one that we are having good conversations with our clients about. Our members in our diabetes programs also demonstrate higher adherence to their diabetes-related drugs. And so it's really important that you understand what's based in the research, what's included. But what I would tell you is we aren't seeing an impact, but we are having good conversations with our clients related to the ROI and the value of our products.

Yes. And just to wrap up on that, Daniel. What I would say is, look, we continue to see strength and momentum in Chronic Care. I would say, as I think about our guidance this year, Integrated Care is off to a solid start. I expect Integrated Care, both from a revenue growth perspective as well as a margin expansion perspective, as indicated in our guidance to continue its momentum. I would say, certainly, if you think about the BetterHelp business, we have had a couple of challenging quarters. And we have the set of drivers that are driving the back half of the year ramp. So I would say, certainly on the Integrated Care side, we are continuing to drive -- get traction, especially on our Chronic Care book.

There are no additional questions waiting at this time. That will conclude the conference call. Thank you for your participation. You may now disconnect your lines.