Good afternoon, thank you for attending today's Teladoc Health First Quarter 2025 Earnings Call. My name is Cole and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. [Operator Instructions]. I'd now like to hand it over to Mike Minchak, Head of Investor Relations Teladoc Health. Please go ahead.

Thank you and good afternoon. Today, after the market closed, we issued a press release announcing our first quarter 2025 financial results. This press release and the accompanying slide presentation are available in the investor relations section of the teladochealth.com website. We also issued a press release today announcing the acquisition of virtual mental health company UpLift, supporting the strategic priorities of our BetterHelp segment. On this call to discuss the first quarter results in this acquisition are Chuck Divita, Chief Executive Officer, and Mala Murthy, Chief Financial Officer. 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 our performance. Details on the relationship between these non-GAAP measures and 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 our actual results 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 Chuck.

Thanks, Mike. I'm pleased to report a solid start to the year. On a consolidated basis, we reported revenues and adjusted EBITDA at the higher end of our first quarter guidance ranges with integrated care results exceeding our ranges for both measures and better health in the upper half of our ranges as well. Mala will provide more details on our first quarter results and our outlook later in the call. We also continue to make progress towards the strategic priorities that we've spoken about previously, and I would like to highlight some important developments in that regard, beginning with our BetterHelp segment. After the market closed today, we announced that we have acquired UpLift, an innovative and tech enabled provider of virtual mental health therapy, psychiatry, and medication management services. This transaction aligns with our key priority of advancing our position in virtual mental health, including our ability for our better health segment to support consumers seeking to use their covered benefits. UpLift is an in-network provider to health plans and has arrangements totaling over 100 million covered lives. With a strong team, important capabilities, and an existing network of over 1,500 mental health professionals, we view UpLift as a great addition to the organization. And we see significant business synergies with our current BetterHelp segment, which will enable us to serve a broader population seeking mental health care. Specifically, we intend to leverage BetterHelp's deep consumer expertise and market position to provide more options for people to address their mental health needs, including the ability to access their benefits coverage through BetterHelp's relationship with UpLift, as well as continued access to direct pay options in the U.S. and internationally. Today, BetterHelp is the largest direct-to-consumer virtual therapy business of its kind and served over 1 million unique users…

Thank you, Chuck, and good afternoon, everyone. First quarter consolidated revenue was $629.4 million, down 3% year-over-year, and at the high end of the guidance range. Adjusted EBITDA of $58.1 million was near the high end of the guidance range and represented a margin of 9.2%. Consolidated net loss per share was $0.53 compared to a net loss per share of $0.49 in the first quarter of 2024. Net loss per share included a non-cash goodwill impairment charge of $0.34 per share pre-tax, which occurred after the issuance of our prior guidance and was not included. Excluding this charge, net loss per share in the quarter would have been near the upper end of our guidance range. As discussed in our 10-K, the integrated care reporting unit's fair value was below its carrying value based on the results of our annual goodwill impairment test in the fourth quarter of 2024 and continued to be at the time of the Catapult acquisition. As a result, any goodwill recorded in the integrated care segment could require immediate impairment. Net loss per share also included amortization of intangibles of $0.48 per share pre-tax and stock-based compensation expense of $0.14 per share pre-tax. These items were partially offset by a discrete tax benefit related to an R&D tax credit of $0.12 per share. First quarter free cash flow was a net outflow of $16 million, an improvement of $11 million versus the prior year period. We ended the quarter with nearly $1.2 billion in cash and cash equivalents of the balance sheet. Turning to our segment results, integrated care segment revenue of $389.5 million increased 3.3% over the prior year period and exceeded the top end of our guidance range. Factors that contributed to the upside versus the guidance range included timing shifts related…

Thanks, Mala. Before we open it up for your questions, I wanted to highlight some exciting recognition we recently received. Teladoc was named to Newsweek's Most Trustworthy Companies in America for 2025 and ranked number one in the healthcare and life sciences industry. We were also included in USA Today's inaugural list of America's Most Trusted Brands and one of just five companies to earn a top five-star rating in the pharmacies, health, and wellness category. We are honored to be recognized for the trust we earn from members, clients, and partners, and I could not be more proud of the entire team and their commitment to integrity and excellence. With that, we will open it up for questions. Operator?

[Operator Instructions]. Our first question is from Jessica Tassan with Piper Sandler.

Congratulations on the acquisition and bringing Behavioral Health Network or expanding that offering. I'm wondering if you guys can talk a little bit about the shorter-duration contracts that were made available in BetterHelp, I think, in the fourth quarter, so like weekly billing. It doesn't look like that had too much of a corrosive impact on average PMPMs in the first quarter, which is good. But just if you could speak a little bit to the impact of that offering on churn and then the expectations embedded in the next three quarters as well, that'd be helpful. And then just a quick follow-up would be, have you done any evaluation or assessment as to why the core BetterHelp Network was not able to ultimately get payer coverage? And up front, obviously, was just kind of any distinctions you want to make on the two different networks. Thanks.

I'll start with your first question, so I'll take them in order. So we have been talking about the weekly offering now for several months. Just to recap the activities we've had there, we started essentially in September with the weekly offer. Prior to that, our BetterHelp offering was only a monthly subscription. What we did do then is to start this weekly offering with a price point that is essentially a fourth of the monthly subscription price point. So we didn't really do any kind of discounting. We have essentially taken that price point and priced it at a fourth of that. What we are seeing, and I will say, a lot of our acquisitions now is around the weekly offer versus the monthly offer. The trends that we have been seeing over the past several months is as follows. First, because the weekly offer is at a more accessible price point, unsurprisingly, we're actually seeing stronger conversion. I would say much stronger conversion. The second, though, is because the user is reminded on a weekly basis, we are also seeing higher churns, both of which we expected. What is important, though, is that net of the two, it is still positive. What we are essentially seeing is, it is still net positive relative to the monthly offer. We are continuing to evaluate how the LTV plays out over time. LTV, as you know, is something that we measure and watch over time. We are essentially seeing that the metrics that we are looking at remain stable. We are pleased with what we are seeing and we will continue to assess and evaluate. The one thing I would also say is, we have to be careful about when we think about the revenue per member, if you will, the revenue per user. Because we are acquiring these customers at that lower weekly price point, you will see an impact quite naturally on the revenue per member. But remember, we are also getting a lot more members, a lot more users. Those are essentially the trends that we are seeing. Chuck, do you want to comment on the second question?

As a reminder, when we talked about getting into the benefit coverage space really through the end of the year, our focus was on the technical capabilities around that. The team had made really good progress as we had shared on the last call. We were ready operationally to do that. We had hired talent, and we still are going after payer contracts. That really started in earnest in the first quarter. We applied to over a dozen payers in terms of getting a network coverage. I had a couple that were at the finish line when the UpLift transaction started to really gain momentum. We paused things there with those payers so we did not send mixed signals and felt like this was a way to accelerate what we were doing. It was not about the BetterHelp Network itself. It was about this as an opportunity to accelerate. We were 35,000 therapists in the network. We believe there are extensive numbers in there that would be interested and meet the requirements for payer coverage. That is what we are going to activate over time. I think the sequencing was, as I just mentioned, and we are excited about this opportunity.

Our next question is from David Roman with Goldman Sachs.

I just wanted to come back to the BetterHelp business here a little bit. I wanted to come back to the BetterHelp business and specifically look at the member trends actually improved quite a bit. You mentioned Q1 versus Q4 down very marginally, sequentially, but if you look at the revenue numbers, you are seeing a pretty significant decline either in PMPM or revenue per member. Can you help us understand the declines that you are seeing both in the integrated care business? I think you noted an 8% decline in revenue per member there and obviously the down 4% on members in BetterHelp compared to the down 11% in revenue. Maybe help us bridge that gap.

Yes. On the integrated care side, yes, what we did see is the decline that we spoke of on a year-over-year basis on revenue per member. However, remember that what that is showing is a very significant increase in number of members and we also reported a 12% increase in members on a year-over-year basis, David, over 8 million members. If you just think about what that means, you are onboarding a big cohort of members and that is essentially in the ratio. We haven't really had time yet to sell into that member population all of the more revenue-accretive services that we offer such as chronic care, et cetera. What you see here is they typically will come in. Take Tricare as a great example. We onboarded 9 million members essentially starting the beginning of the year. What you will see is them coming in with essentially core telehealth services over time, we will have an opportunity to cross sell and upsell to them additional products and services. That dynamic is essentially what is causing a depression in the year-over-year metric. I will say, if you were to look at it on a same-store sales basis, you would actually see a slight increase in our revenue per member on the integrated care side. The fact that we are adding all of these members is a perfect opportunity for us to actually put in action our land and expand. We have landed these members and now is an opportunity for us to expand into additional products and services which will happen over time. That is on the integrated care side. On the BetterHelp side, what I would say is the fact that you are seeing the revenue per user as you are, is a combination of a few things. First is, we have said in terms of our priorities, international growth is certainly an area of focus for us in BetterHelp. We have said that international revenue per user is lower than in the U.S. Keep in mind that in international, the cost of acquisition is also lower. From a margin perspective, it is slightly lower than the U.S. on net margin, but only slightly lower. But certainly, if you look at the headline revenue per user, it is lower. You are partly seeing a mixed effect if you look at the revenue per user. That is one dynamic. The other dynamic that you are seeing is what I spoke about a few minutes ago about the weekly price. We are acquiring users at a price point that is lower, but we are also acquiring more users. It is just so that we will be able to, over time, I would say that as our acquisition efforts become more efficient and we are able to use our advertising spend to actually be more efficient and effective, that should essentially result in greater revenue growth over time.

That is a very helpful perspective, and thank you for the detail. Maybe just a follow-up on that. Strategically, I think one of the themes, Chuck, that you have talked about over the past year is increasing the profitability per member and really focusing in on profitable member growth. How do you contrast that with the continued focus on member growth, the dilutive impact of that? Are you sure you are being focused enough in the strategy here? Maybe any color you can give us on what, in your mind, the signpost that you are watching to give you confidence that you can really return this business to growth.

Are you speaking about members on the BetterHelp side, or are you talking about the [indiscernible]?

Obviously, there is a focus on BetterHelp there, but you are still talking about 8% growth on the integrated care side. You have over 100 million members. That is a giant number. How do you make sure you are extracting the value there? We are still not seeing total company revenue turn in any meaningful way. As you think about the strategic changes you are making and the acquisitions, how does this all fit together for you? What are the signposts you are watching to give you confidence in and get this company back to revenue and EBITDA growth?

I just want to make sure I was clear on the question. A couple of things are in play here. First of all, the growth in customers, growth in members will translate into growth in usage of services. As our business and integrated care side, we see more movement from subscription-based models to visit fee-based models. That membership and the activation of that membership to visits is how you get paid. That is the revenue generation. So the growth is important there as well and why I talked about this a couple of quarters ago, but why it is such a priority for us to make our visits more valuable. What do I mean by that? As that mix shift changes, we need those visits. We need the activation. We need to do a great job for our customers, great job for our members to have the visit. We need those visits to be able to do more services on behalf of our customers. That is why we are putting the technology in place that I mentioned in my prepared remarks that allow us to activate and take the next best action for that member. All of that is underlying the importance of that in terms of how we are going to see growth. I think the headline metric of revenues divided by members I think has historically made some sense, but I think the business is evolving and I would just highlight that. That is one. Second, I have talked about the need to make our chronic care management programs and use our clinical strength and product breadth to drive more value. What do I mean by that? We have over a million people that we serve, a massive number of people that we serve in chronic care. These are people with diabetes, hypertension, with weight and obesity issues. We are doing a great job in terms of engaging with those members, helping them with their conditions, et cetera. We have a further opportunity to drive more outcomes with respect to cost of care, which is a major issue that our health plan customers are facing and our employer customers are facing. That is where a lot of the innovation roadmap is headed, which is how do we take those programs to the next level. It is those things that are going to drive the future growth of the company, both from a top line as well as from a user perspective. Hopefully that is an additional color for you.

David, one other thing I would add is on the BetterHelp side, we have for a while now been talking about balancing top and bottom-line growth. We are managing our return on ad spend such that we are not chasing unprofitable revenue. One thing I would add as we thought about the rationale, the strategic rationale for the UpLift acquisition is the fact that if you think about the enormous funnel that BetterHelp has with its scale, and that scale and the funnel is supported by the advertising and marketing spend that we have in the BetterHelp business, you are talking about close to 4 million users at the top of the funnel who are essentially interested in at least looking into a BetterHelp service. The fact is as they go through the funnel and they come to a cash pay option, many of them choose not to avail themselves of the service. You think about the conversion factor for the amount of ad spend we have, we now with offering the covered benefits option with UpLift are essentially leveraging our ad spend to capture some of those, hopefully many of those users over time with the insurance option. It actually allows us to capture more users through that funnel, leverage our ad spend in a much more effective way, and that should help not only top line growth but that should also translate to bottom line growth.

Our next question is from Daniel Grosslight with Citi.

I was hoping to get a little bit more detail on the cadence of BetterHelp margin improvement in the back half of the year. Guidance implies nearly 20 million or so improvement from one half to second half, and you noted that there's around I think you mentioned 10 million to 15 million of additional costs due to UpLift for making any insured products. So can you help us think through 3Q and 4Q as those two dynamics play out?

Yes. So the way I would think about the dynamic playing out is the following way, Daniel. You know that the BetterHelp business is essentially largely a variable margin business. You know there is a relatively low amount of fixed costs. We do, as we said, have investments proposed for the integration and the, you know, just getting a quick start on realizing the strategy that we have with the UpLift acquisition. Having said that, what I would say is the following. Think of the ramp for the second half to be driven by a few things. One is, if you think about revenue, we will continue to advance on revenue growth as we go to the second half on the back of all of the priorities for the BetterHelp business that we have already talked about, including insurance, sorry, including international. We are continuing to make progress on our international effort, both English-speaking countries as well as the localized market launches that we are in process. We've done France. We're doing Germany and Netherlands next. So we are making progress on advancing those international priorities. So the second half ramp is essentially conditioned on the revenue from those efforts. And then we are also, as we talked about, looking to advance the insurance efforts in the second half. The last thing I will say is, as always, we have talked about pulling back on ad spend in the fourth quarter, and we will do so again this year, just like we have done in prior years. I will say I do expect the ad spend in the fourth quarter of this year to be slightly sequentially greater from a pullback standpoint relative to last year. Last year, if you remember, we had very, very little pullback in ad spend in the fourth quarter. So we expect it to be a little bit more pronounced this year. And those are essentially the various factors playing into the second half.

Got it. Okay. And then on the UpLift pricing model, is that subscription-based and visit-based or visit-based only? And can you talk a little bit about how that may integrate with the mental health solution on the integrated care side of things?

Yes. This is in-network coverage, so it's visit-based. It's not subscription-based. So that model is there, and we expect, as we've seen with others but also our own experience, more extended usage, more visits, because it's covered by insurance. So that's the model there. The integrated care mental health offering, which is quite scaled, over a million visits a year, it's really an offering that is somewhat different. It's got a lot of content, a lot of tools, and it's really sort of sold and integrated with our various other offerings on that side. We have looked at and moved a bit on some synergies between integrated care and BetterHelp. For example, how we were doing some of the sales and go-to-market of the BetterHelp for business offering. There's some products, some joint products that we're exploring right now that we think could be interesting development for the company. Don't want to speak about that too much now. So I think that they're somewhat different markets they're serving, different use cases for customers. But again, the macro theme of virtual mental health care being an important priority for Teladoc is what's most important. It's a space that is widely adopted post-pandemic that had the highest sort of penetration, if you will, in virtual care that's sustained that. You think about the shortage of access, the unmet mental health needs that are there both in the U.S. and internationally, obviously. And so we think from a macro perspective, this is the right space to be in. We're scaled in integrated care. We have massive scale in the consumer business with BetterHelp. We have the most well-recognized brand in BetterHelp. Funnel of four million people registering, that's massively higher than anyone else. So if we have this opportunity to sort of help those consumers access their benefit coverage with the great experience that they're looking for with BetterHelp, we think it's the right strategic move for us. So a different customer basis, but I think broader theme is right on.

Our next question is from Jalindra Singh with Truist.

This is Eduardo on for Jalindra. Can you speak to what you're seeing in terms of CAC trends in the BetterHelp business? Is it different on the domestic and international side? And I noticed that advertising and marketing spend the ratio there is down up to 30 bps year-over-year, 50 bps sequentially. So just curious what you're seeing there.

Yes. I would characterize the trends that we are seeing as stable through the first quarter of this year. And I would say, Eduardo, we are actually seeing it more favorable relative to the last many quarters for an important reason. Because we are seeing good conversion rates from our weekly offer from the acquisitions we are making on our weekly offer, it is the yield is actually better. So if you just think about why we are seeing favorability in our CAC, it is really because of the acquisitions that we are making on the weekly offer. So those are essentially the trends that we are seeing. We are not seeing any significant differences, I would say, in U.S. versus international. I'll say customer acquisition costs have remained relatively stable thus far in 2025 across the board. So that's sort of what we are factoring into our guidance. Now one thing I will obviously always caveat is we started in February with a wide range in our guidance for BetterHelp. We are continuing with that wide range for BetterHelp. And part of the reason we have that wide range out there is macros are uncertain. Consumer sentiment is certainly uncertain to softening. And I would say overall what we have also learned over the past couple of years is this space can move very dynamically including in at costs and at pricing. So we have given ourselves room to navigate through these uncertainties as best we can by the guidance being as wide as it is.

We have a question from Elizabeth Anderson with Evercore.

Thanks for the question. I have a question on cost saving. I believe on the 4Q call you mentioned increased focus on tech and G&A costs. Can you share how you are thinking about additional opportunities in those areas? Thanks.

Yes. We had talked about the fact that in the February call we expected the cost savings this year to be modestly higher than what we had originally signaled for 2025. We continue to make efforts. In fact, I would say to you in the first quarter we took out a little bit of additional costs than we were expecting earlier in the year. We have accounted for increased cost as a result of that as we have put out the EPS guide. Point being, we continue in this uncertain macro economic environment. It is prudent for us to think about continuously looking at our cost base and look at streamlining rationalizing our cost base as appropriate. If you look at the results, we delivered in 1Q, I would say we have demonstrated good control over our overall cost base. Technology and development spend is down on a year-over-year basis. We have spoken about the we are putting scrutiny on this line item. We expect that to continue. I would say I would expect overall T&D dollars spent from an OpEx basis to be down in absolute levels year-over-year as we go through this year. On the G&A side, we did have a couple of accruals that we took reserves on. You will see that in our numbers for the first quarter. I expect us to continue to demonstrate restraint and discipline as we go through the year. As you saw in our prepared remarks, we have brought down our stock-based compensation outlook for the year by $15 million. It is considerably lower than 2024 and 2023. Again, it is a point of focus for us and we will continue to maintain control and exercise control over that.

We have a question from Charles Rhyee with Cowen.

I guess firstly, if we think about sort of the path here with UpLift -- I guess, I just wanted to talk about UpLift here, you pay about 2x revenue up to 3x depending on the contingent payments into the future. You go back to Catapult, you paid about two times revenue as well. I guess both of these bring to you guys some important capabilities with UpLift getting insurance-based coverage here. With your stock trading less than one time, closer to 0.5x revenue, can you talk more about why the board is not more actively perhaps looking at a shared buyback? Understanding you have the converse coming due, you will pay down in cash, but when you look at overall leverage, it is not that drastic. You have a lot of financial capacity as it stands. Can you talk about your capital deployment strategy at this point and maybe why share buyback is not perhaps a bigger part of that?

It is a very fair question, Charles. Unsurprisingly, this is a point of active discussion among the management team internally. As we think about the various options we have to deploy our capital, first, we are looking to deploy capital to amass capabilities that we need for us to be able to drive sustained top-line growth as we move forward over the next 12 to 36 months. When Chuck came on board middle of last year, one of the things that we talked about then and since on earnings calls is the fact that we are a company looking to reposition and turn around our performance. That takes capital deployment. That can be organic. That can be inorganic, as you have seen us use inorganically over the past couple of quarters. So we are looking to, as we have always done, to look at adding to our capabilities, whether it be services, whether it be other capabilities, so that we can drive sustained top-line and bottom-line growth in the months and years ahead. So that's number one. Number two, we definitely are looking at our overall leverage and our debt. As we talked about in our prepared remarks, we will pay down the upcoming note that's due. We are looking at the 2027 note that is outstanding, and we know that it's trading below par, so we are assessing that. The third, and we have never taken this off the table, we are absolutely looking at buybacks as well. So it's a matter of, and we have been talking to the board about all of this. So as a part of normal course of conversations that the leadership team has with the board. I would say to you, none of these is off the table. It's a matter of us at this moment, because of looking to accrete to our top-line growth and bottom-line growth in the years ahead, there are opportunities that are coming our way. We are, with the scale we have in this space, we do tend to get a lot of inbounds, and we look at them in terms of what it will do for our future performance. So the fact that we are going out with Catapult and we have just gone out with the UpLift acquisition is a reflection of the fact that we had these interesting opportunities that we were looking at and that came to us, and we felt that it was really important for us to move forward with this. Chuck?

Yes. The only thing I would add is, we need to invest in those key strategic priorities. Our biggest opportunity as a company and for our shareholders is to leverage this scale position that we have with 100 million lives with this really unparalleled position, over 12,000 customers, international business, so we need to invest in those capabilities that will achieve the outcomes against the scale that's been built. On the BetterHelp side, the acquisition, we mentioned that two times, this is a company that invested in their capabilities as a strong team but are limited in terms of their ability to activate. At the end of the day, you need to activate the consumer, make them aware of what you're doing and activate them into your solution. That's what BetterHelp does. BetterHelp is an expert of that, massive scale. So that's how we looked at that acquisition and we're really excited about the fact that we can accelerate our progress. Obviously, we are going to do it in a measured way as Mala said. We want to build it for the long-term but it really is an unparalleled opportunity to take something as massively scaled as BetterHelp and to start to bring that consumer orientation and activate with that benefit coverage. So that's how we're looking at capital. Obviously, other things that Mala said are on the table. But we also want to make sure we're investing in this business for the future.

Just a follow-up question. Can I just ask, so obviously, you talked about getting into the Tricare population at the start of this year, looking to activate on that side, cross-sell products, above the basic telehealth offering to start. You talked about BetterHelp with UpLift and trying to transition that away from a direct-to-consumer model. Can you talk about the capacity internally at the management level to handle these processes? Because they seem very distinctly different challenges that you have been facing over the last year. Plus, and I guess fundamentally this is the question, would the strategic value of having both of these assets under a single roof here and whether your management attention or resources are being pulled in different directions and perhaps a more focused strategy on one or the other might move things along quicker. Thank you.

Yes. I think it's a fair question. One of the first things when I came on board, and we spoke about this in prior quarters was we needed to look at the way we were organized. We were not as close to the customer as we needed to be and we made a number of changes and focused them on their markets. Not only did it save on the cost if you will, it improved agility and put the right leadership and management structure in place, so we can activate on each one of the strategy. We are organized and execute against this, feel comfortable that we have the ability to drive those forward. I think the importance, we have these two-scaled businesses that are part of Teladoc. It's been coming upon us to make sure that we are maximizing the value out of those. We need to make sure that BetterHelp is positioned for the future as we said. We think that's the right thing to do regardless. And I think activating against these strategies on the integrated care side are going to yield benefits as well. So it's a fair point, but we feel like we have got it adequately covered.

We are out of time for questions. That will conclude today's call. Thank you all for your participation. You may now disconnect your line.