Teladoc Health Inc
NYSE:TDOC
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
6.79
22.1
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Teladoc Health Inc
You don't have any saved screeners yet
Welcome to Teladoc's Third Quarter 2019 Earnings Conference Call and Webcast. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following managements prepared remarks. [Operator Instructions]
It is now my pleasure to turn the floor over to Adam Vandervoort, Chief Legal Officer. You may begin.
Thank you, and good afternoon. Today, after the market closed, we issued a press release announcing our third quarter 2019 financial results. This press release is available in the Investor Relations section of the teladochealth.com website.
On this call to discuss the results are Jason Gorevic, our Chief Executive Officer; and Mala Murthy, our Chief Financial Officer. During this call, we will provide our fourth third quarter and full year outlook and our prepared remarks will be followed by a question-and-answer session.
Please note that we will be discussing certain non-GAAP financial measures that we believe are important in evaluating Teladoc Health's performance. Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliations thereof can be found in the press release that is posted on our website.
Also, please note that certain statements made during this call will be forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause the actual results for Teladoc Health to differ materially from those expressed or implied on this call. For additional information, please refer to our cautionary statement in our press release and our filings with the SEC all of which are available on our website.
I'll now turn the call over to Jason.
Thanks, Adam, and thank you everyone for joining us this afternoon. After the market closed today, Teladoc Health reported another strong quarter. I'm very pleased with our results across the full breadth of our business delivering at the high end of our expectations, showing progress on several of our strategic initiatives and making strides on our path to profitability.
With positive momentum coming out of the third quarter and good visibility into the fourth quarter, we're raising our revenue and visit guidance for the full year 2019. While Mala will delve into the specifics of the quarter shortly, I wanted to spend a few minutes highlighting the strong execution that underscores the quarter's momentum and serves as the foundation for long-term growth.
In the third quarter we saw the greatest population expansion in the company's history as more than 17 million people gained access to Teladoc. This significant increase was driven by our entrenched distribution footprint across channels, in particular, the accelerated momentum and health plans. The largest population on-boarded was UnitedHealthcare's 15 million commercial members. This marks the first and only fully integrated virtual care offering within the UHC experience as highlighted by their recent press release.
The initial launch went very smoothly. Full engagement efforts are progressing on schedule and we're pleased with the early results. I'm extremely proud of our team and appreciative of the collaboration from the United team members who together brought this deeply integrated solution and seamless consumer experience to life.
On the visits front, we continue to see the acceleration of growth across our total book of business globally with visits up 45% in the quarter. Digging into the favorable growth, we continued to see accelerating adoption across all our clinical specialties. In fact, we're seeing the strongest visit growth amongst our largest populations with multiple clinical specialties, which experienced a 59% increase in visit volume over the same quarter last year.
As we continue to realize the benefits from our sustained data-driven member engagement capabilities, combined with the breadth of our clinical services, we're uniquely equipped to take advantage of the growing macro consumer adoption tailwinds. Mental health continues to be an area where we're seeing accelerated adoption. In Q3 we were pleased to celebrate our BetterHelp channel passing the 50 million message milestone and continued strong utilization growth within our U.S. distribution channels.
Internationally, we launched the UK market's first and only virtual mental health service for navigating complex conditions with AIG Life followed by this month's announcement of the expansion of our Great-West Life partnership to include the Mental Health Navigator service in Canada. On the heels of world mental health day however, it's clear to me that we need to do more.
The multinational study we released earlier this month reveals the intense need for greater access to mental health care which pervades across borders and is growing at an alarming rate as younger people are demonstrating poor mental health than previous generations. The study found that 61% of 18 to 25-year-olds report that mental health symptoms have affected their job performance compared to 38% of all age groups. This is truly a global challenge and Teladoc Health's holistic portfolio of mental health offerings is optimally designed to meet the escalating demand.
Our portfolio spend services for those with needs ranging from texting or having a video visit with the therapist for conditions such as anxiety and depression, to psychiatric treatment and medication management to those needing a Full Expert review and navigation of the healthcare system to get them back on their feet. The level of conversation amongst buyers and consumers alike has never been higher or with a greater sense of urgency. And I remained confident we will continue to see strong growth for the foreseeable future.
Continuing on the topic of clinical specialty innovation, in the third quarter we launched Teladoc, Medical experts in the U.S. market on-boarding more than 100,000 employees from UPS and Nationwide Insurance, leveraging the best of breed insights and capabilities from our Advanced Medical and Best Doctors acquisitions into one single experience. The Teladoc medical expert service creates a virtual center of excellence for individuals grappling with the challenges of complex physical and mental conditions.
With this unique service a doctor works with individuals right from the start to get timely answers regarding accurate diagnoses and treatment plans regardless of their geographic location. The Teladoc physicians are also equipped to help people navigate seamlessly across both the virtual and in-person healthcare landscape based on their individual needs and preferences. Leveraging Teladoc Health's proprietary analytics driven physician database to make smart referrals into preferred health plan and center of excellence networks.
Turning to the selling season, we see continued strong momentum, both in terms of net new clients and expansion of existing relationships. As we closed the year and entered 2020 our deal flow, RFPs and pipeline, all remained strong across the full breadth of our diversified distribution channels.
One highlight this quarter is our momentum in the UK. Our relationship with AIG Life is a great example of successfully leveraging our comprehensive integrated portfolio to realize three of our core growth dollars driving new innovation across the market, selling our integrated suite of services and expanding the population. Foundational to AIG expansion was Teladoc Health's successful registration with the Care Quality Commission, the independent regulator of Health and Social Care in England. I am proud of our team in the UK for earning this important stamp of approval as it paves the work for accelerated growth in this key European market
Turning to Medicare Advantage, client interest continue to grow with both existing and new health plan partners. We're seeing early evidence of success with several wins, including an agreement with one of our largest and most significant Blue's [ph] partners for their full Medicare advantage population as well as with five other plans. The pipe line of additional opportunities remains robust and are optimistic about the revenue impact, this initiative will have over the next 18 to 24 months.
And with that, I'll turn the call over to Mala for a review of the third quarter financial results.
Thank you, Jason and good afternoon everyone. It is good to be here today to talk about our third quarter results, which reflects the momentum we are seeing across numerous factors of our business and is a continuation of our track record of delivering strong performance and results.
As I go through the discussion of the quarter, it is worth reminding that this is the first quarter this year where our growth versus prior year is entirely organic, but for the small impact of the Medicine Direct acquisition to our financials. Total revenue increased 24% to $138 million for the third quarter as compared to a year ago.
As we continue to see a stronger U.S. dollar relative to last year against most major currencies in which we operate, FX adjusted revenue growth was approximately 80 basis points above our reported revenue growth. Now, as you know FX rates tend to fluctuate over time and we could see FX rates go in the other direction in future quarters.
Let's look at some details of this performance. I will start with U.S. paid membership and individuals with visit the only access. As Jason noted in his remarks U.S. paid membership grew this quarter to 35 million members up 55% compared to a year ago, as we father's scaled our member base by on-boarding new clients and expanding existing clients on our platform.
Membership growth in the quarter included the continued on-boarding of a large health plan as well as approximately one third of 15 million members in the commercial population of Unitedhealthcare. As a reminder, the U.S. paid membership does not include individuals with visits the only access. Our U.S. paid membership has expanded sequentially in 14of the last 15 quarters and reflects our entrenched distribution across several channels.
Individuals with visit the only access, increased to 19 million at the end of the quarter up from approximately 10 million from the previous quarter and reflecting approximately two thirds of the 15 million members in the commercial population of Unitedhealthcare.
Turning to visits, we had an excellent quarter with respect to visit volume with 928,000 visits and increase of 45% compared to a year ago. Our press release highlights the details of visit volume during the quarter. Visit volume from paid members in the U.S. grew 42% to 622,000, which represents an annualized utilization rate of 8% a 17 basis point increase over last year's third quarter.
The utilization rate in the quarter expanded even with the substantial increase in the population of U.S. paid members versus last year. Our leadership in the area of mental health drove visit growth of over 50% in the quarter.
The final point I'd like to highlight is that the growth in visits from new registrations is accelerating sequentially and year-over-year as we engage with members and drive adoption. Driving our overall revenue growth in the quarter of 24% was revenue from global subscription access fees of $119.1 million which accounted for 86% of our total revenue in the quarter and increased 23% compared to a year ago.
Additionally, U.S. subscription access fee revenue of $92.1 million continues to represent about three quarters of global subscription revenue, while international subscription revenue of $27 million accounts for the balance.
We saw the PNPN [ph] this quarter decrease as expected to 98% from $1.08 a year ago and from $1.06 last quarter. As we have previously indicated, we typically experience a dampening effect on PNPN [ph] when we onboard large new health plan member populations. Visit fee revenue for the quarter increased to $18.8 million representing growth of 31% compared to the prior year and constituted the remaining 14% of global revenue.
U.S. paid membership visits generated $14.1 million in the quarter, a 25% increase over the third quarter of 2018. This line includes revenue from general medical visit as well as other specialty visits primarily comprised of Expert Medical and Commercial Behavioral Health services. Visit fee only access revenue of $4.3 million comprised the remainder of visit fee revenue and grew 72% in the quarter.
Gross margin percentage for the quarter was in line with our expectations at 69% and consistent when compared to 69.2% in the third quarter of last year. The year-over-year consistency in gross margin percentage reflects strength in our diverse product portfolio as well as our disciplined predictable pricing approach as we continue to gain new clients and members.
In terms of gross margin dollars, we generated $95.2 million in the third quarter compared to $76.8 million a year ago, representing a 24% increase and in line with the aforementioned revenue increase.
Turning to expenses, operating expense in the quarter totaled $115.1 million, an increase of 24% from the $92.6 million in third quarter of last year. When non-cash charges such as depreciation and amortization, stock compensation, as well as one-time acquisition related costs are eliminated, adjusted operating expenses are $86.1 million or 62% of total revenue compared to $70.5 million or 64% of third quarter 2018 revenue.
The leverage in our adjusted operating expense includes year-over-year increases in advertising and marketing investments to support the on-boarding of some of our recently added member population, as well as engagements and acquisition activities.
Concluding my commentary of the income statement, our net loss in the quarter was $20.3 million compared to a loss of $23.3 million last year. The lower net loss included a one-time non-cash tax benefit of approximately $8.1 million or $0.11 per share reflecting planning associated with our global tax strategy. On a per share basis our net loss was $0.28 for the third quarter of 2019 compared to $0.34 in the prior year.
Moving to the adjusted EBITDA and EBITDA, adjusted EBITDA increased to a positive $9 million for the quarter which compares favorably to the adjusted EBITDA of $6.3 million from last year's third quarter, reflecting our revenue growth, gross margin performance, and ability to generate improved operating leverage. EBITDA was a loss of $10.3 million for the third quarter of 2019 as compared to a loss of $6 million for the same period last year.
Turning to the balance sheet, we ended the quarter with $490.9 million in cash, cash equivalents and short-term investments. Sequentially our cash balances have improved by roughly $18 million, which is largely reflective of our year-to-date positive cash flows from operations of over $10 million and reinforces our confidence to deliver positive cash flow for the full year.
Our total debt as of September 30, 2019 was $562.5 million which consists of our two convertible note issuances; the $275 million, 3% convertible note that matures at the end of 2022 and the $287.5 million 1 and 38 percentage note that matures during 2025.
In terms of our expectations for the full year and the fourth quarter, here is the guidance for the full year 2019. We are increasing revenue guidance to be between $546 million and $550 million. The increase in guidance is a reflection of our strong performance throughout the year, both on subscription and visit revenue, as well as better visibility into the ramp of recently on-boarded member populations.
We are tightening the guidance for EBITDA and adjusted EBITDA as follows. And EBITDA loss between $45 million and $41 million, adjusted EBITDA between positive $28 million and positive $32 million. We expect total U.S. paid membership of approximately $35 million members and visit the only access to be available to approximately $19 million individuals.
We expect total visits between $3.9 million and $4.1 million visits. Net loss per share to be between a negative $1.49 to negative $1.43 per share based on $71.9 million weighted average shares outstanding. And as we have said before, we expect to continue to be operating cash flow positive and have achieved that as of September 30, 2019.
For the fourth quarter of 2019 we expect total revenue to be between $149 million to $153 million. And EBITDA loss to be between negative $9 million to negative $5 million. Adjusted EBITDA to between positive $11.5 million to positive $15.5 million. Total U.S. paid membership to be approximately $35 million and visits the only access to be available to approximately 19 million individuals.
We expect total visits to be between 1 million and 1.2 million and net loss per share to be between negative $0.37 and negative $0.31 per share based on 72.5 million weighted average shares outstanding. In concluding my remarks, I am pleased with our financial results and I'm confident in our future ability to deliver consistent revenue growth performance as we scale while we continue to strategically invest in the business to enable our longer-term success.
One final point which relates to our Investor Relations team here at Teladoc Health. I'd like to welcome our new Vice President of Investor Relations, Patrick Feely [ph]. Patrick has a highly successful track record as an equity research analyst focused on healthcare services with stints at various banks, most recently at Barclays. He will start his role at Teladoc Health on November 4. I know I speak for the entire Teladoc Health team when I say we are very pleased to have Patrick join the company and I look forward to his leadership and contributions to our growth.
With that, let me turn the call back to Jason for his closing remarks.
Thanks, Mala. I'm pleased with our momentum across the full breadth of our business and I am deeply appreciative of the hard work and commitment from our team members who underpin our success.
I'm also pleased with how we have evolved or leadership team structure to support the growth, scale, and diversification of our business going forward. With this new structure in place Peter McClennen has decided to transition out of the company at the turn of the year. Having joined Teladoc Health as the CEO of Best Doctors, over the past 2.5 years, peter has played a pivotal role in shaping the integration of our offerings, teams and go-to-market strategies. I'd like to thank Peter personally and on behalf of the entire Teladoc Health team for his contributions to the business and his passion for the mission.
I often speak about our many strategic differentiators, scale of global distribution, membership engagement, clinical quality and our network effect. We see these come to life as our clients increasingly embrace the growing strategic and economic value that Teladoc Health's unique offering can provide. It is gratifying to know that consumers also know the difference, ranking Teladoc Health highest in overall satisfaction as well as first in customer service according to the first ever JD Power Teladoc Health satisfaction study which was released earlier this week.
Looking to the fourth quarter and the full year, we remain confident in our ability to deliver on our improved expectations as we lean on the broad-based strength of the business. We're also turning our attention to specific plans for the coming year. We look forward to meeting with you at our 2020 Investor Day which we are planning to host in March.
As always, thank you all for your continued interest in the Teladoc Health story.
And with that, we'll open the call for questions. Operator?
Thank you. [Operator Instructions] Your first question comes from Lisa Gill with J.P. Morgan. Your line is open.
Thanks very much, good afternoon. Jason, you know I have to ask this question and I know you talked a little bit about this selling season and saying that both [indiscernible] and RFPs were strong, but can you just give us a little more color around two things: one you talked about expanding relationships?
Can you just give us any numbers around where people are expanding, What they are adding to their relationship is that it is health plans and they are adding more live, is it employer customers that are adding more clinical services across the platform I guess for either of their customer base. And then as you think about that, RFP activity has been strong, how do we think about that year-over-year as we go into 2020.
No surprise Lisa. I'd be disappointed if you didn’t ask. So there is no question this selling season has been incredibly strong and it has been – that has been the case across multiple of our selling channels. In particular, we've had a great year in the health plan space, International growth has been good. Hospital and health system client base continues to grow at a very rapid rate.
And I think I can give you a little bit more insight, as we look at RFP volume, it is probably up probably up about 25% year-to-date over last year. Our bookings are up probably 30% over last year. Deal size is up, so both in terms of average deal size as well as median deal size, which of course the median takes out the outliers on the large side. And very importantly and I think you - this is part of your question, are multi-products growth has been a strong contributor to our bookings. So when I talk about multi-products, that means we’re selling multiple products into a new client or we're selling additional products into an existing client.
And multi-product bookings have represented about half of our bookings year-to-date worldwide. So I think that's really a testament to the breadth of our product portfolio and our strategy of increasing our clinical services to become a holistic virtual care solution for our clients.
Yes, and as we think about the multi-product booking that you just talked about, about half of them this year, just kind of to put that in perspective versus last year, I mean as Mala said, this is the first quarter where virtually everything is organic. So you've had the product offering out there and now this is kind of the second year of having that full product offering. How do we compare that year-over-year as far as what people are buying into?
Yes, it’s up significantly relative to last year as a percentage of our bookings. So, as I said, it's about half of our bookings this year are multi-product sales, and that's up significantly as a proportion of our bookings at this time last year.
Okay, great. And then just my last question, and I know it's early to think about 2020, but when we were together in September, you talked about your confidence in the longer-term revenue growth of this company being between 20% and 30%. Is that still a number that that you feel confident based on what you've seen to date for new business wins as well as expansion going into 2020?
Absolutely, I still feel very good about 20% to 30% for the foreseeable future as our top line growth. Mala, I don't know if there's anything you want to add to that?
I'd say, I'd echo that. I'd also remind you the base is getting bigger every year. We feel pretty confident about the initiatives we have in place. You've seen the unprecedented membership expansion that we had this year. Obviously, we will work to activate that and that will have an impact on not just 2020, but our growth beyond that. So I would say, Lisa, we have all of the right initiatives and the right plans to invest to drive that growth.
Okay, that's helpful. Thank you very much.
Thanks, Lisa.
Your next question comes from Jamie Stockton with Wells Fargo. Your line is open.
Good evening. Thanks for taking my questions. I guess maybe the first one just on the sales and marketing spend. I think maybe Mala mentioned that you guys obviously on-boarded a lot of lives to United and you had another big I think health plan that you on-boarded during the quarter. So if I remember correctly from your comments last quarter, specifically with United should we think about this big spend this quarter as being kind of the expense of getting those lives on-board or will there probably be another kind of round of incremental spending that hits in Q1 more kind of in line with the normal benefit cycle for those individuals?
Yes, Jamie, great question. I'd say it's both. I'd say we - as you can see from our financial results, we did invest in marketing spend this quarter. I'd say for a couple of reasons. One is as you noted, we have a huge membership expansion. We did invest ahead of that, so that we can put the right plans in place to activate those members. And we continue to invest efficiently in driving customer acquisition. So I would say that’s the second. And the third I would say is, we are leaning in to the cold and flu season that is upon us. I would say though, you should expect to see additional marketing spend as we go into next year as we will continue to activate the new members.
Okay, that's great. And then maybe just one more. It just got a lot of attention on the call last quarter, but from a timing standpoint, I think it might be more relevant now, the Aetna renewal just any color on what's going on there or how that relationship is that would be great?
I would say no change to my comments from last quarter. I feel very, very good about our relationship with Aetna and both sides of the house there, Aetna and CVS. CVS continues to roll-out to more states. We're now at 39 states plus the District of Columbia with the CVS video visits rollout and very strong relationships with my expectation for continued product expansion with the Aetna population. So I continue to expect Aetna to be a strong and great client for many years to come.
Okay, that's great. Thank you.
Thanks Jamie.
Your next question comes from Stephanie Damko with Citi. Your line is open.
Hey guys, thank you for taking my question and Patrick, welcome to team. So when I think about the levers to accelerate your revenue, utilization is always my biggest question mark. And with that in mind, I saw a very healthy jump in your advertising expense this quarter. Could you tell me a bit more about the drivers in any advertising initiatives you could be seeing soon coming out of Teladoc?
Yes, so thanks for the questions Stephanie. I think advertising spend falls into two main buckets for us. One is driving utilization as you indicate, and of course as we onboard large populations, we spend to activate that population, drive utilization, drive first registrations, and then utilization and visits. That increases as we onboard large populations. And I think you'd see that reflected in the quarter.
The other part of it is in our direct-to-consumer business where we're spending against customer acquisition. We continue to get more efficient on both of those. So we are relentless about measuring the yield that we get out of the spend on both of those channels. And we continue to see improvement in the yield that we get out of those, so reducing our customer acquisition costs on the direct-to-consumer side increasing our yield of visits per dollar spent on the utilization side.
Yes. And Stephanie, let me add a little bit of color. Jason talked about the direct-to-consumer. We are always looking at our channel mix. We are looking at where we spend our marketing spend across the different channels in different times of the year because as you probably know, different channels cost differently.
So, we are continuously sort of tweaking, changing and managing our channel mix. And then the second thing I would say is, to the point that Jason talked about activating the members, we do measure and have metrics internally where we are looking at our cost of acquisitions, costs for visits, et cetera. So we are measuring through the year on how we are doing against those.
And is there any way to quantify kind of how you are looking in the direct-to-consumer market if they're advertising channels you've exited or would not use going forward given the ROI?
Yes Stephanie, we are constantly rebalancing the mix depending on the campaigns that we have in the market, the yield that we get out of each one of the channels. So it may have been flow among various channels. Sometimes we light up new channels and we find that they're particularly productive for us and we certainly have some of those, but those are all pretty closely guarded components of how we manage the business.
Thank you, guys. And one quick modelling one. When you guys bought Advanced Medical, there was a lot of signalling, but the gross margins had been becoming down in a pretty meaningful manner, we haven't really seen that as much. Is there anything to call out that you've been able to improve upon that model?
Yes, we're consistently working and we have been since the acquisition on improving the gross margins of the Advanced Medical business. We've seen progress on that and we still see significant opportunity. And I think you see that very well in the strong gross margins that we've been able to post this quarter and the past several quarters. So, the gross margin continues to fluctuate a little bit with seasonality. You should continue to expect that, but we're proud of what we've done so far and we still see significant opportunity going forward.
So safe to say this is no longer a 65% margin mix that we were originally guided too?
Well, I think we're not saying that we're never going to get to the mid-60s, which is where we sort of guided over the longer term. We're just moderating the glide path to that.
And that’s it. Thank you so much.
Thanks, Stephanie.
Your next question comes from Richard Close with Canaccord Genuity. Your line is open.
Great, international related questions here, so and the paid visits revenue internationally declined 30%. I am just curious what happened there. Was that just the FX maybe you were talking about? And then, I guess bigger picture, how do you see the global opportunity developing? You obviously highlighted some things here with an AIG. I know, last year on the third quarter call, I think you talked about AXA Global Care. I am just curious how the international or global opportunity is playing out?
Yes, so Richard let me address the first question. As you can see from the numbers, you're right, it is declining 30%, it is literally the result of one particular client in Canada, where the case rate has gone down, and we are working very actively with the client to solve it. It's off of a very small base. So as you can tell, it is not really overly impacting our overall growth. And then Jason, the second question.
Yes, I'm really excited, Richard about the global opportunity. I think AIG is the perfect example of what we're likely to see across our international markets where we bring the full breadth of our clinical capabilities in order to increase the set of services we bring, the revenue, and the population that we serve. And we're running that play in multiple markets. I think AIG is the first of what I expect to be many to come.
All right, thank you.
Thanks Richard.
Your next question comes from Matthew Gillmor with Baird. Your line is open.
Hey, thanks for the question. I wanted to hit on the revenue guidance for 2019. You know, it looks like 3Q came in about $1.2 million above Street and you raised the full year 2019 revenue by more like $5 million to $6 million. So I wanted to understand sort of what drove that increase and how that carries into 2020. Was that sort of membership with new or existing clients or something else?
Yes so, the way to think about that is, I characterize is it in sort of three different ways. The first is, as you saw, we essentially delivered at the high end of our guidance for Q3. And so, we are reflecting the flow through of that to the full year. And then the second thing I would say is, as Jason referenced in his remarks, we are seeing great momentum across many facets of the business and he particularly highlighted mental health.
We are calling it mental health. We've called behavioral health in the past on past calls. So, we are reflecting the momentum of that part of the business. And then I would say more broadly, we are seeing as you can see from our momentum, we are seeing really strong momentum on visits. So we are essentially factoring all of those into the guidance pick up this time.
And Matt, I guess I would just add that the third quarter results reflected some mid quarter adds. We were pretty public about the launch of United on September 1, so we only get one month of that in the third quarter, but obviously we get our full three months of it in the fourth. So the run rate coming out of September is bigger than the average over the quarter.
Yes.
Got it that's helpful. And then Jason I did want to get an update on Medicare Advantage. It sounds like the momentum there is really good. Can you share with us how that markets developed, are they contracting in a similar way to the traditional business and how are Medicare Advantage plans, these initial ones that are using telehealth looking to use it for their members?
Yes very similar structure to our commercial membership, we're seeing PMPMs plus visit fees. We've already rolled out some MA populations over the course of this year, as we've expanded with some of our large clients. And as I pointed out, we have six already under contract and a robust pipeline still to come. So I would expect that market to develop. As I've always said, I expect that to be sort of a three year development for that to fully flow through the entire MA population.
Health Plans never uniformly move on mass the first year that something is available, And to be honest, you know, we're still seeing some of the MA plans, who are processing the new rules and figuring out exactly how they're going to put it into their plans. So we're actively engaged with our clients and prospects around how to do that. In some cases, we're sort of educating them on the rules because we can be specialists in that part of the rule.
Got it, thank you.
Thanks, Matt.
Your next question comes from Sean Wieland with Piper Jaffray. Your line is open.
Hi, thanks, its Sean. I think the growth in members is probably I am asking an underlying trend is utilization. And I was wondering if you could speak to that and help us understand, what the true growth of utilization is maybe in terms of other members that were paid members of last year this time, what does that that growth in utilization look like?
Yes, so the way I would think about it Sean is, we talked about us being at an 8% utilization rate for the quarter. If we were to "normalize" it, if you will for, the extra population that we added on, it is, think of it about 50 basis points higher approximately for the quarter.
So that 50 basis points that's not an annualized 50 basis points. That's for the quarter?
No, no, sorry it's – think of it on an annualized basis to be 50 basis points higher.
Within the quarter.
Within the quarter.
Within the quarter, okay got it. And then that's helpful thank you. And then, in terms of your guidance, bump up on revenue tightening the range on EBITDA, what is this trying to communicate to us in terms of the incremental profitability of these new adds?
Yes, that's a great question. So, here's what I would say. First of all, just for context and a reminder, if you look at the midpoint of EBITDA of the range that we have given, it's more than doubling the adjusted EBITDA from last year. It's also in Q4, we are calling on a delivery for the fourth quarter that is roughly about equal to what we have delivered from an adjusted EBITDA through Q3.
We feel very confident that we are able to – that we see a clear line of sight to delivering that. And it is based on all of the same levers that we talked about in Q3, either revenue growth, the gross margin delivery that we expect in Q4. Now, I will remind you the gross margin in Q4 is typically more muted from a seasonal perspective relative to the other quarters. And then the operating leverage that we hope to drive in Q4. So, I would not say that we are trying to communicate anything different from what we have said before and from what our levers are to drive EBITDA, adjusted EBITDA year-to-date.
Okay, thank you very much.
Your next question comes from David Windley with Jefferies. Your line is open.
That's perfect, because I had the follow-up question to Sam's question. He only seemed like a Sam to me. The question Sean’s question obviously, the question that I have is around utilization and if you could share with us the range of utilization from your obviously very low for the most recently on boarded I'm presuming. To what kind of levels are you achieving and what is characteristic of the highest achievement?
I think there were some mentioned in the prepared remarks about multi-product plans. Obviously the ones that have been on your platform for longer, but kind of interested in the profile of those. And then, you've talked about advertising, what type of, how important is it? And what type of initiatives are you taking on to drive utilization towards those highest levels?
Sure, thanks, David. We've talked about multiple times, the fact that we have clients up in 80% to 100% utilization range. In fact, our own employee population is north of that. Those tend to be employers where we have very close relationships and we can do direct communications and we work hand in hand with the employer to promote the services. It also tends to be where we have a broad scope of our products and services in the population. Those multi- product implementations.
I can give you a couple of stats that sort of help to set the tone around why we feel confident about the continued growth of utilization. First, I would say 50% of the growth in visits year-over-year are coming from new registrations. So that's very, very strong for us because it keeps the flywheel moving, right. We continue to add more people into the mix. And having said that, about 60% of our total visits come from, at least in the general medical population, come from existing users.
So we're adding more people and we get repeat utilization. And so we're seeing increased visits per user. And then lastly, as you think about those new products and services that we bring to market, they frequently are stickier or create more visits per user. So in our mental health population, almost 80% of our mental health visits are from repeat users, meaning it's not their first visit, but rather it's a second or third or fourth or fifth visit in the cycle of their treatment.
And so, if you put all that together, we feel really good about the underlying model. And then layering on top of it is our surround sound engagement model, where we have a very, very strong data underpinning. We apply data science against it to target where we're going to communicate in digital channels, in work site channels, in partnership with our clients, in the home, and increasingly on a more generalized basis because now with over 50 million people, who have access to the Teladoc platform, those more generalized lower cost channels can be really effective for us.
Appreciate that. Thanks for the complete answer. My follow-up question is around trends in PMPM versus visit fee only, as you mentioned in MA and the answer on MA, that you're seeing similar pursuit from the health plans with PMPM [ph] plus fee and in the UNH was a third PMPM of the total 15 million I believe. I guess I'm curious what your dialogue with health plans sounds like in terms of the interest in pursuing, continuing to pursue PMPM models that I believe also help to fund and contribute to your ability to grow that utilization?
Yes, so that's exactly right. Your last phrase is exactly the right lever. We've proven our ability to drive higher utilization levels. And that is in the best interest of our clients. And they come to us and we model out what we can drive for them and what we can save for them.
And they get a very, very strong ROI on the total spend which includes both the visit fee and the subscription fee. We only have a handful of very, very large clients in that bucket of visit fee only and so I would call those the exception, not the rule and really not a trend.
So it's interesting, I was looking back at what our PMPM and membership was four years ago, the first quarter after we went public, and we had 12.6 million members and a $0.45 PMPM. So people have been asking whether the PMPM is sustainable and can continue to grow over time since we went public and we've more than doubled it while we've gotten to the point of being now more than 15 million people who have access to the platform.
Sorry, if I could, if I could turn that question around, and then I'll drop off, I promise, but maybe to come at it the other way, what's the logic behind United not putting all 15 million members in PMPM?
Yes, so I'm not going to comment on the specific negotiations in discussions with an individual client or put words in their mouth that would put me over my skis. So with due respect, I'm probably going to pass, okay.
All right. That's fine. I'll ask them. Thank you.
Okay.
Your next question comes from Ryan Daniels with William Blair. Your line is open.
Hey guys, this is Nick speaking out in for Ryan. I guess on this new product offering with the mental health, combination, I was wondering why only limit that to the hundred thousand members I think it was and then who exactly is receiving that benefit?
Yes, so you're talking about Teladoc medical experts, thanks for the question
Yes.
We just sold it to our first hundred thousand employee client or two clients with a 100,000 employees client, or two clients with that was UPS [phonetic] and Nationwide Insurance. This is our really an enhanced combination of the expert medical services that were offered by best doctors. The Expert Medical Services they were offered by Advanced Medical and the Mental Health Navigator that we stood up roughly at that same sort of at the roughly at the same time that we were doing the Best Doctors acquisition and putting them all together into a physician led Expert Medical Service that's really holistic and spans across medical and mental health.
And also spans across virtual care and the physical delivery system. We're really excited about the prospects here. We think this is not only going to be a very attractive product for clients, but also make a big impact on the health of our members. And we see this as just the beginning of a big trend.
And was this something that they came to you looking for or was that something that you offer to them kind of like on your own side?
It was a little bit of a combination of both. Nationwide was an existing client and we transitioned them onto this product and or we added it in really and UPS was going to market looking for a solution kind of like this. And we were able to meet their needs by pulling together several of our assets into a single solution. We were already moving down this path anyway, so it was a sort of a convergence of those.
Got you, thanks. And then kind of shifting gears a little bit, I've seen quite a bit of data regarding flu season, I mean how it's supposed to be a pretty bad one here. I was wondering if that's reflected at all in your guidance and then, if not like would that represent an upside I guess to where we're guiding at?
Yes, so right now the early indications that we are seeing, we are obviously monitoring it all the time. It's very, very early for us to take a call on how much worse or not it is relative to last year. So at this point in time we have not made those specific assumptions of it being much worse than last year. It's too early to tell.
Got you. That makes sense, all right, thank you. Thanks, so I'll hop off. Have a good night.
Thanks Nick.
Your next question comes from Daniel Grosslight with SVB Leerink. Your line is open.
Hey guys, thanks for taking the question. I just got a couple for you on the mental health side of the equation. So I think last quarter you noted that you expect to see around 50% growth year-over-year on the mental health side and so about 90 million bucks of mental health revenue for this year. Wondering how you're tracking to that $90 million guide? And then you also noted that mental health RFPs were up around 200% year-over-year last quarter. Can you comment on the win rates you're seeing on those RFPs and what we can expect free growth rates in 2020.
So let me address the first part and then I'll turn it over to Jason. What we specifically said is that we expect the mental health business to grow over 50% north of 50% this year. And so far we feel pretty good about the momentum that we are seeing coming out of the business. I've talked about it, Jason talked about it, et cetera. Hey Jason?
Yes. On the RFP side, we don't generally release win rates within any part of our business. Mental health falls into in many cases the multi-specialty or multiproduct, RFP is - we're, it's only - it's rare that we're seeing just in mental health RFP isolated, more often we're seeing a multi-product RFP that includes mental health, and we tend to have a very good win rate in those RFPs because of the breadth of our product portfolio.
Got it. And just in terms of growth rate, obviously you're working off of a bigger base now. But how should we think about growth rate in that segment of the business, both DTC and the B2B side of it?
So we won't comment on specific growth rates for parts of the business, specific parts of the business. I think that is something based on the color we have provided and the comments we've made. That is just something that you will have to sort of just factor in and reflect in your model.
Understood, thank you.
Your next question comes from Matt Hewitt with Craig-Hallum Capital. Your line is open.
Hi, guys, thanks for taking the questions. This is Lucas Baranowski on for Matt Hewitt. My guess my first one here you've talked in the past about how your first go live date in Canada was scheduled for Q3 and it sounds like that occurred. So maybe you could just tell us what kind of traction you're seeing in Canada generally?
Yes, great receptivity in Canada to our new telemedicine offering there, which of course, is in addition to our Expert Medical Services, which were there already, and our Mental Health Navigator. So that's another example of us continuing to expand the product portfolio receptivity has been really good. We launched with a client, the Johnson Group as our first client, and we're already seeing additional interest and we're seeing good traction with that client.
Okay, that's great to hear it. And then I guess just with some of the noise around potential competition. I guess we were just wondering what levers could you pull to maintain your margin profile, as competition comes in and decides to compete on price?
Well, I think there are a few things. One is we have unmatched scale, right. And so scale gives us a competitive advantage with respect to costs, and enables us to protect our margins. Two, is the nature of our broad product portfolio enables us to not compete on a single product, but rather to compete as a full holistic virtual care solution and that is really a different offering. It's incredibly difficult to replicate the entire breadth of our product portfolio. And as a result, we're in talking about an entirely different strategy than anyone else can in the market or new entrant into the market.
And the other thing I would also add is, we are really the only one who activates and writes membership engagement and that really helps the returns for our clients. And all of that allows us to not only drive to further scale, but also from a pricing perspective as we talk about extending relationship. So it's all of the things that Jason talked about in his closing remarks on what are our strategic differentiators.
Okay, thank you very much, that's helpful.
Thanks, Lucas.
Your next question comes from Charles Rhyee with Cowen. Your line is open.
Hey hi, thanks for squeezing me in here. Hey I just wanted Jason, if I could just jump back to some of the earlier comments when we’re talking about activating and engaging, obviously the United population is coming on. Are you guys able to bring all your engagement tools to bear when trying to reach out to this population? And is there any differences between how you can activate these members whether they're a between - is there any differences if there are visit only member versus a U.S. paid member?
So, I won't get into the details of all the tools that we're going to use, but what I will say is it's extraordinarily collaborative with the UHC team. Our marketing teams have been working together for months in launch planning, communications, collaboration, using joint capabilities between the two organizations. And so, I feel really good about both collaboration between the two organizations and the yield that we're going to get out of that – those efforts.
Okay and maybe just on the visit for you only Mala, everything about the modeling. For visit the only visits when we think about the way we should model it should we think about sort of the revenue per visit, similar to more like the Aetna contract, or at least the numbers that we were kind of told a few years back regarding that or how should we think about that as we build out our models?
Yes, so we have always said that our visit fee only population is not just Aetna. It is a mix of customers. And, we obviously have been fairly public with the pricing we have with Aetna, but we have more than Aetna in our visit only population. So what I would say to you is, just think about that broader mix. Look at our results from a visit, revenue perspective and the visit count and growth that we have for VFO and you will be able to come to from a modeling perspective, more of a weighted mix.
Okay, okay I think that I think I understand what you're saying here. And I am going to just squeeze little more in about CVS, you talked about how that’s ramping up and we're now in 39 States. Can you talk about how this ramp up works as well, since I would imagine, you don't really reach this population directly. Is this really more incumbent on CVS to drive members that access their app or the website to the sort of the virtual service and can you remind us how that's captured maybe in your visit numbers, or is it separate? Thank you.
So the answer to the first part of the question is yes, this is a private label service where we power it with our technology. We provide the clinical services, although the agreement as we've discussed before does provide for the opportunity for their providers also to provide the clinical services, again using our technology. But they are responsible for the marketing and engagement of their customers. And then with the second part of the question, we capture any visits that are on our platform in our visit volume.
Would that be in the U.S. state member volume or is that visit fee only volume?
No by definition there is not a membership and so it's in visit fee only.
It’s in the visit fee only.
Okay, perfect, thank you.
Thanks, Charles.
Your next question comes from Allen Lutz with Bank of America. Your line is open.
Thanks for taking the question. The 4Q EBITDA range is pretty wide, can you talk about what gets you to both the top and bottom end of that range?
So, the way I would think about it is as follows, you are to look at the revenue growth rates and I'd look at it both sequentially from Q3 and I would also look at it from a year-over-year perspective for Q4, so that's number one. The second thing I would say is, we have definitely always in Q4, lower gross margin, typically because of the, greater mix of visits and visit revenue, but again, like I said, we are very early in the flu season.
At this point in time, I would stay with the midpoint, but depending on that, that could change whether you are at the bottom end or the top end, so that's the second thing. And then the last thing I would say is, we are definitely going to drive more leverage in the fourth quarter from an OpEx and a spending perspective. We will typically, as we have talked about marketing spend into Q3, we are pretty judicious about when we buy, how much we spend from a marketing perspective. So I do expect to drive leverage on that. So I would say, those are typically the factors that will drive us either at the bottom end or the top end of the range. But – at this point in time, I wouldn't say there's any other extraneous set of factors other than those.
That's helpful and then on BetterHelp. Is revenue growing faster than advertising or are you viewing this as more of a land grab and you're willing to spend up to get an incremental member? Thanks.
So we haven't broken out either the revenue or the advertising spend for BetterHelp or DTC channel. What we have said and what we continue to find is that our customer acquisition costs continue to come down, so we're getting leverage out of that. Our pricing continues to be strong and our lifetime value of a member continues to increase. So you can sort of derive the answer from those factors and we feel good about the direction all of those are heading.
And I would also say, the data we track shows our membership churn is also improving. So it's all of those different factors that essentially will allow us to get to a greater lifetime value and the ROI.
Great, thank you both.
Thanks Allen.
[Operator Instructions] Your next question comes from George Hill of Deutsche Bank. Your line is open.
Hey, good evening, guys and thanks for squeezing me in at the end or I think I'm near the end. Jason, I have a question I guess improvement about the competitive environment and how you talked about this holistic virtual care solution, we're seeing a lot of plain sponsors, particularly on the employer side, start to bring in what I would call like these niche. They're not perfect telemedicine comps, but niche companies that do like an integrated tech stack and services around things like back pain, musculoskeletal, obesity, diabetes, and I guess just how do you think about whether those things I guess, compete for a wallet share with Teladoc whether there are complimentary opportunities for Teladoc or is that like share of wallet that you guys trying to take in the future and just kind of, I guess how you're seeing that edge of the market evolve?
Yes, it's interesting. We're seeing quite frankly quite a bit of vendor fatigue, especially employer clients who have one of each of the things that you just described and they're uncoordinated and they have to deal with each one of those vendors and so they prefer to come to us for a holistic solution.
So you talk about musculoskeletal, we have a partnership with Telespine which gets delivered through our interface in a seamless experience. We also bring the Expert Medical Services around musculoskeletal, so that we can do treatment decision support before someone has back surgery or something like that.
Our partnership with Vida, where we're going to bring a seamless program to market, through our interface is really resonating with our clients and prospects, because it has the promise of being a virtual multi-specialty practice combined with a virtual center of excellence, all wrapped into one and kind of obviates the need for all of those individual point solutions. So we're going to continue to focus on that holistic solution. And we've been pretty methodical about building out all the various components of that or partnering or acquiring for them where we see that it's appropriate.
Okay, that's helpful. Thank you.
Thanks, George.
Your next question comes from Glen Santangelo from Guggenheim. Your line is open.
Yes, thanks for taking the question. Jason, I just wanted to follow-up on some of the comments you made earlier with respect to PMPM pricing. I appreciate the fact that the company's done a great job over the last four years sort of growing that number, but I'm just kind of want to tie that back to some comments you've made more recently that the company's goal remains to be to sort of grow that PMPM pricing by $0.05 to $0.10 a year.
And I'm trying to reconcile that with some of the comments you made with respect to having a strong health plan pipeline. And I appreciate the dilutive impact of bringing on those big populations. And so given the comments you made about your pipeline like how should we think about that number on a go forward basis, at least in the near term and then now I'm not sure kind of what's implied in the 4Q number and how we should maybe think about 2020 in that regard?
Yes, so what I would guide you to is, we have always said that when we onboard large populations, there will be a temporary dampening impact on the PMPM. What I would expect is you should actually remember that we launched United only in the last month of the quarter.
So if you think about the PMPM in Q4, you will continue to see a depression in the – or dampening in the PMPM for Q4. But what you should also see is what you should also see is over time, you will see the PMPM reassert and grow and the thing I would say why because again, we are today a diverse set of businesses and channels right all the way from the health plans that you've talked about where yes.
The PMPM is one thing for a health plan, but when we sell through the broker channel for example, the PMPM that we have there is multiples of what you see in the health plan that's a channel for us. So, I would say think of us as a diverse portfolio of channels with different PMPMs.
And what you are seeing us deliver and demonstrate because of that diversity of channels is a growth in PMPM, absent the temporary impact of when we onboard large populations. The one other thing I will tell you is if we were to again normalize for the expansion that we had in the quarter, our PMPM would really be at about 107.
Okay all right.
So you should, you will see, so that's the point I'm making about, the dampening and then you should see it growing back.
Okay, that's helpful. Maybe I can just follow-up one question on the selling season. I think you touched on this a little bit, but it sounds like with the RFP volume up 25%, Jason, are you seeing any increased interest in one of the revenue models, whether it be PMPM or shared services or visit fee only? Are you seeing more interest in one way or another and does the company have a strong preference one way or another? Can you - do you prefer PMPM because you can increase the membership engagement what's the company's preference and what are you seeing from the customers at this point in time?
Yeah, the RFP volume or content is pretty consistent with what we've seen historically. We're not seeing any major shifts in that. And what we've always said is that we have enough data enough experience and the sort of underlying analytics to be successful, regardless of what the economic model is, and we know how to price the business according to the expenditure and the costs that we're going to lay out in order to deliver it. So, we have target gross margins that we work to, and we're able to dial in, regardless of what the economic model is.
Okay, helpful. Thank you.
Thanks, Glenn.
There are no further questions at this time. I’ll turn the call back to the presenters for any closing remarks.
Thanks very much. I Appreciate it. We're excited about what was another great quarter and thank you for joining us.
That concludes today's conference call, you may now disconnect.