Teladoc Health Drives Performance Growth Through Strategic Acquisitions and Service Expansion

On January 12, 2020, Teladoc Health, a leader in the U.S. telehealth sector, announced its acquisition of InTouch Health for $600 million. InTouch Health is a pioneer in acute care telemedicine solutions, partnering with more than 450 hospitals and healthcare systems worldwide and serving over 14,500 physician users. Additionally, InTouch Health supports more than 130 health systems and 2,135 care sites, covers over 40 clinical use cases, and was ranked by KLAS Research as the world’s leading virtual care platform for two consecutive years.

Upon completion of this acquisition, Teladoc Health will become the world’s only telehealth company covering all care domains. Its business will span from intensive care and chronic disease management to routine care, extending even to settings such as homes, pharmacies, retail locations, physician offices, and ambulances. This positions Teladoc Health to significantly increase its likelihood of partnering with health systems seeking a single, comprehensive telehealth solution. Furthermore, the acquisition is expected to drive long-term revenue growth for Teladoc Health.

This positive news was quickly reflected in the stock of Teladoc Health (NYSE: TDOC). On January 13, Teladoc Health’s stock opened at $89.04, surged to an intraday high of $98.975, and closed at $95.97, representing a significant 12.7% increase from the previous trading day’s (January 10) closing price of $85.16, thereby setting a historical record for its closing price. With over 4.25 million shares traded, the day’s volume ranked as the eighth highest in the stock’s history, fully reflecting investor confidence.

On January 30, Teladoc’s closing price rose further to $104.75, setting a new all-time high.As of the last trading day before this article went to press (February 3, 2020, Eastern Time), Teladoc Health’s closing price reached $101.99.

TDOC's Stock Price Trend Since Its IPO

TDOC Stock Price Trend Since 2018

As a leading telehealth company, how has Teladoc Health achieved such impressive operational performance? VCBeat (WeChat ID: vcbeat) has also summarized the company’s business trajectory over the past two years.

For a summary of Teladoc’s operations prior to 2018, please refer to VCBeat’s previous articles:“Decoding the Data Behind Teladoc’s Rapid Growth: Continuously Improving Its Telehealth Business, Then Acquiring, Acquiring, and Acquiring!”）。

Let’s turn the clock back two years. On February 27, 2018, Teladoc Health released its 2017 annual report, which showcased robust growth. Investors reacted swiftly; however, by today’s standards, the stock price was not particularly high at that time, with a closing price of just $37.30.

However, since then, Teladoc Health’s stock has shown a steady upward trend, closing at $50.6 on May 24, 2018, and breaking through the $50 mark for the first time. It reached the peak of this rally on September 28, closing at $86.35.

However, this rally did not last long. For a full year, Teladoc Health’s stock price oscillated between $50 and $75. Of course, compared with the previous level of below $40, the stock price had already made a significant leap.

On October 31, 2019, Teladoc Health’s closing price reached $76.60, a 10.7% surge from the previous day’s $69.20, marking its first breach of the $75 threshold in nearly a year. This event heralded the start of another upward trajectory for Teladoc Health’s stock, which ultimately climbed to an all-time high of $96.87 not long ago.

In addition to the positive news from the acquisition of InTouch Health, the financial results disclosed in Teladoc’s current report released at the J.P. Morgan Healthcare Conference on January 13 were also a significant factor driving the surge in its stock price. According to the earnings forecast, Teladoc Health’s revenue for the first quarter of 2019 is expected to reach $155–156 million, an upward revision from the previously projected range of $149–153 million. Meanwhile, the number of service visits is projected to exceed 1.2 million, also higher than the prior estimate of 1–1.2 million visits.

Teladoc Health Financial Reports in Recent Years (in millions of USD)

A review of the financial reports from the past two years reveals that the company has maintained robust operations, with continuous growth in both revenue and customer base. On an annual basis, projected revenue for 2019 reached $552–553 million, representing a more than twofold increase from the $233 million recorded in 2017. In this light, the rise in Teladoc Health’s stock price appears well justified.

Teladoc Health’s Recent Quarterly Reports (in millions of U.S. dollars or millions of visits)

Since the fourth quarter of 2017, Teladoc Health’s revenue has continued to grow: revenue in Q4 2017 was $77.1 million, and by Q3 2019, quarterly revenue had reached $137.9 million. According to official projections, revenue for Q4 2019 is expected to range between $155 million and $156 million, representing a doubling of quarterly revenue.

Of course, Teladoc Health remains in a loss-making position, but at its current scale, the losses are still manageable. In 2018, Teladoc Health reported an annual net loss of $97 million. Although the full-year financial results for 2019 have not yet been released, data from the first three quarters show a net loss of $79.8 million, slightly higher than the $72.3 million recorded during the same period in 2018. Therefore, the full-year net loss for 2019 is expected to remain at a level comparable to that of 2018.

Due to variations in financial adjustments across companies, adjusted EBITDA figures reported in different companies’ financial statements are not directly comparable; however, this metric remains somewhat referenceable for tracking performance over time within the same company. For the full year 2019, Teladoc projected an adjusted EBITDA profit of $28–32 million, representing a significant increase from the $13 million adjusted EBITDA profit recorded in 2018.

According to official disclosures, the company’s operating cash flow reached $12 million in the third quarter of 2019, while its total assets had already hit $1.5 billion as early as 2018. Based on historical growth rates and using a conservative forecast, it is highly likely that its total assets surpassed $2 billion in 2019. Overall, Teladoc Health has maintained a solid operational performance over the past two years.

So, what has Teladoc Health done in the recent period to support its strong performance? We have summarized the operations of Teladoc Health and found that the company has mainly focused on acquisitions, enhancing product capabilities, and brand public relations in the past period.

Teladoc Health’s rapid growth can be largely attributed to its aggressive acquisition strategy. From 2013 to the end of 2017, Teladoc Health completed eight mergers and acquisitions. In the nearly two years from 2018 to the present, the company has executed four additional acquisitions and investments, truly embodying the “Snake” game analogy.

On May 31, 2018, Teladoc Health acquired the Spanish telemedicine provider Advance Medical for $351.7 million. The company’s Q2 2018 earnings report, released in August 2018, revealed that Advance Medical generated $62 million in revenue for Teladoc Health during that quarter.

This acquisition enabled Teladoc Health to expand its operations into Latin America and Asia, aligning with the company’s broader global market expansion efforts. During this period, both international membership revenue and international visit volume saw significant growth: international membership revenue rose from $10.7 million in Q1 2018 to $24 million in Q3, while international visits surged from a negligible figure of just over 1,000 in Q1 to 166,000 in Q3.

On March 19, 2019, Teladoc Health acquired the French telemedicine provider MédecinDirect. With over 40 insurance partners, MédecinDirect held nearly half of the market share among France’s 30 largest private health insurers. This acquisition enabled Teladoc Health to enter one of Europe’s largest markets and serve as a springboard for further expansion across Europe.

Following this acquisition, Teladoc Health saw further growth in its international member revenue and visit volume. In the third quarter of 2019, international member revenue reached $27 million, setting a new record high, while international visits increased and stabilized at 244,000.

In June 2019, Teladoc Health announced that it led the $30 million Series C financing round for Vida Health. Vida Health is a telemedicine platform that provides personalized healthcare services for mental and physical health, particularly for chronic conditions.

Through its investment in Vida Health, Teladoc Health can rapidly strengthen its portfolio in mental health and chronic disease management. Statistics show that 60% of American adults have one chronic condition, 40% have two or more, and over 68% of Americans have at least one risk factor for mental illness.

Shortly after investing in Vida Health, Teladoc Health announced the launch of its Teladoc Medical Experts service for complex mental and physical health conditions.

In January 2020, Teladoc Health announced the acquisition of InTouch Health. The $600 million deal marked the largest acquisition in the company’s history.

InTouch Health is a leading provider of acute care telemedicine solutions. Its scalable platform delivers care for any use case under any circumstances. The company partners with more than 450 hospitals and health systems worldwide and serves over 14,500 physician users. It supports more than 130 health organizations and 2,135 care sites, covering over 40 clinical use cases.

The acquisition is expected to be completed in the second quarter of 2020, at which point Teladoc Health will become the only telehealth company globally covering all care domains. Its services will span from intensive care and chronic disease management to routine care, extending even to settings such as homes, pharmacies, retail locations, physician offices, and ambulances. This will position it as the preferred partner for health systems seeking a single, comprehensive telehealth solution.

Overall, Teladoc Health has continued its consistent pattern of making bold acquisitions over the past two years, which has been a key driver of its rapid growth.

In addition to major acquisitions, Teladoc Health has focused on enhancing its product capabilities over the past two years, launching multiple products and services.

First, in April 2018, Teladoc Health launched the Behavioral Health Navigator service in the United States, an integrated telepsychiatry consultation platform. Users can remotely consult experts on mental health issues.

In August 2018, it partnered with Partners HealthCare to launch the Partners HealthCare On Demand service, providing users with urgent care video services.

In September 2018, the company launched Teladoc Global Care to serve users worldwide, with overseas assignees of multinational corporations—the company’s primary clients—being the main beneficiaries. This service is also part of Teladoc Health’s global strategy, driving rapid growth in its international operations.

In January 2019, Teladoc Health launched its Teladoc Back Care service in the United States. This online treatment service targets back pain, which ranks as the third most costly medical condition in the U.S., with annual healthcare expenditures reaching $87 billion.

In February 2019, the platform launched a new feature called “Clinical WorkScope.” This feature enables healthcare institutions to add numerous customized functionalities to telemedicine services, thereby addressing complex scenarios such as hospital readmissions and chronic disease management. Clinics connected to the Teladoc Health platform can also access imaging and laboratory testing services provided by certified diagnostic organizations, such as LabCorp and Quest Diagnostics, significantly enhancing their capacity to manage complex diseases.

In March 2019, Teladoc Health launched its Teladoc Telemedicine service in Canada. This telemedicine platform is the first in Canada to provide convenient, high-quality medical care 24/7, offering an effective healthcare solution for a vast and sparsely populated country like Canada.

Subsequently, the company further strengthened its presence in Canada. In September, it partnered with Johnston Group to make Teladoc Health’s services accessible to more than 30,000 small and medium-sized enterprises (SMEs) managed by Johnston Group. As one of Canada’s most renowned third-party administrators and payers, Johnston Group’s Chambers of Commerce Group Insurance Plan is the leading employee benefits program for small businesses in Canada.

In March 2019, Teladoc Health partnered with Cincinnati Children’s Hospital Medical Center, the second-ranked pediatric hospital in the United States. This collaboration enables users to opt for pediatric telemedicine services provided by the latter.

In October 2019, it launched the Teladoc Medical Experts service in the United States. This service is regarded as the first telemedicine offering specifically designed for complex and costly physical and mental health conditions. Statistics indicate that one-third of Americans suffer from concurrent physical and mental health issues. Teladoc Health’s service provides them with comprehensive, one-stop care.

In December 2019, Teladoc Health launched Teladoc Nutrition, a service providing users with remote, personalized nutritional counseling from licensed dietitians.

By continuously enhancing the quality and variety of its services, Teladoc Health has steadily increased member stickiness. Its total membership, membership revenue, and domestic member visits have all reached record highs in the past two years.

Teladoc Health has also devoted considerable effort to brand public relations over the past two years, empowering its business operations.

In July 2018, Teladoc announced that it would change its corporate name to Teladoc Health and launched a new domain name and website. The original Teladoc domain was then dedicated to services within the United States.

As the number of acquired sub-brands increases, Teladoc Health is clearly aiming to distinguish its sub-brands from the parent brand through a name change. In addition to Teladoc, other sub-brands under Teladoc Health include Advance Medical, Best Doctors, BetterHelp, and HealthiestYou.

The company has also continuously strengthened its collaborations with top universities and research institutions, gaining endorsements from these research bodies. In November 2018, it partnered with Thomas Jefferson University to launch the first scholarship program in the telemedicine industry. Meanwhile, it collaborated with the University of Southern California to conduct the first large-scale study on antibiotic prescribing guidelines in telemedicine.

In addition to research reports, the endorsement value of authoritative certifications for Teladoc Health should not be underestimated. In May 2019, Teladoc Health established the first Patient Safety Organization (PSO) dedicated to telemedicine and received certification from the U.S. Agency for Healthcare Research and Quality.

This institution holds significant importance for Teladoc Health and the telehealth industry. The U.S. Department of Health and Human Services regards it as the first patient safety and quality control mechanism established for virtual telehealth, thereby enhancing public acceptance of telehealth services.

In November 2019, it received two Telehealth Accreditation Program (TAP) certifications from the ClearHealth Quality Institute, further alleviating user concerns about the reliability and security of telemedicine.

Teladoc Health has also strengthened brand awareness through charitable initiatives, providing free non-emergency telemedicine services to residents in California, Hawaii, Atlanta, Florida, and Alabama—regions in the United States affected by wildfires and hurricanes.

These branding and public relations initiatives have enhanced Teladoc Health’s brand awareness and reputation, with the improvement in operational metrics demonstrating fairly significant results. However, this has also led to a year-over-year increase in Teladoc Health’s advertising and marketing expenses.

In 2016, the company’s advertising and marketing expenses stood at only $34.72 million; by 2018, annual spending had surged to $85.10 million. According to the official financial report for the third quarter of 2019, advertising and marketing expenses for the first nine months of 2019 had already reached $84.34 million, making it all but certain that the full-year total would exceed $100 million.

Given that telemedicine remains in its market cultivation phase, marketing is indispensable; improving the efficiency of marketing expenditures is likely to be a key challenge facing Teladoc Health in the future.

Overall, Teladoc Health has delivered impressive operational performance over the past two years, with substantial growth in both revenue and stock price. In particular, its share price doubled in a short period, reaching an all-time high of nearly $100. This provides Teladoc Health with ample “ammunition” and strategic flexibility for its future initiatives.

Acquisition remains Teladoc Health’s primary strategy. Through a series of consecutive acquisitions, Teladoc Health has achieved significant growth in the global market and expanded its product portfolio coverage, thereby fulfilling the intended objectives of these acquisitions.

In addition to leveraging external forces for rapid growth, Teladoc Health has also remained committed to strengthening its core capabilities and continuously enhancing its product offerings. This dual-pronged strategy has made Teladoc Health a leader in the telemedicine industry, with services that are unmatched in both breadth and depth.

However, Teladoc Health still needs to address the challenge of achieving profitability in the future.

First, reduce costs. Based on current operating expenses, the proportion of high advertising and marketing costs to revenue shows no sign of decreasing. How to maximize the return on every dollar spent on marketing is not only a challenge for this company but also an issue facing the entire industry.

Sustaining customer base expansion remains a significant challenge. The current strategy of rapidly acquiring customers through acquisitions is becoming increasingly costly, and stock prices cannot remain at elevated levels indefinitely. Internationalization may represent a more viable direction, given that Teladoc Health still has substantial room for growth in its global revenue.

Going forward, VCBeat will continue to monitor and report on the developments of Teladoc Health.