Shares of health-tech company Teladoc Health (NYSE: TDOC) have slumped over 35% in pre-market trading today. Teladoc announced its Q1 earnings on April 27 after market hours and reported revenue of $565.4 million and an adjusted loss per share of $0.47. Analysts forecast
Teladoc to report revenue of $568.8 million and adjusted loss per share of $0.56 in Q1 of 2022.
In the year-ago period, Teladoc’s revenue stood at $453.6 million while the loss per share was $1.31. Investors were spooked after the company forecast sales between $2.4 billion and $2.5 billion in 2022, compared to consensus forecasts of $2.58 billion.
At the time of writing, TDOC stock has slumped 88% from all-time highs, burning significant wealth in the process.
What impacted Teladoc in Q1 of 2022?
Another reason for Teladoc’s pre-market crash is the $6.7 billion goodwill impairment charge reported by the company, which works out to $41.58 per share. The goodwill write-down is likely to be associated with Teladoc’s acquisition of Livongo Health in 2020 which now seems extremely overvalued.
However, Teladoc’s chief financial officer Mala Murthy explained, “The goodwill impairment was triggered by the sustained decline in Teladoc Health share price, with the valuation and size of the impairment charge driven by a combination of recent market-based factors, such as an increased discount rate and the decreased market multiples for a relevant peer group of high-growth digital healthcare companies.”
Teladoc ended Q1 with 54.3 million paid members, an increase of 680,000 members on a sequential basis. The total number of its unique members enrolled in more than one chronic care program stood at 731,000, an increase of 78,000 year over year. The company confirmed that 27% of its chronic care members are enrolled in more than one program, up from 15% in the year-ago period. So, the total chronic care program enrollment surged to 900,000, increasing 19% year over year.
The average monthly revenue per member grew by 21% to $2.52 in Q1 of 2022. Further, visit fee sales for Q1 rose by 12% year over year to $68 million. Teladoc stated it provided 4.5 million visits through its network of clinicians, an increase of 35%.
In Q1 of 2022, Teladoc reported adjusted EBITDA of $54.5 million, compared to $56.5 million in the prior-year quarter. However, adjusted EBITDA in Q1 of 2021 was positively impacted by a $6.9 million benefit related to purchase accounting adjustments.
Teladoc claimed it ramped-up ad spending which resulted in lower margins in Q1 as it took advantage of lower media pricing following the holiday season.
What next for TDOC stock and investors?
As seen above, Teladoc estimates for revenue in 2022 were lower than consensus. However, the company stated it continues to see sustainable growth across its product portfolio. It revised the outlook for the year to reflect dynamics experienced in the direct-to-consumer mental health and chronic condition markets.
In the D2C mental health market, higher ad spend generated lower-than-expected yield while the chronic condition market is wrestling with an elongated sales cycle.
TDOC stock is valued at a market cap of $5.6 billion, which suggests its forward price to sales multiple is quite reasonable around 2x. The company is poised to grow revenue at an annual rate of over 20% in each of the next two years making it attractive to growth and contrarian investors.
Further, Wall Street expects TDOC loss per share to narrow from $2.73 in 2021 to $1.05 in 2023.
While the global telehealth market is estimated to expand at a CAGR of 19% to $225 billion through 2025, Teladoc will face competition from legacy players such as UnitedHealth (NYSE: UNH) and Cigna (NYSE: CI).