Mala Murthy, interim CEO of Teladoc Health Inc., is counting on international markets to reverse a troubling trend for BetterHelp, the virtual health company’s direct-to-consumer behavioral services group.
Speaking to analysts after New York-based Teladoc reported its first-quarter results:a net loss of almost $82 million, almost $13 million worse than in the first months of 2023, with revenues of $646 million. Murthy said BetterHelp’s first-quarter revenue fell 4% to $269 million as the number of people paying for its services fell 11% from a year earlier. The unit’s adjusted EBITDA margin fell to 5.7%, about half its average over the past two years.
A key culprit was the rising cost of acquiring new customers through social media advertising, a trend that began building in the second half of last year. Murthy, Teladoc’s chief financial officer who is leading the company as its board searches for a successor to leader Jason Gorevic, said those higher expenses led her team to reduce spending. That hurt revenue and will do so this quarter, too: BetterHelp’s revenue is expected to fall 4% to 8% from a year ago.
However, Murthy remains hopeful for a relatively quick turnaround. He noted that the first quarter is typically the weakest when it comes to profitability and said BetterHelp’s marketing cost per new customer has stabilized in recent weeks. The plan for the next few quarters is to turn that trend into renewed growth for BetterHelp, which accounts for more than 40% of Teladoc’s revenue, starting with its international operations.
BetterHelp ended 2023 with around 460,000 paying users, up 9% from the previous year. People outside the United States make up about 15% of that number and Murthy plans to increase that share, emphasizing English-speaking markets such as the United Kingdom, Canada and Australia, where virtual mental health services have not yet been adopted as widely as in the U.S. State.
“The plan we have is to continue to penetrate those markets first and that is what drives our confidence in the second half,” he said. “We have been in these markets. We know the dynamics of the BetterHelp business in these markets. Based on our experience, we know the economics of being in these markets.”
One key advantage: Teladoc’s advertising in international markets has generally been slightly more profitable than in the United States. Banking on global growth, Murthy and his team are sticking to their full-year forecast for BetterHelp to post sales in line with or slightly above 2023.
It also seems more likely than not that any growth will come from BetterHelp sticking to its direct-to-consumer fabric. Gorevic said in January at the JPMorgan Healthcare Conference that he wanted to grow BetterHelp’s business with employers and insurance plans, but last week Murthy shed some light between those comments and his goals.
“There are other competitors in the market that have […] DTC tested [and] moved into B2B,” Murthy said. “We have built scale in DTC and I would say we will continue to focus on DTC. That said, I would also say that we are looking for ways to improve and accelerate our growth in different ways.”
Teladoc Stock (Ticker: TDOC) fell about 3% on earnings news and commentary on April 25, but have since held firm. On the afternoon of April 29, about $13.40 was changing hands. In the last six months, they have lost more than 15% of their value, leaving the company’s market capitalization at around $2.3 billion.
