Teladoc Teeters as Telehealth Market Morphs
In a sign that the telehealth market remains volatile, the Purchase, New York-based telehealth giant Teladoc Health on Wednesday, July 28 announced $3.1 billion in losses in the second quarter of 2022, which when added to the $6.6 billion charge the company took in the first quarter of the year because of its acquisition of Livongo two years ago, meant that the financial losses for the company now total $9.8 billion over the course of the first half of the year, a staggering amount of money for a company that earned a total of $2.0327 billion in all of 2021.
The huge loss was related to Teladoc’s 2020 acquisition of the Mountain View, California-based Livongo Health for $18.5 billion, bringing the combined value of the two companies to $37 billion at that time. That was a record amount to be paid for a fellow telehealth company, and the deal, announced on August 5, 2020, was completed by October 30 of that year. Unfortunately, the landscape around telehealth has shifted dramatically since mid-2020, when telehealth-based care accounted for a massive proportion of outpatient-based care delivery, prior to the introduction of vaccines for COVID-19. At the time that Teladoc’s executives acquired Livongo, they made that acquisition central to their strategy of creating a unified app for primary care, chronic care, and other types of care that can be delivered remotely.
The $3 billion impairment charge was "triggered by the decline in Teladoc's share price with the valuation and size of the impairment charge primarily driven by an increased discount rate and decreased market multiple for a relevant peer group of high-growth digital healthcare companies," Teladoc's chief financial officer Mala Murthy said during the company's second-quarter earnings call.
The impairment charge relates to the Livongo acquisition; goodwill is the difference between the price paid and the actual book value of an acquired company. Buyers are required to hold that on their balance sheets and regularly revisit their valuations. In this case, this impairment charge (and the one from the first quarter) means that Teladoc and its auditors no longer consider the Livongo assets to be worth what they were before.
In any case, the huge loss was reflected immediately in morning trading this morning. As Joe Woelfel wrote in Barron’s online on Thursday morning, “Teladoc Health TDOC –19.37 percent was falling more than 17 percent Thursday after the remote healthcare provider posted a wider-than-expected quarterly loss after recording a $3 billion impairment charge. Teladoc (ticker: TDOC) reported a second-quarter loss of $3.1 billion, or $19.22 a share, which included the charge that came to $18.78 on a per-share basis. A year earlier, Teladoc reported a loss of 86 cents a share.” As of 2 PM eastern time, at the time of the posting of this news article, Teladoc’s shares had fallen 17.55 percent to $35.65 per share on the New York Stock Exchange.
In a press release published on Wednesday, the company’s executives had attempted to put the best face on some complicated news. “Teladoc Health, Inc. (NYSE: TDOC), the global leader in whole-person virtual care, today reported financial results for the second quarter ended June 30, 2022.,” the press release began.
“Teladoc Health delivered solid second quarter results with significant progress against our whole person care strategy, including growing momentum in Primary360”, said Jason Gorevic, chief executive officer of Teladoc Health. “While we continue to see increased uncertainty in the macroeconomic backdrop, we remain confident in our ability to execute against our strategy to deliver a unified care experience that we believe only Teladoc Health has the breadth and scale to achieve.”
And the press release went on to provide the following financial results for the second quarter of 2022:
“Revenue increased 18% to $592.4 million from $503.1 million in the second quarter of 2021. Access fees revenue grew 20% to $518.7 million and visit fee revenue grew 7% to $66.7 million. U.S. Revenues grew 18% to $521.4 million and International revenues grew 13% to $71.0 million.
Non-cash goodwill impairment charge of $3.0 billion was recorded in the second quarter of 2022. The non-cash charge had no impact on the provision for income taxes.
Net loss totaled $3,101.5 million, or ($19.22) per share, for the second quarter of 2022, compared to $133.8 million, or ($0.86) per share, for the second quarter of 2021. Results for the second quarter of 2022 primarily included a non-cash goodwill impairment charge of $3,030.0 million, or ($18.78) per share, as well as stock-based compensation expense of $51.0 million, or ($0.32) per share, and amortization of acquired intangibles of $49.1 million, or ($0.30) per share.
Results for the second quarter of 2021 included stock-based compensation expense of $83.0 million, or ($0.53) per share, amortization of acquired intangibles of $46.1 million, or ($0.30) per share, loss on extinguishment of debt $31.4 million, or ($0.20) per share, and non-cash income taxes charges of $3.2 million, or ($0.02) per share.
Adjusted EBITDA* decreased 30 percent to $46.7 million, compared to $66.8 million for the second quarter of 2021.”
Comments on Twitter were overwhelmingly negative, with someone who has the Twitter handle “Tristan’s Lady” stating, “Teladoc cut your expenses—good grief—CEO needs to resign and bring in competent management.” And Heikki Keskiväli writing on Thursday, midday U.S. time, “Teladoc has done this year more goodwill impairment than revenue during its whole lifetime. How is this a business?” and pointing out that the company’s $9.6 billion in year-to-date goodwill impairment dwarfs its lifetime revenues of $5.1 billion.
Meanwhile, Sasha Yanshin tweeted, “Teladoc's share price collapsed by 25 percent because Teladoc took a $3B impairment charge because Teladoc's share price collapsed by 50 percent because Teladoc took a $6B impairment charge because Teladoc's share price collapsed by 50 percent. Makes so much sense.”
And, in their tweet on Thursday, a user with the handle One Bubble to Rule Them All, wrote this comment: “Mega $3 bn impairment charge caught all the attention. But look at the declining profits higher up the income statement,” posting a chart that showed that the adjusted EBITDA for the company was 13.3 percent in the second quarter of 2021 and is now down to 7.9 percent during the second quarter of 2022.
Geert De Lombaerde contributing reporting to this article.
