A N N U A L R E P O R T
Our values
We are passionate about
taking care of people.
We are committed to
unsurpassed quality.
We keep our promises.
We lead with integrity,
accountability and transparency.
We stand up for what’s right.
We strive to create value.
We respect each other and
value succeeding together.
A Letter from Charles (Chuck) Divita, III
Chief Executive Officer,
Teladoc Health, Inc.
Teladoc Health faced headwinds in 2024, including an evolving marketplace and operational challenges experienced
by the company earlier in the year. Overall, we finished the year on a solid footing and our employees demonstrated
both resilience and an unwavering commitment to our mission. To strengthen performance, we took definitive
actions to streamline the organization, focus on key priorities, and improve our cost structure, and we are in a
stronger position to go after new market opportunities.
Since joining the company in June 2024, I have had the opportunity to meet with many of our customers and other
stakeholders to better understand their needs and how our solutions can support their priorities and objectives. For
over 20 years, Teladoc Health has demonstrated the constructive role that virtually enabled care can play in health-
care and I’m excited about our potential to drive greater value and impact for our customers as we move forward.
We operate through two major segments – Integrated Care and BetterHelp – each focused on important
markets and having both strengths and opportunities to enhance our business position. Integrated Care, our
largest segment, offers a broad range of technology-enabled products and services and during 2024 added 4.2
million U.S. members, grew underlying visit volumes, and increased enrollment in our chronic care programs. Our
Integrated Care priorities are focused on growth, differentiation, and customer impact.
BetterHelp is the largest direct-to-consumer virtual therapy business of its kind, enjoys strong brand awareness
and customer net promoter scores, and served more than 1 million people during 2024. While the business has
historically driven strong results, performance has been negatively impacted in recent periods, due in part to
elevated customer acquisition costs. Our BetterHelp priorities are focused on balancing financial performance,
stabilizing the U.S. business, and accelerating international growth.
Growing Integrated Care membership:
In 2024, we provided access to nearly 94 million U.S. members in our Integrated Care segment who rely on us to
deliver high-quality healthcare. We also grew chronic care program enrollment by 4% in 2024, and we see
opportunities to further innovate in this space as well, including through our recent acquisition of Catapult Health.
We concluded the year with the strongest level of bookings in our employer channel since 2020 and, in 2025, we
have added TRICARE, the civilian health care program for the U.S. Armed Forces, retirees, and their dependents. The
health plan channel experienced challenges in 2024, due in part to macro factors in healthcare, and is expected to
remain challenging during 2025.
Investing and deepening our impact on patient care
and outcomes:
We are committed to leveraging our clinical strength and the breadth of our product portfolio to meet the current
and evolving needs of our customers. We took several positive steps in 2024, including expanding our obesity and
weight management programs to help customers manage the rising demand for anti-obesity medications while
promoting safe, sustainable weight loss. During 2024, we also continued to develop new partnerships within the
healthcare ecosystem, including Amazon Health Benefits Connector and others, in support of management of
chronic conditions. More than half of adults in the U.S. live with at least one chronic condition. This partnership opens
an innovative new channel for our members.
We also launched new AI-enabled capabilities to enhance our Virtual Sitter solution for hospital and health system
customers to improve patient safety and expand provider capacity. Every year, nearly 1 million hospitalized patients
experience falls in many cases resulting in lasting injuries and significant medical costs. Our new solution helps
address this critical issue by allowing a single remote staff member to monitor more patients, which helps increase
the capacity of healthcare inpatient teams.
Expanding our international position:
An important and ongoing priority for Teladoc Health is expanding our international Integrated Care business.
The efforts of our international team drove strong revenue growth in 2024 as we continued to expand markets
and services. For example, in France we are partnering with the public health system to provide virtual psychiatry in
underserved locations. Additionally, in Canada, we are combining virtual services with the proprietary devices and
software of our hospital and health system solutions to serve needs across several provinces.
BetterHelp’s international revenue represented 20 percent of segment revenue in 2024. We expect to launch new
localized country models in 2025 with respect to language, content, and therapists.
A clear focus on improving performance and
driving growth:
The leadership team and I have a clear focus on what we need to deliver on for our customers, members, and our
investors. We have four priorities moving forward:
• Driving value for our customers,
• Enabling quality health care by leveraging technology,
• Advancing innovation and clinical excellence, and
• Unlocking enterprise synergies.
Working from these priorities, our business segments have developed specific strategies to drive our business
forward and more fully realize our potential as an organization. We have a leading market position, a respected brand,
and an ability to deliver care solutions at scale that gives us a unique foundation for growth. I believe that
Teladoc Health will continue to positively impact healthcare and the health and wellbeing of the people we serve.
Charles (Chuck) Divita, III
Chief Executive Officer
Teladoc Health, Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________
Form 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the year ended December 31, 2024
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
Commission File Number: 001-37477
_______________________________________________
TELADOC HEALTH, INC.
(Exact name of registrant as specified in its charter)
Delaware
04-3705970
(State of incorporation)
(I.R.S. Employer Identification No.)
2 Manhattanville Road, Suite 203
Purchase, New York
10577
(Address of principal executive office)
(Zip code)
(203) 635-2002
(Registrant’s telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.001 per share
TDOC
The New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: Not Applicable
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No
x
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company
or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
x
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company o
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. x
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included
in the filing reflect the correction of an error to previously issued financial statements. o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes o No x
The aggregate market value of the common stock held by non-affiliates as of the last business day of the registrant’s most recently completed
second fiscal quarter was approximately $1,666,071,704. The registrant has no non-voting stock outstanding.
As of February 18, 2025, there were 173,672,032 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement to be delivered to stockholders in connection with the 2025 annual meeting of stockholders
are incorporated by reference in response to Part III of this Report to the extent stated herein.
TABLE OF CONTENTS
Page
PART I
Special Note Regarding Forward Looking Statements
3
ITEM 1.
Business
3
ITEM 1A.
Risk Factors
19
ITEM 1B.
Unresolved Staff Comments
52
ITEM 1C.
Cybersecurity
53
ITEM 2.
Properties
54
ITEM 3.
Legal Proceedings
54
ITEM 4.
Mine Safety Disclosures
54
PART II
ITEM 5.
Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of
Equity Securities
54
ITEM 6.
Reserved
55
ITEM 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
56
ITEM 7A.
Quantitative and Qualitative Disclosures About Market Risk
69
ITEM 8.
Financial Statements and Supplementary Data
70
ITEM 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
70
ITEM 9A.
Controls and Procedures
70
ITEM 9B.
Other Information
ITEM 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
73
PART III
ITEM 10.
Directors, Executive Officers and Corporate Governance
74
ITEM 11.
Executive Compensation
74
ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
74
ITEM 13.
Certain Relationships and Related Transactions, and Director Independence
74
ITEM 14.
Principal Accounting Fees and Services
74
PART IV
ITEM 15.
Exhibits and Financial Statement Schedules
75
ITEM 16.
Form 10-K Summary
75
EXHIBIT INDEX
76
SIGNATURES
82
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
F-1
____________________________________
2
73
PART I
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Teladoc Health, Inc., together with its subsidiaries, is referred to herein as “Teladoc Health,” the “Company,” or
“we.” Many statements made in this Annual Report on Form 10-K that are not statements of historical fact, including
statements about our beliefs and expectations, are forward-looking statements and should be evaluated as such. Forward-
looking statements include information concerning possible or assumed future results of operations, including descriptions
of our business plan and strategies. These statements often include words such as “anticipates”, “believes”, “suggests”,
“targets”, “projects”, “plans”, “expects”, “future”, “intends”, “estimates”, “predicts”, “potential”, “may”, “will”, “should”,
“could”, “would”, “likely”, “foresee”, “forecast”, “continue” and other similar words or phrases, as well as statements in
the future tense to identify these forward-looking statements. These forward-looking statements and projections are
contained throughout this Form 10-K, including the sections entitled “Business,” “Risk Factors,” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.” We base these forward-looking statements or
projections on our current expectations, plans and assumptions that we have made in light of our experience in the industry,
as well as our perceptions of historical trends, current conditions, expected future developments and other factors we
believe are appropriate under the circumstances and at such time. As you read and consider this Form 10-K, you should
understand that these statements are not guarantees of performance or results. The forward-looking statements and
projections are subject to and involve risks, uncertainties and assumptions and you should not place undue reliance on these
forward-looking statements or projections. Although we believe that these forward-looking statements and projections are
based on reasonable assumptions at the time they are made, you should be aware that many factors could affect our actual
financial results or results of operations and could cause actual results to differ materially from those expressed in the
forward-looking statements and projections. Factors that may materially affect such forward-looking statements and
projections include, but are not limited to the section entitled “Risk Factors” in this Form 10-K and in our other reports and
Securities and Exchange Commission (“SEC”) filings. These cautionary statements should not be construed by you to be
exhaustive and are made only as of the date of this Form 10-K. We undertake no obligation to update or revise any
forward-looking statements, whether as a result of new information, future events or otherwise. You should evaluate all
forward-looking statements made in this Form 10-K in the context of these risks and uncertainties.
Item 1.
Business
Overview
Teladoc Health is the global leader in virtual care, forging a new healthcare experience with better convenience,
outcomes, and value. Our mission is to empower all people everywhere to live their healthiest lives by transforming the
healthcare experience.
Teladoc Health was founded on a simple, yet revolutionary idea: that everyone should have access to the best
healthcare, anywhere in the world on their terms. Today, we have a vision of making virtual care the first step on any
healthcare journey, and we are delivering on this mission by providing virtual care that includes primary care, mental
health, chronic condition management, and more.
We have developed and built upon our diverse capabilities over the course of more than 20 years, evolving our
product and service portfolio from a suite of point solutions to an integrated offering. We are creating a unified and
personalized consumer experience, developing technologies to connect patients and extend the reach of care providers,
delivering the highest standard of clinical quality at every touchpoint, and enhancing health decisions and outcomes with
smart data and actionable insights. Regardless of people’s healthcare needs, across any site of care, we aim to provide the
right level of personalized support to meet that need.
We believe that we have the largest breadth of integrated products and services in the virtual care industry,
enabling us to treat the whole person, from mental healthcare to physical healthcare, and from acute episodic needs to
chronic needs. We strive to be the “front door” to the healthcare system for our members, with a unique ability to connect
them to the care they need. People who come to us with one of these needs are in turn much more likely to rely on us for
other healthcare needs, which creates the opportunity for us to build longitudinal relationships, with care that’s
personalized for each individual.
We aim to achieve our vision of making virtual care the first step on any healthcare journey by delivering,
enabling, and empowering integrated virtual care services and experiences that span every stage of the healthcare journey.
3
We offer a portfolio of services and solutions covering hundreds of medical subspecialties, bolstered by technology,
artificial intelligence ("AI"), machine learning and human expertise to provide an effective care experience that people
value and trust. By combining the latest in data science and analytics with an award-winning user experience through a set
of highly flexible integrated technology platforms, we completed approximately 17.3 million telehealth visits in 2024
through our business-to-business ("B2B") and direct-to-consumer ("D2C") channels. We provide access to healthcare
through our portfolio of consumer brands 24 hours a day, 7 days a week, and 365 days a year.
We have two reportable segments: Teladoc Health Integrated Care (“Integrated Care”) and BetterHelp.
Our Integrated Care segment includes a suite of global virtual medical services including general medical, expert
medical services, specialty medical, chronic condition management, mental health, and enabling technologies and
enterprise telehealth solutions for hospitals and health systems. Services in this segment are distributed primarily on a B2B
basis.
Our BetterHelp segment primarily consists of our market leading D2C mental health platform. The online
counseling and therapy services are provided via our network of over 35,000 licensed clinicians leveraging our platform for
web, mobile app, phone, and text-based interactions.
Who We Serve
As of December 31, 2024, approximately 94 million members in the United States (“U.S.”) have access to one or
more of our products and services. The customers of our Integrated Care segment primarily consist of employers, health
plans, hospitals and health systems, insurance and financial services companies (collectively “Clients”), as well as
individual consumers who utilize our solutions. Clients and individual consumers purchase our solutions to expand access
to convenient, affordable, and high-quality healthcare to their constituents and to reduce their healthcare spending. Our
solutions offer our Clients substantial savings opportunities and an attractive return on investment. As part of this segment,
we sell to our Clients on behalf of their beneficiaries, including employees and health plan members. In our various sales
channels, a range of third parties, including health plans, pharmacy benefits managers, financial institutions, brokers,
agents, benefits consultants, and resellers, sell our solutions to various end markets around the world. Our BetterHelp
segment primarily sells directly to individual consumers.
How We Generate Revenue
For the year ended December 31, 2024, 86% of our consolidated revenue was derived from access fees. To a
lesser extent, we generate revenue from visit fees as well as sales of hardware and other related services to hospital and
health systems, which is reported in "other revenue".
Integrated Care Segment
Our Integrated Care segment primarily generates revenue on a contractually recurring, access fee basis. Clients
pay monthly access fees on a per-member-per-month ("PMPM") model, or on a per-participant-per-month ("PPPM")
model, based on the number of actively enrolled members each month. This segment also generates revenue from health
system and provider Clients related to our licensed technology platform, primarily in the form of recurring access fee
revenue as well as from the sale and lease of devices such as robots, carts, and tablets.
Some of our contracts place a portion of our fees at risk or provide an opportunity to earn performance-based
payments for achieving specific targets for service-level metrics, cost savings, and/or clinical outcomes.
Access fees comprise the significant majority of our Integrated Care segment revenue. We also generate revenue
on a per-telehealth visit basis through certain Clients with visit fee only arrangements. For certain Clients, we also earn
visit fees or per-case fees in combination with access fees.
Access fees are paid by our Clients on behalf of their employees, dependents, policy holders, card holders,
beneficiaries, clinicians, or as is the case with certain of our subscribers, fees are paid by our members themselves. Visit
fees for general medical and specialty visits are typically paid by Clients and/or members.
4
Our Integrated Care segment strategy is focused on enhancing our position and pursuing growth vectors, including
four key objectives:
•
Grow our Client and membership base, and further the engagement and usage of our service offerings;
•
Leverage clinical strength and product breadth to deepen impact on patient care and outcomes;
•
Expand and deepen our global business across key markets, customer channels and product offerings;
and
•
Advance our scaled mental health position to increase access and serve needs of more people.
BetterHelp Segment
In our BetterHelp segment, we primarily generate revenue from paying users who most commonly pay a weekly
or monthly fee to access our network of psychotherapists as well as to use our BetterSleep app designed to help people
improve their sleep quality and overall well-being.
Our BetterHelp strategy is focused on stabilizing results and returning to long-term growth, including four key
objectives:
•
Grow our underlying user base, and sustain or increase engagement levels and related fundamentals;
•
Advance our value proposition through product features, services, and other enhancements;
•
Further expand our international position through more localized offerings (language and therapists); and
•
The ability for our user base to access benefit coverage for mental health, where applicable.
The Teladoc Health Brand Portfolio
Our Teladoc Health family of brands – which include, among others, Teladoc and BetterHelp, deliver access to
advice and resolution for a broad array of healthcare needs, in intuitive, award-winning experiences designed to meet the
expectations of today’s consumers, from children to the senior population. The most common way for individuals to
engage with our services is by using a mobile device, reflecting the growing consumer adoption of mobile technology and
applications in managing their health.
Our Competitive Strengths
We believe that Teladoc Health is the leading global virtual healthcare provider because of our strong competitive
advantages that address the most pressing challenges and trends in the delivery of healthcare around the world. We believe
our history of innovation and long-standing operational excellence provide us with significant first-mover advantages, and
we continue to invest and expand our services and geographic footprint globally. As the first comprehensive virtual
healthcare company providing integrated care at scale, we have pioneered solutions and created what we believe are
collectively the telehealth industry’s first and only offerings of their kind. Our competitive advantages allow us to deliver
integrated care solutions that create and demonstrate positive clinical outcomes for our members and strong return on
investment for our Clients.
Comprehensive Suite of Virtual Healthcare Clinical Services
We believe that we are the first and only company to provide a comprehensive and integrated virtual healthcare
solution that both provides and enables care for a full spectrum of clinical conditions, including wellness and prevention,
acute care, chronic conditions, and complex healthcare needs. We also provide a broad range of programs and services,
including primary and specialty care telehealth solutions, chronic condition management, expert medical services, mental
health solutions, and platform & program services.
5
Global Footprint Spanning Clients, Medical Operations and Members
We believe we have the only global virtual healthcare footprint spanning a diverse set of Client channels, medical
operations, and members. Combining our suite of international clinical capabilities with our technology and operational
scale uniquely equips us to meet the needs of multinational employers.
Unmatched Breadth of Solutions for Clients Across All Channels Served
We deliver a comprehensive set of solutions to a diverse Client population through a highly efficient and effective
distribution network wherein we reach Clients and individuals in our Integrated Care segment through our Clients and
channel partners. In our BetterHelp segment, we primarily market our solution directly to potential members.
We believe the breadth of our distribution strategy allows us to directly reach individuals and Clients of nearly
every size and in nearly every market.
Comprehensive Engagement Model that Drives Utilization
We believe that our ability to drive behavior change on a global scale to deliver the highest utilization of virtual
healthcare services in the industry is a key competitive differentiator for Teladoc Health. We utilize a combination of our
proprietary engagement science, our “surround sound” capabilities, personalized individual experiences, as well as our
deep knowledge and expertise of various populations to increase the adoption of our virtual care services.
Our engagement science is a unique combination of the application of predictive analytics and modeling, our deep
experience with all population demographics, and expertise in applying this knowledge to our member populations on a
global scale. With our proprietary engagement science, we target members using behavioral triggers, advanced predictive
modeling, and demographic/firmographic insights. This increases efficiency and the impact of our communications by
reaching the right member, with the right personalized message, in the right micro moments of their day-to-day lives.
We believe that our “surround sound” capabilities are unique in the breadth and scale of media mix, analytics, and
targeting techniques that we actively deploy across our diverse member populations on a global scale. We use these
capabilities, plus our engagement science, to drive awareness and utilization of Teladoc Health services through innovative
media strategies designed to reach members in their homes, on the go, and in their moments of need. Our surround sound
capabilities and strategies are continuously being evaluated, analyzed, and evolved to meet ever-shifting consumer
behaviors.
Intelligent, Adaptable and Innovative Solution to Integrated Care
We have taken an innovative approach to technology to address integrated care. We have fused technology,
logistics, and behavioral and clinical science, with data science serving as the intelligent connective tissue that powers our
integrated care model. We have a large and unique set of data points that gives us a longitudinal understanding of an
individual’s clinical truth and enables us to engage in a holistic stepped care model. We integrate capabilities for our
members across health plan, employer, and health system relationships, in a way that we believe is unique in the industry.
Our platform features the full range of health support – from AI engine-driven “nudges” and health coaches to
therapists and board-certified physicians and the world’s leading specialists – available anytime, anywhere we operate to
ensure the right care is always delivered.
Highly Scalable and Secure API-Driven Technology Integrated Platform
Our core platform is a highly scalable, integrated, application program interface (“API”) driven technology
platform, for virtual healthcare delivery, with multiple real-time integrations spanning the healthcare ecosystem.
The core platform is equipped to provide the same level of member support and response time for upwards of
100,000 visits per day. Further, our platform has been built to accommodate the seamless and quick introduction of new
clinical and digital services and products.
We leverage and develop a unique combination of cloud-based technology that integrates smart connected devices
with sophisticated data science to deliver personalized health insight. For example, we provide a unique and proprietary
6
blood glucose meter to members enrolled in our diabetes program. This Class II, U.S. Food and Drug Administration
(“FDA”)-cleared medical device includes a cellular antenna and color touchscreen to provide seamless integration with our
platform. Our proprietary software relays the blood glucose measurements and user inputs to our cloud service, and then
displays targeted communications and AI-selected “nudges” based on the current context and medical history of the
member. These communications are dynamically personalized and optimized using our algorithms to deliver improved
clinical health outcomes, which drives value to the healthcare ecosystem. The software on the device can also be remotely
upgraded through the cellular antenna to deliver usability improvements and program enhancements.
Our platform’s APIs power external connectivity and deep integration with a wide range of payors, electronic
medical records ("EMR"), third-party applications, and other interfaces with employers, hospital systems, and health
systems, which we believe uniquely positions us as a long-term partner meeting the unique needs of the rapidly changing
healthcare industry. We are able to white label our solutions, so they fit into the plans and strategies of our Clients, all on a
platform that is high performing and highly scalable.
Our platform is compliant with numerous international data and privacy regulations, including the General Data
Protection Regulation (“GDPR”), data-in-country rules, and other national requirements. This gives us the opportunity and
ability to offer our products and services internationally, using the host countries’ languages and currencies, and addressing
their specific local needs. We are also able to customize our platform for key partnerships globally.
Due to the sensitive nature of our members’ and Clients’ data, we have a heightened focus on data security and
protection. We have a rigorous and comprehensive information security program managed by a dedicated team of security
engineers and analysts. We have implemented telehealth industry standard processes, policies, and tools through all levels
of our software development and network administration, including regularly scheduled vulnerability scanning and third-
party penetration testing to reduce the risk of vulnerabilities in our system. In addition, our enterprise security program is
periodically evaluated by expert third parties to ensure we are meeting or exceeding standards, best practices, and
regulatory requirements. One example of such an independent third-party certification that we have achieved is the Health
Information Trust Alliance ("HITRUST").
To meet the growing needs of hospitals and health systems, as well as multi-national insurers, our proprietary
licensed platform enables Clients to fully integrate private instances of our platform alongside their traditional modes of
delivering healthcare to their patients. Leveraging the flexibility and customization available on the platform, most of these
implementations incorporate deep integration with the hospital’s or health system’s EMR platform for scheduling and bi-
directional clinical data sharing.
Our unique technology designed for the hospital and health system market is a complete end-to-end telehealth
solution, including patient intake, emergent and scheduled encounters, video conferencing capabilities (including our
virtual care end-point offering, Inpatient Connected Care), access to medical images, full application-specific clinical
documentation tools – including interfaces to health system EMRs, and complete operational and clinical reporting and
analytics. The technology also supports industry-leading medical devices such as robots, carts, and tablets via a unique
network architecture for maximum performance, reliability, and security. The solution supports the entire patient journey
and the full range of telehealth use cases encountered by hospitals and health systems.
Clinical Capabilities Tailored to Virtual Care
We deliver high-quality clinical care and advice in a virtual setting to our members through the unique mix of our
proprietary guidelines, breadth and depth of clinical quality data and analytics as well as through our in-house and third-
party medical professionals.
We apply analytics to the de-identified data points generated in our millions of visits with patients to continuously
improve the clinical quality of our services. These data sets and insights are applied to enhance the ability of providers in
the THMG Association (as defined below) to deliver quality care through tools such as provider dashboards, as well as
serving as a foundation for clinical innovation and collaboration with other leading healthcare organizations that are
focused on the advancement of virtual care delivery.
We established The Institute for Patient Safety and Quality of Virtual Care in 2019, the healthcare industry’s first
Patient Safety Organization (“PSO”) dedicated to virtual care with the mission of conducting quality and safety initiatives
with and on behalf of key healthcare stakeholders, including other PSOs, to improve the delivery of virtual care. This PSO
7
is formally recognized by the U.S. Department of Health and Human Services (“HHS”) and certified by the Agency for
Healthcare Research and Quality.
Our Growth Strategies
Enable A Virtual First Strategy for Consumer Healthcare Access
Our vision is to position virtual care as the first place individuals go to get the care they need and manage their
health. For whatever healthcare needs an individual has, across any site of care, we aim to provide the right level of
personalized support to meet that need. As we drive the world to a “virtual first” mindset, we believe Teladoc Health has
the enterprise scale, technical capabilities, clinical depth, and consumer engagement expertise to achieve this vision.
Teladoc Health’s platform delivers a single solution leveraging our comprehensive clinical expertise, data, and
scale, to address the complete spectrum of conditions from non-critical, episodic care to chronic conditions and mental
health conditions. The virtual first model is built on our integrated platform, combining smart technologies, AI and
machine learning, rich data exchange, digital self-management tools, integrated remote patient monitoring devices,
analytics, and scalability to streamline care and drive better outcomes. Our platform matches the expectations of today’s
digital consumer by delivering a new kind of healthcare experience that is personalized, convenient, and connected.
Expand our Suite of Services to Address Unmet Needs
We believe that our integrated technology platforms address significant unmet needs, and we intend to continue to
expand our solutions across use cases and additional care settings and clinical conditions, including virtual primary care,
virtual care in a hospital room, home care, post discharge follow-ups, wellness/screening, and new areas in chronic care.
We continue to expand our virtual primary care offering, Primary360, through commercial health plans,
employers, and other organizations that sponsor healthcare for individuals and families in the U.S. Our strategy is to deliver
a reimagined model for primary care, build on a foundation of integrated, multi-source data, leveraging a unified whole
person experience; dedicated care team of physicians and non-medical doctors for a personalized longitudinal care plan;
continuous guidance and support; navigation and coordination with high quality providers; and “last mile” services like lab
testing, prescriptions, and in-home exams. We believe that Primary360 will be an effective gateway to the full range of our
services for an individual. Clients have adopted Primary360 utilizing different models, including making it a care option
for all members in a broad employee or health plan population, or offering a specific Virtual First Health Plan designed for
Primary360 to be the access point for primary care for members. We intend to continue to respond quickly to evolving
market needs with innovative solutions.
Our Inpatient Connected Care offering enables hospitals, health systems, and other clinical facilities to turn the
television in every patient room into a virtual care end-point, utilizing a special purpose set-top box, camera, microphone,
software, and networking. Through our technology and workflows, Clients can more efficiently administer admissions,
discharge planning, patient education, nursing coverage, and virtual provider consultations, improving efficiency and
quality of care, and helping address hospital staffing challenges.
We continue to invest in new expansions and innovation within our chronic care management and mental health
suite of offerings, such as myStrength Complete and Chronic Care Complete. myStrength Complete is an integrated mental
health service providing personalized, targeted care to consumers in a single, comprehensive experience. myStrength
Complete’s proprietary stepped care model is designed to seamlessly combine app-based tools and coaching expertise with
our therapists and psychiatrists to ensure that consumers get the level of mental health support and care they need, when
they need it. Chronic Care Complete is a first-of-its-kind chronic condition management solution to help individuals
improve their health outcomes while living with multiple chronic conditions. This solution provides members with a
unified, comprehensive experience that leverages connected health monitoring devices, access to health coaches and
support from physicians and mental health specialists. Examples of expansion and innovation include enhanced gaps in
care reporting, home delivery of continuous glucose monitors and A1c test kits, flexibility to use a wider range of
monitoring devices, and expanded availability of mental health therapy for adolescents. We believe that these and other
enhancements will improve quality of care and patient experience and expand the scope of populations we serve.
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Increase Engagement and Long-term Relationships with Our Members by Driving Expanded Access & Enhanced
Touch Points
We believe there is significant opportunity within our existing membership base to increase engagement by
continually driving awareness and usage of our solutions. We believe our platform can become the primary entry point for
on-demand, virtual healthcare for eligible individuals around the world. We expect to continually refine and enhance our
user experience, which is a critical driver of new and repeat engagement, and building longer term relationships with our
members, and to continue validating our member satisfaction with surveys and other proactive tools.
Our mobile app is foundational for us as we have redefined virtual healthcare delivery. Our unified mobile app
seamlessly offers members access to all of our virtual health services within a single, modern, user-friendly digital
experience, under the Teladoc Health brand to support member engagement, multi-program enrollment, and longitudinal
relationships with members. In addition, our integrated smart devices, such as our cellular blood glucose monitor, provide
additional touch points for engaging members with relevant AI driven nudges to drive behavior change and improved
health outcomes.
As we expand the range of products and services available to our members, we are investing in a seamless,
relevant, and personalized virtual and digital experience that provides smart guidance for our members.
Our industry leading capabilities and expertise enable unique types of partnerships where our services are
delivered to our partners with their brands, logos, and workflows on mobile and web platforms. These integrated member
experiences drive higher member engagement, convenience, and utilization.
Expand Penetration of our Suite of Services Among Existing Clients
We believe that we offer a highly differentiated suite of solutions for a broad range of market channels, spanning
the spectrum of traditional healthcare system participants such as employers, health plans, and health systems as well as
global financial services businesses and other organizations. We plan to execute this strategy by selling additional, high
value services to our Clients, including our primary care services, chronic condition management programs, and mental
health services. We believe that this strategy will help drive an increase in our average revenue per member over time.
Within existing Clients, we believe our current membership represents only a portion of the potential members
available to us. Our existing health plan Clients and self-insured Clients associated with these health plans currently
purchase our solutions for only a portion of their beneficiaries in the aggregate, and we estimate this provides us the
opportunity to grow our membership base by expanding our penetration within our existing Clients. We also have
substantial room to drive cross-sell opportunities of chronic condition management products into our Client base of
telehealth customers.
Leverage Existing Distribution Channels and Expand Penetration of Global Markets
We have developed a highly effective and efficient global distribution network. Our international operations are
headquartered in Barcelona, Spain with satellite locations in Europe, South America, and Asia. With these locations, we are
able to provide 24x7 services to our members internationally. When medically necessary, our doctors can help members
navigate the local health systems to obtain the best healthcare for their situation.
Our international Client base, largely comprising global financial services and health insurance companies,
provides fertile ground for expansion of our product portfolio through existing partners in attractive markets where our
infrastructure is already in place. We also market our solution in international markets, supporting the needs of government
health systems and hospitals, as well as private entities. In addition, we partner with companies, such as consumer
telecommunications companies, in certain international markets to offer virtual care services on a co-branded or white-
labelled basis directly to customers of those companies and other consumers.
We also plan to continue to expand BetterHelp to additional international markets through more localized
offerings.
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Drive Direct-To-Consumer Channel Growth
We plan to continue driving growth through investments in our D2C channels, which primarily includes our
BetterHelp segment. Relative to our mental health capabilities, BetterHelp is the leader in the D2C therapy market, both in
terms of the number of individuals enrolled and the number of licensed professionals who provide services on the platform.
The scale of our data and provider network, powered by our data science capabilities, creates a competitive advantage for
us in providing an optimal match of an individual with a provider, increasing the rate of success in therapy. We leverage
diverse customer acquisition channels and increase organic sources of traffic, which reduces dependence on any single
source of member acquisition. Even with our strong historical growth, we believe there is substantial untapped growth
potential, both domestically and internationally. Historically, almost half of individuals seeking care from BetterHelp have
never sought therapy before, suggesting that the availability of high quality, convenient, consumer friendly virtual mental
healthcare is expanding the mental healthcare market. We have also begun to explore the ability for users to access
insurance coverage for BetterHelp services.
Expand Through Focused Investments and Acquisitions
We plan to continue to support our overall strategy and market leadership with selective investments and
acquisitions. To date, we have completed multiple acquisitions that have expanded our distribution capabilities, broadened
our service offering, and created a broad global footprint. Our acquisition strategy is centered on acquiring products,
capabilities, clinical specialties, technologies, and distribution channels that are highly scalable and rapidly growing. We
have also established a track record of integrating these acquisitions to deliver incremental value to our Clients and
members.
Sales and Marketing
We sell our Integrated Care services principally through our direct sales organization. Our direct sales team
comprises enterprise focused sales professionals, who are supported by a sales operations staff, including product
technology experts, lead generation professionals, and sales data experts. We maintain relationships with key industry
participants including benefit consultants, brokers, group purchasing organizations, health plans, and hospital partners.
We generate Client leads, accelerate sales opportunities, and build brand awareness through our marketing
programs. Our marketing programs target human resource, benefits, and finance executives in addition to technology and
health professionals, senior business leaders, and healthcare channel partners. Our principal marketing programs include
use of our website to provide information about our company and our solutions, as well as learning opportunities for
potential members; integrated marketing campaigns; and participation in industry events, trade shows, and conferences.
We sell our BetterHelp services principally by marketing our solution directly to potential users. We also rely on
relationships with a wide variety of third parties, including Internet search providers such as Google, social networking
platforms such as Facebook, internet advertising networks, co-registration partners, retailers, distributors, television
advertising agencies, and direct marketers, to source new users and to promote or distribute our services and products.
Research and Development
Our ability to compete depends, in large part, on our continuous commitment to rapidly introduce new products,
services, technologies, features, and functionality. We have invested, and expect to continue to invest, significant resources
in research and development and acquisitions to enhance our existing solutions and introduce innovative products and
capabilities. Our multi-disciplinary team includes a product development team responsible for the design, development,
testing, and certification of our solutions. It also includes software engineering teams responsible for solution development
and deployment, and a data science team providing the insight that powers our differentiated health actions. We
continuously focus on developing new products and further enhancing the usability, functionality, reliability, performance,
and flexibility of our solutions.
Competition
We view our competitors as those companies that currently (or in the future will) (i) provide virtual care services,
such as the delivery of on-demand access to healthcare and chronic condition management and/or (ii) develop and market
virtual care technology (devices, software, and systems). Competition focuses on, among other factors, experience in
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operation, customer service, quality of technology and know-how, ability to generate and demonstrate clinical and financial
outcomes for clients, and reputation.
Integrated Care Segment
Competitors in the telehealth and expert medical services market include MDLive, Inc. (now owned by Cigna),
American Well Corporation, Included Health, and Accolade, Inc., among other participants. In the digital chronic condition
management market, competitors include Omada Health, Inc., Virta Health Corp., and other participants. In the market for
technology solutions for hospitals and health systems, competitors include American Well Corporation and MDLive, Inc.,
as well as smaller technology providers. We also face competition from large, well-financed health plans that in some cases
have developed their own virtual care, expert medical service or chronic condition management tools, as well as large
technology and retail companies, such as Amazon and Walmart, which have developed or acquired their own virtual care
solutions.
BetterHelp Segment
In the D2C mental health and other wellness services markets, competitors include a variety of smaller direct-to-
consumer platforms, including Talkspace and Calm.
Teladoc Health Medical Group, P.A.
We provide business support and administrative services pursuant to a services agreement with our affiliated
clinical entities, including Teladoc Health Medical Group, P.A., formerly Teladoc Physicians, P.A. (“THMG”), which
operate our Integrated Care telehealth provider network. We do not own THMG, which is a 100% physician-owned
independent entity, or the professional corporations with which it contracts. Instead, THMG and the professional
corporations (collectively, the “THMG Association”) are owned by physicians licensed in their respective jurisdictions.
Under the services agreement with THMG, we have agreed to serve, on an exclusive basis, as manager and administrator of
the THMG Association’s non-clinical functions and services related to the provision of the telehealth services by providers
employed by or under contract with the THMG Association. The non-clinical functions and services we provide under the
services agreement primarily include member management services, such as maintaining network operations centers for
our members to request a visit with the THMG Association’s providers, member billing and collection administration, and
maintenance and storage of member medical records. THMG has agreed to provide our members, through its providers,
access to telehealth services and recommended treatment 24 hours per day, 365 days per year. The services agreement also
requires THMG to maintain the state licensure and other credentialing requirements of its providers. The services
agreement has a 20-year term unless earlier terminated upon mutual agreement of the parties or unilaterally by a party
following the commencement of bankruptcy or liquidation proceeds by the non-terminating party, a material breach of the
services agreement by the non-terminating party, or a governmental or judicial termination order related to the services
agreement. The THMG Association is considered a variable interest entity and its financial results are included in Teladoc
Health’s consolidated financial statements.
Seasonality
Our business has historically been subject to seasonality. In our Integrated Care segment, a concentration of our
new Client contracts have an effective date of January 1 as a result of many Clients’ introduction of new services at the
start of each calendar year. Therefore, while membership increases, utilization and enrollment rates are dampened until
service delivery ramps up over the course of the year. In addition, as a result of seasonal cold and flu trends, we historically
have experienced our highest level of visit and other fee revenue during the first and fourth quarters of each year.
Due to the higher cost of customer acquisition during the end-of-year holiday season, our BetterHelp segment has
historically reduced marketing activity during the fourth quarter. As a result of this dynamic, we have typically experienced
fewer new member additions and strong operating income performance in the fourth quarter. Conversely, as marketing
activity typically resumes at the start of the year, we typically experience weak operating income performance during the
first quarter as new customer acquisition and revenue growth lags marketing spend.
See “Risk Factors—Risks Related to Our Business and Industry—Our quarterly results may fluctuate
significantly, which could adversely impact the value of our common stock.” included elsewhere in this Annual Report on
Form 10-K.
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Health Equity
Our commitment to health equity is central to our mission of empowering all people everywhere to live their
healthiest lives. We continue to make targeted investments to advance health equity by capturing and leveraging actionable
data, designing for equity in our products and services, supporting the social drivers of health, and contributing to the
industry's collective progress in this area via partnerships and collaboration.
As health equity increasingly becomes a regulatory and market differentiating reality for our Clients, Teladoc
Health remains well positioned to meet the diverse needs, preferences, and circumstances of those whom we collectively
serve. Our size, scale, and quality infrastructure enable us to continually assess and improve our services in order to deliver
equitable access, experiences, and outcomes for all.
Regulatory Environment
Our operations are subject to comprehensive U.S. federal, state and local, and comparable multiple levels of
international regulation in the jurisdictions in which we do business. The laws and rules governing our business and
interpretations of those laws and rules continue to expand and become more restrictive each year and are subject to
frequent change. Our ability to operate profitably will depend in part upon our ability, and that of our affiliated providers,
to maintain all necessary licenses and to operate in compliance with applicable laws and rules. Those laws and rules
continue to evolve, and we therefore devote significant resources to monitoring developments in healthcare and medical
practice regulation. As the applicable laws and rules change, we are likely to make conforming modifications in our
business processes from time to time. In many jurisdictions where we operate, neither our current nor our anticipated
business model has been the subject of judicial or administrative interpretation. We cannot be assured that a review of our
business by courts or regulatory authorities will not result in determinations that could adversely affect our operations or
that the healthcare regulatory environment will not change in a way that restricts our operations.
Since the onset of the COVID-19 pandemic, state and federal regulatory authorities have reduced or removed a
number of regulatory requirements in order to increase the availability of telehealth services. For example, changes were
made to the Medicare and Medicaid programs (through waivers and other regulatory authority) to increase access to
telehealth services by, among other things, increasing reimbursement, permitting the enrollment of out of state providers,
and eliminating prior authorization requirements. It is uncertain how long these COVID-19 related regulatory changes will
remain in effect. We do not believe that our operations or results will be materially adversely affected by a return to the
status quo from a regulatory perspective.
For additional discussion of our regulatory environment, see “Risk Factors” included in Part I, Item 1A of this
Annual Report on Form 10-K.
Telehealth Provider Licensing, Medical Practice, Certification and Related Laws and Guidelines
The practice of medicine, including the provision of mental health services, is subject to various federal, state, and
local certification and licensing laws, regulations, and approvals, relating to, among other things, the adequacy of medical
care, the practice of medicine (including the provision of remote care and cross coverage practice), equipment, personnel,
operating policies and procedures, and the prerequisites for the prescription of medication. The application of some of these
laws to telehealth is unclear and subject to differing interpretation. Physicians, physician assistants, advanced practice
registered nurses, nurses, and mental health professionals who provide professional medical or mental health services to a
patient via telehealth must, in most instances, hold a valid license to practice medicine or to provide mental health
treatment in the state in which the patient is located. We have established systems for ensuring that our affiliated providers
are appropriately licensed under applicable state law and that their provision of telehealth to our members occurs in each
instance in compliance with applicable rules governing telehealth. Failure to comply with these laws and regulations could
result in our services being found to be non-reimbursable or prior payments being subject to recoupments and can give rise
to civil or criminal penalties.
U.S. Corporate Practice of Medicine; Fee Splitting
We contract with physician-owned professional associations and professional corporations to deliver our U.S.
telehealth services to their patients. We enter into business support services contracts with these physician-owned
professional associations and professional corporations pursuant to which we provide them with non-clinical functions and
services related to the provision of the telehealth services by the providers, such as maintaining network operations centers
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for our members to request a visit with the providers, member billing and collection administration, and maintenance and
storage of member medical records, and the professional associations and professional corporations pay us for those
services out of the fees they collect from patients and third-party payors. These contractual relationships are subject to
various state laws that prohibit fee splitting or the practice of medicine by lay entities or persons and are intended to
prevent unlicensed persons from interfering with or influencing the physician’s professional judgment. In addition, various
state laws also generally prohibit the sharing of professional services income with nonprofessional or business interests.
Activities other than those directly related to the delivery of healthcare may be considered an element of the practice of
medicine in many states. Under the corporate practice of medicine restrictions of certain states, decisions and activities
such as clinician scheduling, contracting, setting rates, and the hiring and management of non-clinical personnel may
implicate the restrictions on the corporate practice of medicine. Numerous states, including Oregon, Washington,
California, Massachusetts, and Connecticut have introduced or are currently introducing bills to codify and strengthen their
corporate practice of medicine prohibitions. If such bills are passed into law, it may necessitate a change in the way we
contract with the THMG Association and the BetterHelp platform.
State corporate practice of medicine and fee splitting laws vary from state to state and are not always consistent
among states. In addition, these requirements are subject to broad powers of interpretation and enforcement by state
regulators. Some of these requirements may apply to us even if we do not have a physical presence in the state, based
solely on our engagement of a provider licensed in the state or the provision of telehealth to a resident of the state.
Regulatory authorities or other parties, including the THMG Association's providers, may assert that, despite our
contractual arrangements with the THMG Association and the BetterHelp platform, we are directly engaged in the
corporate practice of medicine or that our contractual arrangements with affiliated physician groups constitute unlawful fee
splitting. In this event, failure to comply could lead to adverse judicial or administrative action against us and/or the THMG
Association's providers, civil or criminal penalties, receipt of cease-and-desist orders from state regulators, invalidation of
certain contracts, demands to repay reimbursements from third party payors, loss of provider licenses, the need to make
changes to the terms of engagement of the THMG Association's providers that interfere with our business and other
materially adverse consequences.
U.S. Federal and State Fraud, Waste, and Abuse Laws
Federal Stark Law
We are subject to the federal self-referral prohibitions, commonly known as the Stark Law. Where applicable, this
law prohibits a physician from referring Medicare patients to an entity providing “designated health services” if the
physician or a member of such physician’s immediate family has a “financial relationship” with the entity, unless an
exception applies. The penalties for violating the Stark Law include the denial of payment for services ordered in violation
of the statute, mandatory refunds of any sums paid for such services, civil penalties of up to $29,899 for each violation, and
twice the dollar value of each such service and possible exclusion from future participation in the federally funded
healthcare programs. A person who engages in a scheme to circumvent the Stark Law’s prohibitions may be fined up to
$199,338 for each applicable arrangement or scheme. The Stark Law is a strict liability statute, which means proof of
specific intent to violate the law is not required. In addition, the government and some courts have taken the position that
claims presented in violation of the various statutes, including the Stark Law can be considered a violation of the federal
False Claims Act (described below) based on the contention that a provider impliedly certifies compliance with all
applicable laws, regulations and other rules when submitting claims for reimbursement. A determination of liability under
the Stark Law could have a material adverse effect on our business, financial condition, and results of operations.
Federal Anti-Kickback Statute
We are also subject to the federal Anti-Kickback Statute. The Anti-Kickback Statute is broadly worded and
prohibits the knowing and willful offer, payment, solicitation or receipt of any form of remuneration in return for, or to
induce, (i) the referral of a person covered by Medicare, Medicaid or other governmental programs, (ii) the furnishing or
arranging for the furnishing of items or services reimbursable under Medicare, Medicaid or other governmental programs,
or (iii) the purchasing, leasing, or ordering or arranging or recommending purchasing, leasing or ordering of any item or
service reimbursable under Medicare, Medicaid or other governmental programs. Certain federal courts have held that the
Anti-Kickback Statute can be violated if “one purpose” of a payment is to induce referrals. In addition, a person or entity
does not need to have actual knowledge of this statute or specific intent to violate it to have committed a violation, making
it easier for the government to prove that a defendant had the requisite state of mind or “scienter” required for a violation.
Moreover, the government may assert that a claim including items or services resulting from a violation of the Anti-
Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act, as discussed below.
Violations of the Anti-Kickback Statute can result in exclusion from Medicare, Medicaid or other governmental programs
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as well as civil and criminal penalties, including civil monetary penalties of up to $120,816, and criminal fines of $100,000
per violation, and three times the amount of the unlawful remuneration, and imprisonment of up to ten years. Imposition of
any of these remedies could have a material adverse effect on our business, financial condition, and results of operations. In
addition to a few statutory exceptions, the HHS Office of Inspector General (“OIG”) has published safe-harbor regulations
that outline categories of activities that are deemed protected from prosecution under the Anti-Kickback Statute provided
all applicable criteria are met. The failure of a financial relationship to meet all of the applicable safe harbor criteria does
not necessarily mean that the particular arrangement violates the Anti-Kickback Statute. However, conduct and business
arrangements that do not fully satisfy each applicable safe harbor may result in increased scrutiny by government
enforcement authorities, such as the OIG.
False Claims Act
Both federal and state government agencies have continued civil and criminal enforcement efforts as part of
numerous ongoing investigations of healthcare companies and their executives and managers. Although there are a number
of civil and criminal statutes that can be applied to healthcare providers, a significant number of these investigations
involve the federal False Claims Act. These investigations can be initiated not only by the government but also by a private
party asserting direct knowledge of fraud. These “qui tam” whistleblower lawsuits may be initiated against any person or
entity alleging such person or entity has knowingly or recklessly presented, or caused to be presented, a false or fraudulent
request for payment from the federal government or has made a false statement or used a false record to get a claim
approved. In addition, the improper retention of an overpayment for 60 days or more is also a basis for a False Claim Act
action, even if the claim was originally submitted appropriately. Penalties for False Claims Act violations include fines
ranging from $13,058 to $27,018 for each false claim, plus up to three times the amount of damages sustained by the
federal government. A False Claims Act violation may provide the basis for exclusion from the federally funded healthcare
programs. In addition, some states have adopted similar fraud, whistleblower, and false claims provisions.
State and Foreign Fraud, Waste, and Abuse Laws
Several states and foreign jurisdictions in which we operate have also adopted or may adopt similar fraud, waste,
and abuse laws as described above. The scope of these laws and the interpretations of them vary by jurisdiction and are
enforced by local courts and regulatory authorities, each with broad discretion. Some state fraud, waste, and abuse laws
apply to items or services reimbursed by any payor, including patients and commercial insurers, not just those reimbursed
by a federally funded healthcare program. A determination of liability under such state fraud, waste, and abuse laws could
result in fines and penalties and restrictions on our ability to operate in these jurisdictions.
Other Healthcare Laws
The federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information
Technology for Economic and Clinical Health Act (“HITECH”) and their implementing regulations, (collectively,
“HIPAA”), established several separate criminal penalties for making false or fraudulent claims to insurance companies
and other non-governmental payors of healthcare services. Under HIPAA, these two additional federal crimes are:
“Healthcare Fraud” and “False Statements Relating to Healthcare Matters.” The Healthcare Fraud statute prohibits
knowingly and recklessly executing a scheme or artifice to defraud any healthcare benefit program, including private
payors. A violation of this statute is a felony and may result in fines, imprisonment or exclusion from government
sponsored programs. The False Statements Relating to Healthcare Matters statute prohibits knowingly and willfully
falsifying, concealing, or covering up a material fact by any trick, scheme or device, or making any materially false,
fictitious, or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items, or services.
A violation of this statute is a felony and may result in fines or imprisonment. This statute could be used by the government
to assert criminal liability if a healthcare provider knowingly fails to refund an overpayment. These provisions are intended
to punish some of the same conduct in the submission of claims to private payors as the federal False Claims Act covers in
connection with governmental health programs.
In addition, the Civil Monetary Penalties Law imposes civil administrative sanctions for, among other violations,
inappropriate billing of services to federally funded healthcare programs and employing or contracting with individuals or
entities who are excluded from participation in federally funded healthcare programs. Moreover, a person who offers or
transfers to a Medicare or Medicaid beneficiary any remuneration, including waivers of copayments and deductible
amounts (or any part thereof), that the person knows or should know is likely to influence the beneficiary’s selection of a
particular provider, practitioner, or supplier of Medicare or Medicaid payable items or services may be liable for civil
monetary penalties for each wrongful act. Moreover, in certain cases, providers who routinely waive copayments and
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deductibles for Medicare and Medicaid beneficiaries can also be held liable under the Anti-Kickback Statute and civil False
Claims Act, which can impose additional penalties associated with the wrongful act. One of the statutory exceptions to the
prohibition is non-routine, unadvertised waivers of copayments or deductible amounts based on individualized
determinations of financial need or exhaustion of reasonable collection efforts. The OIG emphasizes, however, that this
exception should only be used occasionally to address special financial needs of a particular patient. Although this
prohibition applies only to federal healthcare program beneficiaries, the routine waivers of copayments and deductibles
offered to patients covered by commercial payers may implicate applicable state laws related to, among other things,
unlawful schemes to defraud, excessive fees for services, tortious interference with patient contracts, and statutory or
common law fraud.
Health Information Privacy and Security Laws
There are numerous U.S. federal and state laws and regulations related to the privacy and security of personally
identifiable information (“PII”), including health information. In particular, HIPAA establishes privacy and security
standards that limit the use and disclosure of protected health information (“PHI”) and require the implementation of
administrative, physical, and technical safeguards to ensure the confidentiality, integrity and availability of individually
identifiable health information in electronic form. In addition, numerous states, including California, Colorado,
Washington, Nevada, and Connecticut amongst others, have passed consumer privacy laws intended to supplement the
protections provided by HIPAA, Teladoc Health, the THMG Association and its providers, our health plan Clients and our
employee welfare benefit plan Clients are all regulated as covered entities under HIPAA, and are required to comply both
with HIPAA and applicable state privacy laws. HIPAA’s requirements are also directly applicable to the independent
contractors, agents, and other “business associates” of covered entities that create, receive, maintain, or transmit PHI in
connection with providing services to covered entities. We are also at times a business associate of other covered entities
when we are working on behalf of our affiliated medical groups.
Violations of HIPAA may result in significant civil and criminal penalties, and a single breach incident can result
in violations of multiple standards. Teladoc Health, on our own and as part of our management responsibilities to the
THMG Association, is required to comply with HIPAA’s breach notification rule. Under the breach notification rule,
covered entities must notify affected individuals without unreasonable delay in the case of a breach of unsecured PHI,
which has more than a low probability of compromising the privacy, security, or integrity of the PHI. In addition,
notification must be provided to the HHS and the local media in cases where a breach affects more than 500 individuals.
Breaches affecting fewer than 500 individuals must be reported to HHS on an annual basis. The regulations also require
business associates of covered entities to notify the covered entity of breaches by the business associate. Notification must
also be made in certain circumstances to affected individuals, federal authorities, and others.
State attorneys general also have the right to prosecute HIPAA violations committed against residents of their
states. While HIPAA does not create a private right of action that would allow individuals to sue in civil court for a HIPAA
violation, its standards have been used as the basis for the duty of care in state civil suits, such as those for negligence or
recklessness in misusing personal information. In addition, HIPAA mandates that HHS conduct periodic compliance audits
of HIPAA covered entities and their business associates for compliance. HIPAA also tasks HHS with establishing a
methodology whereby harmed individuals who were the victims of breaches of unsecured PHI may receive a percentage of
the Civil Monetary Penalty fine paid by the violator. We expect federal and state HIPAA privacy and security enforcement
efforts to continue to increase.
The privacy and security of personal information stored, maintained, received or transmitted electronically is an
enforcement priority in the U.S. and internationally. While we strive to comply with all applicable privacy and security
laws and regulations, as well as our own posted privacy policies, legal standards for privacy, including but not limited to
“unfairness” and “deception,” as enforced by the Federal Trade Commission (“FTC”) and state attorneys general, any
failure or perceived failure to comply with such requirements may result in proceedings or actions against us by
government entities or private parties, or could cause us to lose Clients or members, any of which could have a material
adverse effect on our business. For example, we have been subject to litigation alleging improper disclosure and/or use of
PII and PHI. Recently, there has been an increase in public awareness of privacy issues in the wake of revelations about the
activities of various government agencies and in the number of private privacy-related lawsuits filed against companies.
Any allegations about our practices with regard to the collection, use, disclosure, or security of personal information or
other privacy-related matters, even if unfounded and even if we are in compliance with applicable laws, could damage our
reputation and harm our business.
Many states in which we operate and in which our members reside also have laws that protect the privacy and
security of personal information, including health information. These laws may be similar to, or even more protective, and
may apply more broadly than HIPAA and other federal privacy laws, or they apply to personal information that HIPAA
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does not regulate. For example, the California Consumer Privacy Act of 2018 (“CCPA”) protects the personal information
of California consumers regardless of the location of the business holding the information. The California Privacy Rights
Act (“CPRA”) provides additional rights for California consumers and went into effect on January 1, 2023. Numerous
states have enacted, or are currently reviewing, legislation that is similar to the CCPA and/or CPRA. For example, the
Texas Data Privacy and Security Act and the Oregon Consumer Privacy Act both became effective on July 1, 2024, and the
Montana Consumer Data Privacy Act became effective on October 1, 2024. There are also bills that have been approved or
are going through the legislative process in many more states. Where state laws are more protective than HIPAA or apply
more broadly than HIPAA, or apply to different personal information than HIPAA, we must comply with the state laws we
are subject to in addition to HIPAA. In certain cases, it may be necessary to modify our planned operations and procedures
to comply with these more stringent state laws. Not only may some of these state laws impose fines and penalties upon
violators, but also some, unlike HIPAA, may afford private rights of action to individuals who believe their personal
information has been misused. In addition, state laws are changing rapidly, and there is potential for a new federal privacy
law or federal breach notification law, to which we may be subject.
In addition to HIPAA and state information privacy laws, we may be subject to other state and federal laws,
including laws that prohibit unfair and deceptive practices which may include deceptive statements about privacy and
security policies and practices.
In recent years, there have been a number of well publicized data breaches involving the improper use and
disclosure of PII and PHI. Many states have responded to these incidents by enacting laws requiring holders of personal
information to maintain safeguards and to take certain actions in response to a data breach, such as providing prompt
notification of the breach to affected individuals and state officials.
We are also subject to laws and regulations in non-U.S. countries covering data privacy and the protection of
health-related and other personal information. European Union (“EU”) member states and other jurisdictions have adopted
data protection laws and regulations, which impose significant compliance obligations. Laws and regulations in these
jurisdictions apply broadly to the collection, use, storage, disclosure, processing, and security of personal information that
identifies or may be used to identify an individual, such as names, contact information, and sensitive personal data such as
health data. These laws and regulations are subject to frequent revisions and differing interpretations and have generally
become more stringent over time.
The GDPR imposes many requirements for controllers and processors of personal data, including, for example,
higher standards for obtaining consent from individuals to process their personal data, more robust disclosures to
individuals, a strengthened individual data rights regime, shortened timelines for data breach notifications, limitations on
retention and secondary use of information, increased requirements pertaining to health data and pseudonymized (i.e., key-
coded) data, and additional obligations when we contract third-party processors in connection with the processing of
personal data. The GDPR allows EU member states to make additional laws and regulations further limiting the processing
of genetic, biometric, or health data. Failure to comply with the requirements of GDPR and the applicable national data
protection laws of the EU member states may result in fines of up to €20,000,000 or up to 4% of the total worldwide annual
revenue from the preceding financial year, whichever is higher, and other administrative penalties.
We are also subject to EU laws on data export, as we may transfer personal data from the EU to other
jurisdictions, in particular the U.S. These obligations may be interpreted and applied in a manner that is inconsistent from
one jurisdiction to another and may conflict with other requirements or our practices. In addition, these rules are constantly
under scrutiny. For example, following a decision of the Court of Justice of the EU in October 2015 (commonly referred to
as the Schrems I), transferring personal data to U.S. companies that had certified as members of the U.S. Safe Harbor
Scheme was declared invalid. In July 2016, the European Commission adopted the U.S.-EU Privacy Shield Framework
which replaced the Safe Harbor Scheme. However, the U.S.-EU Privacy Shield Framework was also declared invalid by
the Court of Justice of the EU in July 2020 (commonly referred to as Schrems II). While Schrems II affirmed the validity of
corporate binding rules and standard contractual clauses as legal bases to transfer EU data to the U.S., it also put into place
stricter requirements for transfers based on standard contractual clauses. In July 2023, to replace the U.S.-EU Privacy
Shield, the EU and U.S. developed and entered into force the EU-U.S. Data Privacy Framework, the UK Extension for the
EU-U.S. Data Privacy Framework, and the Swiss-U.S. Data Privacy Framework (collectively “Data Privacy
Frameworks”). The Data Privacy Frameworks allow U.S. entities to self-certify compliance after which data transfers to
the U.S. entity are permitted.
Some countries outside the EU have adopted laws that are similar to the EU GDPR. For example, Brazil adopted
the Brazilian General Data Protection Law, which is closely aligned with the EU GDPR and began to be enforced in
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August 2021. Additionally, China adopted the Personal Information Protection Law (“PIPL”), which also closely aligns
with GDPR, although there are differences. PIPL went into effect on November 1, 2021.
International Regulation
We expect to continue to expand our operations in foreign countries through both organic growth and acquisitions.
Our international operations are subject to different, and sometimes more stringent, legal and regulatory requirements,
which vary widely by jurisdiction, including anti-corruption laws; economic sanctions laws; various privacy, insurance,
tax, tariff and trade laws and regulations; corporate governance, privacy, data protection (including GDPR), data mining,
data transfer, labor and employment, intellectual property, consumer protection, and investment laws and regulations;
discriminatory licensing procedures; required localization of records and funds; and limitations on dividends and
repatriation of capital. In addition, the expansion of our operations into foreign countries increases our exposure to the anti-
bribery, anti-corruption, and anti-money laundering provisions of U.S. law, including the U.S. Foreign Corrupt Practices
Act of 1977 (the “FCPA”), and corresponding foreign laws, including the U.K. Bribery Act 2010 (the “U.K. Bribery Act”).
The FCPA prohibits offering, promising, or authorizing others to give anything of value to a foreign government
official to obtain or retain business or otherwise secure a business advantage. We also are subject to applicable anti-
corruption laws of the jurisdictions in which we operate. Violations of the FCPA and other anti-corruption laws may result
in severe criminal and civil sanctions as well as other penalties, and the SEC and the DOJ have increased their enforcement
activities with respect to the FCPA. The U.K. Bribery Act is an anti-corruption law that is broader in scope than the FCPA
and applies to all companies with a nexus to the United Kingdom. Disclosures of FCPA violations may be shared with the
UK authorities, thus potentially exposing companies to liability and potential penalties in multiple jurisdictions. We have
internal control policies and procedures and conduct training and compliance programs for our employees to deter
prohibited practices. However, if our employees or agents fail to comply with applicable laws governing our international
operations, we may face investigations, prosecutions, and other legal proceedings and actions which could result in civil
penalties, administrative remedies, and criminal sanctions.
We also are subject to regulation by the U.S. Treasury’s Office of Foreign Assets Control (“OFAC”). OFAC
administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals against
targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to
the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy, or economy of
the U.S. In addition, we may be subject to similar regulations in the non-U.S. jurisdictions in which we operate.
Human Capital Management
At Teladoc Health, we live our values as a company through policies, governance, and deliberate investment in
operating responsibly and sustainably. We are committed to making a positive impact in society and, perhaps even more
importantly, to encourage others of like mind and spirit to join us in this critical work.
To fulfill our mission, we are focused on building a great company that becomes a global destination for amazing
talent who want to build their careers, develop their capabilities, and grow both professionally and personally. We design a
range of programs and initiatives to nurture talent, encourage curiosity and innovation, make room for diverse voices and
perspectives, increase engagement and connectiveness, and mentor leaders for future roles. We build a range of total
reward programs that support employees through fair, equitable, and competitive pay and benefits, and we invest in
technology, tools, and resources to transform and increase the quality of work.
As of December 31, 2024, we employed approximately 5,500 people, comprised of approximately 84% full-time
employees and 16% part-time employees. In addition, we augment our employee base with contractors to meet resource
needs and to increase flexibility in managing our expense base. Of the total employee population as of December 31, 2024,
approximately 60% of our employees worked in the U.S. and 40% worked in our international locations. We contract with
a network of providers operating through the THMG Association and the BetterHelp platform. In order to ensure
predictable availability of providers and a consistent member experience, we expect that THMG will hire more employees
and rely less on contractors.
We continue to look for ways to expand a range of programs and initiatives that are focused to attract, develop and
retain our workforce. We have enhanced our talent efforts in recent years to include:
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Supporting Employees through Our Products and Services. We offer our employees full access to our diverse
portfolio of integrated health solutions, including free mental health resources, digital health devices, and on-demand
access to the employee assistance program for employees and their dependents.
Talent Development. We prioritize and invest in creating opportunities to help employees grow and build their
careers, through training and development programs. These include online and self-paced courses, live in-class education,
professional speaker series, peer-to-peer learning, certification programs, and on-the-job training, as well as executive
talent and succession planning paired with an individualized development approach.
Expanding the Voice of the Employee. We strive to build a culture of inclusion which includes regularly soliciting
employee feedback through our pulse engagement surveys, listening circles, and seeking opportunities to advance
employee feedback.
Open Dialogue to Encourage Diverse Thinking and Voices. We have invested in our employees and broadened
our external speaker series, interactive expert discussions, and self-paced learning programs to expand knowledge and
awareness of diversity and health topics.
Business Resource Groups. Our business resource groups (“BRGs”) include a focus on LGBTQ+, women,
multicultural, military veterans, neurodiversity and differing physical and mental abilities, working parents and caregivers,
and generational interests of employees who are engaged in four key pillars:
•
Building internal community/network
•
Advancing external community
•
Supporting business impact
•
Enhancing professional development
Focusing on diversity recruiting and talent acquisition. We continue to broaden our diversity hiring manager
training resources for performance-based interviewing, which included a screening tool to promote gender-neutral job
descriptions and expanded our corporate and college/university partnerships to advance our pipeline of diverse talent.
Community Impact. We embrace the opportunity and the responsibility to have a meaningful impact in our global
community, using our voice and our resources to help expand equitable access to care, and create a better future for
families and our neighbors. We continue to work toward further mobilizing our workforce to give back to the communities
where we live and work through new volunteer programs and corporate matching opportunities for giving.
We set out to advance positive social change in our communities with a 2024 achievement of volunteering more
than 19,000 hours around the globe. This was a monumental achievement that was consistent with our values, including
those of respecting and taking care of people, doing what’s right, and succeeding together. For 2025, we have continued to
challenge ourselves and set goals for volunteer hours to do good and give back to our communities.
Intellectual Property
We own and use trademarks and service marks on or in connection with our services, including both unregistered
common law marks and issued trademark registrations in the U.S. and around the world. We also have trademark
applications pending to register marks in the U.S. and internationally. In addition, we rely on certain intellectual property
rights that we license from third parties and on other forms of intellectual property rights and measures, including trade
secrets, know-how, and other unpatented proprietary processes and nondisclosure agreements, to maintain and protect
proprietary aspects of our products and technologies. We require our employees, consultants, and certain of our contractors
to execute confidentiality and proprietary rights agreements in connection with their employment or consulting
relationships with us. We also require our employees and consultants to disclose and assign to us all inventions conceived
during the term of their employment or engagement while using our property or which relate to our business.
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Additional Information
Our website address is teladochealth.com. We make available free of charge at the Investors section of this
website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and
amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we file or furnish such materials with the
SEC. The information on our website is not, and will not be deemed to be, a part of this Annual Report on Form 10-K or
incorporated into any of our other filings with the SEC, except where we expressly incorporated such information.
Item 1A. Risk Factors
Our business, financial and operating results are subject to many significant risks and uncertainties, as described
below. The following is a summary of the material risks known to us. Additional risks and uncertainties that we are
unaware of, or that we currently believe are not material, may also become important factors that adversely affect our
business, financial condition, results of operations or prospects, and could cause the trading price of our common stock to
decline.
Risk Factors Summary
Our business is subject to a number of risks and uncertainties, including those risks discussed at-length below.
These risks include, among others, the following:
•
our history of losses and accumulated deficit and the risk that we may not achieve profitability;
•
risk of the loss of any of our significant Clients or partners, or the loss of a significant number of
members or BetterHelp users;
•
our ability to compete successfully in competitive markets, including implementing effective solutions
that meet the expectations of our Clients and members;
•
failures of our or our vendors' cybersecurity measures that expose the confidential information of us, our
Clients or members;
•
our ability to operate in the heavily regulated healthcare industry, and comply with regulations
concerning data privacy, including personally identifiable information and personal health information;
•
our ability to recruit, retain and develop our workforce, and in particular software engineers, as well as a
network of qualified providers;
•
our ability to obtain additional capital through debt or equity financings on commercially reasonable
terms or at all;
•
ongoing legal challenges to, or new actions against, our business model, or the failure of the virtual care
market to continue to develop;
•
risks associated with a decrease in the number of individuals offered benefits by our Clients or the
number of products and services to which they subscribe;
•
rapid technological change in the virtual care market or the failure to innovate and develop new
applications and services that are adopted;
•
our expectations and management of potential growth, including our ability to introduce new products,
markets and any change in product mix that impacts our profitability;
•
our ability to establish and maintain strategic relationships with third parties;
•
our dependence on a limited number of third-party suppliers for timely access to materials, and the risk of
supply chain disruptions or further cost inflation;
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•
our level of indebtedness and our ability to fund debt obligations and comply with covenants in our debt
instruments;
•
our dependence on our relationships with affiliated professional entities;
•
risks specifically related to our ability to operate in competitive international markets and comply with
complex non-U.S. legal requirements;
•
the potential for future non-cash charges for the impairment of goodwill and other intangible assets;
•
current and potential future legal proceedings against us and that the insurance we maintain may not fully
cover all potential exposures; and
•
our ability to integrate acquired businesses and achieve fully the strategic and financial objectives related
thereto, and their impact on our financial condition and results of operations.
Risks Related to Our Financial Position
We have a history of cumulative losses, which we expect to continue, and we may never achieve or sustain profitability.
We have incurred significant losses in each period since our inception. We incurred net losses of $1,001.2 million
and $220.4 million for the years ended December 31, 2024 and 2023, respectively. The net loss for the year ended
December 31, 2024 included a non-cash goodwill impairment charge of $790.0 million as discussed further below. As of
December 31, 2024, we had an accumulated deficit of $16,229.9 million. These losses and accumulated deficit reflect the
large non-cash impairment charge for our goodwill and the substantial investments we have made to expand our business
and scope of services, acquire new Clients and members, build our proprietary network of healthcare providers, and
develop our technology platform. We cannot assure you that we will achieve profitability in the future or that, if we do
become profitable, we will be able to sustain or increase profitability. Our prior losses, combined with our expected future
losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital. As a result of
these factors and cash flow needs, we may need to raise additional capital through debt or equity financings to fund our
operations, and such capital may not be available on reasonable terms, if at all.
A significant portion of our revenue comes from a limited number of Clients, the loss of which could have a material
adverse effect on our business, financial condition and results of operations.
Historically, we have relied on a limited number of Clients for a substantial portion of our total revenue. For the
years ended December 31, 2024 and 2023, our top five Clients by revenue accounted for 18% and 19% of our total
revenue, respectively, and 31% and 34% of our Integrated Care segment revenue, respectively. In addition, certain health
plans that have historically promoted our services to our employer Clients have developed, and may in the future continue
to develop, solutions that replicate our services or offer competitive services at discounted prices to our current or
prospective Clients, which could result in a loss of Clients, including our largest Clients. The loss of any of our key Clients,
or a failure of some of them to renew or expand their relationships with us, could have a significant impact on the growth
rate of our revenue, profitability, and our reputation. In addition, mergers and acquisitions involving our Clients could lead
to cancellation or non-renewal of our contracts with those Clients or by the acquiring or combining companies, thereby
reducing the number of our existing and potential Clients and members.
We may incur additional non-cash impairment charges for our goodwill or incur non-cash impairment charges for our
other intangible assets which would negatively impact our operating results.
Goodwill represents the excess of the total purchase consideration over the fair value of the identifiable assets
acquired and liabilities assumed in a business combination. Goodwill is not amortized but is tested for impairment at the
reporting unit level annually on October 1 or more frequently if events or changes in circumstances indicate that it is more
likely than not to be impaired. These events include: (i) severe adverse industry or economic trends; (ii) significant
company-specific actions, including exiting an activity in conjunction with restructuring of operations; (iii) current,
historical or projected deterioration of our financial performance; or (iv) a sustained decrease in our market capitalization,
as indicated by our publicly quoted share price.
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As a result of sustained decreases in our publicly quoted share price and market capitalization as well as changes
in the operating results of the BetterHelp reporting unit, we conducted an interim test of our goodwill, definite-lived
intangibles, and other long-lived assets at June 30, 2024. Following this test, we did not identify an impairment to our
definite-lived intangible assets or other long-lived assets, but recorded a $790.0 million non-deductible, non-cash goodwill
impairment charge for the three months ended June 30, 2024. As of December 31, 2024, our balance of definitive-lived
intangible assets, net was $1.4 billion and goodwill, all of which relates to the BetterHelp segment, was $0.3 billion.
On October 1, 2024, we performed our annual goodwill impairment test and determined that, while there was a
significant excess of the BetterHelp reporting unit’s fair value over its carrying value, the Integrated Care reporting unit’s
fair value was less than its carrying value. If we complete any acquisitions of businesses that would be included in the
Integrated Care reporting unit, including the acquisition of Catapult Health, LLC (“Catapult Health”), some or all of any
goodwill associated with the acquisition could be subject to an immediate impairment depending on the Integrated Care
segment’s then-current fair value. In the event there are further adverse changes in our projected cash flows and/or further
changes in key assumptions, including but not limited to an increase in the discount rate, lower revenue growth, lower
margin, and/or a lower terminal growth rate, we may be required to record additional non-cash impairment charges to our
goodwill or other intangibles and/or long-lived assets. Such non-cash charges could have a material adverse effect on our
consolidated statements of operations and balance sheets in the reporting period of the charge.
For additional information, see Note 6. "Goodwill" to the consolidated financial statements.
Risks Related to Our Business and Industry
The virtual care market is developing and volatile, and if it does not continue to develop, if it develops more slowly than
we expect, if it encounters negative publicity, or if our solutions do not drive member engagement, the growth of our
business will be harmed.
The virtual care market continues to develop, and it is uncertain whether it will continue to achieve and sustain
high levels of demand, consumer acceptance, and market adoption. The COVID-19 pandemic increased utilization of
virtual care services, but it is uncertain whether such increase in demand will continue in the long-term. Our success will
depend to a substantial extent on the willingness of our members to use, and to increase the frequency and extent of their
utilization of, our solutions, as well as on our ability to continue to demonstrate the value of virtual care to employers,
health plans, government agencies, and other purchasers of healthcare for beneficiaries. Negative publicity concerning our
solutions, or the virtual care market as a whole, could limit market acceptance of our solutions. If our Clients or members
do not perceive the benefits of our solutions, or if our solutions do not drive member engagement, then our market may not
continue to develop, or it may develop more slowly than we expect. Similarly, individual and healthcare industry concerns
or negative publicity regarding patient confidentiality and privacy in the context of virtual care could limit market
acceptance of our healthcare services. If any of these events occurs, it could have a material adverse effect on our business,
financial condition, and results of operations.
The impact of potential changes in the healthcare industry and in healthcare spending is currently unknown, but may
adversely affect our business, financial condition, and results of operations.
Our revenue is dependent on the healthcare industry and could be affected by changes in healthcare spending and
policy. The healthcare industry is subject to changing political, regulatory, and other influences. The Patient Protection and
Affordable Care Act (“PPACA”) made major changes in how healthcare is delivered and reimbursed, and increased access
to health insurance benefits to the uninsured and underinsured population of the U.S. PPACA, among other things,
increased the number of individuals with Medicaid and private insurance coverage, implemented reimbursement policies
that tie payment to quality, facilitated the creation of accountable care organizations that may use capitation and other
alternative payment methodologies, strengthened enforcement of fraud, waste, and abuse laws, and encouraged the use of
information technology.
Other legislative changes have been proposed and adopted since the PPACA was enacted. These changes include
aggregate reductions to Medicare payments to providers of up to 2% per fiscal year pursuant to the Budget Control Act of
2011 and subsequent laws, which began in 2013 and due to subsequent legislative amendments, will stay in effect through
2030. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further
reduced Medicare payments to several types of providers, including hospitals, imaging centers, and cancer treatment
centers, and increased the statute of limitations period for the government to recover overpayments to providers from three
to five years. New laws may result in additional reductions in Medicare and other healthcare funding, which may materially
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adversely affect Client and member demand and affordability for our solutions and, accordingly, our business, financial
condition, and results of operations. Additional changes that may affect our business include the expansion of new
programs such as Medicare payment for performance initiatives for physicians under the Medicare Access and CHIP
Reauthorization Act of 2015, which first affected physician payment in 2019. At this time, it is unclear how the
introduction of the Medicare quality payment program will impact overall physician reimbursement.
Such changes in the regulatory environment may also result in changes to our payor mix that may affect our
operations and revenue. Further, the PPACA may adversely affect payors by increasing medical costs generally, which
could have an effect on the industry and potentially impact our business and revenue as payors seek to offset these
increases by reducing costs in other areas. Certain of these provisions are still being implemented and the full impact of
these changes on us cannot be determined at this time.
We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which
could limit the amounts that federal and state governments and other third-party payors will pay for healthcare products and
services, which could adversely affect our business, financial condition, and results of operations.
We operate in a competitive industry, and if we are not able to compete effectively, our business, financial condition,
and results of operations will be harmed.
The virtual care market is competitive, and we expect it to continue to attract increased competition, which could
make it difficult for us to succeed. We currently face competition in the virtual care industry for our solutions from a range
of companies, including specialized software and solution providers that offer competitive solutions, often at substantially
lower prices, and that are continuing to develop additional products and becoming more sophisticated and effective. Aside
from other competing virtual care companies and smaller industry participants, we also face competition from companies
that offer solutions for mental health and management of chronic conditions, and enterprise companies who are focused on
or may enter the healthcare industry, including initiatives and partnerships launched by these large companies. In addition,
large, well-financed health plans, technology companies and retailers have in some cases developed or acquired their own
tools and may provide these solutions to their customers at discounted prices. Competition from these parties may result in
a loss of Clients and will result in continued pricing pressures, which is likely to lead to price declines in certain product
segments, which could negatively impact our sales, profitability, and market share. Increased competition has also resulted
in elongated sales cycles for certain products, including chronic condition management solutions, which may continue to
reduce our growth and could negatively impact our sales, profitability, and market share.
Some of our competitors may have, or new competitors or alliances may emerge that have, greater name
recognition, a larger customer base, longer operating histories, more widely adopted proprietary technologies, greater
marketing expertise, larger sales forces, and significantly greater resources than we do. Further, our current or potential
competitors may be acquired by third parties with greater available resources. As a result, our competitors may be able to
respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or customer
requirements and may have the ability to initiate or withstand substantial price competition. Any further consolidation in
the virtual care market may exert downward pressure on prices of our products and services and may have a material
adverse impact on our business, financial condition, or results of operations. In addition, current and potential competitors
have established, and may in the future establish, cooperative relationships with vendors of complementary products,
technologies, or services to increase the availability of their solutions in the marketplace. Our competitors could also be
better positioned to serve certain segments of our markets, which could create additional price pressure. In light of these
factors, even if our solutions are more effective than those of our competitors, current or potential Clients or members may
accept competitive solutions in lieu of purchasing our solutions. If we are unable to successfully compete, our business,
financial condition, and results of operations would be materially adversely affected.
If our existing Clients do not continue or renew their contracts with us, renew at lower fee levels, or decline to purchase
additional applications and services from us, or if our individual members do not renew their purchase of our solutions,
it could have a material adverse effect on our business, financial condition, and results of operations.
We expect to derive a significant portion of our revenue from the renewal of existing Client contracts and sales of
additional applications and services to existing Clients. As part of our growth strategy, for instance, we have focused on
expanding our services amongst current Clients. As a result, selling additional applications and services are critical to our
future business, revenue growth, and results of operations.
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Factors that may affect our ability to sell additional applications and services include, but are not limited to, the
following:
•
the price, performance, and functionality of our solutions;
•
the availability, price, performance, and functionality of competing solutions;
•
our ability to develop and sell complementary applications and services;
•
the stability, performance, and security of our products and solutions;
•
our ability to effectively fulfill our obligations to our Clients and members, including certain supply-
chain functions that are performed in-house;
•
changes in healthcare laws, regulations, or trends; and
•
the business environment of our Clients and, in particular, any headcount reductions by our Clients.
We generally enter into contracts with our Clients for a subscription access or usage fee. Most of our Clients have
no obligation to renew their contracts for our solutions after the initial term expires. In addition, our Clients may negotiate
terms less advantageous to us upon renewal, which may reduce our revenue from these Clients. Our future results of
operations also depend, in part, on our ability to expand into new clinical specialties and across care settings and use cases.
If our Clients fail to renew their contracts, renew their contracts upon less favorable terms or at lower fee levels, or fail to
purchase new products and services from us, our revenue may decline, or our future revenue growth and profitability may
be constrained.
In addition, after the initial term, a significant number of our Client contracts allow Clients to terminate such
agreements for convenience at certain times, typically with three months advance notice. We typically incur the expenses
associated with integrating a Client’s data into our healthcare database and related training and support prior to recognizing
meaningful revenue from such Client. Access fee revenue is not recognized until our products are implemented for launch.
If a Client terminates its contract early and revenue and cash flows expected from a Client are not realized in the time
period expected or not realized at all, our business, financial condition, and results of operations could be adversely
affected.
Similarly, individual members who utilize our BetterHelp services have no obligation to renew their subscriptions,
and the number of BetterHelp paying users has been declining in recent periods. In 2024, BetterHelp paying users
decreased by 11% to 0.41 million. Failure of additional BetterHelp paying users to renew their subscriptions could cause
the revenue of our BetterHelp segment to further decline or constrain any future growth.
Failure to successfully execute on the terms of our contracts could result in significant harm to our business.
Our ability to grow and expand our business is contingent upon our ability to achieve desired performance
metrics, cost savings, and/or clinical outcomes improvements under our existing contracts and to favorably resolve contract
billing and interpretation issues with our Clients. The healthcare industry has shifted toward value-based care, and
increasingly our contracts place a portion of our fees at risk or provide for gain share opportunity based on achieving such
metrics, savings, and/or improvements. We cannot guarantee that we will achieve and reach mutual agreement with Clients
with respect to contractually required performance metrics, cost savings and/or clinical outcomes improvements under our
contracts within the expected time frames. Unusual and unforeseen patterns of healthcare utilization by individuals with
diseases or conditions for which we provide services could adversely affect our ability to achieve desired performance
metrics, cost savings, and clinical outcomes. Our inability to meet or exceed the targets under our Client contracts could
have a material adverse effect on our business, financial condition and results of operations. Also, our ability to provide
financial guidance with respect to performance-based contracts is contingent upon our ability to accurately forecast
variables that affect performance and the timing of revenue recognition under the terms of our contracts ahead of data
collection and reconciliation.
In addition, certain of our contracts are increasing in complexity, requiring integration of data, systems, people,
programs and services, the execution of sophisticated business activities, and the delivery of a broad array of services to
large numbers of people who may be geographically dispersed. The failure to successfully manage and execute the terms of
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these agreements could result in the loss of fees and/or contracts and could adversely affect our business and results of
operations.
If the number of individuals covered by our employer, health plan, and other Clients decreases, or the number of
applications or services to which they subscribe decreases, our revenue will likely decrease.
Under most of our Client contracts, we base our fees on the number of individuals to whom our Clients provide
benefits and the number of applications or services subscribed to by our Clients. Many factors may lead to a decrease in the
number of individuals covered by our Clients and the number of applications or services subscribed to by our Clients,
including, but not limited to, the following:
•
failure of our Clients to adopt or maintain effective business practices;
•
changes in the nature or operations of our Clients;
•
government regulations; and
•
increased competition or other changes in the benefits marketplace.
The number of individuals employed by some of our Clients has decreased, and the number of individuals
employed by our Clients may in the future decrease, as a result of economic conditions or other factors, which could
negatively impact our revenue. If the number of individuals covered by our employer, health plan and other Clients
decreases, or the number of applications or services to which they subscribe decreases, for any reason, our revenue will
likely decrease. Similarly, if the engagement of our members with our usage-based services decreases, our revenue could
decrease.
We incur significant upfront costs in our Client relationships, and if we are unable to maintain and grow these Client
relationships over time, we are likely to fail to recover these costs, which could have a material adverse effect on our
business, financial condition and results of operations.
We derive most of our revenue from access fees. Accordingly, our business model depends heavily on achieving
economies of scale because our initial upfront investment is costly, and the associated revenue is recognized on a ratable
basis. We devote significant resources to establish relationships with our Clients and implement our solutions and related
services, and Clients often request or require specific features or functions unique to their particular business processes.
Accordingly, our results of operations will depend in substantial part on our ability to deliver a successful experience for
both Clients and members and persuade our Clients to maintain and grow their relationship with us over time. Additionally,
as our business is growing significantly, our Client acquisition costs could outpace our build-up of recurring revenue, and
we may be unable to reduce our total operating costs through economies of scale such that we are unable to achieve
profitability. If we fail to achieve appropriate economies of scale or if we fail to manage or anticipate the evolution and in
future periods, demand, of the access fee model, our business, financial condition, and results of operations could be
materially adversely affected.
If our applications and services are not adopted by our Clients or members, or if we fail to innovate and develop new
applications and services that are adopted by our Clients or members, our revenue and results of operations will be
adversely affected.
Our longer-term results of operations and any growth will depend in part on our ability to successfully develop
and market new applications and services that our Clients and members want and are willing to purchase. In addition, we
have invested, and will continue to invest, significant resources in research and development and acquisitions to enhance
our existing solutions and introduce new high-quality applications and services. If existing Clients are not willing to make
additional payments for such new applications, or if new Clients and members do not value such new applications, it could
have a material adverse effect on our business, financial condition, and results of operations. If we are unable to predict
user preferences or if our industry changes, or if we are unable to modify our solutions and services on a timely basis, we
may lose Clients or members. Our results of operations would also suffer if our innovations are not responsive to the needs
of our Clients and members, appropriately timed with market opportunity, or effectively brought to market.
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Rapid technological change in our industry and the interoperability with third-party technologies presents us with
significant risks and challenges.
The virtual care market is characterized by rapid technological change, changing consumer requirements, short
product lifecycles, and evolving industry standards. Our success will depend on our ability to enhance our solutions with
next-generation technologies and to develop or to acquire and market new services to access new consumer populations. As
our operations grow, we must continuously improve and upgrade our systems and infrastructure while maintaining or
improving the reliability and integrity of our infrastructure as the cost of technology increases. Our future success also
depends on our ability to adapt our systems and infrastructure to meet rapidly evolving consumer trends and demands
while continuing to improve the performance, features, and reliability of our solutions in response to competitive services
and offerings. We expect the use of alternative platforms such as tablets and wearables will continue to grow and the
emergence of niche competitors who may be able to optimize offerings, services, or strategies for such platforms will
require new investment in technology. New developments in other areas, such as cloud computing, have made it easier for
competition to enter our markets due to lower up-front technology costs. In addition, we may not be able to maintain our
existing systems or replace or introduce new technologies and systems as quickly as we would like or in a cost-effective
manner.
There is no guarantee that we will possess the resources, either financial or personnel, for the research, design, and
development of new applications or services, or that we will be able to utilize these resources successfully and avoid
technological or market obsolescence. Further, there can be no assurance that technological advances by one or more of our
competitors or future competitors will not result in our present or future applications and services becoming uncompetitive
or obsolete. If we are unable to enhance our offerings and network capabilities to keep pace with rapid technological and
regulatory change, or if new technologies emerge that are able to deliver competitive offerings at lower prices, more
efficiently, more conveniently, or more securely than our offerings, our business, financial condition, and results of
operations could be adversely affected.
Our success will also depend on the availability of our mobile apps in app stores and in “super-app” environments,
and the creation, maintenance, and development of relationships with key participants in related industries, some of which
may also be our competitors. In addition, if the accessibility of various apps is limited by government actions, the full
functionality of devices may not be available to our members. Moreover, third-party platforms, services, and offerings are
constantly evolving, and we may not be able to modify our platform to assure its compatibility with those of third parties. If
we lose such interoperability, we experience difficulties or increased costs in integrating our offerings into alternative
devices or systems, or manufacturers or operating systems elect not to include our offerings, make changes that degrade the
functionality of our offerings, or give preferential treatment to competitive products, the growth of our business, financial
condition, and results of operations could be materially adversely affected. This risk may be exacerbated by the frequency
with which individuals change or upgrade their devices. In the event individuals choose devices that do not already include
or support our platform or do not install our mobile apps when they change or upgrade their devices, our member
engagement may be harmed.
AI and machine learning serve a key role in many of our services. As with many technological innovations, AI
and machine learning present risks and challenges that could affect its adoption, and therefore our business. AI and
machine learning present potential bias issues based on our population data and if we enable or offer solutions that draw
controversy due to their perceived or actual impact on society, we may experience reputational harm, competitive harm or
legal liability. Potential government regulation in the space of AI and machine learning also may increase the burden and
cost of research and development in this area, subjecting us to reputational harm, competitive harm or legal liability.
Failure to address AI and machine learning bias and ethics issues by us or others in our industry could undermine public
confidence in AI and machine learning and slow adoption of AI and machine learning in our products and services.
A decline in the prevalence of employer-sponsored healthcare or the emergence of new technologies may render our
virtual care solutions obsolete or require us to expend significant resources to remain competitive.
The U.S. healthcare industry is massive, with a number of large market participants with conflicting agendas, is
subject to significant government regulation, and is currently undergoing significant change. Changes in our industry, for
example, away from high deductible health plans, or the emergence of new technologies as more competitors enter our
market, could result in our solutions being less desirable or relevant.
For example, we currently derive the majority of our revenue in our Integrated Care segment from sales to Clients
that purchase healthcare for their employees (either via insurance or self-funded benefit plans). A large part of the demand
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for our solutions depends on the need of these employers to manage the costs of healthcare services that they pay on behalf
of their employees. Some experts have predicted that future healthcare reform will encourage employer-sponsored health
insurance to become significantly less prevalent as employees migrate to obtaining their own insurance over the state-
sponsored insurance marketplaces. Were this to occur, there is no guarantee that we would be able to compensate for the
loss in revenue from employers by increasing sales of our solution to health insurance companies, individuals, or
government agencies. In such a case, our business, financial condition, and results of operations would be adversely
affected.
If healthcare benefits trends shift or entirely new technologies are developed that replace existing solutions, our
existing or future solutions could be rendered obsolete, and our business could be adversely affected. In addition, we may
experience difficulties with software development, industry standards, design, or marketing that could delay or prevent our
development, introduction, or implementation of new applications and enhancements.
If we fail to manage our growth effectively, our expenses could increase more than expected, our revenue may not
increase and we may be unable to successfully execute on our growth initiatives, business strategies, or operating plans.
The growth of our business in recent years has strained our business, technology, operations, and employees, and
we anticipate that our Integrated Care segment operations will continue to expand. To manage our current and any
anticipated future growth effectively, we must continue to maintain and enhance our information technology infrastructure,
financial and accounting systems, and controls. For example, we have upgraded our customer relationship management
(“CRM”) and enterprise resource planning (“ERP”) systems in connection with our acquisition and integration activities,
and implemented a new EMR system for certain products. Any expected benefits from these systems will be gradual or
may not be realized at all, and there could be integration issues or inefficiencies as operators learn the new system. In
addition, the introduction of a new system can lead to errors and loss of data or may not work as intended. The integration
process between new and legacy systems may lead to temporary manual processes and possible data integrity issues. If our
data were found to be inaccurate or unreliable due to error or fraud, or if we, or any of the third-party service providers we
engage, were to fail to maintain information systems, including our new EMR system, and data integrity effectively, we
may not achieve the intended benefits of the new system and could experience operational disruptions that may impact our
members and providers and hinder our ability to provide services, retain and attract members, and manage our member risk
profiles. We must also attract, train, and retain a significant number of qualified sales and marketing personnel, customer
support personnel, professional services personnel, software engineers, technical personnel, finance and accounting
personnel, and management personnel, and the availability of such personnel, in particular software engineers, may be
constrained. Additionally, our growth strategy requires the collection, storage, and analysis of a high volumes of data from
internal and external sources. Failure to effectively utilize our current data or establish and integrate new systems of data
capture may adversely impact our ability to achieve our strategic goals and business plans.
A key aspect to managing our growth is our ability to scale our capabilities to implement our solutions
satisfactorily. Clients often require specific features or functions unique to their membership base, which, at a time of
significant growth or during periods of high demand, may strain our implementation capacity and hinder our ability to
successfully implement our solutions to our Clients in a timely manner. We may also need to make further investments in
our technology and automate portions of our solutions or services to decrease our costs. If we are unable to address the
needs of our Clients or members, or our Clients or members are unsatisfied with the quality of our solutions or services,
they may not renew their contracts, seek to cancel or terminate their relationship with us, or renew on less favorable terms,
any of which could cause our annual net dollar retention rate to decrease.
Failure to effectively manage our growth could also lead us to overinvest or underinvest in development and
operations, result in weaknesses in our infrastructure, systems, or controls, give rise to operational mistakes, financial
losses, loss of productivity or business opportunities and result in loss of employees and reduced productivity of remaining
employees. Our growth is expected to continue to require significant capital expenditures and may divert financial
resources from other projects such as the development of new applications and services. If our management is unable to
effectively manage our growth, our expenses may increase more than expected, our revenue may not increase or may grow
more slowly than expected, and we may be unable to implement our business strategy. The quality of our services may also
suffer, which could negatively affect our reputation and harm our ability to attract and retain Clients and members.
We are continually executing a number of growth initiatives, strategies and operating plans designed to enhance
our business, including the introduction of new products and solutions, the expansion of BetterHelp into additional
international markets and pursuing insurance coverage for BetterHelp in the U.S.. The anticipated benefits from these
efforts are based on several assumptions that may prove to be inaccurate. Moreover, we may not be able to successfully
26
complete these growth initiatives, strategies, and operating plans and realize all of the benefits, including growth targets
and cost savings, that we expect to achieve, or it may be more costly to do so than we anticipate. A variety of risks could
cause us not to realize some or all of the expected benefits. These risks include, among others, delays in the anticipated
timing of activities related to such growth initiatives, strategies and operating plans, increased difficulty and cost in
implementing these efforts, including difficulties in complying with new regulatory requirements, and the incurrence of
other unexpected costs associated with operating the business. Moreover, our continued implementation of these programs
may disrupt our operations and performance. As a result, we cannot assure you that we will realize these benefits. If, for
any reason, the benefits we realize are less than our estimates or the implementation of these growth initiatives, strategies
and operating plans adversely affect our operations or cost more or take longer to effectuate than we expect, or if our
assumptions prove inaccurate, our business, financial condition, and results of operations may be materially adversely
affected.
Recently we have implemented operational excellence initiatives which include a number of restructuring,
realignment and cost reduction initiatives. We may not realize the benefits of these initiatives to the extent or on the timing
we anticipated and the ongoing difficulties in implementing these measures may be greater than anticipated and/or offset
by inflationary pressures, which could cause us to incur additional costs. In addition, if these measures are not successful or
sustainable, we may undertake additional realignment and cost reduction efforts, which could result in significant
additional expenses and adversely impact our ability to achieve our other strategic goals and business plans.
Our growth depends in part on the success of our strategic relationships with third parties.
In order to grow our business, we anticipate that we will continue to depend on our relationships with third parties,
including our partner organizations and technology and content providers. For example, we partner with a number of price
transparency, health savings account, and other benefits platforms to deliver our solutions to their consumers. Identifying
partners and negotiating and documenting relationships with them requires significant time and resources. Our competitors
may be effective in providing incentives to third parties to favor their products or services or to prevent or reduce
subscriptions to, or utilization of, our products and services. In addition, acquisitions of our partners by our competitors
could result in a decrease in the number of our current and potential Clients, as our partners may no longer facilitate the
adoption of our applications by potential Clients. If we are unsuccessful in establishing or maintaining our relationships
with third parties, our ability to compete in the marketplace or to grow our revenue could be impaired and our business,
financial condition, and results of operations may suffer. Even if we are successful, we cannot assure you that these
relationships will result in increased Client or member use of our applications or increased revenue.
Our business and growth strategy depend on our ability to maintain and expand a network of qualified providers. If we
are unable to do so, any future growth would be limited and our business, financial condition, and results of operations
would be harmed.
Our success is dependent upon our continued ability to maintain a network of qualified providers, and demand for
such providers in both our Integrated Care and BetterHelp segments has become increasingly competitive. In order to
ensure predictable availability of providers and a consistent member experience, we expect that the THMG Association
will continue to hire more employed providers and rely less on contractors. If the THMG Association is unable to recruit
and retain board-certified physicians, advanced practice providers, mental health providers, and other healthcare
professionals, or unable to augment its employee base with contractors to meet resource needs, it would adversely affect
our business, financial condition, results of operations, and ability to grow. In any particular market, providers could
demand higher payments or take other actions that could result in higher medical costs, less attractive and reliable service
for our Clients and members, or difficulty meeting regulatory or accreditation requirements.
Our ability to develop and maintain satisfactory relationships with providers also may be negatively impacted by
other factors not associated with us, such as changes in Medicare and/or Medicaid reimbursement levels and other
pressures on healthcare providers and consolidation activity among hospitals, physician groups, and healthcare providers.
The failure to maintain or to secure new cost-effective provider contracts may result in a loss of or inability to grow our
membership base, higher costs, healthcare provider network disruptions, less attractive service for our Clients and
members, and/or difficulty in meeting regulatory or accreditation requirements, any of which could have a material adverse
effect on our business, financial condition, and results of operations.
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Failure to adequately develop our direct sales force could impede our growth.
We believe that our future growth will depend on the continued development of our direct sales force and our
ability to obtain new Clients and to manage our existing Client base. Identifying and recruiting qualified personnel and
training them requires significant time, expense, and attention. It can take six months or longer before a new sales
representative is fully trained and productive. Our business may be adversely affected if our efforts to train our direct sales
force do not generate a corresponding increase in revenue. In particular, if we are unable to hire and develop sufficient
numbers of productive direct sales personnel or if new direct sales personnel are unable to achieve desired productivity
levels in a reasonable period of time, sales of our services will suffer, and our growth will be impeded.
Our sales and implementation cycle can be long and unpredictable and requires considerable time and expense, which
may cause our results of operations to fluctuate.
The sales cycle for our solutions from initial contact with a potential lead to contract execution and
implementation varies widely by Client and solution, ranging from a number of days to approximately 24 months. Business
interruptions caused by economic conditions have and may continue to delay or lengthen some of our Clients’ sales cycles.
Some of our Clients undertake a significant and prolonged evaluation process, including to determine whether our services
meet their unique healthcare needs, which frequently involves evaluation of not only our solutions but also an evaluation of
those of our competitors, which has in the past resulted in extended sales cycles. For example, this has occurred and may
continue to occur with respect to our chronic condition management solutions. Our sales efforts involve educating our
Clients about the use, technical capabilities, and potential benefits of our solutions. During the sales cycle, we expend
significant time and money on sales and marketing activities, which lowers our operating margins, particularly if no sale
occurs. Moreover, our large enterprise Clients often begin to deploy our solutions on a limited basis, but nevertheless
demand extensive configuration, integration services, and pricing concessions, which increase our upfront investment in
the sales effort with no guarantee that these Clients will deploy our solutions widely enough across their organization to
justify our substantial upfront investment. It is possible that in the future we may experience even longer sales cycles, more
complex Client needs, higher upfront sales costs, and less predictability in completing some of our sales as we continue to
expand our direct sales force, expand into new territories, and market additional applications and services. If our sales cycle
lengthens or our substantial upfront sales and implementation investments do not result in sufficient sales to justify our
investments, it could have a material adverse effect on our business, financial condition, and results of operations.
Economic uncertainties or downturns in the general economy or the industries in which we or our Clients operate could
disproportionately affect the demand for our solutions and negatively impact our business, financial condition and
results of operations.
Economic downturns, market volatility, inflation and uncertainty make it potentially very difficult for our Clients
and us to accurately forecast and plan future business activities. During challenging economic times, our Clients may have
difficulty gaining timely access to sufficient credit or obtaining credit on reasonable terms, which could impair their ability
to make timely payments to us and adversely affect our revenue. If that were to occur, our financial results could be
harmed. Furthermore, we have Clients in a variety of different industries. A significant downturn in the economic activity
attributable to any particular industry may cause organizations to react by reducing their capital and operating expenditures
in general or by specifically reducing their spending on healthcare matters, including chronic care and mental health
solutions. In addition, our Clients may delay or cancel healthcare projects or seek to lower their costs by renegotiating
vendor contracts. To the extent purchases of our solutions are perceived by Clients and potential Clients to be discretionary,
our revenue may be disproportionately affected by delays or reductions in general healthcare spending. Also, competitors
may respond to challenging market conditions by lowering prices and attempting to lure away our Clients or members.
Similarly, economic conditions may impact the ability of our members to pay for our BetterHelp services,
particularly if such services are perceived by members to be discretionary and too expensive, new users continue to decline
or if we are unsuccessful in obtaining insurance coverage for BetterHelp in the U.S. For example, BetterHelp paying users
decreased during 2024, and any further decrease in, or reduction in growth of, the number of paying users who utilize our
BetterHelp services would negatively impact our business, financial condition and results of operations.
Further, challenging economic conditions may impair the ability of our Clients to pay for the applications and
services they already have purchased from us and, as a result, our write-offs of accounts receivable could increase. We
cannot predict the timing, strength, or duration of any economic slowdown or recovery. If the condition of the general
economy or markets in which we operate worsens, our business, financial condition, and results of operations could be
harmed.
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Our quarterly results may fluctuate significantly, which could adversely impact the value of our common stock.
Our quarterly results of operations, including our revenue, gross profit, net loss, and cash flows, have varied and
may vary significantly in the future, and period-to-period comparisons of our results of operations may not be meaningful.
Accordingly, our quarterly results should not be relied upon as an indication of future performance. Our quarterly financial
results may fluctuate as a result of a variety of factors, many of which are outside of our control, including, without
limitation, the following:
•
the addition or loss of large Clients, including through acquisitions or consolidations of such Clients;
•
seasonal and other variations in the timing of the sales of our services or the cost of BetterHelp customer
acquisitions, as discussed above;
•
the timing of recognition of revenue, including possible delays in the recognition of revenue due to
sometimes unpredictable Client implementation and launch timelines and performance guarantees;
•
the amount and timing of operating expenses related to the maintenance and expansion of our business,
operations, and infrastructure;
•
the effectiveness of our revenue cycle management processes;
•
our ability to effectively manage the size and composition of our proprietary network of healthcare
professionals relative to the level of demand for services from our members;
•
the timing and success of introductions of new applications and services by us or our competitors or any
other change in the competitive dynamics of our industry, including consolidation among competitors,
Clients, or strategic partners;
•
Client renewal rates and the timing and terms of Client renewals;
•
the mix of applications and services sold during a period;
•
the timing of expenses related to the development or acquisition of technologies or businesses and
potential future charges for impairment of goodwill and/or other assets; and
•
changes in the value or useful lives of our assets.
We are particularly subject to fluctuations in our quarterly results of operations because the costs associated with
entering into Client contracts are generally incurred up front, while we generally recognize revenue over the term of the
contract. Further, most of our Integrated Care revenue in any given quarter is derived from contracts entered into with our
Clients during previous quarters. Consequently, a decline in new or renewed contracts in any one quarter may not be fully
reflected in our revenue for that quarter. Such declines, however, would negatively affect our revenue in future periods and
the effect of significant downturns in sales of and market demand for our solutions, and potential changes in our rate of
renewals or renewal terms, may not be fully reflected in our results of operations until future periods. Our access fee model
also makes it difficult for us to rapidly increase our total revenue through additional sales in any period, with the exception
of the first quarter during peak benefits enrollment, as revenue from new Clients must be recognized over the applicable
term of the contract. Accordingly, the effect of changes in the industry impacting our business or changes we experience in
our new sales may not be reflected in our short-term results of operations. Any fluctuation in our quarterly results may not
accurately reflect the underlying performance of our business and could cause a decline in the trading price of our common
stock.
We depend on a limited number of third-party suppliers for certain components of our medical devices, and the loss of
any of these suppliers, or their inability to provide us with an adequate supply of materials, could harm our business.
We utilize sole source contract manufacturing vendors to build and assemble our medical device products. The
hardware components included in such devices are sourced from various suppliers by the manufacturers thereof and are
principally industry standard parts and components that are available from multiple vendors. Quality or performance
failures of the devices or changes in the contractors’ or vendors’ financial or business condition could disrupt our ability to
29
supply quality products to our Clients and members and thereby have a material adverse impact on our business, financial
condition, and results of operations.
For our business strategy to be successful, our suppliers must be able to provide us with components in sufficient
quantities, in compliance with regulatory requirements and quality control standards, in accordance with agreed upon
specifications, at acceptable costs and on a timely basis. Increases in our product sales, whether forecasted or unanticipated,
could strain the ability of our suppliers to deliver an increasingly large supply of components in a manner that meets these
various requirements.
Despite the terms in our supply agreements, our suppliers may encounter problems that limit their ability to supply
products to us, including financial difficulties, imposition of tariffs that impact the suppliers' ability to perform their
obligations or significantly increase the amount we pay, labor shortages, shutdowns related to a pandemic or other
emergency, shipping delays, or damage to their manufacturing equipment or facilities. As a result, our ability to purchase
adequate quantities of our products may be limited. If we fail to obtain sufficient quantities of high-quality components to
meet demand on a timely basis, we could lose Clients or members, our reputation may be harmed, and our business could
suffer. For certain of our contracts, we have obligations to provide a blood glucose meter and other supplies to new
members within a certain specified period of time, and/or to provide replacements for defective blood glucose meters
within a certain specified period of time. If we are regularly unable to meet those obligations, our channel partners,
resellers, or Clients may decide to terminate their contracts.
Depending on a limited number of suppliers, or on a sole supplier, exposes us to risks, including limited control
over pricing, availability, quality, and delivery schedules. Moreover, we may not be able to convince suppliers to continue
to make components available to us unless there is demand for such components from their other clients. As a result, there
is a risk that certain components could be discontinued and no longer available to us, including as a result of economic
conditions or other supply chain disruptions. If any one or more of our suppliers cease to provide us with sufficient
quantities of components in a timely manner or on terms acceptable to us, we would have to seek alternative sources of
supply. Because of factors such as the proprietary nature of our solutions, our quality control standards, and regulatory
requirements, we cannot quickly engage additional or replacement suppliers for some of our critical components. Failure of
any of our suppliers to deliver products at the level our business requires would limit our ability to meet our sales
commitments, which could harm our reputation and could have a material adverse effect on our business. We may also
have difficulty qualifying new suppliers and obtaining similar components from other suppliers that are acceptable to the
FDA or other regulatory agencies, and the failure of our suppliers to comply with strictly enforced regulatory and quality
requirements could expose us to regulatory action including warning letters, product recalls, termination of distribution,
product seizures, or civil penalties. It could also require us to cease using the components, seek alternative components or
technologies, and modify our solutions to incorporate alternative components or technologies, which could result in a
requirement to seek additional regulatory approvals or clearances for alternative components used in our medical devices.
Any disruption of this nature or increased expenses could harm our commercialization efforts and adversely affect our
business, financial condition, and results of operations.
From time to time our devices may also be subject to expiration and/or end-of-life from our manufacturers. Failure
to effectively mitigate this via safety-stock, new manufacture, or equivalent products could impair our ability to provide
care to members.
Additionally, cost inflation has led to higher material costs in recent years, which we may not be able to
successfully offset, and any future cost inflation may adversely affect our business, financial condition, and results of
operations.
Our international operations pose certain political, legal and compliance, operational, regulatory, economic, and other
risks to our business that may be different from or more significant than risks associated with our domestic operations,
and our exposure to these risks is expected to increase.
Our international business is subject to political, legal and compliance, operational, regulatory, economic, and
other risks resulting from differing legal and regulatory requirements, political, social, and economic conditions and
unforeseeable developments in a variety of jurisdictions. These risks vary widely by country and include varying regional
and geopolitical business conditions and demands, government intervention and censorship, discriminatory regulation,
nationalization or expropriation of assets, and pricing constraints. Our international solutions need to meet country-specific
Client and member preferences as well as country-specific legal requirements, including those related to licensing,
credentialing, virtual care, privacy, data storage, location, protection, and security. Our ability to conduct virtual care
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services internationally is subject to the applicable laws governing remote healthcare, including online counseling and
therapy services, and the practice of medicine in such location, and the interpretation of these laws is evolving and vary
significantly from country to country and are enforced by governmental, judicial, and regulatory authorities with broad
discretion. We cannot, however, be certain that our interpretation of such laws and regulations is correct in how we
structure our operations, our arrangements with physicians, clinicians, services agreements, and customer arrangements.
We earned approximately 16% of revenue internationally in 2024, and we expect this may increase as BetterHelp continues
to expand internationally.
Our international operations require us to overcome logistical and other challenges based on differing languages,
cultures, legal and regulatory schemes, and time zones. Our international operations encounter labor laws, customs, and
employee relationships that can be difficult, less flexible than in our domestic operations and expensive to modify or
terminate. In some countries we are required to, or choose to, operate with local business partners, which requires us to
manage our partner relationships and may reduce our operational flexibility and ability to quickly respond to business
challenges.
Our international operations are also subject to particular risks in addition to those faced by our domestic
operations, including:
•
the need to localize and adapt our solutions for specific countries, including translation into foreign languages
and associated expenses;
•
obtaining regulatory approvals or clearances where required for the sale of our solutions, devices, and
services in various countries;
•
potential loss of proprietary information due to misappropriation or laws that may be less protective of our
intellectual property rights than U.S. laws or that may not be adequately enforced;
•
requirements of foreign laws and other governmental controls, including compliance challenges related to the
complexity of multiple, conflicting and changing governmental laws and regulations, including employment,
healthcare, tax, privacy, and data protection laws and regulations;
•
data privacy laws that require that Client and member data be stored and processed in a designated territory;
•
new and different sources of competition and laws and business practices favoring local competitors;
•
local business and cultural factors that differ from our normal standards and practices, including business
practices that we are prohibited from engaging in by the FCPA and other anti-corruption laws and
regulations;
•
changes to economic sanctions laws and regulations and imposition of tariffs;
•
central bank and other restrictions on our ability to repatriate cash from international subsidiaries;
•
adverse tax consequences;
•
fluctuations in currency exchange rates, economic instability, and inflationary conditions, which could make
our solutions more expensive or increase our costs of doing business in certain countries;
•
limitations on future growth or inability to maintain current levels of revenues from international sales if we
do not invest sufficiently in our international operations;
•
different pricing environments, longer sales cycles, and longer accounts receivable payment cycles and
collections issues;
•
difficulties in staffing, managing and operating our international operations, including difficulties related to
administering our stock plans in some foreign countries and increased financial accounting and reporting
burdens and complexities;
31
•
difficulties in coordinating the activities of our geographically dispersed and culturally diverse operations;
•
political unrest, war, terrorism, economic instability, curtailment of trade, epidemics (such as the COVID-19
pandemic), or regional natural disasters, particularly in areas in which we have facilities.
Our overall success in international markets depends, in part, on our ability to anticipate and effectively manage
these risks and there can be no assurance that we will be able to do so without incurring unexpected costs. If we are not
able to manage the risks related to our international operations, our business, financial condition, and results of operations
may be materially adversely affected. As of our efforts to expand BetterHelp into additional international markets
continues, the risks described above may continue to grow as well.
We depend on our senior management team, and the loss of one or more of our executive officers or key employees or
an inability to attract and retain highly skilled employees could adversely affect our business.
Our success depends largely upon the continued services of our key executive officers and other senior leaders,
and on our ability to attract and retain qualified leaders. These individuals are at-will employees and therefore they may
terminate employment with us at any time with no advance notice. In connection with the hiring of our new chief executive
officer and subsequent changes to our operational structure, we have had several recent executive transitions in 2024. There
may be additional changes in our senior management team resulting from the hiring or departure of executives or other key
employees or from additional changes to our operational structure, which could disrupt our business. The replacement of
one or more of our executive officers or other key employees would likely involve significant time and costs and may
significantly delay or prevent the achievement of our business objectives.
We cannot predict the likelihood, timing or effect of future transitions among our senior leadership. The loss of
the services of our executive officers or other key employees, or inability to attract and retain qualified leaders, could
impede the achievement of our objectives and harm our ability to successfully implement our business strategy. For
example, certain of our employees have taken on increased responsibilities in light of this turnover, which could divert
attention from key business areas, and the realignment of our leadership structure could result in a lack of clear ownership
for key products and processes.
To continue to execute our growth strategy, we also must attract and retain highly skilled personnel. However,
competition in the job market is intense for a limited pool of qualified professionals. Inability to meet the ever-increasing
expenses (salaries, benefits and technology costs, and talent inflation) of attracting and retaining talent may threaten our
ability to provide the staffing resources needed to execute our growth strategy. We have from time to time in the past
experienced, and we expect to continue to experience in the future, difficulty in hiring and retaining highly skilled
personnel with appropriate qualifications. The pool of qualified personnel with experience working in the healthcare
market is limited overall. In addition, many of the companies with which we compete for experienced personnel have
greater resources than we have.
In addition, in making employment decisions, job candidates often consider the value of the equity-based awards
they are to receive in connection with their employment. Volatility in the price of our stock may, therefore, adversely affect
our ability to attract or retain highly skilled personnel. Further, the requirement to expense other equity-based
compensation or our efforts to limit stockholder dilution from our equity compensation programs have discouraged us in
the past, and may discourage us in the future, from granting the size or type of equity awards that job candidates require to
join our company. Failure to attract new personnel or failure to retain and motivate our current personnel, could have a
material adverse effect on our business, financial condition, and results of operations.
We are dependent on our ability to recruit, retain and develop a very large and diverse workforce. We must evolve our
culture in order to successfully grow our business.
Our products and services and our operations require a large number of employees. Our success is dependent on
our ability to evolve our culture, align our talent with our business needs, engage our employees, and inspire our employees
to be open to change, to innovate, and to maintain member- and Client-focus when delivering our services. Our business
would be adversely affected if we fail to adequately plan for succession of our executives and senior management; or if we
fail to effectively recruit, integrate, retain, and develop key talent and/or align our talent with our business needs, in light of
the current rapidly changing environment. While we have succession plans in place and we have employment arrangements
with a limited number of key executives, these do not guarantee that the services of these or suitable successor executives
will continue to be available to us.
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If we fail to develop widespread brand awareness cost-effectively, or are subject to widespread negative media coverage
or social media engagement, our business may suffer.
We believe that developing and maintaining widespread awareness of our brands in a cost-effective manner is
critical to achieving widespread adoption of our solutions and attracting new Clients and members. Our brand promotion
activities may not generate Client or member awareness or increase revenue, and even if they do, any increase in revenue
may not offset the expenses we incur in building our brands. If we fail to successfully promote and maintain our brands, or
incur substantial expenses in doing so, we may fail to attract or retain Clients or members necessary to realize a sufficient
return on our brand-building efforts or to achieve the widespread brand awareness that is critical for broad Client and
member adoption of our solutions.
In addition, unfavorable publicity regarding, among others, us, our business, our solutions, the healthcare industry,
litigation or regulatory activity, our data privacy, or data security practices, or those of other participants in our industry,
could materially adversely affect our reputation. From time to time, news media outlets have provided negative coverage
regarding virtual care and privacy practices, in particular related to BetterHelp. Any negative media coverage or public
perceptions about our brand, regardless of the accuracy of such reporting or perceptions, may have an adverse impact on
our business and reputation, as well as have an adverse effect on our ability to attract and retain Clients, members or
employees, and result in decreased revenue, which could materially adversely affect our business, financial condition and
results of operations.
Our Clients, members and other individuals may also engage with us online through social media pages or provide
feedback and public commentary about all aspects of our business and industry. Information concerning us or our services,
whether accurate or not, may be posted on social media pages at any time and may have a disproportionately adverse
impact on our brand, reputation or business. The harm may be immediate without affording us an opportunity to respond
and could materially adversely affect our business, financial condition and results of operations.
Our BetterHelp marketing efforts may not be successful or may become more expensive, either of which could increase
our costs and adversely affect our business, financial condition, results of operations, and cash flows.
BetterHelp represented 41% of our total consolidated revenue in 2024. We spend significant resources marketing
this service, and the cost of customer acquisition increased in 2024. Any decrease in the amount or effectiveness of our
BetterHelp marketing efforts could lead to lower revenue or growth and profitability of this business. Further, if the cost of
customer acquisition for BetterHelp remains elevated or continues to increase, it could materially adversely affect our
business, financial condition and results of operations.
In addition, we rely on relationships for our BetterHelp business with a wide variety of third parties, including
internet search providers such as Google, social networking platforms such as Facebook, internet advertising networks, co-
registration partners, retailers, distributors, television advertising agencies, and direct marketers, to source new members
and to promote or distribute our services and products. If these third parties and social networking platforms materially
change how they permit companies to advertise with them, it could materially adversely affect our business, financial
condition and results of operations. Also, in connection with the launch of new services or products, features or markets for
our BetterHelp business, we may spend a significant amount of resources on marketing, which could divert resources from
marketing efforts for our core BetterHelp service, which could lead to a decrease in the acquisition of new paying users for
that service. The ability of our advertising spend to efficiently attract new members and increase engagement of current
members has led to a decline in visit volume and revenue. If our marketing activities are inefficient or unsuccessful, if
important third-party relationships or marketing strategies, such as internet search engine marketing and search engine
optimization, become more expensive or unavailable, or are suspended, modified, or terminated, for any reason, if there is
an increase in the proportion of individuals visiting our websites or purchasing our services by way of marketing channels
with higher marketing costs as compared to channels that have lower or no associated marketing costs or if our marketing
efforts do not result in our services being prominently ranked in internet search listings, our business, financial condition,
results of operations, and cash flows could be materially and adversely impacted.
In order to support the growth of our business, we have and may need to incur additional indebtedness or seek capital
through new equity or debt financings, which sources of additional indebtedness or capital may not be available to us
on acceptable terms or at all.
Our operations have consumed substantial amounts of cash since inception and we intend to continue to make
significant investments to support our growth, respond to business challenges or opportunities, develop new applications
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and services, enhance our existing solutions and services, enhance our operating infrastructure, and potentially acquire
complementary businesses and technologies. For the years ended December 31, 2024 and 2023, our net cash provided by
operating activities was $293.7 million and $350.0 million, respectively. As of December 31, 2024, we had $1,298.3
million of cash and cash equivalents which are held for working capital purposes, capital expenditures, and other corporate
purposes. As of December 31, 2024, we had outstanding $1,000.0 million of 1.25% convertible senior notes due 2027 (the
“2027 Notes”), $0.7 million of 1.375% convertible senior notes due 2025 (the “2025 Notes”), and $550.0 million of
0.875% convertible senior notes due 2025 that were issued by Livongo Health, Inc. ("Livongo") for which we agreed to
assume all of Livongo's rights and obligations (the "Livongo Notes," and together with the 2027 Notes and 2025 Notes, the
"Notes").
We may be required to use a substantial portion of our cash flows from operations to pay interest and principal on
our indebtedness. An aggregate principal amount of $550.7 million of the Notes is due in 2025. Our ability to make
scheduled payments of the principal of, to pay interest on, or to refinance our indebtedness, including the Notes, depends
on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. Such
payments will reduce the funds available to us for working capital, capital expenditures, and other corporate purposes and
limit our ability to obtain additional financing for working capital, capital expenditures, expansion plans, and other
investments, which may in turn limit our ability to implement our business strategy, heighten our vulnerability to
downturns in our business, the industry, or in the general economy, limit our flexibility in planning for, or reacting to,
changes in our business and the industry, and prevent us from taking advantage of business opportunities as they arise. Our
business may not continue to generate cash flow from operations in the future sufficient to service our debt, make
necessary capital expenditures and fund our operations. If we are unable to generate such cash flow, we may be required to
adopt one or more alternatives, such as selling assets, restructuring debt, or obtaining additional equity capital on terms that
may be onerous or highly dilutive. If we are unable to engage in any of these activities or engage in these activities on
desirable terms, it could result in a default on our debt obligations, which would adversely affect our business, financial
condition, and results of operations. We may settle conversions of the Notes through payment or delivery, as the case may
be, of cash, shares of our common stock, or a combination of cash and shares of our common stock. The amount of cash
paid, or number of shares delivered, in connection with any conversion may be material and could result in a significant
depletion in the cash available to fund our operations or significant dilution to our stockholders.
Our future capital requirements may be significantly different from our current estimates and will depend on many
factors, including our growth rate, subscription renewal activity, the timing and extent of spending to support development
efforts, the expansion of sales and marketing activities, the introduction of new or enhanced services, and the continuing
market acceptance of virtual care. Accordingly, we may need to engage in equity or debt financings or collaborative
arrangements to secure additional funds. If we raise additional funds through further issuances of equity or convertible debt
securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have
rights, preferences, and privileges superior to those of holders of our common stock. Any debt financing secured by us in
the future could become more expensive due to rising interest rates or involve restrictive covenants relating to our capital-
raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional
capital and to pursue business opportunities, including potential acquisitions. In addition, during times of economic
instability, it has been difficult for many companies to obtain financing in the public markets or to obtain debt financing,
and we may not be able to obtain additional financing on commercially reasonable terms, if at all. If we are unable to
obtain adequate financing or financing on terms satisfactory to us, it could have a material adverse effect on our business,
financial condition, and results of operations.
The investment of our cash and cash equivalents is subject to risks which may cause losses and affect the liquidity of
these investments.
At December 31, 2024, we had $1,298.3 million in cash and cash equivalents. Our investments may also include
commercial paper, securities issued by the U.S. government obligations, and money market funds meeting the criteria of
our investment policy, which is focused on the preservation of our capital. These investments are subject to general credit,
liquidity, and market and interest rate risks, particularly in the current economic environment. We may realize losses in the
fair value of these investments or a complete loss of these investments, which would have a negative effect on our
consolidated financial statements. In addition, should our investments cease paying or reduce the amount of interest paid to
us, our interest income would suffer. The market risks associated with our investment portfolio may have an adverse effect
on our results of operations, liquidity and financial condition.
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Foreign currency exchange rate fluctuations could adversely affect our business, financial condition and results of
operations.
Our business is exposed to fluctuations in exchange rates. Although our reporting currency is the U.S. dollar, we
operate in different geographical areas and transact in a range of currencies in addition to the U.S. dollar. As a result,
movements in exchange rates may cause our revenue and expenses to fluctuate, impacting our profitability and cash flows.
Future business operations and opportunities, including any continued expansion of our business outside the U.S., may
further increase the risk that cash flows resulting from these activities may be adversely affected by changes in currency
exchange rates. In the event we are unable to offset these risks, there may be a material adverse impact on our business,
financial condition, and results of operations. In appropriate circumstances where we are unable to naturally offset our
exposure to these currency risks, we may enter into derivative transactions to reduce such exposures. Even where we
implement hedging strategies to mitigate foreign currency risk, these strategies might not eliminate our exposure to foreign
currency exchange rate fluctuations and involve costs and risks of their own, such as ongoing management time and
expertise, costs to implement the strategies, and potential accounting implications. Nevertheless, exchange rate fluctuations
may either increase or decrease our revenues and expenses as reported in U.S. dollars. Moreover, foreign governments may
restrict transfers of cash out of the country, control exchange rates and enforce exchange controls. There can be no
assurance that we will be able to repatriate our earnings, and at exchange rates that are beneficial to us, which could have a
material adverse effect on our business, financial condition, and results of operations.
Natural or man-made disasters and other similar events may significantly disrupt our business and negatively impact
our business, financial condition, and results of operations.
Our offices may be harmed or rendered inoperable by natural or man-made disasters, including earthquakes,
power outages, fires, floods, nuclear disasters, health epidemics (including the COVID-19 pandemic), war, and acts of
terrorism or other criminal activities, which may render it difficult or impossible for us to operate our business for some
period of time. For example, the COVID-19 pandemic, including its variants, disrupted the normal operations of our
business, and any other similar pandemic or epidemic may result in the same among other impacts. As another example,
our headquarters are located in the greater New York City area, a region with a history of terrorist attacks and hurricanes.
Acts of terrorism, including malicious internet-based activity, could cause disruptions to the internet or the economy as a
whole. Even with our disaster recovery arrangements, access to our platform could be interrupted. If our systems were to
fail or be negatively impacted as a result of a natural disaster or other event, our ability to deliver our platform and solution
to our Clients and members would be impaired or we could lose critical data. Although we maintain an insurance policy
covering damage to property we rent, such insurance may not be sufficient to compensate for losses that may occur. If we
are unable to develop adequate plans to ensure that our business functions continue to operate during and after a disaster,
and successfully execute on those plans in the event of a disaster or emergency, any such losses or damages could have a
material adverse effect on our business, financial condition and results of operations and harm our reputation. In addition,
our Clients’ facilities may be harmed or rendered inoperable by such natural or man-made disasters, which may cause
disruptions, difficulties, or material adverse effects on our business.
Risks Related to Information Technology
We rely on data center providers, internet infrastructure, bandwidth providers, third-party computer hardware and
software, network and cloud service providers, other third parties and our own systems for providing services to our
Clients and members, and any failure or interruption in the services provided by these third parties or our own systems
could expose us to litigation and negatively impact our relationships with Clients and members, adversely affecting our
brand and our business, financial condition and results of operations.
We serve all of our Clients and members leveraging a multi-cloud architecture using leading multinational
vendors. The actual instances are geographically diverse to insulate our applications from local failures and have an
additional layer of redundancy provided by company-managed data centers. While we control and have access to our
servers, we do not control the operation of these facilities. The cloud vendors and the owners of our data center facilities
have no obligation to renew their agreements with us on commercially reasonable terms, or at all. If we are unable to renew
these agreements on commercially reasonable terms, or if one of our cloud vendors or data center operators is acquired, we
may be required to transfer our servers and other infrastructure to a new vendor or a new data center facility, and we may
incur significant costs and possible service interruption in connection with doing so. Problems faced by our cloud vendors
or third-party data center locations with the telecommunications network providers with whom we or they contract or with
the systems by which our telecommunications providers allocate capacity among their clients, including us, could
adversely affect the experience of our Clients and members. Our cloud vendors or third-party data center operators could
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decide to close their facilities without adequate notice. In addition, any financial or business actions by our cloud vendors,
third-party data centers operators, or any of the service providers with whom we or they contract may have negative effects
on our business, financial condition, and results of operations, the nature and extent of which are difficult to predict. These
financial or business actions may include bankruptcy declarations or decisions to acquire or develop products that compete
directly with our solutions. Should they compete against us, we may be at a disadvantage because they may gain additional
insights into our system by analyzing our cloud traffic on their servers.
In addition, our ability to deliver our services that rely on internet or mobile technology depends on the
development and maintenance of the infrastructure of the internet or mobile technology by third parties. This includes
maintenance of a reliable network backbone with the necessary speed, data capacity, bandwidth capacity, and security. Our
services are designed to operate without interruption in accordance with our service level commitments. However, we have
experienced and expect that we may experience future interruptions and delays in services and availability from time to
time. In the event of a catastrophic event with respect to one or more of our systems, we may experience an extended
period of system unavailability, which could negatively impact our relationship with Clients and members. To operate
without interruption, both we and our service providers must guard against:
•
damage from fire, power loss, natural disasters, health epidemics (including the COVID-19 pandemic), and
other force majeure events outside our control;
•
communications failures;
•
software and hardware errors, failures, and crashes;
•
security breaches, computer viruses, hacking, denial-of-service attacks, and similar disruptive problems; and
•
other potential interruptions.
We exercise limited control over third-party vendors, which increases our vulnerability to problems with
technology and information services they provide. Interruptions in our network access and services in connection with
third-party technology and information services may reduce our revenue, cause us to issue refunds to Clients or members
for prepaid and unused subscription services, subject us to potential liability, or adversely affect Client or member renewal
rates. Although we maintain a security and privacy damages insurance policy, the coverage under our policies may not be
adequate to compensate us for all losses that may occur related to the services provided by our third-party vendors. In
addition, we may not be able to continue to obtain adequate insurance coverage at an acceptable cost, if at all.
Our ability to rely on these services of third-party vendors could be impaired as a result of the failure of such
providers to comply with applicable laws, regulations, and contractual covenants, or as a result of events affecting such
providers, such as power loss, telecommunication failures, software or hardware errors, computer viruses, cyber incidents,
and similar disruptive problems, fire, flood, and natural disasters. Any such failure or event could adversely affect our
relationships with our Clients and members and damage our reputation. This could materially and adversely impact our
business, financial condition, and results of operations.
If our or our vendors’ security measures fail or are breached and unauthorized access to a Client's or member’s data is
obtained, then our services may be perceived as insecure, we may incur significant liabilities, our reputation may be
harmed, and we could lose sales, Clients, and members.
Our services involve the storage and transmission of Clients’ and our members’ proprietary information, sensitive
or confidential data, including valuable intellectual property and personal information of employees, Clients, members and
others, as well as the PHI of our members. Because of the sensitivity of the information we store and transmit, the security
features of our and our third-party vendors’ computer, network, and communications systems infrastructure are critical to
the success of our business. A breach or failure of our or our third-party vendors’ security measures could result from a
variety of circumstances and events, including third-party action, employee negligence or error, malfeasance, computer
viruses, cyber-attacks by computer hackers, failures during the process of upgrading or replacing software and databases,
power outages, hardware failures, telecommunication failures, user errors, or catastrophic events. Information security risks
have generally increased in recent years because of the proliferation of new technologies and the increased sophistication
and activities of perpetrators of cyber-attacks. As cyber threats continue to evolve, we may be required to expend additional
resources to further enhance our information security measures and/or to investigate and remediate any information
security vulnerabilities. While we have security measures in place, we have experienced cybersecurity incidents in the past.
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Likewise, our third-party vendors have experienced cybersecurity incidents in the past that have impacted us. To date,
management has not determined that any cybersecurity incidents the Company has experienced, including incidents our
third-party vendors have experienced, have resulted in, or are reasonably likely to result in, a material impact to our
business. We learn from these incidents and adjust controls and incident response procedures as needed. If our or our third-
party vendors’ security measures fail or are breached, it could result in unauthorized persons accessing sensitive Client or
member data (including PHI), a loss of or damage to our data, an inability to access data sources, or process data or provide
our services to our Clients or members. Such failures or breaches of our or our third-party vendors’ security measures, or
our or our vendors’ inability to effectively resolve such failures or breaches in a timely manner, could severely damage our
reputation, adversely affect Client, member, or investor confidence in us, and reduce the demand for our services from
existing and potential Clients or members. In addition, we could face litigation, damages for contract breach, monetary
penalties, or regulatory actions for violation of applicable laws or regulations, and incur significant costs for remedial
measures to prevent future occurrences and mitigate past violations. Applicable data protection laws, privacy policies, or
data protection obligations may require us to notify affected individuals, regulators, customers, credit reporting agencies,
and others in the event of a security breach. Members about whom we obtain health information, as well as the providers
who share this information with us, may have statutory or contractual rights that limit our ability to use and disclose the
information. We may be required to expend significant capital and other resources to ensure ongoing compliance with
applicable data protection laws, privacy policies, and data protection obligations. Claims that we have violated individuals’
privacy rights or breached our data protection obligations, even if we are not found liable, could be expensive and time-
consuming to defend and could result in adverse publicity that could harm our business. Although we maintain insurance
covering certain security and privacy damages and claim expenses, we may not carry insurance or maintain coverage
sufficient to compensate for all liability and in any event, insurance coverage would not address the reputational damage
that could result from a security incident.
We may experience cybersecurity and other breach incidents that remain undetected for an extended period.
Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not
recognized until launched, we may be unable to anticipate these techniques or to implement adequate preventive measures.
If an actual or perceived breach of our security occurs, or if we are unable to effectively resolve such breaches in a timely
manner, the market perception of the effectiveness of our security measures could be harmed and we could lose sales,
Clients, and members, which could have a material adverse effect on our business, financial condition, and results of
operations.
Also, the threat of ransomware could result in large-scale business disruption and data breach. A successful attack
could shut down our ability to provide our services for an extended period of time, the result of which would be the loss of
revenue, potential fines and costs associated with data loss, as well as a blemished reputation that could hinder our ability
to retain and attract Clients and members.
Our proprietary software may not operate properly or meet the expectations of our Clients or members, which could
damage our reputation, give rise to claims against us, or divert application of our resources from other purposes, any of
which could harm our business, financial condition, and results of operations.
Our application platform provides our members and providers with the ability to, among other things: register for
our services; complete, view and edit medical history; request a visit (either scheduled or on demand); conduct a visit (via
video or phone); use our devices to collect health information; and initiate an expert medical service. Proprietary software
development is time consuming, expensive, and complex, and may involve unforeseen difficulties. From time to time we
have encountered design and technical obstacles that have led to performance and usability challenges, and it is possible
that we may discover additional problems that prevent our proprietary applications from operating properly or meeting the
expectations of our Clients or members. We continue to implement software with respect to a number of new applications
and services. If our solutions do not function reliably or fail to achieve Client or member expectations in terms of
performance, Clients or members could assert liability claims against us or attempt to cancel their contracts with us. This
could damage our reputation and impair our ability to attract or maintain Clients and members, and could have a material
adverse effect on our business, financial condition, and results of operations.
Moreover, data services are complex and those we offer have in the past contained, and may in the future develop
or contain, undetected defects or errors. Material performance problems, defects, or errors in our existing or new software
and applications and services may arise in the future and may result from interface of our solutions with systems and data
that we did not develop and the function of which is outside of our control or undetected in our testing. These defects and
errors, and any failure by us to identify and address them, could result in loss of revenue or market share, diversion of
development resources, harm to our reputation, incomplete clinical information for our members and increased service and
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maintenance costs. Defects or errors may discourage existing or potential Clients or members from purchasing our
solutions from us or may cause existing Clients to terminate their relationship with us. Correction of defects or errors could
prove to be impossible or impracticable. The costs incurred in correcting any defects or errors may be substantial and could
have a material adverse effect on our business, financial condition, and results of operations.
If we cannot implement our solutions for Clients, enroll members or resolve any technical issues in a timely manner, we
may lose Clients or members and our reputation may be harmed, which could have a material adverse effect on our
business, financial condition and results of operations.
Our Clients utilize a variety of data formats, applications, and infrastructure and our solutions must support our
Clients’ data formats and integrate with complex enterprise applications and infrastructures. If our virtual care platform
does not currently support a Client’s required data format or appropriately integrate with a Client’s applications and
infrastructure, then we must configure our platform to do so, which increases our expenses. Additionally, we do not control
our Clients’ implementation schedules. As a result, if our Clients do not allocate the internal resources necessary to meet
their implementation responsibilities or if we face unanticipated implementation difficulties, the implementation may be
delayed. If the Client implementation process is not executed successfully or if execution is delayed, we could incur
significant costs, Clients could become dissatisfied and decide not to increase utilization of our solutions or not to
implement our solutions beyond an initial period prior to their term commitment or, in some cases, revenue recognition
could be delayed. In addition, competitors with more efficient operating models with lower implementation costs could
jeopardize our Client relationships. In addition, our growth in recent years has led to multiple eligibility systems that has at
times caused, and may in the future cause, challenges regarding member eligibility verification, which could result in
member inability to access care, decreased enrollment and other negative business and financial impacts, including
increased administrative costs.
Our Clients and members depend on our support services to resolve any technical issues relating to our solutions
and services, and we may be unable to respond quickly enough to accommodate short-term increases in member demand
for support services, particularly as we increase the size of our Client and membership bases. We also may be unable to
modify the format of our support services to compete with changes in support services provided by competitors. It is
difficult to predict member demand for technical support services, and if member demand increases significantly, we may
be unable to provide satisfactory support services to our members. Further, if we are unable to address members’ needs in a
timely fashion or further develop and enhance our solution, or if a Client or member is not satisfied with the quality of
work performed by us or with the technical support services rendered, then we could incur additional costs to address the
situation or be required to issue credits or refunds for amounts related to unused services, and our profitability may be
impaired and Clients’ and members’ dissatisfaction with our solution could damage our ability to expand the number of
applications and services purchased by such Clients. These Clients may not renew their contracts, seek to terminate their
relationship with us, or renew on less favorable terms, or members may not renew their subscriptions to our BetterHelp
services. Moreover, negative publicity related to our Client or member relationships, regardless of its accuracy, may further
damage our business by affecting our reputation or ability to compete for new business with current and prospective
Clients or members. If any of these were to occur, our revenue may decline and our business, financial condition, and
results of operations could be materially adversely affected.
Risks Related to Government Regulation
Our business could be adversely affected by legal challenges to our business model or by actions restricting our ability
to provide the full range of our services in certain jurisdictions.
Our ability to conduct our business in a particular U.S. state or non-U.S. jurisdiction is directly dependent upon
the applicable laws governing virtual healthcare, the practice of medicine, and healthcare delivery in general in such
location which are subject to changing political, regulatory, and other influences. With respect to virtual care services, in
the past, state medical boards have established new rules or interpreted existing rules in a manner that has limited or
restricted our ability to conduct our business as it was conducted in other states. Some of these actions have resulted in
litigation and the suspension or modification of our virtual care operations in certain states. With respect to expert medical
services, we believe that they do not constitute the practice of medicine in any jurisdiction in which we provide them.
However, the extent to which a U.S. state or non-U.S. jurisdiction considers particular actions or relationships to constitute
practicing medicine is subject to change and to evolving interpretations by medical boards, state attorneys general, or the
other relevant regulatory and legal authorities, each with broad discretion.
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In addition, our BetterHelp segment and the industry as a whole has come under increasing scrutiny from
government regulators in recent years, including as a result of the industry’s growing profile due to the COVID-19
pandemic. Accordingly, we must monitor our compliance with laws in every jurisdiction in which we operate, on an
ongoing basis, and we cannot provide assurance that our activities and arrangements, if challenged, will be found to be in
compliance with the laws. Additionally, it is possible that the laws and rules governing the practice of medicine, including
virtual healthcare, in one or more jurisdictions may change in a manner deleterious to our business. If a successful legal
challenge or an adverse change in the relevant laws were to occur, and we were unable to adapt our business model
accordingly, our operations in the affected jurisdictions would be disrupted, which could have a material adverse effect on
our business, financial condition, and results of operations.
In our U.S. telehealth business, we are dependent on our relationships with affiliated professional entities, which we do
not own, to provide medical services, and our business would be adversely affected if those relationships were disrupted
or if our arrangements with the THMG Association's providers or our Clients are found to violate state laws prohibiting
the corporate practice of medicine or fee splitting.
The laws of all states prohibit us from exercising control over the medical judgments or decisions of physicians
and the laws of many states, including states in which many of our Clients are located, prohibit us from engaging in certain
financial arrangements, such as splitting professional fees with physicians. These laws and their interpretations vary from
state to state and are enforced by state courts and regulatory authorities, each with broad discretion, and are subject to
change and to evolving interpretations by state boards of medicine and state attorneys general, among others. We enter into
agreements with our affiliated professional association, THMG, which enters into contracts with its providers pursuant to
which they render professional medical services. In addition, we enter into contracts with our Clients to arrange for the
THMG Association to deliver professional services in exchange for fees. These contracts include management services
agreements with our affiliated physician organizations pursuant to which the physician organizations reserve exclusive
control and responsibility for all aspects of the practice of medicine and the delivery of medical services. Although we seek
to comply with applicable state prohibitions on the corporate practice of medicine and fee splitting, changes in, or
subsequent interpretations of, the corporate practice of medicine laws could circumscribe our business operations, and state
officials who administer these laws or other third parties may successfully challenge our existing organization and
contractual arrangements. If such a claim were successful, we could be subject to civil and criminal penalties, the
repayment of reimbursements from third party payors, and could be required to restructure or terminate the applicable
contractual arrangements. A determination that these arrangements violate state statutes, or our inability to successfully
restructure our relationships with the THMG Association's providers to comply with these statutes, could hinder our ability
to provide services to Clients located in certain states, which would have a materially adverse effect on our business,
financial condition, and results of operations. State corporate practice of medicine doctrines also often impose penalties on
physicians themselves for aiding the corporate practice of medicine, which could discourage physicians from participating
in our network of providers. Additionally, a number of states have recently introduced or are planning to introduce
legislation which would significantly increase the level of scrutiny that similarly structured organizations would face and
could introduce additional penalties on management services organizations similar to ours.
We do not own THMG, which is a 100% physician owned independent entity, or the professional corporations
with which it contracts. THMG and the other professional corporations are owned by physicians licensed in their respective
states. While we expect that these relationships will continue, we cannot guarantee that they will. A material change in our
relationship with THMG, or among THMG and the contracted professional corporations, whether resulting from a dispute
among the entities, a change in government regulation, or the loss of these affiliations, could impair our ability to provide
services to our members and could have a material adverse effect on our business, financial condition, and results of
operations. In addition, the arrangements in which we have entered to comply with state corporate practice of medicine
doctrines could subject us to additional scrutiny by federal and state regulatory bodies, including with respect to federal and
state fraud and abuse laws. We believe that our operations comply with applicable state statutes and regulations regarding
corporate practice of medicine, fee-splitting, and anti-kickback prohibitions. However, any scrutiny, investigation, or
litigation with regard to our arrangement with the THMG Association or BetterHelp could have a material adverse effect
on our business, financial condition and results of operations, particularly if we are unable to restructure our operations and
arrangements to comply with applicable laws or we are required to restructure at a significant cost, or if we were subject to
penalties or other adverse action.
In the U.S., a number of states have introduced healthcare transaction notification requirements which may impede our
ability to grow through mergers, acquisitions, consolidations, and other transactions.
A number of states have introduced legislation or passed legislation which requires the acquirer of certain
healthcare entities to provide notice or, in some states, seek approval of state regulators and attorneys general prior to the
39
consummation of such transactions. These healthcare transaction laws have, in some cases, extended the length of time
required to close an acquisition and may result in certain transactions being rejected or blocked by state authorities or
attorneys general. We partially rely on mergers, acquisitions, and consolidation transactions to enable us to scale our
business lines and acquire new business lines. If we were unable to consummate such transactions, or were delayed in
closing and implementing such transactions, the result could negatively affect our financial performance and ability to
grow and expand. In addition, the compliance with such healthcare transaction notification laws increases the cost and
effort associated with each transaction and may bring scrutiny by governmental authorities on our internal operations and
position in the healthcare services marketplace.
Evolving government regulations may require increased costs or adversely affect our business, financial condition, and
results of operations.
In a regulatory climate that is uncertain, our operations have been, and may in the future be, subject to direct and
indirect adoption, expansion, or reinterpretation of various laws and regulations. Compliance with these future laws and
regulations may require us to change our practices at an undeterminable and possibly significant initial monetary and
recurring expense. These additional monetary expenditures may increase future overhead, which could have a material
adverse effect on our business, financial condition, and results of operations. In addition, any regulatory changes that make
it more difficult to license providers in multiple jurisdictions could adversely impact our ability to efficiently scale our
business, which could have a material adverse effect on our business, financial condition, and results of operations.
We have identified what we believe are the areas of government regulation that, if changed, would be costly to us.
These areas include: rules governing the provision of telehealth, including, for example, rules that would require in person
visits or consultations prior to the provision of telehealth; practice of medicine by physicians; licensure standards for
doctors, physician assistants, advanced practice registered nurses, nurses, and mental health professionals; laws limiting the
corporate practice of medicine; cybersecurity and privacy laws; laws and rules relating to the distinction between
independent contractors and employees; and tax and other laws encouraging employer-sponsored health insurance and
group benefits. There could be laws and regulations applicable to our business that we have not identified or that, if
changed, may be costly to us, and we cannot predict all the ways in which implementation of such laws and regulations
may affect us.
In the jurisdictions in which we operate, we believe we are in compliance with all applicable laws, but, due to the
uncertain regulatory environment, certain jurisdictions may allege or determine that we are in violation of their laws. In the
event that we must remedy such violations, we may be required to modify our services and products in a manner that
undermines our solutions’ attractiveness to our Clients, members or providers, we may become subject to fines or other
penalties or, if we determine that the requirements to operate in compliance in such jurisdictions are overly burdensome,
we may elect to terminate our operations in such places. In each case, our revenue may decline, and our business, financial
condition, and results of operations could be materially adversely affected.
Additionally, the introduction of new services may require us to comply with additional, yet undetermined, laws
and regulations. Compliance may require obtaining appropriate licenses or certificates, increasing our security measures,
and expending additional resources to monitor developments in applicable rules and ensure compliance. The failure to
adequately comply with these future laws and regulations may delay or possibly prevent some of our products or services
from being offered to Clients and members, which could have a material adverse effect on our business, financial
condition, and results of operations.
In the U.S., we conduct business in a heavily regulated industry and if we fail to comply with these laws and government
regulations, we could incur penalties or be required to make significant changes to our operations, or experience
adverse publicity, which could have a material adverse effect on our business, financial condition, and results of
operations.
The U.S. healthcare industry is heavily regulated and closely scrutinized by federal, state, and local governments.
Comprehensive statutes and regulations govern the manner in which we provide and bill for services and collect
reimbursement from governmental programs and private payors, our contractual relationships with the THMG
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Association's providers, vendors, and Clients, our marketing activities and other aspects of our operations. Of particular
importance are:
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the federal physician self-referral law, commonly referred to as the Stark Law, that, subject to limited
exceptions, prohibits physicians from referring Medicare or Medicaid patients to an entity for the provision of
certain “designated health services” if the physician or a member of such physician’s immediate family has a
direct or indirect financial relationship (including an ownership interest or a compensation arrangement) with
the entity, and prohibit the entity from billing Medicare or Medicaid for such designated health services;
•
the federal Anti-Kickback Statute that prohibits the knowing and willful offer, payment, solicitation, or
receipt of any bribe, kickback, rebate, or other remuneration for referring an individual, in return for ordering,
leasing, purchasing, or recommending or arranging for or to induce the referral of an individual or the
ordering, purchasing, or leasing of items or services covered, in whole or in part, by any federal healthcare
program, such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the
statute or specific intent to violate it to have committed a violation. In addition, the government may assert
that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute
constitutes a false or fraudulent claim for purposes of the False Claims Act;
•
the criminal healthcare fraud provisions of HIPAA and related rules that prohibit knowingly and willfully
executing a scheme or artifice to defraud any healthcare benefit program or falsifying, concealing, or covering
up a material fact or making any material false, fictitious, or fraudulent statement in connection with the
delivery of or payment for healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute,
a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have
committed a violation;
•
the federal False Claims Act that imposes civil and criminal liability on individuals or entities that knowingly
submit false or fraudulent claims for payment to the government or knowingly making, or causing to be
made, a false statement in order to have a false claim paid, including qui tam or whistleblower suits;
•
reassignment of payment rules that prohibit certain types of billing and collection practices in connection with
claims payable by the Medicare or Medicaid programs;
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similar state law provisions pertaining to anti-kickback, self-referral, and false claims issues, some of which
may apply to items or services reimbursed by any payor, including patients and commercial insurers;
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state laws that prohibit general business corporations, such as us, from practicing medicine, controlling
physicians’ medical decisions, or engaging in some practices such as splitting fees with physicians;
•
laws that regulate debt collection practices as applied to our debt collection practices;
•
a provision of the Social Security Act that imposes criminal penalties on healthcare providers who fail to
disclose or refund known overpayments;
•
federal and state laws that prohibit providers from billing and receiving payment from Medicare and
Medicaid for services unless the services are medically necessary, adequately and accurately documented, and
billed using codes that accurately reflect the type and level of services rendered; and
•
federal and state laws and policies that require healthcare providers to maintain licensure, certification, or
accreditation to enroll and participate in the Medicare and Medicaid programs, to report certain changes in
their operations to the agencies that administer these programs.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it
is possible that some of our business activities could be subject to challenge under one or more of such laws. Achieving
and sustaining compliance with these laws may prove costly. Failure to comply with these laws and other laws can result in
civil and criminal penalties such as fines, damages, overpayment, recoupment, imprisonment, loss of enrollment status and
exclusion from the Medicare and Medicaid programs. The risk of our being found in violation of these laws and regulations
is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and
their provisions are sometimes open to a variety of interpretations. Certain of these laws and regulations are subject to
“facts and circumstances” review, and the considerations for such review may vary based on the reviewer or
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administration. Our failure to accurately anticipate the application of these laws and regulations to our business or any
other failure to comply with regulatory requirements could create liability for us and negatively affect our business. Any
action against us for violation of these laws or regulations, even if we successfully defend against it, could cause us to incur
significant legal expenses, divert our management’s attention from the operation of our business, and result in adverse
publicity.
To enforce compliance with the federal laws, the U.S. Department of Justice, the OIG and other governmental
agencies have increased their scrutiny of healthcare providers, which has led to a number of investigations, prosecutions,
convictions, and settlements in the healthcare industry. Dealing with investigations can be time- and resource-consuming
and can divert management’s attention from the business. Any such investigation or settlement could increase our costs or
otherwise have an adverse effect on our business. In addition, because of the potential for large monetary exposure under
the federal False Claims Act, which provides for treble damages and minimum penalties per false claim or statement,
healthcare providers often resolve allegations without admissions of liability for significant and material amounts to avoid
the uncertainty of treble damages that may be awarded in litigation proceedings. Such settlements often contain additional
compliance and reporting requirements as part of a consent decree, settlement agreement or corporate integrity agreement.
Given the significant size of actual and potential settlements, it is expected that the government will continue to devote
substantial resources to investigating healthcare providers’ compliance with the healthcare reimbursement rules and fraud,
waste, and abuse laws.
The laws, regulations and standards governing the provision of healthcare services may change significantly in the
future. Any new or changed healthcare laws, regulations, or standards or any review of our business by judicial, law
enforcement, regulatory or accreditation authorities could adversely affect our business, financial condition, and results of
operations.
Our use and disclosure of personally identifiable information, including health information, and other personal data is
subject to federal, state, and foreign privacy and security regulations, and our failure to comply with those regulations
or to adequately secure the information we hold could result in significant liability or reputational harm and, in turn, a
material adverse effect on our Client base, membership base, and revenue.
Numerous federal, state and foreign laws and regulations govern the collection, dissemination, use, privacy,
confidentiality, security, availability, and integrity of PII, including PHI. In particular, in the U.S., HIPAA establishes a set
of basic national privacy and security standards for the protection of PHI by health plans, healthcare clearinghouses, and
certain healthcare providers, referred to as covered entities, and the business associates with whom such covered entities
contract for services, which includes us. HIPAA requires healthcare providers like us to develop and maintain policies and
procedures with respect to PHI that is used or disclosed, including the adoption of administrative, physical, and technical
safeguards to protect such information. HIPAA also implemented the use of standard transaction code sets and standard
identifiers that covered entities must use when submitting or receiving certain electronic healthcare transactions, including
activities associated with the billing and collection of healthcare claims.
HIPAA imposes mandatory penalties for certain violations. However, a single breach incident can result in
violations of multiple standards, which could result in significant fines. HIPAA also authorizes state attorneys general to
file suit on behalf of their residents. Courts will be able to award damages, costs, and attorneys’ fees related to violations of
HIPAA in such cases. While HIPAA does not create a private right of action allowing individuals to sue us in civil court
for violations of HIPAA, its standards have been used as the basis for duty of care in state civil suits such as those for
negligence or recklessness in the misuse or breach of PHI. Any such penalties or lawsuits could harm our business,
financial condition, results of operations, and reputation.
In addition, HIPAA mandates that the Secretary of HHS conduct periodic compliance audits of HIPAA-covered
entities or business associates for compliance with the HIPAA Privacy and Security Standards. It also tasks HHS with
establishing a methodology whereby harmed individuals who were the victims of breaches of unsecured PHI may receive a
percentage of the Civil Monetary Penalty fine paid by the violator.
HIPAA further requires that patients be notified of any unauthorized acquisition, access, use or disclosure of their
unsecured PHI that has more than a low probability of compromising the privacy or security of such information, with
certain exceptions related to unintentional or inadvertent use or disclosure by employees or authorized individuals. HIPAA
specifies that such notifications must be made “without unreasonable delay and in no case later than 60 calendar days after
discovery of the breach.” If a breach affects 500 patients or more, it must be reported to HHS without unreasonable delay,
and HHS will post the name of the breaching entity on its public website. Breaches affecting 500 patients or more in the
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same state or jurisdiction must also be reported to the local media. If a breach involves fewer than 500 people, the covered
entity must record it in a log and notify HHS at least annually.
Numerous other federal and state laws protect the confidentiality, privacy, availability, integrity, and security of
PII, including PHI and other personal data. These laws in many cases are more restrictive than, and may not be preempted
by, the HIPAA rules and may be subject to varying interpretations by courts and government agencies, creating complex
compliance issues for us and our Clients and potentially exposing us to additional expense, adverse publicity, and liability.
In addition to fines and penalties imposed upon violators, some of these state laws also afford private rights of action to
individuals who believe their personal information has been misused. There are many other state-based data privacy and
security laws and regulations that may impact our business. All of these evolving compliance and operational requirements
impose significant costs that are likely to increase over time, may require us to modify our data processing practices and
policies, divert resources from other initiatives and projects, and could restrict the way services involving data are offered,
all of which may adversely affect our business, financial condition, and results of operations. For example, U.S. states have
begun to introduce more comprehensive data protection laws. The CCPA went into effect in January 2020 and established
a new privacy framework for covered businesses such as ours that expands the scope of personal information and provides
new privacy rights for California residents. These changes required us to modify our data processing practices and policies
and incur compliance-related costs and expenses. The CCPA also provides for civil penalties for violations, as well as a
private right of action for data breaches, which may increase the likelihood and cost of data breach litigation. Additionally,
the CPRA went into effect on January 1, 2023 and significantly modifies the CCPA by, among other things, creating a
dedicated privacy regulatory agency, requiring businesses to implement data minimization and data integrity principles,
and imposing additional requirements for contracts addressing the processing of personal information. Numerous states
have enacted, or are currently reviewing, legislation that is similar to the CCPA and/or CPRA. For example, the Texas Data
Privacy and Security Act, the Oregon Consumer Privacy Act and the Montana Consumer Data Privacy Act became
effective in 2024. There are also bills that have been approved or are going through the legislative process in many more
states. In 2022, a draft of the American Data Privacy and Protection Act was released and would be a comprehensive
federal data privacy law that would seek to ease the burden of a patchwork of overlapping but different state laws. These
changes may result in further uncertainty with respect to privacy, data protection, and information security issues and will
require us to incur additional costs and expenses in an effort to comply.
New health information standards, whether implemented pursuant to HIPAA, congressional action, or otherwise,
could have a significant effect on the manner in which we must handle healthcare-related data, and the cost of complying
with standards could be significant. If we do not comply with existing or new laws and regulations related to PHI, we could
be subject to criminal or civil sanctions and our reputation could be harmed.
Because of the extreme sensitivity of the PII we store and transmit, the security features of our technology
platform are very important. If our security measures, some of which are managed by third parties, are breached or fail,
unauthorized persons may be able to obtain access to sensitive Client and member data, including HIPAA-regulated PHI.
As a result, our reputation could be severely damaged, adversely affecting Client and member confidence. Members may
curtail their use of, or stop using, our services or our Client base could decrease, which would cause our business to suffer.
In addition, we could face litigation, damages for contract breach, penalties, and regulatory actions for violation of HIPAA
and other applicable laws or regulations and significant costs for remediation, notification to individuals, and for measures
to prevent future occurrences. Any potential security breach could also result in increased costs associated with liability for
stolen assets or information, repairing system damage that may have been caused by such breaches, incentives offered to
Clients or other business partners in an effort to maintain our business relationships after a breach, and implementing
measures to prevent future occurrences, including organizational changes, deploying additional personnel and protection
technologies, training employees, and engaging third-party experts and consultants. While we maintain insurance covering
certain security and privacy damages and claim expenses, we may not carry insurance or maintain coverage sufficient to
compensate for all liability and in any event, insurance coverage would not address the reputational damage that could
result from a security incident.
We outsource important aspects of the storage and transmission of Client and member information, and thus rely
on third parties to manage functions that have material cybersecurity risks. We attempt to address these risks by requiring
outsourcing subcontractors who handle Client and member information to sign business associate agreements and/or data
processing agreements contractually requiring those subcontractors to adequately safeguard personal health data to the
same extent that applies to us and in some cases by requiring such outsourcing subcontractors to undergo third-party
security examinations. In addition, we periodically hire third-party security experts to assess and test our security posture.
However, we cannot assure you that these contractual measures and other safeguards will adequately protect us from the
risks associated with the storage and transmission of Client and members’ proprietary and protected health information.
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We publish statements to our members and potential members that describe how we handle and protect personal
information. If federal or state regulatory authorities or private litigants consider any portion of these statements to be
untrue, we may be subject to claims of deceptive practices, which could lead to significant liabilities and consequences,
including, without limitation, costs of responding to investigations, defending against litigation, settling claims, and
complying with regulatory or court orders. For example, we have been subject to litigation alleging improper disclosure
and/or use of PII and PHI. We also engage in digital marketing which has come under additional scrutiny by the FTC and
state regulators. If our practices are deemed to have been unlawful or deceptive or potentially a violation of FTC
requirements, it could lead to significant liabilities and consequences including, without limitation, costs of responding to
investigations, defending against litigation, including class action suits, settling claims, complying with regulatory or court
orders, and managing public relations and Client and member concerns associated with such violations.
We also send short message service (“SMS”) text messages to potential end users who are eligible to use our
service through certain customers and partners. While we obtain consent from or on behalf of these individuals to send text
messages, federal or state regulatory authorities or private litigants may claim that the notices and disclosures we provide,
form of consents we obtain, or our SMS texting practices, are not adequate. These SMS texting campaigns are potential
sources of risk for our company since they are governed by the Telephone Consumer Protection Act, which allows for
private right of action and class action lawsuits and is enforced by the Federal Communications Commission. Numerous
class action suits under federal and state laws have been filed against companies that conduct SMS texting programs, with
many resulting in multi-million-dollar settlements for the plaintiffs. Any such future litigation against us could be costly
and time-consuming to defend.
Further, there are numerous foreign laws, regulations and directives regarding privacy and the collection, storage,
transmission, use, processing, disclosure, and protection of PII and other personal or customer data, the scope of which is
continually evolving and subject to differing interpretations. We must comply with such laws, regulations, and directives
and we may be subject to significant consequences, including penalties and fines, for our failure to comply. Failure to
comply with the requirements of the GDPR and the applicable national data protection laws of the EU member states may
result in fines of up to €10,000,000 or up to 2% of the total worldwide annual turnover of the preceding financial year,
whichever is higher, and other administrative penalties. To comply with the data protection rules imposed by the GDPR we
may be required to put in place additional mechanisms to ensure compliance. In addition, privacy laws are developing
quickly in other jurisdictions where we operate, which impose similar accountability, transparency, and security
obligations. These additional privacy law obligations may be onerous and adversely affect our business, financial
condition, results of operations, and prospects.
In addition, recent legal developments in Europe have created complexity and compliance uncertainty regarding
certain transfers of information from the EU to the U.S. If one or more of the legal bases for transferring PII from Europe
to the U.S. is invalidated, or if we are unable to transfer PII between and among countries and regions in which we operate,
it could affect the manner in which we provide our services or could adversely affect our financial results. Furthermore,
any failure, or perceived failure, by us to comply with or make effective modifications to our policies, or to comply with
any federal, state, or international privacy, data-retention or data-protection-related laws, regulations, orders, or industry
self-regulatory principles could result in proceedings or actions against us by governmental entities or others, a loss of
customer confidence, damage to our brand and reputation, and a loss of customers, any of which could have an adverse
effect on our business.
Finally, federal, state, and foreign legislative or regulatory bodies may enact new or additional laws and
regulations concerning privacy, data-retention, and data-protection issues, including laws or regulations mandating
disclosure to domestic or international law enforcement bodies, which could adversely impact our business, our brand, or
our reputation with customers. For example, some countries have adopted laws mandating that PII regarding customers in
their country be maintained solely in their country. Having to maintain local data centers and redesign product, service, and
business operations to limit PII processing to within individual countries could increase our operating costs significantly.
Changes to consumer privacy laws could adversely affect our ability to market our offerings effectively and may require
us to change our business practices or expend significant amounts on compliance with such laws.
We rely on a variety of direct marketing techniques, including email marketing, online advertising and direct
mailings. Any further restrictions in laws such as the CAN-SPAM Act, the Telephone Consumer Protection Act, the Do-
Not-Call-Implementation Act, applicable Federal Communications Commission telemarketing rules (including the
declaratory ruling affirming the blocking of unwanted robocalls), the FTC Privacy Rule, Safeguards Rule, Consumer
Report Information Disposal Rule, Telemarketing Sales Rule, Canada’s Anti-Spam Law and various U.S. state laws, or
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new federal or state laws and regulations on marketing and solicitation or international privacy, e-privacy, and anti-spam
laws that govern these activities could adversely affect the continuing effectiveness of email, online advertising and direct
mailing techniques and could force further changes in our marketing strategy. In particular, these laws may require us to
make disclosures regarding our privacy and information sharing practices, safeguard and protect the privacy of such
information, and in some cases, provide customers the opportunity to “opt out” of the use of their information for certain
purposes, any of which could limit our ability to leverage existing and future databases of information or require us to
develop alternative marketing strategies, any of which could have a material adverse effect on our financial condition,
results of operations, and cash flows.
We must comply with U.S. federal, state, and foreign requirements regarding notice and consent to obtain, use,
share, transmit and store certain personal information. Furthermore, we may face conflicting obligations arising from the
potential concurrent application of laws of multiple jurisdictions. In the event that we are not able to reconcile such
obligations, we may be required to change business practices or face liability or sanction.
Our medical device operations are subject to FDA and other similar foreign regulatory requirements.
We are regulated by the FDA and other foreign regulatory agencies as a medical device manufacturer, and the
medical devices that we distribute are subject to extensive regulation. As we continue to expand the sales of our medical
devices internationally, we will also become subject to similar regulations by other foreign governments. Government
regulations specific to medical devices are wide ranging and govern, among other things:
•
product design, development, and manufacture;
•
laboratory, preclinical and clinical testing, labeling, packaging, storage, and distribution;
•
premarketing clearance or approval;
•
record keeping;
•
product marketing, promotion and advertising, sales and distribution; and
•
post-marketing surveillance, including reporting of deaths, serious injuries, and product malfunctions, recalls,
corrections, and removals.
Before a new medical device or a new intended use for a device in commercial distribution can be marketed in the
U.S., a company must first submit and receive either 510(k) clearance pursuant to section 510(k) of the Food, Drug, and
Cosmetic Act or approval of a premarket approval (“PMA”) application from the FDA, unless an exemption applies. In the
510(k) clearance process, the FDA must determine that a proposed device is “substantially equivalent” to a device legally
on the market, known as a “predicate” device, in order to clear the proposed device for marketing. To be substantially
equivalent, the proposed device must have the same intended use as the predicate device, and either have the same
technological characteristics as the predicate device or have different technological characteristics and not raise different
questions of safety or effectiveness than the predicate device. Clinical data is sometimes required to support substantial
equivalence. Failure to demonstrate substantial equivalence to a predicate device to the FDA’s satisfaction may require the
submission and approval by the FDA of a PMA application. The FDA’s 510(k) clearance process usually takes
approximately six months on average but may last longer. The process for obtaining a PMA approval takes from one to
three years, or even longer, from the time the PMA is submitted to the FDA until an approval is obtained. Any delay or
failure to obtain necessary regulatory approvals or clearances could have a material adverse effect on our business,
financial condition, and results of operations. Material modifications to the intended use or technological characteristics of
our devices may also require new 510(k) clearances or premarket approvals prior to implementing the modifications, or
require us to recall or cease marketing the modified devices until these clearances or approvals are obtained.
Although some jurisdictions outside of the U.S. may accept FDA approval as a basis for regulatory approval,
many have their own requirements in order for a device to be marketed. In order to market our products in those countries,
we would need to submit the appropriate applications and meet the requirements set by those regulatory agencies. As is the
case in the U.S., the failure to comply with regulatory requirements in foreign jurisdictions could subject us to possible
legal or regulatory action, and any such failure or delay in obtaining necessary licenses or approvals could restrict or delay
our ability to sell our devices and solutions in those jurisdictions. Depending on the circumstances, failure to meet
applicable regulatory requirements can result in criminal prosecution, fines or other penalties, injunctions, recall or seizure
45
of products, total or partial suspension of production, denial or withdrawal of product approvals, or refusal to allow a us to
enter into supply contracts, including government contracts.
In addition, we are required to timely submit various reports with the FDA, including reports if medical devices
that we distribute as part of our solutions may have caused or contributed to a death or serious injury or malfunctioned in a
way that would likely cause or contribute to a death or serious injury if the malfunction were to recur. If these reports are
not filed in a timely manner, regulators may impose sanctions and we may be subject to product liability or regulatory
enforcement actions, all of which could harm our business, financial condition, and results of operations. Any corrective
actions can be costly, time-consuming, and divert resources from other portions of our business. Furthermore, the
submission of these reports could be used by competitors against us, which could harm our reputation.
The definition of “device” in the Federal Food, Drug, and Cosmetic Act was amended in 2016 to exclude certain
software functions. Our software offerings may include functions that fall under FDA’s jurisdictional definition of a
medical device, while there may be software offerings that do not require FDA clearance or approval even when utilizing
data coming from an FDA regulated medical device. Our determination of the appropriate classification of our digital
offerings may lead to regulatory inquiry and the expenditure of time and resources to meet FDA feedback as to the
appropriate category for particular digital offerings.
The FDA and the FTC also regulate the advertising and promotion of our solutions and services to ensure that the
claims we make are consistent with our regulatory clearances and approvals, that there is adequate and reasonable data to
substantiate the claims and that our promotional labeling and advertising is neither false nor misleading. If the FDA or FTC
determines that any of our advertising or promotional claims are misleading, not substantiated or not permissible, we may
be subject to enforcement actions, including warning letters, and we may be required to revise our promotional claims and
make other corrections or restitutions.
If we or our third-party suppliers fail to comply with the FDA’s Quality Systems Regulation or similar foreign
regulations, our ability to distribute medical devices that are provided to members as part of our solutions could be
impaired.
We and certain of our third-party suppliers are required to comply with the FDA’s Quality System Regulation
(“QSR”) and similar foreign regulations, which cover the methods and documentation of the design, testing, production,
control, quality assurance, labeling, packaging, sterilization, storage, and shipping of medical devices that we distribute.
The FDA and foreign regulators audit compliance with the QSR and similar foreign regulations through periodic
announced and unannounced inspections of manufacturing and other facilities. The FDA or foreign regulators may impose
inspections or audits at any time. If we or our suppliers have significant non-compliance issues or if any corrective action
plan that we or our suppliers propose in response to observed deficiencies is not sufficient, the FDA could take
enforcement action against us and our third-party suppliers. Similarly, foreign regulators could take action to suspend or
withdraw any certifications or licenses required to do business in such jurisdiction. Any of the foregoing actions could have
a material adverse effect on our business, financial condition, and results of operations.
Our failure to comply with the anti-corruption, trade compliance, and economic sanctions laws and regulations of the
U.S. and applicable international jurisdictions could materially adversely affect our reputation, business, financial
condition, and results of operations.
Our international operations increase our exposure to, and require us to devote significant management resources
to implement controls and systems to comply with, the privacy and data protection laws of non-U.S. jurisdictions and the
anti-bribery, anti-corruption and anti-money laundering laws of the U.S. (including the FCPA) and the United Kingdom
(including the U.K. Bribery Act) and similar laws in other jurisdictions. These laws and regulations apply to companies,
individual directors, officers, employees, and agents, and may restrict our operations, trade practices, investment decisions,
and partnering activities. Where they apply, the FCPA and the U.K. Bribery Act prohibit us and our officers, directors,
employees, and business partners acting on our behalf, including joint venture partners and agents, from corruptly offering,
promising, authorizing, or providing anything of value to public officials for the purposes of influencing official decisions
or obtaining or retaining business or otherwise obtaining favorable treatment. The U.K. Bribery Act also prohibits non-
governmental “commercial” bribery and accepting bribes. As part of our business, we may deal with governments and
state-owned business enterprises, the employees and representatives of which may be considered public officials for
purposes of the FCPA and the U.K. Bribery Act. Implementing our compliance policies, internal controls, and other
systems upon our expansion into new countries and geographies may require the investment of considerable management
time and management, financial, and other resources over a number of years before any significant revenues or profits are
46
generated. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers, or
employees, restrictions or outright prohibitions on the conduct of our business, and significant brand and reputational harm.
We must regularly reassess the size, capability, and location of our global infrastructure and make appropriate changes and
must have effective change management processes and internal controls in place to address changes in our business and
operations. Our success depends, in part, on our ability to anticipate these risks and manage these difficulties, and the
failure to do so could have a material adverse effect on our business, operating results, financial position, brand, reputation,
and/or long-term growth.
We also are subject to the jurisdiction of various governments and regulatory agencies around the world, which
may bring our personnel and agents into contact with public officials responsible for issuing or renewing permits, licenses,
or approvals or for enforcing other governmental regulations. In addition, some of the international locations in which we
operate lack a developed legal system and have elevated levels of corruption. Our business also must be conducted in
compliance with applicable export controls and trade and economic sanctions laws and regulations, including those of the
U.S. government, the governments of other countries in which we operate or conduct business and various multilateral
organizations. Such laws and regulations include, without limitation, those administered and enforced by the U.S.
Department of the Treasury's Office of Foreign Assets Control, the U.S. Department of State, the U.S. Department of
Commerce, the United Nations Security Council and other relevant sanctions authorities. Our provision of services to
persons located outside the U.S. may be subject to certain regulatory prohibitions, restrictions, or other requirements,
including certain licensing or reporting requirements. Our provision of services outside of the U.S. exposes us to the risk of
violating, or being accused of violating, anti-corruption, exports controls, and trade compliance and economic sanctions
laws and regulations. Our failure to successfully comply with these laws and regulations may expose us to reputational
harm as well as significant sanctions, including criminal fines, imprisonment, civil penalties, disgorgement of profits,
injunctions, and suspension or debarment from government contracts, as well as other remedial measures. Investigations of
alleged violations can be expensive and disruptive. Though we have implemented formal training and monitoring
programs, we cannot assure compliance by our employees or representatives for which we may be held responsible, and
any such violation could materially adversely affect our reputation, business, financial condition, and results of operations.
Our reputation and/or business could be negatively impacted by ESG matters and/or other reporting of such matters.
There is an increasing focus from regulators, certain investors, and other stakeholders concerning matters relating
to environmental, social, and governance factors (“ESG”), both in the U.S. and internationally. We communicate certain
ESG-related initiatives and/or commitments regarding environmental matters, diversity, and other matters on our website
and elsewhere. These initiatives or commitments could be difficult or costly to achieve. We could fail to achieve, or be
perceived to fail to achieve, our ESG-related initiatives or commitments. In addition, we could be criticized for the timing,
scope or nature of these activities, or for any revisions to them. To the extent that our disclosures about ESG matters
increase, we could be criticized for the accuracy, adequacy, or completeness of such disclosures. Our actual or perceived
failure to achieve our ESG-related initiatives or commitments could negatively impact our reputation, result in ESG-
focused investors not purchasing and holding our stock, or otherwise materially harm our business.
Risks Related to Litigation and Liability
Any current or future litigation or other legal or regulatory proceedings could be costly and time consuming, and any
losses or liability may not be covered by insurance.
We have been and may become subject, from time to time, to legal and regulatory proceedings, including claims
that arise in the ordinary course of business, such as claims brought by our Clients in connection with commercial disputes
or employment claims made by our current or former associates. For example, see Note 17. “Commitments and
Contingencies,” to the consolidated financial statements for additional information regarding certain proceedings that have
been initiated against us. Regardless of outcome, such current or any future proceedings may result in substantial costs and
may divert management’s attention and resources or decrease market acceptance of our solutions, which may substantially
harm our business, financial condition, and results of operations. We attempt to limit our liability to Clients by contract;
however, the limitations of liability set forth in the contracts may not be enforceable or may not otherwise protect us from
liability for damages. Additionally, we may be subject to claims that are not explicitly covered by contract. Insurance may
not cover claims against us, may not provide sufficient payments to cover all of the costs to resolve one or more such
claims, and may not continue to be available on terms acceptable to us. In addition, the insurer might disclaim coverage as
to any future claim. A successful claim not fully covered by our insurance could have a material adverse impact on our
liquidity, financial condition, and results of operations. A claim brought against us that is uninsured or underinsured could
result in unanticipated costs, thereby reducing our earnings and leading analysts or potential investors to reduce their
47
expectations of our performance, which could reduce the market price of our stock. In addition, any insurance coverage
would not address the reputational damage that could result from any legal or regulatory proceedings or claims.
We may become subject to medical liability claims, which could cause us to incur significant expenses and may require
us to pay significant damages if not covered by insurance.
Our business entails the risk of medical liability claims against both the THMG Association's providers and us.
Although we and THMG carry insurance covering medical malpractice claims in amounts that we believe are appropriate
in light of the risks attendant to our business, successful medical liability claims could result in substantial damage awards
that exceed the limits of our and THMG’s insurance coverage. THMG carries professional liability insurance for itself and
each of its healthcare professionals (the THMG Association's providers), and we separately carry a general insurance
policy, which covers medical malpractice claims. In addition, professional liability insurance is expensive and insurance
premiums may increase significantly in the future, particularly as we expand our services. As a result, adequate
professional liability insurance may not be available to the THMG Association's providers or to us in the future at
acceptable costs or at all.
Any claims made against us that are not fully covered by insurance could be costly to defend against, result in
substantial damage awards against us, and divert the attention of our management and the THMG Association's providers
from our operations, which could have a material adverse effect on our business, financial condition, and results of
operations. In addition, any claims may adversely affect our reputation.
Risks Related to Intellectual Property
Any failure to protect our intellectual property rights could impair our ability to protect our technology and our brands.
Our success depends in part on our ability to enforce our intellectual property and other proprietary rights. We rely
upon a combination of patent, trademark, copyright, and trade secret laws, as well as license and access agreements and
other contractual provisions, to protect our intellectual property and other proprietary rights. In addition, we attempt to
protect our intellectual property and proprietary information by requiring our employees, consultants, and certain of our
contractors to execute confidentiality and assignment of inventions agreements. These laws, procedures, and restrictions
provide only limited protection and any of our intellectual property rights may be challenged, invalidated, circumvented,
infringed, or misappropriated. To the extent that our intellectual property and other proprietary rights are not adequately
protected, third parties may gain access to our proprietary information, develop and market solutions similar to ours, or use
trademarks similar to ours, each of which could materially harm our business. Unauthorized parties may also attempt to
copy or obtain and use our technology to develop applications with the same functionality as our solutions. Policing
unauthorized use of our technology and intellectual property rights is difficult and may not be effective. In addition, the
laws of certain foreign countries in which we operate may not protect our intellectual property rights to the same extent as
do the laws of the U.S.
In order to protect our intellectual property rights, we may be required to spend significant resources to establish,
monitor, and protect these rights. We may not always detect infringement of our intellectual property rights, and defending
or enforcing our intellectual property rights, even if successfully detected, prosecuted, enjoined, or remedied, could result
in the expenditure of significant financial and managerial resources. Litigation may be necessary to enforce our intellectual
property rights, protect our proprietary rights, or determine the validity and scope of proprietary rights claimed by others.
Any litigation of this nature, regardless of outcome or merit, could result in substantial costs and diversion of management
and technical resources, any of which could adversely affect our business, financial condition, and results of operations.
We may also incur significant costs in enforcing our trademarks against those who attempt to imitate our brand and other
valuable trademarks and service marks. Furthermore, our efforts to enforce our intellectual property rights may be met with
defenses, counterclaims, countersuits, and adversarial proceedings such as oppositions, inter partes review, post-grant
review, re-examination, or other post-issuance proceedings, that attack the validity and enforceability of our intellectual
property rights. An adverse determination of any litigation proceedings could put our patents at risk of being invalidated or
interpreted narrowly and could put our related pending patent applications at risk of not issuing. The failure to secure and
adequately protect our intellectual property and other proprietary rights could have a material adverse effect on our
business, financial condition, and results of operations.
48
We could incur substantial costs as a result of any claim of infringement of another party’s intellectual property rights.
In recent years, there has been significant litigation in the U.S. involving patents and other intellectual property
rights. Companies in the internet and technology industries are increasingly bringing and becoming subject to suits alleging
infringement of proprietary rights, particularly patent rights, and our competitors and other third parties may hold patents or
have pending patent applications, which could be related to our business. These risks have been amplified by the increase
in third parties whose sole primary business is to assert such claims. Regardless of the merits of any other intellectual
property litigation, we may be required to expend significant management time and financial resources on the defense of
such claims, and any adverse outcome of any such claim could have a material adverse effect on our business, financial
condition, and results of operations. We expect that we may in the future receive notices that claim we or our Clients using
our solutions have misappropriated or misused other parties’ intellectual property rights, particularly as the number of
competitors in our market grows and the functionality of applications amongst competitors overlaps. Our existing or any
future litigation, whether or not successful, could be extremely costly to defend, divert our management’s time, attention,
and resources, damage our reputation and brands, and substantially harm our business.
In addition, in most instances, we have agreed to indemnify our Clients against certain third-party claims, which
may include claims that our solutions infringe the intellectual property rights of such third parties. Our business could be
adversely affected by any significant disputes between us and our Clients as to the applicability or scope of our
indemnification obligations to them. The results of any intellectual property litigation to which we may become a party, or
for which we are required to provide indemnification, may require us to do one or more of the following:
•
cease offering or using technologies that incorporate the challenged intellectual property;
•
make substantial payments for legal fees, settlement payments, or other costs or damages;
•
obtain a license, which may not be available on reasonable terms, to sell or use the relevant technology; or
•
redesign technology to avoid infringement.
If we are required to make substantial payments or undertake any of the other actions noted above as a result of
any intellectual property infringement claims against us or any obligation to indemnify our Clients for such claims, such
payments or costs could have a material adverse effect on our business, financial condition, and results of operations.
Risks Related to Taxation
Unanticipated changes in our effective tax rate and additional tax liabilities may impact our financial conditions or
results of operations.
We are subject to income tax in the U.S. and various jurisdictions outside of the U.S. Our effective tax rate could
fluctuate due to changes in the mix of earnings and losses in countries with differing statutory tax rates. Our tax expense
could also be impacted by changes in non-deductible expenses, fluctuations in our stock price related to our stock-based
compensation, changes in the valuation of deferred tax assets and liabilities and our ability to utilize them, the applicability
of withholding taxes and effects from acquisitions.
We are open to tax examinations in multiple jurisdictions. While we regularly evaluate new information that may
change our judgment resulting in recognition, derecognition, or change in measurement of a tax position taken, there can be
no assurance that the final determination of any examinations will not have an adverse effect on our financial condition or
results of operations.
Our tax provision could also be impacted by changes in accounting principles or changes in U.S. federal and state
or international tax laws applicable to corporate multinationals. Furthermore, changes in taxing jurisdictions’
administrative interpretations, decisions, policies and positions could also impact our tax provision.
We may also be subject to additional liabilities for non-income based taxes due to changes in U.S. federal, state,
or international tax laws, changes in taxing jurisdictions’ administrative interpretations, decisions, policies, and positions,
results of tax examinations, settlements or judicial decisions, changes in accounting principles, changes to our business
operations, including acquisitions, as well as the evaluation of new information that results in a change to a tax position
taken in a prior period.
49
As we continue to expand internationally, our customers are subject to potential additional indirect tax costs and
uncertainties. The tax rules for non-U.S. jurisdiction for imposing taxes like a Value Added Tax ("VAT") or Goods and
Services Tax ("GST") on virtual services offered by us are often ambiguous and are frequently inconsistent in each taxing
jurisdiction. These laws, rules and regulations also are consistently evolving. The imposition of any additional such taxes
or an adverse change in the application of such tax rules could have a material adverse effect on our business, financial
condition, and results of operations.
If the THMG Association's providers or experts are characterized as employees, we would be subject to employment and
withholding liabilities.
We structure our relationships with many of the THMG Association's providers and experts in a manner that we
believe results in an independent contractor relationship, not an employee relationship. An independent contractor is
generally distinguished from an employee by his or her degree of autonomy and independence in providing services. A
high degree of autonomy and independence is generally indicative of a contractor relationship, while a high degree of
control is generally indicative of an employment relationship. Although we believe that these providers and experts are
properly characterized as independent contractors, tax or other regulatory authorities may in the future challenge our
characterization of these relationships. If such regulatory authorities or state, federal, or foreign courts were to determine
that these providers or experts are employees, and not independent contractors, we would be required to withhold income
taxes, to withhold and pay social security, Medicare, and similar taxes and to pay unemployment and other related payroll
taxes. We would also be liable for unpaid past taxes and subject to penalties. As a result, any determination that these
providers or experts are our employees could have a material adverse effect on our business, financial condition, and results
of operations.
Risks Related to Strategic Initiatives
We may acquire other companies or technologies, which could divert our management’s attention, result in dilution to
our stockholders, and otherwise disrupt our operations and we may have difficulty integrating any such acquisitions
successfully or realizing the anticipated synergies or other benefits therefrom, any of which could have a material
adverse effect on our business, financial condition and results of operations.
We have in the past and may in the future seek to acquire or invest in businesses, applications, and services or
technologies that we believe could complement or expand our solutions, enhance our technical capabilities, or otherwise
offer growth opportunities. For example, in January 2025 we entered into an agreement to acquire Catapult Health. The
pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses in
identifying, investigating, and pursuing suitable acquisitions, whether or not they are consummated. The acquisition of
Catapult Health is subject to customary closing conditions, which could prevent or delay us from consummating the
acquisition. Any delay in completing the acquisition could cause us not to realize, or to be delayed in realizing, some or all
of the benefits that we expect to achieve if the acquisition is successfully completed within its expected time frame.
In addition, if we acquire additional businesses, including Catapult Health, we may not be able to integrate the
acquired personnel, operations, and technologies successfully, or the integration process may take longer than expected or
become more costly than expected. Similarly, we may not be able to effectively manage the combined business following
the acquisition. We also may not achieve the anticipated cost savings, synergies or other benefits from the acquired
business due to a number of factors, including, but not limited to:
•
inability to integrate or benefit from acquired technologies or services in a profitable manner;
•
unanticipated costs or liabilities associated with the acquisition;
•
difficulty integrating the accounting and operational systems, operations, and personnel of the acquired
business;
•
difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of
the acquired business;
•
difficulty converting the Clients of the acquired business onto our platform and contract terms, including
disparities in the revenue, licensing, support, or professional services model of the acquired company;
•
diversion of management’s attention from other business concerns;
50
•
adverse effects to our existing business relationships with business partners and Clients as a result of the
acquisition;
•
the potential loss of key employees;
•
use of resources that are needed in other parts of our business; and
•
use of substantial portions of our available cash to consummate the acquisition.
In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired
goodwill and other intangible assets, which can result in the risk of impairment over time. For example, see Note 6.
"Goodwill," to the consolidated financial statements for information regarding goodwill impairment charges.
Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could
adversely affect our results of operations. In addition, if an acquired business fails to meet our expectations, our business,
financial condition, and results of operations may suffer.
Risks Related to Ownership of Our Common Stock
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and under
Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult
and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in our amended and restated certificate of incorporation and our amended and restated bylaws may
discourage, delay or prevent a merger, acquisition, or other change in control of our company that stockholders may
consider favorable, including transactions in which you might otherwise receive a premium for your shares. These
provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock,
thereby depressing the market price of our common stock. In addition, because our board of directors (the "Board") is
responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts
by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace
members of our Board. Among other things, these provisions include those establishing:
•
no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect
director candidates;
•
the exclusive right of our Board to elect a director to fill a vacancy created by the expansion of our Board or
the resignation, death, or removal of a director, which prevents stockholders from filling vacancies on our
Board;
•
the ability of our Board to authorize the issuance of shares of preferred stock and to determine the terms of
those shares, including preferences and voting rights, without stockholder approval, which could be used to
significantly dilute the ownership of a hostile acquirer;
•
the ability of our Board to alter our amended and restated bylaws without obtaining stockholder approval;
•
a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an
annual or special meeting of our stockholders; and
•
advance notice procedures that stockholders must comply with in order to nominate candidates to our Board
or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential
acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise
attempting to obtain control of us.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the
General Corporation Law of the State of Delaware (the “DGCL”), which prohibits a person who owns in excess of 15% of
our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction
in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is
approved in a prescribed manner.
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Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will
be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our
stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of
Delaware is the exclusive forum for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting
a claim of breach of a fiduciary duty or other wrongdoing by any of our directors, officers, employees, or agents to us or
our stockholders, (3) any action asserting a claim arising pursuant to any provision of the DGCL or our amended and
restated certificate of incorporation or amended and restated bylaws, (4) any action to interpret, apply, enforce, or
determine the validity of our amended and restated certificate of incorporation or amended and restated bylaws, or (5) any
action asserting a claim governed by the internal affairs doctrine. This choice of forum provision may limit a stockholder’s
ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other
employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively,
if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to
be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other
jurisdictions, which could have a material adverse effect our business, financial condition, or results of operations.
Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital
appreciation will be your sole source of gain, if any.
We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future
earnings, if any, to finance the growth and development of our business. Any future debt agreements may also preclude us
from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for
the foreseeable future. In addition, the trading price of our common stock has been, and could continue to be, subject to
wide fluctuations. The price at which our stock trades depends on a number of factors, many of which are beyond our
control. We cannot make any predictions or projections as to what the prevailing market price for our common stock will
be at any time, including whether you will achieve any capital appreciation.
We have been, and in the future could be, subject to securities class action litigation, shareholder derivative complaints
and related matters.
In the past, securities class action litigation has often been brought against a company following a decline in the
market price of its securities. We have been, and may in the future become, subject to such securities class action litigation,
shareholder derivative complaints and related matters, and any such proceedings could result in substantial costs and a
diversion of management’s attention and resources, which could have a material adverse effect on our business, financial
condition, and results of operations.
If securities or industry analysts do not publish research or reports about our business, if they adversely change their
recommendations regarding our shares, or if our results of operations do not meet their expectations, the share price
and trading volume of our common stock could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities
analysts publish about us or our business. We do not have any control over these analysts. If one or more of these analysts
cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets,
which in turn could cause the share price or trading volume of our common stock to decline. Moreover, if one or more of
the analysts who cover us express views regarding us that may be perceived as negative or less favorable than previous
views, downgrade our stock, or if our results of operations do not meet their expectations, the share price of our common
stock could decline.
Item 1B. Unresolved Staff Comments
None.
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Item 1C. Cybersecurity
Risk Management and Strategy
We recognize the increasing significance that cybersecurity has to our operations and the success of our business,
as well as the need to continually assess cybersecurity risk and evolve our response in the face of a rapidly and ever-
changing environment. We process and maintain sensitive data on our Clients and members, including in the form of PHI
and PII. In addition, we maintain intellectual property for our solutions and personal information of our employees.
Because of the data we manage, we are subject to various cybersecurity threats that, if they materialized, could adversely
affect our business, employees, Clients, and members through impacts to the confidentiality, integrity, and/or availability of
our systems. We maintain a cybersecurity program and controls as part of our enterprise risk management program in an
effort to reduce the risk of exposure of our information and systems.
To assess, identify, and manage the risks of cybersecurity threats to our information system, we maintain a
cybersecurity program, including policies and controls, which are regularly reviewed through internal and external
assessments. We leverage several industry frameworks for adopting and assessing controls, such as HIPAA, the National
Institute of Standards and Technology Cybersecurity Framework, and HITRUST. We have an active HITRUST
certification and Service Organization Control ("SOC") 2 Type II security compliance that are issued by external entities.
We have controls in place intended to assess our cybersecurity posture and prevent successful access to our
critical systems, including, but not limited to: vulnerability scanning on systems and applications; endpoint detection
capabilities to identify malware and other indicators of threat activity; multifactor authentication; and blocking of malicious
e-mail. In addition, we also provide annual cybersecurity awareness training for our employees. Further, we engage with an
external security firm to perform regular penetration testing. We subject our critical third-party service providers to risk
assessment prior to engagement, and periodically thereafter, to identify material risks. Additionally, we have a process to
engage with these third parties to understand potential impacts of, and remediation efforts associated with, critical
vulnerabilities.
To stay abreast of the evolving threat landscape, we actively engage with key vendors, industry information
sharing, and intelligence and law enforcement communities. These engagements serve as inputs into understanding
techniques and tactics being used by threat actors and in expanding the countermeasures we use to protect Teladoc Health.
In the event of a potential cybersecurity incident, or a series of related cybersecurity incidents, we have a
documented security incident response plan that provides a consistent approach to identifying and classifying the incident
as well as a defined escalation process to management to assess the materiality.
Despite the efforts outlined above, we cannot ensure that we will not be subject to any cybersecurity incidents or
threats. See “Risk Factors Risks Related to Information Technology” for additional information. To date, management has
not determined that any cybersecurity incidents the Company has experienced would have resulted in, or are reasonably
likely to result in, a material impact to its financial condition, results of operations, or business strategy.
Governance
Cybersecurity risk oversight continues to remain a top priority for our Board. The audit committee of our Board
maintains primary responsibility related to overseeing our cybersecurity risk as part of its program of regular risk
management oversight. This includes, but is not limited to, the overall maturity and strategy of our cybersecurity program.
We have a rigorous and comprehensive cybersecurity program managed by a dedicated team of subject matter
experts and is led by our Chief Information Security Officer (“CISO”), who has extensive cybersecurity experience. We
have implemented telehealth industry standard processes, policies, and tools, including regularly scheduled vulnerability
scanning and third-party penetration testing to reduce the risk of vulnerabilities in our system.
Our CISO regularly engages with other members of our executive management team to discuss cyber risk,
including the Chief Technology Officer, the Chief Information Officer, and Chief Compliance Officer, among others, as
well as the audit committee of our Board. Our executive management team has the appropriate expertise, background, and
depth of experience to manage risk arising from cybersecurity threats. Executive management has also participated in
cybersecurity tabletop exercises to test our cyber response playbooks.
53
Item 2.
Properties
We believe that our company’s offices and other facilities are, in general, in good operating condition and
adequate for our current operations.
We lease office space in Purchase, New York for our corporate headquarters and certain of our operations under a
lease for which the term expires in August 2028. We lease additional office space in the U.S. and other foreign locations.
We have reduced our footprint over the past year reflecting post-pandemic remote work changes. We intend to relocate our
corporate headquarters to New York City in the second half of 2025. We believe that our facilities are adequate to meet our
needs for the immediate future, and that, should it be needed, suitable additional space will be available to accommodate
any such expansion of our operations.
Item 3.
Legal Proceedings
We are subject to legal proceedings, claims and litigation arising in the ordinary course of our business.
Descriptions of certain legal proceedings to which we are a party are contained in the Legal Matters section of Note 17.
“Commitments and Contingencies,” to the consolidated financial statements included in Part II, of this Annual Report on
Form 10-K and are incorporated by reference herein.
Item 4.
Mine Safety Disclosures
Not applicable.
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity
Securities
Market Information
Our Common Stock trades on the New York Stock Exchange (“NYSE”) under the symbol “TDOC”.
Holders
On February 18, 2025, there were 84 shareholders of record of our Common Stock. Because many of our shares
of Common Stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total
number of stockholders represented by these record holders.
Dividends
We have never declared or paid any cash dividends on our Common Stock, and we do not anticipate paying cash
dividends in the foreseeable future.
Unregistered Sales of Equity Securities and Use of Proceeds
There were no unregistered sales of equity securities which have not been previously disclosed in a quarterly
report on Form 10-Q or a current report on Form 8-K during the period covered by this report.
Purchase of Equity Securities
We did not purchase any of our registered equity securities during the period covered by this report.
54
Five-Year Stock Performance Graph
The following graph compares the cumulative total stockholder return on our common stock with the comparable
cumulative total return of the Russell 2000 Composite Index and the S&P 500 Health Care Index for each of the five fiscal
years ended December 31, 2024, assuming an investment of $100 at the beginning of such period and the reinvestment of
any dividends in Teladoc Health Common Stock and in each index. The indexes are included for comparative purposes
only. The stock price performance on the following graph is not necessarily indicative of future stock price performance.
This graph is not “soliciting material,” is not to be deemed filed with the SEC and is not to be incorporated by reference in
any of our filings under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act, whether made
before or after the date hereof and irrespective of any general incorporation language in any such filing.
Item 6.
[Reserved]
Not applicable.
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Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Discussion and analysis of our fiscal year 2022, as well as the year-over-year comparison of our 2023 financial
performance to 2022, have been omitted from this section and may be found under the heading “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year
ended December 31, 2023 that was filed with the SEC on February 23, 2024.
Overview
Teladoc, Inc. was incorporated in the State of Texas in June 2002 and changed its state of incorporation to the
State of Delaware in October 2008. Effective August 10, 2018, Teladoc, Inc. changed its corporate name to Teladoc
Health, Inc. Unless the context otherwise requires, Teladoc Health, Inc., together with its subsidiaries, is referred to herein
as “Teladoc Health,” the “Company,” or “we.” The Company’s principal executive office is located in Purchase, New
York. Teladoc Health is the global leader in virtual care focused on forging a new healthcare experience with better
convenience, outcomes, and value around the world.
We were founded on a simple, yet revolutionary idea: that everyone should have access to the best healthcare,
anywhere in the world on their terms. Today, we have a vision of making virtual care the first step on any healthcare
journey, and we are delivering on this mission by providing virtual care that includes primary care, mental health, chronic
condition management, and more.
We believe that favorable existing secular trends in the healthcare industry were accelerated by the impacts of the
COVID-19 pandemic, driving greater consumer awareness and use of virtual care and increased adoption by employers,
health plans, hospitals and health systems, healthcare providers, and individuals. In combination with the expansion of our
capabilities, we believe that these trends continue to present significant opportunities for virtual healthcare to address the
most pressing, universal healthcare challenges through trusted solutions, such as ours, that deliver convenient, affordable,
and high-quality care; empower individuals to manage and improve their health; and enable providers to offer their best
care for their patients.
Key Factors Affecting Our Performance
We believe that our future performance will depend on many factors, including the following:
As it relates to the Integrated Care segment:
Number of U.S. Integrated Care Members. U.S. Integrated Care members represent the number of unique
individuals who have paid access and visit fee only access to our suite of integrated care services in the U.S. at the end of
the applicable period. Our revenue growth rate and long-term profitability are affected by our ability to increase cross
selling capability among our existing members over time because we derive a substantial portion of our revenue from
access and other fees via Client contracts that provide members access to the THMG Association professional provider
network in exchange for a contractual based periodic fee. Therefore, we believe that our ability to add new members and
retain existing members and to increase utilization and penetration further into existing and new health plan and employer
Clients is a key indicator of our increasing market adoption, the growth of our business, and our future revenue potential.
We further believe that increasing our membership is an integral objective that will provide us with the ability to
continually innovate our services and support initiatives that will enhance members’ experiences. However, certain health
plans that have historically promoted our services to our employer Clients have developed, and may in the future continue
to develop, solutions that replicate our services or offer competitive services at discounted prices to our current or
prospective Clients, which could result in a loss of members. For further information, see “Risk Factors—Risks Related to
Our Business and Industry—We operate in a competitive industry, and if we are not able to compete effectively, our
business, financial condition, and results of operations will be harmed,” and “—A significant portion of our revenue comes
from a limited number of Clients, the loss of which could have a material adverse effect on our business, financial
condition and results of operations” included elsewhere in this Annual Report on Form 10-K. U.S. Integrated Care
members increased by 4.2 million, or 5%, to 93.8 million at December 31, 2024, compared to the same period in 2023.
Chronic Care Program Enrollment. Chronic care program enrollment represents the total number of enrollees
across our suite of chronic care programs at the end of a given period. Our chronic care program enrollments are one of the
key components of our virtual care platform that we believe positions us to drive greater engagement with our platforms
56
and increased revenue. Chronic care program enrollment increased by 4% to 1.20 million at December 31, 2024, compared
to 1.16 million at December 31, 2023.
Average Monthly Revenue Per U.S. Integrated Care Member. Average monthly revenue per U.S. Integrated Care
member measures the average monthly amount of global revenue that we generate from a U.S. Integrated Care member for
a particular period. It is calculated by dividing the total revenue generated from the Integrated Care segment by the average
number of U.S. Integrated Care members during the applicable period. Approximately 20% of total Integrated Care
revenues relates to international and hospital and health systems for which membership is not considered as a management
metric. We believe that our ability to increase the revenue generated from each member over time is also a key indicator of
our increasing market adoption, the growth of our business, and future revenue potential. Average monthly revenue per
U.S. Integrated Care member decreased to $1.37 in the year ended December 31, 2024, from $1.41 in the same period in
2023, primarily due to the impact of new members onboarded over the course of the year. The change in average monthly
revenue versus the indicated prior period is reflective of the growth and timing of onboarding new members and the mix of
their fees.
As it relates to the BetterHelp segment:
BetterHelp Paying Users. BetterHelp paying users represent the average number of global monthly paying users
of our BetterHelp therapy services during the applicable period. We believe that our ability to add new paying users and
retain existing users is a key indicator of the market adoption of BetterHelp, the growth of this segment, and future revenue
potential. Effectively reaching potential paying users through various advertising channels remains critical to our success.
BetterHelp paying users decreased by 11% to 0.41 million for the year ended December 31, 2024, compared to
0.46 million for the year ended December 31, 2023.
As it relates to the Company:
Seasonality. Our business has historically been subject to seasonality. In our Integrated Care segment, a
concentration of our new Client contracts have an effective date of January 1 as a result of many Clients’ introduction of
new services at the start of each calendar year. Therefore, while membership increases, utilization and enrollment rates are
dampened until service delivery ramps up over the course of the year. In addition, as a result of seasonal cold and flu
trends, we historically have experienced our highest level of visit and other fee revenue during the first and fourth quarters
of each year.
Due to the higher cost of customer acquisition during the end-of-year holiday season, our BetterHelp segment has
historically reduced marketing activity during the fourth quarter. As a result of this dynamic, we have typically experienced
fewer new member additions and strong operating income performance in the fourth quarter. Conversely, as marketing
activity typically resumes at the start of the year, we typically experience weak operating income performance during the
first quarter as new customer acquisition and revenue growth lags marketing spend.
See “Risk Factors—Risks Related to Our Business and Industry—Our quarterly results may fluctuate
significantly, which could adversely impact the value of our common stock.” included elsewhere in this Annual Report on
Form 10-K.
Critical Accounting Estimates and Policies
Revenue
We follow the revenue accounting requirements of Accounting Standards Codification (“ASC”) Topic 606, which
establishes a principle for recognizing revenue upon the transfer of promised goods or services to customers, in an amount
that reflects the expected consideration received in exchange for those goods or services. The core principle of ASC Topic
606 is to recognize revenue to depict the transfer of promised goods or services to Clients as well as individual members, in
an amount that reflects the consideration the entity expects to be entitled in exchange for those goods or services. This
principle is achieved through applying the following five-step approach:
•
Identification of the contract, or contracts, with a Client.
•
Identification of the performance obligations in the contract.
57
•
Determination of the transaction price.
•
Allocation of the transaction price to the performance obligations in the contract.
•
Recognition of revenue when, or as, we satisfy a performance obligation.
Integrated Care Segment
As it relates to the Integrated Care segment, we primarily generate virtual healthcare service revenue from
contracts with Clients who purchase access to the THMG Association professional provider network or medical experts for
their employees, dependents and other beneficiaries. Our Client contracts include a PMPM access fee as well as certain
contracts that also include additional revenue on a per-virtual healthcare visit basis for general medical, or other specialty
visits or expert medical service on a per case basis. We also have certain contracts that generate revenue based solely on a
per healthcare visit basis for general medical and other specialty visits.
We record access fees from Clients accessing the THMG Association professional provider network or hosted
virtual healthcare platform or chronic care management platforms, visit fee revenue for general medical, expert medical
service and other specialty visits as well as other revenue primarily associated with virtual healthcare device equipment
included with our hosted virtual healthcare platform. Visit and other revenues are reported as “Other” revenue in our
consolidated financial statements.
Revenue is also generated from contracts with Clients in hospital and health systems for the sale and rental of
equipment consisting of virtual healthcare devices which allow physicians to access our hosted virtual healthcare platform.
These contracts also include multiple performance obligations, and we determine the standalone selling prices based on
overall pricing objectives. In some arrangements, our devices are rented to certain qualified Clients that qualify as either
sales-type lease or operating lease arrangements and are subject to lease accounting guidance.
Revenue is also generated from contracts with Clients for our chronic care management solutions. Substantially all
of this revenue is derived from monthly access fees that are recognized as services are rendered and earned under
subscription agreements with Clients that are based on a PPPM model, using the number of active enrolled members each
month for the minimum enrollment period. These solutions integrate devices, supplies, access to our web-based platform,
mobile application, and clinical and data services to provide an overall health management solution. The promises to
transfer these goods and services are not separately identifiable and are considered a single continuous service comprised
of a series of distinct services that are substantially the same and have the same pattern of transfer (i.e., distinct days of
service). These services are consumed as they are received, and we recognize revenue each month using the variable
consideration allocation exception since the nature of the obligations and the variability of the payment being based on the
number of active members are aligned.
Our Client agreements generally have a term of one to three years for the Integrated Care segment. The majority
of Clients have a term of one year and renew their contracts following their first year of services. Revenues are recognized
when we satisfy our performance obligation to stand ready to provide virtual healthcare services which occurs when our
Clients and members have access to and obtain control of the virtual healthcare service or platform.
For contracts where revenue is generated on a per healthcare visit basis, revenues are recognized when the visits
are completed as we have delivered on our stand ready obligation to provide access. For other revenue, which primarily
includes virtual healthcare devices, our performance obligation is satisfied when the equipment is provided to the Client
and revenue is recognized at a point in time upon shipment.
We generally bill for virtual healthcare services on a monthly basis, in advance or in arrears depending on the
service, with payment terms generally being 30 days. There are not significant differences between the timing of revenue
recognition and billing. Consequently, we have determined that Client contracts do not include a financing component.
Revenue is recognized in an amount that reflects the consideration that is expected in exchange for the service and for
certain contracts include a variable transaction price as the number of members may vary from period to period. We
estimate this amount based on historical experience.
Our contracts do not generally contain refund provisions for fees earned related to services performed.
Additionally, certain of our contracts include Client performance guarantees and pricing adjustments that are
based upon minimum member utilization and guarantees by us for specific service level performance, member satisfaction
58
scores, cost savings or other value achievements or guarantees, and health outcome guarantees. Performance guarantees are
estimated at each reporting period based on our historical performance or other available information of the underlying
criteria or the customer’s specific performance as of that reporting date. Any estimated adjustments to the contract price for
achieving or not achieving the performance guarantee are recognized as an adjustment to revenue in the period. For the
years ended December 31, 2024 and 2023, revenue recognized from performance obligations related to prior periods for
changes in estimated transaction price or Client performance guarantees was $5.9 million and $14.7 million, respectively.
We have elected the optional exemption to not disclose the remaining performance obligations of our contracts
since the majority of our contracts have a duration of one year or less and the variable consideration expected to be
received over the duration of the contract is allocated entirely to the wholly unsatisfied performance obligations.
For additional revenue, deferred revenue, deferred costs, and disclosures, refer to Note 3. “Revenue, Deferred
Revenue, and Deferred Device and Contract Costs.”
BetterHelp Segment
As it relates to the BetterHelp segment, users can purchase virtual therapy services for an access fee, generally on
a monthly or weekly basis. For other wellness services, users can purchase access to their consumer application for a
subscription fee, generally for a period of one year. BetterHelp also provides virtual therapy services to employers as part
of employee assistance programs, with revenues recorded based on completion of visit.
The BetterHelp service provides for member refunds. We estimate the expected amount of refunds to be issued
based on historical experience, which are recorded as a reduction of revenue. We issued refunds of approximately $84.0
million and $93.0 million for the years ended December 31, 2024 and 2023, respectively.
Goodwill
Goodwill represents the excess of the total purchase consideration over the fair value of the identifiable assets
acquired and liabilities assumed in a business combination. Goodwill is not amortized but is tested for impairment at the
reporting unit level annually on October 1 or more frequently if events or changes in circumstances indicate that it is more
likely than not to be impaired. These events include: (i) severe adverse industry or economic trends; (ii) significant
company-specific actions, including exiting an activity in conjunction with restructuring of operations; (iii) current,
historical or projected deterioration of our financial performance; or (iv) a sustained decrease in our market capitalization,
as indicated by our publicly quoted share price. The Company has two reporting units, which are the same as its reportable
segments: Teladoc Health Integrated Care and BetterHelp.
As of December 31, 2024, our balance of goodwill was $283.2 million, which all related to the BetterHelp
segment.
For the year ended December 31, 2024, a $790.0 million non-deductible goodwill impairment charge was
recognized following goodwill impairment testing performed at June 30, 2024 resulting from sustained decreases in our
quoted share price and market capitalization as well as changes in the operating results of the BetterHelp reporting unit.
Refer to Note 6. “Goodwill,” to our consolidated financial statements for further information.
At October 1, 2024, we performed our annual test of goodwill impairment using a quantitative analysis. We
determined that the BetterHelp reporting unit’s fair value exceeded its carrying value by a significant margin, while the
Integrated Care reporting unit’s fair value was less than its carrying value. Since the BetterHelp reporting unit's fair value
exceeded its carrying value and the Integrated Care reporting unit carries no goodwill at October 1, 2024, no impairment
was recorded.
On January 31, 2025, we signed a definitive agreement to acquire Catapult Health, LLC (“Catapult Health”) that
we expect to close during the three months ending March 31, 2025. Following the closing of the acquisition, Catapult
Health will be included in the Integrated Care segment. Concurrent with the closing of the acquisition of Catapult Health,
some or all of the goodwill associated with the acquisition may be immediately impaired, depending on the Integrated Care
reporting unit’s then-current fair value. For additional information on the acquisition of Catapult Health, see Note 19.
"Subsequent Events" to the consolidated financial statements.
59
Other Intangible Assets
Other intangible assets include customer relationships, non-compete agreements, acquired technology, and
trademarks resulting from business acquisitions, as well as capitalized software development costs. As of December 31,
2024, the aggregate balance of these assets was $1,431.4 million. We amortize these definite-lived intangible assets over
their estimated useful lives as disclosed in Note 8. “Intangible Assets, Net and Certain Cloud Computing Costs” to the
consolidated financial statements. We also review the useful lives on a quarterly basis to determine if the period of
economic benefit has changed. Potential changes in useful lives, whether due to strategic decisions involving our brands,
competitive forces, or other factors could result in additional amortization expense taking effect prospectively in the period
of the change and could have a material impact on our consolidated financial statements.
Customer relationships are amortized over a period of two to 20 years in relation to expected future cash flows.
The useful lives of the customer relationships are subject to risks and uncertainties including future attrition rates. These
considerations include, but are not limited to, the emergence of new competitor offerings, relative competitor pricing and
scale, our ability to successfully integrate and manage the acquired customers, our level of success in delivering future
innovation, and overall changes in economic and regulatory conditions. Significant changes in any one or a combination of
considerations could lead us to update our weighted average attrition rate, which, in turn would impact the assigned useful
life and the level of amortization expense recorded for our customer relationship intangibles. For example, a sustained
increase in the customer attrition rate related to customers added as a result of the Livongo acquisition could prompt us to
reduce our estimate of the remaining useful life of the customer relationships. Should this occur, a one-year reduction to the
estimated life would result in an annual increase in amortization expense of approximately $6.0 million. Acquired
technology is amortized over four to seven years using the straight-line method. Capitalized software development costs
are amortized over three to five years using the straight-line method.
During the second half of 2023, we initiated a strategy to transition the majority of our chronic condition
management Clients and members to the Teladoc Health brand on a phased basis, with a smaller subset continuing to be
served under the Livongo trade name beyond 2024. In connection with the brand strategy, we accelerated the amortization
of intangible assets that are associated with the Livongo trademark, increasing amortization of intangible assets expense
beginning in the second half of 2023 and continuing through the year ended December 31, 2024, with corresponding
reductions thereafter.
Definite-lived intangible assets are re-evaluated whenever events or changes in circumstances indicate that their
estimated useful lives may require revision and/or the carrying value of the related asset group may not be recoverable by
its projected undiscounted cash flows. If the carrying value of the asset group is determined to be unrecoverable, an
impairment charge would be recognized in an amount equal to the amount by which the carrying value of the asset group
exceeds its fair value.
Provision for Income Taxes
Our provision for income taxes, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits
reflect management's best assessment of estimated current and future taxes to be paid. The objectives for accounting for
income taxes, as prescribed by the relevant accounting guidance, are to recognize the amount of taxes payable or
refundable for the current year and deferred tax assets and liabilities for future tax consequences of events that have been
recognized in the financial statements. Deferred income taxes reflect the tax effect of temporary differences between asset
and liability amounts that are recognized for financial reporting purposes and the amounts that are recognized for income
tax purposes. These deferred taxes are measured by applying currently enacted tax laws. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position
will be sustained on examination by taxing authorities, including resolution of any related appeals or litigation processes,
based on the technical merits of the position. The assumptions about future tax consequences require significant judgment
and variations in the actual outcome of these consequences could materially impact our results of operations. We recognize
tax liabilities based on estimates of whether additional taxes and interest will be due. We adjust these liabilities when our
judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of
some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current
estimate of the tax liabilities. Interest and penalties, if any, related to accrued liabilities for potential tax assessments are
included in income tax expense.
60
Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit
will not be realized. Determination of valuation allowances recorded against deferred tax assets requires significant
judgment and use of assumptions, including past operating results, estimates of future taxable income and the feasibility of
tax planning strategies. To the extent that new information becomes available which causes us to change our judgment
regarding the adequacy of existing valuation allowances, such changes to tax liabilities will impact income tax expense in
the period in which such determination is made.
Components of Results of Operations
Cost of Revenue (exclusive of depreciation and amortization, which are shown separately)
Cost of revenue (exclusive of depreciation and amortization, which are shown separately), or "Cost of revenue,"
primarily consists of fees paid to the physicians and other health professionals in the THMG Association provider network;
product cost; costs incurred in connection with the THMG Association provider network operations and data center
activities, which include employee-related expenses (including salaries and benefits, incentive compensation, and stock-
based compensation); costs related to Client support; and provider network, medical records, magnetic resonance imaging,
medical lab tests, translation, postage, medical malpractice insurance, and deferred device costs. Cost of revenue includes
costs of technology enabling multiple modes of real-time communication, including via web browser, mobile application,
voice / telephony, and text. These expenses increase or decrease as the level of revenue changes. Cost of revenue is driven
primarily by the number of general medical visits, expert medical services, and other specialty visits completed in each
period and are closely correlated or directly related to delivery of our solutions and monthly access fees. Many of the
elements of the cost of revenue are relatively variable, and can be reduced in the near-term to offset any decline in our
revenue. Our business and operational models are designed to be highly scalable and leverage variable costs to support
revenue-generating activities. Cost of revenue does not include an allocation of depreciation and amortization.
Advertising and Marketing Expenses
Advertising and marketing expenses consist primarily of costs of digital and media advertisements, personnel, and
related expenses (including salaries and benefits, incentive compensation, and stock-based compensation) for our
marketing staff and communications materials that are produced for member acquisition and to generate greater awareness
and utilization among our Clients and members. Marketing costs also include third-party independent research, trade shows
and brand messages, public relations costs, and stock-based compensation for our advertising and marketing employees.
Our advertising and marketing expenses exclude certain allocations of occupancy expense as well as depreciation and
amortization.
Our advertising and marketing expenses will fluctuate as a percentage of our total revenue from period to period
due to the seasonality of our total revenue and the timing and extent of our advertising campaigns and marketing expenses.
We will continue to invest in advertising and marketing by promoting our brands through a variety of marketing and public
relations activities.
Sales Expenses
Sales expenses consist primarily of employee-related expenses, including salaries, benefits, commissions,
incentive-based awards, and stock-based compensation, employment taxes, travel costs for our employees engaged in sales,
account management, and sales support in addition to commissions paid to external brokers. Our sales expenses exclude
certain allocations of occupancy expense as well as depreciation and amortization.
Technology and Development Expenses
Technology and development expenses include the costs of operating our on-demand technology infrastructure
that are not directly related to changes in revenue or volume of visits, including certain licensed applications, information
technology infrastructure, security, and compliance. The technology and development line item also contains amounts
charged to expense for research and development, which include costs of new product development, costs to add new
features or improve reliability or scalability of existing applications, and other software development and engineering costs
to the extent that they are not capitalized. The research and development expenses may enable future revenue growth but
are not directly related to current revenues.
61
Technology and development expenses include personnel and related expenses (including salaries and benefits,
incentive compensation, and stock-based compensation) for software engineering, information technology infrastructure,
security and compliance, product development, and support for our efforts to add new features and ensure the reliability or
scalability of our existing solutions. Technology and development expenses also include outsourced software engineering
services, the costs of operating our on-demand technology infrastructure (whereas costs directly associated with revenue
are presented separately in cost of revenues), and certain licensed applications. Our technology and development expenses
exclude capitalized software development costs and depreciation and amortization.
Our technology and development expenses may fluctuate as a percentage of our total revenue from period to
period due to the seasonality of our total revenue and the timing and extent of our technology and development expenses,
including the ability to capitalize software development costs.
General and Administrative Expenses
General and administrative expenses include personnel and related expenses (including salaries and benefits,
incentive compensation, and stock-based compensation) of, and professional fees incurred by our finance, legal and
compliance, operations, human resources, clinical, corporate strategy, business development, strategies, quality and
executive departments. They also include bank charges, most of the facilities costs including rent, utilities, and facilities
maintenance, except for amounts allocated to cost of revenues, as well as therapists recruiting costs, related to BetterHelp,
indirect taxes and certain licensed corporate applications. Our general and administrative expenses exclude any allocation
of depreciation and amortization.
Our general and administrative expenses may fluctuate as a percentage of our total revenue from period to period
due to the seasonality of our total revenue and the timing and extent of our general and administrative expenses.
Restructuring Costs
Restructuring costs consist primarily of lease impairment costs, losses related to the reduction of office space, and
costs for employee transition, severance payments, employee benefits, and related costs.
Acquisition, Integration, and Transformation Costs
Acquisition, integration, and transformation costs include investment banking, financing, legal, accounting,
consultancy, integration, fair value changes related to contingent consideration, and certain other transaction costs related
to mergers and acquisitions. It also includes costs related to certain business transformation initiatives focused on
integrating and optimizing various operations and systems, including upgrading our CRM and ERP systems, incurred in
connection with our acquisition and integration activities.
Amortization of Intangible Assets
Amortization of intangible assets consists of the amortization of capitalized software development costs and of
acquisition-related intangible assets.
Depreciation of Property and Equipment
Depreciation of property and equipment consists of the depreciation of fixed assets.
Interest Income
Interest income primarily consists of interest earned on cash and cash equivalents.
Interest Expense
Interest expense consists of interest costs and the amortization of debt discounts primarily associated with
convertible senior notes.
62
Other Expense (Income), Net
Other expense (income), net includes the impact of foreign currency remeasurement, realized gains on investment
securities, and all other non-operating items not included in other financial statement lines.
Provision for Income Taxes
Provision for income taxes reflects management’s best assessment of estimated current and future taxes to be paid.
The objectives for accounting for income taxes, as prescribed by the relevant accounting guidance, are to recognize the
amount of taxes payable or refundable for the current year and deferred tax assets and liabilities for future tax
consequences of events that have been recognized in the financial statements. See above for Critical Accounting Estimates
and Policies.
Adjusted EBITDA and Free Cash Flow
To supplement our financial information presented in accordance with U.S. generally accepted accounting
principles (“GAAP”), we use certain non-GAAP financial measures to clarify and enhance an understanding of past
performance, which include Adjusted EBITDA (as defined below) and free cash flow. We believe that the presentation of
these financial measures enhances an investor’s understanding of our financial performance, and are commonly used by
investors to evaluate our performance and that of our competitors. We further believe that these financial measures are
useful to assess our operating performance and financial and business trends from period-to-period by excluding certain
items that we believe are not representative of our core business, and that free cash flow reflects an additional way of
viewing our liquidity that, when viewed together with GAAP results, provides management, investors, and other users of
our financial information with a more complete understanding of factors and trends affecting our cash flows. We use these
non-GAAP financial measures for business planning purposes and in measuring our performance relative to that of our
competitors. We utilize Adjusted EBITDA as a key measure of our performance.
Adjusted EBITDA consists of net loss before provision for income taxes; other expense (income), net; interest
income; interest expense; depreciation of property and equipment; amortization of intangible assets; restructuring costs;
acquisition, integration, and transformation cost; goodwill impairment; and stock-based compensation.
Free cash flow is net cash provided by operating activities less capital expenditures and capitalized software
development costs.
Our use of these non-GAAP terms may vary from that of others in our industry, and other companies may
calculate such measures differently than we do, limiting their usefulness as comparative measures.
Non-GAAP measures have important limitations as analytical tools and you should not consider them in isolation,
and they should not be considered as an alternative to net loss before provision for income taxes, net loss, net loss per
share, net cash from operating activities or any other measures derived in accordance with GAAP. Some of these
limitations are:
•
Adjusted EBITDA eliminates the impact of the provision for income taxes on our results of operations, and
does not reflect other expense (income), net, interest income, or interest expense;
•
Adjusted EBITDA does not reflect restructuring costs. Restructuring costs may include certain lease
impairment costs, certain losses related to early lease terminations, and severance;
•
Adjusted EBITDA does not reflect significant acquisition, integration, and transformation costs. Acquisition,
integration, and transformation costs include investment banking, financing, legal, accounting, consultancy,
integration, fair value changes related to contingent consideration and certain other transaction costs related to
mergers and acquisitions. It also includes costs related to certain business transformation initiatives focused
on integrating and optimizing various operations and systems, including upgrading our CRM and ERP
systems. These transformation cost adjustments made to our results do not represent normal, recurring,
operating expenses necessary to operate the business but rather, incremental costs incurred in connection with
our acquisition and integration activities;
•
Adjusted EBITDA does not reflect goodwill impairment charges; and
63
•
Adjusted EBITDA does not reflect the significant non-cash stock-based compensation expense which should
be viewed as a component of recurring operating costs.
In addition, although amortization of intangible assets and depreciation of property and equipment are non-cash
charges, the assets being amortized and depreciated will often have to be replaced in the future, and Adjusted EBITDA
does not reflect any expenditures for such replacements.
We compensate for these limitations by using these non-GAAP measures along with other comparative tools,
together with GAAP measurements, to assist in the evaluation of operating performance. Such GAAP measurements
include net loss, net loss per share, net cash provided by operating activities, and other performance measures.
In evaluating these financial measures, you should be aware that in the future we may incur expenses similar to
those eliminated in this presentation. Our presentation of these non-GAAP measures should not be construed as an
inference that our future results will be unaffected by unusual or nonrecurring items.
Consolidated Results of Operations
The following table sets forth our consolidated statement of operations data for the years ended December 31,
2024 and 2023 and the dollar and percentage change between the respective periods (dollars in thousands, except per share
data).
Year Ended
December 31,
Variance
%
2024
2023
Revenue
$
2,569,574 $
2,602,415 $
(32,841)
(1) %
Costs and expenses:
Cost of revenue (exclusive of depreciation and
amortization, which are shown separately below)
751,270
760,031
(8,761)
(1) %
Advertising and marketing
705,787
688,854
16,933
2 %
Sales
204,993
213,780
(8,787)
(4) %
Technology and development
307,274
348,521
(41,247)
(12) %
General and administrative
435,490
464,659
(29,169)
(6) %
Goodwill impairment
790,000
—
790,000
n/a
Acquisition, integration, and transformation costs
1,743
21,110
(19,367)
(92) %
Restructuring costs
20,355
16,942
3,413
20 %
Amortization of intangible assets
363,365
325,933
37,432
11 %
Depreciation of property and equipment
10,183
11,138
(955)
(9) %
Total costs and expenses
3,590,460
2,850,968
739,492
26 %
Loss from operations
(1,020,886)
(248,553)
(772,333)
n/m
Interest income
(57,071)
(46,782)
(10,289)
22 %
Interest expense
23,803
22,282
1,521
7 %
Other expense (income), net
6,035
(4,445)
10,480
(236) %
Loss before provision for income taxes
(993,653)
(219,608)
(774,045)
n/m
Provision for income taxes
7,592
760
6,832
n/m
Net loss
$ (1,001,245) $
(220,368) $
(780,877)
n/m
Net loss per share, basic and diluted
$
(5.87) $
(1.34) $
(4.53)
n/m
Adjusted EBITDA (1)
$
310,711 $
328,120 $
(17,409)
(5) %
______________________________________
n/m – not meaningful
(1) Non-GAAP Financial Measures
64
The following table reconciles net loss, the most directly comparable GAAP measure, to Adjusted EBITDA for
the years ended December 31, 2024 and 2023 (in thousands):
Year Ended
December 31,
2024
2023
Net loss
$
(1,001,245) $
(220,368)
Add:
Provision for income taxes
7,592
760
Other expense (income), net
6,035
(4,445)
Interest expense
23,803
22,282
Interest income
(57,071)
(46,782)
Depreciation of property and equipment
10,183
11,138
Amortization of intangible assets
363,365
325,933
Restructuring costs
20,355
16,942
Acquisition, integration, and transformation costs
1,743
21,110
Goodwill impairment
790,000
—
Stock-based compensation
145,951
201,550
Adjusted EBITDA
$
310,711 $
328,120
Integrated Care
$
232,902 $
191,871
BetterHelp
77,809
136,249
Adjusted EBITDA
$
310,711 $
328,120
Revenue. Total revenue was $2,569.6 million for the year ended December 31, 2024, compared to $2,602.4
million for the year ended December 31, 2023, a decrease of $32.8 million, or 1%. The decrease was driven by a 3%
decrease in access fees, primarily related to BetterHelp, offset by an 11% increase in other revenues. The increase in other
revenues primarily related to higher visit revenues. By geography, total revenue for the U.S. was $2,160.0 million and for
International was $409.6 million for the year ended December 31, 2024, reflecting a decrease of 3% and an increase of
12%, respectively, compared to the year ended December 31, 2023.
Cost of Revenue (exclusive of depreciation and amortization, which are shown separately below). Cost of revenue
was $751.3 million for the year ended December 31, 2024, compared to $760.0 million for the year ended December 31,
2023, a decrease of $8.8 million, or 1%. The decrease was primarily driven by lower provider and technology costs,
partially offset by higher amortization of device costs.
Advertising and Marketing Expenses. Advertising and marketing expenses were $705.8 million for the year ended
December 31, 2024, compared to $688.9 million for the year ended December 31, 2023, an increase of $16.9 million, or
2%. This increase was substantially driven by higher media advertising costs, partially offset by lower employee
compensation costs.
Sales Expenses. Sales expenses were $205.0 million for the year ended December 31, 2024, compared to $213.8
million for the year ended December 31, 2023, a decrease of $8.8 million, or 4%. The decrease was primarily driven by
lower employee compensation, partially offset by higher professional fees and broker commissions.
Technology and Development Expenses. Technology and development expenses were $307.3 million for the year
ended December 31, 2024, compared to $348.5 million for the year ended December 31, 2023, a decrease of $41.2 million,
or 12%. The decrease was primarily driven by lower employee compensation costs, partially offset by higher infrastructure,
hosting, and software license costs associated with running operations as well as ongoing projects and services to
continuously improve and optimize our products and services. For the years ended December 31, 2024 and 2023, research
and development costs were $89.1 million and $124.6 million, respectively.
General and Administrative Expenses. General and administrative expenses were $435.5 million for the year
ended December 31, 2024, compared to $464.7 million for the year ended December 31, 2023, a decrease of $29.2 million,
65
or 6%. The decrease was primarily driven by lower employee compensation and therapist onboarding costs, partially offset
by higher legal fees and software and infrastructure costs.
Goodwill Impairment. As discussed earlier under the section "Critical Accounting Estimates and Policies:
Goodwill," we recorded a non-cash goodwill impairment charge of $790.0 million for the year ended December 31, 2024.
The non-cash charge was not deductible for income tax purposes.
Acquisition, Integration, and Transformation Costs. Acquisition, integration, and transformation costs were $1.7
million for the year ended December 31, 2024, compared to $21.1 million for the year ended December 31, 2023, a
decrease of $19.4 million, as we wrap up the upgrading of our CRM and ERP systems.
Restructuring Costs. Restructuring costs were $20.4 million and $16.9 million for the years ended December 31,
2024 and 2023, respectively. The costs primarily related to the reduction of office space, severance, right-of-use asset
impairment charges and other restructuring related costs. See Note 12. ‘Restructuring” to the financial statements for
additional information.
Amortization of Intangible Assets.
The following table shows amortization of intangible assets broken down by components for the periods indicated
(in thousands):
Year Ended
December 31,
2024
2023
%
Amortization of acquired intangibles
$
230,328 $
242,976
(5) %
Amortization of capitalized software development costs
133,037
82,957
60 %
Amortization of intangible assets expense
$
363,365 $
325,933
11 %
Amortization of intangible assets was $363.4 million for the year ended December 31, 2024, compared to $325.9
million for the year ended December 31, 2023, an increase of $37.4 million, or 11%. The higher expense was driven by an
increase in the amortization of capitalized software development costs related to our investment in platforms, partially
offset by lower amortization of acquired intangibles due to certain trademarks becoming fully amortized.
In the second half of 2023, we initiated a strategy to transition the majority of our chronic condition management
Clients and members to the Teladoc Health brand on a phased basis, with a smaller subset continuing to be served under
the Livongo trade name beyond 2024. In connection with the brand strategy, we accelerated the amortization of intangible
assets that are associated with the Livongo trademark, increasing amortization of intangible assets expense beginning in the
second half of the year ended December 31, 2023 and continuing through the year ended December 31, 2024, with
corresponding reductions thereafter.
Depreciation of Property and Equipment. Depreciation of property and equipment was $10.2 million for the year
ended December 31, 2024, compared to $11.1 million for the year ended December 31, 2023, a decrease of $1.0 million, or
9%.
Interest Income. Interest income was $57.1 million for the year ended December 31, 2024, compared to $46.8
million for the year ended December 31, 2023. The increase was primarily driven by an increase in the average cash and
cash equivalent balance.
Interest Expense. Interest expense was $23.8 million for the year ended December 31, 2024, compared to $22.3
million for the year ended December 31, 2023.
Other Expense (Income), Net. Other expense (income), net was an expense of $6.0 million for the year ended
December 31, 2024, compared to an income of $4.4 million for the year ended December 31, 2023, primarily reflecting
losses on foreign currency exchange rate fluctuations for the year ended December 31, 2024, whereas the year ended
December 31, 2023 reflected a gain on the partial sale of a business, partially offset by losses on foreign currency exchange
rate fluctuations.
66
Provision for Income Taxes. We recorded income tax expense of $7.6 million for the year ended December 31,
2024, compared to $0.8 million for the year ended December 31, 2023. The income tax provision for the year ended
December 31, 2024 reflects the current year operational loss and the impact of lower stock-based compensation deductions
for tax purposes compared to the stock-based compensation expense recorded in the consolidated statement of operations.
Segment Information
The following tables set forth the results of operations by segment for the years ended December 31, 2024 and
2023 (dollars in thousands):
Year Ended
December 31,
Variance
%
Integrated Care
2024
2023
Revenue
$ 1,528,870
$ 1,468,794
$
60,076
4 %
Cost of revenue, exclusive of depreciation,
amortization, and stock-based compensation
474,955
440,996
33,959
8 %
Other segment expenses (1)
821,013
835,927
(14,914)
(2) %
Adjusted EBITDA
$
232,902
$
191,871
$
41,031
21 %
Adjusted EBITDA Margin %
15.2 %
13.1 %
_________________________________________
(1) Other segment expenses include advertising and marketing expenses, sales expenses, technology and development
expenses, and general and administrative expenses, each exclusive of stock-based compensation.
Integrated Care total revenues increased by $60.1 million, or 4%, to $1,528.9 million for the year ended
December 31, 2024. The increase in net revenues was primarily driven by higher chronic care program enrollment and
adoption, as well as higher telemedicine product revenue.
Integrated Care cost of revenue, exclusive of depreciation, amortization, and stock-based compensation, increased
by $34.0 million, or 8%, to $475.0 million for the year ended December 31, 2024. The increase was primarily driven by
higher provider costs and amortization of device costs, partially offset by lower technology costs.
Integrated Care other segment expenses decreased by $14.9 million, or 2%, to $821.0 million for the year ended
December 31, 2024. The decrease was primarily driven by lower employee compensation, partially offset by higher
software and infrastructure costs, legal and regulatory costs, and advertising costs, as well as higher commissions and
professional fees.
Year Ended
December 31,
Variance
%
BetterHelp
2024
2023
Therapy Services
$ 1,017,725
$ 1,116,693
$
(98,968)
(9) %
Other Wellness Services
22,979
16,928
6,051
36 %
Total Revenue
1,040,704
1,133,621
(92,917)
(8) %
Cost of revenue, exclusive of depreciation,
amortization, and stock-based compensation
271,533
313,572
(42,039)
(13) %
Advertising and marketing, exclusive of stock-based
compensation
558,759
541,815
16,944
3 %
Other segment expenses (1)
132,603
141,985
(9,382)
(7) %
Adjusted EBITDA
$
77,809
$
136,249
$
(58,440)
(43) %
Adjusted EBITDA Margin %
7.5 %
12.0 %
_________________________________________
(1) Other segment expenses include sales expenses, technology and development expenses, and general and
administrative expenses, each exclusive of stock-based compensation.
67
BetterHelp total revenues decreased by $92.9 million, or 8%, to $1,040.7 million for the year ended December 31,
2024, driven by an 11% decrease in average monthly paying users.
BetterHelp cost of revenue, exclusive of depreciation, amortization, and stock-based compensation decreased by
$42.0 million, or 13%, to $271.5 million for the year ended December 31, 2024. The decrease was primarily driven by
lower therapist costs.
BetterHelp advertising and marketing, exclusive of stock-based compensation increased by $16.9 million, or 3%,
to $558.8 million for the year ended December 31, 2024, primarily reflecting higher spending on digital and media
advertising.
BetterHelp other segment expenses decreased by $9.4 million, or 7%, to $132.6 million for the year ended
December 31, 2024. The decrease was primarily driven by lower therapist recruiting and retention costs, lower employee
related costs, and lower credit card processing fees, partially offset by higher legal and regulatory fees and higher software
and infrastructure costs.
Liquidity and Capital Resources
The following table presents a summary of our cash flow activity for the years ended December 31, 2024 and
2023 (in thousands):
Year Ended
December 31,
Consolidated Statements of Cash Flows - Summary
2024
2023
Net cash provided by operating activities
$
293,680 $
350,021
Net cash used in investing activities
(124,052)
(156,347)
Net cash provided by financing activities
8,312
10,854
Effect of foreign currency exchange rate changes
(3,288)
965
Total increase in cash and cash equivalents
$
174,652 $
205,493
Our principal source of liquidity is our cash and cash equivalents, totaling $1,298.3 million as of December 31,
2024. During 2024, we experienced positive operating cash flow and we also anticipate continuing positive operating cash
flows for 2025.
We believe that our existing cash and cash equivalents will be sufficient to meet our working capital, capital
expenditure, and contractual obligation needs for at least the next 12 months. Our future capital requirements will depend
on many factors including our growth rate, contract renewal activity, number of visits, our ability to retain and/or obtain
new members, the timing and extent of spending to support product development efforts, our expansion of sales and
marketing activities, the introduction of new and enhanced services offerings, the continuing market acceptance of
telehealth, and our debt service obligations. We may in the future enter into arrangements to acquire or invest in additional
complementary businesses, services, technologies, and intellectual property rights. We may be required to seek additional
equity or debt financing to fund working capital, capital expenditures and acquisitions, and to settle debt obligations. In the
event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or
at all, which would adversely affect our business, financial condition, and results of operations.
Historically, we have financed our operations primarily through sales of equity securities, debt issuance, and bank
borrowings.
An aggregate principal amount of $550.7 million of our convertible senior notes is due in 2025. See Note 10.
“Convertible Senior Notes” to the consolidated financial statements for additional information on our convertible senior
notes.
We were in compliance with all debt covenants at December 31, 2024.
We routinely enter into contractual obligations with third parties to provide professional services, licensing, and
other products and services in support of our ongoing business. The current estimated cost of these contracts is not
expected to be significant to our liquidity and capital resources based on contracts in place as of December 31, 2024.
68
Cash from Operating Activities
Cash flows provided by operating activities consisted of net loss adjusted for certain non-cash items and the cash
effect of changes in assets and liabilities. Cash provided by operating activities was $293.7 million and $350.0 million for
the years ended December 31, 2024 and 2023, respectively, a decrease of $56.3 million. The decrease was driven by higher
incentive compensation payments. Cash provided by operating activities for the years ended December 31, 2024 and 2023
included approximately $3.7 million and $15.6 million, respectively, of payments made related to investments in and
implementation of cloud computing applications, which are deferred and amortized over multiple years based on the
expected contract life.
The primary uses of cash from operating activities are for the payment of cash compensation, provider fees,
engagement marketing, direct-to-consumer digital and media advertising, inventory, insurance, technology costs, interest
expense and acquisition, integration, and transformation costs. Historically, cash compensation is at its highest level in the
first quarter when discretionary employee compensation related to the previous fiscal year is paid.
Cash from Investing Activities
Cash used in investing activities was $124.1 million for the year ended December 31, 2024 and primarily
consisted of capitalized software development costs of $113.3 million and capital expenditures of $10.8 million. Cash used
in investing activities for the year ended December 31, 2023 of $156.3 million, and consisted primarily of capitalized
software development costs of $144.9 million and capital expenditures of $11.5 million. The decrease of $32.3 million was
primarily driven by lower capitalized software development costs.
Cash from Financing Activities
Cash provided by financing activities for the year ended December 31, 2024 was $8.3 million and primarily
consisted of $3.6 million of proceeds from the exercise of employee stock options and $4.7 million of proceeds from
participants in our employee stock purchase plan. Cash provided by financing activities for the year ended December 31,
2023 was $10.9 million and primarily consisted of $1.5 million of proceeds from the exercise of employee stock options
and $9.7 million of proceeds from participants in our employee stock purchase plan.
The following is a reconciliation of net cash provided by operating activities to free cash flow (in thousands,
unaudited):
Year Ended
December 31,
2024
2023
Net cash provided by operating activities
$
293,680 $
350,021
Capital expenditures
(10,790)
(11,464)
Capitalized software development costs
(113,262)
(144,884)
Free Cash Flow
$
169,628 $
193,673
Free cash flow was $169.6 million for the year ended December 31, 2024, as compared to $193.7 million for the
year ended December 31, 2023. The year-over-year decrease was substantially driven by a decline in operating cash flow,
partially offset by a decline in capitalized software.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk and Foreign Currency Exchange Risk
Our cash and cash equivalents are subject to interest rate volatility, which impacts the amount of interest income
earned, and represents our principal market risk. A 1% change in interest rates would result in a change of interest income
generated from our cash and cash equivalents by approximately $12.3 million over the next 12 months. We do not expect
cash flows related to our convertible senior notes to be affected by a sudden change in market interest rates as they bear
fixed interest rates. We do not enter into investments for trading or speculative purposes.
69
We operate our business primarily within the U.S. which accounts for approximately 84% of our revenues. We
have not historically utilized hedging strategies with respect to our foreign currency exchange exposure, however we may
begin to do so.
Concentrations of Risk and Significant Clients
Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash
equivalents and accounts receivable. Although we deposit our cash with multiple financial institutions in the U.S. and in
foreign countries, our deposits, at times, may exceed federally insured limits. Our cash equivalents are primarily invested in
institutional money market funds.
No Client represented over 10% of consolidated revenues for the years ended December 31, 2024 or 2023. For the
Integrated Care segment, a significant portion of our revenue is derived from large enterprises, mainly health plans.
Revenue from the five largest customers was 31% and 34% of total Integrated Care segment revenue for the years ended
December 31, 2024 and 2023, respectively. For further information, see “Risk Factors—Risks Related to Our Business and
Industry—We operate in a competitive industry, and if we are not able to compete effectively, our business, financial
condition, and results of operations will be harmed,” “—A significant portion of our revenue comes from a limited number
of Clients, the loss of which could have a material adverse effect on our business, financial condition and results of
operations” included elsewhere in this Annual Report on Form 10-K.
For the BetterHelp segment, there is no significant concentration risk as substantially all revenue is generated
from individuals in the direct-to-consumer market.
Item 8.
Financial Statements and Supplementary Data
Our consolidated financial statements are listed in the Index to Consolidated Financial Statements and
Supplemental Data filed as part of this Annual Report on Form 10-K.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired
control objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible
controls and procedures.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as
of the end of the period covered by this Annual Report on Form 10-K, the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that as of December 31, 2024, our disclosure controls and
procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that
we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) during the three months ended December 31, 2024 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
70
Our management, including our Chief Executive Officer and our Chief Financial Officer, assessed the
effectiveness of our internal control over financial reporting as of December 31, 2024. In making this assessment,
management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control-Integrated Framework (2013 framework). Based on this assessment, management, including
our Chief Executive Officer and our Chief Financial Officer, concluded that we maintained effective internal control over
financial reporting at the reasonable assurance level as of December 31, 2024.
Ernst & Young LLP, independent registered public accounting firm, is appointed by the Board of Directors and
ratified by our Company’s stockholders. They were engaged to render an opinion regarding the fair presentation of our
consolidated financial statements as well as conducting an audit of internal control over financial reporting. Their
accompanying reports are based upon audits conducted in accordance with the standards of the Public Company
Accounting Oversight Board (United States).
February 27, 2025
71
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting,
as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control system is designed
to provide reasonable assurance regarding the preparation and fair presentation of published financial statements.
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Teladoc Health, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Teladoc Health, Inc.’s internal control over financial reporting as of December 31, 2024, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Teladoc Health, Inc. (the Company)
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on
the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related
consolidated statements of operations and other comprehensive loss, stockholders’ equity and cash flows for each of the
three years in the period ended December 31, 2024, and the related notes and financial statement schedule listed in the
Index at Item 15(a) and our report dated February 27, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s
Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in
all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides
a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
New York, New York
February 27, 2025
72
5,500,000 shares of Common Stock. The amendment is filed as Exhibit 10.25 hereto and incorporated herein by reference.
As previously disclosed, the 2023 Inducement Plan was adopted by our Board without stockholder approval pursuant to
NYSE Rule 303A.08.
(b) Rule 10b5-1 Trading Plans. During the three months ended December 31, 2023, the following officer (as
defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) adopted a Rule 10b5-1 trading arrangement (as defined in
Item 408 of Regulation S-K of the Securities Act of 1933), which was intended to satisfy the affirmative defense of
Rule10b5-1(c):
On November 18, 2024, Fernando Madeira Rodrigues, our President of BetterHelp, adopted a Rule 10b5-1 trading
plan, which was amended on November 27, 2024, that provides for the sale of up to 36,540 shares of our common stock
through December 2025.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
73
Item 9B. Other Information
(a) Effective February 27, 2025, we amended our 2023 Employment Inducement Incentive Award Plan (as
amended, the “2023 Inducement Plan”) solely to increase the number of shares of common stock, par value $0.001 per
share (“Common Stock”), reserved for issuance under the 2023 Inducement Plan by 1,000,000 shares, to a new total of
Item 13. Certain Relationships and Related Transactions, and Director Independence
We will provide information that is responsive to this Item 13 in our definitive proxy statement or in an
amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report, in
either case under the caption “Related-Party Transactions,” and possibly elsewhere therein. That information is
incorporated in this Item 13 by reference.
Item 14. Principal Accounting Fees and Services
We will provide information that is responsive to this Item 14 in our definitive proxy statement or in an
amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report, in
either case under the caption “Audit Matters” (excluding the information under the subheading "Audit Committee Report"),
and possibly elsewhere therein. That information is incorporated in this Item 14 by reference.
74
PART III
Information required by Items 10, 11, 12, 13 and 14 of Part III is omitted from this Annual Report and will be
filed in a definitive proxy statement or by an amendment to this Annual Report not later than 120 days after the end of the
fiscal year covered by this Annual Report.
Item 10. Directors, Executive Officers and Corporate Governance
We will provide information that is responsive to this Item 10 in our definitive proxy statement or in an
amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report, in
either case under the caption “Corporate Governance and Board Matters,” and possibly elsewhere therein. That information
is incorporated in this Item 10 by reference.
Our Board has adopted a Code of Business Conduct and Ethics that applies to all of our employees, officers, and
directors. The full text of our Code of Business Conduct and Ethics is posted on the Investors section of our website,
www.teladochealth.com. We intend to disclose any amendments to our Code of Business Conduct and Ethics, or waivers
of its requirements, on our website.
We have adopted an insider trading policy governing the purchase, sale, and other disposition of our securities by
our directors, officers, and employees. We believe this policy is reasonably designed to promote compliance with insider
trading laws, rules, and regulations and listing standards applicable to the Company. A copy of our insider trading policy is
filed as Exhibit 19.1 to this Annual Report on Form 10-K for the fiscal year ended December 31, 2024. In addition, with
regard to the Company’s trading in its own securities, it is our policy to comply with the federal securities laws and the
applicable exchange listing requirements.
Item 11. Executive Compensation
We will provide information that is responsive to this Item 11 in our definitive proxy statement or in an
amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report, in
either case under the captions "Director Compensation," “Executive Compensation” and “Compensation Tables,” and
possibly elsewhere therein. That information is incorporated in this Item 11 by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
We will provide information that is responsive to this Item 12 in our definitive proxy statement or in an
amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report, in
either case under the captions “Securities Ownership of Certain Beneficial Owners and Management” and “Equity
Compensation Plan Information,” and possibly elsewhere therein. That information is incorporated in this Item 12 by
reference.
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) (1) Our consolidated financial statements are listed in the Index to Consolidated Financial Statements and
Supplemental Data filed as part of this Annual Report on Form 10-K.
(2) Schedule II—Valuation and Qualifying Accounts.
Valuation and Qualifying Accounts (in thousands):
Descriptions
Balance at
Beginning
of Period
Provision
Other
Write-offs
Balance at
End
of Period
Allowance for Doubtful Accounts
2024
$
4,240 $
3,795 $
(23) $
(2,878) $
5,134
2023
$
4,324 $
4,686 $
3,001 $
(7,771) $
4,240
2022
$
11,269 $
2,815 $
464 $
(10,224) $
4,324
Income Tax Valuation Allowance
2024 (1)
$
418,234 $
(275) $
(1,258) $
— $
416,701
2023 (2)
$
415,751 $
1,904 $
579 $
— $
418,234
2022 (3)
$
335,809 $
18,966 $
60,976 $
— $
415,751
(1) Other reflects currency translation adjustments.
(2) Other primarily reflects adjustments related to the adoption of ASU 2020-06. For additional information, see Note
2. "Summary of Significant Accounting Policies" to the consolidated financial statements.
(3) Other primarily reflects adjustments i) recorded against goodwill related to the acquisition of Livongo and ii)
recorded against additional paid-in capital related to the conversion of certain convertible senior notes. For
additional information, see Note 10. "Convertible Senior Notes" to the consolidated financial statements.
(3) A list of exhibits is set forth on the Exhibit Index immediately prior to the signature page of this Annual
Report on Form 10-K, and is incorporated herein by reference.
Item 16. Form 10-K Summary
Not applicable.
75
Exhibit Index
Incorporated by Reference
Exhibit
Number
Exhibit Description
Form
File No.
Exhibit
Filing
Date
Filed
Herewith
3.1
Seventh Amended and Restated Certificate of
Incorporation of Teladoc Health, Inc.
8-K
001-37477
3.1
6/2/22
3.2
Seventh Amended and Restated Bylaws of Teladoc
Health, Inc.
10-K
001-37477
3.2
2/23/24
4.1
Specimen stock certificate evidencing shares of the
common stock.
*
4.2
Indenture, dated as of May 8, 2018, by and between
Teladoc, Inc. and Wilmington Trust, National
Association.
8-K
001-37477
4.1
5/8/18
4.3
Global 1.375% Convertible Senior Note due 2025,
dated as of May 8, 2018.
8-K
001-37477
4.2
5/8/18
4.4
Indenture, dated as of May 19, 2020, by and
between Teladoc Health, Inc. and Wilmington
Trust, National Association.
8-K
001-37477
4.1
5/19/20
4.5
Global 1.25% Convertible Senior Note due 2027,
dated as of May 19, 2020 (included as Exhibit A to
Exhibit 4.4).
8-K
001-37477
4.2
5/19/20
4.6
Indenture, dated as of June 4, 2020, by and between
Livongo Health, Inc. and U.S. Bank National
Association.
8-K
001-38983
4.1
10/30/20
4.7
Global 0.875% Convertible Senior Note due 2025
(included as Exhibit A to Exhibit 4.6).
8-K
001-38983
4.1
10/30/20
4.8
First Supplemental Indenture, dated as of October
30, 2020, among Livongo Health, Inc., Teladoc
Health, Inc. and U.S. Bank National Association, as
trustee.
8-K
001-37477
4.1
10/30/20
4.9
Second Supplemental Indenture, dated as of
January 1, 2023, among Livongo Health, Inc.,
Teladoc Health, Inc. and U.S. Bank Trust
Company, National Association (as successor in
interest to U.S. Bank National Association), as
trustee.
10-K
001-37477
4.9
3/1/23
4.10
Description of Securities Registered under Section
12 of the Securities Exchange Act of 1934, as
amended.
10-K
001-37477
4.10
3/1/23
10.1+
Form of Indemnification Agreement between
Teladoc Health, Inc. and each of its directors and
officers.
S-1/A
333-204577
10.7
6/18/15
10.2+
Form of Indemnification Agreement between
Teladoc Health, Inc. and each of its directors and
officers (form used since October 2020).
10-K
001-37477
10.2
3/1/21
76
10.3+
Teladoc Health, Inc. 2015 Incentive Award Plan
(as amended and restated effective May 25, 2017).
8-K
001-37477
10.1
5/31/17
10.4+
Form of Stock Option Agreement under the
Teladoc Health, Inc. 2015 Incentive Award Plan.
S-1/A
333-204577
10.11
6/18/15
10.5+
Form of Restricted Stock Agreement under the
Teladoc Health, Inc. 2015 Incentive Award Plan.
S-1/A
333-204577
10.12
6/18/15
10.6+
Form of Restricted Stock Unit Agreement under
the Teladoc Health, Inc. 2015 Incentive Award
Plan.
S-1/A
333-204577
10.13
6/18/15
10.7+
Form of Performance Restricted Stock Unit
Agreement under the Teladoc Health, Inc. 2015
Incentive Award Plan.
10-Q
001-37477
10.1
5/2/22
10.8+
Teladoc Health, Inc. 2015 Employee Stock
Purchase Plan.
10-Q
001-37477
10.1
8/2/21
10.9+
Second Amendment to Teladoc Health, Inc.
Amended and Restated Employee Stock Purchase
Plan.
8-K
001-37477
10.2
5/30/23
10.10+
Teladoc Health, Inc. 2017 Employment
Inducement Incentive Award Plan (as amended on
July 11, 2017).
S-8
333-219275
99.3
7/14/17
10.11+
Form of Stock Option Agreement under the
Teladoc Health, Inc. 2017 Employment
Inducement Incentive Award Plan.
10-K
001-37477
10.17
3/1/17
10.12+
Form of Restricted Stock Agreement under the
Teladoc Health, Inc. 2017 Employment
Inducement Incentive Award Plan.
10-K
001-37477
10.18
3/1/17
10.13+
Form of Restricted Stock Unit Agreement under
the Teladoc Health, Inc. 2017 Employment
Inducement Incentive Award Plan.
10-K
001-37477
10.19
3/1/17
10.14+
Teladoc Health, Inc. Livongo Acquisition Incentive
Award Plan.
S-8
333-249892
99.1
11/6/20
10.15+
Form of Stock Option Agreement under the
Teladoc Health, Inc. Livongo Acquisition Incentive
Award Plan.
10-K
001-37477
10.14
3/1/21
10.16+
Form of Restricted Stock Agreement under the
Teladoc Health, Inc. Livongo Acquisition Incentive
Award Plan.
10-K
001-37477
10.15
3/1/21
10.17+
Form of Restricted Stock Unit Agreement under
the Teladoc Health, Inc. Livongo Acquisition
Incentive Award Plan.
10-K
001-37477
10.16
3/1/21
10.18+
Teladoc Health, Inc. 2023 Incentive Award Plan.
8-K
001-37477
10.1
5/30/23
10.19+
Form of Stock Option Agreement under the
Teladoc Health, Inc. 2023 Incentive Award Plan.
10-Q
001-37477
10.2
7/28/23
77
10.20+
Form of Restricted Stock Agreement under the
Teladoc Health, Inc. 2023 Incentive Award Plan.
10-Q
001-37477
10.3
7/28/23
10.21+
Form of Restricted Stock Unit Agreement under
the Teladoc Health, Inc. 2023 Incentive Award
Plan.
10-Q
001-37477
10.4
7/28/23
10.22+
Form of Performance Restricted Stock Unit
Agreement under the Teladoc Health, Inc. 2023
Incentive Award Plan.
10-Q
001-37477
10.5
7/28/23
10.23+
Teladoc Health, Inc. 2023 Employment
Inducement Incentive Award Plan.
S-8
333-273509
99.1
7/28/23
10.24+
First Amendment to Teladoc Health, Inc. 2023
Employment Inducement Award Plan.
8-K
001-37477
10.4
6/10/24
10.25+
Second Amendment to Teladoc Health, Inc. 2023
Employment Inducement Award Plan.
*
10.26+
Form of Stock Option Agreement under the
Teladoc Health, Inc. 2023 Employment
Inducement Incentive Award Plan.
10-Q
001-37477
10.2
10/27/23
10.27+
Form of Restricted Stock Agreement under the
Teladoc Health, Inc. 2023 Employment
Inducement Incentive Award Plan.
10-Q
001-37477
10.3
10/27/23
10.28+
Form of Restricted Stock Unit Agreement under
the Teladoc Health, Inc. 2023 Employment
Inducement Incentive Award Plan.
10-Q
001-37477
10.4
10/27/23
10.29+
Form of Performance Restricted Stock Unit
Agreement under the Teladoc Health, Inc. 2023
Employment Inducement Incentive Award Plan.
10-Q
001-37477
10.5
10/27/23
10.30+
Teladoc Health, Inc. Level 14 Severance Plan.
8-K
001-37477
10.3
5/30/23
10.31+
Teladoc Health, Inc. Non-Employee Director
Compensation Program (as amended).
10-K
001-37477
10.29
2/23/24
10.32+
Teladoc Health, Inc. Deferred Compensation Plan
for Non-Employee Directors.
10-K
001-37477
10.8
2/27/18
10.33+
Offer Letter, dated June 5, 2024, by and between
Teladoc Health, Inc. and Charles Divita.
8-K
001-37477
10.1
6/10/24
10.34+
Employment Agreement, dated June 10, 2024, by
and between Teladoc Health, Inc. and Charles
Divita.
8-K
001-37477
10.2
6/10/24
10.35+
Chief Executive Officer Restricted Stock Unit
Agreement under the Teladoc Health, Inc. 2023
Employment Inducement Incentive Award Plan.
10-Q
001-37477
10.3
8/1/24
10.36+
Form of Chief Executive Officer Performance
Restricted Stock Unit Agreement under the Teladoc
Health, Inc. 2023 Employment Inducement
Incentive Award Plan.
10-Q
001-37477
10.4
8/1/24
78
10.37+
Executive Severance Agreement, dated June 24,
2019, by and between Teladoc Health, Inc. and
Mala Murthy.
10-Q
001-37477
10.1
7/31/19
10.38+
Amendment No. 1 to Executive Severance
Agreement, dated October 29, 2019, by and
between Teladoc Health, Inc. and Mala Murthy.
10-Q
001-37477
10.5
10/30/19
10.39+
Amendment No. 2 to Executive Severance
Agreement, dated June 6, 2024, by and between
Teladoc Health, Inc. and Mala Murthy.
8-K
001-37477
10.3
6/10/24
10.40+
Letter Agreement, dated April 1, 2024, by and
between Teladoc Health, Inc. and Mala Murthy.
10-Q
001-37477
10.1
4/26/24
10.41+
Executive Severance Agreement, dated July 15,
2015, by and between Teladoc Health, Inc. and
Adam Vandervoort.
10-Q
001-37477
10.17
4/30/19
10.42+
Amendment No. 1 to Executive Severance
Agreement, dated October 29, 2019, by and
between Teladoc Health, Inc. and Adam
Vandervoort.
10-Q
001-37477
10.8
10/30/19
10.43+
Amendment No. 2 to Executive Severance
Agreement, dated April 26, 2024, by and between
Teladoc Health, Inc. and Adam Vandervoort.
10-Q
001-37477
10.4
4/26/24
10.44+
Retention Bonus Agreement, dated April 26, 2024,
by and between Teladoc Health, Inc. and Adam
Vandervoort.
10-Q
001-37477
10.3
4/26/24
10.45+
Executive Severance Agreement, dated July 14,
2017, by and between Teladoc Health, Inc. and
Kelly Bliss.
*
10.46+
Amendment No. 1 to Executive Severance
Agreement, dated April 26, 2024, by and between
Teladoc Health, Inc. and Kelly Bliss.
*
10.47+
Retention Bonus Agreement, dated April 26, 2024,
by and between Teladoc Health, Inc. and Kelly
Bliss.
*
10.48+
Services Agreement, dated May 31, 2018, by and
between Teladoc Health International, S.A.U.
(formerly Advance Medical Healthcare
Management Services, S.A.) and Carlos Nueno.
*
10.49+
Retention Bonus Agreement, dated April 26, 2024,
by and between Teladoc Health, Inc. and Carlos
Nueno.
*
10.50+
Amended and Restated Executive Employment
Agreement, dated June 16, 2015, by and between
Teladoc Health, Inc. and Jason Gorevic.
S-1/A
333-204577
10.19
6/18/15
79
10.51+
Amendment No. 1 to Amended and Restated
Executive Employment Agreement, dated October
29, 2019, by and between Teladoc Health, Inc. and
Jason Gorevic.
10-Q
001-37477
10.2
10/30/19
10.52+
Release and Separation Agreement, dated as of
April 11, 2024, by and between Teladoc Health,
Inc. and Jason Gorevic.
10-Q
001-37477
10.2
4/26/24
10.53+
Executive Employment Agreement, dated October
2, 2022, by and between Teladoc Health, Inc. and
Laizer Kornwasser.
8-K
001-37477
10.1
10/28/22
10.54+
Executive Employment Agreement, dated June 15,
2022, by and between Teladoc Health, Inc. and
Michael Waters.
10-Q
001-37477
10.1
11/2/22
10.55+
Release and Separation Agreement, dated as of
September 27, 2024, by and between Teladoc
Health, Inc. and Michael Waters.
10-Q
001-37477
10.1
10/31/24
19.1
Teladoc Health, Inc. Insider Trading Compliance
Policy
*
21.1
Subsidiaries of the Registrant.
*
23.1
Consent of Ernst & Young, LLP, Independent
Registered Public Accounting Firm
*
31.1
Chief Executive Officer—Certification pursuant to
Rule 13a-14(a) or Rule 15d-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
*
31.2
Chief Financial Officer—Certification pursuant to
Rule 13a-14(a) or Rule 15d-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
*
32.1
Chief Executive Officer—Certification pursuant to
Rule13a-14(b) or Rule 15d-14(b) of the Securities
Exchange Act of 1934 and 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
**
32.2
Chief Financial Officer—Certification pursuant to
Rule 13a-14(b) or Rule 15d-14(b) of the Securities
Exchange Act of 1934 and 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
**
97.1
Teladoc Health, Inc. Incentive-Based
Compensation Recovery Policy.
10-K
001-37477
97.1
2/23/24
101.INS
XBRL Instance Document.
*
101.SCH
XBRL Taxonomy Extension Schema Document.
*
101.CAL
XBRL Taxonomy Calculation Linkbase Document.
*
80
101.DEF
XBRL Definition Linkbase Document.
*
101.LAB
XBRL Taxonomy Label Linkbase Document.
*
101.PRE
XBRL Taxonomy Presentation Linkbase
Document.
*
104
Cover Page Interactive Data File – The Cover page
interactive data file does not appear in the
Interactive Data File because its XBRL tags are
embedded within the Inline XBRL document
_________________________________________
*
Filed herewith.
**
Furnished herewith.
+
Management contract or compensatory plan.
81
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
TELADOC HEALTH, INC.
Date: February 27, 2025
By:
/s/ CHARLES DIVITA, III
Name:
Charles Divita, III
Title:
Chief Executive Officer and Director
Date: February 27, 2025
By:
/s/ MALA MURTHY
Name:
Mala Murthy
Title:
Chief Financial Officer
Date: February 27, 2025
By:
/s/ JOSEPH CATAPANO
Name:
Joseph Catapano
Title:
Chief Accounting Officer
82
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: February 27, 2025
By:
/s/ DAVID B. SNOW, JR.
Name:
David B. Snow, Jr
Title:
Chairman of the Board
Date: February 27, 2025
By:
/s/ J. ERIC EVANS
Name:
J. Eric Evans
Title:
Director
Date: February 27, 2025
By:
/s/ SANDRA L. FENWICK
Name:
Sandra L. Fenwick
Title:
Director
Date: February 27, 2025
By:
/s/ CATHERINE A. JACOBSON
Name:
Catherine A. Jacobson
Title:
Director
Date: February 27, 2025
By:
/s/ THOMAS G. MCKINLEY
Name:
Thomas G. McKinley
Title:
Director
Date: February 27, 2025
By:
/s/ KENNETH H. PAULUS
Name:
Kenneth H. Paulus
Title:
Director
Date: February 27, 2025
By:
/s/ DAVID L. SHEDLARZ
Name:
David L. Shedlarz
Title:
Director
Date: February 27, 2025
By:
/s/ MARK DOUGLAS SMITH, M.D.
Name:
Mark Douglas Smith, M.D.
Title:
Director
83
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Page
1. Audited Consolidated Financial Statements of Teladoc Health, Inc.
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
F-2
Consolidated Balance Sheets
F-5
Consolidated Statements of Operations and Other Comprehensive Loss
F-6
Consolidated Statements of Stockholders’ Equity
F-7
Consolidated Statements of Cash Flows
F-8
Notes to Audited Consolidated Financial Statements
F-9
2. Supplemental Financial Data:
The following supplemental financial data of the Registrant required to be included in Item 15(a)(2) on Form
10-K are listed below:
Schedule II – Valuation and Qualifying Accounts
75
F-1
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Teladoc Health, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Teladoc Health, Inc. (the Company) as of December 31,
2024 and 2023, the related consolidated statements of operations and other comprehensive loss, stockholders’ equity and
cash flows for each of the three years in the period ended December 31, 2024, and the related notes and financial statement
schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our
opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company
at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) and our report dated February 27, 2025 expressed an unqualified opinion
thereon.
Adoption of ASU No. 2020-06
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for
Convertible Senior Notes in 2022 due to the adoption of Financial Accounting Standards Board (“FASB”) Accounting
Standards Update 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and
Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in
an Entity’s Own Equity.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our
opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements
that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex
judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate
opinions on the critical audit matters or on the accounts or disclosures to which they relate.
F-2
Capitalized software development costs
Description of the Matter
At December 31, 2024, the Company’s capitalized software development costs were $362
million. As described in Note 2 and 8 of the consolidated financial statements, the Company
capitalizes certain software development costs related to its software development tools that
enable its members and providers to interact. Management determines the amount of
internal-use software costs to be capitalized based on the amount of time spent by internal
developers and vendors on projects in the application stage of development. There is
judgment involved in estimating time incurred in the application development stage.
Auditing capitalized internal-use software development costs required a higher degree of
judgement and effort involved in evaluating management’s judgement related to the amount
of time incurred by developers on each project.
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness
of controls over the Company’s capitalization of software development costs process. For
example, we tested controls over the Company’s process to review the time incurred by
developers on each project.
To test the Company’s capitalization of software development costs, we performed audit
procedures that included, among others, inspecting underlying documentation to evaluate
whether the time was capitalizable under the applicable accounting standards for a sample
of projects. For these projects, we also inquired of technology and development
management, project managers, and developers regarding the objective and nature of the
projects and inquired with software developers regarding their time spent on each project
and the nature of their tasks performed for the project. We also inspected underlying
documentation to evaluate the nature of the work of the software developers. For external
vendor costs, we also obtained a sample of vendor contracts and invoices to review the time
incurred to perform development activities.
Valuation of goodwill for the BetterHelp reporting unit
Description of the Matter
At December 31, 2024, the Company’s consolidated goodwill was $283.2 million, all of
which is recorded within the BetterHelp reporting unit. As discussed in Notes 2 and 6 of the
consolidated financial statements, goodwill is not amortized but is tested for impairment at
the reporting unit level annually on October 1 or more frequently if events or changes in
circumstances indicate that it is more likely than not to be impaired. As a result of sustained
decreases in the Company’s publicly quoted share price and market capitalization as well as
changes in the operating results of the BetterHelp reporting unit, the Company conducted an
interim test of its goodwill at June 30, 2024. For the twelve months ended December 31,
2024, the Company recognized $790 million of non-deductible, non-cash goodwill
impairment charges.
Auditing management’s goodwill impairment test for the Company’s BetterHelp reporting
unit was complex and highly judgmental due to the significant uncertainty in determining
the fair value of the reporting unit. In particular, the fair value estimate was sensitive to
changes in significant assumptions such as the projected revenue, EBITDA margin growth
rates, terminal growth rate, and discount rate. These assumptions are affected by
expectations about future market or economic conditions and the impact of planned
business and operation strategies.
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness
of controls over the Company’s goodwill impairment assessment process. For example, we
tested controls over the Company’s forecasting process as well as controls over
management's review of the valuation model and significant assumptions used.
F-3
To test the estimated fair value of the Company’s reporting unit, we performed audit
procedures that included, among others, assessing the valuation methodologies used, testing
the significant assumptions described above and testing the completeness and accuracy of
the underlying data the Company used in its analyses. For example, we compared the
projected revenue, EBITDA margin growth rates, and terminal growth rate used in the
valuations to historical results, forecasted industry and economic trends, analyst reports and
peer company information, where available. We also evaluated management’s ability to
accurately forecast by comparing actual results to historical forecasts. We involved our
valuation specialists to assist in our evaluation of the Company’s determined weighted
average cost of capital (WACC), which was used to determine the discount rate applied to
management’s cash flow projections, including performing a comparative calculation of the
WACC. We also performed sensitivity analyses of significant assumptions to evaluate
changes in the fair value that would result from changes in the assumptions. In addition, we
tested management’s reconciliation of the fair value of the reporting units to the market
capitalization of the Company.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2014.
New York, New York
February 27, 2025
F-4
TELADOC HEALTH, INC.
Consolidated Balance Sheets
(in thousands, except share and per share data)
December 31,
2024
December 31,
2023
ASSETS
Current assets:
Cash and cash equivalents
$
1,298,327 $
1,123,675
Accounts receivable, net of allowance for doubtful accounts of $5,134 and $4,240
at December 31, 2024 and December 31, 2023, respectively
214,146
217,423
Inventories
38,138
29,513
Prepaid expenses and other current assets
113,296
118,437
Total current assets
1,663,907
1,489,048
Property and equipment, net
29,487
32,032
Goodwill
283,190
1,073,190
Intangible assets, net
1,431,360
1,677,781
Operating lease—right-of-use assets
27,092
40,060
Other assets
81,488
80,258
Total assets
$
3,516,524 $
4,392,369
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
33,130 $
43,637
Accrued expenses and other current liabilities
202,157
178,634
Accrued compensation
76,229
102,686
Deferred revenue—current
79,296
95,659
Convertible senior notes, net—current
550,723
—
Total current liabilities
941,535
420,616
Other liabilities
720
1,080
Operating lease liabilities, net of current portion
32,135
42,837
Deferred revenue, net of current portion
9,786
13,623
Deferred taxes, net
49,851
49,452
Convertible senior notes, net—non-current
991,418
1,538,688
Total liabilities
2,025,445
2,066,296
Commitments and contingencies (Note 17)
Stockholders’ equity:
Common stock, $0.001 par value; 300,000,000 shares authorized; 173,405,016
shares and 166,658,253 shares issued and outstanding as of December 31, 2024
and December 31, 2023 respectively
173
167
Additional paid-in capital
17,759,194
17,591,551
Accumulated deficit
(16,229,900)
(15,228,655)
Accumulated other comprehensive loss
(38,388)
(36,990)
Total stockholders’ equity
1,491,079
2,326,073
Total liabilities and stockholders’ equity
$
3,516,524 $
4,392,369
See accompanying notes to audited consolidated financial statements.
F-5
TELADOC HEALTH, INC.
Consolidated Statements of Operations and Other Comprehensive Loss
(in thousands, except share and per share data)
Year Ended
December 31,
2024
2023
2022
Revenue
$
2,569,574 $
2,602,415 $
2,406,840
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization, which
are shown separately below)
751,270
760,031
743,987
Advertising and marketing
705,787
688,854
623,536
Sales
204,993
213,780
227,172
Technology and development
307,274
348,521
333,629
General and administrative
435,490
464,659
449,855
Goodwill impairment
790,000
—
13,402,812
Acquisition, integration, and transformation costs
1,743
21,110
15,620
Restructuring costs
20,355
16,942
7,416
Amortization of intangible assets
363,365
325,933
244,620
Depreciation of property and equipment
10,183
11,138
11,407
Total costs and expenses
3,590,460
2,850,968
16,060,054
Loss from operations
(1,020,886)
(248,553) (13,653,214)
Interest income
(57,071)
(46,782)
(12,674)
Interest expense
23,803
22,282
21,944
Other expense (income), net
6,035
(4,445)
859
Loss before provision for income taxes
(993,653)
(219,608) (13,663,343)
Provision for income taxes
7,592
760
(3,812)
Net loss
(1,001,245)
(220,368) (13,659,531)
Other comprehensive loss, net of tax:
Currency translation adjustment
(1,398)
5,786
(36,491)
Comprehensive loss
$ (1,002,643) $
(214,582) $ (13,696,022)
Net loss per share, basic and diluted
$
(5.87) $
(1.34) $
(84.60)
Weighted-average shares used to compute basic and diluted net loss per
share
170,564,088 164,578,219 161,457,123
See accompanying notes to audited consolidated financial statements.
F-6
TELADOC HEALTH, INC.
Consolidated Statements of Stockholders’ Equity
(in thousands, except share data)
Common Stock
Additional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Gain (Loss)
Total
Stockholders’
Equity
Shares
Amount
Balances as of December 31, 2021
160,469,325
$
160
$
17,473,336
$
(1,421,454) $
(6,285) $
16,045,757
Cumulative effect adjustment due to adoption
of ASU 2020-06 (see Note 2)
—
—
(363,731)
72,698
—
(291,033)
Exercise of stock options
591,213
1
5,883
—
—
5,884
Issuance of common stock upon vesting of
restricted stock units
1,508,570
2
(2)
—
—
—
Issuance of stock under employee stock
purchase plan
271,159
—
7,064
—
—
7,064
Issuance of common stock for 2025 Notes
93
—
7
—
—
7
Equity portion of extinguishment of 2025
Notes
—
—
(2)
—
—
(2)
Stock-based compensation
—
—
236,090
—
—
236,090
Other comprehensive loss, net of tax
—
—
—
—
(36,491)
(36,491)
Net loss
—
—
—
(13,659,531)
—
(13,659,531)
Balances as of December 31, 2022
162,840,360
163
17,358,645
(15,008,287)
(42,776)
2,307,745
Exercise of stock options
175,761
—
1,481
—
—
1,481
Issuance of common stock upon vesting of
restricted stock units
3,049,824
3
(3)
—
—
—
Issuance of stock under employee stock
purchase plan
592,308
1
10,439
—
—
10,440
Stock-based compensation
—
—
220,989
—
—
220,989
Other comprehensive income, net of tax
—
—
—
—
5,786
5,786
Net loss
—
—
—
(220,368)
—
(220,368)
Balances as of December 31, 2023
166,658,253
167
17,591,551
(15,228,655)
(36,990)
2,326,073
Exercise of stock options
520,190
—
3,566
—
—
3,566
Issuance of common stock upon vesting of
restricted stock units
5,634,883
6
(6)
—
—
—
Issuance of stock under employee stock
purchase plan
591,690
—
5,409
—
—
5,409
Stock-based compensation
—
—
158,674
—
—
158,674
Other comprehensive loss, net of tax
—
—
—
—
(1,398)
(1,398)
Net loss
—
—
—
(1,001,245)
—
(1,001,245)
Balances as of December 31, 2024
173,405,016
$
173
$
17,759,194
$ (16,229,900) $
(38,388) $
1,491,079
See accompanying notes to audited consolidated financial statements.
F-7
TELADOC HEALTH, INC.
Consolidated Statements of Cash Flows
(in thousands)
Year Ended
December 31,
2024
2023
2022
Cash flows from operating activities:
Net loss
$
(1,001,245) $
(220,368) $
(13,659,531)
Adjustments to reconcile net loss to net cash flows from operating activities:
Goodwill impairment
790,000
—
13,402,812
Amortization of intangible assets
363,365
325,933
244,620
Depreciation of property and equipment
10,183
11,138
11,407
Amortization of right-of-use assets
9,295
11,650
11,757
Provision for allowances for doubtful accounts
3,795
4,686
2,815
Stock-based compensation
145,951
201,550
217,852
Deferred income taxes
(1,145)
(1,903)
(7,840)
Other, net
9,796
5,692
13,788
Changes in operating assets and liabilities:
Accounts receivable
(375)
(10,252)
(49,058)
Prepaid expenses and other current assets
5,188
12,461
(41,081)
Inventory
(9,749)
24,095
14,800
Other assets
(1,257)
(23,052)
(27,767)
Accounts payable
(10,365)
(4,185)
1,876
Accrued expenses and other current liabilities
30,178
9,069
61,217
Accrued compensation
(20,499)
19,180
(12,290)
Deferred revenue
(18,246)
(4,900)
15,240
Operating lease liabilities
(10,892)
(10,224)
(11,525)
Other liabilities
(298)
(549)
200
Net cash provided by operating activities
293,680
350,021
189,292
Cash flows from investing activities:
Capital expenditures
(10,790)
(11,464)
(16,480)
Capitalized software development costs
(113,262)
(144,884)
(156,284)
Proceeds from marketable securities
—
—
2,507
Other, net
—
1
2,514
Net cash used in investing activities
(124,052)
(156,347)
(167,743)
Cash flows from financing activities:
Proceeds from the exercise of stock options
3,566
1,481
5,884
Proceeds from employee stock purchase plan
4,748
9,651
6,501
Other, net
(2)
(278)
(5,888)
Net cash provided by financing activities
8,312
10,854
6,497
Net increase in cash and cash equivalents
177,940
204,528
28,046
Effect of foreign currency exchange rate changes
(3,288)
965
(3,344)
Cash and cash equivalents at beginning of the period
1,123,675
918,182
893,480
Cash and cash equivalents at end of the period
$
1,298,327
$
1,123,675
$
918,182
Cash paid for income taxes, net
$
8,946
$
7,238
$
2,512
Interest paid
$
17,322
$
17,422
$
17,361
Supplemental disclosure of non-cash investing activities
Accruals related to Property and equipment, net and Intangible assets, net
$
4,351
$
11,006
$
8,216
See accompanying notes to audited consolidated financial statements.
F-8
TELADOC HEALTH, INC.
Notes to Audited Consolidated Financial Statements
Note 1. Organization and Description of Business
Teladoc, Inc. was incorporated in the State of Texas in June 2002 and changed its state of incorporation to the
State of Delaware in October 2008. Effective August 10, 2018, Teladoc, Inc. changed its corporate name to Teladoc
Health, Inc. Unless the context otherwise requires, Teladoc Health, Inc., together with its subsidiaries, is referred to herein
as “Teladoc Health” or the “Company”. The Company’s principal executive office is located in Purchase, New York.
Teladoc Health is the global leader in virtual care focused on forging a new healthcare experience with better convenience,
outcomes and value around the world.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
These consolidated financial statements have been prepared in accordance with the United States (“U.S.”)
generally accepted accounting principles (“GAAP”). The consolidated financial statements include the results of Teladoc
Health, as well as two professional associations and 10 professional corporations (collectively, the “THMG Association”).
Teladoc Health Medical Group, P.A. (“THMG”) is party to a Services Agreement by and among it and the
professional associations and professional corporations pursuant to which each professional association and professional
corporation provides services to THMG. Each professional association and professional corporation is established pursuant
to the requirements of its respective domestic jurisdiction governing the corporate practice of medicine.
The Company holds a variable interest in the THMG Association, which contracts with physicians and other
health professionals in order to provide services to Teladoc Health. The THMG Association is considered a variable
interest entity (“VIE”) since it does not have sufficient equity to finance its activities without additional subordinated
financial support. An enterprise having a controlling financial interest in a VIE must consolidate the VIE if it has both
power and benefits—that is, it has (1) the power to direct the activities of a VIE that most significantly impact the VIE’s
economic performance (power) and (2) the obligation to absorb losses of the VIE that potentially could be significant to the
VIE or the right to receive benefits from the VIE that potentially could be significant to the VIE (benefits). The Company
has the power and rights to control the activities that most significantly impact the THMG Association economic
performance and funds and absorbs all losses of the VIE and appropriately consolidates the THMG Association.
Total revenue and net loss for the VIE were $270.7 million and $0.0 million, $241.7 million and $0.0 million and
$244.5 million and $1.0 million for the years ended December 31, 2024, 2023 and 2022, respectively. The VIE’s total
assets, all of which were current, were $29.4 million and $20.6 million at December 31, 2024 and 2023, respectively. The
VIE’s total liabilities, all of which were current, were $78.0 million and $69.2 million at December 31, 2024 and 2023,
respectively. The VIE’s total stockholders’ deficit was $48.6 million and $48.6 million at December 31, 2024 and 2023,
respectively.
All intercompany transactions and balances have been eliminated.
Business Combinations
The Company accounts for its business combinations using the acquisition method of accounting. The purchase
price is attributed to the fair value of the assets acquired and liabilities assumed. Transaction costs directly attributable to
the acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed are measured separately at
their fair values as of the acquisition date. The excess of the purchase price of acquisition over the fair value of the
identifiable net assets of the acquiree is recorded as goodwill. The results of businesses acquired in a business combination
are included in the Company’s consolidated financial statements from the date of acquisition.
When the Company issues stock-based or cash awards to an acquired company’s stockholders, the Company
evaluates whether the awards are consideration or compensation for post-acquisition services. The evaluation includes,
among other things, whether the vesting of the awards is contingent on the continued employment of the acquired
company’s stockholders beyond the acquisition date. If continued employment is required for vesting, the awards are
treated as compensation for post-acquisition services and recognized as expense over the requisite service period.
F-9
Determining the fair value of assets acquired and liabilities assumed requires management to use significant
judgment and estimates, including the selection of valuation methodologies, estimates of future revenue and cash flows,
discount rates, and selection of comparable companies. The estimates and assumptions used to determine the fair values
and useful lives of identified intangible assets could change due to numerous factors, including market conditions,
technological developments, economic conditions, and competition. In connection with determination of fair values, the
Company may engage a third-party valuation specialist to assist with the valuation of intangible and certain tangible assets
acquired and certain obligations assumed. Acquisition-related transaction costs incurred by the Company are not included
as a component of consideration transferred but are accounted for as an operating expense in the period in which the costs
are incurred.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The
Company bases its estimates on historical experience, current business and economic factors, and various other
assumptions that the Company believes are necessary to form a basis for making judgments about the carrying values of
assets and liabilities, the recorded amounts of revenue and expenses, and the disclosure of contingent assets and liabilities.
The Company is subject to uncertainties such as the impact of future events, economic and political factors, and changes in
the Company’s business environment; therefore, actual results could differ from these estimates. Accordingly, the
accounting estimates used in the preparation of the Company’s consolidated financial statements will change as new events
occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment
evolves. The Company believes that estimates used in the preparation of these consolidated financial statements are
reasonable; however, actual results could differ materially from these estimates.
Changes in estimates are made when circumstances warrant. Such changes in estimates and refinements in
estimation methodologies are reflected in the Consolidated Statement of Operations; if material, the effects of changes in
estimates are disclosed in the Notes to Audited Consolidated Financial Statements.
Significant estimates and assumptions by management affect areas including the value and useful life of long-
lived assets (including intangible assets), the capitalization and amortization of software development costs, allowances for
sales, and the accounting for business combinations. Other significant areas include revenue recognition (including
performance guarantees), the accounting for income taxes, contingencies, litigation and related legal accruals, the
accounting for stock-based compensation awards, and other items as described in the Summary of Significant Accounting
policies in this Annual Report on Form 10-K.
Segment Information
The Company operates as an organizational and reporting structure based on two reportable segments, which are
the same as its reporting units: Teladoc Health Integrated Care (“Integrated Care”) and BetterHelp. This structure reflects
how management allocates resources and assesses performance. See Note 18. “Segments” for further information.
Fair Value Measurements
The carrying value of the Company’s cash equivalents, accounts receivable, accounts payable, and accrued
liabilities approximates fair value due to their short-term nature.
A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is
significant to the fair value measurement. Three levels of inputs may be used to measure fair value:
Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active
markets.
Level 2—Include other inputs that are directly or indirectly observable in the marketplace.
Level 3—Unobservable inputs that are supported by little or no market activity.
F-10
The Company measures its cash equivalents at fair value on a recurring basis. The Company classifies its cash
equivalents within Level 1 because they are valued using observable inputs that reflect quoted prices for identical assets in
active markets and quoted prices directly in active markets.
Revenue Recognition
The Company follows the revenue accounting requirements of Accounting Standards Codification (“ASC”) Topic
606. ASC Topic 606 establishes a principle for recognizing revenue upon the transfer of promised goods or services to
customers, in an amount that reflects the expected consideration received in exchange for those goods or services. The core
principle of ASC Topic 606 is to recognize revenue to depict the transfer of promised goods or services to the Company’s
customers, which primarily consist of employers, health plans, hospitals and health systems, insurance, and financial
services companies (collectively “Clients”) as well as individual members, in an amount that reflects the consideration the
entity expects to be entitled in exchange for those goods or services. This principle is achieved through applying the
following five-step approach:
•
Identification of the contract, or contracts, with a Client.
•
Identification of the performance obligations in the contract.
•
Determination of the transaction price.
•
Allocation of the transaction price to the performance obligations in the contract.
•
Recognition of revenue when, or as, the Company satisfies a performance obligation.
Integrated Care Segment
As it relates to the Company’s Integrated Care segment, the Company primarily generates virtual healthcare
service revenue from contracts with Clients who purchase access to the THMG Association’s professional provider
network or medical experts for their employees, dependents and other beneficiaries. The Company’s Client contracts
include a per-member-per-month (“PMPM”) access fee as well as certain contracts that also include additional revenue on
a per-virtual healthcare visit basis for general medical, or other specialty visits or expert medical service on a per case
basis. The Company also has certain contracts that generate revenue based solely on a per healthcare visit basis for general
medical and other specialty visits.
The Company records access fees from Clients accessing the THMG Association professional provider network or
hosted virtual healthcare platform or chronic care management platforms, visit fee revenue for general medical, expert
medical service and other specialty visits as well as other revenue primarily associated with virtual healthcare device
equipment included with its hosted virtual healthcare platform. Visit and other revenues are reported as “Other” revenue in
the Company’s consolidated financial statements.
Revenue is also generated from contracts with Clients in hospital and health systems for the sale and rental of
equipment consisting of virtual healthcare devices which allow physicians to access the Company’s hosted virtual
healthcare platform. These contracts also include multiple performance obligations, and the Company determines the
standalone selling prices based on overall pricing objectives. In some arrangements, the Company’s devices are rented to
certain qualified Clients that qualify as either sales-type lease or operating lease arrangements and are subject to lease
accounting guidance.
Revenue is also generated from contracts with Clients for the Company’s chronic care management solutions.
Substantially all of this revenue is derived from monthly access fees that are recognized as services are rendered and earned
under subscription agreements with Clients that are based on a per-participant-per-month model, using the number of
active enrolled members each month for the minimum enrollment period. These solutions integrate devices, supplies,
access to the Company’s web-based platform, mobile application, and clinical and data services to provide an overall
health management solution. The promises to transfer these goods and services are not separately identifiable and are
considered a single continuous service comprised of a series of distinct services that are substantially the same and have the
same pattern of transfer (i.e., distinct days of service). These services are consumed as they are received, and the Company
recognizes revenue each month using the variable consideration allocation exception because the nature of the obligations
and the variability of the payment being based on the number of active members are aligned.
F-11
The Company’s Client agreements generally have a term of one to three years for the Integrated Care segment.
The majority of Clients have a term of one year and renew their contracts following their first year of services. Revenues
are recognized when the Company satisfies its performance obligation to stand ready to provide virtual healthcare services
which occurs when the Company’s Clients and members have access to and obtain control of the virtual healthcare service
or platform.
For contracts where revenue is generated on a per healthcare visit basis, revenues are recognized when the visits
are completed as the Company has delivered on its stand ready obligation to provide access. For other revenue, which
primarily includes virtual healthcare devices, the Company’s performance obligation is satisfied when the equipment is
provided to the Client and revenue is recognized at a point in time upon shipment.
The Company generally bills for virtual healthcare services on a monthly basis, in advance or in arrears depending
on the service, with payment terms generally being 30 days. There are not significant differences between the timing of
revenue recognition and billing. Consequently, the Company has determined that Client contracts do not include a
financing component. Revenue is recognized in an amount that reflects the consideration that is expected in exchange for
the service and for certain contracts include a variable transaction price as the number of members may vary from period to
period. The Company estimates this amount based on historical experience.
The Company’s contracts do not generally contain refund provisions for fees earned related to services performed.
Additionally, certain of the Company’s contracts include Client performance guarantees and pricing adjustments
that are based upon minimum member utilization and guarantees by the Company for specific service level performance,
member satisfaction scores, cost savings or other value achievements or guarantees, and health outcome guarantees.
Performance guarantees are estimated at each reporting period based on the Company’s historical performance or other
available information of the underlying criteria or the customer’s specific performance as of that reporting date. Any
estimated adjustments to the contract price for achieving or not achieving the performance guarantee are recognized as an
adjustment to revenue in the period. For the years ended December 31, 2024, 2023, and 2022, revenue recognized from
performance obligations for changes in estimated transaction price or Client performance guarantees was $5.9 million,
$14.7 million, and $4.4 million, respectively.
The Company has elected the optional exemption to not disclose the remaining performance obligations of its
contracts since the majority of its contracts have a duration of one year or less and the variable consideration expected to be
received over the duration of the contract is allocated entirely to the wholly unsatisfied performance obligations.
For additional revenue, deferred revenue, deferred costs, and disclosures, refer to Note 3. “Revenue, Deferred
Revenue, and Deferred Device and Contract Costs.”
BetterHelp Segment
As it relates to the BetterHelp segment, users can purchase virtual therapy services for an access fee, generally on
a monthly or weekly basis. For other wellness services, users can purchase access to their consumer application for a
subscription fee, generally for a period of one year. BetterHelp also provides virtual therapy services to employers as part
of employee assistance programs, with revenues recorded based on completion of visit.
The BetterHelp service provides for member refunds. The Company estimates the expected amount of refunds to
be issued based on historical experience, which are recorded as a reduction of revenue. The Company issued refunds of
approximately $84.0 million, $93.0 million, and $79.2 million for the years ended December 31, 2024, 2023, and 2022,
respectively.
Deferred Revenue
Deferred revenue represents billed, but unrecognized revenue, and is comprised of fees received in advance of the
delivery or completion of the services and amounts received in instances when revenue recognition criteria have not been
met. The Company records deferred revenue when cash payments are received in advance of the Company’s performance
obligation to provide services. Deferred revenue is derived from: 1) upfront payments for a device, which is amortized
ratably over the expected member enrollment period; 2) upfront payments for certain services where payment is required
for future periods before the service is delivered to the member, which is recognized when the services are provided; and 3)
upfront payments from third-party financing companies with whom the Company works to provide certain Clients with a
rental option, which is recognized over the rental period. Deferred revenue that will be recognized during the next twelve-
F-12
month period is recorded as current deferred revenue and the remaining portion is recorded as non-current deferred
revenue.
Deferred Device and Contract Costs
Deferred device costs consist of cost of inventory incurred in connection with delivery of services that are
deferred and amortized over the shorter of the expected member enrollment period or the expected device life and recorded
as cost of revenue.
Deferred contract costs represent the incremental costs of obtaining a contract with a Client if the Company
expects to recover such costs. The primary example of the Company’s costs to obtain a contract include incremental sales
commissions to obtain contracts paid to its sales organization. A portion of these incremental costs to obtain Client
contracts are deferred and then amortized on a straight-line basis over the period of benefit, which has been determined to
be four years. The amounts subject to the services period are amortized in sales expense in the consolidated statement of
operations.
Deferred device and contract costs that are to be amortized within twelve months are recorded to deferred device
and contract costs, current within the line item Prepaid expenses and other current assets and the remainder is recorded to
deferred device and contract costs, noncurrent within the line item Other assets on the Company’s consolidated balance
sheets.
Cost of Revenue (exclusive of depreciation and amortization, which are shown separately)
Cost of revenue (exclusive of depreciation and amortization, which are shown separately) primarily consists of
fees paid to the physicians and other health professionals; product costs; costs incurred in connection with the THMG
Association provider network operations and data center activities, which include employee-related expenses (including
salaries and benefits, incentive compensation, and stock-based compensation) costs related to Client support; provider
network operations center activities; medical records; magnetic resonance imaging; medical lab tests; translation; postage
and medical malpractice insurance, and deferred device costs.
Technology and Development
Technology and development expenses include the costs of operating the Company’s on-demand technology
infrastructure that are not directly related to changes in revenue or volume of visits, including certain licensed applications,
information technology infrastructure, security, and compliance. The technology and development line item also contains
amounts charged to expense for research and development, which include costs of new product development, costs to add
new features or improve reliability or scalability of existing applications, and other software development and engineering
costs to the extent that they are not capitalized. The research and development expenses may enable future revenue growth
but are not directly related to current revenues.
Technology and development expenses include personnel and related expenses (including salaries and benefits,
incentive compensation, and stock-based compensation) for software engineering, information technology infrastructure,
security and compliance, product development, and support for the Company’s efforts to add new features and ensure the
reliability and scalability of its existing solutions. Technology and development expenses also include outsourced software
engineering services, the costs of operating the Company’s on-demand technology infrastructure (whereas costs directly
associated with changes in revenue are presented separately in cost of revenues), certain licensed applications, and stock-
based compensation for its technology and development employees. The Company’s technology and development
expenses exclude certain allocations of occupancy expense, capitalized software development costs, and depreciation and
amortization.
Research and Development Costs
Research and development costs include costs of new product development, costs to add new features or improve
reliability or scalability of existing applications, and other software development and engineering costs to the extent that
they are not capitalized. The research and development expenses may enable future revenue growth but are not directly
related to changes in current revenues. Research and development costs are recorded as a component of technology and
development in the Company’s Consolidated Statements of Operations and Other Comprehensive Loss.
F-13
For the years ended December 31, 2024, 2023, and 2022, research and development costs of $89.1 million,
$124.6 million, and $106.9 million, respectively, were recognized in the Company’s Consolidated Statements of
Operations and Other Comprehensive Loss in technology and development.
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less
from the date of purchase. The Company’s cash and cash equivalents primarily consist of investments in money market
funds. Cash and cash equivalents are stated at fair value.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at the invoiced amount, net of allowances for doubtful accounts. The allowance
for doubtful accounts reflects the Company’s best estimate of expected losses inherent in the accounts receivable balance.
The Company determines the allowance based on historical experience, specific account information, and other currently
available evidence. Accounts receivable deemed uncollectable are charged against the allowance for doubtful accounts
when identified.
Inventories
Inventories consist of purchased components for assembling welcome kits, refill kits, and replacement
components for the Company’s chronic care management solutions, and virtual health devices manufactured for sale or
lease as part of the Company’s hosted virtual healthcare platform solution. Inventories are stated at the lower of cost and
net realizable value. The cost of inventories is computed using standard cost, which approximates actual cost, on a first-in,
first-out basis. Inventory costs include direct materials, direct labor and contracting costs, certain indirect labor and
manufacturing overhead, and inbound shipping charges. Inventories are assessed on a periodic basis for potentially
obsolete and slow-moving inventory with write-downs being recorded when identified. Write-downs are measured as the
difference between cost of the inventory and net realizable value based upon assumptions about future demand and
obsolescence, and charged to cost of revenue (exclusive of depreciation and amortization, which are shown separately) in
the accompanying consolidated statement of operations. At the point of the loss recognition, a new lower cost basis for that
inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in
that newly established cost basis.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is recorded using the
straight-line method over the estimated useful lives of the respective asset as follows:
Computer equipment
3 years
Furniture and equipment
5 years
Leasehold improvements
Shorter of the lease term or the estimated useful lives of the improvements
Rental equipment
4.3 years
Operating Leases
The Company accounts for its leases under the standards set forth under ASC Topic 842, “Leases". See Note 11.
“Leases” for further information.
Leases of Hosted Virtual Healthcare Platform
The Company rents its hosted virtual healthcare platform for certain Clients under arrangements that qualify
primarily as operating lease arrangements. The contracts include equipment consisting of virtual health devices which
allow physicians access to the platform and there are multiple performance obligations where the Company determines the
standalone selling prices based on overall selling prices and pricing objectives. In determining whether a transaction should
be classified as a sales-type or operating lease, the Company considers whether: (1) ownership of the virtual healthcare
device transfers to the lessee by the end of the term of the lease, (2) the lease grants the lessee an option to purchase the
virtual healthcare device that the lessee is reasonably certain to exercise, (3) the lease term is for the major part of the
F-14
remaining useful life of the virtual healthcare device, (4) the present value of the sum of the lease payments equals or
exceeds substantially all of the fair value of the virtual healthcare device, and (5) it is expected that there will be no
alternative use for the virtual healthcare device at the end of the lease term.
The Company generally recognizes revenue for virtual healthcare devices as sales-type leases at a point in time
upon shipment by the Client provided all other revenue recognition criteria have been met. For operating lease
arrangements, revenue for the virtual healthcare device is recognized over the lease term and generally on a straight-line
basis. For both sales-type and operating lease arrangement, revenue associated with virtual healthcare platform access is
recognized over the lease term on a straight-line basis.
Rental Equipment
Equipment is assigned to the rental pool upon the execution of a sales leasing arrangement. Rental equipment
assets are generally stated at cost, less accumulated depreciation and reflected in property and equipment, net. Depreciation
of rental equipment is provided on a straight-line basis, over the estimated useful lives of the respective assets, which is
generally 4.3 years and is charged to cost of revenues.
Maintenance and repairs are charged to expense as incurred while improvements are capitalized. When assets are
retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting
gain or loss is reflected in the consolidated statement of operations in the period realized.
Capitalized Software Development Costs
Capitalized software development costs are included in intangible assets and are amortized on a straight-line basis
over three to five years. For the Company’s development costs related to its software development tools that enable its
members and providers to interact, the Company capitalizes costs incurred during the application development stage. Costs
related to maintenance activities are expensed as incurred.
Goodwill
Goodwill represents the excess of the total purchase consideration over the fair value of the identifiable assets
acquired and liabilities assumed in a business combination. Goodwill is not amortized but is tested for impairment at the
reporting unit level annually on October 1 or more frequently if events or changes in circumstances indicate that it is more
likely than not to be impaired. These events include: (i) severe adverse industry or economic trends; (ii) significant
company-specific actions, including exiting an activity in conjunction with restructuring of operations; (iii) current,
historical or projected deterioration of our financial performance; or (iv) a sustained decrease in the Company's market
capitalization, as indicated by its publicly quoted share price. As of December 31, 2024, the Company operates as two
reporting units under the guidance in ASC 350, “Intangibles- Goodwill and Other,” the Teladoc Health Integrated Care
reporting unit and the BetterHelp reporting unit.
When testing goodwill for impairment, the Company has the option of first performing a qualitative assessment to
determine whether it is more likely than not that the fair value of its reporting units is less than its carrying amount. If the
Company elects to bypass the qualitative assessment, or if a qualitative assessment indicates it is more likely than not that
carrying value exceeds its fair value, the Company performs a quantitative goodwill impairment test. Under the quantitative
goodwill impairment test, if the Company’s reporting unit’s carrying amount exceeds its fair value, the Company will
record an impairment charge based on that difference.
To determine reporting unit fair value as part of the quantitative test, the Company uses the income approach, the
market approach, or a weighting of the fair values derived from both approaches. Under the income approach, the
Company projects its future cash flows and discount these cash flows to reflect their relative risk. The cash flows used are
consistent with those the Company uses in its internal planning, which reflects actual business trends experienced and its
long-term business strategy. As such, key estimates and factors used in this method include, but are not limited to, revenue,
margin and operating expense growth rates; as well as a discount rate and a terminal growth rate.
Under the market approach, the Company uses the guideline company method to develop valuation multiples and
compare the Company’s reporting unit to similar publicly traded companies. In order to further validate the reasonableness
of fair value as determined by the income and market approaches described above, a reconciliation to market capitalization
is then performed by estimating a reasonable control premium and other market factors. Future changes in the judgments,
assumptions and estimates that are used in the impairment testing for goodwill could result in significantly different
estimates of fair value.
F-15
Other Intangible Assets
Other intangible assets include client relationships, acquired technology, and trademarks resulting from business
acquisitions as well as capitalized software development costs. The Company amortizes these definite-lived intangible
assets over their estimated useful lives and review the estimated useful lives on a quarterly basis to determine if the period
of economic benefit has changed. Customer relationships are amortized over a period of two to 20 years in relation to
expected future cash flows. Acquired technology is amortized over four to seven years using the straight-line method.
Capitalized software development costs are amortized over three to five years using the straight-line method.
Definite-lived intangible assets are re-evaluated whenever events or changes in circumstances indicate that their
estimated useful lives may require revision and/or carrying value of the related asset group may not be recoverable by its
projected undiscounted cash flows. If the carrying value of the asset group is determined to be unrecoverable, an
impairment charge would be recognized in an amount equal to the amount by which the carrying value of the asset group
exceeds its fair value.
Convertible Senior Notes
The Company's convertible senior notes are fully accounted for and carried as liabilities, net of debt discounts on
the Company’s Consolidated Balance Sheets following its adoption of FASB Accounting Standards Update ("ASU")
2020-06, "Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in
Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own
Equity.”
The Company adopted ASU 2020-06 as of January 1, 2022, under the modified retrospective transition method,
and, accordingly, its prior period financial statements were not restated. Upon adoption of ASU 2020-06, the conversion
feature of the Company’s convertible senior notes is no longer reported as a component of equity. Instead, the previously-
separated equity component is now combined with the liability component, thereby eliminating the amortization of the debt
discount arising from the conversion option separation model. To reflect the adoption of ASU 2020-06, the Company
recorded an increase to convertible senior notes of $306.3 million and decreases to additional paid-in capital, accumulated
deficit and net deferred tax liabilities of $363.7 million, $72.7 million, and $15.3 million, respectively, as of January 1,
2022.
Stock-Based Compensation
Stock-based compensation for stock options and restricted stock units (“RSUs”) granted is measured based on the
grant-date fair value of the awards and recognized on a straight-line basis over the period during which the employee is
required to perform services in exchange for the award (generally the vesting period of the award). The Company estimates
the fair value of employee stock options using the Black-Scholes option-pricing model. Stock-based compensation for
performance stock units (“PSUs”) granted is measured based on the grant-date fair value of the awards and recognized on
an accelerated tranche by tranche basis over the period during which the employee is required to perform services in
exchange for the award (generally the vesting period of the award). The ultimate number of PSUs that are issued to an
employee is the result of the actual performance under the terms of the awards at the end of the performance period
compared to the performance targets and generally range from 0% to 200% of the initial grant. The Company recognizes
forfeitures of share-based awards as they occur.
The Company’s Employee Stock Purchase Plan (“ESPP”) permits eligible employees to purchase common stock
at a discount through payroll deductions during defined offering periods. Under the ESPP, the Company may specify
offerings with durations of not more than 27 months and may specify shorter purchase periods within each offering. Each
offering will have one or more purchase dates on which shares of its common stock will be purchased for employees
participating in the offering. An offering may be terminated under certain circumstances. The price at which the stock is
purchased is equal to the lower of 85% of the fair market value of the common stock at the beginning of an offering period
or on the date of purchase.
Income Taxes
The Company’s provision for income taxes, deferred tax assets and liabilities, and liabilities for unrecognized tax
benefits reflect management's best assessment of estimated current and future taxes to be paid. The objectives for
accounting for income taxes, as prescribed by the relevant accounting guidance, are to recognize the amount of taxes
F-16
payable or refundable for the current year and deferred tax assets and liabilities for future tax consequences of events that
have been recognized in the financial statements. Deferred income taxes reflect the tax effect of temporary differences
between asset and liability amounts that are recognized for financial reporting purposes and the amounts that are
recognized for income tax purposes. These deferred taxes are measured by applying currently enacted tax laws. Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the enactment date.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the
tax position will be sustained on examination by taxing authorities, including resolution of any related appeals or litigation
processes, based on the technical merits of the position. The assumptions about future tax consequences require significant
judgment and variations in the actual outcome of these consequences could materially impact the Company’s results of
operations. The Company recognizes tax liabilities based on estimates of whether additional taxes and interest will be due.
The Company adjusts these liabilities when its judgment changes as a result of the evaluation of new information not
previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a
payment that is materially different from the Company’s current estimate of the tax liabilities. Interest and penalties, if any,
related to accrued liabilities for potential tax assessments are included in income tax expense.
Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit
will not be realized. Determination of valuation allowances recorded against deferred tax assets requires significant
judgment and use of assumptions, including past operating results, estimates of future taxable income and the feasibility of
tax planning strategies. To the extent that new information becomes available which causes the Company to change its
judgment regarding the adequacy of existing valuation allowances, such changes to tax liabilities will impact income tax
expense in the period in which such determination is made.
The Company’s policy is to include interest and penalties related to unrecognized tax benefits as a component of
tax expense.
Foreign Currency Translation
Assets and liabilities of operations having non-U.S. dollar functional currencies are translated at year-end
exchange rates, and income statement accounts are translated at weighted average exchange rates for the year. Gains or
losses resulting from translating foreign currency financial statements are reflected in accumulated other comprehensive
loss, a separate component of shareholders’ equity.
Net Loss Per Share
Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of
common stock of the Company outstanding during the period. Diluted net loss per share is computed by giving effect to all
potential shares of common stock, including outstanding stock options and convertible notes, to the extent dilutive. Basic
and diluted net loss per share was the same for each period presented as the inclusion of all potential shares of common
stock outstanding would have been anti-dilutive.
Third-party Advertising and Marketing Expenses
Third-party advertising and marketing expenses are expensed as incurred and predominately relate to the
BetterHelp segment and, to a lesser extent, communications and campaigns to the Integrated Care segment’s Clients and
members. For the years ended December 31, 2024, 2023, and 2022, advertising expenses were $594.4 million,
$613.9 million, and $503.9 million, respectively.
Concentrations of Risk
The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash
and cash equivalents and accounts receivable. Although the Company deposits its cash with multiple financial institutions
in the U.S. and in foreign countries, its deposits, at times, may exceed federally insured limits. The Company’s cash
equivalents are primarily invested in institutional money market funds.
No customer represented over 10% of consolidated revenue for the years ended December 31, 2024, 2023, or
2022. For the Integrated Care Segment, a significant portion of its revenue is derived from large enterprises, mainly health
plans. Revenue from the five largest customers was 31% and 34% of total Integrated Care segment revenue for the years
F-17
ended December 31, 2024 and 2023, respectively. For further information, see “Risk Factors—Risks Related to Our
Business and Industry—We operate in a competitive industry, and if we are not able to compete effectively, our business,
financial condition, and results of operations will be harmed,” “—A significant portion of our revenue comes from a
limited number of Clients, the loss of which could have a material adverse effect on our business, financial condition and
results of operations” included elsewhere in this Annual Report on Form 10-K.
For the BetterHelp segment, there is no significant concentration risk as substantially all revenue is generated
from individuals in the direct-to-consumer market.
Seasonality
The Company’s business has historically been subject to seasonality. In the Company’s Integrated Care segment,
a concentration of the Company’s new Client contracts have an effective date of January 1 as a result of many Clients’
introduction of new services at the start of each year. Therefore, while membership increases, utilization and enrollment
rates are dampened until service delivery ramps up over the course of the year. In addition, as a result of seasonal cold and
flu trends, the Company historically has experienced its highest level of visit and other fees revenue during the first and
fourth quarters of each year.
Due to the higher cost of customer acquisition during the end of year holiday season, the Company’s BetterHelp
segment has historically reduced marketing activity during the fourth quarter. As a result of this dynamic the Company has
typically experienced fewer new member additions and strong operating income performance in the fourth quarter.
Conversely, as marketing activity typically resumes at the start of the year the Company typically experiences weak
operating income performance during the first quarter as new customer acquisition and revenue growth lags marketing
spend.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
Recently Adopted Accounting Standards
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280)—Improvements to Report
Segment Disclosures” which updates reportable segment disclosure requirements primarily through enhanced disclosures
about significant segment expenses so that investors can better understand an entity’s overall performance. The
amendments are effective for annual reporting periods beginning after December 15, 2023, and interim periods, beginning
after December 15, 2024, with early adoption permitted. The provisions of ASU 2023-07 are to be applied retrospectively
to all periods presented in the financial statements, unless it is impracticable. The segment expense categories and amounts
disclosed in the prior periods are based on the significant segment expense categories identified and disclosed in the period
of adoption. The Company implemented the requirements of ASU 2023-07 in Note 18. "Segments."
Recently Issued Accounting Standards
In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvement to Income Tax
Disclosures" to enhance the transparency and decision usefulness of income tax disclosures through expansion of
disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign
jurisdictions. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 on a prospective basis with
early adoption permitted. The Company is currently evaluating the impact of this accounting standard update on its
financial disclosures.
In November 2024, the FASB issued ASU No. 2024-03, “Income Statement-Reporting Comprehensive Income-
Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03
requires a public business entity (“PBE”) to disclose information in the notes to financial statements about purchases of
inventory, employee compensation, depreciation, intangible asset amortization, and depletion for each income statement
line item that contains those expenses. Entities would also have to disclose other specific expenses, gains, or losses that are
already required to be disclosed under GAAP in this same disclosure, a qualitative description of the amounts remaining
that are not separately disaggregated quantitatively, and the total amount of selling expenses, as well as the PBE’s
definition of selling expenses. In January 2025, the FASB Issued ASU No. 2025-01, "Income Statement—Reporting
Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40)," which clarified that ASU 2024-03 is
effective public business entities for annual reporting periods beginning after December 15, 2026 and interim reporting
F-18
periods within annual reporting periods beginning after December 15, 2027. Implementation of ASU 2024-03 may be
applied prospectively or retrospectively. The application of this new guidance is not expected to have a material impact on
the Company’s financial statements, as the guidance pertains only to disclosures.
Note 3. Revenue, Deferred Revenue, and Deferred Device and Contract Costs
The Company generates access fees from Clients, as well as individual paying users, accessing the THMG
Association professional provider network, hosted virtual healthcare platform, and chronic care management platforms.
Visit fee revenue is generated for general medical, expert medical service, and other specialty visits and is reported as a
component of other revenue. Revenue associated with virtual healthcare device equipment sales included with the
Company’s hosted virtual healthcare platform is also reported in other revenue.
The following table presents the Company’s revenues disaggregated by revenue source, geography, and segment
(in thousands):
Year Ended
December 31,
2024
2023
2022
Revenue by Type
Access fees
$
2,215,220 $
2,282,521 $
2,103,814
Other
354,354
319,894
303,026
Total Revenue
$
2,569,574 $
2,602,415 $
2,406,840
Revenue by Geography
U.S. Revenue
$
2,159,959 $
2,237,533 $
2,101,015
International Revenue
409,615
364,882
305,825
Total Revenue
$
2,569,574 $
2,602,415 $
2,406,840
Revenue by Segment
Integrated Care
$
1,528,870 $
1,468,794 $
1,373,900
BetterHelp
1,040,704
1,133,621
1,019,646
Other (1)
—
—
13,294
Total Revenue
$
2,569,574 $
2,602,415 $
2,406,840
(1) Other reflects certain revenues not related to ongoing segment operations.
Deferred Revenue
For certain services, payment is required for future periods before the service is delivered to the member. The
Company records deferred revenue when cash payments are received in advance of the Company’s performance obligation
to provide services.
The following table summarizes deferred revenue activities for the periods presented (in thousands):
Year Ended
December 31,
2024
2023
Beginning balance
$
109,282 $
113,786
Cash collected
66,262
87,683
Revenue recognized
(86,462)
(92,187)
Ending balance
$
89,082 $
109,282
The Company expects to recognize $77.1 million and $10.0 million of revenue in 2025 and 2026, respectively,
related to future performance obligations that are unsatisfied or partially unsatisfied as of December 31, 2024.
F-19
Deferred Device and Contract Costs
Deferred device and contract costs are classified as a component of prepaid expenses and other current assets or
other assets, depending on term, and consisted of the following (in thousands):
As of December 31,
2024
As of December 31,
2023
Deferred device and contract costs, current
$
33,188 $
32,703
Deferred device and contract costs, non-current
17,057
17,573
Total deferred device and contract costs
$
50,245 $
50,276
Deferred device and contract costs were as follows (in thousands):
Deferred Device
and Contract Costs
Beginning balance as of December 31, 2023
$
50,276
Additions
47,925
Cost of revenue recognized
(47,956)
Ending balance as of December 31, 2024
$
50,245
Note 4. Inventories
Inventories consisted of the following (in thousands):
As of December 31,
2024
As of December 31,
2023
Raw materials and purchased parts
$
14,459 $
9,338
Work in process
600
299
Finished goods
23,079
19,876
Total inventories
$
38,138 $
29,513
Note 5. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
As of December 31,
2024
As of December 31,
2023
Prepaid expenses
$
67,471 $
65,651
Deferred device and contract costs, current
33,188
32,703
Other receivables
9,809
12,640
Other current assets
2,828
7,443
Total prepaid expenses and other current assets
$
113,296 $
118,437
Note 6. Goodwill
Goodwill consisted of the following (in thousands):
Integrated Care
BetterHelp
Total
Balance as of December 31, 2022 and 2023
—
1,073,190
1,073,190
Impairment
—
(790,000)
(790,000)
Balance as of December 31, 2024
$
— $
283,190 $
283,190
F-20
$
$
$
Goodwill as of December 31, 2024 is net of accumulated impairment charges of $14.2 billion, of which $12.3
billion was recognized in the year ended December 31, 2022 prior to the Company reorganizing its reporting structure to
include two reportable segments on October 1, 2022, $1.1 billion was recognized in the year ended December 31, 2022 on
the goodwill assigned to the Integrated Care segment, and $0.8 billion was recognized on the goodwill assigned to the
BetterHelp segment in the year ended December 31, 2024.
As a result of sustained decreases in the Company’s publicly quoted share price and market capitalization as well
as changes in the operating results of the BetterHelp reporting unit, the Company conducted an interim test of its goodwill,
definite-lived intangibles, and other long-lived assets at June 30, 2024. Following this test, the Company did not identify an
impairment to its definite-lived intangible assets or other long-lived assets, but recorded a $790.0 million non-deductible,
non-cash goodwill impairment charge in the year ended December 31, 2024.
The Company’s June 30, 2024 goodwill impairment testing was performed using a discounted cash flow method
under the income approach. Unlike in prior testing, the Company did not utilize the market approach because of limited
availability of relevant comparable company information. The Company believes using only the income approach for this
impairment test was appropriate as it most directly reflects its future growth and profitability expectations. For the
Company’s June 30, 2024 impairment testing, the Company reduced its estimated future cash flows related to its
BetterHelp reporting unit used in the impairment assessment, including revenues and margin, to reflect its best and most
recent estimates at this time. The Company also updated certain significant inputs into the valuation models including the
discount rate, which increased to 15%, reflecting, in part, higher interest rates. The Company’s updates to its discount rate
and estimated future cash flows each had a significant impact to the estimated fair value of the reporting unit.
At October 1, 2024, the Company performed its annual test of goodwill impairment using a quantitative analysis.
The Company determined that the BetterHelp reporting unit’s fair value exceeded its carrying value by a significant
margin, while the Integrated Care reporting unit’s fair value was less than its carrying value. Since the BetterHelp reporting
unit's fair value exceeded its carrying value and the Integrated Care reporting unit carries no goodwill at October 1, 2024,
no impairment was recorded.
On January 31, 2025, the Company signed a definitive agreement to acquire Catapult Health, LLC (“Catapult
Health”) that is expected to close during the three months ending March 31, 2025. Following the closing of the acquisition,
Catapult Health will be included in the Integrated Care segment. Concurrent with the closing of the acquisition of Catapult
Health, some or all of the goodwill associated with the acquisition may be immediately impaired, depending on the
Integrated Care segment’s then-current fair value. See Note 19. "Subsequent Events" for further information regarding the
Catapult Health acquisition.
During the year ended December 31, 2022, the Company experienced triggering events due to sustained decreases
in its share price, prompting impairment assessments of goodwill and long-lived assets including definite-lived intangibles
as of March 31, 2022 and again as of June 30, 2022.
As of March 31, 2022, the Company updated the projected long-range cash flows used in the impairment
assessment, including revenues, margin, and capital expenditures to reflect current conditions. Other changes in valuation
assumptions included increases in interest rates and market volatility, resulting in a higher discount rate, and selection of
lower revenue multiples based upon an assessment of a relevant peer group. As a result of this review, the Company did
not identify an impairment to its definite-lived intangible assets or other long-lived assets, but the Company recorded a
$6.6 billion non-deductible goodwill impairment charge in the quarter ended March 31, 2022. The non-cash charge had no
impact on the provision for income taxes.
As of June 30, 2022, the Company updated valuation assumptions. The discount rate was increased for a company
risk premium to reflect the current perception of risks of achieving projected cash flows and, to a lesser extent, to reflect
further increases in interest rates and market volatility. Additionally, revenue market multiples were lowered based upon an
updated analysis of a consistent peer group. The assessment did not result in an impairment of definite-lived intangible
assets or other long-lived assets but resulted in an additional $3.0 billion non-deductible goodwill impairment charge. The
non-cash charge had no impact on the provision for income taxes.
On October 1, 2022, the Company reorganized its reporting structure to include two reportable segments,
Integrated Care and BetterHelp, which also represent reporting units for purposes of assessing goodwill. The Company
performed its annual impairment test consistent with the rules set forth under ASC 350, “Intangibles—Goodwill and
Other,” performing an initial test on its then-existing reporting unit. The impairment test utilized the Company’s latest
F-21
estimates of projected cash flows, including revenues, margin, and capital expenditures, as well as current market
assumptions for the discount rate and revenue multiples, to reflect current market conditions and risk assessments. Based
on the result of the impairment test, the Company recognized an additional $2.6 billion non-deductible goodwill
impairment charge, driven significantly by a decline in projected cash flows. Following this impairment, the Company
reassigned the remaining $2.2 billion to its new reporting units using a relative fair value allocation approach. The
Company performed tests of the asset groups identified for the purposes of testing the recoverability of each reporting
unit’s definite-lived intangibles and other long-lived assets, which was passed by a significant margin. Lastly, a post
allocation goodwill impairment test on each of the reporting units was performed, the result of which was the recognition
of an additional $1.1 billion of impairment on the goodwill assigned to the Company’s Teladoc Health Integrated Care
reporting unit. The $3.8 billion non-cash charges had no impact on the provision for income taxes.
Both of the impairment assessments in the first half of 2022 reflected a 75%/25% allocation between the income
and market approaches. The Company believed the 75% weighting to the income approach was the most appropriate at the
time as it more directly reflected the Company’s future growth and profitability expectations. The table below indicates
changes in the most significant inputs to the Company’s impairment analysis on each testing date related to those triggering
events and the annual impairment test.
Testing Dates
Reporting Unit
Discount Rate
Peer Group Revenue Multiples
(Current Year/Subsequent Year)
Excess of Reporting Unit Fair Value over
Carrying Value
March 31, 2022
Consolidated
12.0%
3.5x/3.0x
None
June 30, 2022
Consolidated
16.0%
2.0x/1.8x
None
October 1, 2022
Consolidated,
Pre-reassignment
12.5%
1.65x/1.5x
None, Pre-reassignment
October 1, 2022
Teladoc Health
Integrated Care
12.0%
1.2x/1.0x
No remaining goodwill
October 1, 2022
BetterHelp
13.5%
1.6x/1.3x
Significant amount
Note 7. Property and Equipment, Net
Property and equipment, net, consisted of the following (in thousands):
As of December 31,
2024
2023
Computer equipment
$
42,868 $
35,992
Furniture and equipment
16,143
14,661
Leasehold improvement
25,332
24,293
Rental equipment
15,897
15,106
Construction in progress
603
1,719
Total
100,843
91,771
Accumulated depreciation
(71,356)
(59,739)
Property and equipment, net
$
29,487 $
32,032
F-22
Note 8. Intangible Assets, Net and Certain Cloud Computing Costs
Intangible assets, net consisted of the following (dollars in thousands):
Useful
Life
Gross Value
Accumulated
Amortization
Net Carrying
Value
Weighted
Average
Remaining
Useful Life
(Years)
December 31, 2024
Client relationships
2 to 20 years
$
1,453,811 $
(490,426) $
963,385
11.6
Trademarks
2 to 15 years
324,229
(263,671)
60,558
5.8
Software
3 to 5 years
575,106
(293,588)
281,518
2.1
Acquired technology
4 to 7 years
341,563
(215,664)
125,899
2.8
Intangible assets, net
$
2,694,709 $ (1,263,349) $
1,431,360
8.7
December 31, 2023
Client relationships
2 to 20 years
$
1,460,857 $
(391,196) $
1,069,661
12.5
Trademarks
2 to 15 years
325,479
(189,330)
136,149
6.9
Software
3 to 5 years
456,583
(161,108)
295,475
2.5
Acquired technology
4 to 7 years
341,814
(165,318)
176,496
3.7
Intangible assets, net
$
2,584,733 $
(906,952) $
1,677,781
9.3
The following table presents the Company's amortization of intangible assets expense by component (in
thousands):
Year Ended
December 31,
2024
2023
2022
Amortization of acquired intangibles
$
230,328 $
242,976 $
198,522
Amortization of capitalized software development costs
133,037
82,957
46,098
Amortization of intangible assets expense
$
363,365 $
325,933 $
244,620
During the second half of the year ended December 31, 2023, the Company initiated a strategy to transition the
majority of its chronic condition management Clients and members to the Teladoc Health brand on a phased basis, with a
smaller subset continuing to be served under the Livongo trade name beyond 2024. In connection with the brand strategy,
the Company accelerated the amortization of intangible assets that are associated with the Livongo trademark, increasing
amortization of intangible assets expense beginning in the second half of the year ended December 31, 2023 and continuing
through the year ended December 31, 2024, with corresponding reductions thereafter.
In the year ended December 31, 2022, the Company recognized impairments of capitalized software of the full
value associated with certain international product programs totaling $9.9 million. This value was reported in amortization
on the Company’s Consolidated Statement of Operations and Other Comprehensive Loss.
Periodic amortization of intangible assets that will be charged to expense over the remaining life of the intangible
assets as of December 31, 2024 was as follows (in thousands):
Years Ending December 31,
2025
$
313,626
2026
257,918
2027
186,985
2028
103,391
2029 and thereafter
569,440
$
1,431,360
F-23
Refer to Note 6. “Goodwill” for the results of impairment testing of the Company’s intangible assets, including
goodwill.
Net cloud computing costs, which are primarily related to the implementation of the Company's customer
relationship management and enterprise resource planning systems, are recorded in "Other assets" within the Company's
Consolidated Balance Sheets. As of December 31, 2024 and 2023, those costs were $44.8 million and $41.1 million,
respectively. The associated expense for cloud computing costs, which is recorded in general and administration expense,
was $5.7 million and $3.7 million for the years ended December 31, 2024 and 2023, respectively. The capitalized cloud
computing implementation costs are amortized over the shorter of the term of the related cloud computing arrangement or
the period of benefit from the right to access the hosted software. The amortization period will be periodically reassessed to
determine if it continues to be reasonable.
Note 9. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
As of December 31,
2024
As of December 31,
2023
Marketing and advertising
$
44,057 $
34,427
Client performance guarantees and accrued rebates
36,865
36,934
Franchise, sales and other taxes
28,112
12,933
Consulting fees/provider fees
18,974
16,416
Operating lease liabilities—current
10,337
10,752
Information technology
10,147
7,605
Professional fees
9,358
9,910
Insurance
7,653
5,777
Lease abandonment obligation—current
5,036
3,800
Staff augmentation
2,708
4,287
Interest payable
1,483
1,481
Other
27,427
34,312
Total
$
202,157 $
178,634
Note 10. Convertible Senior Notes
Outstanding Convertible Senior Notes
As of December 31, 2024, the Company had three series of convertible senior notes outstanding. The issuances of
such notes originally consisted of (i) $1.0 billion aggregate principal amount of 1.25% convertible senior notes due 2027
(the “2027 Notes”), issued on May 19, 2020 for net proceeds to the Company of $975.9 million after deducting offering
costs of approximately $24.1 million, (ii) $287.5 million aggregate principal amount of 1.375% convertible senior notes
due 2025 (the “2025 Notes”), issued on May 8, 2018 for net proceeds to the Company of $279.1 million after deducting
offering costs of approximately $8.4 million, and (iii) $550.0 million aggregate principal amount of 0.875% convertible
senior notes due 2025 that were issued by Livongo Health, Inc. ("Livongo") on June 4, 2020 for which the Company
agreed to assume all of Livongo’s rights and obligations (the “Livongo Notes” and together with the 2027 Notes and the
2025 Notes, the “Notes”).
F-24
The following table presents certain terms of the Notes that were outstanding as of December 31, 2024:
2027 Notes
2025 Notes
Livongo Notes
Principal Amount Outstanding as of December 31, 2024
(in thousands)
$
1,000,000
$
725
$
550,000
Interest Rate Per Year
1.25 %
1.375 %
0.875 %
Fair Value as of December 31, 2024 (in thousands) (1)
$
875,000
$
587
$
535,700
Fair Value as of December 31, 2023 (in thousands) (1)
$
822,000
$
291
$
513,700
Maturity Date
June 1, 2027
May 15, 2025
June 1, 2025
Optional Redemption Date
June 5, 2024
May 22, 2022
June 5, 2023
Conversion Date
December 1, 2026
November 15, 2024
March 1, 2025
Conversion Rate Per $1,000 Principal Amount as of
December 31, 2024
4.1258
18.6621
13.94
Remaining Contractual Life as of December 31, 2024
2.4 years
0.4 years
0.4 years
(1) The Notes would be classified as Level 2 within the fair value hierarchy, as defined in Note 2. “Summary of
Significant Accounting Policies.”
All of the Notes are unsecured obligations of the Company and rank senior in right of payment to the Company’s
indebtedness that is expressly subordinated in right of payment to such Notes; equal in right of payment to the Company’s
liabilities that are not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness
to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other
liabilities incurred by the Company’s subsidiaries.
Holders may convert all or any portion of their Notes in integral multiples of $1,000 principal amount, at their
option, at any time prior to the close of business on the business day immediately preceding the applicable conversion date
only under the following circumstances:
•
during any quarter (and only during such quarter), if the last reported sale price of the shares of the
Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30
consecutive trading days ending on the last trading day of the immediately preceding quarter is greater than or
equal to 130% of the conversion price for the applicable Notes on each applicable trading day;
•
during the five business day period after any 10 consecutive trading day period (or five consecutive trading
day period in the case of the Livongo Notes) in which the trading price was less than 98% of the product of
the last reported sale price of Company’s common stock and the conversion rate for the applicable Notes on
each such trading day;
•
upon the occurrence of specified corporate events described under the applicable indenture; or
•
if the Company calls the applicable Notes for redemption, at any time until the close of business on the
second business day immediately preceding the redemption date.
On or after the applicable conversion date, until the close of business on the second scheduled trading day
immediately preceding the maturity date, holders may convert all or any portion of such Notes, regardless of the foregoing
circumstances.
The 2027 Notes and the 2025 Notes are convertible into shares of the Company’s common stock at the applicable
conversion rate shown in the table above. Upon conversion, the Company will pay or deliver, as the case may be, cash,
shares of the Company’s common stock or a combination thereof, at the Company’s election. If the Company elects to
satisfy the conversion obligation solely in cash or through payment and delivery, as the case may be, of a combination of
cash and shares of the Company’s common stock, the amount of cash and shares of the Company’s common stock due
upon conversion will be based on a daily conversion value calculated on a proportionate basis for each trading day in a 25
consecutive trading day observation period.
F-25
The Livongo Notes are convertible at the applicable conversion rate shown in the table above into “units of
reference property,” each of which is comprised of 0.592 of a share of the Company’s common stock and $4.24 in cash,
without interest. Upon conversion, the Company will pay or deliver, as the case may be, cash, units of reference property,
or a combination thereof, at the Company’s election. If the Company elects to satisfy the conversion obligation solely in
cash or through payment and delivery, as the case may be, of a combination of cash and units of reference property, the
amount of cash and units of reference property, if any, due upon conversion will be based on a daily conversion value
calculated on a proportionate basis for each trading day in a 40 consecutive trading day observation period.
For each Note series, the Company may redeem for cash all or part of the Notes, at its option, on or after the
applicable optional redemption date shown in the table above (and prior to the 41st scheduled trading day immediately
preceding the maturity date in the case of the Livongo Notes) if the last reported sale price of its common stock exceeds
130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30
consecutive trading days ending on, and including, the trading day immediately preceding the date on which the Company
provides notice of the redemption. The redemption price will be the principal amount of the Notes to be redeemed, plus
accrued and unpaid interest, if any. In addition, calling any 2027 Note or 2025 Note for redemption on or after the
applicable optional redemption date will constitute a make-whole fundamental change with respect to that Note, in which
case the conversion rate applicable to the conversion of that Note, if it is converted in connection with the redemption, will
be increased in certain circumstances as described in the applicable indenture. If the Company undergoes a fundamental
change (as defined in the applicable indenture) at any time prior to the maturity date of the Livongo Notes, holders will
have the right, at their option, to require the Company to repurchase for cash all or any portion of their Livongo Notes at a
fundamental change repurchase price equal to 100% of the principal amount of the Livongo Notes to be repurchased, plus
accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
The Company accounts for each Note series at amortized cost within the liability section of its Consolidated
Balance Sheets. The Company has reserved an aggregate of 8.7 million shares of common stock for the Notes.
The net carrying values of the Notes consisted of the following (in thousands):
2025 Notes
As of December 31,
2024
As of December 31,
2023
Principal
$
725 $
725
Less: Debt discount (1)
(2)
(4)
Net carrying amount
723
721
Livongo Notes
Principal
550,000
550,000
Less: Debt discount (1)
—
—
Net carrying amount
550,000
550,000
2027 Notes
Principal
1,000,000
1,000,000
Less: Debt discount (1)
(8,582)
(12,033)
Net carrying amount
991,418
987,967
Total net carrying amount
$
1,542,141 $
1,538,688
Convertible senior notes, net—current
$
550,723 $
—
Convertible senior notes, net—non-current
991,418
1,538,688
Total net carrying amount
$
1,542,141 $
1,538,688
(1) Included in the accompanying Consolidated Balance Sheets within Convertible senior notes, net—current and
Convertible senior notes, net—non-current and amortized to interest expense over the expected life of the Notes using
the effective interest rate method.
F-26
The following table sets forth total interest expense recognized related to the Notes (in thousands):
Year Ended
December 31,
2025 Notes
2024
2023
2022
Contractual interest expense
$
10
$
10
$
10
Amortization of debt discount
3
3
3
Total
$
13
$
13
$
13
Effective interest rate
1.8 %
1.8 %
1.8 %
Year Ended
December 31,
Livongo Notes
2024
2023
2022
Contractual interest expense
$
4,813
$
4,813
$
4,813
Amortization of debt discount
—
—
—
Total
$
4,813
$
4,813
$
4,813
Effective interest rate
0.9 %
0.9 %
0.9 %
Year Ended
December 31,
2027 Notes
2024
2023
2022
Contractual interest expense
$
12,500
$
12,500
$
12,500
Amortization of debt discount
3,451
3,396
3,342
Total
$
15,951
$
15,896
$
15,842
Effective interest rate
1.6 %
1.6 %
1.6 %
Note 11. Leases
Operating Leases
The Company has operating leases for facilities, hosting co-location facilities, and certain equipment under non-
cancelable leases in the U.S. and various international locations. The leases have remaining lease terms of less than one to
eight years, with options to extend the lease term from one to five years. At the inception of an arrangement, the Company
determines whether the arrangement is, or contains, a lease based on the terms covering the right to use property, plant, or
equipment for a stated period of time. For new and amended leases beginning in 2020 and after, the Company separately
allocates the lease (e.g., fixed lease payments for right-to-use land, building, etc.) and non-lease components (e.g., common
area maintenance) for its leases. The components of lease expense reflected in the consolidated statements of operations
were as follows (in thousands):
Year Ended December 31,
Lease cost
2024
2023
2022
Operating lease cost
$
13,259 $
15,458 $
18,473
Short-term lease cost
—
—
162
Total lease cost
$
13,259 $
15,458 $
18,635
F-27
In determining the present value of the lease payments, the Company has elected to utilize its incremental
borrowing rate based on the original lease term and not the remaining lease term. Supplemental information related to
operating leases was as follows (dollars in thousands):
Year Ended December 31,
Consolidated Statements of Cash Flows
2024
2023
2022
Operating cash flows used for operating leases
$
13,957
$
16,265
$
16,854
Operating lease liabilities arising from obtaining right-of-use assets
$
2,108
$
14,437
$
3,748
Other Information
Weighted-average remaining lease term (in years)
4.98
5.54
5.55
Weighted-average discount rate
6.37 %
6.33 %
6.08 %
The Company leases office space under non-cancelable operating leases in the U.S. and various international
locations. The future minimum lease payments under non-cancelable operating leases were as follows (in thousands):
Operating Leases:
As of December 31,
2024
2025
$
12,582
2026
10,709
2027
7,627
2028
5,686
2029
4,985
2030 and thereafter
8,203
Total future minimum payments
49,792
Less: imputed interest
(7,320)
Present value of lease liabilities
$
42,472
Accrued expenses and other current liabilities
$
10,337
Operating lease liabilities, net of current portion
$
32,135
The Company rents certain virtual healthcare platforms to selected qualified customers under arrangements that
qualify as either sales-type lease or operating lease arrangements. Leases have terms that generally range from two to five
years.
The Company recorded certain restructuring costs related to lease impairments and the related charges due to the
abandonment and/or exit of excess leased office space. However, the lease liabilities related to these spaces remain an
outstanding obligation of the Company as of December 31, 2024.
Note 12. Restructuring
The Company accounts for restructuring costs in accordance with ASC Subtopic 420-10, "Exit or Disposal Cost
Obligations" and ASC Section 360-10-35, "Property, Plant and Equipment-Subsequent Measurement." The costs are
recorded to the "Restructuring costs" line item within the Company's Consolidated Statements of Operations and Other
Comprehensive Loss as they are recognized.
The Company recorded $20.4 million of restructuring costs during the year ended December 31, 2024, of which
$11.2 million was related to employee transition, severance payments, employee benefits, and related costs and
$6.3 million was related to costs associated with office space reductions, including $3.9 million of right-of-use asset
impairment charges, and $2.9 million was for other restructuring related costs. The Company recorded $16.9 million of
restructuring costs during the year ended December 31, 2023, of which $7.9 million was related to employee transition,
severance payments, employee benefits, and related costs and $9.0 million was related to costs associated with office space
reductions, including $5.2 million of right-of-use asset impairment charges. The portion of these expenses that are to be
F-28
settled by cash disbursements was accounted for as a restructuring liability under the line item "Accrued expenses and
other current liabilities" in the Company's Consolidated Balance Sheets.
The table below summarizes the accrual and charges incurred and cash payments made with respect to the
Company's restructurings, with the severance related portion included in the line item "Accrued compensation" and the
lease termination and other related portion included in the line item "Accrued expenses and other current liabilities" in the
Company's Consolidated Balance Sheets as of December 31, 2024 (in thousands):
Restructuring Plan
Severance
Lease
Termination
Other (1)
Total
Accrued Balance, December 31, 2022
$
796 $
3,247 $
— $
4,043
Additions
7,890
3,847
—
11,737
Cash payments
(8,686)
(3,294)
—
(11,980)
Accrued Balance, December 31, 2023
—
3,800
—
3,800
Additions
11,156
2,361
2,857
16,374
Cash payments
(10,004)
(1,125)
(2,857)
(13,986)
Accrued Balance, December 31, 2024
$
1,152 $
5,036 $
— $
6,188
(1) Reflects amounts associated with other restructuring related costs.
Note 13. Common Stock and Stockholders’ Equity
Stock Plans
The Company’s 2023 Incentive Award Plan and 2023 Employment Inducement Incentive Award Plan
(collectively, the “2023 Plans”) provide for the issuance of incentive and non-statutory options and other equity-based
awards to its employees and non-employee service providers. Previously, the Company’s 2015 Incentive Award Plan, 2017
Employment Inducement Incentive Award Plan and Livongo Acquisition Incentive Award Plan (together with the 2023
Plans, collectively, the “Plans”) also provided for the issuance of such awards. The Company had 13,382,798 shares
available for grant under the 2023 Plans at December 31, 2024.
All stock-based awards to employees are measured based on the grant-date fair value, or replacement grant date
fair value in relation to the Livongo merger, and are generally recognized on a straight-line basis in the Company’s
consolidated statement of operations over the period during which the employee is required to perform services in
exchange for the award (generally a four-year vesting period for each stock option and a three-year vesting period for each
RSU).
CEO New Hire Awards
In connection with the commencement of employment of the Company's new Chief Executive Officer ("CEO") on
June 10, 2024, the Company granted a new-hire incentive equity award to the CEO under the Company’s 2023
Employment Inducement Incentive Award Plan. Such award had an aggregate grant date target value of approximately
$15.0 million and consisted of 939,849 performance stock units and 469,924 restricted stock units. The fair value of
approximately one-fourth of these performance stock units had not yet been determined as of December 31, 2024 and will
be after the performance criteria for those awards has been established. The expense recognition for all the performance
stock units will begin at the start of their performance periods, which will be January 1, 2025.
The restricted stock units issued to the CEO are expected to vest one-third on the first anniversary of the grant date
and in eight substantially equal quarterly installments beginning on the 15-month anniversary of the grant date, in each case
subject to the CEO's continued service on the applicable vesting date. The performance stock units issued to the CEO
provide a target number of shares of the Company's common stock that would be earned at the end of a specified
performance period based on (i) the Company's adjusted EBITDA for 2025 (“EBITDA PSUs”) and (ii) the Company's
actual compound annual revenue growth rate during the period January 1, 2025 through December 31, 2027 (“Revenue
CAGR PSUs”). Seven-twelfths of any earned EBITDA PSUs would vest on March 10, 2026 and the remaining five-
F-29
twelfths would vest in five substantially equal quarterly installments over the subsequent 15 months. Any earned Revenue
CAGR PSUs would vest on March 1, 2028.
Stock Options
Options issued under the Plans are exercisable for periods not to exceed 10 years, and vest and contain such other
terms and conditions as specified in the applicable award document. Options to buy common stock are issued under the
Plans, with exercise prices equal to the closing price of shares of the Company’s common stock on the New York Stock
Exchange on the date of award.
Stock option activity under the Plans was as follows (in thousands, except share, per share amounts, and years):
Number of
Shares
Outstanding
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Life in Years
Aggregate
Intrinsic
Value
Balance at December 31, 2023
4,182,187
$
27.37
5.26
$
13,732
Stock option grants
32,477
$
20.66
N/A
Stock options exercised
(520,190)
$
6.85
N/A
$
2,286
Stock options forfeited
(1,291,945)
$
33.24
N/A
Balance at December 31, 2024
2,402,529
$
28.56
3.90
$
346
Vested or expected to vest at December 31, 2024
2,402,529
$
28.56
3.90
$
346
Exercisable at December 31, 2024
2,082,660
$
28.86
3.24
$
346
The total grant-date fair value of stock options granted during the years ended December 31, 2024, 2023, and
2022 was $0.4 million, $3.2 million, and $26.8 million, respectively.
The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing model.
The assumptions used are determined as follows:
Volatility. The expected volatility was derived from the historical price volatility of the Company’s stock over a
period equivalent to the expected term of the stock option grants.
Expected Term. The expected term represents the period that the stock-based awards are expected to be
outstanding. When establishing the expected term assumption, the Company utilizes historical data.
Risk-Free Interest Rate. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with terms
similar to the expected term on the options.
Dividend Yield. The Company has never declared or paid any cash dividends and does not plan to pay cash
dividends in the foreseeable future, and therefore, it used an expected dividend yield of zero.
The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing
model with the following assumptions and fair value per share:
Year Ended
December 31,
2024
2023
2022
Volatility
67.86% - 67.94%
65.60% - 68.20%
56.70% - 68.70%
Expected term (in years)
4.3
4.3
4.1
Risk-free interest rate
3.85% -3.90%
3.68% - 4.67%
1.13%-4.36%
Dividend yield
0%
0%
0%
Weighted-average fair value of underlying stock options
$11.55
$11.45
$17.48
F-30
For the years ended December 31, 2024, 2023, and 2022, the Company recorded stock-based compensation
expense related to stock options granted of $6.9 million, $9.4 million, and $20.3 million, respectively.
As of December 31, 2024, the Company had $4.1 million in unrecognized compensation cost related to non-
vested stock options, which is expected to be recognized over a weighted average period of approximately 1.8 years.
Restricted Stock Units
The fair value of RSUs is determined on the date of grant. The Company records compensation expense in the
Consolidated Statement of Operations on a straight-line basis over the vesting period for RSUs. The vesting period for
employees and members of the board of directors ranges from one to three years.
RSU activity under the Plans was as follows:
RSUs
Weighted-Average
Grant Date
Fair Value Per RSU
Balance at December 31, 2023
9,452,412
$
34.70
Granted
5,659,297
$
14.09
Vested and issued
(5,361,056)
$
37.56
Forfeited
(2,451,977)
$
25.30
Balance at December 31, 2024
7,298,676
$
19.72
Vested and unissued at December 31, 2024
72,620
$
42.69
Non-vested at December 31, 2024
7,226,056
$
19.51
The total grant-date fair value of RSUs granted during the years ended December 31, 2024, 2023, and 2022 was
$79.7 million, $196.4 million and $322.2 million, respectively.
For the years ended December 31, 2024, 2023, and 2022, the Company recorded stock-based compensation
expense related to RSUs of $134.7 million, $181.0 million, and $179.4 million, respectively.
As of December 31, 2024, the Company had $108.9 million in unrecognized compensation cost related to non-
vested RSUs, which is expected to be recognized over a weighted-average period of approximately 1.6 years.
Performance Stock Units
Stock-based compensation costs associated with PSUs are initially determined using the fair market value of the
Company's common stock on the date the awards are granted (service inception date). The vesting of these PSUs is subject
to certain performance conditions and a service requirement generally ranging from one to three years. Stock-based
compensation costs associated with these PSUs are reassessed each reporting period based upon the estimated performance
attainment on the reporting date until the performance conditions are met. The ultimate number of PSUs that are issued to
an employee is the result of the actual performance of the Company at the end of the performance period compared to the
performance targets and generally range from 0% to 200% of the initial grant. Stock compensation expense for PSUs is
recognized on an accelerated tranche by tranche basis for performance-based awards.
F-31
PSU activity under the Plans was as follows:
Shares
Weighted-Average
Grant Date
Fair Value Per PSU
Balance at December 31, 2023
1,452,387
$
36.82
Granted (1)
2,102,495
$
13.56
Vested and issued
(273,838)
$
45.39
Forfeited
(950,210)
$
20.77
Performance adjustment (2)
(246,495)
Balance at December 31, 2024
2,084,339
$
19.05
Vested and unissued at December 31, 2024
—
$
—
Non-vested at December 31, 2024
2,084,339
$
19.05
(1) Granted excludes 0.2 million target shares for which the performance criteria has not been established as of
December 31, 2024.
(2) Based on the Company's results, PSUs were attained at rates ranging from 0% to 85.21% of the target award.
The total grant-date fair value of PSUs granted during the years ended December 31, 2024, 2023, and 2022 was
$28.5 million, $34.9 million, and $35.9 million, respectively.
For the years ended December 31, 2024, 2023, and 2022, the Company recorded stock-based compensation
expense related to PSUs of $2.2 million, $7.1 million, and $15.1 million, respectively.
As of December 31, 2024, the Company had $11.4 million in unrecognized compensation cost related to non-
vested PSUs, which is expected to be recognized over a weighted-average period of approximately 1.9 years.
Employee Stock Purchase Plan
In July 2015, the Company adopted the 2015 ESPP in connection with its initial public offering. A total of
4,113,343 shares of common stock have been reserved for issuance under this plan as of December 31, 2024. The
Company’s ESPP permits eligible employees to purchase common stock at a discount through payroll deductions during
defined offering periods. Under the ESPP, the Company may specify offerings with durations of not more than 27 months
and may specify shorter purchase periods within each offering. Each offering will have one or more purchase dates on
which shares of its common stock will be purchased for employees participating in the offering. An offering may be
terminated under certain circumstances. The price at which the stock is purchased is equal to the lower of 85% of the fair
market value of the common stock at the beginning of an offering period or on the date of purchase.
During 2024, 2023, and 2022 the Company issued 591,690 shares, 592,308 shares, and 271,159 shares,
respectively, under the ESPP. As of December 31, 2024, 2,209,091 shares remained available for issuance.
For the years ended December 31, 2024, 2023, and 2022, the Company recorded stock-based compensation
expense related to the ESPP of $2.2 million, $4.0 million, and $3.0 million, respectively.
As of December 31, 2024, the Company had $0.6 million in unrecognized compensation cost related to the ESPP,
which is expected to be recognized over a weighted-average period of approximately 0.4 years.
F-32
Total compensation costs for stock-based awards were recorded as follows (in thousands):
Year Ended
December 31,
2024
2023
2022
Cost of revenue (exclusive of depreciation and amortization, which are
shown separately)
$
4,782 $
5,478 $
6,468
Advertising and marketing
12,575
15,300
14,083
Sales
24,807
35,448
43,183
Technology and development
34,855
58,336
64,577
General and administrative
68,932
86,988
89,541
Total stock-based compensation expense
145,951
201,550
217,852
Capitalized stock-based compensation
12,723
19,439
18,238
Total stock-based compensation
$
158,674 $
220,989 $
236,090
Note 14. Income Taxes
For financial reporting purposes, loss before provision for income taxes for the years ended December 31, 2024,
2023, and 2022 included the following components (in thousands):
Year Ended December 31,
2024
2023
2022
Domestic
$
(989,958) $
(192,665) $ (13,303,130)
International
(3,695)
(26,943)
(360,213)
Total
$
(993,653) $
(219,608) $ (13,663,343)
The provision for income taxes was comprised of the following components (in thousands):
Year Ended December 31,
2024
2023
2022
Current federal
$
1,344 $
— $
—
Current state
3,892
1,439
3,007
Current foreign
3,501
1,225
1,021
Total current
8,737
2,664
4,028
Deferred federal
210
(3,946)
770
Deferred state
(784)
5,388
(5,643)
Deferred foreign
(571)
(3,346)
(2,967)
Total deferred
(1,145)
(1,904)
(7,840)
Provision for income taxes
$
7,592 $
760 $
(3,812)
F-33
The provision for income taxes differs from the amount computed by applying the statutory federal income tax
rate to income before provision for income taxes. The sources and tax effects of the differences are as follows:
Year Ended December 31,
2024
2023
2022
Tax at federal statutory rate
21.0 %
21.0 %
21.0 %
Goodwill impairment
(16.7)
—
(24.7)
State and local tax
1.1
(1.3)
4.2
Stock compensation
(5.2)
(19.0)
(0.3)
Non-deductible expenses
—
0.2
—
Foreign rate differential
0.2
0.4
—
Change in valuation allowance
—
(0.9)
(0.1)
Change in unrecognized tax benefits
(1.1)
—
—
Other
(0.1)
(0.7)
(0.1)
Effective tax rate
(0.8) %
(0.3) %
— %
The Company’s deferred tax assets and liabilities consisted of the following (in thousands):
As of December 31,
2024
2023
Deferred tax assets:
Net operating loss carryforwards
$
541,791 $
602,895
Accrued expenses and compensation
5,308
3,684
Stock-based compensation
16,747
47,141
Foreign tax credits and alternative minimum tax credits
873
2,009
Depreciation of property and equipment
2,144
1,485
Interest expense carryforward
—
354
Operating lease assets
10,065
11,088
Deferred revenue
3,941
5,479
Capitalized R&D
65,382
43,629
Other
17,286
11,130
Deferred tax assets
663,537
728,894
Valuation allowance
(416,701)
(418,234)
Net deferred tax assets
246,836
310,660
Deferred tax liabilities:
Operating lease liabilities
(5,068)
(8,341)
Intangible assets
(284,774)
(346,753)
Other
(6,845)
(5,018)
Deferred tax liabilities
(296,687)
(360,112)
Net deferred tax liabilities
$
(49,851) $
(49,452)
As of December 31, 2024, the Company had approximately $2,154.9 million of federal net operating loss
(“NOL”) carryforwards, $1,179.4 million of state NOL carryforwards, and $76.7 million of foreign NOL carryforwards.
The federal NOL carryforwards created starting in the year ended December 31, 2018 of $2,154.9 million will carry
forward indefinitely. A portion of the state and foreign NOL carryforwards will begin to expire in 2025. As of
December 31, 2024, the Company had approximately $0.9 million of foreign tax credits, which will expire in 2025. As of
December 31, 2024, the Company had no federal and state research and development credits.
F-34
As of December 31, 2024, the Company had a valuation allowance of approximately $416.7 million against a
portion of the U.S. and certain foreign deferred tax assets, for which realization cannot be considered more likely than not
at this time. The valuation allowance decreased by $1.5 million from December 31, 2023, as a result of current year
operational loss and the impact of lower stock compensation deductions for tax purposes compared to the GAAP accrual.
The following table presents a reconciliation of the beginning and ending amount of the gross unrecognized tax
benefits for the years ended December 31, 2024, 2023, and 2022 (in thousands):
Year Ended December 31,
2024
2023
2022
Balance at beginning of the period
$
171,566 $
143,798 $
110,848
Unrecognized tax benefits assumed in a business combination
—
—
—
Additions based on prior year tax positions
8,725
6,677
12,151
Additions based on current year tax positions
11,017
21,091
20,799
Statute of limitations expirations
—
—
—
Release
—
—
—
Balance at end of the period
$
191,308 $
171,566 $
143,798
The amount of unrecognized tax benefits as of December 31, 2024 that, if recognized, would reduce tax expense
was approximately $191.3 million. The Company does not anticipate any of its unrecognized tax benefits to be settled
within the next 12 months.
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal
course of business, the Company is subject to examination by federal and state jurisdictions in the U.S. and other countries,
where applicable. The Company is open under the U.S. federal statute from 2020 to the present, although earlier years may
be examined to the extent that loss carryforwards are used in open audit periods. The Company is currently not under audit
by the IRS or in any foreign tax jurisdictions. One state is currently under audit in the United States. There are no tax
matters under discussion with taxing authorities that are expected to have a material effect on the Company's consolidated
financial statements. The Company further believes that it has made adequate provision for all income tax uncertainties.
During 2021, the Organization for Economic Co-operation and Development announced an agreed framework for
“Pillar Two” and released detailed model rules for a global minimum corporate tax rate of fifteen percent (15%) which
requires multilateral agreement(s) and/or country-specific legislative action to be effective. A few jurisdictions have
implemented legislation with effective dates spanning from 2024 through 2026. The Company will continue to monitor
further legislation by individual countries and is currently evaluating the potential impact of Pillar Two to its business in
future periods. However, the Company is not likely to have any Pillar Two liability and minimal compliance
responsibilities in 2025 and beyond.
The Company’s consolidated financial statements provide for any related tax liability on amounts that may be
repatriated, aside from undistributed earnings of $31.8 million for certain of the Company’s foreign subsidiaries that are
intended to be indefinitely reinvested in operations outside the U.S. as of December 31, 2024. The amount of any
unrecognized deferred tax liability on these undistributed earnings would be immaterial.
Note 15. Net Loss per Share
Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of
common stock of the Company outstanding during the period. Diluted net loss per share is computed by giving effect to all
potential shares of common stock of the Company, including outstanding stock options and convertible notes, to the extent
dilutive. Basic and diluted net loss per share was the same for each period presented as the inclusion of all potential shares
of common stock of the Company outstanding would have been anti-dilutive. As of December 31, 2024, the Company had
2.4 million outstanding stock options, 7.3 million outstanding RSUs, and 2.1 million outstanding PSUs.
F-35
The following table presents the calculation of basic and diluted net loss per share for the Company’s common
stock (in thousands, except shares and per share data):
Year Ended December 31,
2024
2023
2022
Net loss
$ (1,001,245) $
(220,368) $ (13,659,531)
Weighted-average shares used to compute basic and diluted net loss per
share
170,564,088
164,578,219
161,457,123
Net loss per share, basic and diluted
$
(5.87) $
(1.34) $
(84.60)
Note 16. 401(k) Plan
The Company has established a 401(k) plan that qualifies as a deferred compensation arrangement under Internal
Revenue Code Section 401. All U.S. employees over the age of 21 are eligible to participate in the plan. The Company
contributes 100% of eligible employee’s elective deferral up to 4% of $0.3 million of eligible earnings. The Company
made matching contributions to participants’ accounts totaling $14.7 million, $13.4 million, and $12.1 million during the
years ended December 31, 2024, 2023, and 2022, respectively.
Note 17. Commitments and Contingencies
Commitments
The Company has contractual obligations to make future payments related to its outstanding convertible senior
notes, which are presented in Note 10. "Convertible Senior Notes," and its long-term operating leases, which are presented
in Note 11. "Leases."
Legal Matters
From time to time, Teladoc Health is involved in various litigation matters arising in the normal course of
business, including the matters described below. The Company consults with legal counsel on those issues related to
litigation and seeks input from other experts and advisors with respect to such matters. Estimating the probable losses or a
range of probable losses resulting from litigation, government actions and other legal proceedings is inherently difficult and
requires an extensive degree of judgment, particularly where the matters involve indeterminate claims for monetary
damages, may involve discretionary amounts, present novel legal theories, are in the early stages of the proceedings, or are
subject to appeal. Whether any losses, damages, or remedies ultimately resulting from such matters could reasonably have
a material effect on the Company’s business, financial condition, results of operations, or cash flows will depend on a
number of variables, including, for example, the timing and amount of such losses or damages (if any) and the structure
and type of any such remedies. As of the date of these financial statements, Teladoc Health’s management does not expect
any litigation matter to have a material adverse impact on its business, financial condition, results of operations, or cash
flows.
On June 6, 2022, a purported securities class action complaint (Schneider v. Teladoc Health, Inc., et al.) was filed
in the U.S. District Court for the Southern District of New York against the Company and certain of the Company’s
officers. The complaint was brought on behalf of a purported class consisting of all persons or entities who purchased or
otherwise acquired shares of the Company’s common stock during the period October 28, 2021 through April 27, 2022.
The complaint asserted violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5
promulgated thereunder based on allegedly false or misleading statements and omissions with respect to, among other
things, the Company’s business, operations, and prospects. The complaint seeks certification as a class action and
unspecified compensatory damages plus interest and attorneys’ fees. On August 2, 2022, a duplicative purported securities
class action complaint (De Schutter v. Teladoc Health, Inc., et al.) was filed in the U.S. District Court for the Eastern
District of New York, which was consolidated with the Schneider case in the Southern District court under the caption In re
Teladoc Health, Inc. Securities Litigation. The lead plaintiff subsequently filed amended complaints that expanded the
alleged class period to February 11, 2021 to July 27, 2022. On July 5, 2023, the court granted the defendants’ motion to
dismiss the complaint, and on September 24, 2024 the U.S. Court of Appeals for the Second Circuit affirmed in part, and
vacated in part, the Southern District court’s dismissal and remanded for further proceedings. On November 22, 2024,
Defendants filed a renewed motion to dismiss in the District Court to address issues not reached by the Second Circuit,
F-36
including scienter and loss causation. That motion is fully briefed and pending before the District Court. The Company
believes that it has substantial defenses, and the Company and its named officers intend to defend the lawsuit vigorously.
On August 9, 2022, a verified shareholder derivative complaint (Vaughn v. Teladoc Health, Inc., et al.) was filed
in the U.S. District Court for the Southern District of New York against the Company as a nominal defendant and certain of
the Company’s officers and directors. The complaint asserts violations of Section 10(b) of the Securities Exchange Act of
1934 and Rule 10b-5 promulgated thereunder, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust
enrichment, and waste of corporate assets in connection with factual assertions similar to those in the purported securities
class action complaints described above. The complaint seeks damages to the Company allegedly sustained as a result of
the acts and omissions of the named officers and directors and seeks an order directing the Company to reform and
improve the Company’s corporate governance. On September 6, 2022, a duplicative verified stockholder derivative
complaint (Hendry v. Teladoc Health, Inc., et al.) was filed in the U.S. District Court for the Southern District of New
York. The claims and parties in Hendry were substantially similar to those in Vaughn. The Vaughn and Hendry actions
have now been consolidated under the caption In re Teladoc Stockholder Derivative Litigation, and a consolidated
complaint was filed on November 29, 2022. The consolidated complaint also asserts violations of Section 14(a) of the
Securities Exchange Act of 1934. The parties subsequently stipulated to transfer the action to the U.S. District Court for the
District of Delaware, and on December 22, 2022 the parties agreed, and the Court ordered, to stay all proceedings until
final resolution, including exhaustion of appeals, of the motion to dismiss filed in the purported securities class action
complaint described above. The named directors and officers thus have not yet responded to the complaint.
There have been multiple putative class-action lawsuits filed against the Company’s subsidiary BetterHelp, Inc.
(“BetterHelp”) in connection with the consent order that BetterHelp entered into with the U.S. Federal Trade Commission
in July 2023. The actions have been filed in California federal and state courts and in Canada. The cases are substantially
similar, involving allegations of misleading patients as to BetterHelp’s use of patient data and associated alleged violations
of law involving privacy, advertising, contract, and tort. The Company believes that it has substantial defenses, and the
Company intends to defend the lawsuits vigorously.
On February 13, 2023, Data Health Partners, Inc. (“Data Health Partners”) filed a lawsuit against the Company in
the U.S. District Court for the District of Delaware alleging that certain of the Company’s products, including its blood
glucose meter, infringe upon certain patents held by Data Health Partners and seeking unspecified damages, attorney’s fees
and costs. The Company believes that it has substantial defenses, and the Company intends to defend the lawsuit
vigorously.
On May 17, 2024, a purported securities class action complaint (Stary v. Teladoc Health, Inc., et al.) was filed in
the U.S. District Court for the Southern District of New York against the Company and certain of the Company’s current
and former officers. The complaint was brought on behalf of a purported class consisting of all persons or entities who
purchased or otherwise acquired shares of the Company’s common stock during the period November 2, 2022 through
February 20, 2024. The complaint asserts violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934
and Rule 10b-5 promulgated thereunder based on allegedly false or misleading statements and omissions with respect to,
among other things, the Company’s advertising spend on BetterHelp. The complaint seeks certification as a class action
and unspecified compensatory damages plus interest and attorneys’ fees. On July 15, 2024, a duplicative purported
securities class action complaint (Waits v. Teladoc Health, Inc., et al.) was filed in the U.S. District Court for the Southern
District of New York. The claims and parties in Waits were substantially similar to those in Stary. The Stary and Waits
actions were consolidated. On December 10, 2024, the District Court appointed co-lead plaintiffs, and, on February 24,
2025 the lead plaintiffs filed an amended complaint that asserts Exchange Act claims for a putative class of shareholders
who purchased or acquired stock between July 26, 2023 and February 20, 2024. The Company believes that it has
substantial defenses, and the Company and its named officers intend to defend the lawsuits vigorously.
On June 18, 2024, a verified shareholder derivative complaint (Roy v. Gorevic, et al.) was filed in the U.S.
District Court for the Southern District of New York against the Company as a nominal defendant and certain of the
Company’s current and former officers and directors. The complaint asserts violations of Sections 10(b) and 14(a) of the
Securities Exchange Act of 1934, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust enrichment,
waste of corporate assets, gross mismanagement and abuse of control in connection with factual assertions similar to those
in the purported securities class action complaint described in the preceding paragraph. The complaint seeks damages to the
Company allegedly sustained as a result of the acts and omissions of the named officers and directors and seeks an order
directing the Company to reform and improve the Company’s corporate governance. On October 4, 2024 the parties
agreed, and the Court ordered, to stay all proceedings until any motion to dismiss filed in the purported securities class
action complaint described above is granted with prejudice and any appeals therefrom are resolved, or any defendant files
an answer in the purported securities class action complaint described above. On October 1, 2024, a duplicative verified
stockholder derivative complaint (Brigman, et al. v. Daniel, et al.) was filed in the U.S. District Court for the Southern
F-37
District of New York. The claims and parties in Brigman are substantially similar to those in Roy, and also alleges insider
trading violations and misappropriation of information against certain defendants. The named directors and officers have
not yet responded to the complaint.
Note 18. Segments
ASC Subtopic 280-10, “Segment Reporting,” establishes standards for reporting information about operating
segments. Operating segments are defined as components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources
and assess performance. The Company’s Chief Executive Officer is the CODM and is responsible for reviewing financial
information presented on a segment basis for purposes of making operating decisions and assessing financial performance.
The CODM measures and evaluates segments based on segment operating revenues, segment expenses, and
Adjusted EBITDA. The CODM reviews annual-operating-plan-to-actual variances for these measures on a regular basis to
assess the performance of the segments and to make decisions about allocating resources. The Company does not include
the following items in segment expenses and Adjusted EBITDA: provision for income taxes; interest income; interest
expense; other expense (income), net; depreciation of property and equipment; amortization of intangible assets;
restructuring costs; acquisition, integration, and transformation charges; goodwill impairment; and stock-based
compensation. Although these amounts are excluded from segment Adjusted EBITDA, they are included in reported
consolidated net loss and are included in the reconciliations that follow.
The Company’s computation of segment Adjusted EBITDA may not be comparable to other similarly titled
metrics computed by other companies because all companies do not calculate segment Adjusted EBITDA in the same
fashion.
Operating revenues and expenses directly associated with each segment are included in determining its operating
results. Other expenses that are not directly attributable to a particular segment are based upon allocation methodologies,
including the following: revenue, headcount, time and other relevant usage measures, and/or a combination of such.
The Company has two reportable segments: Teladoc Health Integrated Care and BetterHelp. The Integrated Care
segment includes a suite of global virtual medical services including general medical, expert medical services, specialty
medical, chronic condition management, mental health, and enabling technologies and enterprise telehealth solutions for
hospitals and health systems. The BetterHelp segment includes virtual therapy and other wellness services provided on a
global basis which are predominantly marketed and sold on a direct-to-consumer basis. Other reflects certain revenues and
charges not related to ongoing segment operations.
The CODM does not review any information regarding total assets on a segment basis. Segments do not record
intersegment revenues, and, accordingly, there is none to be reported. The accounting policies for segment reporting are the
same as for the Company as a whole.
F-38
The following tables present the financial results of the Company's reportable segments, along with reconciliations
of the segments' total consolidated Adjusted EBITDA to the consolidated net loss for the periods indicated (in thousands):
Year Ended December 31, 2024
Integrated Care
BetterHelp
Other
Consolidated
Revenue
$
1,528,870 $ 1,040,704 $
— $
2,569,574
Cost of revenue, exclusive of depreciation, amortization,
and stock-based compensation (1)
474,955
271,533
—
Advertising and marketing, exclusive of stock-based
compensation (1)
558,759
Other segment expenses (2)
821,013
132,603
—
Adjusted EBITDA
232,902
77,809
—
310,711
Less adjustments to reconcile to consolidated net loss:
Stock-based compensation
145,951
Goodwill impairment
790,000
Acquisition, integration, and transformation costs
1,743
Restructuring costs
20,355
Amortization of intangible assets
363,365
Depreciation of property and equipment
10,183
Other expense (income), net
6,035
Interest expense
23,803
Interest income
(57,071)
Loss before provision for income taxes
(993,653)
Provision for income taxes
7,592
Net loss
$
(1,001,245)
Year Ended December 31, 2023
Integrated Care
BetterHelp
Other
Consolidated
Revenue
$
1,468,794 $ 1,133,621 $
— $
2,602,415
Cost of revenue, exclusive of depreciation, amortization,
and stock-based compensation (1)
440,996
313,572
—
Advertising and marketing, exclusive of stock-based
compensation (1)
541,815
Other segment expenses (2)
835,927
141,985
—
Adjusted EBITDA
191,871
136,249
—
328,120
Less adjustments to reconcile to consolidated net loss:
Stock-based compensation
201,550
Goodwill impairment
—
Acquisition, integration, and transformation costs
21,110
Restructuring costs
16,942
Amortization of intangible assets
325,933
Depreciation of property and equipment
11,138
Other expense (income), net
(4,445)
Interest expense
22,282
Interest income
(46,782)
Loss before provision for income taxes
(219,608)
Provision for income taxes
760
Net loss
$
(220,368)
F-39
Year Ended December 31, 2022
Integrated Care
BetterHelp
Other
Consolidated
Revenue
$
1,373,900 $ 1,019,646 $
13,294 $
2,406,840
Cost of revenue, exclusive of depreciation, amortization,
and stock-based compensation (1)
429,347
298,937
8,159
Advertising and marketing, exclusive of stock-based
compensation (1)
479,381
Other segment expenses (2)
809,400
127,212
7,891
Adjusted EBITDA
135,153
114,116
(2,756)
246,513
Less adjustments to reconcile to consolidated net loss:
Stock-based compensation
217,852
Goodwill impairment
13,402,812
Acquisition, integration, and transformation costs
15,620
Restructuring costs
7,416
Amortization of intangible assets
244,620
Depreciation of property and equipment
11,407
Other expense (income), net
859
Interest expense
21,944
Interest income
(12,674)
Loss before provision for income taxes
(13,663,343)
Provision for income taxes
(3,812)
Net loss
$ (13,659,531)
_________________________________________
(1) The significant segment expense categories and amounts align with the information that is regularly provided to
the CODM.
(2) Other segment expenses for the corresponding reportable segment includes:
Integrated Care—advertising and marketing expenses, sales expenses, technology and development expenses, and
general and administrative expenses, each exclusive of stock-based compensation.
BetterHelp—sales expenses, technology and development expenses, and general and administrative expenses,
each exclusive of stock-based compensation.
Geographic data for long-lived assets (representing property and equipment, net) were as follows (in thousands):
As of December 31,
2024
2023
United States
$
25,686 $
28,096
International
3,801
3,936
Total long-lived assets
$
29,487 $
32,032
Note 19. Subsequent Events
On January 31, 2025, Teladoc Health signed a definitive agreement to acquire Catapult Health in an all-cash
transaction for $65.0 million, with up to $5.0 million in additional contingent earnout consideration. Catapult Health will
be included in the Integrated Care segment following the closing of the transaction, which is expected to occur during the
three months ending March 31, 2025. Concurrent with the closing of the acquisition of Catapult Health, some or all of the
goodwill associated with the acquisition may be immediately impaired, depending on the Integrated Care segment’s then-
current fair value.
F-40
Corporate information
Learn more
TeladocHealth.com | 203-635-2002 | NYSE: TDOC
Teladoc Health empowers all people everywhere to live their healthiest lives by transforming the healthcare experience. As the world leader in virtual
care, Teladoc Health uses proprietary health signals and personalized interactions to drive better health outcomes across the full continuum of care, at
every stage in a person’s health journey. Teladoc Health leverages more than two decades of expertise and data-driven insights to meet the growing
virtual care needs of consumers and healthcare professionals.
© Teladoc Health, Inc. All rights reserved.
STOCK LISTING
Teladoc Health common stock is traded on the
New York Stock Exchange. The Teladoc Health
ticker symbol is TDOC.
CORPORATE HEADQUARTERS
2 Manhattanville Road
Purchase, New York 10577
203-635-2002
TRANSFER AGENT
Equiniti Trust Company, LLC
48 Wall Street, Floor 23
New York, NY 10005
www.equiniti.com
800-937-5449
INVESTOR RELATIONS
Teladoc Health
Investor Relations
2 Manhattanville Road
Purchase, New York 10577
203-635-2002
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Ernst & Young, LLP
1 Manhattan West
401 9th Avenue
New York, New York 10001
CORPORATE WEBSITE
TeladocHealth.com
DIRECTORS
David B. Snow, Jr. (Chairman)
Chairman and Chief Executive Officer,
Cedar Gate Technologies
Charles Divita, III
Chief Executive Officer, Teladoc Health
J. Eric Evans
Chief Executive Officer, Surgery Partners
Sandra L. Fenwick
Retired Chief Executive Officer,
Boston Children’s Hospital
Catherine A. Jacobson
Former Chief Executive Officer,
Froedtert ThedaCare Health
Thomas G. McKinley
General Partner, Cardinal Partners
Kenneth H. Paulus
Former President and Chief Executive Officer,
Prime Therapeutics
David L. Shedlarz
Retired Vice Chairman, Executive Vice President
and Chief Financial Officer, Pfizer
Mark D. Smith, MD, MBA
Clinical Professor of Medicine, University of California
at San Francisco and a board-certified internist
EXECUTIVE OFFICERS
Charles Divita, III
Chief Executive Officer
Kelly Bliss
President, U.S. Group Health
Fernando Madeira
President of BetterHelp
Mala Murthy
Chief Financial Officer
Carlos Nueno
President, International
Adam Vandervoort
Chief Legal Officer and Secretary
LEARN MORE
TeladocHealth.com | 203-635-2002 | NYSE: TDOC