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Why Is Teladoc (TDOC) Down 12.8% Since Last Earnings Report?

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A month has gone by since the last earnings report for Teladoc (TDOC - Free Report) . Shares have lost about 12.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Teladoc due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Teladoc Q1 Earnings Beat, 2021 Revenue Guidance Up

Teladoc Health’s first-quarter 2021 earnings of 13 cents per share, surpassing the Zacks Consensus Estimate by 122.81%. The bottom line also rebounded from the year-ago loss of 40 cents per share.

Strong Operating Performance

The company’s operating revenues of $454 million (came in the management’s expected range of $445-$455 million) surpassed the Zacks Consensus Estimate by 0.35% and also surged 151% year over year. This upside can be attributed to a strong performance of its revenue components, namely access fees revenues and visit fee revenues.

Revenues from access fees (which comprised 85.5% of total revenues in the quarter) soared 183% year over year to $388.2 million. Within this, access fees of $350.1 million from the United States, which made up 90% of the total access fees, grew 225% year over year while international access fees accounted for the remaining 10% or $37.3 million (up 28%).

The increase in access fee revenues as a percentage of total revenue is primarily owing to the acquisition of Livongo and InTouch Health, both of which generate the majority of their revenues from subscription access fees.

The company generated $54.5 million in visit fee revenues from general and medical visits, which increased 24% year over year.
Adjusted gross margin expanded 780 basis points year over year to 67.8%, primarily attributable to the higher gross margin profile associated with Livongo revenues.

Total visits of 3.19 million (were higher than the projection of 2.9-3.1 million) rose 56% year over year, driven by a 69% and 8% increase in visits from United States and International segments, respectively.

Teladoc ended the quarter with U.S. paid membership of 51.5 million, up 20% year over year and  U.S. visit fee only access membership of 22 million (up 15%).

Total expenses rose to $538.3 million, up 167%, primarily due to general and administrative expenses, technology and development, cost of revenues, advertising and marketing, sales, acquisition and integration.

Adjusted EBITDA was $56.6 million, which soared more than 4 times from $10.7 million in the year-ago quarter. The metric surpassed management’s estimated range of $45-$48 million.

Financial Update (as of Mar 31, 2021)

The company had $733.3 million as cash and cash equivalents, up 43% year over year.

Total debt was $1.35 million, dipping 1.9% from December 2020-end levels.

During the quarter, net cash used in operating activities of $18.1 million compared with cash used of $6.3 million in the first quarter of 2020.

Second-Quarter Guidance

The company anticipates revenues between $495 million and $505 million while adjusted EBITDA is estimated to be $61-$64 million.

Total visits are expected in the range of 3.2-3.4 million. The company projects total U.S. paid membership in the band of 52-54 million members. Visit-fee-only access is estimated to be available to 22-23 million individuals

Updated 2021 Outlook

Following a strong first-quarter performance, the company raised its guidance for revenues and visits. The telehealth provider anticipates total revenues of $1.97-$2.02 billion (up from the previous estimate of $1.95-$2 billion), driven by strong growth in per member per month fees as well as higher expected utilizations, particularly among specialty visits.  Total adjusted EBITDA of $255-$275 million is estimated.

The company projects total visits between 12.5 million and 13.5 million (compared with the 12-13 million range anticipated earlier). Total U.S. paid membership is expected in the range of 52-54 million members and visit fee only access is projected to be available to 22-23 million individuals including 2-3 million individuals on a temporary basis.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -19.09% due to these changes.

VGM Scores

Currently, Teladoc has a poor Growth Score of F, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Teladoc has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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