Teladoc Health’s New CEO Emphasizes Potential for Improvement Amid Mixed Results

Teladoc Health boasts substantial strengths and is positioned for enhanced performance, but according to new CEO Chuck Divita, there is work to do.

“The company has many strengths to build upon and to drive higher levels of execution and performance,” he said during the company’s second-quarter earnings call, but added, “This is a company that is not yet delivering on its fullest potential.”

Divita, who took over as CEO in June, recently interacted with employees and stakeholders and praised the company’s capabilities and focus on patient safety, clinical quality and technological assets, including its member-to-provider matching engines and investments in data science and artificial intelligence, which are crucial for future growth.

But he stressed the importance of fully realizing these investments to meet evolving customer needs and address the company’s current performance gaps, adding, “We need to ensure we’re achieving the expected impact of these investments.”

Second-quarter revenue decreased 2%, to $642.4 million; there was a net loss of $837.7 million; the Integrated Care segment grew 5%, to $377.4 million; and the BetterHelp segment slipped 9%, to $265 million.

Divita pointed to the company’s scaled business and leading brands that are well-recognized in the marketplace, stating, “Over 92 million people in the U.S. have access to one or more of our products today, and we intend to increase our ability to serve additional needs over time. I’m also excited about our success and market potential internationally, including the strong results and momentum that our international teams are delivering.”

Since he became CEO, Divita has evaluated all aspects of the company, its strategic direction and priorities, product offerings in terms of current performance and market potential, the outlook for business units, and “where we can drive improved performance and long-term shareholder value. And we will be acting on opportunities accordingly. From an operating perspective, I see an ability to strengthen execution, streamline the organization, and further raise the bar on performance. I’m also pleased to see additional ways that our teams are working together across our various businesses to create new areas of differentiation for Teladoc Health.”

Teladoc acquired BetterHelp, the largest therapy platform in the world which is 100% online, in 2015 for $17.2 million. Divita addressed the challenges surrounding BetterHelp.

“We’re proud of the work the team is doing to support the mental health and well-being of people,” Divita explained. “The business is serving well over 1 million unique individuals on an annual basis and has a net promoter score of over 70. While it is resonating with consumers who are paying out of pocket for the services today, the operating environment remains challenging, and elevated customer acquisition costs continue to impact both top- and bottom-line results. We see BetterHelp as a business in transition, one with a market leading position, but needing to find additional ways to reach more people who can benefit from the service while also balancing scale, growth and financial performance.”

Several initiatives are being pursued to improve BetterHelp’s results, he noted, including furthering international expansion, pursuing insurance coverage access in the U.S., and continued product enhancements.

Chief Financial Officer Mala Murthy said during the call that BetterHelp’s growth is “dependent on our ability to efficiently deploy marketing dollars to acquire new customers. Our scale makes us the largest advertiser of virtual mental health. And while our spending is diversified across various channels, there is only so much incremental ad spend we can drive in a short period of time without further inflating our customer acquisition costs.”

Teladoc Health officials will continue to evaluate the business, Divita said.

“When I’m talking about unlocking value, when you look across our businesses, there are opportunities,” he explained. “And there already are some synergies being realized today, but there are opportunities to do more. You’ve got a consumer business that has resonated well, and we have need for engagement in our B2B business. We have a scaled B2B business that can benefit from other parts of the organization as well. So, what I’m looking for is each individual business to meet the market needs and realize its own potential, but as part of the broader company, where are those opportunities to unlock new value and differentiate. I think there are a number of areas that we’re going to explore.”