Good afternoon, ladies and gentlemen. Thank you for joining today's Teladoc Health Q4 Earnings Call. My name is Tia, and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. I’d now like to pass the call over to Patrick Feeley, Head of Investor Relations. Please proceed.

Thank you, and good afternoon. Today after the market closed, we issued a press release announcing our fourth quarter and full year 2023 financial results. This press release and the accompanying slide presentation are available in the investor relations section of the teladochealth.com website. On this call to discuss the results are Jason Gorevic, Chief Executive Officer; and Mala Murthy, Chief Financial Officer. During this call we will also discuss our forward outlook and our prepared remarks will be followed by a question-and-answer session. Please note that we will be discussing certain non-GAAP financial measures that we believe are important in evaluating Teladoc Health's performance. Details on the relationship between these non-GAAP measures and the most comparable GAAP measures, and reconciliations thereof, can be found in the press release that is posted on our website. Also, please note that certain statements made during this call will be forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause the actual results for Teladoc Health to differ materially from those expressed or implied in this call. For additional information, please refer to our cautionary statement on our press release and our filings with the SEC, all of which are available on our website. I would now like to turn the call over to Jason.

Thank you, Patrick. And thanks, everyone, for joining us. As we start 2024, we're very much in a time of transition as an economy, an industry, and a company. Teladoc Health has made significant strides in our increased focus on bottom-line performance, realizing more benefits of scale over the past several quarters. This year, we'll continue to accelerate that progress. Our success is evident in our most profitable year-to-date, delivering 33% growth in adjusted EBITDA and free cash flow of $194 million in 2023. We also closed out 2023 with a strong selling season that yielded double-digit bookings growth over the prior year. The breadth of our product portfolio continues to drive cross-selling, as approximately 75% of our bookings were upsells or expansions with existing clients. This is representative of our success driving increased product penetration to our large installed base of nearly 90 million virtual care members. This year, we will grow our adjusted EBITDA margins and free cash flow while making continued investments in innovation. We'll do this by both growing our revenue and removing more than $85 million in expenses through efficiencies and restructuring. We're targeting 50 basis points to 100 basis points of annual margin expansion over the next three years and have line of sight to at least $425 million of adjusted EBITDA in 2025. This puts us in a strong financial position as others in the space struggle, and it provides us the flexibility to have all options on the table, including continued investments in organic innovation, tuck-in M&A, retiring debt and giving back money to our investors through share repurchase. At the same time, we will continue to grow our top line. With approximately 90 million members and thousands of clients around the world, we continue to be the leader in whole person virtual care. We're excited to bring to market a broader range of services in areas like weight management and pediatrics this year, even as we work to achieve profitability. And our productivity initiatives mean we will continue to invest in our leading technology and engagement capabilities. With that framing for where we are and where we're going, I'd like to quickly walk you through our Q4 results, our 2024 guidance, and our ongoing organizational review as key milestones in this journey. First, fourth quarter results. On the top line, our consolidated revenue grew 4% on a year-over-year basis in the fourth quarter to $661 million. Consolidated adjusted EBITDA of $114 million grew 22% year-over-year, representing 260 basis points of year-over-year margin expansion to 17.3%. Revenue from our Integrated Care segment was in line with our expectations, growing 8% year-over-year to $384 million. Segment margins expanded 230 basis points over the prior year's fourth quarter to 14.6%, a benefit of operating leverage and improved efficiency. Including the strong fourth quarter margin results, the Integrated Care segment delivered over 320 basis points of margin expansion and 42% growth in adjusted EBITDA for the full year. Turning to the BetterHelp segment, Revenue was $276 million in the fourth quarter, while adjusted EBITDA was $58 million. BetterHelp margins expanded 210 basis points over the prior year's fourth quarter, which helped drive year-over-year adjusted EBITDA growth of 11% despite lower revenue. While we're pleased to deliver double-digit adjusted EBITDA growth at BetterHelp both for the quarter and the full year, revenue and margins were below our expectations in the quarter as we saw lower yields on marketing spend. Specifically, we experienced returns on our social media advertising spend that were below target in the second half of the year, which was a departure relative to the first half. We'll speak to guidance in a moment, but our BetterHelp outlook assumes the lower yields experienced in certain channels in the second half of 2023 will persist and as a result will impact our year-over-year growth rates in the first half of 2024. I'd like to take a step back and spend a few minutes providing a higher level framework for how we're thinking about our long-term outlook. I'll begin with the Integrated Care segment. At a high level, roughly half of our Integrated Care segment revenue is derived from our US-based virtual care business, including what you may think of as our traditional Teladoc general medical business. From a business model perspective, the beauty of our virtual care business is that it's a very stable asset that provides a steady source of revenue and a large client base with approximately 90 million members into which we sell additional products and services. At the same time, it's important to remember that most US healthcare consumers have access to virtual urgent care today, so it's largely a replacement market at this point. We've consistently taken share in this market, and we expect to continue to do so. But it's fairly well penetrated, and accordingly, we anticipate revenue growth from our U.S. virtual care products will be in the low single digits going forward. So think of roughly half of the Integrated Care segment as stable, but lower growth. The remaining half of Integrated Care segment revenue is primarily comprised of our chronic care suite of products and our international virtual care business. Our general medical virtual urgent care book of business, including our 90 million members, represent a long runway for continued cross-selling of our chronic care products as we execute against our land and expand strategy. And when I look at our suite of chronic care products, only about 16% of our general medical client base has access to one or more of our chronic care products today. That's up from just 12% two years ago. While we've made a lot of progress over the last two years with 16% penetration, there's still a long runway for chronic care growth within our existing virtual care book. So we've been successful in selling our chronic care products through our existing client book. And that gives us a lot of confidence that we can deliver mid to high single-digit average chronic care revenue growth over the next few years. Our international B2B business continues to be a steady contributor to revenue growth. And our expanded presence in Canada this year gives us good visibility into 2024 revenue growth. So combined, we have a reliably stable asset in our virtual care book of business and a chronic care suite of products and an international channel, each growing at a higher rate. Altogether, we expect mid-single-digit annual revenue growth for the Integrated Care segment over the next three years. We also see significant opportunities for margin expansion in the Integrated Care segment from both operating leverage and productivity improvements, all while maintaining robust capacity for sustained strong investment and long-term innovation and growth. We expect this segment will drive the majority of consolidated margin growth over the next three years. Turning now to our outlook for BetterHelp. As we step back and think about the BetterHelp segment going forward, I think of three broad growth drivers. First, the overall demand for mental health services continues to rise, and with significant unmet need, that demand is outpacing supply. Second, consumer preference for mental health services continues to shift toward the virtual modality. That continues to be a tailwind. At the same time, with our increased focus on profitable growth, as a direct-to-consumer business, BetterHelp's new member acquisition is gated somewhat by the amount of capital we can deploy at an acceptable rate of return in any given time period. This means BetterHelp's growth is in part dependent on our ability to efficiently reach new individuals to create awareness for BetterHelp services and convert them to members. At its current size and scale, we believe BetterHelp is by far the largest direct-to-consumer virtual therapy provider in the market today. BetterHelp's scale and experience afford us the unique advantage of deploying a large amount of capital efficiently each year while driving strong free cash flow. The good news is that, given the continued runway for growth and our well-established algorithm for deploying advertising dollars, we believe we can drive steady growth in this business at an attractive margin. We're also increasing our focus on growing BetterHelp outside the U.S. Roughly 15% of BetterHelp's fiscal year 2023 revenue was generated in international markets, primarily in English-speaking countries such as Canada and the UK, and we're actively working to expand BetterHelp's presence internationally. To advance this goal and accelerate BetterHelp's revenue growth internationally, we recently hired a new leader. We think there's a lot of untapped potential outside the U.S. and expect to see these efforts begin to contribute to our financial results more meaningfully as we move through 2024, particularly in the second half of the year. We will continue to grow BetterHelp responsibly, with an eye toward maintaining the attractive margin and free cash flow profile of the business. With over $1.1 billion in revenue and our increased focus on bottom-line performance, we believe we can efficiently deploy capital to drive new customer acquisition and revenue growth at BetterHelp in the low-single-digit range over the next three years with opportunities for modest margin expansion. Before I update you on the results of our ongoing operational review, I want to reinforce our commitment to investing in technology and the long-term growth of our company. Our ability to effectively leverage data and technology to drive engagement and multi-product utilization is fundamental to delivering better outcomes and lower costs for our clients. Our engagement capabilities underpinned by the data and data science remain a key competitive advantage. Therefore, it's important that we continue driving greater differentiation through investments in technologies, such as machine learning and AI, improving our ability to engage with members on a hyper-personalized basis. So while we continue to work hard to drive productivity and efficiency across the organization, you should expect us to continue to make sizable targeted investments in product, technology, and data. At the same time, we have increased our focus on efficiency and bottom-line performance. We're driving sustained margin improvement and increased cash flow generation while continuing to make substantial investments in innovation. To date, we have identified actions that we expect will result in approximately $85 million in total annual run rate operating expense savings by the end of 2024. These savings build on the cost initiatives we delivered upon in 2023 and are expected from productivity initiatives, including automation and internal process improvements, organizational realignment, and third-party spend reduction. We expect $35 million of these identified cost savings to benefit 2024 adjusted EBITDA and $43 million in total impact to 2024 GAAP expenses, inclusive of stock-based compensation. Our efforts to unlock productivity improvements are ongoing and we will provide updates as appropriate. These productivity and efficiency initiatives will allow us to drive near-term growth and invest in future growth opportunities while also continuing our path toward enhanced bottom-line performance and free cash flow generation. The long-term fundamentals of our business are strong, and we remain committed to expanding our leadership position in the industry. With that, I'll turn the call over to Mala to review the fourth quarter and share our forward guidance.

Thank you, Jason, and good afternoon, everyone. Fourth quarter consolidated revenue of $661 million increased 4% year-over-year. Fourth quarter adjusted EBITDA was $114 million, an increase of 22% year-over-year, representing a margin of 17.3%. Full year consolidated revenue of $2.6 billion increased 8% over the prior year, while full year consolidated adjusted EBITDA increased 33% to $328 million. Full year adjusted EBITDA margins increased 240 basis points to 12.6%. Consolidated net loss per share in the fourth quarter was $0.17, compared to a net loss per share of $23.49 in the fourth quarter of 2022. Net loss per share in the fourth quarter included amortization of acquired intangibles of $0.43 per share and stock-based compensation expense of $0.28 per share. Fourth quarter free cash flow was $93.6 million compared to $11.7 million in the fourth quarter of 2022. Full year free cash flow was $193.7 million, compared to $16.5 million in the prior year. We ended the year with over $1.1 billion in cash and cash equivalents on the balance sheet. Turning to segment results. Integrated Care segment revenue increased 8% year-over-year to $384 million in the fourth quarter, growing 3% sequentially. For the full year, Integrated Care segment revenue increased 7% to $1.5 billion. The largest contributor to 2023 Integrated Care growth was Chronic Care revenue growth. Fourth quarter Integrated Care adjusted EBITDA was $56 million, an increase of 28% over the prior year's fourth quarter, representing a 230 basis point margin expansion. During the fourth quarter, member enrollment in Chronic Care programs grew by 36,000, bringing full year net enrollment growth to 139,000. We ended the fourth quarter with Chronic Care enrollment of 1.16 million, an increase of 14% year-over-year and 3% sequentially. The biggest drivers of new Chronic Care enrollment in fiscal year 2023 were hypertension, followed by our diabetes prevention and weight management programs. As of year-end, diabetes management priced approximately half of Chronic Care program enrollment, followed by hypotension at 30% and diabetes prevention and weight management, both approximately 10% of total program enrollment. Program enrollment growth continues to benefit from our success in selling bundled chronic care management solutions. Total Integrated Care segment membership ended the year at 89.6 million members. Average Integrated Care revenue per U.S. member of $1.42 decreased $0.02 over the prior year's fourth quarter. Excluding the impact of new virtual care members added during the year, revenue per member increased $0.06. Turning to BetterHelp. Revenue was $276 million in the fourth quarter, roughly flat versus the prior year and down 3% sequentially. Fourth quarter BetterHelp adjusted EBITDA was $58 million, representing growth of 11% over the prior year's fourth quarter. Adjusted EBITDA margin of 21.2% increased 210 basis points over last year's fourth quarter. BetterHelp revenue for the full year was $1.1 billion, an increase of 11% over the prior year. Full year adjusted EBITDA grew 19% over the prior year to $136 million, representing a margin of 12% compared to 11.2% in the prior year. Now turning to forward guidance. We expect full year 2024 revenue to be in the range of $2.635 billion to $2.735 billion, which represents year-over-year growth of approximately 1.5% to 5%. The 2024 revenue outlook includes low to mid-single-digit growth in our Integrated Care segment and flat to low single-digit growth in our BetterHelp segment. We expect full year 2024 consolidated adjusted EBITDA to be in the range of $350 million to $390 million, representing year-over-year growth between 6.7% and 18.9%. Consolidated guidance includes a year-over-year increase to adjusted EBITDA margin of 150 basis points to 250 basis points for the Integrated Care segment. And margins for the BetterHelp segment are flat plus or minus 50 basis points. We expect full year free cash flow of $210 million to $204 million, representing year-over-year growth of 8% to 24%. Full year stock-based compensation is expected to be approximately $180 million, representing a decline of approximately $20 million. For the first quarter, we expect revenue to be in the range of $630 million to $645 million. First quarter Integrated Care segment year-over-year revenue growth is expected to be in the range of 5% to 7%, while BetterHelp segment revenue growth is expected to be down 6% to down 3% compared to the first quarter of last year. First quarter consolidated adjusted EBITDA is expected to be in the range of $52 million to $62 million. First quarter adjusted EBITDA guidance includes Integrated Care segment adjusted EBITDA margins in the range of 10.5% to 12% and BetterHelp adjusted EBITDA margins between 5.5% and 6.5%. One thing I want to call out related to our 2024 guidance is that we did experience a delay in launching our B2B consumer engagement efforts during the first quarter due to a technical issue in mapping new client populations. While we have fixed the issue and relaunched our marketing campaigns, we expect the cumulative effect of this one-time delay to have an impact on 2024 revenue of approximately $20 million. This $20 million impact represents approximately 140 basis points of year-over-year Integrated Care segment growth, which is reflected in our 2024 Integrated Care segment outlook. Looking beyond 2024, as reflected in today's press release, we are also providing a long-term outlook as follows: we expect consolidated annual revenue growth over the next three years in the low to mid-single digits, which includes annual growth of mid-single digits for the Integrated Care segment and low single digits for the BetterHelp segment. We are targeting 50 basis points to 100 basis points of margin expansion annually over the next three years, and at least $425 million of adjusted EBITDA in 2025, inclusive of the identified cost actions discussed earlier. We anticipate margin expansion to be driven in large part by operating leverage over our technology, development, and G&A line items. We expect annual decline in stock-based compensation over the next three years as we manage our compensation expense and march towards GAAP profitability. Including an approximate $20 million year-over-year decline in 2024. Finally, with $1.1 billion in cash on our balance sheet and our business generating strong and increasing amounts of free cash flow, I thought it would be helpful to remind you of our capital allocation priorities going forward. One, tuck-in M&A. We believe our large base of clients with 90 million members gives us a unique ability to bring new products to our existing book of business. We will, therefore, continue to look for opportunities to expand our capabilities. Two, debt pay down. We have a convertible bond due in 2025 and the cash on our balance sheet allows us the flexibility to retire that issuance if we choose. Three, share buybacks. The level of annual free cash flow we are generating will increasingly provide us the flexibility to do strategic share buybacks as well as minimize potential dilution from employee stock grants. With that, I will turn the call back to Jason.

Thanks very much and thanks for all the detail. Jason, I just want to go back and talk for a minute about the selling season and try to square just a couple of numbers that you gave and Mala gave. So Mala talked about chronic members being up 14%. You talked about double-digit booking growth in the selling season. But yet, when you talked about the integrated business and talked about the chronic component of that, you talked about mid to high single-digit growth. Can you help me to understand like, is it that you're doing more bundled programs and therefore the growth isn't as high? And then secondly, as we think about this going forward, you talked about 16% of the base having access. Is this an opportunity where 100% of your base can have access or is it some smaller number as I think about that would be my question.

Thank you, Lisa, for your question. Looking at our long-term prospects, we believe we will keep expanding our chronic care programs within our existing business. Approximately 75% of our sales originate from existing clients, and we've seen our penetration grow from 12% to 16% over the last two years, which we expect to continue. When comparing last year's bookings to this year's, we encountered a temporary issue with new member onboardings that led to a three-week pause in marketing. This resulted in an estimated impact of around $20 million, equating to about 140 basis points of growth in Integrated Care, primarily affecting our chronic care programs. For this year, as we analyze the business booked last year, there's a timing aspect to consider regarding when these sales become operational and generate revenue. We've recognized a significant amount of this in-year revenue from sales last year, with some starts delaying until late in the first quarter or early in the second quarter. This plays a role in shaping our full-year revenue and growth projections. We expect chronic care revenue to be a major factor in driving higher growth rates in Integrated Care, particularly compared to the stable stream of virtual care revenue, which serves as a solid foundation for our sales. Moreover, we're noticing an increase in the sale of bundled programs. When we sell bundles, we generally see higher total revenue but lower revenue per member, compared to selling individual products. Overall, we feel optimistic about the multi-year outlook for both chronic care and international markets as key contributors to our Integrated Care revenue growth.

Hey guys, thank you for taking my question. Apologies for my background noise, I'm in an airport. I was hoping you could talk me through some of your assumptions getting to the BetterHelp outlook. What improved in the underlying assumptions to get to the back half ramp? Is there any color you can provide about the deteriorating yields and if it’s improved? And just in general, how much risk is taken to the outlook, such as macro assumptions?

Yes, so Stephanie, I'll start and then Mala can go deeper. On BetterHelp, if you think back to our third quarter earnings call, we talked about how customer acquisition cost trends in the direct-to-consumer market would result in BetterHelp growth in the lower half of our guidance range. Our original 2023 outlook called for double-digit to mid-teens growth for BetterHelp. That range assumed some deterioration at the low end of the range and some improvement at the high end of the range. BetterHelp ended up growing just over 11% for the full year. So it was in the lower part of our guidance range. What drove that was weaker customer acquisition trends in the second half of the year. There are a bunch of factors that go into that. In particular, we saw pressure on our customer acquisition costs in social media channels. We're fortunate; I guess the good part is we have a diversified set of channels, and the higher overall spend levels as we get to higher levels, the more we press on sort of across all of those channels. So we felt the impact of that in the second half of the year. As we made our outlook for this year in 2024, the assumption is that those higher levels of customer acquisition costs persist. We do think that we'll start to get a benefit in the back half of the year from some of our international markets as we shift dollars into those international markets which we've seen good results, but at a limited scale thus far. The customer acquisition costs tend to be lower in the international markets, although the cost of goods sold tends to be slightly higher. And if you balance those two things, they end up at roughly the same net margin as our domestic business. So when we look at the range for our outlook, it sort of brackets that current outlook, meaning if you extend the current situation forward, the lower end of the guidance assumes that there is some deterioration. The higher end of the guidance assumes some improvement.

Yes. I think you've covered most of it, Jason. What I would say, Stephanie, is we believe we have taken a measured approach to our guidance by assuming that the levels of cost per acquisition trends continue as we saw in the back half. And frankly, as we are continuing to see in the first quarter of this year. So as Jason said, if you think about the range we have provided. At the high end of the guidance range, we assume some improvement in customer acquisition trends in the second half, and at the low end of the range, we assume some deterioration in those trends. And as we said in our prepared remarks, if you sort of take a step back and just think about the BetterHelp business. What I would also say is, with our increased focus on profitable growth, our BetterHelp business's member acquisition is somewhat gated by the amount of capital we can deploy at what we would consider to be acceptable rates of return during any given period. So what that means is that the growth in BetterHelp is in part dependent on our ability to efficiently reach new individuals to create awareness for BetterHelp products and services. So it is both, I would say, the cost per acquisition trends that we are seeing that we have factored into our guidance and a continuing theme of how we are balancing top-line growth with profitability in this business.

Hi. This is Jailendra Singh from Truist. Thanks for taking my questions. So just wanted to follow up on the question on the efficiency program, like $35 million benefit in EBITDA, it seems more than half of that is coming in Q4. Can you help us better understand why benefit from this program is more second half loaded? Are you expecting any benefit in Q1? And how is this benefit spread across two segments?

I would say regarding your second question, most of the advantages from our cost efficiency and cost reduction programs are primarily seen on the Integrated Care side. As mentioned in our prepared remarks, this segment is where we expect to see greater margin expansion as the year progresses. We can achieve more operating expense leverage in this area. In terms of the $35 million benefit reflected in an adjusted EBITDA of $43 million on a GAAP basis, we are implementing initiatives across various areas, such as organizational improvements including offshoring, productivity initiatives like automation, and managing third-party supplier spending. Therefore, I wouldn’t categorize these benefits as being concentrated in a single quarter; instead, we will notice a gradual increase throughout the year.

Yes. Thanks for the questions. I appreciate the details on the delayed enrollment engagement or marketing on the Chronic Care that you talked about and the financial impact there. But can you provide more details exactly what that was? Was that on the customer side or your side? And if it was on your side, how do you get comfortable that that's not going to happen again?

Yes, Richard, thank you for your question. We achieved record client implementations in January 2024. Like all healthcare companies handling eligibility files, these implementations come with a certain level of complexity. In January, we identified an issue with data mapping for some of these implementations. The number of members affected was quite small. However, due to the record volume of implementations occurring simultaneously, we decided to pause member communications while we diagnosed and fixed the problem. This delay caused our consumer engagement marketing to be set back by approximately three to four weeks and pushed the enrollment curve primarily for our chronic care programs. As we mentioned, we expect this delay to have a financial impact of around $20 million over the full year. We have restarted our marketing efforts and have encountered no further issues, so we are confident that this matter is fully resolved. We prioritized a thorough diagnosis and identifying the affected population before resuming our marketing campaigns. Ultimately, the number of impacted members was very small, and we are assured that we have resolved the issue, having clearly identified its source.

Hi, guys. Thank you so much for taking the questions and thank you for the detail on the report and guide. I guess maybe just in terms of ad yield on BetterHelp, I'm curious to understand maybe when you all first observe the declining ad yield in BetterHelp and just kind of whether it got worse over the course of 2023? And any update on what you've observed on year-to-date in 2024?

Yes, thanks, Jess. We began noticing the yields coming in lower than expected in the latter half of the year. We mentioned this during the October third quarter earnings call. We previously indicated that last year, when we first provided our range, we expected to be at the low end if the yields started to deteriorate and at the high end if there was improvement. As we noted earlier, yields have been consistently lower during the second half of the year. We have continued to monitor these trends, and they remain persistent, which is why we've incorporated this into our guidance. As Jason mentioned, we anticipate easier comparisons in the second half of the year. That's why we are presenting the current range. Similar to last year, the high end of the range reflects an expectation of improvement, while the low end accounts for continued deterioration.

I mean generally, we generally see improvement in January. And so, we monitored closely as we were going through the January timeframe. And we saw them stubbornly, especially in those channels, stubbornly higher. And so, we're using that as the basis for our guidance going forward.

Thank you for your question. Jason, I want to return briefly to Integrated Care. You mentioned that 16% of the general medical base has one or more chronic care products, which is an increase from 12% over the last few years. You also indicated that 75% of your sales come from existing clients. Can you share some insights on what the sales pipeline looks like? How frequently do these clients present opportunities for potential cross-selling? Additionally, how often do clients choose not to make a decision? It seems like there is a substantial base available for selling, yet the growth rates you are discussing suggest a gradual improvement over time. I’m trying to better understand the decision-making dynamics among clients regarding the addition of chronic care if they haven't implemented it yet.

Yes. Thanks, Charles. I'll try to answer as many of the dimensions of that question as I can. With respect to the pipeline, we we're really early in the year. And generally, what happens is we sell through the pipeline toward the end of the year. And at this point of the year, we're refreshing it. That's exactly what's happening now. So I'll reserve commentary on sort of what the pipeline looks like until later in the year when it refills and we're looking at our significant selling season sort of bolus. With respect to the dynamics of our client base, our sales force is split into essentially new business reps who are out trying to sign new clients who don't have a relationship with Teladoc Health and account managers and essentially upsellers whose job is to go build our base with our existing customers. When we think about selling into new clients, there are essentially two dimensions of that. One is selling more products into the same population. The second is selling products into new populations with that client. That tends to happen mostly within health plans as we go into new geographies, new lines of business, such as managed Medicaid or Medicare Advantage, and we expand the population that we serve. So you're really asking, I think, mostly about that first one of selling into new clients or into existing clients, which is upselling additional products. We're constantly working through that, and I would say the adoption for chronic care programs goes through an evolution. Some of those clients have other solutions that they bought previously, and it's a replacement business for us. Equally as frequently, we're going in with our suite of chronic care solutions where they don't have one in place. And so that is an evolutionary sale. It certainly doesn't happen all at once. So I wouldn't expect us to all of a sudden go from 16% to 30% or 40% penetration. We are working on solutions like our bundling structures in order to accelerate the penetration. But right now, we guide based on what we know and what our existing trends are. So as we see breakthroughs to the degree that we see breakthroughs in our ability to more rapidly penetrate our book of business, we'll update our guidance. But our guidance right now is based on the progress that we're making and our outlook based on what we know, not based on any breakthroughs that we haven't yet identified.

Yes, good evening, Jason and Mala. I'll try to be efficient with my questions here. And I guess my first one, Mala, is on the cost savings program, which is you guys are targeting 50 basis points to 100 basis points of margin expansion per year, but the cost savings programs alone should give you almost 150 basis points margin expansion in 2024 and over $325 million. So I guess I'd ask you what are the offsets in the underlying business through eroding where the cost savings programs don't give you more margin expansion?

Yes. Thanks, George. So if you just think about 2024 as we have said, we've talked about our guidance of $350 million to $390 million in adjusted EBITDA. That includes the $35 million of cost savings that we have talked about. The reality is, if you think about the way the margins we expect in 2024, the margins to play out, we are seeing some modest pressure on our gross margin line from higher clinical costs, and that's primarily associated with the expected ramping up in Primary360 volumes. We added about $30 million in Primary360 revenue over the course of 2023, and that was a very, very significant increase in revenue for P360, and we expect visit volume from those members to continue to ramp up through 2024. And so that ramp will create some modest pressure on gross margins this year relative to 2023. Now that variance, that delta is being offset by leverage from operating expenses and in particular, as we said in our prepared remarks, technology and development and G&A. So that's sort of the way the sort of the margin structure is feathering through the whole P&L.

Yes. Thanks. Last quarter, along with the operational review, you also talked about undertaking a portfolio assessment. Is there any update you can share on that? Are there any portfolio actions in the savings you laid out from the efficiency program? Or would those be incremental? And then maybe if you could give us some sense of what a portfolio assessment may involve? Are there particular geographies, markets, books of businesses that just don't make sense to be in anymore?

Yes. So I'll start by saying there are no significant portfolio changes contemplated in our guidance. Anything that we would do would be incremental to that. When we talk about doing a portfolio assessment, it really is looking across the business for two dimensions. One, the profitability and growth outlook for the various customer channels and segments, products within our portfolio, geographies, et cetera. And then second is where do we place investments. So where do we get the greatest yield on investing our dollars, especially in technology and development and advertising and marketing. So I think that's what's involved in it. If we have any significant actions, obviously, we'll announce it. A lot of it, quite frankly, is fine-tuning. Sometimes it's fine-tuning pricing. Sometimes it's fine-tuning go-to-market strategy. Sometimes it's fine-tuning service model and service intensity to make sure that we are optimizing our resource allocation versus the profitability of a given customer segment or products.

Yes, I would say, as we evaluate both our revenue growth and profitability, we have set our expectations for the upcoming years. We will keep reviewing the different aspects of our business and how they contribute to both revenue growth and profitability. This is an ongoing review. We are committed to making strategic investments. We have discussed leveraging technology, development, and general and administrative expenses. However, we will also continue to make significant investments in areas such as products, data, and data science. To support these investments responsibly, we must consistently assess all parts of our business regarding their contributions to both revenue and profitability.

Thanks for taking my question and thanks for all the detailed commentary thus far. Maybe a little bit of a different line of questioning. I'm just curious in regards to capital deployment. You clearly have a lot of cash. You mentioned maybe a repo, but more curious about the overall capital structure and how you view it. I know you have some of the convertible bonds of about $550 million that will be concurrent in June and then a bigger convert a couple of years after that. So how are you thinking about potential refi or use of cash to pay that down over the coming quarters? Thanks.

Thank you for your question. Looking at our capital structure, we have the flexibility with $1.8 billion in cash on our balance sheet and strong free cash flow generated last year, which we expect to continue this year. This will further strengthen our balance sheet. In terms of cash use, my priority would be to identify interesting M&A opportunities that align with our strategic and financial criteria. We plan to leverage our balance sheet for suitable M&A prospects. Additionally, I aim to use some of our cash to pay down the convertible bond due in the middle of 2025, while we have some time regarding the $1 billion convertible maturing in 2027. Lastly, if we have more flexibility, we will consider strategic share buybacks to mitigate potential dilution from employee stock grants. These are the key areas I’m focusing on.

I want to go back to the BetterHelp marketing yield here. I was wondering if you could provide a little more detail on why those marketing yields remain depressed? Are consumers being a little more discerning? Are you seeing more competition from other DTC vendors? Is there another big vendor out there that's spending like you saw in 2022? Any additional detail there would be very helpful.

Yes. In response to the second part of your question, we don't observe a major competitor causing rates to rise. Instead, we notice many advertisers targeting similar audiences. It's not about a single competitor, but rather the general competition in the advertising market. Additionally, as we increase our advertising spend, we closely monitor the marginal return on each additional dollar spent. We strive to ensure that every extra dollar contributes positively. If we notice that we're reaching a point where we can't spend that money effectively, we will scale back instead of pursuing growth at the cost of profitability. These factors are the main contributors to the situation.

Thank you. There are no additional questions left at this time. That concludes today's conference call. Thank you. You may now disconnect your lines.