Teladoc Health Q2’26 Earnings Conference Call

To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Our first question comes from Sarah James from Cantor. Sarah, your line is open. Please go ahead.

So I'm hoping to get a better idea of what the pacing to closing the supply gap looks like. for the therapists that are taking insurance. So you went from 6,000 to 8,000. I think you have a net worth of 30 or so. How big is the supply gap right now? What do you mean by, you mentioned accelerating insurance adoptions through certain programs that you're doing. Can you be more explicit about that and how do you think about the ramp going forward?

Yeah, thanks, sir. Appreciate the question. As you mentioned, we've continued to grow the total number of credentialed therapists pretty significantly over the course of the year, and that continues. I think, you know, and that's been able to support the insurance sessions and revenue and things that we had expected. I think this higher level of demand and the strong preference for insurance and now our national rollout, obviously, is why we're making these moves and these changes there I would say there's a number of initiatives going on but let me bucket them into two areas first of all I would say around provider acquisition and retention this is really things that are aimed at recruitment both out of the better health network that you referenced the cash pay network as well as therapists that are not in the network that are more traditional in terms of taking insurance so we've got a number of things going on there to look at our recruitment processes, the effectiveness of that, and how we can scale those more quickly. We are also continuing to look at ways that we can expand delegated credentialing with payers. We have begun and going through the process to pursue NCQA accreditation as a delegated credentialing. So we think that's going to be a benefit. And we've also got some initiatives is around the onboarding and engagement of therapists onto the platform and get them using it and serving the patients. The second area is around what I would say about improving existing provider capacity in addition to new recruitment. And this is really things like improving the platform, the insurance platform we have, the tooling, looking at scheduling, efficiencies. We've done a lot there. I mentioned in the last quarter some of the things that we had done around AI to support efficiency and documentation and things looking at the experience of the providers and the user experience. We're also putting into place, and have been, but we're doing more, looking at state-by-state and payer-level initiatives to be able to respond to demand and capacity needs on a more dynamic basis as that demand and capacity will change over time. So there's a number of things underneath that and really why we took the actions to refocus resources and really lean into this insurance opportunity we have.

Thank you. And just any view on the timing of closing the gap of where demand is to where supply is?

Look, we're actively working on it and have been. We reaffirmed our revenue range that I had mentioned in my prepared remarks. We're obviously taking these actions to strengthen our position in 2026 to position for strong insurance revenue growth in 2027. I don't want to speak on the timing of that. I would just say that we've got a number of things underway and really why we have refocused the resources the way we have.

Thank you.

Our next question comes from the line of Lisa Gill from JP Morgan. Lisa, your line is open. Please go ahead.

Thanks very much. And in fact, thank you for all the comments on BetterHelp, just two things I want to try to better understand. One, is the reimbursement under insurance materially different for the provider where they have a preference for cash pay versus insurance coverage? And then secondly, as we make that conversion over to insurance, can you talk about the profitability to Teladoc? Will that look materially different? I know your advertising costs are going to materially change over time as You won't have to do as much direct-to-consumer advertising, and your customer acquisition costs won't be as high. How do I think about that transition and the impact on your margin as well?

Yeah, let me take the first comment. Certainly in a cash pay environment, the therapists are, you know, approaching that on a cash pay basis for a number of reasons, including, you know, flexibility. and they don't necessarily have to do all the same documentation requirements that you would have to get reimbursement from a payer. Similar therapy and visit and all that, but different kind of model. In the insurance side of the house, obviously there's more requirements of the therapists in terms of the documentation, the administration. Obviously there's claim submission that happens and all those kinds of things and so it is a bit of a different dynamic and it's it's not necessarily for everyone I think the reimbursement really will focus on kind of supply and demand dynamics and it's market by market basis and we are continuing to evaluate compensation programs that will you know make sure that those therapists are supported but it's a different a little bit of a different animal between the two because of the cash pay versus the payer reimbursement. In terms of the margin view, I would say first of all, we're going to be very focused on scaling insurance and we see this in-network move and pivot for BetterHelp as a really important one to create a more durable business because of the volatility that comes with the cash pay side. From a margin perspective, we're sort of looking at it this way. We should expect, and I've said this before, a lower gross margin percent in insurance versus cash pay. Cash pay requires a significant level of advertising and marketing, as you referenced, and the gross margin profile is different. So we do expect and should expect a lower gross margin percentage in insurance, which is the dynamic in insurance. We would also expect that the lifetime value for insurance will be more reflective of the patient's need and less around whether the cost is as much of a barrier as it is obviously in cash pay fully out of pocket. We do see the ability over time to improve our ad spend efficiency and the spending levels. We had expected that to occur over time, but obviously a bit more accelerated now in terms of the advertising spending levels, but we do expect that to create some efficiencies. And we also are, you know, we're investing ahead of the opportunity here, so we expect to see operating leverage kick in as insurance continues to scale further so beyond that the margin profile for better help will depend on those kinds of factors the pace of the business transition how cash pay evolves but but that's how we're looking at uh you know margins under the insurance model thank you our next question comes from the line of george hill from deutsche bank george your line is open please go ahead hey good evening guys and i forget i forgive me if i missed this part but have we addressed like what percentage of the capacity that you currently have in better

help can address the capacity needs in the insured segment and and again i apologize if i missed this part like is like do we need to find a bunch of new therapists to serve the insurance business or is there a licensing issue why the therapists that serve the cash pay business can't serve the insurance business? Or is it more addressed to Lisa's question, which is there's a compensation issue as opposed to a licensing issue?

Yeah. The therapist network that's part of the cash pay market are experienced and a very significant part of BetterHelp's value proposition on the cash pay side. And we have continued to recruit and offer insurance to the network as we rolled out these states, and we've seen good solid interest in therapists, you know, looking at the insurance side. But we're not just limiting ourselves to the therapist network in the cash pay side. We've been recruiting and going after therapists that aren't necessarily in the cash pay network. So it's a combination of both that's occurring. It is a significant network in the cash pay side that gives us an opportunity to bring insurance to market. I think what we're seeing though is the demand really outpacing what our expectations were in terms of the movement from cash to insurance. We've grown the capacity pretty significantly over the last many number of months as was noted and it's a market by market, payer by payer dynamic. We don't have capacity constraints uniformly. It varies by market and so we're approaching it that way as well. So I think it's both. It's a cash pay therapist moving to insurance as well as recruiting therapists that are not in the cash pay network today.

Okay and then maybe just a real quick follow-up. Is there a quick way to frame like can we put a number on by like what order of magnitude are we like missing capacity? Like how much revenue are we missing by not having the capacity to to capture the volume?

Yeah I don't want to comment on that. I think again we we've done well in terms of growing capacity. The insurance sessions are growing well. We were able to be at the higher end of our revenue expectations. But because of the size of the cash pay market in the U.S. and the cash pay user base that's out there, it obviously creates a significant capacity issue when you throttle all that demand towards insurance. So that's how we're looking at it and why we've taken these actions to refocus more on insurance as well as taking into consideration more in our advertising and marketing, which is intended to create awareness and demand generation to more increasingly focus on the insurance objective so that we're not out there spending money to generate demand beyond what we have the capacity to fill as we grow the network.

Okay. I'll hop back to the queue. Thanks.

Our next question comes from the line of Daniel Grosleit from Citi. Daniel, your line is open. Please go ahead. Hi, guys.

Thanks for taking the question. I'll stick with BetterHelp here. I'm really focusing on the international segment here because it's been a pretty consistent area of strength for you in BetterHelp. I get there's a lot to focus on in the U.S., but I'm curious why you've chosen to deprioritize international now, and at what point would you consider re-accelerating investment in international markets?

Yeah, I appreciate the question there, and it has been an important part of BetterHelp and continues to be. We are maintaining our position in the markets that we're in today, and international will continue to be an important area for BetterHelp. We really see this more as a near-term prioritization action here. We've got finite resources at BetterHelp, and we feel like the product, the engineering, the operating resources, the market resources that could benefit our insurance scaling, that the best, highest use of them is to focus on insurance scaling, given the demand and the preference we see. So I wouldn't see it necessarily as a moving away from those non-U.S. markets. There's still a large market opportunity. There's a lot of unmet need out there that BetterHelp is leaning into, and we're going to maintain our positions and presence in those markets. And we have the opportunity once we see, you know, these insurance initiatives take hold to revisit those non-U.S. markets in terms of the level of focus we have there. So I would more look at that as a near-term prioritization item and do see it as a longer-term opportunity for the company.

Got it. Okay. And as we think about the cash pay part of BetterHelp in 27, I know you're not giving formal guidance now, but would it be fair to kind of back out what the cash pay is in 4Q and then annualize that as a good run rate for 27, again, just on the cash pay side? Or do you think we'll see continued declines in the cash pay business in 27 from that 4Q run rate?

Yeah, I don't want to comment on 2027, but I would say that obviously we're making these moves because we see, you know, significant additional opportunity in the insurance market and to position us to grow insurance revenues in 2027. And we had expected and continue to expect pressure on the U.S. cash pay market. Obviously, that's accelerated further than we were thinking. And so as you get to the fourth quarter, you've got a couple of things going on. You've got that dynamic as well as you – I know you're aware of this, but we have a typically pullback in ad spending during the holiday season, which impacts the cash pay market as well. So I wouldn't necessarily take the fourth quarter and annualize that. I would just say that we would expect continued pressure on the cash pay market. We'd expect to continue to drive insurance revenue growth, including through the actions we're taking. And then to the earlier question, we'll revisit how we're looking at the non-U.S. markets and how we look to grow there as well.

Got it. Thank you. Our next question comes from the line of Jessica Tassan from Piper Sandler. Jessica, your line is open.

Hi, guys. Thanks for taking the question. So I'm curious if you can give us a sense of just kind of how many insured lives or what level of run rate revenue your 8,000 BetterHelp insured providers can support? And then just how are you thinking about the insurance business growing in 2027 and kind of what level of capacity do you need in order to support that growth?

And then just my quick follow-up would be, can you comment at all on the behavior that you're observing within the BetterHelp insured business so uh how many visits like what level of acuity just what are you seeing um in in those members how long are they staying with the product um etc thank you okay well i think so i'll try to tick through those uh the the first question you know the 8 000 credential therapists in total we continue to grow the total number which is important but it's also important their availability from a state perspective from a payer perspective obviously capacity and availability for the clinical need, the appointment time, and the length of the time. So there's a lot of things that go into it beyond the raw number. So both are important. Continue to grow the credential network as well as these actions that I mentioned earlier around the provider acquisition and retention and improvements, frankly, that we can make to the insurance platform to drive that. So I don't want to give a number in terms of what the 8,000 equates to. It's more about the capacity and the utilization that's there as well. So I think that's how I would answer that. In terms of the revenue run rate, we've reinstated our guidance there, reinforced our guidance around $90 to $105 million. These actions are being taken so that we can strengthen our position in 2026 and drive strong insurance revenue growth in 2027, and that's really what we're going out. In terms of how the users are behaving, it's early. Obviously, this national rollout, we think, is going to give us, you know, maybe a bit more representative view of the consumer behavior, not just the cash pay versus insurance, but how they use the platform, what the ongoing operating requirements are. But we had referenced a few things in the last quarter call, and we are seeing, you know, good users in the usage in the first 90 days relative to cash pay. We're seeing good session growth, as I mentioned before, the 20,000. And so a lot of those factors are coming into play as we think about the outlook moving forward.

Our next question comes from the line of Alan Lutz from Bank of America. Alan, your line is open.

Good afternoon, and thanks for taking the questions. Chuck, I want to follow up on the Better Health thread here. So you're still expecting the same EBITDA margins despite the issues in cash pay. And cash pay is going to have higher gross profit dollars, as you talked about. But it seems like you're able to at least somewhat manage this through lower advertising spend. And in response to a prior question, you talked about the trajectory of gross profit margin and the trajectory of advertising spend as you make this shift from cash pay to insurance. I'm not asking for any type of guidance here, but just conceptually over the next couple of years or however you want to frame it, how should we think about the cadence of gross margin and the timing of gross margin degradation versus EBITDA margin expansion? Is it do we need to see EBITDA margins go down before they go up based on the dynamics here around cash pay? Thank you.

Yeah, I don't want to go too far on that last point, but I would say that, yes, we have taken into consideration in the EBITDA margin guidance, the initiatives that we're planning to take and the actions we're taking here, as well as, you know, how we're looking at our advertising spending. So that is a big lever. As you know, the cash pay business, there's a significant expenditure to acquire members. There's a high churn with cash pay. And so it has its own set of dynamics in terms of the efficiency of that spend and how that plays into margins. And we do believe that over time that this scaling of insurance will give us a greater ability to, you know, impact ad spend efficiency and user acquisition efficiency. And now this is a bit more accelerated given the preference and demand we're seeing. We always expected that we would need to evolve that approach over time as insurance continues to scale and grow. I think the fourth quarter dynamic that we've seen in terms of adjusted EBITDA being higher for better help in the fourth quarter, tending to be at least, than other quarters, that dynamic I think is still going to continue to be there, even within the insurance market as well, just given the ad spend dynamics around the holidays. So beyond that, I don't necessarily want to get into cadence of gross margin, but we do believe that insurance will create a more durable position for BetterHelp and I think create a more durable view of how that gross margin and the financial profile of the company is going to proceed going forward.

Makes sense. Thank you very much.

Our next question comes from the line of Jaylendra Singh from Truist. Jaylendra, your line is open. Please go ahead.

Thank you, and thanks for taking my question. I actually want to maybe talk about integrated care business. I know we are still in the midst of selling season. Maybe if we can talk about any updates, how the trends have been compared last year, how does the pipeline look? Are you seeing larger deals, better win rates, or more product consolidation? and how is Teladoc 1 affecting selling season conversation? Any update that will be helpful?

Yeah, I appreciate that, Jalindra. I would say, first of all, you know, with respect to the selling season, I think the operating environment that we are in is really in line with what, you know, I've spoken about previously. I would say in the employer market, looking for solutions that, you know, align with their goals. I think they are concerned around fragmentation and driving impact from the programs they have in place. With the health plans, as you know, they're working through a number of challenges, you know, higher medical costs, regulatory dynamics, and, you know, business decisions they're making around that. So that kind of continues to be a similar environment. We are seeing solid interest across the channels in what we're doing. Through the second quarter, I would say the selling season overall was in line with our expectations and in line with where we were in the first half of 2025. I would say the conversations we're having with clients are productive. They're, I would say, more strategic in nature as they look at their challenges and what they want to do and what the benefits of programs like ours can have. The innovation focus we have, our capabilities, the outcomes we can drive, and our focus on reducing fragmentation, I think all those things resonate with them. We have had some nice wins and expansions so far this year. We've also faced some pressures just because of the competitive nature and the market environment. And there's a lot of the year left to go, as you referenced. I think we're seeing really good interest across our solutions in virtual care, in chronic care. Adoption of bundles continues to be a theme. We've seen good growth in weight and obesity management programs. So I think all of that is in line with where we expect it to be. And we're really excited about bringing Teladoc One to market. this is really the culmination of a lot of work over the last year or so. As you know, the products and services that are brought to market today are focused on a particular problem or particular need, whereas Teladoc 1 is a much more comprehensive approach because it's focused on what the individual need is and not necessarily one condition or a fragmented product solution that's prevalent out in the market today. We launched it last week, actually, with our clients. We had a client forum. I think there was good excitement about what Teladoc is doing in this renewed innovation. I think they understand why we're going after it this way in terms of this comprehensive model and why it can really benefit them and benefit their members. So we're excited to get it in the hands of our sellers and get it out to clients. It's really new. I mean, we just launched it last week, but very encouraging in terms of the market acceptance and awareness of what we're doing, at least from that client forum, and we're going to build on it going That's super helpful.

One quick follow-up, and it's a clarification on – I'm sorry if I missed this, but did you say if cash pay trends, did they stabilize in July, or are the trends you saw in Q2 have continued in Q3 here in July?

I don't believe I spoke about July, but certainly as we progressed through the tail end of the second quarter, it caused us to really take the view that these were not short-term variations that we were seeing, that these were more sustained business developments and really required us to reassess the assumptions that were underlying our prior outlook, given what was evolving in the marketplace, as well as the impact of the actions we're taking. So I think all of that factored into how we are setting the expectations going forward.

Great. Thanks a lot.

Our next question comes from the line of Sean Dodge from BMO Capital Market. Sean, your line is open.

Thanks for taking our questions here. It's Chris Charlton on for Sean. Sticking on integrated care, can you share some more color on the competitive dynamics within the chronic care portion and kind of what some of the drivers were behind the big step up in enrollment in the quarter and i know you mentioned greater adoption of the multi-condition bundle and called out weight management but are there any other areas of strength or demand clout here and how this is setting your expectations for the rest of the selling season and into 2027 thanks yeah i appreciate the question um yeah i think there's a couple things going on and i reference those but I'll just maybe give a bit more detail.

Certainly we're seeing, and have seen, but strong adoption of bundles by clients. Again, it addresses more needs of the people that they're serving, creates more recruitable population for us, and in turn, the ability to increase and improve enrollees. And that's important in terms of meeting more needs, but also stickiness with the program, engagement, all of those things kind of factor into the benefits to us of bundled. Weight and obesity programs have seen significant, you know, and solid growth, as you mentioned, those carry a different, a lower PMPM than some of the other programs. So there's a little bit of a mixed thing going on there. And I think that having more enrollees and having these bundled programs, you know, also bodes well with respect to how we bring Teladoc One to the market because it's more comprehensive offering. In terms of the competitive landscape, it's very competitive, and it has been. But I think the actions we're taking to really lean into our strengths, bring new capabilities to market, and really differentiate on this clinical care model that's very comprehensive, obviously enabled by the AI investments that we've made, I think are going to create some distance and differentiation relative to point solutions that are out there. So I think that's how we're looking at it. I think we're in the right space. The cardiometabolic health area is a significant part of healthcare expenditure, a lot of challenges that face those individuals. And by us bringing up the full breadth of our clinical capabilities, we think we can help them and we think we can drive impact for our clients.

Our next question comes from the line of Elizabeth Anderson with Evercore. Elizabeth, your line is open. Please go ahead. just a reminder that if you are muted locally to please unmute your device our next question comes from the line of charles re with td cohen charles your line is open

uh yeah thanks thanks for uh thanks for the question um i i guess just to kind of i don't know if you explicitly connected these two issues but it is the issue that we're seeing in the accelerated demand as people come to BetterHelp and they, you know, go through the process, they realize they can get insurance coverage and they seek insurance coverage. It's not, and then there's a capacity issue where they can't get access to a therapist quickly. And then they decide, you know what, if I can't get it now, I'm going to hold off and I don't choose the DTC option. Are these two directly linked? And as such, does this, you know, as you talk about trying to expand capacity in the areas where you're having this issue, you know, what does this do in terms of your ability to expand into other regions on the insurance side? Or are those kind of two still two separate things?

Yeah, I think the, you know, the traditional historical advertising and marketing approach for BetterHelp really is about brand awareness and demand generation for the cash pay environment. And I think we're seeing the demand generation occur with the level of advertising we were doing. And to your point, now that BetterHelp, it's becoming more aware that we are offering insurance. And as we scale and grow more markets and during the quarter actually launched all the remaining markets that now have a baseline footprint nationally, there's more awareness and more interest, which we had expected because it really underscores why we got into insurance to begin with, the pressure on the consumer and affordability and the greater acknowledgement about the need for mental health by payers and more in-network availability. So all those things have factored in, and really what we needed to do was, you know, as a result of this higher demand and this accelerated cash pay situation, is that we needed to evolve that marketing approach to more and more take into consideration this emerging national footprint. And so that we weren't generating, you know, demand both for cash pay but also for insurance that we weren't able to meet. So that's what's going on there. We think we are evolving that appropriately, and we'll be able to, I think, more effectively tailor the advertising to the capacity that we have. And again, as I said earlier, it's not a uniform challenge. I mean, we have capacity that grows and subtracts in different markets. And so I think this evolution really is people wanting to use BetterHelp, people wanting to use BetterHelp and use their insurance coverage, and part of that is our demand generation and then ultimately our conversion of that demand into insurance users paying sessions and revenue. That's what's going on and why we really felt that it wasn't a short-term variation that we needed to reevaluate, not just the assumptions underlying our prior outlook, but what actions we could take to really strengthen and lean into this insurance market opportunity that we have ahead of us.

Thank you. And just to follow up, I think, from Alan's question earlier, you've maintained the margin guide. How long is this sustainable? Because obviously you are pulling back on the ad spend in the short term as you're trying to adjust to this capacity issue. but clearly you need the advertising for the DTC demand side of the equation. It's kind of like, you know, it's sustainable for a certain period, but just curious, like, how long you think this transition will take? You know, is this something that we think we can get fixed, you know, within 26, or could this take longer? Thank you.

Yeah, well, I touched on before how we're thinking about the margin. I think this, you know, evolving the advertising and marketing approach to more strongly consider our insurance footprint and capacity, I think is an important part of that answer. We have always and we will continue to focus on the bottom line of the company and making sure that we're good financial stewards in terms of how we deploy advertising and so forth. And as I mentioned before, we are investing ahead of this opportunity. I mean, we are scaling insurance. We've gone from one state in less than a year to, you know, all 50 states and plus D.C. So there's some investments that we're making and some operating costs that, you know, we believe that we're going to be able to get some leverage out of as we continue to scale insurance. So I think all of that is in play with the answer to that question. But I think you should be aware that we are, you know, always looking at the bottom line financial performance of the company.

I appreciate it. Thank you very much.

The Q&A session has ended. This concludes today's call. Thank you for attending. You may now disconnect.