TDOC/LVGO - How we got here

I’m holding onto a 7.5% position in Teledoc post-merger. There have been plenty of positive anecdotes shared on Saul’s board on both Livongo and Teledoc throughout 2020, from COVID’s impact directly on telehealth demand, to a loosened regulatory environment and the implications for insurance companies, to preventative medicine and the push for better health care.

But there’s also been a lot of skepticism and perhaps deservedly so, especially around the merger itself, including why Livongo would sell at only a 10% premium, and what kind of TAM does virtual and telemedicine actually have in practicality, even assuming the combined TDOC/LVGO company takes a majority of market share. And from a stock ownership perspective, much has been discussed around the investment thesis changing with the combined company and the results going forward being, at best, unpredictable.

From my vantage point, that has left the future of the combined Teledoc/Livongo company in “battleground” status as it relates to shared opinions on this board, as opposed to something like Crowdstrike where sentiment is probably above 90% positive and a good chunk of us are holding 20%+ positions.

Some, if not most, of the answers to the questions above are simply going to take time to play out, but we should start to get a much better picture starting in February when Teledoc reports for the first time in a full quarter as a combined company.

With that all in mind, I’m going to confess that as of the past few months of holding TDOC, I’ve been relying on what others on this board have shared in both data and anecdotes, as well as my gut instincts and feelings around the healthcare industry, rather than putting in the work to really dig into the numbers and what the companies have said leading into their first combined report. Too much “I think…” and “I feel…” without putting in the work to analyze the companies we own is dangerous - I’ve fallen into that trap all too often, and (high) stock performance is just a facade to mask it as if it wasn’t necessary.

I finally sucked it up and put in the work, so today I’m going to share the numbers for both companies that I’m looking at up through Q320 reporting, my thoughts on deriving some insight from those numbers as well as insight from what the companies have discussed since the announcement that might help you (and I) think through best course of action on TDOC leading into their Q4 report, as well as how to react quickly as necessary based on their reported results.

I will preface the below by stating that ExponentialDave already gave a great shorthand review of TDOC’s Q3 report -…

On to the numbers, and in particular the income statements of TDOC and LVGO, starting with TDOC - they’ve been breaking out their revenue by Subscription Fees and Paid Visits. While they do have some “International” business, in terms of subscriptions, that business is growing at a slower rate than the US. Furthermore, the Paid Visits internationally are just a tiny fraction of the subscription business. The need for telehealth, regardless of any debate about how big exactly that need is, certainly does not have any geographic bounds in terms of value-add, so this is something I’d like to see better numbers going forward on.

As far as US-based revenue and the bigger revenue picture overall, there really wasn’t the kind of spike with COVID that I had perceived there was prior to actually gathering these numbers. In fact, the QoQ numbers for Visits in aggregate was down sequentially each of the past 4 quarters. The subscription numbers, if anything, are where the COVID bump came from, as those accelerated to 33% sequentially in Q2, and still a healthy 24% sequential jump in Q3. That said, I can’t help but objectively question the demand when paid visits are not pacing with subscriptions, as if implying a difference between forced COVID-driven demand (subscriptions) vs. “I really want to use this service!” demand (paid visits).

|                                                              | Q319    | Q419    | Q120    | Q220    | Q320    |
| Rev (in millions) (Total)                                    | $138.00 | $156.50 | $180.80 | $241.03 | $288.80 |
| Rev (in millions) (Subscription Access Fees - US)            | $92.10  | $98.05  | $107.94 | $152.02 | $194.62 |
| Rev (in millions) (Subscription Access Fees - International) | $27.03  | $28.92  | $29.11  | $30.15  | $31.98  |
| Rev (in millions) (Paid Visits - US)                         | $14.14  | $21.27  | $30.90  | $39.04  | $35.07  |
| Rev (in millions) (Paid Visits - International)              | $0.40   | $0.29   | $0.26   | $0.35   | $0.10   |
| Rev (in millions) (Visit Fee Only - US)                      | $4.31   | $7.96   | $12.59  | $19.47  | $15.87  |
| Rev (in millions) (Other)                                    |         |         |         |         | $11.15  |
| Rev Growth (YoY)(Total)                                      | 24.00%  | 27.00%  | 41.00%  | 85.00%  | 109.28% |
| Rev Growth (QoQ)(Total)                                      |         | 13%     | 16%     | 33%     | 20%     |
| Rev Growth (QoQ)(Visits)                                     |         | 57%     | 48%     | 35%     | -13%    |
| Rev Growth (QoQ)(Subscription)                               |         | 7%      | 8%      | 33%     | 24%     |
|                                                              |         |         |         |         |         |
| EPS (Adjusted)                                               | -0.28   | -0.26   | -0.4    | -0.34   | -0.43   |
| EBITDA (in millions)                                         | $9.02   | $15.20  | $10.68  | $26.27  | $39.50  |

On the Livongo side, the revenue numbers are much simpler and the growth story a bit more impressive than Teledoc. Note: Livongo’s breaks out “Estimated Value of Agreements” (EVA) as those agreements signed in the quarter with new Clients or expansions entered into with existing clients. They used to call this out as Total Contract Value (TCV). Livongo says about EVA - “Estimated Value of Agreements is helpful in evaluating our business because it provides some visibility into future revenue. Our new client subscriptions typically have a term of one to three years, and we generally invoice our clients in monthly installments at the end of each month in the subscription period based on the number of members in such month who were active on or used our solution within a certain period of time, as specified in the applicable client’s agreement.”

Livongo had turned a profit and had a clear bump in revenue growth from 8% in Q419 to 37% Q120 sequentially. On total revenue, the sequential pullback in Q3 was similar to Teledoc’s, but they had a pretty big bump in EVA.

|                               | Q319    | Q419    | Q120    | Q220    | Q320    |
| Rev (in millions) (Total)     | $46.70  | $50.40  | $68.80  | $91.90  | $106.10 |
| Estimated Value of Agreements | $85.50  | $76.70  | $89.00  | $108.70 | $145.90 |
| EPS (Adjusted)                | -0.05   | 0.02    | 0.03    | 0.11    | 0.16    |
| EBITDA (in millions)          | -$3.90  | $1.60   | $3.80   | $13.30  | $20.70  |
| Rev Growth (YoY)(Total)       | 148.00% | 137.00% | 115.00% | 125.00% | 127.19% |
| Rev Growth (QoQ)(Total)       |         | 8%      | 37%     | 34%     | 15%     |

On Expenses as a % of Revenue, TDOC has been pretty steady. Their Gross Margins have slight variation, but solidly above 60%

|                               | Q319   | Q419   | Q120   | Q220   | Q320   |
| Total CoR                     | 31%    | 35%    | 40%    | 38%    | 36%    |
| Gross Margin (TOTAL)          | 61.00% | 65.00% | 60.00% | 62.30% | 63.70% |
|                               |        |        |        |        |        |
| Advertising and Marketing     | 23%    | 16%    | 18%    | 20%    | 18%    |
| Sales                         | 12%    | 11%    | 10%    | 8%     | 8%     |
| Technology and Development    | 11%    | 10%    | 11%    | 10%    | 10%    |
| Legal and Regulatory          | 1%     | 1%     | 1%     | 1%     | 1%     |
| Acquisition and Integration   | 1%     | 2%     | 2%     | 1%     | 9%     |
| General and Administrative    | 28%    | 28%    | 25%    | 23%    | 20%    |
| Depreciation and Amortization | 7%     | 6%     | 5%     | 4%     | 4%     |
| Operating Margin              | -14%   | -10%   | -12%   | -3%    | -7%    |

Livongo’s Gross Margins were comfortably above 75% and their Operating Margins has swung impressively into positive territory in 2020

|                            | Q319   | Q419   | Q120   | Q220   | Q320   |
| Total CoR                  | 26%    | 26%    | 26%    | 23%    | 24%    |
| Gross Margin (TOTAL)       | 75.00% | 79.20% | 74.40% | 77.30% | 75.60% |
|                            |        |        |        |        |        |
| Research and Development   | 38%    | 25%    | 20%    | 17%    | 18%    |
| Sales and Marketing        | 51%    | 43%    | 40%    | 36%    | 35%    |
| General and Administrative | 31%    | 27%    | 23%    | 24%    | 43%    |
| Operating Margin           | -19%   | 5%     | 16%    | 23%    | 6%     |

The Customer Specific numbers get pretty interesting. As expected based off the revenue numbers above, Teledoc’s US paid visit numbers actually show a drop from 0.8 Million in Q2 to 0.68 Million in Q3, a 15% decline. Total US paid memberships dropped slightly from 52 million to 51.5 million between Q2 and Q3 as well. Again, this comes back to a question I have about demand for the actual paid services. I guess you could pin that on a number of different potential issues, such as, say, a lack of educating patients about the value of a paid telehealth visit, but that is just conjecture unless this was asked and answered by Teledoc on an earning call or otherwise. Needless to say, I’ll be keeping a very close eye on these numbers going forward.

|                                                            | Q319  | Q419  | Q120   | Q220   | Q320   |
| Total Patient Visits (millions)                            | 0.928 | 1.2   | 2      | 2.8    | 2.8    |
| Paid Member + Paid Visit (US) (millions)                   |       | 0.441 | 0.648  | 0.8    | 0.68   |
| Total US Paid Memberships                                  |       | 36.7  | 43     | 52     | 51.5   |
| Membership Utilization %                                   |       | 9.49% | 13.36% | 16.00% | 16.50% |
| Platform Enabled Sessions (virtual voice/video) (millions) |       |       |        |        | 0.986  |
|                                                            |       |       |        |        |        |
| Customer Growth (QoQ)(Total US Paid Memberships)           |       |       | 17%    | 20%    | 0%     |
| Customer Growth (QoQ)(Paid Visits US)                      |       |       | 47%    | 23%    | -15%   |

Livongo breaks out their customers into “Livongo for Diabetes” members and “Livongo Clients”. On the former, here’s what Livongo says - “We believe our ability to grow the number of enrolled diabetes members is an indicator of penetration of our flagship solution, Livongo for Diabetes. We define our enrolled diabetes members as all individuals that are enrolled in Livongo for Diabetes at the end of a given period.”

In addition, here’s what Livongo says about how they define “Clients”, and there is an interesting backward-looking (2020) comment I will put in bold that impacts the numbers - “We define our clients as business entities that have at least one active paid contract with us at the end of a particular period. Entities that access our platform through our channel partners, such as PBMs and resellers, are counted as individual clients. Historically, we have treated our partnerships with health plans as a single client because of the relatively small number of employers who enrolled under those plans, though multiple employers may contract for our services through a single health plan. Because of the increase in the number of employers who are enrolling through health plans instead of other channels, beginning with the first quarter of 2020 we believe that it is more appropriate to treat health plans in the same manner as we treat our channel partners, such as PBMs and resellers, and include entities who enroll in our platform through a health plan as separate clients. The historical information presented has been revised to include such entities as individual clients. We do not count our channel partners, such as PBMs, health plans, or resellers as clients, unless they also separately have active paid contracts for our solutions. If business units or subsidiaries of the same entity enter into separate agreements with us, they are counted as separate clients. However, entities that have purchased multiple solutions through different contracts are treated as a single client.”

So, I’m not sure how much of an impact from Q419 to Q120 was had on their re-defining what a “client” is, but clearly the 55% sequential growth in Q120 isn’t organically that high. Still, they’ve had positive sequential growth through Q3.

|                                             | Q319  | Q419  | Q120 | Q220 | Q320 |
| Livongo for Diabetes Members (thousands)    | 207.8 | 223   | 328  | 410  | 442  |
| Livongo Clients (thousands)                 | 0.771 | 0.804 | 1.25 | 1.33 | 1.4  |
|                                             |       |       |      |      |      |
| Customer Growth (QoQ)(Livongo for Diabetes) |       | 7%    | 47%  | 25%  | 8%   |
| Customer Growth (QoQ)(Livongo Clients)      |       | 4%    | 55%  | 6%   | 5%   |

So how about guidance for Q4? Teledoc guided to $304 million in revenue at the top end, which would represent a 5% sequential growth number off of Q3. Teledoc has beaten their revenue guidance by 7%, 5%, and 1% respectively the last 3 quarters. However, they guided to total US Paid Memberships of 51 million at the top end, which would basically be flat for the 3rd straight quarter. Why aren’t they generating more paid memberships during a pandemic? That makes me pretty nervous without an explanation to be quite honest, and certainly is going to factor into my decision making on TDOC going forward.

Speaking of going forward, what relevant information has TDOC and LVGO given us beyond the Q3 numbers leading into 2021 that we can pick apart at evaluate? Well, Teledoc participated in 2 Annual Healthcare Conferences at the end of 2020 - the Credit Suisse conference on November 11th and the Piper Sandler conference on December 1st.

Seeking Alpha has both transcripts respectively -….….

My highlights from the Credit Suisse conference….

CFO Mala Murthy - “we are seeing that in the anxiety that our consumers have through the pandemic and the robustness of the demand” - my question is, then where is the paid membership growth to back that up?

CEO Jason Gorevic - ”we estimate the U.S. addressable market at about $121 billion, which includes about $47 billion of TAM relative to the Livongo diabetes and hypertension programs”

CEO Jason Gorevic - ” the hospitals and health systems I’m talking to are really interested in taking advantage of the technology and the data science underpinning the Livongo capabilities. And that’s a market that the Livongo team hadn’t yet penetrated……….And then, you combine that with the InTouch platform’s ability to reach out to the consumer in the comfort of their own home. That’s a really killer combination” - More on the InTouch acquisition they did in July 2020 -…

CEO Jason Gorevic - ”based on the data that we were seeing and gave an outlook of 30% to 40% growth in '21. And we weren’t naïve to the fact that there was going to be a vaccine…”

CEO Jason Gorevic - ”the significant increase in visits for non-infectious diseases, right, things like hypertension, lower back pain, anxiety, depression, that now represents 55% of our visits”

CFO Mala Murthy - “We have talked about how we intend to continue to invest advertising and marketing, with keeping pace with revenue growth. So, I would say, we are continuously priming the pump, if you will, to engage with our customers such that we can help that utilization.” - It is true that their utilization numbers have improved, and this is a good sign that they are focused on improving it more.

CFO Mala Murthy - “I’d encourage you all to focus really more on the overall visit revenue and the growth that we’re seeing. Because at the end of the day, that is really what fuels our revenue scaling.” - I expect better trends than US Paid visits declining in Q3, so IDK about this comment.

CEO Jason Gorevic on Mental Health - ”The BetterHelp business has been growing at a really, really strong rate. We don’t break it out. So, I won’t get too specific. What we’ve said previously, way back in the beginning of March, the last sort of large in-person meeting I can remember being at, which was our Investor Day, we said that it was over $100 million last year, and we expected it to grow over 50% this year. We absolutely delivered on that”

CEO Jason Gorevic - ”I think, the ability for us to make hospital in the home come to life for a provider is exactly the intersection of the Livongo and the InTouch technology that opens up those possibilities and maximizes the impact that the hospital or health system can have.”

CEO Jason Gorvic on their Virtual Primary Care Pilot - ”I think some interesting learnings, really diverse set of diagnoses, over 70 diagnoses, many first diagnoses of things like hypertension, pre-hypertension, diabetes, pre-diabetes. I think 43% of the hypertension or pre-hypertension diagnoses were first time diagnoses. So, the opportunity for us to really make a difference and catch something early, and then bring to bear those Livongo capabilities is really powerful. A lot of overlap of mental health and physical health, where the virtual PCP, if you will, has referred into some of our behavioral health offerings and gotten the consumer started on a course of therapy and maybe brought in a psychiatrist as well to assist with medication management. So, there are really powerful results there. From a satisfaction perspective – member satisfaction perspective, it’s off the charts. I mean, literally, over 90 net promoter score, which is almost unheard of anywhere………This is a very representative cross-section of the population. It tends to be a lot of people who didn’t necessarily have a primary care relationship previously, which is roughly 50% of the population. So, there’s a tremendous addressable market there. And when you talk about the economics, the economic opportunity is massive”

My highlights from the Piper Sandler conference -

CEO Jason Gorvic on Livongo+InTouch - ”Enterprises are looking for a single solution that can enable a physician to provide virtual care to the bedside in the hospital, but also the bedside in the home, all from a single interface, from a single technology platform………As soon we announced the Livongo acquisition, our hospital and health system clients came to us saying, “When can we get access to that such that we can discharge our patients with a blood pressure cuff, with a blood glucose monitor with a connected scale, take advantage of the underlying data science, and then intervene on the InTouch platform – the Teladoc InTouch platform if we need to connect with the patient directly in their home?” So, really delivering on that promise of hospital in the home………from a selling perspective, obviously, one sales force selling the full suite of all three companies’ products is significantly more efficient. And it gives our sales force, quite frankly, the full credit answer for the hospital and health system buyer. It moves us up strategically in the organization, because now it becomes an enterprise-wide strategic purchase as opposed to a pure technology purchase………from a product perspective, it also brings our extensive network of physicians to supplement the hospital and health system providers, who are – those, they have finite workforces, right? So, they have scarce resources, and we bring our physicians to supplement their physician network for additional surge capacity, for after-hours coverage, for nights and weekends, and for additional specialties……Livongo had a lot of hospital clients, where they served their employee population, but weren’t really activated for their patient population………the ability to discharge the patient with the blood glucose monitor or the blood pressure cuff, but then not only send them digital health nudges, which are appropriate for a moderate or minor or temporal blip in their readings, but also then enable the treating physician to connect to the patient via the InTouch telehealth platform, that really completes the last mile of delivering care to know whether that patient needs to have their medication titrated, their prescription modified, or they need to be examined and then brought back into the facility.”

Ok, so a lot of this, as typical from a CFO/CEO at an investor conference, sounds really really promising, and reinforces some of the longer term thesis for me. But they still have to back the talk up with real numbers, and there are some holes that I think they need to plug and concerns to assuage heading into 2021 that I hadn’t quite seen prior to digging into the numbers this deeply.

I’m also here to say that, since the announcement of the merger, the stock performance has been down slightly, and I’m not here to argue the fact that many of our other stocks have severely outperformed it. It’s easily been the weakest performer in my portfolio. That’s just stone cold facts and is what it is. Maybe that’s based on some of the information presented above. I still like the long term thesis and vision, but strictly on the results alone, if I knew now what I did back when the merger was announced and after the Q3 earnings for both companies, I probably wouldn’t have carried at 7.5% position and would have at least trimmed it.

How is Teledoc going to break out the Livongo numbers in 2021? That isn’t something I’ve heard them comment on, so if anyone has any additional insight there I’d love to hear it.




Excellent writeup. Very helpful. The only piece of the puzzle you might have missed is a bit of granularity on what COVID means for this business. One the one hand yes, there has been a big push by many practitioners to seeing patients online. Teledoc has clearly benefitted from that trend, though as you point out, perhaps not as much as one might have assumed without looking at the numbers. But on the other hand, a lot of people have been delaying or skipping seeing a doctor for financial reasons. A lot of people are either out of work or have suffered loss of income because of the pandemic. Many have lost health insurance. At the same time, many have and continue to avoid medical procedures because of fear of COVID. Teledoc isn’t useful for procedures, but it is useful for the consultations ahead of and after the procedure. I would be curious to know how all of this has affected Teledoc. Are we going to see a bump as all of those postponed visits to the doctor are backloaded? I know some practices are running 6+days a week now trying to catch up with the backlog that accumulated over the summer.



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Why would Teladoc be useful for pre- or post- procedure visits?

Teladoc is not a communications service for doctors to use, it is a doctor-service for patients to use.

I think many people keep forgetting what Teladoc “is”.


Really great post, cfee2000. I also have been questioning TDOC as an investment - just seems like our other companies are more of a sure thing.

There is a question you pose that I think I can shed some light on, specifically you ask why paid visits declined in Q3.

It is possible TDOC’s paid visits are highly seasonal. If we look back at Q3 in 2019, we see that visit dollars declined 6%, and this was after Q2 of 2019 which saw a 17% reduction in U.S. paid visit dollars.

Quarter, U.S. Paid visits (in millions of dollars), Sequential Change
q3 2020 35.07, -10%
q2 2020 39.04, 26%
q1 2020 30.9, 45%
q4 2019 21.27, 50%
q3 2019 14.14, -6%
q2 2019 15.08, -17%
q1 2019 18.24, 16%
q4 2018 15.75

Q4 2018 is as far back as I see them providing data on U.S. paid visits (in dollar amount). It is worth mentioning that it is possibly hard to just look at 2 years of data and say “aha! I see a pattern”, but that’s how it sort of looks.

If, instead we look at total visits, a similar pattern is a bit more obscure, but you could argue it does show strong Q4 and Q1 visit growth with weaker growth in Q2 and Q3.

Quarter, Total Customer Visits (in millions), Sequential Growth
q3 2020 2.8, 0.0%
q2 2020 2.8, 40.0%
q1 2020 2, 66.7%
q4 2019 1.2, 29.3%
q3 2019 0.928, 2.2%
q2 2019 0.908, -14.6%
q1 2019 1.063, 23.5%
q4 2018 0.861, 34%
q3 2018 0.641, 20%
q2 2018 0.533, -12%
Q1 2018 0.606 31%

It seems that the power of 'Rona made U.S. paid visits become seasonally very abnormal in Q1 and Q2 of 2020 but not Q3. If you look back at Q3 2020 (which I *think ended 9/30/2020), this encompassed a large swath of time where it seemed like covid cases were not growing exponentially. Then November/December came and cases started rising exponentially again.

This is definitely a guess on my part, but I would say there is a decent chance that U.S. paid visits rise 30% or more in Q4.


As Dave said, there is seasonality in TDOC business. Y/Y or TTM comparison is best approach, not Q/Q.

There is seasonality in TDOC visits that go down in spring and summer… also for 2020 lock-down related uptick in Q2 and therefore, sequential down in Q3 makes sense.

Also, on getting more members on the board, there is seasonality related to open enrollment period AND lumpiness related to when a new major client (insurer or employer) came on board.

It certainly not a SaaS business and probably why among all hyper growth names, TDOC is one of very few companies trading at valuation where multiple expansion seems possible.


Dave and nilvest,

You both make great points and well-taken on the seasonality, very helpful to fill in that data. Still though, I can’t help but be a little underwhelmed with that during a global pandemic, and the spread between Q2 and Q3 is still higher than past years.

What about the spread between subscriptions and visits in the context of seasonality? Is that also explained in historical data? And what about the US Paid Memberships they break out staying at 51 million the past 2 quarters with a flatline guide of 51 million for Q4? I know it’s a bit apples (visits) to oranges (memberships), but if we’re expecting seasonal uptick in winter (Q4), wouldn’t that imply they should be guiding to an increase in memberships too?

I went back to their latest 10-Q and here’s what they say about seasonality - "Seasonality. We typically experience the strongest increases in consecutive quarterly revenue during the fourth and first quarters of each year, which coincides with traditional annual benefit enrollment seasons. In particular, as a result of many Clients’ introduction of new services at the very end of the current year, or the start of each year, the majority of our new Client contracts have an effective date of January 1. Therefore, while Membership increases, utilization is dampened until service
delivery ramps up over the course of the year. Our business also has become more diversified across services, channels and geographies. As a result, we have seen a diversification of client start dates, resulting from our health plan expansions, cross sales of new services, international growth, and mid-market employer growth, all of which are not constrained by a calendar year start."

So, in context, this confirms Q4 and Q1 spikes in revenue, but it sounds like memberships should be spiking during Q4 and Q1? Maybe they are sandbagging their guide, but from what I could find they are typically pretty close on guide vs. actual.

On a side note, I’m a bit confused on the “utilization” commentary, as I would think a dampening in utilization would negatively impact paid visits, but the numbers don’t show that correlation, as they reported their highest utilization numbers in Q3 at 16.5%, but paid visits were down significantly (seasonally). There must be a very low/unpaid threshold for what they deem “utilization”. Their CFO mentioned the utilization metric specifically in the Credit Suisse conference, so I’m assuming there’s a “lead conversion” metric of sorts that they’re going to continue to try to capitalize on to convince members “utilizing” the service to actually pay for visits.



Good summary. On your observation about lower visits in Q2, Q3 here is from their annual report:

Additionally, as a result of national seasonal cold and flu trends, we experience our highest level of visit fees during the first and fourth quarters of each year when compared to other quarters of the year. We typically experience the strongest increases in consecutive quarterly revenue during the fourth and first quarters of each year, which coincides with traditional annual benefit enrollment seasons.
1. We primarily generate revenue on a contractually recurring, subscription access fee basis, typically on a per-Member-per-month (PMPM) basis, and in certain contracts, on a per subscriber basis. Our subscription access fees comprise the majority of our revenue and therefore provide us with significant revenue visibility.
2. We also generate additional revenue on a per-visit basis through certain Clients with visit fee only (VFO) arrangements.
3. For certain Clients, we also earn visit fees or per-case fees in combination with subscription access fees.


If I am understanding this correctly #1 in my earlier post is mostly subscription rev. #2 is all visit rev. #3 is both sub and visit rev. They have a certain number of free Visits Included with the subscription for #1. This has scaled up nicely in Q320 - 321% increase YoY. It came to 1.44M visits in Q3 or more than 50% of all visits. “Paid Visits from U.S. Paid Membership” has dropped 15% in Q320 vs Q220 as you noted. This is explained by their seasonal observation as well as reduced covid this year in Q3. Despite the seasonal issue, I am not sure if the rate of change in visit rev alone is a good barometer on how the business is doing. If they do see a large increase in the free visits that is indeed a good thing as utilization is going up which suggests increased retention and possibly more members and new clients.

I think total visits and total member count or utilization rate which is a combination of these 2 are good barometers. I would like to see them go up in future Qs instead of stabilizing. I would imagine that even the 51M members use TDOC only for a small portion of their medical visits currently. So, they have a lot of room to grow even within their member base which again means the # of visits needs to go up several folds if we believe the telehealth growth story has been accelerated due to Covid. I do see a lot of ads on TV nowadays and even my insurance provider, carefirst keeps emailing me about telehealth options. Of course, we never know unless we start seeing some numbers in the next few Qs.

Your detailed breakdown helped me dig deeper as well. So, many thanks

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An opportunity to dig deeper is coming next week.

Investor Events
January 11, 2021
J.P. Morgan 39th Annual Healthcare Conference
10:00 AM ET


Hello. New member here. I have been consuming the last few months of posts and board rules/concepts over the last few weeks.Unbelievable knowledge and analysis.

I noticed when I clicked the above link, that the report is out.…
I will let keener minds then myself do the deep dive.


From the JP Morgan Healthcare Conference:…

We correctly assumed the updated revenue guidance was reported with such a small change due to this forthcoming presentation. Given their fiscal year is already over, I expect this is very accurate guidance.

Current 2020E: $1.091-1.093MM

Using the mid-point, this equates to $381MM in Q4 Revenue, a 109% increase YoY and 32% sequential increase.

BUT, late in the deck on slide 22 we find:

  • Sustainable long-term growth 30-40% average annual revenue growth expected through 2023 (not the 50-70% we like to see on Saul’s board)
  • Strong gross margin profile with growing operating leverage Mid-60s gross margin, significant operating leverage opportunity (again, slightly lower than the 70-90% we like to see here - it appears Livongo’s higher gross margins aren’t lifting TDOC)

So they are indicating that growth is slowing, gross margins aren’t getting substantially better. I’ll be reducing my position on this basis.

(Long TDOC)


So, just to clear up the potential confusion around the numbers:

Using top-line, best case guidance…

TDOC initially guided to $304 million for Q4 when they reported Q3 earnings on October 28th. Then, they filed an 8-K on November 10th (see here -…) where as you can see they guided to $379 million for Q4 and full year to $1,090 million. In the 8-K they literally state the guidance update is “to reflect the completion of the merger with Livongo Health”. Thus, one can deduce they are attributing $75 million to Livongo for Q4, as both the Q4 and full year guide reflect that.

But that doesn’t tell the full story. As TMF user Digized mentioned in a previous post regarding the guidance, “The LVGO merger closed on October 30th, so it’s only incorporating the last two months”

If we assumed equal weighted revenue distribution with $75 million for November and December for Livongo, then October would have been 75/2 = $37.5 million, and 37.5+75=$112.5 million Livongo revenue guidance for Q4.

Now, TDOC just raised the guidance again on January 11th from $1,090 to $1,093 million, which is only a $3 million bump to $382 million.

For the sake of argument, if you attributed that $3 million to Livongo, you’d have $115.5 million for Livongo contribution in Q4 as of Jan 11th.

Before the Livongo-induced guidance bump, TDOC guided $304 million, which was 94% YoY and 5% QoQ. Livongo finished Q3 with total revenue of $106 million, so Q4 @ $115.5 million (probably a best-case scenario) would be 129% YoY and 9% QoQ on Livongo revenue.

Mid-60’s revenue growth probably makes sense given TDOC was low 60’s and LVGO was mid 70’s but TDOC has 3 times the revenue.

The 30-40% annual average revenue growth was something they had mentioned on the Q3 conference call. That’s probably conservative since they are comfortable enough to say “through 2023” but as always, we’ll just have to follow the story that the real numbers tell us as 2021 moves along. At this point I doubt we’ll get another guidance update, so it’s likely the final numbers here are pretty much the final numbers for Q4.

In short, tbh I don’t think the story is materially different than it was before this particular JP Morgan conference.

Long TDOC @ ~8%


Before Livongo acquisition their organic growth rate in next few years was projected to be in 30s. After Livongo - they increased their “post-Livongo” organic growth rate forecast to 30-40s.

I urge u guys to pay attention that their business model includes relatively frequent acquisitions. It reminds me of Twilio - which is also frequently doing bigger acquisitions. Compare this to Coupa which does smaller bolt-on acquisitions periodically as well.

I don’t have position in TDOC for the reasons discussed on our board in 2020 in different threads (please use search function). On the other hand, with Biden and all the democrats there could be a big push for tele-medicine this year and TDOC could explode. But this is more kind of a macro-economic bet. It’s not really how we invest on this board - in the fast(est) growing companies with recurring revenues, asset light model, high margins etc. We focus on micro-economic part - i.d. the company itself. Of course, structural tailwinds and general macro is important, but we focus on micro to the best of my understanding. 30-40s organic growth rates are (too) low for me personally + all the “rigidity” of health care system in the US and abroad etc.

Of course, I could be totally wrong here (by not owning TDOC), just want to point out especially to newer members that, from investment perspective, TDOC is not a CRWD, NET or ZM. It’s much more complicated investment thesis. Search previous discussions on the board for details.



There is a lot of effort to read the tea leaves to gain insights into the effects of the merger / acquisition on earnings. I would caution that we should expect earnings to be choppy from one quarter to the next, particularly with the LVGO contribution, because there is a seasonal dimension to companies deciding to add their services. Importantly, I am inclined to think 2020 will be atypical in this regard because the pandemic likely altered the timing of such decisions and there may be some sort of signal also related to economic contraction. In other words, probably two signals – one for the move to WFH and need to take care of employees there, and one for the belt tightening that many companies experienced. I continue to hold my shares, but I am maintaining a fairly modest position.


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