TDOC short/medium term VERY unclear

Quick FYI, If you are a super long term buy and hold investor, this post is probably not for you.

I am a long term believer in TDOC as a company, and if I were a rip van winkle style investor, I’d be keen to stay invested.

Thing is, this company requires way too much guess work and mental gymnastics these days to figure out on a quarter to quarter basis.

What was Teladoc’s growth this quarter?
Organically it grew at 79%, so because we know last year’s revenue numbers for Teladoc alone were $156mm in Q4 2019, we can back out organic TDOC revenues at $279mm for Q4 2020. 79% organic rev growth YoY sounds very good, but Q3 TDOC’s organic revenue was $262mm (I subtracted the InTouch health revenue), so organic rev growth QoQ was only 6.5%, which means TDOC had a seasonally weak Q4.

Moving on to inorganic growth, the picture gets murky in Q4 when you factor in that TDOC acquired LVGO on 10/30/2020 (approximately one month into the 4th quarter) and TDOC acquired InTouch Health on 7/1/2020. So this most recent Q4 “inorganic” growth got two months of Livongo growth added into it and 3 months of InTouch health added into it.

So what were Livongo’s numbers this quarter, and what were InTouch health numbers this quarter? We cannot possibly know this, but we can try to use past numbers to take an educated guess. A big problem with this is the high variability in Livongo’s revenue growth per quarter. Taking a guess at Livongo’s revenue at any given time seems an ill fated exercise.

What will Teladoc’s growth be next quarter?
All we know is that growth is forecast for $455mm, but presumably this is inorganic growth. $455mm inorganic from the $383mm inorganic in Q4 represents 18.8% growth QoQ, which sounds terrific, but for Q1 2021 they are getting a full 3 months of Livongo, while in the comparison quarter of Q4 2020 we already established they only had 2 months of Livongo, so a QoQ comparison is not fair here, and if anything it makes TDOC look much better than reality.

So this inorganic number includes Livongo and InTouch health. Well, Livongo historically has reported HUGE Q1 numbers. So how big will it be this year? Again, we have no idea, or if the law of large numbers comes into play here LVGO may be in for a much smaller Q1 this year.

Furthermore, thanks to Covid, Teladoc had a wonky year to say the least. This further complicates comparisons. In olden days, TDOC would see stronger Q4’s and Q1’s dependent on how bad the flu season is.

Wrapping up this section, the guidance really gives us no idea how either a) Teladoc alone will perform or b) how Livongo will perform or c) how InTouch health will perform.

Why do we care, since they are all one business now? Well, outperformance of one can completely mask underperformance of the other two. Or underperformance of one could make things look much worse than they are.

What happens when Q1 2021 gets reported?
Firstly TDOC does not have to use the word “organic” next time around (nor did they have to this most recent time). They should, but they also should have broken out LVGO numbers and InTouch numbers this most recent quarter. So who is to say if they will do what they should do?

If, for Q1 2021, they do what they did in Q4 2020 (big if in my opinion), and they tell us “organic revenue growth which does not include LVGO and InTouch Health”, then we still don’t know how LVGO or InTouch are performing individually. LVGO in particular is a major part of TDOC’s revenue, so I am keen to say that we need this information in order to understand whether or not TDOC is in hyper growth or just normal growth. And if we don’t know have a clear picture by how much it’s growing, and we do have a clear picture of our other stocks, why own Teladoc at all?

Plus if they don’t tell us TDOC’s organic growth next quarter, then we are even more out of the loop as to what is really going on with TDOC as an investment.

Additionally, because we don’t know the Livongo or Intouch Health effect for Q4 2020, how actually meaningful can any number thrown out next quarter be? Just to be even more clear, I am saying that, because Q4 2020 had a weird mix of 2 months of LVGO and 3 of InTouch Health, how meaningful would inorganic growth of Q1 2021 be? My guess is, not very meaningful.

And because of said high seasonal variance, comparing QoQ numbers can only be but so helpful. LVGO and TDOC both tend to have strong Q1’s and weaker Q2’s, so they are not even really comparable quarters. So guidance given for Q2 2021 is also not going to be meaningful.

Lastly, comparing YoY numbers are not going to be possible for the next 3 quarters unless they break out LVGO and InTouch (which they won’t), so we will need to wait until they report Q1 2022 (which would happen in Spring 2022) before we can start looking at meaningful YoY numbers.

In conclusion, we do not know what happened with LVGO and InTouch Health for Q4 2020, nor can we count on having this information regarding future quarters. Additionally, QoQ comparisons will not be particularly useful due to inherent seasonality of the business, and YoY comparisons will not be helpful until we have an apples to apples comparison in Spring 2022 (to compare against Q1 2021).

These types of questions don’t exist for any other stock in our small universe of growth stocks - for those reasons I am out.


I am also doubting this company’s estimates and have lowered my expectations, I have not sold out completely yet, but have trimmed, especially since I do not think that the stock price will recover from its lows significantly given the uncertainty in their numbers/forecast. These are my internal notes that I have kept on my bearish thesis. My only bull case here is that somehow Livongo will contribute meaningfully after 2022, and they might be able to launch effectively their virtual primary care (but concerns on age cohorts below)

  • From their earning call “Turning to fourth quarter results. Total revenue increased 145% to $383 million or 79% on an organic basis. U.S. access fee revenue for the quarter was $283 million, representing growth of 188% over the prior year’s quarter. Total international revenue of $34 million grew 16% versus the prior year.”

My note: So the above represents, 10% international revenue, and growing YoY only 16%

Where is this international going to come from exactly? 16% YoY is nothing! Other concerns here is that most countries have national health systems, not sure why would they want to adopt Teladoc, and more specifically how Teladoc will make money from that. There are so many rules and regulations, on top of localization concerns - I don’t see the International part expanding significantly.

  • The margins for doctor visits, shrink, with more visits per client, cost is increasing

  • Physicians don’t like it because supposedly get paid “$20” per visit ? Saw that comment somewhere, not sure if its actually the case.

  • Bad reviews - their app has plenty of bad reviews, some of which are actually describing the app as being buggy (video concern below), some the actual service (doctors servicing clients on the go/from their cars,etc)

  • The age cohorts are not clear for their estimated potential membership - old people (ones that are sick more often) prefer to go doctor in person, only younger are more tech savvy but they are not that sick in general

Age/Wealth/Etc Cohort concerns
The use of technology to maintain access to outpatient care raises important equity concerns. The digital divide has been well documented, with lower rates of technology and broadband adoption among older patients, racial/ethnic minority groups, and those of lower socioeconomic status
Teladoc requires video - which is not available in rural area if patient has no access to broadband connection (or no money to pay for one).
This report is related to different cohort and demographic concerns in telehealth:…

1 Like