Thanks to duma for finding my post on TDOC for me again. My post was from just three months ago (Jan 2018) and I haven’t followed the company since, so I’m not up to date, but I think that the concerns I mentioned must still be relevant. So here it is again for those who are interested (with a few small updates made today). Look, they may do great, but these are just my thoughts:
I had a small position briefly early in the year (2017). I thought that doing some medical appointments by phone, and saving medical costs, is something that insurance companies and enterprises would both jump at. However I realized that a telephone “exam” is only good for patients that you have no need to examine physically, or for a preliminary screening, or something like that. But they were losing money and losing a little more each quarter than the year before. I got out when they bought Best Doctors, which is a consulting-at-a-distance service, and a totally different, 30-year old, stable business. [“Send us a copy of all your records and we’ll have one of our specialists evaluate them for you and report back.” That seemed unrelated to Teledoc’s business to me.]
I thought I’d take another look at it, again thinking that doing some consults and saving medical costs is something that insurance companies and enterprises would both jump at. Maybe a wave of the future? Here’s what’s holding me up"
First, here’s why I didn’t like the acquisition
Teladoc paid $440 million!!! Remember that Teladoc had only $123 million in revenue in 2016, and was on track for maybe $180 million in 2017. So that $440 million was a bundle for them! They paid well more than twice their own annual revenue. And for a nearly 30-year old business that generated just $6.5 million of EBITDA in 2016. It’s almost unbelievable that they paid that much!!!
The huge acquisition takes them from a $134 million net cash position at the end of the Mar quarter to a net debt position of roughly $300 million. That’s a lot of debt for a business with a combined revenue run rate of about $280 million, and growing losses. How are they ever going to pay all that debt back, aside from selling more shares and further diluting (more on that below).
Second there’s the growing losses
Loss for 2016 was $74.2 million, up from losses of $58.0 million the year before. That’s losses growing by 28%.
3rd quarter loss was $31.3 million, up from $29.8 million,
For the 4th quarter they are predicting losses of $24.0 million up from $14.3).
[That was what I wrote in January. Here’s what they actually reported:]
4th quarter 2017 net loss was $44.4 million for the compared to $14.3 million in the 4th quarter 2016. (So I was worried that they’d lose $24 million, up from $14 million, but they lost $44 million!) For the full-year 2017, net loss was $106.8 million compared to $74.2 million in 2016. Losses were up 44%. It was even much, much worse than I expected. ]
Thirdly there’s the massive dilution.
Weighted average shares for the first nine months were 54.4 million, up from 41.1 million the year before at that time. That’s up 32% in one year.
If you are in Teladoc, what are you seeing that I’m not??? I know they are signing up businesses, but what about the debt, the losses, the dilution?
Thanks for any help,