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.
I believe you are a retired physician so feel free to dispute this but I read a few places that at least 80% of the time, the doctor knows the diagnosis just from the history taken and before any hands-on physical. That being the base, one can see how this concept could be a useful tool to prevent ER visits, etc…and that is probably why Aetna is pushing this for its patients nationwide.
I could see its use for dermatology, HIV, Diabetes and psychiatry quite easily as well as many other indications…? reduced readmission rates.
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. That’s a bundle! 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.
I believe we already discussed this but remember that Best Doctors was very poorly advertised with mailed flyers such that Teledoc believes that they will do a much better job getting the word out that this service is available and expand usage dramatically. We also discussed that they believe this acquisition essentially DOUBLED their TAM. So for $440 million purchase (around 1/4 their then market cap), they expanded their TAM by 2 times.
The second reason that they felt justified with this price point was that they want to become the “go to” platform for virtual care (telemedicine plus) and this would differentiate their offering from the many other telemedicine wannabe’s that are already in existence. The “platform” is a crucial strategic initiative to build a reputable and dependable alternative to higher expense medical care such as an ER visit but also now with what may be inadequately delivered in a community hospital or overseas (complicated cases)…hence perhaps more than just Aetna will sign on a pay per member per month to Teledoc given its platform of services.
They believe they have an annual $200 million cross selling opportunity between Teledoc and Best Doctors.
If they pull these three core issues off with this acquisition (doubling of TAM and platform differentiator), this will have been a seminal event in their growth. But without a doubt, an investor here has to have a leap of faith that these two initiatives can be achieved.
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).
OK, of course this doesn’t appear great but it also doesn’t appear predictive of anything dire…this is a recent IPO and the platform is just being built out with the recent Best Doctors acquisition barely rolled into the product line and with minimal impact on this past quarter’s numbers. As in most startups, we should first see top line growth (up some 80%+ YoY). They say they will be + for EBTDA by 4th quarter!
EBITDA the last 3 quarters were -9, -5, -1 and now in 4th quarter +2. Or for year end totals past 3 years -48, -40 and then -14 for 2017 (estimate). This seems like progress.
But their main focus needs to be expanding their footprint and there are signs they are making some headway in that regard. On nearly every growth metric (PMPM, virtual visits), they are growing rapidly…visit growth up 187% YoY.
Again I refer you back to their recent investor slides:
They have less than 1% market penetration into a TAM of $57 Billion.
AS you look at the technology adoption lifecycle (TALC), they are at the early adoption stage…Aetna/CVS, United health, Anthem and 206 hospitals are signed on…probably more to follow.
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.
I had from 42.3 to 54.4 for increase of 29% from 2016. SBC is pretty low but I would expect more secondary offerings to fund future growth.
So while an investment in TDOC is not for everyone and without question, there are various concerns, it doesn’t seem grossly out of the universe from some other stocks you are invested in like SHOP, TLND (100% increase in shares), NTNX(21% increase shares), etc.
TDOC is certainly high risk but potential very high return investment at a market cap of $2.3 Billion, P/S of 11, and TAM that may be over $50 Billion. It is still very early in the expansion of their footprint, establishment of the virtual medical platform and cross selling…if these three things occur…will be a great investment…if not…much less so.