Teladoc Health, Inc. (TDOC) Earnings

Management highlights

### Strategic Context & Overall Positioning - Management confirms ongoing industry shifts in consumer and client care access preferences reinforce the company's existing strategic priorities, and Teladoc maintains its position as the global leader in virtual care. - Consolidated Q2 2026 results fell within the prior guidance range, with uneven performance across the two business segments. ### Integrated Care Innovation & Progress - Launched *Teladoc One*, a new connected care model that unifies all of Teladoc's clinical and technical capabilities to deliver person-centered, whole-person care instead of fragmented condition-specific products. - Teladoc One leverages Teladoc Health Pulse, an AI-powered intelligence engine that delivers multidimensional clinical insights directly to care teams at the point of care, and will launch broadly in January 2027, initially focused on high-cost cardiometabolic patient populations, with plans to expand to additional groups over time. - Enhanced the company's core 24/7 acute care offering with expanded condition coverage and specialist support for frontline clinicians. - Chronic care enrollment grew driven by increased client adoption of multi-condition care bundles, which expand the total eligible patient population. ### BetterHelp Insurance Transition Updates - Completed the national U.S. insurance footprint rollout ahead of the original schedule, launching all remaining states during the quarter and establishing a baseline national in-network presence. - As of Q2, BetterHelp has contracted for over 150 million in-network covered lives and credentialed more than 8,000 mental health providers for the insurance network. Insurance sessions grew to over 20,000 per week, representing an annualized revenue run rate of over $110 million, up from $75 million at Q1 2026. - Consumer demand for in-network insurance-covered care grew faster than expected, with ~70% of potential BetterHelp users preferring insurance, and up to 80% in some markets. This caused a faster-than-anticipated shift away from cash pay, while provider network capacity expansion could not keep pace with accelerating demand, leading to a net decline in total segment revenue beyond prior assumptions. - Management has enacted three key strategic changes in response: (1) prioritize expanding insurance network capacity through accelerated provider recruitment, retention, and platform efficiency improvements; (2) shift historical direct-to-consumer cash pay advertising to a national insurance-aligned strategy, reducing total 2026 ad spend to align with current capacity and margin targets; (3) near-term de-prioritization of international expansion to reallocate product, engineering, and marketing resources to U.S. insurance scaling.

Guidance

- **2026 Consolidated Guidance**: - Revenue guidance is lowered to $2.36 billion to $2.45 billion, a 5% reduction at the midpoint from prior guidance, driven entirely by the updated faster decline in BetterHelp cash pay revenue. - Adjusted EBITDA guidance is raised slightly at the midpoint to $271 million to $303 million, representing ~85 basis points of margin expansion from 2025. Free cash flow guidance is unchanged at $130 million to $170 million. - 2026 stock-based compensation is now expected to be below $50 million, a 35% year-over-year decline. Net loss per share guidance is set at $0.75 to $1.00. - **Integrated Care 2026 Guidance**: - Revenue growth guidance is 0.8% to 2.4% year-over-year, adjusted for a client-requested deferral of a large contract implementation from 2026 to 2027 and a smaller FX tailwind than previously expected. Adjusted EBITDA margin guidance is raised 40 basis points at the midpoint to 15.6% to 16.4%, an 85 basis point increase from 2025. - International organic constant currency revenue growth is still expected to land in the high single digits. - **BetterHelp 2026 Guidance**: - Total segment revenue guidance is lowered to $770 million to $830 million, representing a 19.0% to 12.7% year-over-year decline, driven by a faster-than-expected contraction in cash pay revenue. Insurance revenue guidance is maintained at $90 million to $105 million. - Adjusted EBITDA margin guidance is unchanged at 3.0% to 4.6%, with the lower revenue offset by a mid-to-high 20% reduction in advertising and marketing spend aligned with new strategic priorities. By Q4 2026, insurance revenue is expected to hit an annualized exit run rate approaching $140 million. - **Q3 2026 Consolidated Guidance**: Revenue of $569 million to $609 million, adjusted EBITDA of $62 million to $74 million.

Segment performance

1. Integrated Care Segment: Q2 2026 revenue was $394 million, a 0.7% year-over-year increase, representing 64.9% of consolidated Q2 revenue. Adjusted EBITDA for the segment was $65 million, a 13.6% year-over-year increase, with a 16.5% adjusted EBITDA margin. US integrated care membership reached 100.3 million at quarter end, and chronic care program enrollment hit 1.27 million, up 6% sequentially and 14% year-over-year. Double-digit international revenue growth, led by a 30% increase in hybrid care revenue, offset ongoing headwinds from lower subscription revenue. 2. BetterHelp Segment: Q2 2026 revenue was $213 million, an 11.6% year-over-year decrease, representing 35.1% of consolidated Q2 revenue. Insurance revenue hit $22 million (near the high end of guidance, up $9 million sequentially), offset by an accelerated decline in cash pay revenue. Total average paying users declined 11% year-over-year to 346,000, while insurance users grew over 70% sequentially. Adjusted EBITDA for the segment was $0.5 million, with a 0.2% margin, slightly below the midpoint of guidance.

Risks & headwinds

- BetterHelp's business model transition from cash pay to in-network insurance faces persistent capacity constraints: accelerating consumer demand for insurance outpaced provider network expansion, with uneven capacity constraints across different states and payer groups, leading to unrealized revenue that would have otherwise offset cash pay declines. - Sustained, faster-than-anticipated declines in U.S. cash pay revenue create ongoing revenue pressure during the multi-quarter transition, as growing insurance revenue cannot immediately fill the gap created by accelerating cash pay contraction. - Integrated care faces headwinds from client enrollment volatility, competitive pressure from existing point solution providers, and FX fluctuations that negatively impact expected revenue growth. - The timing of market acceptance and revenue traction for the new Teladoc One offering is uncertain, as the product just launched and full market uptake will unfold over multiple quarters.

Analyst Q&A

• Q: What is the timeline for closing the BetterHelp insurance provider capacity gap, and what initiatives are being used to accelerate capacity growth?

  A: Management is expanding capacity through two sets of initiatives: recruiting new providers both from the existing cash pay network and external therapist pools that already accept insurance, and pursuing NCQA accreditation and delegated credentialing to speed up onboarding. They are also improving platform and scheduling efficiency for existing providers to increase usable capacity, and dynamically adjusting to market-by-market demand shifts. Management declined to give a specific timeline for closing the gap, noting current actions are focused on strengthening the 2026 position to drive strong 2027 growth.

• Q: How do reimbursement and long-term profitability differ between BetterHelp's cash pay and insurance models?

  A: Cash pay offers therapists more flexibility and fewer administrative requirements, while insurance requires additional documentation and claim processing, so it is not a fit for all providers. Reimbursement varies by market based on local supply and demand dynamics. Gross margin percentage for insurance is expected to be lower than cash pay due to inherent business model differences. However, insurance is expected to lower long-term advertising spend and customer acquisition costs, and operating leverage will kick in as insurance scales, leading to more stable long-term profitability. The lower volatility of insurance will create a more durable business than the cash pay model.

• Q: Why is BetterHelp de-prioritizing international expansion near term, and when might investment resume?

  A: Management emphasized this is a near-term resource prioritization, not a retreat from international markets. BetterHelp has finite product, engineering, marketing and operational resources, and the faster-than-expected demand for U.S. insurance means the highest return on these resources is supporting U.S. insurance scaling. The company will maintain its existing presence in international markets, and will revisit increasing investment in international expansion once U.S. insurance initiatives are on solid footing.

• Q: How is Teladoc One impacting integrated care selling season conversations, and what are current sales trends?

  A: The 2026 selling season is tracking in line with expectations and 2025 levels, with productive strategic conversations with clients who are focused on reducing care fragmentation and controlling rising medical costs. Teladoc One, which launched the prior week, has received strong early interest from clients, who respond to its comprehensive, person-centered model that differs from the fragmented point solutions common in the market. Multi-condition care bundle adoption continues to grow, with solid growth in weight and obesity management programs.