Digital medical services platform Teladoc Health (NYSE:TDOC) met Wall Street’s revenue expectations in Q4 CY2024, but sales fell by 3% year on year to $640.5 million. On the other hand, next quarter’s revenue guidance of $618.5 million was less impressive, coming in 2.4% below analysts’ estimates. Its GAAP loss of $0.28 per share was 26.1% below analysts’ consensus estimates.
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Teladoc (TDOC) Q4 CY2024 Highlights:
- Revenue: $640.5 million vs analyst estimates of $641 million (3% year-on-year decline, in line)
- EPS (GAAP): -$0.28 vs analyst expectations of -$0.22 (26.1% miss)
- Adjusted EBITDA: $74.84 million vs analyst estimates of $83.27 million (11.7% margin, 10.1% miss)
- Management’s revenue guidance for the upcoming financial year 2025 is $2.52 billion at the midpoint, missing analyst estimates by 0.9% and implying -1.9% growth (vs -1.2% in FY2024)
- EBITDA guidance for the upcoming financial year 2025 is $298.5 million at the midpoint, below analyst estimates of $325.7 million
- Operating Margin: -7.5%, down from -5.3% in the same quarter last year
- Free Cash Flow Margin: 8.8%, down from 17% in the previous quarter
- U.S. Integrated Care Members: 93.8 million, up 4.2 million year on year
- Market Capitalization: $1.92 billion
“We had a solid finish to the year, both in terms of performance and advancing initiatives important to our future. Consistent with our guidance range, Integrated Care delivered revenue growth and strong margin expansion, and progressed well on key priorities, including the announced agreement to acquire Catapult Health. In BetterHelp, while we were pleased with the sequential improvement in key metrics in the fourth quarter, the operating environment continues to be challenging and we remain focused on actions to stabilize results consistent with our overall virtual mental health strategy,” said Chuck Divita, Chief Executive Officer of Teladoc Health.
Company Overview
Founded to help people in rural areas get online medical consultations, Teladoc Health (NYSE:TDOC) is a telemedicine platform that facilitates remote doctor’s visits.
Online Marketplace
Marketplaces have existed for centuries. Where once it was a main street in a small town or a mall in the suburbs, sellers benefitted from proximity to one another because they could draw customers by offering convenience and selection. Today, a myriad of online marketplaces fulfill that same role, aggregating large customer bases, which attracts commission-paying sellers, generating flywheel scale effects that feed back into further customer acquisition.
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, Teladoc’s 8.1% annualized revenue growth over the last three years was mediocre. This fell short of our benchmark for the consumer internet sector and is a tough starting point for our analysis.
This quarter, Teladoc reported a rather uninspiring 3% year-on-year revenue decline to $640.5 million of revenue, in line with Wall Street’s estimates. Company management is currently guiding for a 4.3% year-on-year decline in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to remain flat over the next 12 months, a deceleration versus the last three years. This projection doesn't excite us and implies its products and services will see some demand headwinds.
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U.S. Integrated Care Members
User Growth
As an online marketplace, Teladoc generates revenue growth by increasing both the number of users on its platform and the average order size in dollars.
Over the last two years, Teladoc’s u.s. integrated care members, a key performance metric for the company, increased by 6.9% annually to 93.8 million in the latest quarter. This growth rate is slightly below average for a consumer internet business. If Teladoc wants to reach the next level, it likely needs to enhance the appeal of its current offerings or innovate with new products. 
In Q4, Teladoc added 4.2 million u.s. integrated care members, leading to 4.7% year-on-year growth. The quarterly print was lower than its two-year result, suggesting its new initiatives aren’t accelerating user growth just yet.
Revenue Per User
Average revenue per user (ARPU) is a critical metric to track for online marketplace businesses like Teladoc because it measures how much the company earns in transaction fees from each user. ARPU also gives us unique insights into a user’s average order size and Teladoc’s take rate, or "cut", on each order.
Teladoc’s ARPU fell over the last two years, averaging 3.2% annual declines. This isn’t great when combined with its weaker u.s. integrated care members performance. If Teladoc tries boosting ARPU by taking a more aggressive approach to monetization, it’s unclear whether user growth would be sustainable. 
This quarter, Teladoc’s ARPU clocked in at $6.83. It declined 7.4% year on year, worse than the change in its u.s. integrated care members.
Key Takeaways from Teladoc’s Q4 Results
We struggled to find many positives in these results. Its full-year EBITDA guidance missed significantly and its revenue guidance for next quarter fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 11.7% to $9.71 immediately after reporting.
Teladoc didn’t show it’s best hand this quarter, but does that create an opportunity to buy the stock right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
