After two years of “hyper-growth,” Teladoc (NYSE: TDOC) expects gains in its B2C behavioral health product, BetterHelp, to slow.
In Q4, BetterHelp revenue grew by 29% year over year, raking in $277 million. Overall, that made up, more than 40% of Teladoc’s consolidated revenue of $638 million. BetterHelp business had an adjusted EBITDA of $53 million. Meanwhile, Teladoc’s integrated care segment had an adjusted EBITDA of $44 million.
“At this point, BetterHelp is over a $1 billion business,” Mala Murthy, Teladoc’s CFO, said on a Q4 earnings call Wednesday. “I don’t think you’re going to see it return to the type of hyper-growth that this business has seen over the past two years.”
Still, the New York-based virtual provider sees incremental growth for its B2B therapy provider over a long period. In Q4, BetterHelp grew to 450,000 users, up slightly from 437,000 in Q3.
“We do think, importantly, that there remains a long runway for growth in this market. If you think about virtual therapy, it’s still under-penetrated,” Murthy said. “And a lot of the structural issues, or access, and cost aren’t getting addressed in other places. So the tailwinds for this business are still very strong. … BetterHelp is still likely to add more incremental revenue this year than, frankly, most of our competitors generate in total annual revenue.”
On the earnings call, CEO Jason Gorevic said the company’s 2023 guidance reflects a “balanced approach to top and bottom line growth.” The company projects a $610 million to $625 million range for the first quarter of 2023, and $2.5 billion to $2.6 billion for the year.
However, the company’s outlook on BetterHelp and its lower-than-expected yearly revenue guidance has some analysts critical of its direction.
“We believe the lower-than-expected revenue guide reflects the continued slowdown of BetterHelp, and the normalization of demand for the company’s core offering. We expect guidance to weigh on shares as investors digest the details,” Jefferies analysts wrote in a note.
The performance of BetterHelp is more closely aligned with macroeconomics than Teladoc’s other business segments.
“We’re more attuned to [the economy] in the BetterHelp segment and oriented around the sensitivity of the consumer, given the macroeconomic uncertainty. Certainly, we’ve factored that into our outlook over the course of this year,” Gorevic said. “I think in the B2B segment, it really has the effect of sometimes slowing down the buying process or the decision-making process, but doesn’t necessarily stop it altogether.”
Integrated care
As for the B2B segment, Teladoc focuses on incorporating mental health services as part of its integrated care business.
“Our standard offering for Primary 360 delivers mental health along with virtual primary care. That mental health tends to be therapy as well as access to psychiatry for medication management,” Gorevic said. “Having said that, not every client takes a standard or full bundle of services.”
Gorevic touted the company’s new integrated behavioral health, chronic care and primary care integration app. Specifically, he said that this product is appealing to enterprise clients.
“We hear a growing desire from our clients to shift away from point solutions and toward multi-product integrated virtual and digital platforms,” Gorevic said. “At the same time, we’re seeing clients increasingly focused on demonstrated results. Teladoc Health has been at the forefront of the adoption curve. And we believe that our scale, breadth of product offerings and proven outcomes will enable us to maintain and expand our position in the market.”
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