A month has gone by since the last earnings report for Teladoc (TDOC Quick QuoteTDOC - Free Report) . Shares have lost about 16.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Teladoc due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Teladoc Health Incurs Loss in Q1, Revenues Up Y/Y 

Teladoc Health reported first-quarter 2023 adjusted loss of 37 cents per share, narrower than the Zacks Consensus Estimate of a loss of 51 cents and our estimate of a loss of 54 cents. The bottom line improved 21.3% year over year.

Operating revenues improved 11.3% year over year to $629.2 million (surpassing management’s expected range of $610-$625 million). The top line outpaced the consensus mark by 1.9% and our estimate of $613.7 million.

The quarterly results gained from strong growth in access fees and other revenues coupled with improving segmental profitability of Integrated Care. However, deteriorating earnings of the BetterHelp segment partially offset the positives.

Operational Update

Revenues from Access Fees (which comprised 87.6% of total quarterly revenues) amounted to $550.9 million, which increased 12% year over year in the quarter under review. The figure beat our estimate by 3%.

TDOC generated $78.4 million of other revenues, which rose 6% year over year. However, the metric missed our estimate by a whisker.

On a geographical basis, revenues from the United States grew 10% year over year to $541.7 million, accounting for 86.1% of total revenues. The metric beat our estimate by 1.2%. International revenues improved 18% year over year to $87.6 million in the first quarter. The metric beat our estimate by 12.3%.

Adjusted EBITDA of $52.8 million slipped 3% year over year. However, the figure surpassed management’s view of $42-$50 million, beating our estimate of $48 million.

The adjusted gross margin of Teladoc Health improved 290 basis points year over year to 69.8% in the quarter under review.

Total expenses of $706.3 million decreased by a huge margin, mainly due to goodwill impairment incurred last year. Sales and technology and development expenses also declined in the quarter.

Segmental Update

In the quarter under review, TDOC reported revenues of $350 million in its Integrated Care segment. The figure grew 5% year over year. The metric beat the Zacks Consensus Estimate by 0.4% and our estimate of $346.9 million.

BetterHelp segment’s revenues of $279.3 million climbed 21% year over year on the back of new member growth and stable customer acquisition cost in the quarter. The metric beat the Zacks Consensus Estimate by 4% and our estimate of $266.8 million.

Adjusted EBITDA of Integrated Care and BetterHelp amounted to $35.1 million and $17.6 million, denoting an increase of 51% and a decrease of 41%, respectively, from their corresponding prior-year quarter’s reported figures. The metric for Integrated Care beat the Zacks Consensus Estimate by 31.3%, while the same for BetterHelp missed the mark by 13.6%.

Visits & Memberships

Total visits came in at 4.9 million, which rose 8% year over year in the first quarter. The metric missed the Zacks Consensus Estimate by 0.5% and our estimate by 2%.

U.S. Integrated Care Members witnessed an uptick of 7% on a year-over-year basis to 84.9 million (within the expectation of 84-85 million) as of Mar 31, 2023. The metric beat our estimate by 1%.

Financial Update (as of Mar 31, 2023)

Teladoc Health exited the first quarter with cash and cash equivalents of $888.6 million, which declined from $918.2 million at 2022-end. Total assets of $4,309.1 million declined from $4,345.4 at 2022-end.

Debt amounted to $1,536.1 million, up from $1,535.3 million at 2022-end. Total stockholders’ equity declined 0.7% from 2022-end to $2,291.2 million.  

In the quarter under review, net operating cash flow increased nearly 1.5 times year over year to $13.2 million. Free cash outflows were $32.5 million, narrower than $62.6 million a year ago.

Guidance

Q2

For second-quarter 2023, Teladoc Health anticipates total revenues to be between $635 million and $660 million. Adjusted EBITDA is estimated within $60-$68 million. Net loss per share is expected within 55-45 cents. U.S. Integrated Care Members are forecasted to stay in the 84.5-85.5 million range.

Full Year

TDOC’s management expects revenues for 2023 to be between $2,575 and $2,675 million, the mid-point of which indicates an improvement of 9.1% from the 2022 figure of $2,406.8 million.

Adjusted EBITDA is anticipated to be in the range of $285-$325 million, the mid-point of which suggests 23.7% growth from the 2022 figure of $246.5 million.

Net loss per share is predicted within $1.25-$1.70. U.S. Integrated Care Members are expected in the 84-86 million band.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

At this time, Teladoc has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Teladoc has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.