Teladoc Health, Inc. [TDOC] Filings

10-Q 1 tdoc-20240930.htm 10-Q tdoc-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________________________________________________________________________

Form 10-Q


			x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


			☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File Number: 001-37477

______________________________________

TELADOC HEALTH, INC.

(Exact name of registrant as specified in its charter)


Delaware						04-3705970
(State of incorporation)						(I.R.S. Employer Identification No.)

2 Manhattanville Road, Suite 203
Purchase, New York						10577
(Address of principal executive office)						(Zip code)

(203) 635-2002

(Registrant’s telephone number including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	TDOC	New York Stock Exchange

______________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of October 24, 2024, the Registrant had 172,166,723 shares of Common Stock outstanding.

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TELADOC HEALTH, INC.

QUARTERLY REPORT ON FORM 10-Q

For the period ended September 30, 2024

TABLE OF CONTENTS


		Page Number

PART I	Financial Information	2
Item 1.	Financial Statements	2
	Condensed Consolidated Balance Sheets as of September 30, 2024 (unaudited) and December 31, 2023	2
	Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) for the three and nine months ended September 30, 2024 and 2023	3
	Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the three and nine months ended September 30, 2024 and 2023	4
	Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2024 and 2023	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	38
PART II	Other Information	39
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 5.	Other Information	40
Item 6.	Exhibits	40
Exhibit Index		40
Signatures		42

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PART I

FINANCIAL INFORMATION

ITEM 1. Financial Statements

TELADOC HEALTH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data, unaudited)


	September 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	1,243,866	$	1,123,675
Accounts receivable, net of allowance for doubtful accounts of $4,318 and $4,240 at September 30, 2024 and December 31, 2023, respectively	212,039		217,423
Inventories	36,993		29,513
Prepaid expenses and other current assets	115,738		118,437
Total current assets	1,608,636		1,489,048
Property and equipment, net	28,030		32,032
Goodwill	283,190		1,073,190
Intangible assets, net	1,496,698		1,677,781
Operating lease—right-of-use assets	34,115		40,060
Other assets	77,912		80,258
Total assets	$	3,528,581	$	4,392,369
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	37,801	$	43,637
Accrued expenses and other current liabilities	188,095		178,634
Accrued compensation	66,437		102,686
Deferred revenue—current	88,325		95,659
Convertible senior notes, net—current	550,723		—
Total current liabilities	931,381		420,616
Other liabilities	736		1,080
Operating lease liabilities, net of current portion	36,896		42,837
Deferred revenue, net of current portion	10,469		13,623
Deferred taxes, net	50,846		49,452
Convertible senior notes, net—non-current	990,551		1,538,688
Total liabilities	2,020,879		2,066,296
Commitments and contingencies (Note 14)
Stockholders’ equity:
Common stock, $0.001 par value; 300,000,000 shares authorized; 171,944,014 shares and 166,658,253 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively	172		167
Additional paid-in capital	17,726,127		17,591,551
Accumulated deficit	(16,181,491)		(15,228,655)
Accumulated other comprehensive loss	(37,106)		(36,990)
Total stockholders’ equity	1,507,702		2,326,073
Total liabilities and stockholders’ equity	$	3,528,581	$	4,392,369

See accompanying notes to unaudited condensed consolidated financial statements.

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TELADOC HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share data, unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenue	$	640,508	$	660,238	$	1,929,083	$	1,941,888
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization, which are shown separately below)	179,745		185,960		562,342		566,607
Advertising and marketing	177,462		186,152		531,061		541,698
Sales	47,465		52,309		152,267		160,329
Technology and development	72,383		84,289		230,522		258,583
General and administrative	114,245		115,716		335,494		355,702
Goodwill impairment	—		—		790,000		—
Acquisition, integration, and transformation costs	457		5,824		1,287		16,848
Restructuring costs	3,580		411		14,753		16,043
Amortization of intangible assets	86,906		91,834		276,825		231,205
Depreciation of property and equipment	2,666		2,468		7,203		8,345
Total costs and expenses	684,909		724,963		2,901,754		2,155,360
Loss from operations	(44,401)		(64,725)		(972,671)		(213,472)
Interest income	(15,326)		(12,606)		(42,840)		(33,075)
Interest expense	5,660		5,646		16,957		16,744
Other (income) expense, net	(2,239)		1,792		(1,306)		(2,908)
Loss before provision for income taxes	(32,496)		(59,557)		(945,482)		(194,233)
Provision for income taxes	780		(2,484)		7,354		(2,755)
Net loss	(33,276)		(57,073)		(952,836)		(191,478)
Other comprehensive loss, net of tax:
Currency translation adjustment	1,860		(2,740)		(116)		1,256
Comprehensive loss	$	(31,416)	$	(59,813)	$	(952,952)	$	(190,222)

Net loss per share, basic and diluted	$	(0.19)	$	(0.35)	$	(5.61)	$	(1.17)

Weighted-average shares used to compute basic and diluted net loss per share	171,496,282		165,119,379		169,824,993		164,079,194

See accompanying notes to unaudited condensed consolidated financial statements.

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TELADOC HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data, unaudited)


	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Gain (Loss)		Total Stockholders’ Equity
	Shares	Amount
Balance as of June 30, 2024	171,124,883	$	171	$	17,689,096	$	(16,148,215)	$	(38,966)	$	1,502,086
Exercise of stock options	6,133	—		34		—		—		34
Issuance of common stock upon vesting of restricted stock units	812,998	1		(1)		—		—		—
Issuance of stock under employee stock purchase plan	—	—		—		—		—		—
Stock-based compensation	—	—		36,998		—		—		36,998
Other comprehensive income, net of tax	—	—		—		—		1,860		1,860
Net loss	—	—		—		(33,276)		—		(33,276)
Balances as of September 30, 2024	171,944,014	$	172	$	17,726,127	$	(16,181,491)	$	(37,106)	$	1,507,702

Balance as of December 31, 2023	166,658,253	$	167	$	17,591,551	$	(15,228,655)	$	(36,990)	$	2,326,073
Exercise of stock options	253,146	—		2,711		—		—		2,711
Issuance of common stock upon vesting of restricted stock units	4,728,547	5		(5)		—		—		—
Issuance of stock under employee stock purchase plan	304,068	—		3,153		—		—		3,153
Stock-based compensation	—	—		128,717		—		—		128,717
Other comprehensive loss, net of tax	—	—		—		—		(116)		(116)
Net loss	—	—		—		(952,836)		—		(952,836)
Balance as of September 30, 2024	171,944,014	$	172	$	17,726,127	$	(16,181,491)	$	(37,106)	$	1,507,702

Balance as of June 30, 2023	164,877,180	$	165	$	17,476,451	$	(15,142,692)	$	(38,780)	$	2,295,144
Exercise of stock options	93,855	—		746		—		—		746
Issuance of common stock upon vesting of restricted stock units	586,270	1		(1)		—		—		—
Issuance of stock under employee stock purchase plan	—	—		—		—		—		—
Stock-based compensation	—	—		57,973		—		—		57,973
Other comprehensive loss, net of tax	—	—		—		—		(2,740)		(2,740)
Net loss	—	—		—		(57,073)		—		(57,073)
Balances as of September 30, 2023	165,557,305	$	166	$	17,535,169	$	(15,199,765)	$	(41,520)	$	2,294,050

Balance as of December 31, 2022	162,840,360	$	163	$	17,358,645	$	(15,008,287)	$	(42,776)	$	2,307,745
Exercise of stock options	171,888	—		1,423		—		—		1,423
Issuance of common stock upon vesting of restricted stock units	2,273,321	3		(3)		—		—		—
Issuance of stock under employee stock purchase plan	271,736	—		5,790		—		—		5,790
Stock-based compensation	—	—		169,314		—		—		169,314
Other comprehensive income, net of tax	—	—		—		—		1,256		1,256
Net loss	—	—		—		(191,478)		—		(191,478)
Balance as of September 30, 2023	165,557,305	$	166	$	17,535,169	$	(15,199,765)	$	(41,520)	$	2,294,050

See accompanying notes to unaudited condensed consolidated financial statements.

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TELADOC HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)


	Nine Months Ended September 30,
	2024		2023
Cash flows from operating activities:
Net loss	$	(952,836)	$	(191,478)
Adjustments to reconcile net loss to net cash flows from operating activities:
Goodwill impairment	790,000		—
Amortization of intangible assets	276,825		231,205
Depreciation of property and equipment	7,203		8,345
Amortization of right-of-use assets	7,144		8,325
Provision for allowances for doubtful accounts	2,199		4,935
Stock-based compensation	118,479		154,727
Deferred income taxes	611		(6,658)
Other, net	5,212		9,761
Changes in operating assets and liabilities:
Accounts receivable	3,675		(696)
Prepaid expenses and other current assets	2,849		14,070
Inventory	(8,328)		18,246
Other assets	1,439		(18,362)
Accounts payable	(5,851)		(21,670)
Accrued expenses and other current liabilities	13,980		17,075
Accrued compensation	(35,943)		433
Deferred revenue	(10,456)		(1,261)
Operating lease liabilities	(8,088)		(7,133)
Other liabilities	(336)		75
Net cash provided by operating activities	207,778		219,939
Cash flows from investing activities:
Capital expenditures	(4,658)		(10,060)
Capitalized software development costs	(89,750)		(109,781)
Net cash used in investing activities	(94,408)		(119,841)
Cash flows from financing activities:
Net proceeds from the exercise of stock options	2,711		1,423
Proceeds from employee stock purchase plan	3,721		8,597
Cash received for withholding taxes on stock-based compensation, net	(176)		2,609
Other, net	(2)		—
Net cash provided by financing activities	6,254		12,629
Net increase in cash and cash equivalents	119,624		112,727
Effect of foreign currency exchange rate changes	567		(382)
Cash and cash equivalents at beginning of the period	1,123,675		918,182
Cash and cash equivalents at end of the period	$	1,243,866	$	1,030,527

Cash paid for income taxes, net	$	7,234	$	6,317

Interest paid	$	8,662	$	8,687

Supplemental disclosure of non-cash investing activities
Accruals related to Property and equipment, net and Intangible assets, net	$	3,706	$	10,050

See accompanying notes to unaudited condensed consolidated financial statements.

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TELADOC HEALTH, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization and Description of Business

Teladoc Health, Inc., together with its subsidiaries, is referred to herein as “Teladoc Health,” or the “Company,” and is the global leader in whole person virtual care, forging a new healthcare experience with better convenience, outcomes, and value. The Company’s mission is to empower all people everywhere to live their healthiest lives by transforming the healthcare experience.

The Company was incorporated in the State of Texas in June 2002 and changed its state of incorporation to the State of Delaware in October 2008. Effective August 10, 2018, Teladoc, Inc. changed its corporate name to Teladoc Health, Inc. The Company’s principal executive office is located in Purchase, New York.

Note 2. Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements for the nine months ended September 30, 2024 and 2023, in the opinion of management, reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the Condensed Consolidated Results of Operations, financial position and cash flows of Teladoc Health for the periods presented. However, the financial results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year or for any other future period.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States (“U.S.”) have been omitted or condensed pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The information in this report should be read in conjunction with the Company’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2023 (the “2023 Form 10-K”), which includes a complete set of footnote disclosures, including the Company’s significant accounting policies.

These consolidated financial statements include the results of Teladoc Health, as well as two professional associations and 10 professional corporations (collectively, the “THMG Association”).

Teladoc Health Medical Group, P.A., (“THMG”), is party to a Services Agreement by and among it and the professional associations and professional corporations pursuant to which each professional association and professional corporation provides services to THMG. Each professional association and professional corporation is established pursuant to the requirements of its respective domestic jurisdiction governing the corporate practice of medicine.

The Company holds a variable interest in the THMG Association, which contracts with physicians and other health professionals in order to provide services to Teladoc Health. The THMG Association is considered a variable interest entity (“VIE”) since it does not have sufficient equity to finance its activities without additional subordinated financial support. An enterprise having a controlling financial interest in a VIE must consolidate the VIE if it has both power and benefits—that is, it has (1) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance (power) and (2) the obligation to absorb losses of the VIE that potentially could be significant to the VIE or the right to receive benefits from the VIE that potentially could be significant to the VIE (benefits). The Company has the power and rights to control the activities that most significantly affect the THMG Association economic performance and funds and absorbs all losses of the VIE and appropriately consolidates the THMG Association.

Total revenue and net loss for the VIE were $65.6 million and $0.0 million and $56.1 million and $0.0 million for the three months ended September 30, 2024 and 2023, respectively. Total revenue and net loss for the VIE were

$199.7 million and $0.0 million and $176.6 million and $0.0 million for the nine months ended September 30, 2024 and 2023, respectively. The VIE’s total assets, all of which were current, were $23.2 million and $20.6 million at September 30, 2024 and December 31, 2023, respectively. The VIE’s total liabilities, all of which were current, were

$71.8 million and $69.2 million at September 30, 2024 and December 31, 2023, respectively. The VIE’s total stockholders’ deficit was $48.6 million at each of September 30, 2024 and December 31, 2023.

All intercompany transactions and balances have been eliminated.

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Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company bases its estimates on historical experience, current business and economic factors, and various other assumptions that the Company believes are necessary to form a basis for making judgments about the carrying values of assets and liabilities, the recorded amounts of revenue and expenses, and the disclosure of contingent assets and liabilities. The Company is subject to uncertainties such as the impact of future events, economic and political factors, and changes in the Company’s business environment; therefore, actual results could differ from these estimates. Accordingly, the accounting estimates used in the preparation of the Company’s condensed consolidated financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment evolves. The Company believes that estimates used in the preparation of these condensed consolidated financial statements are reasonable; however, actual results could differ materially from these estimates.

Changes in estimates are made when circumstances warrant. Such changes in estimates and refinements in estimation methodologies are reflected in the Condensed Consolidated Statements of Operations; if material, the effects of changes in estimates are disclosed in the Notes to Unaudited Condensed Consolidated Financial Statements.

Significant estimates and assumptions by management affect areas including the value and useful life of long-lived assets (including intangible assets), the capitalization and amortization of software development costs, allowances for sales, and the accounting for business combinations. Other significant areas include revenue recognition (including performance guarantees), the accounting for income taxes, contingencies, litigation and related legal accruals, the accounting for stock-based compensation awards, and other items as described in Note 2. “Basis of Presentation and Principles of Consolidation" in the Summary of Significant Accounting policies in the 2023 Form 10-K and as may be updated in this Quarterly Report in Note 2. “Basis of Presentation and Principles of Consolidation."

Fair Value Measurements

The carrying value of the Company’s cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximates fair value due to their short-term nature.

A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:

Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2—Include other inputs that are directly or indirectly observable in the marketplace.

Level 3—Unobservable inputs that are supported by little or no market activity.

The Company measures its cash equivalents at fair value on a recurring basis. The Company classifies its cash equivalents within Level 1 because they are valued using observable inputs that reflect quoted prices for identical assets in active markets and quoted prices directly in active markets.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

Recently Issued Accounting Standards

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, “Segment Reporting (Topic 280)—Improvements to Report Segment Disclosures” which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses so that investors can better understand an entity’s overall performance. The amendments are effective for annual reporting periods beginning after December 15, 2023, and interim periods, beginning after December 15, 2024, with early adoption permitted. The provisions of ASU 2023-07 are to be applied retrospectively to all periods presented in the financial statements, unless it is impracticable. The segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption. As the guidance is a

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change to disclosures only, ASU 2023-07 will impact the "Segments" note within the Company's quarterly and annual financial statements but will not have an impact in the consolidated financial statements. The Company is currently evaluating the impact of ASU 2023-07 on its financial disclosures.

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvement to Income Tax Disclosures" to enhance the transparency and decision usefulness of income tax disclosures through expansion of disclosures in an entity’s income tax rate reconciliation table and regarding cash taxes paid both in the U.S. and foreign jurisdictions. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 on a prospective basis with early adoption permitted. The Company is currently evaluating the impact of ASU 2023-09 on its financial disclosures.

In March 2024, the SEC issued Release Nos. 33-11275; 34-99678 "The Enhancement and Standardization of Climate-Related Disclosures for Investors" to improve the consistency, comparability, and reliability of disclosures on the financial effects of climate-related risks on a registrant's operations and how it manages these risks. The compliance date for this release was scheduled to be fiscal year 2025 for large accelerated filers. On April 4, 2024, the SEC voluntarily stayed implementation of this new rule pending judicial review. The Company is currently analyzing the impact that the new climate-related rules will have on its consolidated financial statements.

Note 3. Revenue, Deferred Revenue, and Deferred Device and Contract Costs

The Company generates access fees from customers, which primarily consist of employers, health plans, hospitals and health systems, insurance and financial services companies (collectively “Clients”), as well as individual paying users, accessing its professional provider network, hosted virtual healthcare platform, and chronic care management platforms. Visit fee revenue is generated for general medical, expert medical service, and other specialty visits and is reported as a component of other revenue. Revenue associated with virtual healthcare device equipment sales included with the Company’s hosted virtual healthcare platform is also reported in other revenue.

The following table presents the Company’s revenues disaggregated by revenue source and also by geography (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenue by Type
Access fees	$	555,275	$	582,070	$	1,672,097	$	1,708,601
Other	85,233		78,168		256,986		233,287
Total Revenue	$	640,508	$	660,238	$	1,929,083	$	1,941,888

Revenue by Geography
U.S. Revenue	$	536,161	$	569,322	$	1,624,563	$	1,672,770
International Revenue	104,347		90,916		304,520		269,118
Total Revenue	$	640,508	$	660,238	$	1,929,083	$	1,941,888

Deferred Revenue

Deferred revenue represents billed, but unrecognized revenue, and is comprised of fees received in advance of the delivery or completion of the services and amounts received in instances when revenue recognition criteria have not been met. The Company records deferred revenue when cash payments are received in advance of the Company’s performance obligation to provide services. Deferred revenue is derived from 1) upfront payments for a device, which is amortized ratably over the expected member enrollment period; 2) upfront payments for certain services where payment is required for future periods before the service is delivered to the member, which is recognized when the services are provided; and 3) upfront payments from third-party financing companies with whom the Company works to provide certain Clients with a rental option, which is recognized over the rental period. Deferred revenue that will be recognized during the next twelve-month period is recorded as current deferred revenue and the remaining portion is recorded as non-current deferred revenue.

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The following table summarizes deferred revenue activities for the periods presented (in thousands):


	Nine Months Ended September 30,
	2024		2023
Beginning balance	$	109,282	$	113,786
Cash collected	68,858		87,155
Revenue recognized	(79,346)		(88,597)
Ending balance	$	98,794	$	112,344

The Company expects to recognize $60.1 million of revenue throughout the remainder of 2024, $30.1 million of revenue in the year ending December 31, 2025, and the remaining balance thereafter related to future performance obligations that are unsatisfied or partially unsatisfied as of September 30, 2024.

Deferred Device and Contract Costs

Deferred device and contract costs are classified as a component of prepaid expenses and other current assets or other assets, depending on term, and consisted of the following (in thousands):


	As of September 30, 2024		As of December 31, 2023
Deferred device and contract costs, current	$	34,781	$	32,703
Deferred device and contract costs, non-current	17,414		17,573
Total deferred device and contract costs	$	52,195	$	50,276

Deferred device and contract costs were as follows (in thousands):


	Deferred Device and Contract Costs
Beginning balance as of December 31, 2023	$	50,276
Additions	28,516
Cost of revenue recognized	(26,597)
Ending balance as of September 30, 2024	$	52,195

Note 4. Inventories

Inventories consisted of the following (in thousands):


	As of September 30, 2024		As of December 31, 2023
Raw materials and purchased parts	$	9,122	$	9,338
Work in process	804		299
Finished goods	27,067		19,876
Total inventories	$	36,993	$	29,513

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Note 5. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):


	As of September 30, 2024		As of December 31, 2023
Prepaid expenses	$	68,471	$	65,651
Deferred device and contract costs, current	34,781		32,703
Other receivables	11,503		12,640
Other current assets	983		7,443
Total prepaid expenses and other current assets	$	115,738	$	118,437

Note 6. Goodwill

Goodwill consisted of the following (in thousands):


	Teladoc Health Integrated Care		BetterHelp		Total
Balance as of December 31, 2023	$	—	$	1,073,190	$	1,073,190
Impairment	—		(790,000)		(790,000)
Balance as of September 30, 2024	$	—	$	283,190	$	283,190

As a result of sustained decreases in the Company’s publicly quoted share price and market capitalization as well as changes in the operating results of the BetterHelp reporting unit, the Company conducted an interim test of its goodwill, definite-lived intangibles, and other long-lived assets at June 30, 2024. Following this test, the Company did not identify an impairment to its definite-lived intangible assets or other long-lived assets, but recorded a $790.0 million non-deductible, non-cash goodwill impairment charge for the three months ended June 30, 2024. No goodwill impairment charge was recognized for the three months ended September 30, 2024.

The Company’s June 30, 2024 goodwill impairment testing was performed using a discounted cash flow method under the income approach. Unlike in prior testing, the Company did not utilize the market approach because of limited availability of relevant comparable company information. The Company believes using only the income approach is appropriate as it most directly reflects its future growth and profitability expectations. For the Company’s June 30, 2024 impairment testing, the Company reduced its estimated future cash flows related to its BetterHelp reporting unit used in the impairment assessment, including revenues and margin, to reflect its best and most recent estimates at this time. The Company also updated certain significant inputs into the valuation models including the discount rate, which increased to 15%, reflecting, in part, higher interest rates. The Company’s updates to its discount rate and estimated future cash flows each had a significant impact to the estimated fair value of the reporting unit.

After recording this goodwill impairment charge, there is no excess of the BetterHelp reporting unit’s fair value over its carrying value, so any further decrease in the reporting unit’s fair value would result in an additional impairment charge. In the event there are further adverse changes in the Company’s projected cash flows and/or further changes in key assumptions, including but not limited to an increase in the discount rate, lower revenue growth, lower margin, and/or a lower terminal growth rate, the Company may be required to record additional non-cash impairment charges to its goodwill, other intangibles, and other long-lived assets. Such non-cash charges could have a material adverse effect on the Company’s Condensed Consolidated Statement of Operations and Balance Sheets in the reporting period of the charge.

Goodwill is net of accumulated impairment charges of $14.2 billion, of which $12.3 billion was recognized prior to the Company reorganizing its reporting structure to include two reportable segments on October 1, 2022, $1.1 billion was recognized in the year ended December 31, 2022 on the goodwill assigned to the Teladoc Health Integrated Care segment, and $0.8 billion was recognized on the goodwill assigned to the BetterHelp segment in the nine months ended September 30, 2024.

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Note 7. Intangible Assets, Net and Certain Cloud Computing Costs

Intangible assets, net consisted of the following (in thousands, except years):


	Useful Life	Gross Value		Accumulated Amortization		Net Carrying Value		Weighted Average Remaining Useful Life (Years)
September 30, 2024
Client relationships	2 to 20 years	$	1,462,287	$	(469,777)	$	992,510	11.8
Trademarks	2 to 15 years	325,677		(252,325)		73,352		6.1
Software	3 to 5 years	551,866		(259,623)		292,243		2.2
Acquired technology	4 to 7 years	341,850		(203,257)		138,593		3.0
Intangible assets, net		$	2,681,680	$	(1,184,982)	$	1,496,698	8.8
December 31, 2023
Client relationships	2 to 20 years	$	1,460,857	$	(391,196)	$	1,069,661	12.5
Trademarks	2 to 15 years	325,479		(189,330)		136,149		6.9
Software	3 to 5 years	456,583		(161,108)		295,475		2.5
Acquired technology	4 to 7 years	341,814		(165,318)		176,496		3.7
Intangible assets, net		$	2,584,733	$	(906,952)	$	1,677,781	9.3

The following table presents the Company's amortization of intangible assets expense by component (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Amortization of acquired intangibles	$	51,089	$	69,189	$	179,372	$	172,210
Amortization of capitalized software development costs	35,817		22,645		97,453		58,995
Amortization of intangible assets expense	$	86,906	$	91,834	$	276,825	$	231,205

During the second half of 2023, the Company initiated a strategy to transition the majority of its chronic condition management Clients and members to the Teladoc Health brand on a phased basis, with a smaller subset continuing to be served under the Livongo trade name beyond 2024. In connection with the brand strategy, the Company has accelerated the amortization of intangible assets that are associated with the Livongo trademark, increasing amortization of intangible assets expense beginning in the second half of the year ended December 31, 2023 and continuing through the six months ended June 30, 2024, with corresponding reductions thereafter.

Periodic amortization of intangible assets that will be charged to expense over the remaining life of the intangible assets as of September 30, 2024 was as follows (in thousands):


Years Ending December 31,
2024	$	91,312
2025	306,508
2026	248,779
2027	175,334
2028 and thereafter	674,765
	$	1,496,698

Net cloud computing costs, which are primarily related to the implementation of the Company's customer relationship management ("CRM") and enterprise resource planning ("ERP") systems, are recorded in "Other assets" within the Company's Condensed Consolidated Balance Sheets. As of September 30, 2024 and December 31, 2023, the cloud

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computing costs were $40.4 million and $41.1 million, respectively. The associated expense for cloud computing costs, which is recorded in general and administration expense, was $1.3 million and $0.6 million for the three months ended September 30, 2024 and 2023, respectively. The associated expense for cloud computing costs for the nine months ended September 30, 2024 and 2023 was $3.7 million and $2.4 million, respectively.

Note 8. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):


	As of September 30, 2024		As of December 31, 2023
Marketing and advertising	$	38,826	$	34,427
Client performance guarantees and accrued rebates	33,835		36,934
Franchise, sales and other taxes	18,492		12,933
Consulting fees/provider fees	15,943		16,416
Operating lease liabilities—current	10,708		10,752
Professional fees	9,832		9,910
Information technology	9,292		7,605
Insurance	7,278		5,777
Interest payable	5,813		1,481
Lease abandonment obligation—current	3,272		3,800
Staff augmentation	2,595		4,287
Other	32,209		34,312
Total	$	188,095	$	178,634

Note 9. Convertible Senior Notes

Outstanding Convertible Senior Notes

As of September 30, 2024, the Company had three series of convertible senior notes outstanding. The issuances of such notes originally consisted of (i) $1.0 billion aggregate principal amount of 1.25% convertible senior notes due 2027 (the “2027 Notes”), issued on May 19, 2020 for net proceeds to the Company of $975.9 million after deducting offering costs of approximately $24.1 million, (ii) $287.5 million aggregate principal amount of 1.375% convertible senior notes due 2025 (the “2025 Notes”), issued on May 8, 2018 for net proceeds to the Company of $279.1 million after deducting offering costs of approximately $8.4 million, and (iii) $550.0 million aggregate principal amount of 0.875% convertible senior notes due 2025 that were issued by Livongo Health, Inc. (“Livongo”) on June 4, 2020 for which the Company agreed to assume all of Livongo’s rights and obligations (the “Livongo Notes;” and together with the 2027 Notes and the 2025 Notes, the “Notes”).

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The following table presents certain terms of the Notes that were outstanding as of September 30, 2024:


	2027 Notes			2025 Notes			Livongo Notes
Principal Amount Outstanding as of September 30, 2024 (in millions)	$	1,000.0		$	0.7		$	550.0
Interest Rate Per Year	1.25		%	1.375		%	0.875		%
Fair Value as of September 30, 2024 (in millions) (1)	$	862.0		$	0.6		$	529.7
Fair Value as of December 31, 2023 (in millions) (1)	$	822.0		$	0.3		$	513.7
Maturity Date	June 1, 2027			May 15, 2025			June 1, 2025
Optional Redemption Date	June 5, 2024			May 22, 2022			June 5, 2023
Conversion Date	December 1, 2026			November 15, 2024			March 1, 2025
Conversion Rate Per $1,000 Principal Amount as of September 30, 2024	4.1258			18.6621			13.9400
Remaining Contractual Life as of September 30, 2024	2.7 years			0.6 years			0.7 years

(1)The Company estimates the fair value of its Notes utilizing market quotations for debt that have quoted prices in active markets. Since the Notes do not trade on a daily basis in an active market, the fair value estimates are based on market observable inputs based on borrowing rates currently available for debt with similar terms and average maturities. The Notes would be classified as Level 2 within the fair value hierarchy, as defined in Note 2. “Basis of Presentation and Principles of Consolidation.”

All of the Notes are unsecured obligations of the Company and rank senior in right of payment to the Company’s indebtedness that is expressly subordinated in right of payment to such Notes; equal in right of payment to the Company’s liabilities that are not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities incurred by the Company’s subsidiaries.

Holders may convert all or any portion of their Notes in integral multiples of $1,000 principal amount, at their option, at any time prior to the close of business on the business day immediately preceding the applicable conversion date only under the following circumstances:

•during any quarter (and only during such quarter), if the last reported sale price of the shares of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding quarter is greater than or equal to 130% of the conversion price for the applicable Notes on each applicable trading day;

•during the five business day period after any 10 consecutive trading day period (or five consecutive trading day period in the case of the Livongo Notes) in which the trading price was less than 98% of the product of the last reported sale price of Company’s common stock and the conversion rate for the applicable Notes on each such trading day;

•upon the occurrence of specified corporate events described under the applicable indenture; or

•if the Company calls the applicable Notes for redemption, at any time until the close of business on the second business day immediately preceding the redemption date.

On or after the applicable conversion date, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of such Notes, regardless of the foregoing circumstances.

The 2027 Notes and the 2025 Notes are convertible into shares of the Company’s common stock at the applicable conversion rate shown in the table above. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination thereof, at the Company’s election. If the Company elects to satisfy the conversion obligation solely in cash or through payment and delivery, as the case may be, of a combination of cash and shares of the Company’s common stock, the amount of cash and shares of the Company’s common stock due

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upon conversion will be based on a daily conversion value calculated on a proportionate basis for each trading day in a 25 consecutive trading day observation period.

The Livongo Notes are convertible at the applicable conversion rate shown in the table above into “units of reference property,” each of which is comprised of 0.592 of a share of the Company’s common stock and $4.24 in cash, without interest. Upon conversion, the Company will pay or deliver, as the case may be, cash, units of reference property, or a combination thereof, at the Company’s election. If the Company elects to satisfy the conversion obligation solely in cash or through payment and delivery, as the case may be, of a combination of cash and units of reference property, the amount of cash and units of reference property, if any, due upon conversion will be based on a daily conversion value calculated on a proportionate basis for each trading day in a 40 consecutive trading day observation period.

For each Note series, the Company may redeem for cash all or part of the Notes, at its option, on or after the applicable optional redemption date shown in the table above (and prior to the 41st scheduled trading day immediately preceding the maturity date in the case of the Livongo Notes) if the last reported sale price of its common stock exceeds 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading days ending on, and including, the trading day immediately preceding the date on which the Company provides notice of the redemption. The redemption price will be the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any. In addition, calling any 2027 Note or 2025 Note for redemption on or after the applicable optional redemption date will constitute a make-whole fundamental change with respect to that Note, in which case the conversion rate applicable to the conversion of that Note, if it is converted in connection with the redemption, will be increased in certain circumstances as described in the applicable indenture. If the Company undergoes a fundamental change (as defined in the applicable indenture) at any time prior to the maturity date of the Livongo Notes, holders will have the right, at their option, to require the Company to repurchase for cash all or any portion of their Livongo Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Livongo Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The Company accounts for each Note series at amortized cost within the liability section of its Condensed Consolidated Balance Sheets. The Company has reserved an aggregate of 8.7 million shares of common stock for the Notes.

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The net carrying values of the Notes consisted of the following (in thousands):


	As of September 30, 2024		As of December 31, 2023
2025 Notes
Principal	$	725	$	725
Less: Debt discount, net (1)	(2)		(4)
Net carrying amount	723		721

Livongo Notes
Principal	550,000		550,000
Less: Debt discount, net (1)	—		—
Net carrying amount	550,000		550,000

2027 Notes
Principal	1,000,000		1,000,000
Less: Debt discount, net (1)	(9,449)		(12,033)
Net carrying amount	990,551		987,967

Total net carrying amount	$	1,541,274	$	1,538,688

Convertible senior notes, net—current	$	550,723	$	—
Convertible senior notes, net—non-current	990,551		1,538,688
Total net carrying amount	$	1,541,274	$	1,538,688

(1)Included in the accompanying Condensed Consolidated Balance Sheets within Convertible senior notes, net—current and Convertible senior notes, net—non-current and amortized to interest expense over the expected life of the Notes using the effective interest rate method.

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The following table sets forth total interest expense recognized related to the Notes (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
2025 Notes	2024			2023			2024			2023
Contractual interest expense	$	2		$	2		$	7		$	7
Amortization of debt discount	0			1			2			2
Total	$	2		$	3		$	9		$	9
Effective interest rate	1.8		%	1.8		%	1.8		%	1.8		%

	Three Months Ended September 30,						Nine Months Ended September 30,
Livongo Notes	2024			2023			2024			2023
Contractual interest expense	$	1,203		$	1,203		$	3,609		$	3,609
Amortization of debt discount	—			—			—			—
Total	$	1,203		$	1,203		$	3,609		$	3,609
Effective interest rate	0.9		%	0.9		%	0.9		%	0.9		%

	Three Months Ended September 30,						Nine Months Ended September 30,
2027 Notes	2024			2023			2024			2023
Contractual interest expense	$	3,125		$	3,125		$	9,375		$	9,375
Amortization of debt discount	865			851			2,584			2,542
Total	$	3,990		$	3,976		$	11,959		$	11,917
Effective interest rate	1.6		%	1.6		%	1.6		%	1.6		%

Note 10. Leases

Operating Leases

The Company has operating leases for facilities, hosting co-location facilities, and certain equipment under non-cancelable leases in the U.S. and various international locations. The leases have remaining lease terms of less than one to eight years, with options to extend the lease term from one to five years. At the inception of an arrangement, the Company determines whether the arrangement is, or contains, a lease based on the terms covering the right to use property, plant or equipment for a stated period of time. For new and amended leases beginning in 2020 and after, the Company separately allocates the lease (e.g., fixed lease payments for right-to-use land, building, etc.) and non-lease components (e.g., common area maintenance) for its leases.

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The Company leases office space under non-cancelable operating leases in the U.S. and various international locations. The future minimum lease payments under non-cancelable operating leases were as follows (in thousands):


Operating Leases:	As of September 30, 2024
2024	$	3,464
2025	12,766
2026	11,580
2027	8,474
2028	6,319
2029 and thereafter	13,451
Total future minimum payments	56,054
Less: imputed interest	(8,450)
Present value of lease liabilities	$	47,604

Accrued expenses and other current liabilities	$	10,708
Operating lease liabilities, net of current portion	$	36,896

The Company rents certain virtual healthcare platforms to selected qualified customers under arrangements that qualify as either sales-type lease or operating lease arrangements. Leases have terms that generally range from two to five years.

The Company recorded certain restructuring costs related to lease impairments and the related charges due to the abandonment and/or exit of excess leased office space. However, the lease liabilities related to these spaces remain an outstanding obligation of the Company as of September 30, 2024. See Note. 11, “Restructuring,” for further information.

Note 11. Restructuring

The Company accounts for restructuring costs in accordance with Accounting Standards Codification ("ASC") Subtopic 420-10, "Exit or Disposal Cost Obligations" and ASC Section 360-10-35, "Property, Plant and Equipment-Subsequent Measurement." The costs are recorded to the "Restructuring costs" line item within the Company's Condensed Consolidated Statements of Operations and Other Comprehensive Loss as they are recognized.

The Company previously disclosed that, as a result of its comprehensive operational review of the business and in order to drive efficiency to reduce costs and improve profit growth, it expected to incur pre-tax charges in the range of $12.0 million to $16.0 million in the year ending December 31, 2024.

During the three months ended September 30, 2024, the Company recorded $3.6 million of restructuring costs, of which $2.3 million was for employee transition, severance, employee benefits, and related costs and $1.3 million was for office space reduction related costs, including $1.0 million of right-of-use asset impairment charges. During the nine months ended September 30, 2024, the Company recorded $14.8 million of restructuring costs, of which $10.7 million was for employee transition, severance, employee benefits, and related costs, $1.3 million was for office space reduction related costs, including $1.0 million of right-of-use asset impairment charges, and $2.8 million was for other restructuring related costs.

During the three months ended September 30, 2023, the Company recorded $0.4 million of restructuring costs, of which $0.2 million was for employee transition, severance, employee benefits, and related costs and $0.2 million was related to cost associated with office space reductions. During the nine months ended September 30, 2023, the Company recorded $16.0 million of restructuring costs, of which $7.9 million was for employee transition, severance, employee benefits, and related costs and $8.1 million was related to cost associated with office space reductions, including

$4.9 million of right-of-use asset impairment charges.

The portion of these expenses that are to be settled by cash disbursements were accounted for as a restructuring liability under the line item "Accrued expenses and other current liabilities" in the Company's Condensed Consolidated Balance Sheets.

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The table below summarizes the accrual and charges incurred and cash payments made with respect to the Company's restructurings, with the severance related portion included in the line item "Accrued compensation" and the lease termination and other related portion included in the line item "Accrued expenses and other current liabilities" in the Company's Condensed Consolidated Balance Sheets as of September 30, 2024 (in thousands):


	Restructuring Plan
	Severance		Lease Termination		Other (1)		Total
Accrued Balance, December 31, 2023	$	—	$	3,800	$	—	$	3,800
Additional expenses	10,656		299		2,837		13,792
Cash payments	(9,179)		(827)		(2,837)		(12,843)
Accrued Balance, September 30, 2024	$	1,477	$	3,272	$	—	$	4,749

(1)Reflects amounts associated with other restructuring related costs.

Note 12. Common Stock and Stockholders’ Equity

Stock Plans

The Company’s 2023 Incentive Award Plan and 2023 Employment Inducement Incentive Award Plan (collectively, the “2023 Plans”) provide for the issuance of incentive and non-statutory options and other equity-based awards to its employees and non-employee service providers. Previously, the Company’s 2015 Incentive Award Plan, 2017 Employment Inducement Incentive Award Plan and Livongo Acquisition Incentive Award Plan (together with the 2023 Plans, collectively, the “Plans”) also provided for the issuance of such awards. The Company had 12,913,482 shares available for grant under the 2023 Plans at September 30, 2024.

All stock-based awards to employees are measured based on the grant-date fair value. Expense is recognized in the Company’s Condensed Consolidated Statements of Operations over the requisite service period, which is generally the vesting period of the respective award. The Company recognizes the forfeiture of stock-based awards as they occur.

CEO New Hire Awards

In connection with the commencement of employment of the Company's new Chief Executive Officer ("CEO") on June 10, 2024, the Company granted a new-hire incentive equity award to the CEO under the Company’s 2023 Employment Inducement Incentive Award Plan. Such award had an aggregate grant date target value of approximately $15.0 million and consisted of 939,849 performance stock units and 469,924 restricted stock units. The fair value of approximately one-fourth of these performance stock units has not yet been determined and will be after the performance criteria for those awards has been established. The expense recognition for all the performance stock units will begin at the start of their performance periods, which will be January 1, 2025.

The restricted stock units issued to the CEO are expected to vest one-third on the first anniversary of the grant date and in eight substantially equal quarterly installments beginning on the 15-month anniversary of the grant date, in each case subject to the CEO's continued service on the applicable vesting date. The performance stock units issued to the CEO provide a target number of shares of the Company's common stock that would be earned at the end of a specified performance period based on (i) the Company's adjusted EBITDA for 2025 (“EBITDA PSUs”) and (ii) the Company's actual compound annual revenue growth rate during the period January 1, 2025 through December 31, 2027 (“Revenue CAGR PSUs”). Seven-twelfths of any earned EBITDA PSUs would vest on March 10, 2026 and the remaining five-twelfths would vest in five substantially equal quarterly installments over the subsequent 15 months. Any earned Revenue CAGR PSUs would vest on March 1, 2028.

Stock Options

Options issued under the Plans are exercisable for periods not to exceed 10 years, and vest and contain such other terms and conditions as specified in the applicable award document. Options to buy common stock are issued under the Plans, with exercise prices equal to the closing price of shares of the Company’s common stock on the New York Stock Exchange on the date of award.

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Stock option activity under the Plans was as follows (in thousands, except share and per share amounts and years):


	Number of Shares Outstanding	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life in Years	Aggregate Intrinsic Value
Balance at December 31, 2023	4,182,187	$	27.37	5.26	$	13,732
Stock option grants	32,477	$	20.66	N/A
Stock options exercised	(253,146)	$	10.71	N/A	$	694
Stock options forfeited	(1,006,976)	$	31.93	N/A
Balance at September 30, 2024	2,954,542	$	27.13	3.75	$	1,951
Vested or expected to vest at September 30, 2024	2,954,542	$	27.13	3.75	$	1,951
Exercisable at September 30, 2024	2,493,425	$	27.06	2.95	$	1,951

The total grant-date fair value of stock options granted during the three months ended September 30, 2024 and 2023 were $0.0 million and $0.4 million, respectively. The total grant-date fair value of stock options granted during the nine months ended September 30, 2024 and 2023 were $0.4 million and $1.2 million, respectively.

The Company estimates the fair value of stock options granted using the Black-Scholes option pricing model.

The assumptions used are determined as follows:

Volatility. The expected volatility was derived from the historical stock volatility of the Company’s stock over a period equivalent to the expected term of the stock option grants.

Expected Term. The expected term represents the period that the stock-based awards are expected to be outstanding. When establishing the expected term assumption, the Company utilizes historical data.

Risk-Free Interest Rate. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with terms similar to the expected term on the options.

Dividend Yield. The Company has never declared or paid any cash dividends and does not plan to pay cash dividends in the foreseeable future and, therefore, it used an expected dividend yield of zero.

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions and fair value per share:


	Nine Months Ended September 30,
	2024	2023
Volatility	67.86% - 67.94%	65.58% - 68.22%
Expected term (in years)	4.3	4.3
Risk-free interest rate	3.85% - 3.90%	3.68% - 4.34%
Dividend yield	0%	0%
Weighted-average fair value of underlying stock options	$11.55	$13.42

For the three months ended September 30, 2024 and 2023, the Company recorded stock-based compensation expense related to stock options granted of $1.9 million and $2.3 million, respectively. For the nine months ended September 30, 2024 and 2023, the Company recorded stock-based compensation expense related to stock options granted of $5.8 million and $7.0 million, respectively.

As of September 30, 2024, the Company had $5.5 million in unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of approximately 1.9 years.

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Restricted Stock Units

The fair value of RSUs is determined on the date of grant. The Company records compensation expense on a straight-line basis over the vesting period for RSUs. The vesting period for employees and members of the Board of Directors ranges from one to three years.

RSU activity under the Plans was as follows:


	RSUs	Weighted-Average Grant Date Fair Value Per RSU
Balance at December 31, 2023	9,452,412	$	34.70
Granted	5,362,335	$	14.37
Vested and issued	(4,482,291)	$	38.27
Forfeited	(2,132,247)	$	26.05
Balance at September 30, 2024	8,200,209	$	21.71
Vested and unissued at September 30, 2024	72,620	$	42.69
Non-vested at September 30, 2024	8,127,589	$	21.52

The total grant-date fair value of RSUs granted during the three months ended September 30, 2024 and 2023, was

$1.4 million and $7.5 million, respectively. The total grant-date fair value of RSUs granted during the nine months ended September 30, 2024 and 2023, was $77.1 million and $189.2 million, respectively.

For the three months ended September 30, 2024 and 2023, the Company recorded stock-based compensation expense related to RSUs of $32.5 million and $46.9 million, respectively. For the nine months ended September 30, 2024 and 2023, the Company recorded stock-based compensation expense related to RSUs of $109.1 million and $134.1 million, respectively.

As of September 30, 2024, the Company had $142.3 million in unrecognized compensation cost related to non-vested RSUs, which is expected to be recognized over a weighted-average period of approximately 1.7 years.

Performance Stock Units

Stock-based compensation costs associated with the Company’s RSUs subject to performance criteria (“PSUs”) are initially determined using the fair market value of the Company’s common stock on the date the awards are granted (service inception date). The vesting of these PSUs is subject to certain performance conditions and a service requirement generally ranging from one to three years. Stock-based compensation costs associated with these PSUs are reassessed each reporting period based upon the estimated performance attainment on the reporting date until the performance conditions are met. The ultimate number of PSUs that are issued to an employee is the result of the actual performance of the Company at the end of the performance period compared to the performance targets and generally ranges from 0% to 200% of the initial grant. Stock compensation expense for PSUs is recognized on an accelerated tranche by tranche basis for performance-based awards.

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PSU activity under the Plans was as follows:


	Shares	Weighted-Average Grant Date Fair Value Per PSU
Balance at December 31, 2023	1,452,387	$	36.82
Granted (1)	2,102,495	$	13.56
Vested and issued	(246,256)	$	47.63
Forfeited	(863,852)	$	20.78
Performance adjustment (2)	(246,495)
Balance at September 30, 2024	2,198,279	$	19.25
Vested and unissued at September 30, 2024	—	$	—
Non-vested at September 30, 2024	2,198,279	$	19.25

(1)Granted excludes 0.2 million target shares for which the performance criteria has not been established as of September 30, 2024.

(2)Based on the Company's 2023 results, PSUs were attained at rates ranging from 0% to 85.2% of the target award.

The total grant-date fair value of PSUs granted was $0.0 million during each of the three months ended September 30, 2024 and 2023. The total grant-date fair value of PSUs granted during the nine months ended September 30, 2024 and 2023 was $28.5 million and $34.9 million, respectively.

For the three months ended September 30, 2024 and 2023, the Company recorded stock-based compensation expense related to PSUs of $(0.9) million and $2.6 million, respectively. For the nine months ended September 30, 2024 and 2023, the Company recorded stock-based compensation expense related to PSUs of $1.9 million and $9.9 million, respectively.

As of September 30, 2024, the Company had $11.4 million in unrecognized compensation cost related to non-vested PSUs, which is expected to be recognized over a weighted-average period of approximately 1.9 years.

Employee Stock Purchase Plan

In July 2015, the Company adopted the 2015 Employee Stock Purchase Plan (“ESPP”) in connection with its initial public offering. At the Company’s 2023 annual meeting of stockholders, the Company’s stockholders approved an amendment to the ESPP to increase the number of shares of the Company’s common stock available for issuance under the ESPP by 3,000,000. As a result, a total of 4,113,343 shares of common stock have been reserved for issuance under this plan. The Company’s ESPP permits eligible employees to purchase common stock at a discount through payroll deductions during defined offering periods. Under the ESPP, the Company may specify offerings with durations of not more than 27 months and may specify shorter purchase periods within each offering. Each offering will have one or more purchase dates on which shares of its common stock will be purchased for employees participating in the offering. An offering may be terminated under certain circumstances. The price at which the stock is purchased is equal to the lower of 85% of the fair market value of the common stock at the beginning of an offering period or on the date of purchase.

During the three months ended September 30, 2024 and 2023, the Company did not issue any shares under the ESPP. During the nine months ended September 30, 2024 and 2023, the Company issued 304,068 shares and 271,736 shares, respectively, under the ESPP. As of September 30, 2024, 2,496,713 shares remained available for issuance.

For the three months ended September 30, 2024 and 2023, the Company recorded stock-based compensation expense related to the ESPP of $0.5 million and $1.2 million, respectively. For the nine months ended September 30, 2024 and 2023, the Company recorded stock-based compensation expense related to the ESPP of $1.7 million and $3.6 million, respectively.

As of September 30, 2024, the Company had $0.2 million in unrecognized compensation cost related to the ESPP, which is expected to be recognized over a weighted-average period of approximately 0.1 years.

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Total compensation costs for stock-based awards were recorded as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Cost of revenue (exclusive of depreciation and amortization, which are shown separately)	$	1,075	$	1,464	$	3,782	$	4,060
Advertising and marketing	3,856		4,399		11,023		11,527
Sales	5,204		9,110		20,124		27,055
Technology and development	8,152		14,566		27,134		42,984
General and administrative	15,760		23,406		56,416		69,082
Total stock-based compensation expense	34,047		52,945		118,479		154,708
Capitalized stock-based compensation	2,951		5,028		10,238		14,606
Total stock-based compensation	$	36,998	$	57,973	$	128,717	$	169,314

Note 13. Provision for Income Taxes

The Company recorded income tax expense of $0.8 million and $7.4 million for the three and nine months ended September 30, 2024, respectively. The tax expenses recorded were the result of state tax law changes and the tax shortfall associated with the stock-based compensation awards that vested in the year.

The Company recorded income tax benefits of $2.5 million and $2.8 million for the three and nine months ended September 30, 2023, respectively.

Note 14. Commitments and Contingencies

Commitments

The Company has contractual obligations to make future payments related to its outstanding convertible senior notes, which are presented in Note 9. Convertible Senior Notes, and its long-term operating leases, which are presented in Note 10. Leases.

Legal Matters

From time to time, Teladoc Health is involved in various litigation matters arising in the normal course of business, including the matters described below. The Company consults with legal counsel on those issues related to litigation and seeks input from other experts and advisors with respect to such matters. Estimating the probable losses or a range of probable losses resulting from litigation, government actions, and other legal proceedings is inherently difficult and requires an extensive degree of judgment, particularly where the matters involve indeterminate claims for monetary damages, may involve discretionary amounts, present novel legal theories, are in the early stages of the proceedings, or are subject to appeal. Whether any losses, damages, or remedies ultimately resulting from such matters could reasonably have a material effect on the Company’s business, financial condition, results of operations, or cash flows will depend on a number of variables, including, for example, the timing and amount of such losses or damages (if any) and the structure and type of any such remedies. As of the date of these financial statements, Teladoc Health’s management does not expect any litigation matter to have a material adverse impact on its business, financial condition, results of operations, or cash flows.

On June 6, 2022, a purported securities class action complaint (Schneider v. Teladoc Health, Inc., et. al.) was filed in the U.S. District Court for the Southern District of New York against the Company and certain of the Company’s officers. The complaint was brought on behalf of a purported class consisting of all persons or entities who purchased or otherwise acquired shares of the Company’s common stock during the period October 28, 2021 through April 27, 2022. The complaint asserted violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder based on allegedly false or misleading statements and omissions with respect to, among other things, the Company’s business, operations, and prospects. The complaint seeks certification as a class action and unspecified compensatory damages plus interest and attorneys’ fees. On August 2, 2022, a duplicative purported securities class action complaint (De Schutter v. Teladoc Health, Inc., et.al.) was filed in the U.S. District Court for the Eastern District of New York, which was consolidated with the Schneider case in the Southern District court under the caption In re

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Teladoc Health, Inc. Securities Litigation. The lead plaintiff subsequently filed amended complaints that expanded the alleged class period to February 11, 2021 to July 27, 2022. On July 5, 2023, the court granted the defendants’ motion to dismiss the complaint, and on September 24, 2024 the United States Court of Appeals for the Second Circuit affirmed in part, and vacated in part, the Southern District court's dismissal and remanded for further proceedings. The Company believes that it has substantial defenses, and the Company and its named officers intend to defend the lawsuit vigorously.

On August 9, 2022, a verified shareholder derivative complaint (Vaughn v. Teladoc Health, Inc., et.al.) was filed in the U.S. District Court for the Southern District of New York against the Company as a nominal defendant and certain of the Company’s officers and directors. The complaint asserts violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust enrichment, and waste of corporate assets in connection with factual assertions similar to those in the purported securities class action complaints described above. The complaint seeks damages to the Company allegedly sustained as a result of the acts and omissions of the named officers and directors and seeks an order directing the Company to reform and improve the Company’s corporate governance. On September 6, 2022, a duplicative verified stockholder derivative complaint (Hendry v. Teladoc Health, Inc., et. al.) was filed in the U.S. District Court for the Southern District of New York. The claims and parties in Hendry were substantially similar to those in Vaughn. The Vaughn and Hendry actions have now been consolidated under the caption In re Teladoc Stockholder Derivative Litigation, and a consolidated complaint was filed on November 29, 2022. The consolidated complaint also asserts violations of Section 14(a) of the Securities Exchange Act of 1934. The parties subsequently stipulated to transfer the action to the U.S. District Court for the District of Delaware, and on December 22, 2022 the parties agreed, and the Court ordered, to stay all proceedings until final resolution, including exhaustion of appeals, of the motion to dismiss filed in the purported securities class action complaint described above. The Company believes that it has substantial defenses, and the Company and its named officers and directors intend to defend the lawsuit vigorously.

On July 30, 2020, the Company’s subsidiary BetterHelp, Inc. (“BetterHelp”) received a Civil Investigative Demand from the U.S. Federal Trade Commission (“FTC”) as part of its non-public investigation to determine whether BetterHelp engaged in unfair business practices in violation of the Federal Trade Commission Act. In March 2023, BetterHelp and the FTC entered into a tentative settlement of all claims arising from the FTC’s investigation and agreed to a consent order that required the Company to make a $7.8 million payment to the FTC. The settlement, including the consent order, received final approval from the FTC on July 14, 2023.

There have been multiple putative class-action litigations filed against BetterHelp in connection with the above-referenced FTC settlement and consent order. The actions have been filed in California federal and state courts and in Canada. The cases are substantially similar, involving allegations of misleading patients as to BetterHelp’s use of patient data and associated alleged violations of law involving privacy, advertising, contract, and tort. The Company believes that it has substantial defenses, and the Company intends to defend the lawsuits vigorously.

On February 13, 2023, Data Health Partners, Inc. (“Data Health Partners”) filed a lawsuit against the Company in the U.S. District Court for the District of Delaware alleging that certain of the Company’s products, including its blood glucose meter, infringe upon certain patents held by Data Health Partners and seeking unspecified damages, attorney’s fees and costs. The Company believes that it has substantial defenses, and the Company intends to defend the lawsuit vigorously.

On May 17, 2024, a purported securities class action complaint (Stary v. Teladoc Health, Inc., et. al.) was filed in the United States District Court for the Southern District of New York against the Company and certain of the Company’s current and former officers. The complaint was brought on behalf of a purported class consisting of all persons or entities who purchased or otherwise acquired shares of the Company’s common stock during the period November 2, 2022 through February 20, 2024. The complaint asserts violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder based on allegedly false or misleading statements and omissions with respect to, among other things, the Company’s business, operations, and prospects. The complaint seeks certification as a class action and unspecified compensatory damages plus interest and attorneys’ fees. On July 15, 2024, a duplicative purported securities class action complaint (Waits v. Teladoc Health, Inc., et.al.) was filed in the U.S. District Court for the Southern District of New York. The claims and parties in Waits were substantially similar to those in Stary. The Company believes that it has substantial defenses, and the Company and its named officers intend to defend the lawsuits vigorously.

On June 18, 2024, a verified shareholder derivative complaint (Roy v. Gorevic, et.al.) was filed in the U.S. District Court for the Southern District of New York against the Company as a nominal defendant and certain of the Company’s current and former officers and directors. The complaint asserts violations of Sections 10(b) and 14(a) of the Securities Exchange Act of 1934, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust enrichment, waste of corporate assets, gross mismanagement and abuse of control in connection with factual assertions similar to those in the purported securities class action complaint described in the preceding paragraph. The complaint seeks damages to the

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Company allegedly sustained as a result of the acts and omissions of the named officers and directors and seeks an order directing the Company to reform and improve the Company’s corporate governance. On October 4, 2024 the parties agreed, and the Court ordered, to stay all proceedings until any motion to dismiss filed in the purported securities class action complaint described above is granted with prejudice and any appeals therefrom are resolved, or any defendant files an answer in the purported securities class action complaint described above. On October 1, 2024, a duplicative verified stockholder derivative complaint (Brigman v. Daniel, et. al) was filed in the United States District Court for the Southern District of New York. The claims and parties in Brigman are substantially similar to those in Roy, and also alleges insider trading violations against certain defendants. The Company believes that it has substantial defenses, and the Company and its named officers and directors intend to defend the lawsuits vigorously.

Note 15. Segments

ASC Subtopic 280-10, “Segment Reporting,” establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance. The Company’s Chief Executive Officer is the CODM and is responsible for reviewing financial information presented on a segment basis for purposes of making operating decisions and assessing financial performance.

The CODM measures and evaluates segments based on segment operating revenues together with Adjusted EBITDA. The Company excludes the following items from segment Adjusted EBITDA: goodwill impairment; provision for income taxes; other expense (income), net; interest income; interest expense; depreciation of property and equipment; amortization of intangible assets; stock-based compensation; restructuring costs; and acquisition, integration and transformation charges. Although these amounts are excluded from segment Adjusted EBITDA, they are included in reported consolidated net loss and are included in the reconciliation that follows.

The Company’s computation of segment Adjusted EBITDA may not be comparable to other similarly titled metrics computed by other companies because all companies do not calculate segment Adjusted EBITDA in the same fashion.

Operating revenues and expenses directly associated with each segment are included in determining its operating results. Other expenses that are not directly attributable to a particular segment are based upon allocation methodologies, including the following: revenue, headcount, time and other relevant usage measures, and/or a combination of such.

The Company has two reportable segments: Teladoc Health Integrated Care and BetterHelp. The Integrated Care segment includes a suite of global virtual medical services including general medical, expert medical services, specialty medical, chronic condition management, mental health, and enabling technologies and enterprise telehealth solutions for hospitals and health systems. The BetterHelp segment includes virtual therapy and other wellness services provided on a global basis which are predominantly marketed and sold on a direct-to-consumer basis.

The CODM does not review any information regarding total assets on a segment basis. Segments do not record intersegment revenues, and, accordingly, there is none to be reported. The accounting policies for segment reporting are the same as for the Company as a whole.

The following table presents revenues by segment (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Teladoc Health Integrated Care	$	383,666	$	374,416	$	1,138,198	$	1,084,438
BetterHelp	256,842		285,822		790,885		857,450
Total Consolidated Revenue	$	640,508	$	660,238	$	1,929,083	$	1,941,888

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The following table presents Adjusted EBITDA by segment (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Teladoc Health Integrated Care	$	68,039	$	62,805	$	179,741	$	135,900
BetterHelp	15,216		25,952		56,135		77,777
Total Consolidated Adjusted EBITDA	$	83,255	$	88,757	$	235,876	$	213,677

The following table presents a reconciliation of segment profitability (Adjusted EBITDA) to consolidated net loss (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Teladoc Health Integrated Care	$	68,039	$	62,805	$	179,741	$	135,900
BetterHelp	15,216		25,952		56,135		77,777
Total consolidated Adjusted EBITDA	83,255		88,757		235,876		213,677
Less adjustments to reconcile to GAAP net loss
Stock-based compensation	34,047		52,945		118,479		154,708
Goodwill impairment	—		—		790,000		—
Acquisition, integration, and transformation costs	457		5,824		1,287		16,848
Restructuring costs	3,580		411		14,753		16,043
Amortization of intangible assets	86,906		91,834		276,825		231,205
Depreciation of property and equipment	2,666		2,468		7,203		8,345
Interest income	(15,326)		(12,606)		(42,840)		(33,075)
Interest expense	5,660		5,646		16,957		16,744
Other (income) expense, net	(2,239)		1,792		(1,306)		(2,908)
Loss before provision for income taxes	(32,496)		(59,557)		(945,482)		(194,233)
Provision for income taxes	780		(2,484)		7,354		(2,755)
Net loss	$	(33,276)	$	(57,073)	$	(952,836)	$	(191,478)

Geographic data for long-lived assets (representing property and equipment, net) were as follows (in thousands):


	As of September 30, 2024		As of December 31, 2023
United States	$	24,458	$	28,096
International	3,572		3,936
Total long-lived assets	$	28,030	$	32,032

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Special Note Regarding Forward-Looking Statements

Many statements made in this Quarterly Report on Form 10-Q that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements and should be evaluated as such. Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plan and strategies. These statements often include words such as “anticipates,” “believes,” “suggests,” “targets,” “projects,” “plans,” “expects,” “future,” “intends,” “estimates,” “predicts,” “potential,” “may,” “will,” “should,” “could,” “would,” “likely,” “foresee,” “forecast,” “continue” and other similar words or phrases, as well as statements in the future tense to identify these forward-looking statements. These forward-looking statements and projections are contained throughout this Form 10-Q, including the section entitled” “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We base these forward-looking statements or projections on our current expectations, plans and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances and at such time. As you read and consider this Form 10-Q, you should understand that these statements are not guarantees of performance or results. The forward-looking statements and projections are subject to and involve risks, uncertainties, and assumptions and you should not place undue reliance on these forward-looking statements or projections. Although we believe that these forward-looking statements and projections are based on reasonable assumptions at the time they are made, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements and projections. Factors that may materially affect such forward-looking statements and projections include, but are not limited to, the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”) and in our other reports and U.S. Securities and Exchange Commission (“SEC”) filings. These cautionary statements should not be construed by you to be exhaustive and are made only as of the date of this Form 10-Q. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should evaluate all forward-looking statements made in this Form 10-Q in the context of these risks and uncertainties.

Overview

Teladoc, Inc. was incorporated in the State of Texas in June 2002 and changed its state of incorporation to the State of Delaware in October 2008. Effective August 10, 2018, Teladoc, Inc. changed its corporate name to Teladoc Health, Inc. Unless the context otherwise requires, Teladoc Health, Inc., together with its subsidiaries, is referred to herein as “Teladoc Health,” the “Company,” or “we.” The Company’s principal executive office is located in Purchase, New York. Teladoc Health is the global leader in whole person virtual care focused on forging a new healthcare experience with better convenience, outcomes, and value around the world.

We were founded on a simple, yet revolutionary idea: that everyone should have access to the best healthcare, anywhere in the world on their terms. Today, we have a vision of making virtual care the first step on any healthcare journey, and we are delivering on this mission by providing whole person virtual care that includes primary care, mental health, chronic condition management, and more.

Teladoc Health, Inc. [TDOC] Filings
10-Q	[2024-10-31]
10-Q	[2024-08-01]
10-Q	[2024-04-26]
10-K	[2024-02-23]
10-Q	[2023-10-27]
10-Q	[2023-07-28]
10-Q	[2023-05-02]
10-K	[2023-03-01]
10-Q	[2022-11-02]
10-Q	[2022-08-03]
10-Q	[2022-05-02]
10-K	[2022-02-28]
10-Q	[2021-11-01]
10-Q	[2021-08-02]
10-Q	[2021-05-03]
10-K	[2021-03-01]
10-Q	[2020-11-06]
10-Q	[2020-07-29]
10-Q	[2020-04-29]
10-K	[2020-02-26]
10-Q	[2019-10-30]
10-Q	[2019-07-31]
10-Q	[2019-04-30]
10-K	[2019-02-27]
10-Q	[2018-11-01]
10-Q	[2018-08-01]
10-Q	[2018-05-01]
10-K	[2018-02-27]
10-Q	[2017-11-01]
10-Q	[2017-08-02]
10-Q	[2017-05-08]
10-K	[2017-03-01]
10-Q	[2016-10-27]
10-Q	[2016-08-03]
10-Q	[2016-05-10]
10-K	[2016-03-03]
10-Q	[2015-11-02]
10-Q	[2015-08-12]
S-1	[2015-05-29]