10-Q 1 tdoc-20220331x10q.htm 10-Q
160532301152167606http://www.teladoc.com/20220331#AccruedLiabilitiesAndOtherLiabilitiesExcludingAccruedCompensationCurrent00000016046932516143451341.581.31P9MP1Yhttp://www.teladoc.com/20220331#AccruedLiabilitiesAndOtherLiabilitiesExcludingAccruedCompensationCurrentP1YP1YP2Y0.004130.018660.01394P1YP1Y0001477449--12-312022Q1false0001477449us-gaap:RetainedEarningsMember2022-03-310001477449us-gaap:AdditionalPaidInCapitalMember2022-03-310001477449us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310001477449srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:RetainedEarningsMember2021-12-310001477449srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AdditionalPaidInCapitalMember2021-12-310001477449srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001477449us-gaap:RetainedEarningsMember2021-12-310001477449us-gaap:AdditionalPaidInCapitalMember2021-12-310001477449us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001477449srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2021-12-310001477449us-gaap:RetainedEarningsMember2021-03-310001477449us-gaap:AdditionalPaidInCapitalMember2021-03-310001477449us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310001477449us-gaap:RetainedEarningsMember2020-12-310001477449us-gaap:AdditionalPaidInCapitalMember2020-12-310001477449us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001477449us-gaap:CommonStockMember2022-03-310001477449srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:CommonStockMember2021-12-310001477449us-gaap:CommonStockMember2021-12-310001477449us-gaap:CommonStockMember2021-03-310001477449us-gaap:CommonStockMember2020-12-310001477449tdoc:IncentiveAwardPlan2015Member2021-12-312021-12-310001477449tdoc:IncentiveAwardPlan2015Member2021-12-310001477449tdoc:IncentiveAwardPlan2015Member2022-03-310001477449srt:MaximumMembertdoc:EmployeeAndNonEmployeeStockOptionMember2022-03-310001477449srt:MaximumMembertdoc:EmployeeAndNonEmployeeStockOptionMember2022-01-012022-03-310001477449srt:MinimumMemberus-gaap:RestrictedStockUnitsRSUMember2022-01-012022-03-310001477449srt:MaximumMemberus-gaap:RestrictedStockUnitsRSUMember2022-01-012022-03-3100014774492022-04-012022-03-3100014774492023-01-012022-03-310001477449tdoc:VisitFeeRevenueMemberus-gaap:NonUsMember2022-01-012022-03-310001477449tdoc:VisitFeeRevenueMembercountry:US2022-01-012022-03-310001477449tdoc:SubscriptionAccessFeesMemberus-gaap:NonUsMember2022-01-012022-03-310001477449tdoc:SubscriptionAccessFeesMembercountry:US2022-01-012022-03-310001477449tdoc:OtherRevenueMemberus-gaap:NonUsMember2022-01-012022-03-310001477449tdoc:OtherRevenueMembercountry:US2022-01-012022-03-310001477449tdoc:VisitFeeRevenueMember2022-01-012022-03-310001477449tdoc:SubscriptionAccessFeesMember2022-01-012022-03-310001477449tdoc:OtherRevenueMember2022-01-012022-03-310001477449tdoc:VisitFeeRevenueMemberus-gaap:NonUsMember2021-01-012021-03-310001477449tdoc:VisitFeeRevenueMembercountry:US2021-01-012021-03-310001477449tdoc:SubscriptionAccessFeesMemberus-gaap:NonUsMember2021-01-012021-03-310001477449tdoc:SubscriptionAccessFeesMembercountry:US2021-01-012021-03-310001477449tdoc:OtherRevenueMemberus-gaap:NonUsMember2021-01-012021-03-310001477449tdoc:OtherRevenueMembercountry:US2021-01-012021-03-310001477449tdoc:VisitFeeRevenueMember2021-01-012021-03-310001477449tdoc:SubscriptionAccessFeesMember2021-01-012021-03-310001477449tdoc:OtherRevenueMember2021-01-012021-03-310001477449us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2022-01-012022-03-310001477449us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2021-01-012021-03-310001477449srt:CumulativeEffectPeriodOfAdoptionAdjustmentMembersrt:ProFormaMemberus-gaap:AccountingStandardsUpdate202006Member2022-01-012022-01-010001477449srt:MinimumMemberus-gaap:TrademarksMember2022-01-012022-03-310001477449srt:MinimumMemberus-gaap:TechnologyBasedIntangibleAssetsMember2022-01-012022-03-310001477449srt:MinimumMemberus-gaap:SoftwareAndSoftwareDevelopmentCostsMember2022-01-012022-03-310001477449srt:MinimumMemberus-gaap:CustomerRelationshipsMember2022-01-012022-03-310001477449srt:MaximumMemberus-gaap:TrademarksMember2022-01-012022-03-310001477449srt:MaximumMemberus-gaap:TechnologyBasedIntangibleAssetsMember2022-01-012022-03-310001477449srt:MaximumMemberus-gaap:SoftwareAndSoftwareDevelopmentCostsMember2022-01-012022-03-310001477449srt:MaximumMemberus-gaap:CustomerRelationshipsMember2022-01-012022-03-310001477449srt:MinimumMemberus-gaap:TrademarksMember2021-01-012021-12-310001477449srt:MinimumMemberus-gaap:SoftwareAndSoftwareDevelopmentCostsMember2021-01-012021-12-310001477449srt:MinimumMemberus-gaap:CustomerRelationshipsMember2021-01-012021-12-310001477449srt:MaximumMemberus-gaap:TrademarksMember2021-01-012021-12-310001477449srt:MaximumMemberus-gaap:SoftwareAndSoftwareDevelopmentCostsMember2021-01-012021-12-310001477449srt:MaximumMemberus-gaap:CustomerRelationshipsMember2021-01-012021-12-310001477449srt:WeightedAverageMemberus-gaap:TrademarksMember2022-01-012022-03-310001477449srt:WeightedAverageMemberus-gaap:TechnologyBasedIntangibleAssetsMember2022-01-012022-03-310001477449srt:WeightedAverageMemberus-gaap:SoftwareAndSoftwareDevelopmentCostsMember2022-01-012022-03-310001477449srt:WeightedAverageMemberus-gaap:CustomerRelationshipsMember2022-01-012022-03-310001477449srt:WeightedAverageMember2022-01-012022-03-310001477449srt:WeightedAverageMemberus-gaap:TrademarksMember2021-01-012021-12-310001477449srt:WeightedAverageMemberus-gaap:TechnologyBasedIntangibleAssetsMember2021-01-012021-12-310001477449srt:WeightedAverageMemberus-gaap:SoftwareAndSoftwareDevelopmentCostsMember2021-01-012021-12-310001477449srt:WeightedAverageMemberus-gaap:CustomerRelationshipsMember2021-01-012021-12-310001477449srt:WeightedAverageMember2021-01-012021-12-310001477449us-gaap:TrademarksMember2022-03-310001477449us-gaap:TechnologyBasedIntangibleAssetsMember2022-03-310001477449us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2022-03-310001477449us-gaap:CustomerRelationshipsMember2022-03-310001477449us-gaap:TrademarksMember2021-12-310001477449us-gaap:TechnologyBasedIntangibleAssetsMember2021-12-310001477449us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2021-12-310001477449us-gaap:CustomerRelationshipsMember2021-12-3100014774492021-01-012021-12-310001477449tdoc:EmployeeAndNonEmployeeStockOptionMember2022-03-310001477449tdoc:ConvertibleSeniorNotesDueJune2025Member2020-06-040001477449tdoc:ConvertibleSeniorNotesDue2027Member2020-05-190001477449tdoc:ConvertibleSeniorNotesDue2025Member2018-05-080001477449tdoc:ConvertibleSeniorNotesDue2022Member2017-06-270001477449tdoc:ConvertibleSeniorNotesDueJune2025Member2022-03-310001477449tdoc:ConvertibleSeniorNotesDue2027Member2022-03-310001477449tdoc:ConvertibleSeniorNotesDue2025Member2022-03-310001477449tdoc:ConvertibleSeniorNotesDueJune2025Member2021-12-310001477449tdoc:ConvertibleSeniorNotesDue2027Member2021-12-310001477449tdoc:ConvertibleSeniorNotesDue2025Member2021-12-310001477449tdoc:SubscriptionAccessFeesMemberus-gaap:RevenueFromContractWithCustomerMemberus-gaap:ProductConcentrationRiskMember2022-01-012022-03-310001477449tdoc:SubscriptionAccessFeesMemberus-gaap:RevenueFromContractWithCustomerMemberus-gaap:ProductConcentrationRiskMember2021-01-012021-03-3100014774492020-10-3000014774492020-10-290001477449tdoc:CommonStockWarrantMember2022-03-310001477449tdoc:CommonStockWarrantMember2021-12-3100014774492021-03-3100014774492020-12-310001477449us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-03-310001477449us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-03-310001477449us-gaap:FairValueMeasurementsRecurringMember2022-03-310001477449us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001477449us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001477449us-gaap:FairValueMeasurementsRecurringMember2021-12-310001477449us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2022-03-310001477449us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2021-12-310001477449tdoc:ConvertibleSeniorNotesDueJune2025Member2021-01-012021-03-310001477449tdoc:ConvertibleSeniorNotesDue2027Member2021-01-012021-03-310001477449us-gaap:GeneralAndAdministrativeExpenseMember2022-01-012022-03-310001477449us-gaap:CostOfSalesMember2022-01-012022-03-310001477449tdoc:TechnologyAndDevelopmentMember2022-01-012022-03-310001477449tdoc:SalesExpenseMember2022-01-012022-03-310001477449tdoc:AdministrativeAndMarketingMember2022-01-012022-03-310001477449us-gaap:GeneralAndAdministrativeExpenseMember2021-01-012021-03-310001477449us-gaap:CostOfSalesMember2021-01-012021-03-310001477449tdoc:TechnologyAndDevelopmentMember2021-01-012021-03-310001477449tdoc:SalesExpenseMember2021-01-012021-03-310001477449tdoc:EmployeeStockPurchasePlan2015Member2021-01-012021-03-310001477449tdoc:AdministrativeAndMarketingMember2021-01-012021-03-310001477449srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccountingStandardsUpdate202006Member2022-01-010001477449us-gaap:MarketApproachValuationTechniqueMember2022-03-312022-03-310001477449us-gaap:RetainedEarningsMember2022-01-012022-03-310001477449us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-310001477449us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-310001477449us-gaap:CommonStockMember2022-01-012022-03-310001477449tdoc:EmployeeAndNonEmployeeStockOptionMember2022-01-012022-03-310001477449tdoc:EmployeeAndNonEmployeeStockOptionMember2021-01-012021-03-310001477449tdoc:IncentiveAwardPlan2015Member2022-01-012022-03-310001477449tdoc:IncentiveAwardPlan2015Member2021-01-012021-03-310001477449us-gaap:RestrictedStockUnitsRSUMember2021-12-310001477449us-gaap:PerformanceSharesMember2021-12-310001477449us-gaap:PerformanceSharesMember2022-01-012022-03-310001477449us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-03-310001477449us-gaap:PerformanceSharesMember2021-01-012021-03-310001477449us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-03-310001477449us-gaap:RestrictedStockUnitsRSUMember2022-03-310001477449us-gaap:PerformanceSharesMember2022-03-310001477449us-gaap:RetainedEarningsMember2021-01-012021-03-310001477449us-gaap:CommonStockMember2021-01-012021-03-310001477449us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001477449us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310001477449tdoc:ConvertibleSeniorNotesDue2027Member2020-05-192020-05-190001477449tdoc:ConvertibleSeniorNotesDue2025Member2018-05-082018-05-080001477449tdoc:EmployeeStockPurchasePlan2015Member2022-01-012022-03-310001477449tdoc:PeerGroupRevenueMultiplesNextYearMembertdoc:MeasurementInputPeerGroupRevenueMultiplesMember2022-03-312022-03-310001477449tdoc:PeerGroupRevenueMultiplesCurrentYearMembertdoc:MeasurementInputPeerGroupRevenueMultiplesMember2022-03-312022-03-310001477449us-gaap:MeasurementInputDiscountRateMember2022-03-312022-03-310001477449us-gaap:IncomeApproachValuationTechniqueMember2022-03-312022-03-310001477449tdoc:MeasurementInputPercentageOfExcessOfReportingUnitsFairValueOverCarryingValueMember2022-03-312022-03-310001477449tdoc:PeerGroupRevenueMultiplesNextYearMembertdoc:MeasurementInputPeerGroupRevenueMultiplesMember2021-12-012021-12-010001477449tdoc:PeerGroupRevenueMultiplesCurrentYearMembertdoc:MeasurementInputPeerGroupRevenueMultiplesMember2021-12-012021-12-010001477449us-gaap:MeasurementInputDiscountRateMember2021-12-012021-12-010001477449tdoc:MeasurementInputPercentageOfExcessOfReportingUnitsFairValueOverCarryingValueMember2021-12-012021-12-010001477449tdoc:ConvertibleSeniorNotesDue2022Member2021-03-012021-03-310001477449us-gaap:ConvertibleNotesPayableMember2022-03-310001477449us-gaap:ConvertibleNotesPayableMember2022-01-012022-03-310001477449tdoc:ConvertibleSeniorNotesDue2025Membertdoc:ConvertibleSeniorNotesPayableExcludingLivongoNotesMember2022-01-012022-03-310001477449tdoc:ConvertibleSeniorNotesPayableExcludingLivongoNotesMember2022-01-012022-03-310001477449tdoc:ConvertibleSeniorNotesDueJune2025Member2022-01-012022-03-310001477449tdoc:ConvertibleSeniorNotesDue2027Member2022-01-012022-03-310001477449tdoc:ConvertibleSeniorNotesDue2025Member2022-01-012022-03-310001477449tdoc:ConvertibleSeniorNotesDue2022Member2022-01-012022-03-310001477449tdoc:EmployeeStockPurchasePlan2015Member2022-03-310001477449srt:MinimumMember2022-03-310001477449srt:MaximumMember2022-03-310001477449tdoc:ConvertibleSeniorNotesDue2025Memberus-gaap:RetainedEarningsMember2021-01-012021-03-310001477449tdoc:ConvertibleSeniorNotesDue2025Memberus-gaap:CommonStockMember2021-01-012021-03-310001477449tdoc:ConvertibleSeniorNotesDue2025Memberus-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001477449tdoc:ConvertibleSeniorNotesDue2025Memberus-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310001477449tdoc:ConvertibleSeniorNotesDue2022Memberus-gaap:RetainedEarningsMember2021-01-012021-03-310001477449tdoc:ConvertibleSeniorNotesDue2022Memberus-gaap:CommonStockMember2021-01-012021-03-310001477449tdoc:ConvertibleSeniorNotesDue2022Memberus-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001477449tdoc:ConvertibleSeniorNotesDue2022Memberus-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310001477449tdoc:ConvertibleSeniorNotesDue2025Member2021-01-012021-03-310001477449tdoc:ConvertibleSeniorNotesDue2022Member2021-01-012021-03-310001477449srt:MinimumMemberus-gaap:PerformanceSharesMember2022-01-012022-03-310001477449srt:MaximumMemberus-gaap:PerformanceSharesMember2022-01-012022-03-3100014774492022-03-3100014774492021-12-3100014774492021-01-012021-03-3100014774492022-04-2700014774492022-01-012022-03-31xbrli:sharesiso4217:USDxbrli:pureiso4217:USDxbrli:sharestdoc:Dtdoc:item

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended March 31, 2022

or

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

For the transition period from                      to                     

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)

(203635-2002

(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

The 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   No 

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes    No  

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.

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

As of April 27, 2022, the Registrant had 161,182,633 shares of Common Stock outstanding.

TELADOC HEALTH, INC.

QUARTERLY REPORT ON FORM 10-Q

For the period ended March 31, 2022

TABLE OF CONTENTS

Page
Number

PART I

Financial Information

2

Item 1.

Financial Statements

2

Condensed Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021

2

Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) for the quarters ended March 31, 2022 and 2021

3

Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the quarters ended March 31, 2022 and 2021

4

Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2022 and 2021

5

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

Item 4.

Controls and Procedures

32

PART II

Other Information

33

Item 1.

Legal Proceedings

33

Item 1A.

Risk Factors

33

Item 6.

Exhibits

34

Exhibit Index

34

Signatures

36

1

PART I

FINANCIAL INFORMATION

ITEM 1. Financial Statements

TELADOC HEALTH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

March 31,

December 31,

    

2022

    

2021

Assets

Current assets:

Cash and cash equivalents

$

836,444

$

893,480

Short-term investments

2,544

2,537

Accounts receivable, net of provision of $13,056 and $12,384, respectively

 

191,528

 

168,956

Inventories

70,654

73,079

Prepaid expenses and other current assets

 

106,875

 

87,387

Total current assets

 

1,208,045

 

1,225,439

Property and equipment, net

 

28,419

 

27,234

Goodwill

 

7,899,795

 

14,504,174

Intangible assets, net

 

1,883,897

 

1,910,278

Operating lease - right-of-use assets

45,552

46,780

Other assets

 

26,629

 

20,703

Total assets

$

11,092,337

$

17,734,608

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

47,412

$

47,257

Accrued expenses and other current liabilities

 

116,689

 

102,933

Accrued compensation

 

46,075

 

91,941

Deferred revenue-current

83,847

75,569

Advances from financing companies

12,664

13,313

Total current liabilities

 

306,687

 

331,013

Other liabilities

 

1,445

 

1,492

Operating lease liabilities, net of current portion

40,163

41,773

Deferred revenue, net of current portion

2,884

3,834

Advances from financing companies, net of current portion

8,252

9,291

Deferred taxes, net

 

57,516

 

75,777

Convertible senior notes, net

1,532,780

1,225,671

Commitments and contingencies (Note 10)

Stockholders’ equity:

Common stock, $0.001 par value; 300,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 161,434,513 shares and 160,469,325 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

 

161

 

160

Additional paid-in capital

 

17,177,152

 

17,473,336

Accumulated deficit

 

(8,023,279)

 

(1,421,454)

Accumulated other comprehensive loss

(11,424)

(6,285)

Total stockholders’ equity

 

9,142,610

 

16,045,757

Total liabilities and stockholders’ equity

$

11,092,337

$

17,734,608

See accompanying notes to unaudited condensed consolidated financial statements.

2

TELADOC HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

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

Quarter Ended March 31,

 

    

2022

2021

 

Revenue

$

565,350

    

$

453,675

    

Expenses:

Cost of revenue (exclusive of depreciation and amortization, which is shown separately below)

187,025

 

145,959

Operating expenses:

Advertising and marketing

 

133,600

 

89,439

Sales

 

58,329

 

64,793

Technology and development

 

87,412

 

78,008

General and administrative

 

104,923

 

105,172

Acquisition, integration, and transformation costs

4,507

 

6,323

Depreciation and amortization

 

58,933

 

48,659

Goodwill impairment

6,600,000

0

Total expenses

7,234,729

538,353

Loss from operations

 

(6,669,379)

 

(84,678)

Loss on extinguishment of debt

0

 

11,459

Other income, net

(724)

(5,652)

Interest expense, net

 

5,480

 

22,125

Net loss before taxes

 

(6,674,135)

 

(112,610)

Income tax expense

 

388

 

87,039

Net loss

(6,674,523)

(199,649)

Other comprehensive loss, net of tax:

Currency translation adjustment and other

(5,139)

(13,492)

Comprehensive loss

$

(6,679,662)

$

(213,141)

Net loss per share, basic and diluted

$

(41.58)

$

(1.31)

 

 

Weighted-average shares used to compute basic and diluted net loss per share

160,532,301

152,167,606

See accompanying notes to unaudited condensed consolidated financial statements.

3

TELADOC HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data, unaudited)

Accumulated

Additional

Other

Total

Common Stock

Paid-In

Accumulated

Comprehensive

Stockholders’

   

Shares

   

Amount

   

Capital

   

Deficit

   

Gain (Loss)

   

Equity

Balance as of December 31, 2021

160,469,325

$

160

$

17,473,336

$

(1,421,454)

$

(6,285)

$

16,045,757

Cumulative effect adjustment due to adoption of ASU 2020-06 (see Note 2)

0

0

(363,731)

72,698

0

(291,033)

Exercise of stock options

267,586

0

3,585

0

0

3,585

Issuance of common stock upon vesting of restricted stock units

697,602

1

(1)

0

0

0

Stock-based compensation

0

0

63,963

0

0

63,963

Other comprehensive loss, net of tax

0

0

0

0

(5,139)

(5,139)

Net loss

0

0

0

(6,674,523)

0

(6,674,523)

Balance as of March 31, 2022

161,434,513

$

161

$

17,177,152

$

(8,023,279)

$

(11,424)

$

9,142,610

Balance as of December 31, 2020

150,281,099

$

150

$

16,857,797

$

(992,661)

$

18,518

$

15,883,804

Exercise of stock options

1,238,112

1

11,907

0

0

11,908

Issuance of common stock upon vesting of restricted stock units

976,999

1

(1)

0

0

(0)

Issuance of common stock for 2022 Notes

1,058,373

1

270,111

0

0

270,112

Equity portion of extinguishment of 2022 Notes

0

0

(224,081)

0

0

(224,081)

Issuance of common stock for 2025 Notes

1,056,861

1

288,485

0

0

288,486

Equity portion of extinguishment of 2025 Notes

0

0

(237,261)

0

0

(237,261)

Recovery of excess common stock issued for acquisition

(205,280)

(0)

(40,329)

0

0

(40,329)

Stock-based compensation

0

0

90,000

0

0

90,000

Other comprehensive loss, net of tax

0

0

0

0

(13,492)

(13,492)

Net loss

0

0

0

(199,649)

0

(199,649)

Balance as of March 31, 2021

154,406,164

$

154

$

17,016,628

$

(1,192,310)

$

5,026

$

15,829,498

See accompanying notes to unaudited condensed consolidated financial statements.

4

TELADOC HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

Quarter Ended March 31,

 

    

2022

2021

 

Operating activities:

    

    

    

    

Net loss

$

(6,674,523)

$

(199,649)

Adjustments to reconcile net loss to net cash used in operating activities:

Goodwill impairment

6,600,000

0

Depreciation and amortization

 

58,933

 

48,659

Depreciation of rental equipment

770

824

Amortization of right-of-use assets

3,173

2,948

Provision for doubtful accounts

 

4,591

 

3,074

Stock-based compensation

 

60,436

 

86,300

Deferred income taxes

 

(2,319)

 

87,004

Accretion of interest

826

16,829

Loss on extinguishment of debt

 

0

 

11,459

Gain on sale of investment

0

(5,852)

Other, net

0

38

Changes in operating assets and liabilities:

Accounts receivable

 

(27,842)

 

(11,717)

Prepaid expenses and other current assets

 

(18,993)

 

(12,799)

Inventory

2,023

(2,877)

Other assets

 

(6,047)

 

1,244

Accounts payable

 

492

 

(11,989)

Accrued expenses and other current liabilities

 

11,706

 

(1,889)

Accrued compensation

 

(48,819)

 

(43,624)

Deferred revenue

7,479

17,086

Operating lease liabilities

(3,626)

(3,076)

Other liabilities

 

(7)

 

(19)

Net cash used in operating activities

 

(31,747)

 

(18,026)

Investing activities:

Capital expenditures

 

(3,913)

 

(2,115)

Capitalized software

 

(26,918)

 

(11,144)

Proceeds from marketable securities

0

50,000

Acquisitions of business, net of cash acquired

 

0

 

(55,921)

Other, net

3,264

3,150

Net cash used in investing activities

 

(27,567)

 

(16,030)

Financing activities:

Net proceeds from the exercise of stock options

 

3,585

 

11,908

Repurchase of 2022 Notes

 

0

 

(130)

Proceeds from advances from financing companies

2,232

4,816

Payment against advances from financing companies

(3,921)

(4,098)

Proceeds from employee stock purchase plan

 

3,680

 

8,648

Cash received for withholding taxes on stock-based compensation, net

103

1,218

Other, net

(2,863)

(187)

Net cash provided by financing activities

 

2,816

 

22,175

Net decrease in cash and cash equivalents

 

(56,498)

 

(11,881)

Foreign exchange difference

(538)

(1,339)

Cash and cash equivalents at beginning of the period

 

893,480

 

733,324

Cash and cash equivalents at end of the period

$

836,444

$

720,104

Income taxes paid

$

261

$

52

Interest paid

$

7

$

3

See accompanying notes to unaudited condensed consolidated financial statements.

5

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.

On October 30, 2020, the Company completed the merger with Livongo Health, Inc. (“Livongo”), a transformational opportunity to improve the delivery, access and experience of chronic healthcare for individuals around the world.

On July 1, 2020, the Company completed the acquisition of InTouch Technologies, Inc. (“InTouch”), a leading provider of enterprise telehealth solutions for hospitals and health systems.

Note 2. Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements for the three months ended March 31, 2022 and 2021, 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, 2021 (the “2021 Form 10-K”), which includes a complete set of footnote disclosures, including the Company’s significant accounting policies.

These financial statements include the results of Teladoc Health, as well as three professional associations and twelve professional corporations (collectively, the “THMG Association”). All intercompany transactions and balances have been eliminated. Certain prior year amounts have been reclassified to conform to the current year presentation.

Teladoc Health Medical Group, P.A., formerly Teladoc Physicians, P.A. (“THMG”) is party to several Services Agreements 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 the Company. 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 all activities of the THMG Association and funds and absorbs all losses of the VIE and appropriately consolidates the THMG Association.

Total revenue and net income (loss) for the VIE were $60.1 million and $2.3 million, and $54.2 million and $1.2 million, for the quarters ended March 31, 2022 and 2021, respectively. The VIE’s total assets, all of which were current, were $33.1 million and $58.5 million at March 31, 2022 and December 31, 2021, respectively. The VIE’s total liabilities, all of which were current, were $71.5 million and $94.7 million at March 31, 2022 and December 31, 2021,

6

respectively. The VIE’s total stockholders’ deficit was $38.4 million and $36.1 million at March 31, 2022 and December 31, 2021, respectively.

Business Combinations

The Company accounts for its business combinations using the acquisition method of accounting. The purchase price is attributed to the fair value of the assets acquired and liabilities assumed. Transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition date. The excess of the purchase price of acquisition over the fair value of the identifiable net assets of the acquiree is recorded as goodwill. The results of businesses acquired in a business combination are included in the Company’s condensed consolidated financial statements from the date of acquisition.

When the Company issues stock-based or cash awards to an acquired company’s stockholders, the Company evaluates whether the awards are consideration or compensation for post-acquisition services. The evaluation includes, among other things, whether the vesting of the awards is contingent on the continued employment of the acquired company’s stockholders beyond the acquisition date. If continued employment is required for vesting, the awards are treated as compensation for post-acquisition services and recognized as expense over the requisite service period.

Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates and selection of comparable companies. The estimates and assumptions used to determine the fair values and useful lives of identified intangible assets could change due to numerous factors, including market conditions, technological developments, economic conditions, and competition. In connection with determination of fair values, the Company may engage a third-party valuation specialist to assist with the valuation of intangible and certain tangible assets acquired and certain assumed obligations. Acquisition-related transaction costs incurred by the Company are not included as a component of consideration transferred but are accounted for as an operating expense in the period in which the costs are incurred.

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 reported results of operations; if material, the effects of changes in estimates are disclosed in the notes to the condensed consolidated financial statements.

Significant estimates and assumptions by management affect areas including the carrying value and useful life of long-lived assets (including intangible assets), the carrying value of goodwill, the capitalization and amortization of software development costs, deferred costs, the allowance for doubtful accounts, and the accounting for business combinations. Other significant areas include revenue recognition (including performance guarantees, the accounting for income taxes, contingences, litigation and related legal accruals, and the accounting for stock-based compensation awards, and other items as described in the Summary of Significant Accounting policies in this Quarterly Report and in the 2021 Form 10-K.

7

Recently Adopted Accounting Standards

In August 2020, the financial accounting standards board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06—"Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 simplifies the accounting for convertible instruments by eliminating the conversion option separation model for convertible debt that can be settled in cash and by eliminating the measurement model for beneficial conversion features. Convertible instruments that continue to be subject to separation models are (1) those with conversion options that are required to be accounted for as bifurcated derivatives and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. This ASU also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards.

The Company adopted ASU 2020-06 as of January 1, 2022, under the modified retrospective transition method, and accordingly, its prior period financial statements were not restated. Upon adoption of ASU 2020-06, the conversion feature of the Company’s convertible senior notes is no longer reported as a component of equity. Instead, the previously-separated equity component is now combined with the liability component, thereby eliminating the amortization of the debt discount arising from the conversion option separation model. As such, the Company currently anticipates a reduction of approximately $58 million in non-cash interest to be recorded on its convertible senior notes for the year ended December 31, 2022, as compared to the year ended December 31, 2021. To reflect the adoption of ASU 2020-06, the Company recorded an increase to convertible senior notes of $306.3 million and decreases to additional paid-in capital, accumulated deficit and net deferred tax liabilities of $363.7 million, $72.7 million and $15.3 million, respectively, as of January 1, 2022.

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

The Company generates access fees from customers, consisting of employers, health plans, hospitals and health systems, insurance, and financial services companies (collectively “Clients”), as well as individual members, 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. In addition, other revenue is primarily associated with virtual healthcare device equipment included with its hosted virtual healthcare platform. Access revenue accounted for 87% and 84% of the Company’s revenue for the quarters ended March 31, 2022 and 2021, respectively.

8

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

Quarter Ended

March 31,

    

2022

    

2021

    

Access Fees Revenue

U.S.

$

421,146

$

327,553

International

70,191

54,553

Total

491,337

382,106

Visit Fee Revenue

U.S.

64,473

 

57,128

International

3,455

3,383

Total

67,928

60,511

Other

U.S.

5,581

10,671

International

504

387

Total

6,085

11,058

Total Revenues

$

565,350

$

453,675

During the fourth quarter of 2021, the Company refined its definition of international revenues to reflect all international revenues based on location of the customer. Previously, Direct-to-Consumer (“D2C”) activities were primarily reflected based on the location of operations. In addition, certain activities related to the Company’s international operations are now reflected in visit revenues versus access fee revenues. Prior period amounts have been recast to conform with current presentation.

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. Deferred revenue associated with upfront payments for a device is amortized ratably over the expected member enrollment period. Deferred revenue that will be recognized during the succeeding twelve-month period is recorded as current deferred revenue and the remaining portion is recorded as noncurrent deferred revenue.

For certain services, payment is required for future months before the service is delivered to the member. The Company records deferred revenue when cash payments are received in advance of the Company’s performance obligation to provide services. Deferred revenue, current plus long-term, was $87.1 million at March 31, 2022 and $73.2 million at March 31, 2021. The net increase of $7.6 million and $18.4 million in the deferred revenue balance for the three months ended March 31, 2022 and 2021, respectively, was primarily driven by InTouch and Livongo as well as BetterHelp, the Company’s D2C mental health product, and cash payments received or due in advance of satisfying the Company’s performance obligations, offset by revenue recognized that were included in the deferred revenue balance at the beginning of the period. The Company anticipates that it will satisfy most of its performance obligation associated with the deferred revenue within the prospective fiscal year. Revenue recognized during the quarters ended March 31, 2022 and 2021 that was included in deferred revenue at the beginning of the periods was $51.6 million and $32.7 million, respectively.

The Company expects to recognize $73.0 million and $5.0 million of revenue in 2022 and 2023, respectively, related to future performance obligations that are unsatisfied or partially unsatisfied as of March 31, 2022.

9

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 as of March 31, 2022 (in thousands):

As of March 31,

As of December 31,

    

2022

2021

Deferred device and contract costs, current

$

27,335

$

22,304

Deferred device and contract costs, noncurrent

7,636

6,249

Total deferred device and contract costs

$

34,971

$

28,553

Deferred costs and other activity were as follows (in thousands):

    

Deferred Device and Contract Costs

Beginning balance as of December 31, 2021

$

28,553

Additions

13,986

Cost of revenue recognized

(7,568)

Ending balance as of March 31, 2022

$

34,971

10

Note 4. Inventories

Inventories consisted of the following (in thousands):

As of March 31,

As of December 31,

 

    

2022

    

2021

 

Raw materials and purchased parts

$

25,006

$

26,164

Work in process

379

313

Finished goods

 

45,269

 

46,602

Total inventories

$

70,654

$

73,079

Note 5. Prepaid Expenses and Other Current Assets

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

As of March 31,

As of December 31,

    

2022

    

2021

Prepaid expenses

$

51,397

$

38,179

Deferred device and contract costs, current

 

27,335

22,304

Other receivables

22,817

21,170

Other current asset

5,326

5,734

Total prepaid expenses and other current assets

$

106,875

$

87,387

Note 6. Intangible Assets, Net

Intangible assets, net consist of the following (in thousands):

Weighted

Average

    

    

Remaining

 

Useful

    

    

Accumulated

    

Net Carrying

Useful Life

Life

Gross Value

Amortization

Value

 

(Years)

March 31, 2022

Client relationships

 

2 to 20 years  

 

$

1,463,335

$

(222,285)

$

1,241,050

14.3

Trademarks

2 to 15 years  

325,958

(58,823)

267,135

7.4

Software

 

3 to 5 years  

 

 

155,456

(45,101)

110,355

2.8

Technology

5 to 7 years

343,310

(77,953)

265,357

5.3

Intangible assets, net

$

2,288,059

$

(404,162)

$

1,883,897

11.4

December 31, 2021

Client relationships

 

2 to 20 years  

 

$

1,465,926

$

(199,866)

$

1,266,060

14.5

Trademarks

3 to 15 years  

326,392

(45,555)

280,837

9.5

Software

 

3 to 5 years  

 

 

126,188

(40,767)

85,421

2.7

Technology

5 to 7 years

343,262

(65,302)

277,960

5.6

Intangible assets, net

$

2,261,768

$

(351,490)

$

1,910,278

12.0

Amortization expense for intangible assets net of foreign currency remeasurement for intangible assets was $56.6 million and $46.6 million for the quarters ended March 31, 2022 and 2021, respectively.

In January 2022, the Company embarked upon a two-year migration strategy that integrates and moves selected consumer brands under Teladoc Health – which will serve as the primary business-to-business-to-consumer brand that meets all consumer healthcare needs. The evolution of brand names results in the weighted average life of our trademarks decreasing from 9.5 years to 7.4 years as of March 31, 2022, and an acceleration of amortization expense being expensed over 2022 and 2023. This change resulted in additional amortization expense of $5.8 million (or $0.04 per basic and diluted share) in the first quarter of 2022.

Refer to Note 7 to the condensed consolidated financial statements for the results of impairment testing of the Company’s intangible assets including goodwill.

11

Note 7. Goodwill

Goodwill consisted of the following (in thousands):

As of March 31,

As of December 31,

    

2022

    

2021

Beginning balance as of December 31, 2021 and 2020, respectively

$

14,504,174

$

14,581,255

Impairment

(6,600,000)

0

Additions associated with acquisitions

0

64,269

Purchase consideration adjustments net of deferred tax impacts

0

(122,306)

Currency translation adjustment

 

(4,379)

 

(19,044)

Ending balance as of March 31, 2022 and December 31, 2021

$

7,899,795

$

14,504,174

As a result of sustained decreases in the Company’s publicly quoted share price and market capitalization continuing into 2022, the Company conducted additional testing of its goodwill, definite-lived intangibles, and other long-lived assets as of March 31, 2022. As a result of this review, the Company did not identify an impairment to its definite-lived intangible assets or other long-lived assets, but the Company recorded a $6.6 billion non-deductible, non-cash goodwill impairment charge (or $41.11 per basic and diluted share) for the quarter ended March 31, 2022. 

Consistent with prior goodwill impairment testing, the Company’s March 31, 2022, testing reflected a 75%/25% allocation between the income and market approaches. The Company believes the 75% weighting to the income approach continues to be appropriate as it more directly reflects its future growth and profitability expectations. For the Company’s March 31, 2022 impairment testing, as compared to its December 1, 2021 testing, the Company reduced its estimated future cash flows used in the impairment assessment, including revenues, margin, and capital expenditures to reflect its best estimates at this time. The Company also updated certain significant inputs into the valuation models including the discount rate which increased reflecting, in part, higher interest rates and market volatility, and the Company reduced its revenue market multiples, reflecting declining valuations across the Company’s selected peer group. The Company’s updates to its discount rate, market multiples, and estimated future cash flows each had a significant impact to the estimated fair value of the reporting unit.

The following table reflects changes in the most significant inputs to the Company’s impairment analysis on each testing date since its last annual test.

Testing dates

Discount Rate

Peer Group Revenue Multiples
(current year/subsequent year)

% Excess of Reporting Unit Fair Value over Carrying Value

December 1, 2021

10.5%

7.0x/5.5x

15.0%

March 31, 2022

12.0%

3.0x/2.5x

0% post impairment

Note 8. Accrued Expenses and Other Current Liabilities

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

As of March 31,

As of December 31,

    

2022

    

2021

 

Professional fees

$

5,485

$

5,373

Consulting fees/provider fees

 

18,029

19,292

Client performance guarantees

10,034

7,653

Interest payable

5,809

1,480

Income tax payable

5,131

3,098

Insurance

5,779

3,884

Marketing

6,104

3,471

Operating lease liabilities - current

13,052

12,687

Franchise and sales taxes

11,429

9,965

Device replacement cost

5,913

6,263

Other

 

29,924

29,767

Total

$

116,689

$

102,933

12

Note 9. Fair Value Measurements

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

The Company measures its financial assets and liabilities at fair value at each reporting period using a fair value hierarchy that requires it to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. 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.

The Company’s short-term investments held as of March 31, 2022 and 2021 consisted primarily of certificates of deposit held at financial institutions. The amortized cost of these investments, which are classified as Level 2, approximated their fair value.

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis using the above input categories (in thousands):

March 31, 2022

    

Level 1

    

Level 2

    

Total

Cash and cash equivalents

$

836,444

$

0

$

836,444

Short-term investments

$

0

$

2,544

$

2,544

December 31, 2021

    

Level 1

    

Level 2

    

Total

Cash and cash equivalents

$

893,480

$

0

$

893,480

Short-term investments

$

0

$

2,537

$

2,537

There were no transfers between fair value measurement levels during the quarters ended March 31, 2022 and December 31, 2021.

Note 10. 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 1 to 11 years, with options to extend the lease term from 1 to 6 years. At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the arrangement 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.

13

Operating Leases

The Company leases office space under non-cancelable operating leases in the U.S. and various international locations. As of March 31, 2022, the future minimum lease payments under non-cancelable operating leases were as follows (in thousands):

    

As of March 31,

Operating Leases:

2022

2022

$

15,023

2023

 

14,261

2024

9,634

2025

7,197

2026

5,822

2027 and thereafter

12,638

Total future minimum payments

$

64,575

The Company rents certain information systems to selected qualified customers under arrangements that qualify as either sales-type lease or operating lease arrangements. Leases have terms that generally range from 2 to 5 years.

Note 11. Convertible Senior Notes

Outstanding Convertible Senior Notes

As of March 31, 2022, 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 on June 4, 2020 for which the Company has agreed to guarantee Livongo’s obligations (the “Livongo Notes;” and together with the 2027 Notes, the 2025 Notes and the 2022 Notes (as defined below), the “Notes”). On June 27, 2017, the Company issued, at par value, $275.0 million aggregate principal amount of 3% convertible senior notes due 2022 (the “2022 Notes”), which were redeemed during the quarter ended March 31, 2021 as described below.

The following table presents certain terms of the Notes that were outstanding as of March 31, 2022:

2027 Notes

    

2025 Notes