shares tumbled 38% in Wednesday’s after-hours trading, after the remote healthcare provider reported deeper-than-expected losses for the first quarter and cut its financial projections for the year. The stock already had slid 70% over the past 12 months as the company struggled to shake off concerns that it’s just a pandemic play.
During the first three months of 2022,
(ticker: TDOC) posted a loss of $6.67 billion, or $41.58 a share. Analysts polled by FactSet had been expecting a loss of just 60 cents a share, on average. In the same quarter last year, the telemedicine company lost $199.6 million, or $1.31 per share.
The loss in the first quarter was mainly driven by a noncash goodwill impairment charge of $6.6 billion, which is often recorded on the income statement after a company acknowledges that an asset has lost value or become completely worthless.
In Wednesday’s news release, Teladoc didn’t disclose many details about the goodwill impairment charge, but a large part of goodwill on its books came from its $18.5 billion acquisition of Livongo in 2020, according to the company’s filings with the Securities and Exchange Commission. Livongo is a digital health-management and coaching platform for people with chronic conditions like diabetes.
The goodwill impairment was triggered by the sustained decline in Teladoc’s share price, which is driven by the increased discount rate of the company’s future cash flows and decreasing valuations for peers in the high-growth digital healthcare space, said Chief Financial Officer Mala Murthy during a conference call Wednesday afternoon.
(ONEM), two of Teladoc’s major competitors in the telemedicine space, have seen their shares lose 80% and 83%, respectively, over the past 12 months.
Teladoc revenue increased 25% from the year-ago quarter to reach $565.4 million. The firm demonstrated “significant progress” in a number of strategic initiatives, said Teladoc CEO Jason Gorevic in a statement. Still, the number came in slightly lower than the $568.7 million estimates from Wall Street analysts.
For the fiscal year, Teladoc now expects to see revenue between $2.4 billion and $2.5 billion, and earnings before interest, taxes, depreciation and amortization, or Ebitda, ranging from negative $7 million to negative $52 million. The company has previously projected $2.55 billion to $2.65 billion in revenue and $18 million to $48 million in Ebitda.
“We are revising our 2022 outlook to reflect dynamics we are currently experiencing in the direct-to-consumer mental health and chronic condition markets,” says Gorevic, noting that higher advertising costs in some channels have dragged on the yield of its marketing spending. The firm is also seeing an “elongated sales cycle” in the chronic-condition market, he says, as employers and health plans evaluate their long-term strategies.
Following the disappointing earnings report, Teladoc shares, which had already fallen 3.1% during Wednesday’s trading to $55.99, slid further after hours to reach $34.50. If the losses are retained at Thursday’s market open, it will be the lowest level for the stock since March 2018 and cause significant losses for some of its largest shareholders.
Cathie Wood’s $12 billion
ETF (ARKK), for example, has been a big buyer of Teladoc shares since they fell from their 2021 peak. As of Wednesday’s close, Teladoc was the fund’s third-largest position—with a nearly 7% weight worth more than $652 million—behind only
Zoom Video Communications
(ZM). That means the 38% plunge in Teladoc stock would drag the ARK fund lower by nearly 3%.
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