Teladoc Health Reports Fourth Quarter and Full Year 2023 Results

• Fourth quarter 2023 revenue increase of 4% and full year 2023 revenue increase of 8% to $2,602.4 million
• Fourth quarter 2023 net loss of $28.9 million, or $0.17 per share, and full year 2023 net loss of $220.4 million, or $1.34 per share
• Fourth quarter 2023 adjusted EBITDA increase of 22% to $114.4 million and full year 2023 adjusted EBITDA increase of 33% to $328.1 million, resulting in the company’s most profitable year-to-date
• Full year 2023 operating cash flow of $350.0 million, up from $189.3 million; full year 2023 free cash flow of $193.7 million, up from $16.5 million; cash position of $1,123.7 million as of December 31, 2023
• Initiates 2024 guidance, provides three year outlook
  

PURCHASE, NY, Feb. 20, 2024 (GLOBE NEWSWIRE) -- Teladoc Health, Inc. (NYSE: TDOC), the global leader in whole-person virtual care, today reported financial results for the fourth quarter and full year ended December 31, 2023.

"With approximately 90 million members and thousands of clients around the world, Teladoc Health continues to be the leader in whole person virtual care," said Jason Gorevic, CEO of Teladoc Health. "In 2023 – in the midst of a challenging macro-economic environment – we reported meaningful progress in generating higher margins and delivering strong bottom-line performance. During the year, we delivered 33% growth in adjusted EBITDA as well as free cash flow of $194 million while driving 8% consolidated top-line growth. At the same time, we brought forward innovative offerings like our integrated app experience and provider-based chronic condition management that differentiate us in the marketplace.

“As we look at 2024 and beyond, we are excited for the future. We remain focused on serving our clients globally, delivering world-class health care while at the same time, expanding our bottom line through a combination of operating leverage and expense reduction.”

Key Financial Data
($ in thousands, except per share data, unaudited)
	Quarter Ended										Year Ended
	December 31,								Year-over-		December 31,								Year-over-
		2023				2022			Year Change			2023				2022			Year Change
Revenue	$	660,527			$	637,709			4%		$	2,602,415			$	2,406,840			8%
Net loss	$	(28,890	)		$	(3,810,071	)		99%		$	(220,368	)		$	(13,659,531	)		98%
Net loss per share, basic and diluted	$	(0.17	)		$	(23.49	)		99%		$	(1.34	)		$	(84.60	)		98%
Adjusted EBITDA (1)	$	114,443			$	94,094			22%		$	328,120			$	246,513			33%

See note (1) in the Notes section that follows.

Fourth Quarter 2023

Revenue increased 4% to $660.5 million from $637.7 million in the fourth quarter of 2022. Access fees revenue grew 4% to $573.9 million and other revenue grew 3% to $86.6 million. U.S. revenue grew 2% to $564.8 million and International revenue grew 15% to $95.8 million.

Teladoc Health Integrated Care ("Integrated Care") segment revenue increased 8% to $384.4 million in the fourth quarter of 2023 and BetterHelp segment revenue was essentially flat at $276.2 million.

Net loss totaled $28.9 million, or $0.17 per share, for the fourth quarter of 2023, compared to $3,810.1 million, or $23.49 per share, for the fourth quarter of 2022. Results for the fourth quarter of 2023 included stock-based compensation expense of $46.8 million, or $0.28 per share, and amortization of acquired intangibles of $70.8 million, or $0.43 per share. The amortization of acquired intangibles increased over the prior year period reflecting a change in the useful lives of certain intangibles.

Results for the fourth quarter of 2022 primarily included non-cash goodwill impairment charges of $3,772.8 million, or $23.26 per share, stock-based compensation expense of $50.8 million, or $0.31 per share, and amortization of acquired intangibles of $50.2 million, or $0.31 per share. Net loss for the fourth quarter of 2022 also included $3.7 million, or $0.02 per share, of restructuring costs primarily related to the abandonment of certain excess leased office space.

Adjusted EBITDA⁽¹⁾ increased 22% to $114.4 million, compared to $94.1 million for the fourth quarter of 2022. Integrated Care segment adjusted EBITDA increased 28% to $56.0 million in the fourth quarter of 2023 and BetterHelp segment adjusted EBITDA increased 11% to $58.5 million in the fourth quarter of 2023.

GAAP gross margin, which includes depreciation and amortization, was 68.8% for the fourth quarter of 2023, compared to 68.6% for the fourth quarter of 2022.

Adjusted gross margin⁽¹⁾ was 70.7% for the fourth quarter of 2023, compared to 70.4% for the fourth quarter of 2022.

Full Year Ended December 31, 2023

Revenue increased 8% to $2,602.4 million from $2,406.8 million for the year ended December 31, 2022. Access fees revenue grew 8% to $2,282.5 million, and other revenue grew 6% to $319.9 million. U.S. revenue grew 6% to $2,237.5 million, and International revenue grew 19% to $364.9 million for the year ended December 31, 2023.

Revenue increased 7% to $1,468.8 million for the Integrated Care segment for the year ended December 31, 2023 and increased 11% to $1,133.6 million for the BetterHelp segment.

Net loss totaled $220.4 million, or $1.34 per share, for the year ended December 31, 2023, compared to $13,659.5 million, or $84.60 per share, for the year ended December 31, 2022. Results for the year ended December 31, 2023 included stock-based compensation expense of $201.6 million, or $1.22 per share, restructuring costs of $16.9 million, or $0.10 per share, and amortization of acquired intangibles of $243.0 million, or $1.48 per share.

Results for the year ended December 31, 2022 included non-cash goodwill impairment charges of $13,402.8 million, or $83.01 per share, as well as stock-based compensation expense of $217.9 million, or $1.35 per share, and amortization of acquired intangibles of $198.5 million, or $1.23 per share. Net loss for the year ended December 31, 2022 also included $7.4 million, or $0.05 per share, of restructuring costs related to the abandonment of certain excess leased office space and severance.

Adjusted EBITDA⁽¹⁾ increased 33% to $328.1 million, compared to $246.5 million for the year ended December 31, 2022. Integrated Care segment adjusted EBITDA increased 42% to $191.9 million in the year ended December 31, 2023 and BetterHelp segment adjusted EBITDA increased 19% to $136.2 million in the year ended December 31, 2023.

GAAP gross margin, which includes depreciation and amortization, was 68.2% for the year ended December 31, 2023, compared to 67.8% for the year ended December 31, 2022.

Adjusted gross margin⁽¹⁾ was 70.8% for the year ended December 31, 2023, compared to 69.1% for the year ended December 31, 2022.

Capex and Cash Flow

Cash flow from operations was $130.1 million in the fourth quarter of 2023, compared to $65.5 million in the fourth quarter of 2022, and was $350.0 million in the year ended December 31, 2023, compared to $189.3 million in the year ended December 31, 2022. Capitalized expenditures and capitalized software (together, “Capex”) totaled $36.5 million in the fourth quarter of 2023, compared to $53.9 million in the fourth quarter of 2022, and totaled $156.3 million for the year ended December 31, 2023, compared to $172.8 million for the year ended December 31, 2022. Free cash flow was $93.6 million in the fourth quarter of 2023, compared to $11.7 million in the fourth quarter of 2022, and was $193.7 million for the year ended December 31, 2023, compared to $16.5 million for the year ended December 31, 2022.

Financial Outlook

Teladoc Health provides an outlook based on current market conditions and expectations and what we know today. Accordingly, we believe our outlook ranges provide a reasonable baseline for future financial performance.

For the first quarter of 2024, we expect:

	1Q 2024 Outlook Range
Revenue	$630 - $645 million
Adjusted EBITDA	$52 - $62 million
Net loss per share	($0.55) - ($0.45)
U.S. Integrated Care Members (2)	89.5 - 90.5 million

Integrated Care
Revenue growth percentage (year-over-year)	5% - 7%
Adjusted EBITDA margin	10.5% - 12%

BetterHelp
Revenue growth percentage (year-over-year)	(6%) - (3%)
Adjusted EBITDA margin	5.5% - 6.5%

For the full year of 2024, we expect:

	Full Year 2024 Outlook Range
Revenue	$2,635 - $2,735 million
Adjusted EBITDA	$350 - $390 million
Net loss per share	($1.10) - ($0.80)
Free Cash Flow	$210 - $240 million
U.S. Integrated Care Members (2)	90 - 92 million

Integrated Care
Revenue growth percentage (year-over-year)	Low to mid-single-digits
Adjusted EBITDA margin expansion (year-over-year)	+150bps to +250bps

BetterHelp
Revenue growth percentage (year-over-year)	Flat to low-single-digits
Adjusted EBITDA margin expansion (year-over-year)	Flat +/- 50bps

See note (2) in the Notes section that follows.

Three Year Outlook

We expect:

Low to mid-single-digit annual consolidated revenue growth, including mid-single-digit Integrated Care and low single-digit BetterHelp annual revenue growth; and

50 -100 basis points of annual margin expansion, and at least $425 million of adjusted EBITDA for the full year of 2025⁽⁹⁾ inclusive of cost actions associated with our efficiency program.

See note (9) in the Notes section that follows.

Efficiency Program

As part of the previously announced comprehensive operational review of the business to drive efficiency in order to reduce costs and improve profit growth, we expect pre-tax expense reductions of an approximate net $43 million in 2024, which is reflected in our financial outlook, and approximately $85 million on an annualized basis. Included in the expense reductions is stock-based compensation expense of approximately $8 million in both 2024 and on an annualized basis.

In relation to the efficiency program, we expect to incur pre-tax restructuring charges in the range of $12 million to $16 million in 2024, of which approximately $11 million is expected to occur in the first quarter of 2024. The charges will primarily relate to employee transition, severance, employee benefits, and other costs needed to execute on various optimization initiatives. In addition, we expect a reduction in stock-based compensation of approximately $3 million in the first quarter of 2024 associated with the forfeiture of stock awards.

Earnings Conference Call

The fourth quarter and full year 2023 earnings conference call and webcast will be held Tuesday, February 20, 2024 at 5:00 p.m. E.T. The conference call can be accessed by dialing 1-833-470-1428 for U.S. participants and using the access code # 825968. For international participants, please visit the following link for global dial-in numbers: https://www.netroadshow.com/conferencing/global-numbers?confId=60046. A live audio webcast will also be available online at http://ir.teladoc.com/news-and-events/events-and-presentations/. A replay of the call will be available via webcast for on-demand listening shortly after the completion of the call, at the same web link, and will remain available for approximately 90 days.

About Teladoc Health

Teladoc Health empowers all people everywhere to live their healthiest lives by transforming the healthcare experience. As the world leader in whole-person virtual care, Teladoc Health uses proprietary health signals and personalized interactions to drive better health outcomes across the full continuum of care, at every stage in a person’s health journey. Teladoc Health leverages more than two decades of expertise and data-driven insights to meet the growing virtual care needs of consumers and healthcare professionals. For more information, please visit www.teladochealth.com.

Cautionary Note Regarding Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “believe,” “project,” “estimate,” “expect,” “may,” “should,” “will” and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding future financial or operating results, future numbers of members or clients, litigation outcomes, regulatory developments, market developments, new products and growth strategies, and the effects of any of the foregoing on our future results of operations or financial condition.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: (i) changes in laws and regulations applicable to our business model; (ii) changes in market conditions and receptivity to our services and offerings, including our ability to effectively compete; (iii) results of litigation or regulatory actions; (iv) the loss of one or more key clients or the loss of a significant number of members or BetterHelp paying users; (v) changes in valuations or useful lives of our assets; (vi) changes to our abilities to recruit and retain qualified providers into our network; (vii) the impact of and risk related to impairment losses with respect to goodwill or other assets; and (viii) the success of our operational review of the company to achieve a more balanced approach to growth and margin. For a detailed discussion of the risk factors that could affect our actual results, please refer to the risk factors identified in our SEC reports, including, but not limited to, our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, as filed with the SEC.

Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

TELADOC HEALTH, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data, unaudited)

	Quarter Ended December 31,								Year Ended December 31,
		2023				2022				2023				2022
Revenue	$	660,527			$	637,709			$	2,602,415			$	2,406,840
Expenses:
Cost of revenue (exclusive of depreciation and amortization, which are shown separately below)		193,424				188,873				760,031				743,987
Operating expenses:
Advertising and marketing		147,156				146,443				688,854				623,536
Sales		53,451				56,278				213,780				227,172
Technology and development		89,938				82,930				348,521				333,629
General and administrative		108,957				119,845				464,659				449,855
Acquisition, integration, and transformation costs		4,262				6,627				21,110				15,620
Restructuring costs		899				3,738				16,942				7,416
Depreciation		2,793				2,598				11,138				11,407
Amortization		94,728				73,118				325,933				244,620
Goodwill impairment		—				3,772,811				—				13,402,812
Total expenses		695,608				4,453,261				2,850,968				16,060,054
Loss from operations		(35,081	)			(3,815,552	)			(248,553	)			(13,653,214	)
Interest income		(13,707	)			(6,482	)			(46,782	)			(12,674	)
Interest expense		5,538				4,590				22,282				21,944
Other (income) expense, net		(1,537	)			(1,749	)			(4,445	)			859
Loss before provision for income taxes		(25,375	)			(3,811,911	)			(219,608	)			(13,663,343	)
Provision for income taxes		3,515				(1,840	)			760				(3,812	)
Net loss		(28,890	)			(3,810,071	)			(220,368	)			(13,659,531	)
Net loss per share, basic and diluted	$	(0.17	)		$	(23.49	)		$	(1.34	)		$	(84.60	)
Weighted-average shares used to compute basic and diluted net loss per share		166,059,023				162,169,564				164,578,219				161,457,123

Stock-based Compensation Summary

Compensation costs for stock-based awards were classified as follows (in thousands):

	Quarter Ended December 31,						Year Ended December 31,
		2023			2022			2023			2022
Cost of revenue (exclusive of depreciation and amortization, which are shown separately)	$	1,418		$	1,474		$	5,478		$	6,468
Advertising and marketing		3,773			3,561			15,300			14,083
Sales		8,393			9,337			35,449			43,183
Technology and development		15,352			14,461			58,336			64,577
General and administrative		17,906			21,921			86,987			89,541
Total stock-based compensation expense (3)	$	46,842		$	50,754		$	201,550		$	217,852

See note (3) in the Notes section that follows.

Revenues

	Quarter Ended								Year Ended
	December 31,						Year-over-		December 31,						Year-over-
($ in thousands, unaudited)		2023			2022		Year Change			2023			2022		Year Change
Revenue by Type
Access fees	$	573,920		$	553,668		4%		$	2,282,521		$	2,103,814		8%
Other		86,607			84,041		3 %			319,894			303,026		6%
Total Revenue	$	660,527		$	637,709		4 %		$	2,602,415		$	2,406,840		8%
Revenue by Geography
U.S. Revenue	$	564,763		$	554,416		2%		$	2,237,533		$	2,101,015		6%
International Revenue		95,764			83,293		15%			364,882			305,825		19%
Total Revenue	$	660,527		$	637,709		4%		$	2,602,415		$	2,406,840		8%

Summary Operating Metrics

Consolidated

	Quarter Ended						Year Ended
	December 31,				Year-over-		December 31,				Year-over-
(In millions)	2023		2022		Year Change		2023		2022		Year Change
Total Visits	4.4		4.8		(8)%		18.4		18.5		(1)%

Integrated Care

	As of December 31,				Year-over-
(In millions)	2023		2022		Year Change
U.S. Integrated Care Members (2)	89.6		83.3		8%
Chronic Care Program Enrollment (4)	1.158		1.019		14%

	Quarter Ended								Year Ended
	December 31,						Year-over-		December 31,						Year-over-
		2023			2022		Year Change			2023			2022		Year Change
Average Monthly Revenue Per U.S. Integrated Care Member (5)	$	1.42		$	1.44		(1)%		$	1.41		$	1.42		(1)%

BetterHelp

	Average for Quarter Ended						Average for Year Ended
	December 31,				Year-over-		December 31,				Year-over-
(In millions)	2023		2022		Year Change		2023		2022		Year Change
BetterHelp Paying Users (6)	0.425		0.450		(6)%		0.457		0.419		9%

See notes (2), (4), (5), and (6) in the Notes section that follows.

Operating Results by Segment (see note (7) in the Notes section that follows)

The following table presents operating results by reportable segment for the periods indicated:

	Quarter Ended								Year Ended
	December 31						Year-over-		December 31						Year-over-
($ in thousands, unaudited)		2023			2022		Year Change			2023			2022		Year Change
Teladoc Health Integrated Care
Revenue	$	384,356		$	357,100		8%		$	1,468,794		$	1,373,900		7%
Adjusted EBITDA	$	55,971		$	43,686		28%		$	191,871		$	135,153		42%
Adjusted EBITDA Margin %		14.6%			12.2%		233 bps			13.1%			9.8%		323 bps
BetterHelp
Therapy Services	$	271,272		$	274,495		(1)%		$	1,116,693		$	1,012,574		10%
Other Wellness Services		4,898			2,513		95%			16,928			7,072		139%
Total Revenue	$	276,170		$	277,008		— %		$	1,133,621		$	1,019,646		11%
Adjusted EBITDA	$	58,472		$	52,846		11%		$	136,249		$	114,116		19%
Adjusted EBITDA Margin %		21.2%			19.1%		210 bps			12.0%			11.2%		83 bps

TELADOC HEALTH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)

	Year Ended December 31,
		2023				2022
Cash flows from operating activities:
Net loss	$	(220,368	)		$	(13,659,531	)
Adjustments to reconcile net loss to net cash flows from operating activities:
Goodwill impairment		—				13,402,812
Depreciation		11,138				11,407
Amortization		325,933				244,620
Depreciation of rental equipment		2,602				2,859
Amortization of right-of-use assets		11,650				11,757
Provision for allowances		4,686				2,815
Stock-based compensation		201,550				217,852
Deferred income taxes		(1,903	)			(7,840	)
Accretion of interest		3,400				3,345
Other, net		(310	)			7,584
Changes in operating assets and liabilities:
Accounts receivable		(10,252	)			(49,058	)
Prepaid expenses and other current assets		12,461				(41,081	)
Inventory		24,095				14,800
Other assets		(23,052	)			(27,767	)
Accounts payable		(4,185	)			1,876
Accrued expenses and other current liabilities		9,069				61,217
Accrued compensation		19,180				(12,290	)
Deferred revenue		(4,900	)			15,240
Operating lease liabilities		(10,224	)			(11,525	)
Other liabilities		(549	)			200
Net cash provided by operating activities		350,021				189,292
Cash flows from investing activities:
Capital expenditures		(11,464	)			(16,480	)
Capitalized software		(144,884	)			(156,284	)
Proceeds from marketable securities		—				2,507
Other, net		1				2,514
Net cash used in investing activities		(156,347	)			(167,743	)
Cash flows from financing activities:
Net proceeds from the exercise of stock options		1,481				5,884
Proceeds from employee stock purchase plan		9,651				6,501
Cash received for withholding taxes on stock-based compensation, net		(278	)			124
Other, net		—				(6,012	)
Net cash provided by financing activities		10,854				6,497
Net increase in cash and cash equivalents		204,528				28,046
Effect of foreign currency exchange rate changes		965				(3,344	)
Cash and cash equivalents at beginning of the period		918,182				893,480
Cash and cash equivalents at end of the period	$	1,123,675			$	918,182

The following table presents the selected cash flow information for the following quarters (in thousands, unaudited):

	Quarter Ended December 31,
		2023				2022
Net cash provided by operating activities	$	130,082			$	65,549
Net cash used in investing activities		(36,506	)			(53,891	)
Net cash (used in) provided by financing activities		(1,775	)			4,381
Effect of foreign currency exchange rate changes		1,347				2,512
Net increase in cash and cash equivalents	$	93,148			$	18,551

CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data, unaudited)

	December 31, 2023				December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	1,123,675			$	918,182
Accounts receivable, net of allowance for doubtful accounts of $4,240 and $4,324 at December 31, 2023 and December 31, 2022, respectively		217,423				210,554
Inventories		29,513				56,342
Prepaid expenses and other current assets		118,437				130,310
Total current assets		1,489,048				1,315,388
Property and equipment, net		32,032				29,641
Goodwill		1,073,190				1,073,190
Intangible assets, net		1,677,781				1,836,765
Operating lease - right-of-use assets		40,060				41,831
Other assets		80,258				48,540
Total assets	$	4,392,369			$	4,345,355
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	43,637			$	47,690
Accrued expenses and other current liabilities		178,634				168,693
Accrued compensation		102,686				81,554
Deferred revenue-current		95,659				101,832
Total current liabilities		420,616				399,769
Other liabilities		1,080				1,618
Operating lease liabilities, net of current portion		42,837				38,042
Deferred revenue, net of current portion		13,623				11,954
Deferred taxes, net		49,452				50,939
Convertible senior notes, net		1,538,688				1,535,288
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value; 300,000,000 shares authorized; 166,658,253 shares and 162,840,360 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively		167				163
Additional paid-in capital		17,591,551				17,358,645
Accumulated deficit		(15,228,655	)			(15,008,287	)
Accumulated other comprehensive loss		(36,990	)			(42,776	)
Total stockholders’ equity		2,326,073				2,307,745
Total liabilities and stockholders’ equity	$	4,392,369			$	4,345,355

Non-GAAP Financial Measures:

To supplement our financial information presented in accordance with generally accepted accounting principles in the United States (“GAAP”), we use non-GAAP financial measures to clarify and enhance an understanding of past performance, which include adjusted gross profit, adjusted gross margin, EBITDA, adjusted EBITDA, and free cash flow. We believe that the presentation of these financial measures enhances an investor’s understanding of our financial performance, and are commonly used by investors to evaluate our performance and that of our competitors. We further believe that these financial measures are useful financial metrics to assess our operating performance and financial and business trends from period-to-period by excluding certain items that we believe are not representative of our core business, and that free cash flow reflects an additional way of viewing our liquidity that, when viewed together with GAAP results, provides management, investors, and other users of our financial information with a more complete understanding of factors and trends affecting our cash flows. We use these non-GAAP financial measures for business planning purposes and in measuring our performance relative to that of our competitors. We utilize adjusted EBITDA as a key measure of our performance.

Adjusted gross profit is our total revenue minus our total cost of revenue (exclusive of depreciation and amortization, which are shown separately) and adjusted gross margin is adjusted gross profit as a percentage of our total revenue.

EBITDA consists of net loss before interest income; interest expense; other (income) expense, net, including foreign currency exchange gains or losses; provision for income taxes; depreciation; amortization; and goodwill impairment. Adjusted EBITDA consists of net loss before interest income; interest expense; other (income) expense, net, including foreign currency exchange gains or losses; provision for income taxes; depreciation; amortization; goodwill impairment; stock-based compensation; restructuring costs; and acquisition, integration, and transformation costs.

Free cash flow is net cash provided by operating activities less capital expenditures and capitalized software (together, "Capex").

Our use of these non-GAAP terms may vary from that of others in our industry, and other companies may calculate such measures differently than we do, limiting their usefulness as comparative measures.

Non-GAAP measures have important limitations as analytical tools and you should not consider them in isolation, and they should not be considered as an alternative to net loss before provision for income taxes, net loss, net loss per share, net cash from operating activities or any other measures derived in accordance with GAAP. Some of these limitations are:

• adjusted gross margin has been and will continue to be affected by a number of factors, including the fees we charge our clients, the number of visits and cases we complete, the costs paid to providers and medical experts, as well as the costs of our provider network operations center;
• adjusted gross margin does not reflect the significant depreciation and amortization to cost of revenue;
• EBITDA and adjusted EBITDA eliminate the impact of the provision for income taxes on our results of operations, and they do not reflect goodwill impairment, interest income, interest expense, or other (income) expense, net;
• adjusted EBITDA does not reflect restructuring costs. Restructuring costs may include certain lease impairment costs, certain losses related to early lease terminations, and severance;
• adjusted EBITDA does not reflect significant acquisition, integration, and transformation costs. Acquisition, integration and transformation costs include investment banking, financing, legal, accounting, consultancy, integration, fair value changes related to contingent consideration, and certain other transaction costs related to mergers and acquisitions. It also includes costs related to certain business transformation initiatives focused on integrating and optimizing various operations and systems, including upgrading our customer relationship management (CRM) and enterprise resource planning (ERP) systems. These transformation cost adjustments made to our results do not represent normal, recurring, operating expenses necessary to operate the business but, rather, incremental costs incurred in connection with our acquisition and integration activities; and
• adjusted EBITDA does not reflect the significant non-cash stock-based compensation expense which should be viewed as a component of recurring operating costs.

In addition, although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and adjusted gross profit, adjusted gross margin, EBITDA and adjusted EBITDA do not reflect any expenditures for such replacements.

We compensate for these limitations by using these non-GAAP measures along with other comparative tools, together with GAAP measurements, to assist in the evaluation of operating performance. Such GAAP measurements include net loss, net loss per share, net cash provided by operating activities, and other performance measures.

In evaluating these financial measures, you should be aware that in the future we may incur expenses similar to those eliminated in this presentation. Our presentation of these non-GAAP measures should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.

The following is a reconciliation of gross profit and gross margin, the most directly comparable GAAP financial measures, to adjusted gross profit and adjusted gross margin, respectively:

Reconciliation of GAAP Gross Profit to Adjusted Gross Profit and Adjusted Gross Margin
(In thousands, unaudited)

	Quarter Ended December 31,								Year Ended December 31,
		2023				2022				2023				2022
Revenue	$	660,527			$	637,709			$	2,602,415			$	2,406,840
Cost of revenue (exclusive of depreciation and amortization, which are shown separately below)		(193,424	)			(188,873	)			(760,031	)			(743,987	)
Depreciation and amortization of intangible assets		(12,658	)			(11,109	)			(67,751	)			(30,773	)
Gross Profit		454,445				437,727				1,774,633				1,632,080
Depreciation and amortization of intangible assets		12,658				11,109				67,751				30,773
Adjusted gross profit	$	467,103			$	448,836			$	1,842,384			$	1,662,853
Gross margin		68.8	%			68.6	%			68.2	%			67.8	%
Adjusted gross margin		70.7	%			70.4	%			70.8	%			69.1	%

The following is a reconciliation of net loss, the most directly comparable GAAP financial measure, to EBITDA and adjusted EBITDA:

Reconciliation of GAAP Net Loss to EBITDA and Adjusted EBITDA

																	Outlook (8)
	Quarter Ended								Year Ended								First
	December 31,								December 31,								Quarter		Full Year
($ in thousands, except for outlook data, unaudited)		2023				2022				2023				2022			2024 (in millions)		2024 (in millions)
Net loss	$	(28,890	)		$	(3,810,071	)		$	(220,368	)		$	(13,659,531	)		$(91) - (74)		$(185) - (134)
Add:
Goodwill impairment		—				3,772,811				—				13,402,812
Interest income		(13,707	)			(6,482	)			(46,782	)			(12,674	)
Interest expense		5,538				4,590				22,282				21,944
Other (income) expense, net		(1,537	)			(1,749	)			(4,445	)			859
Provision for income taxes		3,515				(1,840	)			760				(3,812	)
Depreciation		2,793				2,598				11,138				11,407
Amortization		94,728				73,118				325,933				244,620
Total Adjustments		91,330				3,843,046				308,886				13,665,156
Consolidated EBITDA		62,440				32,975				88,518				5,625
Adjustments:
Stock-based compensation		46,842				50,754				201,550				217,852
Acquisition, integration, and transformation costs		4,262				6,627				21,110				15,620
Restructuring costs		899				3,738				16,942				7,416
Total Adjustments		52,003				61,119				239,602				240,888			126 - 153		484 - 575
Consolidated Adjusted EBITDA	$	114,443			$	94,094			$	328,120			$	246,513			$52 - 62		$350 - 390
Segment Adjusted EBITDA
Teladoc Health Integrated Care	$	55,971			$	43,686			$	191,871			$	135,153
BetterHelp		58,472				52,846				136,249				114,116
Other		—				(2,438	)			—				(2,756	)
Consolidated Adjusted EBITDA	$	114,443			$	94,094			$	328,120			$	246,513

See note (8) in the Notes section that follows.

The following is a reconciliation of net cash provided by operating activities, the most directly comparable GAAP financial measure, to free cash flow:

Reconciliation of GAAP Net Cash Provided by Operating Activities to Free Cash Flow

	Quarter Ended								Year Ended								Outlook (10)
	December 31,								December 31,								Full Year
($ in thousands, except for outlook data, unaudited)		2023				2022				2023				2022			2024 (in millions)
Net cash provided by operating activities	$	130,082			$	65,549			$	350,021			$	189,292			$354 - 374
Capital expenditures		(1,404	)			(6,194	)			(11,464	)			(16,480	)
Capitalized software		(35,103	)			(47,697	)			(144,884	)			(156,284	)
Capex		(36,507	)			(53,891	)			(156,348	)			(172,764	)		(144) - (134)
Free Cash Flow	$	93,575			$	11,658			$	193,673			$	16,528			$210 - 240

See note (10) in the Notes section that follows.

Notes:

1. A reconciliation of each non-GAAP measure to the most comparable measure under GAAP has been provided in this press release in the accompanying tables. An explanation of these non-GAAP measures is also included under the heading “Non-GAAP Financial Measures.”
   
2. U.S. Integrated Care Members represent the number of unique individuals who have paid access and visit fee only access to our suite of integrated care services in the U.S. at the end of the applicable period.
   
3. Excluding the amounts related to capitalized software projects.
   
4. Chronic Care Program Enrollment represents the total number of enrollees across our suite of chronic care programs at the end of a given period.
   
5. Average monthly revenue per U.S. Integrated Care member is calculated by dividing the total revenue generated from the Integrated Care segment by the average number of U.S. Integrated Care Members (see note 2) during the applicable period.
   
6. BetterHelp Paying Users represent the average number of global monthly paying users of our BetterHelp therapy services during the applicable period.
   
7. We have two segments: Teladoc Health Integrated Care (“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.
   
   Other includes certain revenues and charges not related to ongoing segment operations.
   
8. We have not provided a full line-item reconciliation for net loss to adjusted EBITDA outlook because we do not provide outlook on the individual reconciling items between net loss and adjusted EBITDA. This is due to the uncertainty as to timing, and the potential variability, of the individual reconciling items such as impairments, stock-based compensation and the related tax impact, provision for income taxes, acquisition, integration, and transformation costs, and restructuring costs, the effect of which may be significant. Accordingly, a full line-item reconciliation of the GAAP measure to the corresponding non-GAAP financial measure outlook is not available without unreasonable effort.
   
9. We have not provided a reconciliation for net loss/income to adjusted EBITDA outlook for the full year of 2025 because it is impracticable to do so. Reconciling items like income taxes, stock-based compensation, and certain other costs have not yet been determined so a net loss/income amount for the full year of 2025 is not available to provide. Accordingly, a full line-item reconciliation of the GAAP measure to the corresponding non-GAAP financial measure outlook is not available without unreasonable effort.
   
10. We have not provided a line-item reconciliation for free cash flow to net cash from operating activities for this future period because we believe such a reconciliation would imply a degree of precision and certainty that could be confusing to investors and we are unable to reasonably predict certain items contained in the GAAP measure without unreasonable efforts.
    

Investors:
Patrick Feeley
914-265-7925
[e-mail]

Media:
Chris Stenrud
860-491-8821
[e-mail]