Healthpeak Properties Inc V.DOC

Teladoc Health

[retiredcf]

A sign of things to come? GLTA

July 29, 2020

Teladoc Health, Inc
Key Insights from 2Q20 Results

Our view: 2Q results were well ahead of expectations, driven by strength in both member adds and utilization. The momentum across all facets of TDOC’s business continues (and in some cases is accelerating) and underpins management’s confidence in both its elevated ’20 growth outlook (increased the MP of its full-year revenue guide by 14%) and preliminary 30–40% ’21 revenue growth target. Both well ahead of consensus.

Key points:

Provides Impressive 2021 Growth Targets. In an unexpected move, the company provided a preliminary view for 2021 revenue growth of 30– 40%. Backing out the inorganic contribution of the InTouch acquisition implies 20–30% organic growth, in line with the rates that the company has historically targeted. Taking a step back, though, what makes this impressive is that it will be on top of the 65–68% organic growth TDOC generates this year! The guidance implies consolidated 2021 revenue of $1.27–1.39B; excluding $160–170M (we estimate) for InTouch, this implies an organic base of $1.11–1.23B vs. the $1.02B consensus.

Increases MP of 2020 “Core” Teladoc Revenue Guide by 14%. Turning
to this year—and similarly impressive—the company has elevated its
2020 targets again, this time by another 14%. It is now guiding to organic revenue and EBITDA of $917–932M and $85–92M, respectively, which are 12% and 17% ahead of the $823M and $77M Street mean estimates. The company also provided views on InTouch, the acquisition of which closed 7/1. For 2H20, TDOC is targeting InTouch revenue of $65M (excluding a $2–3M purchase accounting adjustment). For the full year, per management, this implies growth of 35%+.

Seeing Strength Across All Aspects of Its Business. Underpinning the confidence in both its elevated 2020 and impressive 2021 outlooks is the strength that management is seeing across all offerings. Notably, it cited: (1) selling season momentum—TDOC said that bookings so far are up 70% YoY, two-thirds of which are for multi-product deals (vs. 50% last year), and average deal size is up 50% YoY; and (2) on utilization, visit volumes have begun to stabilize ~40% above pre-COVID levels.

Increasingly Being Viewed/Valued as a Tech Company; Raising Price Target to $235. Similar to what we discussed in our recent Livongo note (here), we have been fielding an increasing number of calls from tech investors wanting to discuss Teladoc. It’s not hard to see why: (1) the TAM is large; (2) revenue is growing at a rapid pace; and (3) while it is not quite as scalable as Livongo or some of the other non-HC SaaS companies, there is a lot of operating leverage and future scalability in the model. Non-HC SaaS stocks with similar revenue growth trajectories and long-term margin targets trade at an average of 26x 2021E revenue. Our $235 price target is based on TDOC trading at 15x.