New York, New York--(Newsfile Corp. - July 16, 2024) - Pomerantz LLP announces that a class action lawsuit has been filed against Teladoc Health, Inc. ("Teladoc" or the "Company") (NYSE: TDOC) and certain officers. The class action, filed in the United States District Court for the Southern District of New York, and docketed under 24-cv-05339, is on behalf of all persons who purchased or otherwise acquired Teladoc stock between November 3, 2022 and February 20, 2024, inclusive (the "Class Period"), against Teladoc and certain of its officers and/or directors for violations of the Securities Exchange Act of 1934 (the "Exchange Act"). As set forth below, the Complaint alleges that Defendants violated Section 10(b) of the Exchange Act by making false or misleading statements about the Company's profitability and plans to attain profitability.
If you are a shareholder who purchased or otherwise acquired Teladoc stock during the Class Period, you have until July 16, 2024 to ask the Court to appoint you as Lead Plaintiff for the class. A copy of the Complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Danielle Peyton at newaction@pomlaw.com or 646-581-9980 (or 888.4-POMLAW), toll-free, Ext. 7980. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and the number of shares purchased.
[Click here for information about joining the class action]
Teladoc provides direct-to-consumer, online health services. One of Teladoc's services is "BetterHelp," an online mental health counseling platform. Teladoc also provides online primary care and chronic disease management services.
BetterHelp is the nation's largest provider of direct-to-consumer online mental health counseling, with 415,000 paying users in the first quarter of 2024.
BetterHelp is Teladoc's largest division and contributes the Company's greatest revenue share, contributing about 42% of overall revenue.
On November 30, 2022, Teladoc's Chief Financial Officer, Defendant Mala Murthy ("Murthy"), presented at the Piper Sandler Annual Healthcare Conference. There she discussed projections for BetterHelp's projected memberships and advertising spend for the coming year. She stated that, despite increased advertising spending for BetterHelp over the past few years, "we have talked about the ad spending about BetterHelp business moderating in 4Q, right?" She further described "a sequential pullback in ad spending."
Defendant Murthy also explained: "I will also say just because we are pulling back spend does not mean that we are not spending at all, right? Like it's not that we are going dark, far from that. So we continue to have spending in the BetterHelp business, and we are essentially looking to the ad prices and deciding where we want to be."
Later in the same conference, Teladoc's Chief Executive Officer, Defendant Jason Gorevic ("Gorevic"), described "doing more in larger media sort of mass media outlets. And some of that's just in response to the fact that the price of advertising in those mass media channels has come down."
The Complaint alleges that, throughout the Class Period, Defendants made materially false and misleading statements regarding the Company's business, operations, and prospects. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) the Company continued to expand its marketing spend throughout 2023, despite public assurances that it would pull back its advertising spending; (ii) increased marketing spend on BetterHelp deteriorated the Company's revenue, with little return for that investment; (iii) despite the Company's acknowledgment that increased advertising spend would be marginally inefficient due to market saturation, it continued to grow its advertising spend in the BetterHelp business; and (iv) despite public statements that there remained "a long runway" for BetterHelp membership growth, BetterHelp's membership stagnated and then decreased in 2023, due to market saturation, largely due to BetterHelp's own marketing.
On October 24, 2023, during after-market hours, Teladoc issued a press release announcing its third quarter 2023 ("Q3-2023") results (the "Q3-2023 Earnings Release"). The Q3-2023 Earnings Release reported, inter alia, revenue of $660.24 million for the quarter, missing consensus estimates by $2.82 million. The Q3-2023 Earnings Release also provided fourth quarter 2023 ("Q4-2023") revenue guidance in a range of $658 million to $683 million, below consensus estimates of $686.56 million, as well as revised full year 2023 revenue guidance in a range of $2.6 billion to $2.625 billion, down from a prior forecast of $2.6 billion to $2.675 billion and below the consensus estimate of $2.63 billion. In addition, the Q3-2023 Earnings Release quoted Defendant Gorevic, who announced that the Company would undertake an operational review of its business. Further, in a related investor presentation released the same day, Teladoc revealed that its BetterHelp segment revenue had declined from $292 million in the second quarter of 2023 ("Q2-2023") to $286 million in Q3-2023. The same presentation also revealed that BetterHelp membership had declined from 476,000 paying users in Q2-2023 to 459,000 paying users in Q3-2023.
Investors reacted negatively to these disclosures. Teladoc's stock price fell $0.71 per share, or approximately 3.9%, from a closing price of $18.12 per share on October 24, 2023 to a closing price of $17.41 per share on October 25, 2023.
On February 20, 2024, Teladoc announced its Q4-2023 earnings results and held its quarterly earnings call.
In its associated investor presentation, the Company revealed that BetterHelp revenue fell $1 million compared to the year prior, and fell about $10 million from Q3-2023 to Q4-2023.
The same presentation revealed that BetterHelp lost paying users for two consecutive quarters, decreasing from 476,000 paying users in Q2-2023 to 425,000 paying users in Q4-2023-despite increased advertising spend.
On the earnings call, Defendant Gorevic revealed that the Company's revenue was flat compared to the prior year and down 3% sequentially-well below expectations.
Defendant Gorevic blamed these trends on BetterHelp: "Revenue and margins were below our expectations in the quarter as we saw lower yields on marketing spend. Specifically, we experienced returns on our social media advertising that were below target in the second half of the year, which was a departure relative to the first half. BetterHelp outlook assumes the lower yields experienced in certain channels in the second half of 2023 will persist, and, as a result, will impact our year-over-year growth rates in the first half of 2024."
Analysts expressed surprise at this report. Gil Lunria of Davidson wrote the "business is proving difficult to grow with existing marketing dollars and strategies."
Investors reacted negatively to the news. Teladoc's stock price fell $4.85 per share, or approximately 23.6%, from a closing price of $20.49 per share on February 20, 2024 to a closing price of $15.64 per share on February 21, 2024.
Then, on February 23, 2024, Teladoc filed its annual report on Form 10-K with the U.S. Securities and Exchange Commission, reporting the Company's Q4-2023 results (the "2023 10-K"). The 2023 10-K reflected substantially increased advertising costs in 2023. In 2023, advertising and marketing spend was $688.854 million, up from $623.536 million in 2022-itself an increase from $416.726 million in 2021. According to the 2023 10-K, "[t]his increase was substantially driven by higher digital and media advertising costs related to BetterHelp."
Pomerantz LLP, with offices in New York, Chicago, Los Angeles, London, Paris, and Tel Aviv, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, Pomerantz pioneered the field of securities class actions. Today, more than 85 years later, Pomerantz continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered billions of dollars in damages awards on behalf of class members. See www.pomlaw.com.
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