Teladoc Health (NYSE:TDOC) Q1 2021 Earnings Call

0:00 Ladies and gentlemen, thank you for standing by, and welcome to the Teladoc First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press Star 1 on your telephone keypad. If you require any further assistance, please press Star 0. Thank you. I'll now turn the conference over to Patrick Seeley, Vice President of Investor Relations. Please go ahead. Patrick Seeley Thank you and good afternoon. Today after the market closed, we issued a press release announcing our first quarter 2021 financial results. This press release and the accompanying slide presentation are available in the Investor Relations section of the TeladocHealth.com website.

0:47 On this call to discuss the results are Jason Gorovic, our Chief Executive Officer, and Mala Murthy, our Chief Financial Officer. During this call, we will also provide our second quarter and full year 2021 outlook, and our prepared remarks will be followed by a question and answer session. Please note that we will be discussing certain non-GAAP financial measures that we believe are important in evaluating Teladoc Health's performance. Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliations thereof can be found in the press release that is posted on our website. Also, please note that certain statements made during this call will be forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties, and other factors that could cause the actual results for Teladoc Health to differ materially from those expressed or implied on this call.

1:37 For additional information, please refer to our cautionary statement in our press release and our filings with the SEC, all of which are available on our website. I would now like to turn the call over to Jason. Thanks Patrick, and thank you everyone for joining us this afternoon. After the market closed, we reported another quarter of outperformance across key financial and operational metrics, driven by broad-based momentum throughout the business. The strength across our portfolio drove revenue of $454 million in the first quarter, an increase of 151% over the prior year, including organic revenue growth of 69% for Legacy Teladoc. As a result of the momentum demonstrated across our channels and geographies and the continued development of the pipeline of new and expanded opportunities, We are raising our full year revenue guidance by $20 million to $1.97 to $2.02 billion for the year.

2:39 Turning to utilization, our network of clinicians provided 3.2 million visits during the first quarter, representing more than 50% growth over the prior year's quarter, despite a historically weak flu season. We continue to see significant strength in noninfectious disease and specialty visits, with mental health volumes in particular driving growth in both B2B and DTC channels. We're also finding that specialty growth is acting as a gateway into multi-service usage. Our members who engage with specialty care are significantly more likely to utilize one of our other services. For example, members who had a specialty visit had 40% more general medical visits per member than those who used general medical alone.

3:30 This is particularly encouraging given client trends toward multi-product sales, with over 40% of our members now having access to more than one product. Membership in the Livongo Chronic Care suite of products grew 66% over the prior year, as we added 62,000 new chronic care members in the quarter. And our share of wallet continues to expand as we gain deeper penetration within clients. As a result, we've seen year-over-year revenue expansion within all of our top 10 chronic care accounts in the first quarter. Particularly encouraging is that over 15% of chronic care members are now enrolled in more than one program.

4:17 Compared to less than 5% a year ago. With over 40% of adults in the US living with more than one chronic condition, the opportunity is significant. And we continue to execute on our whole person care strategy to address the full spectrum of consumer health needs rather than just one particular disease. Enrollment in chronic care programs as a percentage of recruitables remains strong throughout 2020 and into the first quarter. Enrollment rates are consistent with Livongo's performance in recent years across the various books of business, which is a significant achievement given that we have been addressing meaningfully larger populations, and in some cases, population types that are newer to us, such as government employee benefit programs, Medicare Advantage populations, and people with hypertension.

5:09 The strong enrollment performance is a direct result of our investments in data science, which has consistently led to greater consumer engagement across populations. As our differentiated and comprehensive product portfolio continues to resonate in the marketplace, we're seeing significant traction in both expanding our offering within existing clients as well as adding new clients. Earlier this month, we signed an extensive agreement to expand our relationship with a regional Blue Cross Blue Shield plan on the East Coast to offer our comprehensive whole person virtual care solution to its members. Beginning early next year, we will provide members access to our suite of products, including our virtual care solutions and a full suite of digital chronic care solutions across diabetes, hypertension, diabetes prevention, and mental health.

6:03 This deal is notable as it covers all of the plan's commercial books of business and represents another significant competitive takeaway. Moreover, it demonstrates the power of our broad and integrated suite of products and our proven ability to deliver industry-leading utilization and member engagement, which ultimately drives clinical and financial ROI for our clients. In addition to a large pipeline of new and expansion opportunities, We continue to see opportunities for competitive takeaways, particularly in the health plan channel, as these clients look for enterprise platforms that can leverage technology and data at scale to deliver actionable insights.

6:48 We're also seeing strong interest in our primary 360 offering from health plans, employers, and even hospitals and health systems. And our vision to reimagine the primary care experience is gaining traction in the market. Our primary 360 pilots that launched earlier this year are progressing well and delivering encouraging results for clients and consumers. And we've already signed several additional deals expected to launch later this year. Our comprehensive virtual care solution also continues to gain momentum in the international marketplace. During the quarter, we signed a strategic partnership with Generali Hong Kong, a leading insurance carrier in the region, to offer our virtual care solutions to its members across Asia.

7:37 In Australia, we recently announced a partnership with MetLife to offer access to a customized platform across our comprehensive virtual care service to MetLife's members in the region. In the hospital and health system market, our industry-leading enterprise platform solution continues to see strong demand around the world. In addition to new and expanded enterprise deals domestically, we reached multiple new agreements this quarter with health systems in Europe and Asia, as our strategy to take the InTouch capabilities to the international arena continues to pay dividends. Similarly, the pipeline of opportunities to bring the Livongo suite of chronic care products to the provider market continues to grow, particularly among hospitals that are increasingly bearing risk through ACOs and their own health plans.

8:31 And we've now signed several deals to bring our chronic care solutions to the health system market. Turning to an update on integration, we've made considerable progress across our key work streams. As we previously noted, our commercial organization has been fully integrated, with sales teams selling across the entire whole person portfolio of products since early this year. We've now closed several deals for our new integrated mental health product that combines the Teladoc therapists and psychiatrists with the Livongo digital mental health capabilities to deliver a market-leading solution. Earlier this month, we also enabled the first wave of members to access and register for Livongo programs from within the Teladoc app.

9:22 This is an important first step toward creating a seamless member experience that will allow us to engage with members more effectively across programs. Additionally, we recently enabled capabilities for clinicians to refer members into Livongo chronic care programs from within the Teladoc provider workflow, leveraging our combined data to deliver clinically relevant insights that aid in decision making and get consumers the right care at the right time. We're making significant investments to integrate and enhance our technology platform to capitalize on our robust data and behavioral science capabilities across the entire organization.

10:07 Data is a significant part of what underpins our ability to provide a highly personalized experience and deliver longitudinal virtual care that's fully integrated with our digital solutions. The investments we're making in data capabilities will enable us to drive greater consumer engagement, expand the breadth and depth of our product offerings, and consistently increase the value we provide to consumers, providers, and clients. Our ability to deliver data-driven insights combined with clinical expertise at scale will further our vision of becoming consumers' trusted destination for whole person health. Finally, while we're on the topic of innovation and data science, I'd like to welcome Klaus Jensen as our new Chief Innovation Officer.

10:57 With more than 20 years of experience leading digital transformation at enterprise healthcare and technology organizations, Klaus has deep experience across product innovation, information systems, health informatics, and data products. I'm extremely pleased to have Klaus join our team and look forward to his leadership and contributions to our growth. And with that, I'll turn the call over to Mala for a review of the first quarter as well as detailed guidance. Thank you, Jason, and good afternoon, everyone. During the first quarter, total revenue increased 151% to $454 million, or 69% excluding acquired revenue. Total U.S. revenue for the quarter was $416 million representing growth of 175% over the prior year's quarter. Total international revenue of $38 million increased 29% over the prior year.

12:07 Access fee revenue for the first quarter increased 183% year-over-year to $388 million and comprised 86% of total revenue, up from 76% in the prior year's quarter. The increase in access fee revenue as a percent of total revenue is primarily due to the acquisition of Livongo and InTouch Health, both of which generate the majority of their revenue from subscription access fees. Visit fee revenue for the first quarter increased 24% year-over-year to $54 million and comprised 12% of total revenue as compared to 24% of revenue in last year's quarter.

12:57 Turning to membership and access. We ended the quarter with U.S. paid membership of 51.5 million members, an increase of 20% over the prior year's quarter. Note that as we discussed on last quarter's earnings call, the approximately 1.5 million temporary members that were onboarded during the pandemic rolled off during the first quarter and are now excluded from our membership count. Individuals with visit fee only access was $22 million at the end of the first quarter. Total chronic care enrollment, which includes unique individuals enrolled in one or more of our chronic care programs, was 658,000 members as of the first quarter.

13:42 A 66% increase over the 396,000 members as of the prior year's first quarter. Proforma for the merger with Livongo. Average PMPM was $2.24 in the first quarter, up from 87 cents in the prior year's first quarter and $1.76 in the fourth quarter. Of the 48-cent sequential increase in PMPM, roughly half was driven by the contribution of an extra month of Livongo revenue in the first quarter. We provided 3.2 million visits in the quarter, as Jason mentioned, through our network of clinicians representing 56% growth over the prior year's first quarter.

14:38 Platform-enabled sessions, which represents encounters facilitated by our licensed revenue platform and provided by our clients' own clinicians, was an additional 1.1 million in the quarter. The analyzed utilization rate for our members was 19.6% in the first quarter, a 620 basis point increase over the prior year's first quarter, and a 190 basis point increase sequentially over the fourth quarter. Adjusted gross profit, which excludes depreciation and amortization of intangibles, increased to $308 million, an increase of 184% as compared to the prior year's first quarter. Adjusted gross margins were 67.8% compared to 60% in the first quarter of 2020.

15:38 The 780 basis point increase in adjusted gross margin is primarily attributable to the higher gross margin profile associated with Livongo revenue. Gross profit and adjusted gross profit in the first quarter of 2021 include the benefit of approximately $7 million in lower expenses on Livongo devices attributable to purchase accounting adjustments related to the merger. Adjusted EBITDA increased to $56.6 million in the quarter compared to $10.7 million in Q1 of 2020. Adjusted EBITDA in the first quarter includes the benefit of approximately $7 million attributable to purchase accounting adjustments mentioned previously.

16:30 The adjusted EBITDA outperformance in the first quarter was driven in part by strong access fee revenue growth and better operating expense performance as we continue to make progress against cost synergies, including integrating back office functions, streamlining processes and consolidating vendors. As discussed previously, we anticipate reinvesting cost synergies back into the growth of the business over the remainder of the year. Overall, we continue to have a high degree of confidence in our ability to achieve our multi-year revenue and cost energy targets. Net loss in the quarter was $199.6 million compared to a net loss of $29.6 million in the first quarter of 2020.

17:27 The larger net loss was primarily attributable to increased stock-based compensation, amortization of acquired intangibles, and income tax adjustments primarily related to the merger with Livongo. On a per share basis, net loss was $1.31 for the first quarter compared to a loss of $0.40 in the first quarter of last year. Net loss per share includes a deferred income tax valuation adjustment of $0.57, amortization of acquired intangibles of $0.30, and stock-based compensation expense of $0.57. We ended the quarter with $723 million in cash and short-term investments, while our total recorded debt outstanding as of March 31st was $1.4 billion.

18:25 Now, turning to forward guidance. For the full year 2021, we now expect revenue to be in the range of $1.97 billion to $2.02 billion, up $20 million from prior guidance, driven by strong growth in per-member, per-month fees, as well as higher expected utilization, particularly among specialty visits. We expect adjusted EBITDA in 2021 in the range of $255 to $275 million, including an approximately $20 million benefit from lower expenses on Livongo devices attributable to purchase accounting adjustments related to the Livongo merger.

19:18 As we have previously discussed, we expect increased spending over the course of the year as we invest in the growth of the business. particularly in new product launches and expansions into new markets, the integration of Livongo, and the development of our integrated data platform. We now expect total visits in 2021 to be between 12.5 and 13.5 million visits, representing growth of 18% to 27% over the prior year. For the second quarter of 2021, we expect revenues of $495 to $505 million, representing growth of 105% to 110% over the prior year's quarter.

20:11 We expect total paid membership in the range of $52 to $53 million and anticipate total visits during the second quarter of between 3.2 and 3.4 million visits. We expect second quarter adjusted EBITDA to be in the range of $61 to $64 million, including an approximately $6 million benefit from lower expenses on Livongo devices attributable to purchase accounting adjustments related to the Livongo merger. With that, I will turn the call back to Jason for closing remarks. Thanks, Mala. Before I turn the call over to Q&A, I want to take a moment to acknowledge the hard work of our team members around the world.

20:57 This week, we were very pleased to be recognized in Time Magazine's first ever compilation of the 100 most influential companies. Our inclusion along other global leaders is a meaningful recognition of our 4,500 colleagues and a direct result of all that we do for our members and clients every day. As always, thank you for your continued interest in Teladoc Health. And with that, we'll open the calls for questions. Operator? At this time, I would like to remind everyone, in order to ask a question, press star and the number 1 on your telephone keypad. As a reminder, please ask only one question so that we can accommodate as many analysts as possible.

21:44 And your first question comes from Lisa Gill with the GP Morgan. Good afternoon, Jason. Thank you for taking my question. I just really want to start with your most recent thoughts on competition. As we think about some of the comments that you talked about displacing others with some of your business wins, the idea of whole care talking about both employers, as well as health plans looking for someone that has a deep embedded enterprise platform. We get a lot of questions around how do we think about Amazon Care, the fact that MDLive has been sold to Cigna, Doctors on Demand and Grand Rounds coming together. So can you just maybe just level the playing field for who are you seeing when you're out there winning these pieces of business?

22:34 and how you think about how that competitive landscape has really shifted and changed over the last couple of years. Sure. Thanks, Lisa. You know, we focus on our competitive advantages and our competitive advantages, as you mentioned, are around the broadest set of clinical solutions ranging from acute, episodic to specialty care, chronic care and complex care. as well as being across all of the customer channels ranging from employers to health plans to hospitals and health systems and on a direct-to-consumer basis. More and more, and I think this is really characterized by the makeup of our pipeline, clients are looking for comprehensive multi-product solutions.

23:27 They're not looking for point solutions that they have to integrate themselves to stitch together and get the benefit of that. And I think the data that we talked about today about multi-product usage and specialty usage in particular being a gateway and driving higher general medical visits is the consumer proof point behind that. There's really nobody in the market who comes close to the comprehensive solution for both acute, episodic, and chronic care, as well as the range of both digital and professional services in terms of our clinicians that we can bring to bear. And we see that in our pipeline.

24:17 based on the fact that it's characterized by larger deals than we've ever seen before. Multi-product deals are sort of the preponderance of the pipeline, and we see it in the competitive takeaways that we have booked, as we mentioned on the call, large East Coast Blues plan, as well as other very large opportunities in the pipeline. With respect to the moves in the market that you've seen, you'll recall last summer when we announced the Livongo acquisition, we talked about the fact that the market had accelerated and that we foresaw the strategic chessboard moving.

25:04 and ours was a move to put the leaders together in the market to create an unmatched solution. And bringing together InTouch, Livongo and Teladoc certainly does that. And there is no comparable move that we didn't foresee. In some cases, we've seen success and increased interest as some of those smaller competitors have gone to health plans. And for the most part, one health plan doesn't wanna buy from another competing health plan. And then in other cases, The moves in the market have been somewhat antagonistic toward the health plans in an effort to disintermediate them. It's always been our view to work with the healthcare system, not against it. And that's proven to be beneficial for us as we align with our partners and bring them greater value.

26:09 So all of those moves are sort of within the realm of what we expected. And, you know, I'm not going to call out individual solutions that you mentioned or competitors that you mentioned. But, you know, for the most part, many of them we almost never bump into. And some of the new entrants we're just not seeing gain traction. Just as a quick follow-up, because you did say the word pipeline several times in that conversation, and you know I love to ask about that as we think about the forward year. Is there anything that you can give us around the size of the pipeline versus previous years or quantify it in any way as we think about going into this next year for 2022?

26:59 Yeah, sure. So I would say a few things. One, as you recall, two months ago when we reported the fourth quarter on four-year results, we talked about the fact that our pipeline of new members was about 50% larger than at the same time last year. It has only grown since then. and it has also moved along in terms of the deal stage. So you'll also recall that we said that it was characterized by a larger sort of gross opportunity, but there were earlier stage deals. And we've seen those deals move along the pipeline as we would have expected. Obviously, one of those materialized into a very significant sale for us, and we have others in very late stage.

27:54 The other thing is that we are seeing more large multi-product deals than we've ever seen before. And I'm very, very encouraged by faster than I would have expected opportunities arising for the Livongo suite of products into the hospital and health system channel. That's moving along faster than I would have expected. and then maybe last, we've talked about our primary 360 offering. That pipeline has also increased materially since just two months ago and we see large deals moving along there.

28:40 When we look, and you'll recall that it's very unusual for us to raise guidance at this time in the year. We did it last year, but that was in the face of the massive wave that we saw of COVID hitting the states. But we've really, I don't think before that we've ever increased our guidance at this time in the year. And so I think the increase in our revenue guidance for this year is both based on the performance we're seeing today as well as the expectations that we have going forward. And your next question comes from Sean Wyling with Piper Sendler.

29:28 Thank you very much. So I'm most interested in this whole person care at the Blues Plan you mentioned. I know you said it includes your whole book of business, but I'd really like to know beyond that, what role are you taking on to really coordinate the care, especially across medical and behavioral? And are the economics on a contract like this any different than standard economics? So what we said is it's for the entire commercial book of this Blues Plan and that we're selling our full suite of telehealth and chronic care solutions. We will also bring to bear, as we mentioned, the integration within a single app of the ability for the consumer to get access to the full set of services as well as the ability for our clinicians to refer across those solutions. So we have now executed on the first wave of that integration.

30:33 That'll continue to develop over the course of this year and we'll launch this service for them early next year. And that resonates, and that was part of the thesis behind bringing together all of these assets under one roof. And it's a significant competitive advantage when we're going out to, in this case, displace a competitor. With respect to the economics, there are certainly some economies that we get from selling all of our solutions or a full suite into a single client. It's one data feed for multiple products. And, Sean, as we mentioned, we get benefit from higher utilization when people use our specialty products.

31:24 So we are able to bring it to bear at a more competitive price because of the economies that we get out of it. And ultimately, we drive higher revenue per user because they're using multiple services. And your next question comes from Sean Dodge with RBC Capital. Thanks. Good afternoon. Jason, on the primary 360 program, you mentioned the pipeline there increasing. Can you give us a sense of how quickly you think offerings like that in virtual primary care could ramp? Maybe what kind of adoption do you think you can achieve of it over the next few years? And then you said before the revenue opportunity per member there is much larger.

32:12 Can you put any bookends around that, any quantification, maybe in some of the pilots, how much did virtual primary care, primary 360 enhanced revenue per member? Yeah, so the pipeline is very strong. We've already closed deals among several Fortune 1000s to launch in the second half of this year, and we expect to roll out nationally. in the first quarter next year. We've always said we don't expect it to be a material contributor to our revenue this year, and we've taken that into account even as we've increased our guidance for this year. We do expect it to be a meaningful contributor next year and to increase over time.

33:01 When we talk about the revenue opportunity per member, It's still a mixed bag when we talk about what's in the pipeline and what clients are looking for. Some of them are happy with a higher PMPM and higher visit fees that reflect the increased value that each one of those visits and the increased intensity of each one of those visits. Others are looking for more sort of value-based arrangements. including leading up to more risk arrangements where we have the opportunity to really benefit from the savings that we generate. We're going to migrate into those over time.

33:46 That's not going to be the preponderance of arrangements in the short term. But I do think that that's where we're going to go. And I think we have a unique opportunity and capability to do that because of our scale. relative to anyone else in the market. The other thing I'd also add, Sean, is it's one of the reasons why as we think about PMPM over the sort of medium to long term, it is an opportunity for us to expand our PMPM because by its very nature, if you think about primary 360, it is multi-product. So we will be looking to capture economics both from the expansion of PMPM because of that and the incremental populations.

34:39 And your next question comes from Ryan Daniels with William Blair. Yeah, thanks for taking my question. Jason, wanted to follow up on the strength in the behavioral business. It sounds like from our channel checks that that's one area in particular that not only has benefited unfortunately due to COVID with an increase in need for care but also you know more insurers and employers wanting that and then more of a sustained movement towards telehealth versus in-person visits you know as it is truly conversational and maybe has less stigma etc. So I'm curious if you can just dive a little bit more into what you're seeing in that market both in the D2C and then the more emerging Thank you, Ryan.

35:25 You're exactly right. Mental health continues to be the fastest growing specialty in our portfolio. And we are seeing The need for that service continuing to increase, the attraction of our product continuing to increase. I mentioned we're bringing together the Livongo digital assets with our therapist and psychiatrist capabilities into a single offering, and that's clearly resonating in the market. We talked last year, Ryan, about about growing our B2B mental health visits by over 500% in 2020. And we're on track to more than double that this year as well, even after that incredibly explosive growth in 2020.

36:23 So that should give you an idea of how much traction we're getting. The other thing that I think is meaningful is that we We mentioned that over 40% of our members now have access to multiple specialties and certainly mental health is the sort of leading second product, if you will, to general medical. On the direct-to-consumer side, we also continue to see just surging demand for that product. We also see the utilization continuing to shift toward more live interactions. What used to be, many years ago, a service that was focused primarily on Tech Space Interactions has migrated to more live interactions between the therapist and the consumer. And our ability to continue to scale that, I think, is a credit to the team, to the therapists who work with us. and to the scalability of the platform.

37:34 It also enables us to continue to bring significant value to consumers at an attractive price point, both for the consumer and one that is economically advantageous for us. And your next question comes from Stephanie Davis with SBB Clear, Inc. Hey guys, congratulations on the quarter once again, and thank you for taking my question. It's been about six months since the Livongo deal closed, so I was hoping we can get an update on the platform integration side. Where are you on the back end, and when can we see an integrated front end to really bring the platforms together from an user experience standpoint?

38:21 Yeah, well, thank you, Stephanie. Appreciate your comments. We're very excited about the progress of integration. You know, we mentioned the rapid progress on the commercial side, and I think that the team has just done incredible work to bring that together. Breaking up territories and reallocating and bringing to market a comprehensive and unified suite is hard work, and the team has done a tremendous job. We mentioned that we have now launched the first wave of consumers who can access the Livongo capabilities and products through the Teladoc app.

39:06 That's really just the first step. I would expect early next year to have a completely redesigned user experience that integrates all of those capabilities and really optimizes the experience for the consumer and optimizes the funnel, if you will, into those different products. The provider integration is material because we believe that providers referring into those programs will be a significant source of consumer engagement, which of course directly drives revenue in those products.

39:53 and then on the back end you asked about the data platform and the data integration is really critical. We just have an incredible treasure trove of data and the more we can integrate the 12 million plus, 12 and a half million plus visits that we'll do this year and all of the data from those visits with the more than 2 million blood glucose readings a week we get, for example, as well as from all the other products. It just makes everything much more powerful, much more personalized for the consumer, and much more able to move the needle on consumer behavior change, which results in better outcomes and more ROI for our clients.

40:41 So we are deep in that process. and I'm really excited that Klaus Jensen is joining us. We spent some time today just talking about the vision for what that can be and I think we're going to really get the benefit of bringing the teams together and his leadership as well. I'd also add, Stephanie, the good thing is we have a very, very clear roadmap and we have spent a fair amount of time as a leadership team prioritizing that roadmap so that the investments we put against that, as we have talked about, I expect 2021 to be an investment year, it is stacked and aligned against those very clear priorities in the R&D roadmap.

41:35 whether it be in terms of data integration as you asked, you know, recognizing a unique member from an eligibility and an identity perspective, you know, that requires deep integration and I would say we are well on our way to it. And your next question comes from Daniel Groffleit with CIGI. Hey guys, thanks for taking my question. Just a couple questions around BetterHelp specifically. I think last quarter you mentioned that you had started to sell that into the EAP, so I was curious how that will work alongside your traditional B2B behavioral health platform. And then on the DTC side, we've heard that CACs remain pretty elevated in behavioral specifically, particularly for paid search. Curious how that's impacting your marketing strategy this year and if there's any changes to the previously mentioned 50% revenue growth in BetterHelp.

42:37 Yeah, actually, we continue to see revenue per dollar spent on customer acquisition increase in our DTC channels. That continues to get more efficient as we sort of optimize the channels. As well as I think we are benefiting from the fact that the market acceptance of getting therapy virtually has increased substantially. And so awareness of that as a service and acceptance of that as a service also provides a tailwind that I believe helps in addition to all of the test and learn that we've gotten over the course of the last several years.

43:23 So we're not seeing a challenge relative to customer acquisition cost in that channel. The EAP services actually are always alongside behavioral health services that are built into the benefit package. It's really not an or, it's an and for most large employers. and there are different buyers on the health plan side. So most of the large insurers also offer an EAP and sell them together and some of them we're selling our commercial behavioral health B2B services into the same health plan that's also bundling our better health capabilities into their EAP.

44:15 The EAP generally has limited number of visits And so the recipe there is that we are there for the consumer to provide them with those visits. And then if they exhaust that benefit, they have the option of rolling in on a direct-to-consumer basis. So that becomes an opportunity for us to continue the relationship with the consumers. And, you know, coming back to your question on CAC and, as Jason mentioned, the efficiencies that we continue to see in that, you know, we monitor, as we have said, a lot of metrics across our business, including our DTC. And we continue to see gains in terms of better attention, and that drives greater lifetime value. So there are sort of the underlying levers that drive the revenue growth. are still strong.

45:17 And your next question comes from George Still with Georgia Bank. Good afternoon, Jason and Mala, and thanks for taking the question. Jason, you kind of talked about a clear product roadmap, but the space continues to evolve pretty rapidly as it relates to partnerships and M&A. I guess, so can you talk about the opportunities that you guys don't touch and maybe how you think about moving up the value chain into higher dollar cost areas as it relates to your clients? Thank you. Yeah, thanks, George. We will continue to expand the scope of our clinical portfolio. You saw us earlier this year make some announcements around chronic kidney disease. I think you'll continue to see us develop along the cardiometabolic continuum, which, of course, to your point, has higher dollar impact and, therefore, a higher economic opportunity for us to make an impact.

46:15 And again, you know, our focus is on whole person care. And so, you know, there are things that you can do remotely. There are things that you can't do remotely. I think you'll see, my guess is we'll continue to see more of a trend toward at-home diagnostics. And that provides us with an opportunity to expand the scope of what we do and the value we can deliver for the consumer. And then The opportunity for us to bring our Livongo solutions as they increase in scope into both the hospital and health system channel as well as internationally will continue to provide us with opportunities.

47:02 So I don't I don't see an end to our continuing expansion. And as always, we'll look at that in terms of build, buy, and partner. And your next question comes from with Credit Suisse. Thank you. Actually, Jason, you talked about the faster than expected opportunities in the Livongo business within the hospital and health system market. These hospitals, health systems you have been successful in contracting with, have those been existing clients to Livongo where they were available to employees of their health system or these are organic contract wins? And just maybe help us understand a little bit more about the Your differentiation there, what is resonating with these health system clients?

47:56 Yeah, most of them are cross-sells where we're bringing the Livongo capabilities into our existing hospital and health system clients on the Teladoc and InTouch side. The big move and the big shift, Jalendra, is moving from the HR department, which is where Livongo used to sell, into the C-suite because the C-suite of the hospital or health system is focused on their at-risk population, either within their ACO or within their own sort of owned or captive health plan. So whether that means that they're in a direct contracting relationship or they've stood up a health plan or they have a JV or an ACO relationship with a health plan, more and more the hospitals are going at risk for populations and their ability to discharge one of their patients with the Livongo capabilities is a massive step up in terms of their capabilities and ability to avoid readmissions, avoid exacerbations and avoid higher cost members.

49:12 And your next question comes from Richard Cruz with Canaccord Genuity. Great, thanks for the question. Jason, a lot of time spent on the fourth quarter call on membership. And in your answer to Lisa's pipeline question, you ended with the RAISE guidance. However, the membership guidance didn't change. So on these takeaway deals that you're referencing, does that provide upside to 2021 potentially? or should we think of it more as 2022 start from business? Yeah, so thanks, Richard. It's a good question. I would say the membership increases and the sales that we're closing over the course of this year will have a much bigger impact on 2022 than on 2021. And actually, I have great confidence in what 2022 looks like based on the current status of our pipeline and our line of sight into significant deals where we're likely to see upside in 2021 is in increased Livongo chronic care enrollment.

50:30 We've factored in essentially no flu season in the back half of this year. So if we were to see a more normal flu season in the back half of this year, that would be upside to our revenue numbers. and of course on our DTC channel, that's performing incredibly well. And if that were to accelerate, it would also provide upside in 21. And your next question comes from Charles Lee with Cohen. Yeah, thanks for taking the question. Jason, one of your competitors today talked about opening their platform, particularly for third-party developers, to add additional capabilities.

51:21 I think they're working with Google Cloud as well. Can you talk about sort of how you think about the broader ecosystem going forward and maybe some of the opportunities that presents for you guys in that kind of area as you think about, you talked about BioBuild, and many more. On the cloud side, we're multi-platform, so we don't work with only one cloud provider. Rather, we work across cloud providers to sort of take advantage of the best of all of them. And we think it's best to be able to be a little bit more diversified.

52:23 And then with respect to the platform and my vision of what we want to own and partner and open, I see it as concentric circles where there are things that we really want to own and deeply integrate because that's going to deliver on the vision of whole person care. It's going to best impact the outcomes from a clinical perspective as well as a financial perspective for the consumer and the client. And it is integral to the consumer experience. Then there's a set of things in what I think of as the next circle that are areas where we need deep partnership because it's really important to the consumer experience, but they're not assets that we want to own for all kinds of reasons. Either it's not part of our core competencies or it's not a beneficial economic model.

53:23 But we do think that there's opportunity for deep partnership in order to optimize the consumer experience. and then there are many things outside of that where I believe we will open the opportunity for other curated. I don't intend to open the platform for integration to all comers. I think it's our responsibility, quite frankly, to curate that set in the third ring. but also areas where we can bring value to the consumer as well as value to those third parties by providing access to that large population that we serve. And I think the fact that we have really an unmatched population and meaningfully larger scale than anyone else in the market makes us the ideal partner.

54:30 And your next question comes from Alan Luntz with Bank of America. Thanks for taking the question. Mala, you said that you expect increased spending over the course of the year. Where specifically is that increase coming from? Is that from the primary 360 rollout? Is that from BetterHelp? And then also, is that an absolute increase or is it percent of revenue? Yeah, it's a great question. You know, we talked about the R&D roadmap and the fact that, especially now with clouds coming in, even more so we will want to invest against the clear roadmap we have. So I would say the investments will be against that, whether it be an integrated data platform, whether it be the unified Product Experience that we intend to deliver.

55:22 Definitely Primary 360. It's a big bet for us. It is something that, as Jason talked about, it's a multi-year ramp and it will require investment. So that is definitely something. You know, we will continue to invest in behavioral health. whether it be on the B2B side or on the DTC side. So that will continue to be an investment for us. So that would be, those are the kinds of areas that we are looking at from an investment perspective. Going to your second question on percentage of revenue versus absolute, I think about it really in both ways. At the end of the day, what I'm looking at is what are the priorities we have, how do we stack them, and most importantly, what are the returns, what are the ROIs against those investments?

56:17 And can I see the very clear payback for the investments we make? Definitely, I, you know, it will have to be, I do look at percentage of revenue at the end of the day. We have margins to manage and grow, importantly. But I also look at what is the dollar investment and what priorities it's leading. And your next question comes from Kevin Colito with UBS. Hey, thanks for the question. This is Adam Noble on for Kevin. I just wanted to circle back a little bit to your comments around the PMPM quarter. I think you mentioned that of the 48 cent sequential jump versus 4Q, half of that came from the extra month of Livongo.

57:09 So kind of 24 cents beyond that. And I'm curious if you could Break that 24 cents down between the growth and behavioral business, the substantial growth just in the chronic care business itself, as well as the upsells and other dynamics. Yeah, Adam, you know, we don't provide very specific breakout on the different components of our business and therefore the different components of PMPM. But what I will say more generally is, you know, I do, we have With the numbers that we have given out in our prepared remarks, you can see the buckets of drivers that drove the expansion in PMPN.

57:59 And as we have talked about the overarching trends in the business, whether it be multi-product, whether it be multi-service usage, and I would say even with the addition of Livongo now, those are all key drivers of the continued expansion in PMPN that I do foresee. Maybe I'll give you just a couple of stats. Some of them we talked about in our prepared remarks, and some of them may be incremental. But we talked about the fact that now 15% of our chronic care members are using more than one product. That's more than tripled since a year ago. and we're now at the point where about a third of our chronic care clients are buying more than one product from us, up from about 18% a year ago, right?

58:54 So when we talk about multi-product sales, it's across really our entire portfolio, both on the chronic care as well as acute. And then maybe lastly, I think an important data point is what is our, and this really gets to my point about the pipeline, but what's our revenue per client look like? And our revenue per chronic care client is up 33% versus a year ago. So when you combine all of those, you can understand how we're not only getting more revenue per client, but we're also getting more revenue per member. and all of that contributes to increasing PMPM. And by the way, it also shows that there is significant runway to continue to expand, right? So the fact is it's grown, as Jason said, from 5% to 15%, but there's enormous runway ahead of us. Same thing if you think about the clients that we are contracting with. So the point is we've made progress and there is significant room to continue that expansion.

1:00:01 And that is all the time we have for questions. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.