Teladoc Health (NYSE:TDOC) Q4 2020 Earnings Call

0:00 Ladies and gentlemen, thank you for standing by and welcome to the TelDoc Health fourth quarter 2020 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 a session, you'll need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to Mr. Patrick Feely, Vice President of Investor Relations. Please go ahead. Thank you and good afternoon. Today, after the market closed, we issued a press release announcing our fourth quarter and full year 2020 financial results. This press release is available in the investor relations section of the teladochealth.com website. On this call to discuss the results are Jason Gorovic, our chief executive officer, and Mala Murthy, our chief financial officer.

0:54 During this call, we will also provide our first 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 security 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 for additional information please refer to our cautionary statement in our press release and our filings with the FCC 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.

1:52 2020 was a transformational year for Teladoc Health and for the role of virtual care within the broader healthcare industry. We delivered needed healthcare to millions of consumers in the midst of the coronavirus pandemic and completed two significant acquisitions that together under Teladoc Health are defining a new category of whole person virtual care. Taken together, we dramatically accelerated our mission to empower all people everywhere to live their healthiest lives by transforming the healthcare experience. We delivered over $1 billion in revenue for the year, provided over 10.5 million virtual visits, and our licensed platform solution enabled an additional 3.9 million visits for our client's own clinicians pro forma for InTouch.

2:45 We onboarded a record 15 million new paid members in 2020. And over the last 18 months, we've added 25 million paid members and 11 million members with BFO access. A remarkable result. During the fourth quarter, we saw broad-based strength across our business, which drove revenue of $383 million, an increase of 145% over the prior year, and organic growth of 79%, excluding the additions of InTouch Health and Livongo. The strength across our channels, products, and geographies, combined with a robust pipeline of new opportunities, gives us tremendous confidence in the near-term and long-term outlook for the business.

3:32 As we enter a new year, we have never been better positioned to meet the increasingly sophisticated expectations of consumers, clients, and providers. We are heartened by the progress that has been made in delivery of the coronavirus vaccines and expect some return to normalcy coupled with strong continued demand for virtual care, well exceeding pre-pandemic levels. The strategic investments we made during 2020 to expand the breadth and depth of our capabilities have uniquely positioned us to serve the growing client and consumer demand for virtual care. and have accelerated our path to realizing our vision of becoming consumers' trusted destination for whole person health.

4:20 The expansion of our capabilities in the hospital and health system market, including the acquisition of InTouch, positions us as the leader in that channel. Our enterprise solution enables the full suite of virtual care regardless of the consumer's needs across any location. Whether through one of our over 11,000 facility-based care locations or directly to the consumer's home via a mobile device, our platform enables our clients to provide virtual care for a broad spectrum of use cases, from high-acuity critical care in the ICU to post-discharge follow-up and urgent care visits. We see growing demand as health systems around the globe look for an enterprise-wide, secure, integrated virtual care solution.

5:10 During the fourth quarter, we continued to make strong progress in bringing our platform solution to international markets with multiple new deals, including a new contract supporting critical care programs for a large network of hospitals in Germany. Our expanded capabilities in the management of chronic disease have uniquely positioned us to deliver on the promise of whole person care. The combination with Lubongo extends our leadership position and enhances our opportunity to redefine the future of virtual care, leveraging technology and data at unmatched scale to drive better outcomes and lower costs while delivering a better consumer experience. We have the capabilities to deliver and manage care virtually across the spectrum for consumers, ranging from wellness and prevention to coordination of care for people living with chronic conditions to high acuity for those dealing with critical illness.

6:09 The combination is resonating in the marketplace, and we have signed multiple cross-sales since closing the Livongo transaction. We highlighted the GuideWell and Tyson Foods deals on our last earnings call, as well as a regional health plan cross sale last month. We have now signed over a dozen new cross sales since the close of the transaction, and the pipeline of new opportunities has more than doubled in just the past three months. The early indicators give me tremendous confidence that we will deliver on the revenue synergy that we highlighted when we announced the transaction. Our industry-leading breadth and depth of capabilities comes together to underpin our innovative virtual primary care offering, Teladoc Primary 360.

6:57 Primary 360 is a full credit, differentiated, whole person solution that leverages our capabilities to provide and coordinate care using a team-based approach and brings together healthcare providers across multiple specialties. Primary 360 goes beyond just enabling virtual visits. Rather, it's a reimagining of the entire primary care experience, and it positions us to become the trusted healthcare destination for the consumer regardless of what they need for both their mental and physical health. The results of our first virtual primary care pilot launched during the second quarter of last year have been highly encouraging. We're seeing over 30% consumer engagement and incredibly high satisfaction with an NPS of over 90. Over 40% of hypertension and prehypertension diagnoses and over 25% of diabetes and prediabetes diagnoses made by our clinicians have been first-time diagnoses.

8:03 This allows our clinicians and members to begin addressing the progression of disease and creates an opportunity for us to introduce the Livongo capabilities to those consumers early in their journey, which will ultimately drive better outcomes for consumers and lower the overall cost of care. Last month, we launched additional Primary 360 pilots with multiple new partners, and the amount of interest from new potential clients has been incredibly strong. We have a pipeline of well over 100 opportunities ranging from Fortune 1000 employers to large payers looking to partner on virtual first health plans. In fact, just last week we signed another new partnership with a very large employer expected to launch later this year.

8:53 We are making excellent progress on our integration efforts. Our commercial organization is now fully integrated, and our teams responsible for cross-selling have been collaborating for months. A few weeks ago, we virtually hosted our annual Global Growth Summit, bringing together over 700 teammates across our commercial organization, including our new teammates from InTouch Health and Labanga. This annual summit is a great opportunity to not only equip our commercial teams with the tools they need to effectively communicate our leading value proposition in the marketplace, but to share best practices and learn from one another. The integration of our data platform and assets also continues to progress as we work to unlock the power of our combined data sets.

9:45 We are now capturing 2 million blood glucose data points per week and our clinicians are responding to over 100,000 patient messages via text and chat and providing over 30,000 visits on average every day. We are also making significant investments to integrate our products and services. For example, we see a tremendous opportunity for a new integrated behavioral health product that combines the capabilities of both Livongo and Teladoc. This innovative offering will pair the highly scalable, personalized, self-directed digital care programs of Livongo's My Strength platform with access to the expertise and convenience of Teladoc's virtual network of clinicians.

10:36 With this integrated offering, we will create a new digital front door to behavioral health care. Further breaking down barriers to mental health by allowing consumers to find the right care at the right time, increasing access, and improving outcomes. We are already seeing tremendous excitement from clients globally for this next generation behavioral health offering and expect to launch it more broadly in the market by the end of the year. Before I turn the call over to Mala to discuss our results and forward guidance in more detail, I want to talk briefly regarding our outlook for 2021. Following a transformative 2020, and with the significant momentum we have entering this year, we feel extremely confident in our outlook for 2021.

11:27 For the full year, we expect revenue to be in the range of $1.95 to $2.0 billion, representing growth of 80%. or approximately 40 to 43% pro forma for the acquisition of Lavanda. This robust growth is the result of the broad-based momentum we continue to see across our business, including growth and utilization, a robust and growing pipeline of multi-product sales, including strong demand for our whole-person chronic care programs, continued strength in the direct-to-consumer channel, Increasing demand for our licensed platform in the health system market, growth in international markets, and new member additions.

12:13 With that, I'll turn the call over to Mala for a review of the fourth quarter as well as detailed 2021 guidance. Thank you, Jason, and good afternoon, everyone. Before I get into the details of the results, I would like to note that following the close of the Livongo transaction, We are streamlining some of our reported metrics. Our revenue disclosure will continue to be broken out between access fee revenue, visit fee revenue, and other revenue. Each of those revenue buckets is further broken out into U.S. and international. Our visit volume metrics are aligned with our revenue disclosure, including both U.S. and international visit volumes, which is aligned with how we manage the business.

13:08 We are also adding a new metric, chronic care enrollment, which captures the total unique individuals enrolled in the Lubongo suite of chronic care programs. This metric is based on a count of total unique members, so members utilizing multiple solutions are only counted once. Turning to fourth quarter results, total revenue increased 145% to $383 million, or 79% on an organic basis. U.S. access fee revenue for the quarter was $283 million, representing growth of 188% over the prior year's quarter.

13:58 Total international revenue of $34 million grew 16% versus the prior year. Visit fee revenue for the fourth quarter increased 80% year over year, to $53 million and comprise 14% of total revenue as compared to 19% of revenue in the prior year's quarter. The decrease in visit fee revenue as a percent of total revenue is due to the acquisitions of Livongo and InTouch Health, both of which generate a significant majority of revenue from subscription access fees. Turning to membership and access, We ended the quarter with US paid membership of 51.8 million members, an increase of 41% year-over-year.

14:51 Individuals with visit fee only access was 21.3 million at the end of the fourth quarter. Total chronic care enrollment which includes individuals enrolled in one of our chronic care programs with 596,000 members, an increase of more than 40,000 members sequentially. We provided 3 million visits in the quarter to our CalDoc network of clinicians representing 139% growth versus the prior year. Platform-enabled sessions, which represents encounters facilitated by our licensed software platform and provided by our client's own clinicians, was an additional $1.1 million in the quarter.

15:40 More than four times the number of sessions in the same period last year performed for the acquisition of InTouch Health. As I mentioned earlier, we have streamlined our visit metrics to better align with how we manage the business and our focus on driving utilization and delivering value for clients and members regardless of payment model. The annualized utilization rate for our paid members was 17.7% in the fourth quarter, an 825 basis point increase over the last year's fourth quarter, and a 120 basis point increase sequentially. PMPM was $1.76 in the fourth quarter, up from 91 cents in the prior year's fourth quarter, with over half of the increase driven by the inclusion of Livongo in our consolidated results.

16:38 Adjusted gross profit, which excludes depreciation and amortization of intangibles, increased to $260 million and increase of 157% as compared to the prior year's fourth quarter. Adjusted gross margin was 67.9% compared to 64.6% in the fourth quarter of 2019. Gross profit and adjusted gross profit include the benefit of $5.4 million in lower expenses on Livongo devices, attributable to purchase accounting adjustments related to the merger. Adjusted EBITDA increased to $50.4 million in the quarter, compared to $15.2 million in the fourth quarter of 2019.

17:32 Fourth quarter adjusted EBITDA margin of 13.1% increased by 340 basis points year over year, Adjusted EBITDA includes a benefit of $5.4 million attributable to purchase accounting adjustments mentioned previously. Net loss in the quarter was $394 million compared to a net loss of $19 million in the fourth quarter of 2019. Fourth quarter net loss includes $57.6 million in transaction costs as well as $331.7 million of non-cash accelerated stock-based compensation expense related to the merger with Livongo.

18:25 On a per-share basis, net loss was $3.07 for the fourth quarter compared to a loss of 26 cents in the fourth quarter of last year. Fourth quarter net loss per share includes 45 cents of transaction costs as well as $2.59 of non-cash accelerated stock-based compensation related to the merger with La Bamba. Excluding all transaction-related costs and tax benefits, the per share loss in the fourth quarter would have been $0.27. We ended the quarter with $787 million in cash and short-term investments, while our total recorded debt outstanding as of December 31st was $1.4 billion.

19:21 Now, turning to forward guidance. For the full year 2021, we expect revenue to be in the range of $1.95 to $2.0 billion, as Jason mentioned, representing growth of 78 to 83% over the prior year, or 40 to 43% fully pro forma for the acquisition of Livongo. Our confidence in that strong revenue growth is underpinned by, first, continued growth and utilization, particularly among non-infectious disease-related visits, such as hypertension, lower back pain, anxiety, and depression.

20:12 During the fourth quarter, approximately 75% of our visit volume was related to non-infectious diseases, up from 50% in the fourth quarter of last year as our visit mix continues to diversify, a trend that has continued into the new year. We've also seen tremendous growth in new registrations over the past year, with newly registered individuals growing at twice the rate of new member additions. Registered member growth creates opportunity for deeper engagement and is a leading indicator of forward utilization. Growth in specialty visits has been particularly strong. led by Growth and Behavioral Health, which experienced visit growth of over 500% in 2020 as the growth in visits accelerated throughout the course of the year.

21:07 All of that comes together to give us tremendous confidence in our visit volume outlook. And you can see that reflected in our strong visit volume guidance. We expect total visit volume to be between 12 and 13 million visits this year, representing growth of 13% to 23%. Second, we have built a robust and growing pipeline of multi-product sales, including strong demand for our whole-person chronic care program. In 2020, two-thirds of Peladoc's deals were multi-product deals, and our experience shows that client retention, member engagement, and PMPM growth are all significantly stronger for clients that use more than one of our products.

21:59 Next, in the direct-to-consumer channel, our BetterHelp brand has also continued to significantly outperform, delivering over $300 million of revenue in 2020. We expect another year of robust growth of at least 50% in 2021 as we continue to gain scale, and expand our leadership position in that channel. Fourth, continued new member additions at both existing and used clients. We expect to grow paid membership to 52 to 54 million members in 2021, which is net of the approximately 1.5 million COVID-related temporary members that have rolled off during the first quarter, as previously disclosed.

22:52 We expect visit fee only access to be available to an additional 22 to 23 million individuals. We also see increasing demand for our hospital and health system platform solution as these organizations look to invest in robust, secure, and purpose-built telehealth capabilities. We expect organic growth in this channel at the high end of the 20-30% target range we provided last year upon the closing of the in-couch acquisition. And last but not least, accelerating growth in the international market driven by increased penetration in existing geographies and expansion into new regions.

23:39 We expect adjusted EBITDA in 2021 in the range of $255 to $275 million, representing an increase of over 100% at the midpoint, and including an approximately $20 million benefit from lower expenses on Livongo devices attributable to purchase accounting adjustments related to the Livongo merger. The expected growth in adjusted EBITDA is driven by the contribution from a full year of Livongo, as well as the overall strength across channels, partially offset by investments back into the business, including the integration of Livongo, as well as new product development and enhancement to existing products.

24:26 For the first quarter of 2021, we expect total revenue of $445 to $455 million. representing growth of approximately 150% over the prior year's quarter. We expect total paid membership in the range of 51 to 52 million, which is net of the approximately 1.5 million temporary members discussed in prior quarters that have rolled off subsequent to year end. We anticipate total visits during the first quarter of between 2.9 million and 3.1 million visits. We expect first quarter adjusted EBITDA to be in the range of $45 to $48 million, including an approximate $7 million benefit from lower expenses on Lubongo devices attributable to purchase accounting adjustments related to the Lubongo transaction.

25:25 With that, I will turn the call back to Jason for closing remarks. Thanks, Mala. In closing, I want to thank the entire Teladoc team for their amazing commitment to serving our clients and members around the world during a challenging year. Over the past 12 months, we've seen a monumental change in consumer expectations for the way they access and experience health care as virtual care has firmly entered the mainstream. As a company, we've responded by significantly expanding our capabilities to meet the rising demands of clients and consumers around the world, while extending our leadership positions by delivering, enabling, and empowering virtual care. As always, thank you all for your continued interest in Teladoc Health, and with that, we'll open the call for questions. Operator?

26:19 If you would like to ask a question at this time, please press star and then number one on your telephone keypad. If you would like to withdraw your question, press the pound key. In the interest of time, please limit yourself to one question. First question comes from Lisa Gill with JP Morgan. Thanks very much, and congratulations on a great year, Jason. I just really want to understand just a couple of really quick things. You've given us so much information. Thank you to you and Mala. But the first would just be around U.S. paid members, retention rates, Thank you for joining us. and many more.

27:37 With respect to retention rates, they continue to be at high levels consistent with historic levels, which have always been in sort of the low to mid 90s. We can continue to see that. And in fact, what we're seeing is the pipeline is growing actually faster than we've seen in previous years. When I look at our membership opportunities, sort of the gross opportunities in our pipeline, the membership opportunity is up over 50% relative to the same time last year. And I think that that's really indicative of The market and clients recognizing the value of the full solution that we have and the unique position that we occupy.

28:30 And I've had a number of large client discussions over the last several weeks as we start to move into this selling season and we start to talk about the opportunity of the full credit answer, sort of that full solution across all of our product portfolio and it is truly differentiated. So, you know, I was just talking to a regional blue plan who I believe we will take away from a competitor who has a much narrower set of products and can't compete in the evolving landscape and sort of the new paradigm that we've created. With respect to the cross-selling What I think we said is over a dozen cross sales.

29:23 Those will roll on over the course of 2021. And I would say we'll have some impact on the back half of the year, but relatively small in the back half of this year. What we're really looking at is impact on 2022. and we still feel very good, in fact better than we've ever felt before about the prospects for our revenue synergies. Just sort of characterizing the cross-sell opportunities, We look at the pipeline today versus the pipeline just sort of the middle of last quarter. And remember, we started commercial collaboration long before we closed the Livongo transaction.

30:17 and we've more than doubled the pipeline of cross-sell opportunities. So I feel very, very good about it. We've taken, I would say, a relatively conservative view of the contribution from the revenue synergies in 2021 and believe that those will materialize much more significantly in 22 and beyond. Great. Thank you. Next question comes from Sandy Draper with Truist Securities. Thanks very much and would also echo the congratulations on a very strong year. Jason, from a high level, one of the things I know we used to talk about is you are really focused on the higher visit fee or higher visit growth than access fee growth because back this is pre-COVID, you are really showing the power of your ability to drive utilization and show the value of the platform.

31:18 Post-COVID, I'm just wondering when you think longer term, is really because you shift post-COVID plus the diversity of the model, is it really more about access fee growth and that will grow faster than membership? I'm just trying to think about how you think, and maybe Mala chime in as well, thinking about that growth dynamic because it could clearly be coupled with COVID, but would love to just get your thoughts on driving the business and the growth. Is it around the visit volume versus the access fee? Thanks. Yeah, no, I appreciate the question, and it is a complicated question, right, because I think visit volume will continue to grow at a more rapid rate than membership will, but I think what you're going to see with the significantly increased sort of per-member subscription fees that we get with the Livongo business is You're going to see the revenue grow faster on the subscription access fees.

32:19 So there's a little bit of a mix there. I think one of the things that I would look at and makes me really bullish on the future of our continued visit volume growth is the fact that this year we saw visits grow 140% year over year in spite of the fact that infectious disease visits decreased by 17%. So we have this situation where people are coming to us for a much broader array of reasons. We're seeing our mental health visits increase dramatically, over 500% through our B2B channel, for example. Dermatology, similarly. And yet, we're facing an historically low flu season because of social distancing and mask wearing.

33:12 Now, we've taken that into account in the guidance that we gave for 2021. and we're even contemplating it as we look into the first half of 22 because I think it's really not until the back half of 22 that you're going to see us return to a more sort of normalized flu, cold and flu season. So all of that's taken into consideration as we think about the long-term growth. So hopefully that clarifies a little bit, right? Visit volume grows faster than membership, and yet subscription access fees are likely to grow faster than visit fees. Yeah, and Sandy, it's a great question. What I would add is, you know, if you think about the growth of both of those revenues, just to reinforce what I said in our prepared remarks in terms of why do we have confidence in the growth of both access fee revenue and Visit Revenue.

34:10 It's sort of a few different factors, right? One is on the access fee growth. To Jason's point around, it is a much bigger base with the addition of Livongo and Intouch. Most of those feed our access fee revenue, as we've talked about. And so the growth there is going to be driven by our strong pipeline of multi-product sales. We talked about our growth in specialties, continued growth in our chronic condition programs, and then the growth in HHS and InTouch and our licensed platform solution. All of that is going to feed our access-free revenue growth. and then to the point that Jason made around what's driving visit revenue, it will really be the gains we continue to make in utilization.

34:56 You saw from our results, you know, we saw a very strong increase in utilization in the fourth quarter, you know, over 800 points relative to fourth quarter of 2019 and sequentially much over 100 points in relation to the, with respect to the third quarter. So we will continue to drive growth and utilization, and that will obviously feed visit revenue growth. The growth in utilization is on the back of the significant increase in growth that we are seeing in noninfectious diseases. It was about 75% of our visit volume mix in the fourth quarter. So we're seeing strong growth there. We've talked about the growth that we are seeing in specialty, whether it be mental health, whether it be DERM.

35:47 So that is going to continue to drive the utilization. So all of those factors is what is underpinning our confidence in both the access fee revenue growth as well as the visit revenue growth. Next question comes from Sean Leland with Piper Sandler. Hi, thanks so much. And I guess a follow-up to Sandy's just to go a little bit deeper. So, you know, clearly membership growth is moderating in the outlook. And I'd just like to know, is that a factor of overall market penetration of virtual care? Do you think that there's opportunities longer term to continue to grow membership? And then related to that, you called out, Mala, new registrations.

36:33 What percent of members today are registered members? So let me speak first, Sean, to the question of membership growth. We added 15 million members last year and 25 million members in the last two years. That's a staggering number. I think what gives me confidence in the continued membership growth is what I mentioned earlier, which is that if you look at our growth pipeline, the membership growth opportunity is actually 50% larger than it was at this time last year. It's just that those are earlier in the selling process, right? So we've had to sort of refill the pipeline, if you will, after just an explosive year last year.

37:28 We take a relatively conservative view of the membership growth given the earlier stage, and yet the growth opportunity is 50% larger than it was at this time last year. I think that gives me significant confidence over the longer term. We still have 65 million members worth of white space within existing clients. So I feel very, very good about continued membership growth, and we look at it over sort of a multi-year, not a quarter-by-quarter question. Yeah, and to your second question, Sean, we, as you know, do not break out what you ask. We've given you a lot of information.

38:17 As was pointed out earlier in the call, we don't give you every piece of information. So that's not something we've broken out. We have talked, as you mentioned, about the increase in first-time registrants and how that contributes to our overall visit growth, not only in the year that they first-time register, but also that that enters the flywheel and we get then repeat utilization, especially among multiple products. Yeah, and it's important that, you know, registrations, as we have talked about, is running well ahead of membership addition growth, right? So that is also important as we continue to drive utilization in 21. Next question comes from Stephanie Davis with SBB Lyric.

39:06 Hey, guys. I ask you, everyone else, congrats on the quarter. Congrats on the guide. Thank you for having me. A really strong international dynamic on your prepared remarks. I was hoping that you could talk a little bit more about really what pockets of geography were you seeing the biggest strengths and how the competitive dynamics differ in that market. Yeah, absolutely. I'm really excited about our international prospects, and we're just starting to really hit our stride and activate the international channels for the in-touch solutions, and we're seeing tremendous interest in the international markets for the Livongo products.

39:53 And you know how large those opportunities are. So with respect to the geographies, we're seeing good growth in Europe, both on the continent as well as in the UK. We continue to see the South American markets, and especially Brazil, as very exciting opportunities. You know, the Brazilian market is characterized by by a very tech-savvy population and it's a market where private health insurance is rather prevalent. Specifically in Europe, we launched with Telefonica and that continues to be a very, very strong relationship.

40:43 We're very bullish on the prospects for that relationship. And then, of course, we launched over the past year in the Nordic region. So right now, those are probably our primary growth areas. We continue to have a strong and steady footprint in Canada and Australia and New Zealand. And so from my perspective, I'm very, very bullish there. I believe that unlocking some of those markets for the Livongo capabilities will be a game changer in terms of the role of the international markets in our book of business.

41:33 Next question comes from Richard Close with Canaccord Genuity. Great, thanks for the question. I assume you can hear me okay? Yep, perfect. Excellent. I was going to drill down on membership, but that's been hammered on here. But can we talk a little bit about primary care, Jason, and how you're thinking about that? Obviously, the comments on the pilots were positive. How do we think about the business model for primary care? What metrics you're focused in on there? And then, Does it shift the revenue model more from an episodic type of payment to more recurring?

42:20 Just overall, how does that model evolve? Yeah, I appreciate the question, Richard. We're really excited about the prospects for Primary 360. We have a very, very large and diverse pipeline of opportunities for that model, and it ranges, honestly. Higher PMPMs plus a wider variety of visit fees because of course a 30 minute introductory visit with a new primary care relationship is going to be worth more than an annual check-in. or a symptomatic visit, for example.

43:07 Having said that, we're also talking to a number of health plans about putting in quality metrics and incorporating more value-based reimbursement associated with our ability to move the needle on quality of care. and I think that will start with small steps along the lines of documented improvement in screening, rates of screening and appropriate preventative care and move towards more impactful outcomes-based measurement and ultimately the opportunity for us to enter into risk sharing arrangements or share of savings arrangements with some of the payers.

43:55 We're already having those discussions, but we're also very cognizant that we need to step carefully into that and make sure that we have the right data to be able to enter into those relationships with eyes wide open and know where we can make the biggest impact. So I think you'll see an evolution of that model, but in all of those cases, A significantly higher revenue per member for those who were serving with our primary 360 product. Next question comes from Sean Dodge with RBC Capital Markets. Thanks. Good afternoon. On the average PMPM, the sequential change there was pretty significant, even Mala, what you were saying, including the lift from the Livongo inclusion there. If we set Livongo aside, can you give us a sense of how much that was driven by multi-product sales versus maybe something like repricing or true-ups related to the visits included contracts?

45:00 Yeah, so, you know, what we have shared with you is, as you said, there was a pretty significant increase in the PMPM, as you saw, $1.76 in the quarter compared to $1.18 sequentially at $0.91, so a very significant increase. You know, the way I would think about it is a lot of it was because of the addition of Lubongo, to be clear. But even absent the addition of Lubongo, we did see an expansion, a nice expansion in our PMP and in the quarter. I don't want to break it out more specifically on how much of it came from a re-rating of our visits included contracts, which by the way, we have re-rated through the year as we went through the visit volume through the year.

45:50 We've talked about that and that definitely did happen. But there are a lot of, you know, so I don't want to specifically break out the individual drivers, but what I will say is even excluding the impact of Livongo for the two months of the quarter, we actually did see a nice expansion in PNPM as we went through the fourth quarter. Next question comes from Daniel Vilsack with Citi. Hi, guys. Thanks for taking my question. I want to focus a little bit on Medicare, both on MA and MP for service. I think in the third quarter you mentioned you had around 2.5 million MA lives aboard, and CMS mentioned I think that around 21 million beneficiaries for the plan year 2021 will have access to some type of telehealth benefit.

46:43 So, seriously, can you give us an update on the MA progress you've made during this past AEP period? And then on the fee-for-service side, there's been some noise out of the Inspector General's office about auditing some telehealth visits. And I don't know, it seems like the regulatory landscape in fee-for-service might be a little more uncertain. So curious to get your thought on that market in particular, which I suppose would go into your provider segment. And if the direct contracting within Medicare fee-for-service is going to have any impact and many more. Thank you. I continue to think that Medicare fee-for-service is primarily an opportunity for us with respect to our hospital and health systems business as hospital and health systems continue to lean in harder to providing virtual care for their membership and being reimbursed by CMS.

47:59 We continue to be very active in terms of working with CMS and various state legislators, for that matter, on best practices when it comes to the regulatory environment. We're very optimistic, actually. We think that the winds are all blowing in the right direction. It's a rare bipartisan issue, and we're collaborative with respect to making sure that there are the right guardrails around it because we think that it's important to have best practices proliferate with respect to not only payment models but also the best care being delivered and to make sure that the consumers' needs as well as the payers' needs, whether that's the federal government or a private health plan are also being looked after. So we're very active on those fronts. We're actually applying quite a bit of technology to that to be able to do things like, you know, use artificial intelligence to validate that a clinical visit took place and things like that. So I feel very good about the direction that that's heading.

49:13 We continue to make progress in the Medicare Advantage market. I don't know that we gave numbers updated with respect to our Medicare Advantage population. We'll continue to keep you apprised of that as we go through the quarters. Yeah, and the only other thing I would add is, you know, as we've talked about the 15 million member addition in 2020, we have talked about how we've seen nice growth in government, whether that includes Medicare Advantage or Medicaid. So think of it more as we are seeing strong growth and membership addition across government. You know, maybe the last thing I'd just mention is we're also seeing – Private Medicare, meaning Medicare populations from within large employers who come through the health plans.

50:11 It's a part of the market that frequently isn't talked about, but we're seeing growth in some of those populations where the health plans are coming to us for those populations as well. Next question comes from Charles Reilly with Cohen. Yeah, thanks for taking the question. Just to follow up a little bit on primary 360 as it relates to membership guidance, is it right to think that primary 360 members as that grows is a conversion of existing U.S. paid membership members, or would that be incremental within the membership growth? And then secondly, on the utilization number, which was quite strong, I know you don't give this number, but in the past, but can you give a sense on how much of those utilization is from repeat users versus bringing in first-time users? Thanks.

51:09 Yeah, so I'll take the primary 360 membership, and then Mala can talk a little bit about repeat utilization and registrations, because I think really it's a question of new registrations. With respect to Primary 360, the answer is actually both. In some cases, we're going to existing clients, to existing populations, and we're making Primary 360 available to them. We wouldn't newly count those members. They're already in our membership count. In other cases, they're new populations where we're going to them and making our services available for the first time and the product that we're bringing to bear for them may be Primary 360.

51:55 It may also be Primary 360 and other products alongside of it. So, you know, you may get some into our Primary 360 driving that revenue and then other members may have other versions of the product either on a I think you'll see it show up in different ways. What you can be confident, though, is we're only going to count a number once. Yeah, and Charles, regarding your other question, you know, we, as you said, we don't break it out, but I'll just give you a few facts. The first is, if you think about our visit volume in the quarter, about half of it actually came from first-time users, and as you know, that's always – Really helpful as we think about driving future utilization, right?

52:49 They try it once and then they will repeat. So that is something that is also a factor that underpins our confidence in driving utilization as we move forward. So the fact that we are seeing registrations well outpace membership additions, the fact that about half of the volume came from first-time users. And then the only other thing I would say is, you know, when we were at J.P. Morgan in January, we did talk about, How we are seeing the flywheel dynamics fueling durable growth, and we did talk about repeat visits showing very nice, robust growth over the past few years. I don't want to say more than that, but I would sort of think about the half of our visit volume coming from first-time users in the fourth quarter.

53:39 and that's true for the whole year. So that was a trend that was in the fourth quarter. That was true and it was true for the whole year as well. Next question comes from Jalinda Singh with Credit Suisse. Thank you. Thanks for taking the questions. Just want to follow up on BetterHelp, a very strong trend there, revenues in $300 million range, expected to go 50% in 2021. With the business not becoming a very sizable piece of your overall company, I was wondering if you are willing to talk about margins on that business, how does that compare with overall profit margins and long-term profitability opportunity there? On a related part, with several employers now expanding telebehavioral and mental health services, do you see that having any impact on your Better Health DPC side of growth prospects?

54:31 So let me answer about the market dynamics around Better Health, and then Mala can talk to margins and performance. We really don't. I think a couple of things, Joandra. One, we've actually started taking BetterHelp into some B2B arrangements, in particular with respect to EAP plans, and that's turned out to be a very fruitful market for us. The second thing I would say is most people who are turning to BetterHelp either don't have adequate coverage or decide that they don't want to use that coverage especially for reasons of expenses, honestly.

55:19 One of the value propositions of BetterHelp is that For a month's worth of therapy, you can get therapy for a month that would otherwise cost you in person about the same for a single visit or maybe a visit and a half if you're fortunate. And so the value proposition is very, very strong. and, you know, it has always been the case and continues to be the case that many of the people who turn to BetterHelp wouldn't have otherwise gotten therapy, right? And so we continue to see that market be very, very sort of under-penetrated. The opportunity, very significant. And so we don't see any slowing down of that insight.

56:11 And from a margin standpoint, Jalendra, I am really pleased with the progression in margins that that aspect of our business has been making over the past few years. I obviously will not break out margins for any part of our business, but there has been really good progress in terms of margins. And it's really on the back of a few things, right, just to give you a little bit of color on what's driving the improvement in margins. We are seeing improvement in lifetime value. We are seeing improvement in retention and lower churn. Definitely looking at constantly innovating when it comes to different channels.

57:02 We do a lot of product improvements through the year. We test different pricings as we go through the year. A bunch of different levers that underpin the margin progression we are seeing. And I have to say, if you think about revenue vis-a-vis the cost of acquisition, which is something that we are very, very keenly focused on, we're seeing some very strong improvement in that. So overall, I'm pleased with the margin progression for BetterHelp. Next question comes from Donald Hooker with KeyBank. Great, good afternoon. Thank you for the question. So I wanted to revisit the PMPM metric that you gave, you know, ex-Livongo. I guess based on your comments, Mala, it appears it was about about $1.30, I think, from your comments, or somewhere in that neighborhood.

58:02 That keeps marching up. Is there sort of a point in time where that sort of taps out? Just wanted to think ahead, because that's been kind of a driver for you. is there sort of a full stack of your services where that sort of stops rising somewhere out in the future or maybe another way to ask the question is there a particular client with a very very high PMPM that you can sort of highlight? You know if you think about our PMPM and you know the way I think about how that progresses It really is about a couple of things. One is we have actually shown case studies where as we sell multiple products and services, we actually see a market increase pre-post in PMPM, right?

58:53 So I would say the first is it is about expanding our suite of products and services, which is what we have been doing over the past many years, right? We've been steadily expanding our suite of products and services. And then the second thing I would say is it's also about expanding into products and services that are more longitudinal, not episodic, because that drives It drives expansion in PMPM. So the way I think about it is if I look at the progression of our business and what we have done and where we are headed, and as I think about the growth of the various pieces of our business that underpin the 40% to 43% growth that we talked about, I actually feel we have all the right ingredients to continue to expand the PMPM.

59:55 And this does conclude the call for today. You may now disconnect.