DeferredTaxAssetsDeferredIncome

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~June 30, 2022

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-37477

TELADOC HEALTH, INC.

(Exact name of registrant as specified in its charter)

Delaware		04-3705970
(State of incorporation)		(I.R.S. Employer Identification No.)

2 Manhattanville Road, Suite 203
Purchase, New York		10577
(Address of principal executive office)		(Zip code)

(203) 635-2002

(Registrant’s telephone number including area

code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	TDOC	The New York Stock Exchange

Indicate by check mark whether the ~~registrant:~~registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer”,~~filer,” “smaller reporting ~~company”~~company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:


Large accelerated filer	⌧	Accelerated filer	◻	Non-accelerated filer	◻	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange ~~Act.)~~Act). Yes ☐ No ⌧

As of ~~April~~July 27, 2022, the Registrant had ~~161,182,633~~161,657,805 shares of Common Stock outstanding.

Table of Contents

TELADOC HEALTH, INC.

QUARTERLY REPORT ON FORM 10-Q

For the period ended ~~March 31,~~June 30, 2022

TABLE OF CONTENTS

		Page Number

PART I	Financial Information	2
Item 1.	Financial Statements	2
	Condensed Consolidated Balance Sheets as of ~~March 31,~~June 30, 2022 (unaudited) and December 31, 2021	2
	Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) for the quarters and six months ended ~~March 31,~~June 30, 2022 and 2021	3
	Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the quarters and six months ended ~~March 31,~~June 30, 2022 and 2021	4
	Condensed Consolidated Statements of Cash Flows (unaudited) for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	32
PART II	Other Information	33
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 6.	Exhibits	34
Exhibit Index		34
Signatures		3635

Table of Contents

PART I

FINANCIAL INFORMATION

ITEM 1. Financial Statements

TELADOC HEALTH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data, unaudited)


	March 31,		December 31,		June 30,		December 31,
	2022		2021		2022		2021
Assets
Current assets:
Cash and cash equivalents	$	836,444	$	893,480	$	881,161	$	893,480
Short-term investments		2,544		2,537		2,539		2,537
Accounts receivable, net of provision of $13,056 and $12,384, respectively		191,528		168,956
Accounts receivable, net of allowance of $15,095 and $12,384, respectively						205,434		168,956
Inventories		70,654		73,079		60,260		73,079
Prepaid expenses and other current assets		106,875		87,387		107,875		87,387
Total current assets		1,208,045		1,225,439		1,257,269		1,225,439
Property and equipment, net		28,419		27,234		27,403		27,234
Goodwill		7,899,795		14,504,174		4,858,196		14,504,174
Intangible assets, net		1,883,897		1,910,278		1,872,172		1,910,278
Operating lease - right-of-use assets		45,552		46,780		49,795		46,780
Other assets		26,629		20,703		37,940		20,703
Total assets	$	11,092,337	$	17,734,608	$	8,102,775	$	17,734,608
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	47,412	$	47,257	$	94,371	$	47,257
Accrued expenses and other current liabilities		116,689		102,933		127,187		102,933
Accrued compensation		46,075		91,941		51,594		91,941
Deferred revenue-current		83,847		75,569		86,254		75,569
Advances from financing companies		12,664		13,313		12,073		13,313
Total current liabilities		306,687		331,013		371,479		331,013
Other liabilities		1,445		1,492		1,609		1,492
Operating lease liabilities, net of current portion		40,163		41,773		44,274		41,773
Deferred revenue, net of current portion		2,884		3,834		3,373		3,834
Advances from financing companies, net of current portion		8,252		9,291		7,855		9,291
Deferred taxes, net		57,516		75,777		55,926		75,777
Convertible senior notes, net		1,532,780		1,225,671		1,533,609		1,225,671
Commitments and contingencies (Note 10)
Stockholders’ equity:
Common stock, $0.001 par value; 300,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 161,434,513 shares and 160,469,325 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		161		160
Common stock, $0.001 par value; 300,000,000 shares authorized; 161,892,008 shares and 160,469,325 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively						162		160
Additional paid-in capital		17,177,152		17,473,336		17,239,092		17,473,336
Accumulated deficit		(8,023,279)		(1,421,454)		(11,124,740)		(1,421,454)
Accumulated other comprehensive loss		(11,424)		(6,285)		(29,864)		(6,285)
Total stockholders’ equity		9,142,610		16,045,757		6,084,650		16,045,757
Total liabilities and stockholders’ equity	$	11,092,337	$	17,734,608	$	8,102,775	$	17,734,608

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

TELADOC HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share data, unaudited)

Quarter Ended March 31,


2022

2021

Revenue

$
565,350

$
453,675


Expenses:

Cost of revenue (exclusive of depreciation and amortization, which is shown separately below)

187,025

145,959

Operating expenses:

Advertising and marketing

133,600

89,439

Sales

58,329

64,793

Technology and development

87,412

78,008

General and administrative

104,923

105,172

Acquisition, integration, and transformation costs

4,507

6,323

Depreciation and amortization

58,933

48,659

Goodwill impairment

6,600,000

0

Total expenses

7,234,729

538,353

Loss from operations

(6,669,379)

(84,678)

Loss on extinguishment of debt

0

11,459

Other income, net

(724)

(5,652)

Interest expense, net

5,480

22,125

Net loss before taxes

(6,674,135)

(112,610)

Income tax expense

388

87,039

Net loss

(6,674,523)

(199,649)

Other comprehensive loss, net of tax:

Currency translation adjustment and other

(5,139)

(13,492)

Comprehensive loss

$
(6,679,662)

$
(213,141)

Net loss per share, basic and diluted

$
(41.58)

$
(1.31)

Weighted-average shares used to compute basic and diluted net loss per share

160,532,301

152,167,606


	Quarter Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenue	$	592,379	$	503,139	$	1,157,729	$	956,814
Expenses:
Cost of revenue (exclusive of depreciation and amortization, which is shown separately below)		182,470		160,273		369,495		306,232
Operating expenses:
Advertising and marketing		164,574		103,221		298,174		192,660
Sales		57,930		63,856		116,259		128,649
Technology and development		80,826		80,759		168,238		158,767
General and administrative		110,868		111,216		215,791		216,388
Acquisition, integration, and transformation costs		2,892		11,421		7,399		17,744
Depreciation and amortization		59,371		51,341		118,304		100,000
Goodwill impairment		3,030,000		0		9,630,000		0
Total expenses		3,688,931		582,087		10,923,660		1,120,440
Loss from operations		(3,096,552)		(78,948)		(9,765,931)		(163,626)
Loss on extinguishment of debt		0		31,419		0		42,878
Other expense (income), net		1,760		(217)		1,036		(5,869)
Interest expense, net		4,337		20,473		9,817		42,598
Net loss before provision for income taxes		(3,102,649)		(130,623)		(9,776,784)		(243,233)
Provision for income taxes		(1,188)		3,196		(800)		90,235
Net loss		(3,101,461)		(133,819)		(9,775,984)		(333,468)
Other comprehensive (loss) income, net of tax:
Currency translation adjustment and other		(18,440)		7,265		(23,579)		(6,227)
Comprehensive loss	$	(3,119,901)	$	(126,554)	$	(9,799,563)	$	(339,695)

Net loss per share, basic and diluted	$	(19.22)	$	(0.86)	$	(60.72)	$	(2.16)

Weighted-average shares used to compute basic and diluted net loss per share		161,377,695		156,055,090		161,002,075		154,187,739

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

TELADOC HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data, unaudited)

Accumulated

Additional

Other

Total

Common Stock

Paid-In

Accumulated

Comprehensive

Stockholders’


Shares

Amount

Capital

Deficit

Gain (Loss)

Equity

Balance as of December 31, 2021

160,469,325

$
160

$
17,473,336

$
(1,421,454)

$
(6,285)

$
16,045,757

Cumulative effect adjustment due to adoption of ASU 2020-06 (see Note 2)

0

0

(363,731)

72,698

0

(291,033)

Exercise of stock options

267,586

0

3,585

0

0

3,585

Issuance of common stock upon vesting of restricted stock units

697,602

1

(1)

0

0

0

Stock-based compensation

0

0

63,963

0

0

63,963

Other comprehensive loss, net of tax

0

0

0

0

(5,139)

(5,139)

Net loss

0

0

0

(6,674,523)

0

(6,674,523)

Balance as of March 31, 2022

161,434,513

$
161

$
17,177,152

$
(8,023,279)

$
(11,424)

$
9,142,610

Balance as of December 31, 2020

150,281,099

$
150

$
16,857,797

$
(992,661)

$
18,518

$
15,883,804

Exercise of stock options

1,238,112

1

11,907

0

0

11,908

Issuance of common stock upon vesting of restricted stock units

976,999

1

(1)

0

0

(0)

Issuance of common stock for 2022 Notes

1,058,373

1

270,111

0

0

270,112

Equity portion of extinguishment of 2022 Notes

0

0

(224,081)

0

0

(224,081)

Issuance of common stock for 2025 Notes

1,056,861

1

288,485

0

0

288,486

Equity portion of extinguishment of 2025 Notes

0

0

(237,261)

0

0

(237,261)

Recovery of excess common stock issued for acquisition

(205,280)

(0)

(40,329)

0

0

(40,329)

Stock-based compensation

0

0

90,000

0

0

90,000

Other comprehensive loss, net of tax

0

0

0

0

(13,492)

(13,492)

Net loss

0

0

0

(199,649)

0

(199,649)

Balance as of March 31, 2021

154,406,164

$
154

$
17,016,628

$
(1,192,310)

$
5,026

$
15,829,498


								Accumulated
				Additional				Other		Total
	Common Stock			Paid-In		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Gain (Loss)		Equity
Balance as of March 31, 2022	161,434,513	$	161	$	17,177,152	$	(8,023,279)	$	(11,424)	$	9,142,610
Exercise of stock options	159,775		1		1,394		0		0		1,395
Issuance of common stock upon vesting of restricted stock units	149,018		0		(0)		0		0		(0)
Issuance of stock under employee stock purchase plan	148,609		0		4,225		0		0		4,225
Issuance of common stock for 2025 Notes	93		0		7		0		0		7
Equity portion of extinguishment of 2025 Notes	0		0		(2)		0		0		(2)
Stock-based compensation	0		0		56,316		0		0		56,316
Other comprehensive loss, net of tax	0		0		0		0		(18,440)		(18,440)
Net loss	0		0		0		(3,101,461)		0		(3,101,461)
Balance as of June 30, 2022	161,892,008	$	162	$	17,239,092	$	(11,124,740)	$	(29,864)	$	6,084,650

Balance as of December 31, 2021	160,469,325	$	160	$	17,473,336	$	(1,421,454)	$	(6,285)	$	16,045,757
Cumulative effect adjustment due to adoption of ASU 2020-06 (see Note 2)	0		0		(363,731)		72,698		0		(291,033)
Exercise of stock options	427,361		1		4,979		0		0		4,980
Issuance of common stock upon vesting of restricted stock units	846,620		1		(1)		0		0		0
Issuance of stock under employee stock purchase plan	148,609		0		4,225		0		0		4,225
Issuance of common stock for 2025 Notes	93		0		7		0		0		7
Equity portion of extinguishment of 2025 Notes	0		0		(2)		0		0		(2)
Stock-based compensation	0		0		120,279		0		0		120,279
Other comprehensive loss, net of tax	0		0		0		0		(23,579)		(23,579)
Net loss	0		0		0		(9,775,984)		0		(9,775,984)
Balance as of June 30, 2022	161,892,008	$	162	$	17,239,092	$	(11,124,740)	$	(29,864)	$	6,084,650

Balance as of March 31, 2021	154,406,164	$	154	$	17,016,628	$	(1,192,310)	$	5,026	$	15,829,498
Exercise of stock options	668,942		1		5,872		0		0		5,873
Issuance of common stock upon vesting of restricted stock units	278,206		0		(0)		0		0		(0)
Issuance of stock under employee stock purchase plan	82,088		0		10,539		0		0		10,539
Issuance of common stock for 2025 Notes	4,027,578		4		617,161		0		0		617,165
Equity portion of extinguishment of 2025 Notes	0		0		(421,167)		0		0		(421,167)
Stock-based compensation	0		0		85,716		0		0		85,716
Other comprehensive income, net of tax	0		0		0		0		7,265		7,265
Net loss	0		0		0		(133,819)		0		(133,819)
Balance as of June 30, 2021	159,462,978	$	159	$	17,314,749	$	(1,326,129)	$	12,291	$	16,001,070

Balance as of December 31, 2020	150,281,099	$	150	$	16,857,797	$	(992,661)	$	18,518	$	15,883,804
Exercise of stock options	1,907,054		2		17,779		0		0		17,781
Issuance of common stock upon vesting of restricted stock units	1,255,205		1		(1)		0		0		(0)
Issuance of stock under employee stock purchase plan	82,088		0		10,539		0		0		10,539
Issuance of common stock for 2022 Notes	1,058,373		1		270,111		0		0		270,112
Equity portion of extinguishment of 2022 Notes	0		0		(224,081)		0		0		(224,081)
Issuance of common stock for 2025 Notes	5,084,439		5		905,646		0		0		905,651
Equity portion of extinguishment of 2025 Notes	0		0		(658,428)		0		0		(658,428)
Recovery of excess common stock issued for acquisition	(205,280)		(0)		(40,329)		0		0		(40,329)
Stock-based compensation	0		0		175,716		0		0		175,716
Other comprehensive loss, net of tax	0		0		0		0		(6,227)		(6,227)
Net loss	0		0		0		(333,468)		0		(333,468)
Balance as of June 30, 2021	159,462,978	$	159	$	17,314,749	$	(1,326,129)	$	12,291	$	16,001,070

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

TELADOC HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

Quarter Ended March 31,


2022

2021

Operating activities:







Net loss

$
(6,674,523)

$
(199,649)

Adjustments to reconcile net loss to net cash used in operating activities:

Goodwill impairment

6,600,000

0

Depreciation and amortization

58,933

48,659

Depreciation of rental equipment

770

824

Amortization of right-of-use assets

3,173

2,948

Provision for doubtful accounts

4,591

3,074

Stock-based compensation

60,436

86,300

Deferred income taxes

(2,319)

87,004

Accretion of interest

826

16,829

Loss on extinguishment of debt

0

11,459

Gain on sale of investment

0

(5,852)

Other, net

0

38

Changes in operating assets and liabilities:

Accounts receivable

(27,842)

(11,717)

Prepaid expenses and other current assets

(18,993)

(12,799)

Inventory

2,023

(2,877)

Other assets

(6,047)

1,244

Accounts payable

492

(11,989)

Accrued expenses and other current liabilities

11,706

(1,889)

Accrued compensation

(48,819)

(43,624)

Deferred revenue

7,479

17,086

Operating lease liabilities

(3,626)

(3,076)

Other liabilities

(7)

(19)

Net cash used in operating activities

(31,747)

(18,026)

Investing activities:

Capital expenditures

(3,913)

(2,115)

Capitalized software

(26,918)

(11,144)

Proceeds from marketable securities

0

50,000

Acquisitions of business, net of cash acquired

0

(55,921)

Other, net

3,264

3,150

Net cash used in investing activities

(27,567)

(16,030)

Financing activities:

Net proceeds from the exercise of stock options

3,585

11,908

Repurchase of 2022 Notes

0

(130)

Proceeds from advances from financing companies

2,232

4,816

Payment against advances from financing companies

(3,921)

(4,098)

Proceeds from employee stock purchase plan

3,680

8,648

Cash received for withholding taxes on stock-based compensation, net

103

1,218

Other, net

(2,863)

(187)

Net cash provided by financing activities

2,816

22,175

Net decrease in cash and cash equivalents

(56,498)

(11,881)

Foreign exchange difference

(538)

(1,339)

Cash and cash equivalents at beginning of the period

893,480

733,324

Cash and cash equivalents at end of the period

$
836,444

$
720,104

Income taxes paid

$
261

$
52

Interest paid

$
7

$
3


	Six Months Ended June 30,
	2022		2021
Operating activities:
Net loss	$	(9,775,984)	$	(333,468)
Adjustments to reconcile net loss to net cash provided by operating activities:
Goodwill impairment		9,630,000		0
Depreciation and amortization		118,304		100,000
Depreciation of rental equipment		1,486		1,663
Amortization of right-of-use assets		6,540		5,858
Provision for allowances		5,857		7,534
Stock-based compensation		111,436		169,270
Deferred income taxes		(2,528)		83,823
Accretion of interest		1,659		32,566
Loss on extinguishment of debt		0		39,782
Gain on sale of investment		0		(5,901)
Other, net		0		38
Changes in operating assets and liabilities:
Accounts receivable		(43,948)		(16,573)
Prepaid expenses and other current assets		(20,195)		(26,758)
Inventory		11,974		(2,234)
Other assets		(17,453)		1,919
Accounts payable		47,417		(4,741)
Accrued expenses and other current liabilities		20,712		5,380
Accrued compensation		(38,328)		(35,606)
Deferred revenue		10,823		17,205
Operating lease liabilities		(7,266)		(5,833)
Other liabilities		216		267
Net cash provided by operating activities		60,722		34,191
Investing activities:
Capital expenditures		(6,455)		(4,405)
Capitalized software		(69,213)		(21,508)
Proceeds from marketable securities		0		50,000
Proceeds from the sale of investment		0		10,901
Acquisitions of businesses, net of cash acquired		(0)		(56,336)
Other, net		3,264		3,150
Net cash used in investing activities		(72,404)		(18,198)
Financing activities:
Net proceeds from the exercise of stock options		4,980		17,781
Repurchase of 2022 Notes		(0)		(137)
Proceeds from advances from financing companies		5,113		7,924
Payment against advances from financing companies		(7,789)		(8,122)
Proceeds from employee stock purchase plan		1,972		11,031
Cash received for withholding taxes on stock-based compensation, net		54		5,159
Other, net		(2,848)		(98)
Net cash provided by financing activities		1,482		33,538
Net (decrease) increase in cash and cash equivalents		(10,200)		49,531
Foreign exchange difference		(2,119)		869
Cash and cash equivalents at beginning of the period		893,480		733,324
Cash and cash equivalents at end of the period	$	881,161	$	783,724

Income taxes paid	$	564	$	52

Interest paid	$	8,673	$	10,379

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

TELADOC HEALTH, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization and Description of Business

Teladoc Health, Inc., together with its subsidiaries, is referred to herein as “Teladoc Health,” or the “Company,” and is the global leader in whole person virtual care, forging a new healthcare experience with better convenience, outcomes, and value. The Company’s mission is to empower all people everywhere to live their healthiest lives by transforming the healthcare experience.

The Company was incorporated in the State of Texas in June 2002 and changed its state of incorporation to the State of Delaware in October 2008. Effective August 10, 2018, Teladoc, Inc. changed its corporate name to Teladoc Health, Inc. The Company’s principal executive office is located in Purchase, New York.

On October 30, 2020, the Company completed the merger with Livongo Health, Inc. (“Livongo”), a transformational opportunity to improve the delivery, access and experience of chronic healthcare for individuals around the world.

On July 1, 2020, the Company completed the acquisition of InTouch Technologies, Inc. (“InTouch”), a leading provider of enterprise telehealth solutions for hospitals and health systems.

Note 2. Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021, in the opinion of management, reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the condensed consolidated results of operations, financial position and cash flows of Teladoc Health for the periods presented. However, the financial results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year or for any other future period.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States (“U.S.”) have been omitted or condensed pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The information in this report should be read in conjunction with the Company’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2021 (the “2021 Form 10-K”), which includes a complete set of footnote disclosures, including the Company’s significant accounting policies.

These financial statements include the results of Teladoc Health, as well as 3 professional associations and 12 professional corporations (collectively, the “THMG Association”). All intercompany transactions and balances have been eliminated. Certain prior year amounts have been reclassified to conform to the current year presentation.

Teladoc Health Medical Group, P.A., formerly Teladoc Physicians, P.A. (“THMG”), is party to several Services Agreements by and among it and the professional associations and professional corporations pursuant to which each professional association and professional corporation provides services to THMG. Each professional association and professional corporation is established pursuant to the requirements of its respective domestic jurisdiction governing the corporate practice of medicine.

The Company holds a variable interest in the THMG Association which contracts with physicians and other health professionals in order to provide services to the Company. The THMG Association is considered a variable interest entity (“VIE”) since it does not have sufficient equity to finance its activities without additional subordinated financial support. An enterprise having a controlling financial interest in a VIE must consolidate the VIE if it has both power and benefits—that is, it has (1) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance (power) and (2) the obligation to absorb losses of the VIE that potentially could be significant to the VIE or the right to receive benefits from the VIE that potentially could be significant to the VIE (benefits). The Company has the power and rights to control all activities of the THMG Association and funds and absorbs all losses of the VIE and appropriately consolidates the THMG Association.

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Total revenue and net income (loss) for the VIE were ~~$60.1~~$59.3 million and ~~$2.3~~($0.5) million, and ~~$54.2~~$56.5 million and ~~$1.2~~($0.1) million, for the quarters ended ~~March 31,~~June 30, 2022 and 2021, respectively. Total revenue and net income (loss) for the VIE were $119.4 million and ($2.8) million, and $110.7 million and ($1.3) million, for the six months ended June 30, 2022 and 2021, respectively. The VIE’s total assets, all of which were current, were ~~$33.1~~$18.8 million and $58.5 million at ~~March 31,~~June 30, 2022 and December 31, 2021, respectively. The VIE’s total liabilities, all of which were current, were ~~$71.5~~$57.7 million and ~~$94.7~~$94.6 million at ~~March 31,~~June 30, 2022 and December 31, 2021,

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respectively. The VIE’s total stockholders’ deficit was ~~$38.4~~$38.9 million and $36.1 million at ~~March 31,~~June 30, 2022 and December 31, 2021, respectively.

Business Combinations

The Company accounts for its business combinations using the acquisition method of accounting. The purchase price is attributed to the fair value of the assets acquired and liabilities assumed. Transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition date. The excess of the purchase price of acquisition over the fair value of the identifiable net assets of the acquiree is recorded as goodwill. The results of businesses acquired in a business combination are included in the Company’s condensed consolidated financial statements from the date of acquisition.

When the Company issues stock-based or cash awards to an acquired company’s stockholders, the Company evaluates whether the awards are consideration or compensation for post-acquisition services. The evaluation includes, among other things, whether the vesting of the awards is contingent on the continued employment of the acquired company’s stockholders beyond the acquisition date. If continued employment is required for vesting, the awards are treated as compensation for post-acquisition services and recognized as expense over the requisite service period.

Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates and selection of comparable companies. The estimates and assumptions used to determine the fair values and useful lives of identified intangible assets could change due to numerous factors, including market conditions, technological developments, economic conditions, and competition. In connection with determination of fair values, the Company may engage a third-party valuation specialist to assist with the valuation of intangible and certain tangible assets acquired and certain ~~assumed obligations.~~obligations assumed. Acquisition-related transaction costs incurred by the Company are not included as a component of consideration transferred but are accounted for as an operating expense in the period in which the costs are incurred.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company bases its estimates on historical experience, current business and economic factors, and various other assumptions that the Company believes are necessary to form a basis for making judgments about the carrying values of assets and liabilities, the recorded amounts of revenue and expenses, and the disclosure of contingent assets and liabilities. The Company is subject to uncertainties such as the impact of future events, economic and political factors, and changes in the Company’s business environment; therefore, actual results could differ from these estimates. Accordingly, the accounting estimates used in the preparation of the Company’s condensed consolidated financial statements will change as new events occur, as more experience is acquired, as additional information is obtained, and as the Company’s operating environment evolves. The Company believes that estimates used in the preparation of these condensed consolidated financial statements are reasonable; however, actual results could differ materially from these estimates.

Changes in estimates are made when circumstances warrant. Such changes in estimates and refinements in estimation methodologies are reflected in reported results of operations; if material, the effects of changes in estimates are disclosed in the notes to the condensed consolidated financial statements.

Significant estimates and assumptions by management affect areas including the carrying value and useful life of long-lived assets (including intangible assets), the carrying value of goodwill, the capitalization and amortization of software development costs, deferred device and contract costs, ~~the allowance for doubtful accounts,~~sales and bad debt allowances, and the accounting for business combinations. Other significant areas include revenue recognition (including performance ~~guarantees,~~guarantees), the accounting for income taxes, contingences, litigation and related legal accruals, ~~and~~ the accounting for stock-based

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compensation awards, and other items as described in the Summary of Significant Accounting policies in this Quarterly Report and in the 2021 Form 10-K.

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Recently Adopted Accounting Standards

In August 2020, the financial accounting standards board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06—"Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 simplifies the accounting for convertible instruments by eliminating the conversion option separation model for convertible debt that can be settled in cash and by eliminating the measurement model for beneficial conversion features. Convertible instruments that continue to be subject to separation models are (1) those with conversion options that are required to be accounted for as bifurcated derivatives and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. This ASU also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards.

The Company adopted ASU 2020-06 as of January 1, 2022, under the modified retrospective transition method, and, accordingly, its prior period financial statements were not restated. Upon adoption of ASU 2020-06, the conversion feature of the Company’s convertible senior notes is no longer reported as a component of equity. Instead, the previously-separated equity component is now combined with the liability component, thereby eliminating the amortization of the debt discount arising from the conversion option separation model. As such, the Company currently anticipates a reduction of approximately $58 million in non-cash interest to be recorded on its convertible senior notes for the year ended December 31, 2022, as compared to the year ended December 31, 2021. To reflect the adoption of ASU 2020-06, the Company recorded an increase to convertible senior notes of $306.3 million and decreases to additional paid-in capital, accumulated deficit and net deferred tax liabilities of $363.7 million, $72.7 million and $15.3 million, respectively, as of January 1, 2022.

Recently Issued Accounting Standards

In June 2022, FASB issued ASU 2022-03— “Fair Value Measurement (Topic 820)—Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” to clarify that an equity security subject to a contractual sale restriction does not take that restriction into consideration when measuring its fair value and to require specific disclosures related to such an equity security. ASU 2022-03 is effective for annual reporting periods, including interim periods, beginning after December 15, 2023, with early adoption permitted. The provisions of ASU 2022-03 are to be applied prospectively with any adjustments made to earnings on the date of adoption. The Company is currently evaluating what the impact of adopting ASU 2022-03 may have on its financial statements.

Note 3. Revenue, Deferred Revenue, and Deferred Device and Contract Costs

The Company generates access fees from customers, consisting of employers, health plans, hospitals and health systems, insurance, and financial services companies (collectively “Clients”), as well as individual members, accessing its professional provider network, hosted virtual healthcare platform and chronic care management platforms. Visit fee revenue is generated for general medical, expert medical service and other specialty visits. In addition, other revenue is primarily associated with virtual healthcare device equipment included with its hosted virtual healthcare platform. Access revenue accounted for ~~87%~~88% and ~~84%~~86% of the Company’s revenue for the quarters ended ~~March 31,~~June 30, 2022 and 2021, respectively. Access revenue accounted for 87% and 85% of the Company’s revenue for the six months ended June 30, 2022 and 2021, respectively.

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The following table presents the Company’s revenues disaggregated by revenue source (in thousands):


	Quarter Ended				Quarter Ended				Six Months Ended
	March 31,				June 30,				June 30,
	2022		2021		2022		2021		2022		2021
Access Fees Revenue
U.S.	$	421,146	$	327,553	$	450,426	$	371,591	$	871,572	$	699,144
International		70,191		54,553		68,304		59,474		138,495		114,027
Total		491,337		382,106		518,730		431,065		1,010,067		813,171

Visit Fee Revenue
U.S.		64,473		57,128		64,240		59,196		128,713		116,324
International		3,455		3,383		2,493		3,058		5,948		6,441
Total		67,928		60,511		66,733		62,254		134,661		122,765

Other
U.S.		5,581		10,671		6,720		9,363		12,301		20,034
International		504		387		196		457		700		844
Total		6,085		11,058		6,916		9,820		13,001		20,878

Total Revenues	$	565,350	$	453,675	$	592,379	$	503,139	$	1,157,729	$	956,814

During the fourth quarter of 2021, the Company refined its definition of international revenues to reflect all international revenues based on location of the customer. Previously, Direct-to-Consumer (“~~D2C”~~DTC”) activities were primarily reflected based on the location of operations. In addition, certain activities related to the Company’s international operations are now reflected in visit revenues versus access fee revenues. Prior period amounts have been recast to conform with current presentation.

Deferred Revenue

Deferred revenue represents billed, but unrecognized revenue, and is comprised of fees received in advance of the delivery or completion of the services and amounts received in instances when revenue recognition criteria have not been met. Deferred revenue associated with upfront payments for a device is amortized ratably over the expected member enrollment period. Deferred revenue that will be recognized during the succeeding twelve-month period is recorded as current deferred revenue and the remaining portion is recorded as noncurrent deferred revenue.

For certain services, payment is required for future months before the service is delivered to the member. The Company records deferred revenue when cash payments are received in advance of the Company’s performance obligation to provide services. Deferred revenue, current plus long-term, was ~~$87.1~~$89.6 million at ~~March 31,~~June 30, 2022 and ~~$73.2~~$72.8 million at ~~March 31,~~June 30, 2021. The net increase of ~~$7.6~~$10.2 million and ~~$18.4~~$18.0 million in the deferred revenue balance for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021, respectively, was primarily driven by InTouch and Livongo as well as BetterHelp, the Company’s ~~D2C~~DTC mental health product, and cash payments received or due in advance of satisfying the Company’s performance obligations, offset by revenue recognized that were included in the deferred revenue balance at the beginning of the period. The Company anticipates that it will satisfy most of its performance obligation associated with the deferred revenue within the prospective fiscal year. Revenue recognized during the quarters ended ~~March 31,~~June 30, 2022 and 2021 that was included in deferred revenue at the beginning of the periods was ~~$51.6~~$58.0 million and ~~$32.7~~$46.6 million, respectively. Revenue recognized during the six months ended June 30, 2022 and 2021 that was included in deferred revenue at the beginning of the periods was $60.2 million and $45.5 million, respectively.

The Company expects to recognize ~~$73.0~~$72.6 million and ~~$5.0~~$13.1 million of revenue in the remainder of 2022 and 2023, respectively, related to future performance obligations that are unsatisfied or partially unsatisfied as of ~~March 31,~~June 30, 2022.

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Deferred Device and Contract Costs

Deferred device and contract costs are classified as a component of Prepaid expenses and other current assets or Other assets, depending on term, and consisted of the following as of ~~March 31,~~June 30, 2022 (in thousands):


	As of March 31,		As of December 31,		As of June 30,		As of December 31,
	2022		2021		2022		2021
Deferred device and contract costs, current	$	27,335	$	22,304	$	30,013	$	22,304
Deferred device and contract costs, noncurrent		7,636		6,249		9,071		6,249
Total deferred device and contract costs	$	34,971	$	28,553	$	39,084	$	28,553

Deferred costs and other activity were as follows (in thousands):


	Deferred Device and Contract Costs		Deferred Device and Contract Costs
Beginning balance as of December 31, 2021	$	28,553	$	28,553
Additions		13,986		29,161
Cost of revenue recognized		(7,568)		(18,630)
Ending balance as of March 31, 2022	$	34,971
Ending balance as of June 30, 2022			$	39,084

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Note 4. Inventories

Inventories consisted of the following (in thousands):


	As of March 31,		As of December 31,		As of June 30,		As of December 31,
	2022		2021		2022		2021
Raw materials and purchased parts	$	25,006	$	26,164	$	16,952	$	26,164
Work in process		379		313		484		313
Finished goods		45,269		46,602		42,824		46,602
Total inventories	$	70,654	$	73,079	$	60,260	$	73,079

Note 5. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):


	As of March 31,		As of December 31,		As of June 30,		As of December 31,
	2022		2021		2022		2021
Prepaid expenses	$	51,397	$	38,179	$	48,947	$	38,255
Deferred device and contract costs, current		27,335		22,304		30,013		22,304
Other receivables		22,817		21,170		21,906		21,168
Other current asset		5,326		5,734
Other current assets						7,009		5,660
Total prepaid expenses and other current assets	$	106,875	$	87,387	$	107,875	$	87,387

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Note 6. Intangible Assets, Net

Intangible assets, net consist of the following (in thousands):


								Weighted								Weighted
								Average								Average
								Remaining								Remaining
	Useful			Accumulated		Net Carrying		Useful Life	Useful			Accumulated		Net Carrying		Useful Life
	Life	Gross Value		Amortization		Value		(Years)	Life	Gross Value		Amortization		Value		(Years)
March 31, 2022
June 30, 2022
Client relationships	2 to 20 years	$	1,463,335	$	(222,285)	$	1,241,050	14.3	2 to 20 years	$	1,457,623	$	(245,112)	$	1,212,511	14.1
Trademarks	2 to 15 years		325,958		(58,823)		267,135	7.4	2 to 15 years		325,082		(71,717)		253,365	7.2
Software	3 to 5 years		155,456		(45,101)		110,355	2.8	3 to 5 years		206,845		(53,185)		153,660	2.8
Technology	5 to 7 years		343,310		(77,953)		265,357	5.3	5 to 7 years		343,215		(90,579)		252,636	5.0
Intangible assets, net		$	2,288,059	$	(404,162)	$	1,883,897	11.4		$	2,332,765	$	(460,593)	$	1,872,172	11.0
December 31, 2021
Client relationships	2 to 20 years	$	1,465,926	$	(199,866)	$	1,266,060	14.5	2 to 20 years	$	1,465,926	$	(199,866)	$	1,266,060	14.5
Trademarks	3 to 15 years		326,392		(45,555)		280,837	9.5	3 to 15 years		326,392		(45,555)		280,837	9.5
Software	3 to 5 years		126,188		(40,767)		85,421	2.7	3 to 5 years		126,188		(40,767)		85,421	2.7
Technology	5 to 7 years		343,262		(65,302)		277,960	5.6	5 to 7 years		343,262		(65,302)		277,960	5.6
Intangible assets, net		$	2,261,768	$	(351,490)	$	1,910,278	12.0		$	2,261,768	$	(351,490)	$	1,910,278	12.0

Amortization expense for intangible assets net of foreign currency remeasurement for intangible assets was ~~$56.6~~$56.7 million and ~~$46.6~~$49.1 million for the quarters ended ~~March 31,~~June 30, 2022 and 2021, respectively. Amortization expense for intangible assets net of foreign currency remeasurement for intangible assets was $113.3 million and $95.7 million for the six months ended June 30, 2022 and 2021, respectively.

In January 2022, the Company embarked upon a two-year migration strategy that integrates and moves selected consumer brands under Teladoc Health, – which will serve as the primary business-to-business-to-consumer brand that meets all consumer healthcare needs. The evolution of brand names ~~results~~resulted in the weighted average life of ~~our~~the trademarks decreasing from 9.5 years to ~~7.4~~7.5 years as of ~~March 31,~~January 1, 2022, and an acceleration of amortization expense being expensed over 2022 and 2023. This change resulted in additional amortization expense of $5.8 million (or $0.04 per basic and diluted share) inand $11.6 million (or $0.07 per basic and diluted share) for the ~~first~~ quarter ~~of 2022.~~and six months ended June 30, 2022, respectively.

Refer to Note 7 to the condensed consolidated financial statements for the results of impairment testing of the Company’s intangible assets, including goodwill.

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Note 7. Goodwill

Goodwill consisted of the following (in thousands):


	As of March 31,		As of December 31,		As of June 30,		As of December 31,
	2022		2021		2022		2021
Beginning balance as of December 31, 2021 and 2020, respectively	$	14,504,174	$	14,581,255	$	14,504,174	$	14,581,255
Impairment		(6,600,000)		0		(9,630,000)		0
Additions associated with acquisitions		0		64,269		0		64,269
Purchase consideration adjustments net of deferred tax impacts		0		(122,306)		0		(122,306)
Currency translation adjustment		(4,379)		(19,044)		(15,978)		(19,044)
Ending balance as of March 31, 2022 and December 31, 2021	$	7,899,795	$	14,504,174
Ending balance as of June 30, 2022 and December 31, 2021					$	4,858,196	$	14,504,174

AsThe Company has experienced a ~~result~~pair of triggering events in 2022 due to sustained decreases in the Company’s ~~publicly quoted~~ share price, prompting impairment assessments of goodwill and ~~market capitalization continuing into 2022, the Company conducted additional testing of its goodwill,~~long-lived assets including definite-lived intangibles, ~~and other long-lived assets~~first as of March 31, 2022, and again as of June 30, 2022.

Both impairment assessments in 2022 reflected a 75%/25% allocation between the income and market approaches. The Company believes the 75% weighting to the income approach continues to be appropriate as it more

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directly reflects the Company’s future growth and profitability expectations. The table below indicates changes in the most significant inputs to the Company’s impairment analysis on each testing date since its last annual test.


Testing dates	Discount Rate	Peer Group Revenue Multiples (current year/subsequent year)	% Excess of Reporting Unit Fair Value over Carrying Value
December 1, 2021	10.5%	7.0x/5.5x	15.0%
March 31, 2022	12.0%	3.5x/3.0x	0% post impairment
June 30, 2022	16.0%	2.0x/1.8x	0% post impairment

In March 2022, the Company updated the forecasted future cash flows used in the impairment assessment, including revenues, margin, and capital expenditures to reflect current conditions. Other changes in valuation assumptions included increases in interest rates and market volatility, resulting in a higher discount rate, and selection of lower revenue multiples based upon an assessment of a relevant peer group. As a result of this review, the Company did not identify an impairment to its definite-lived intangible assets or other long-lived assets, but the Company recorded a $6.6 billion non-deductible ~~non-cash~~ goodwill impairment charge (or $41.11 per basic and diluted share) for the quarter ended March 31, 2022.

~~Consistent with prior~~As of June 30, 2022, the Company updated valuation assumptions. The discount rate was increased for a company risk premium to reflect the current perception of risks of achieving projected cash flows and, to a lesser extent, to reflect further increases in interest rates and market volatility. Additionally, revenue market multiples were lowered based upon an updated analysis of a consistent peer group. The assessment did not result in an impairment of definite-lived intangible assets or other long-lived assets, but resulted in an additional $3.0 billion non-deductible goodwill impairment ~~testing,~~charge (or $18.78 per basic and diluted share). For the six months ended June 30, 2022, a $9.6 billion non-deductible goodwill impairment charge (or $59.81 per basic and diluted share) was recognized.

In the event there are further adverse changes in the Company’s ~~March 31, 2022, testing reflected~~projected cash flows and/or further changes in key assumptions, including but not limited to an increase in the discount rate, lower market multiples, lower revenue growth, lower margin, and/or a ~~75%/25% allocation between~~lower terminal growth rate, the ~~income and market approaches. The~~ Company ~~believes the 75% weighting~~may be required to ~~the income approach continues~~record additional non-cash impairment charges to ~~be appropriate as it more directly reflects~~ its ~~future growth and profitability expectations. For~~goodwill, other intangibles, and/or long-lived assets. Such non-cash charges could have a material adverse effect on the Company’s ~~March 31,~~condensed consolidated statement of operations and balance sheet in the reporting period of the charge. Following the June 2022 impairment, ~~testing, as compared~~there is no excess of reporting unit fair value over the carrying amount, so any further decrease in estimated fair value would result in an additional impairment charge. The assessment is most sensitive to its December 1, 2021 testing, the Company reduced its estimated future cash flows used in the impairment assessment, including revenues, margin, and capital expenditures to reflect its best estimates at this time. The Company also updated certain significant inputs into the valuation modelsbroader market conditions, including the discount rate ~~which increased reflecting, in part, higher interest rates~~ and ~~market volatility, and the Company reduced its revenue market multiples, reflecting declining valuations across the Company’s selected peer group. The Company’s updates to its discount rate,~~ market multiples, and to the Company’s estimated future cash ~~flows each had a significant impact to the estimated fair value of the reporting unit.~~flows.

~~The following table reflects changes in the most significant inputs to the Company’s impairment analysis on each testing date since its last annual test.~~

Testing dates
Discount Rate
Peer Group Revenue Multiples
(current year/subsequent year)
% Excess of Reporting Unit Fair Value over Carrying Value
December 1, 2021
10.5%
7.0x/5.5x
15.0%
March 31, 2022
12.0%
3.0x/2.5x
0% post impairment

Note 8. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):


	As of March 31,		As of December 31,		As of June 30,		As of December 31,
	2022		2021		2022		2021
Professional fees	$	5,485	$	5,373	$	12,029	$	7,124
Consulting fees/provider fees		18,029		19,292		15,258		19,010
Client performance guarantees		10,034		7,653		4,277		3,034
Interest payable		5,809		1,480		1,479		1,480
Income tax payable		5,131		3,098		3,745		3,098
Insurance		5,779		3,884		7,037		3,884
Marketing		6,104		3,471		4,378		2,958
Operating lease liabilities - current		13,052		12,687
Operating lease liabilities – current						12,983		12,687
Franchise and sales taxes		11,429		9,965		8,963		9,965
Device replacement cost		5,913		6,263		5,925		6,263
Accrued rebates						8,585		4,619
Staff augmentation						8,450		1,858
Other		29,924		29,767		34,078		26,953
Total	$	116,689	$	102,933	$	127,187	$	102,933

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Note 9. Fair Value Measurements

The carrying value of the Company’s cash equivalents, short-term investments, accounts receivable, accounts payable, and accrued liabilities approximates fair value due to their short-term nature.

The Company measures its financial assets and liabilities at fair value at each reporting period using a fair value hierarchy that requires it to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:

Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active

markets.

Level 2—Include other inputs that are directly or indirectly observable in the marketplace.

Level 3—Unobservable inputs that are supported by little or no market activity.

The Company measures its cash equivalents at fair value on a recurring basis. The Company classifies its cash equivalents within Level 1 because they are valued using observable inputs that reflect quoted prices for identical assets in active markets and quoted prices directly in active markets.

The Company’s short-term investments held as of ~~March 31,~~June 30, 2022 and 2021 consisted primarily of ~~certificates~~a certificate of deposit held at a financial ~~institutions.~~institution. The amortized cost of these investments, which are classified as Level 2, approximated their fair value.

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis using the above input categories (in thousands):


	March 31, 2022						June 30, 2022
	Level 1		Level 2		Total		Level 1		Level 2		Total
Cash and cash equivalents	$	836,444	$	0	$	836,444	$	881,161	$	0	$	881,161
Short-term investments	$	0	$	2,544	$	2,544	$	0	$	2,539	$	2,539


	December 31, 2021
	Level 1		Level 2		Total
Cash and cash equivalents	$	893,480	$	0	$	893,480
Short-term investments	$	0	$	2,537	$	2,537

There were no transfers between fair value measurement levels during any of the ~~quarters ended March 31, 2022 and December 31, 2021.~~periods presented.

Note 10. Leases

The Company has operating leases for facilities, hosting co-location facilities, and certain equipment under non-cancelable leases in the U.S. and various international locations. The leases have remaining lease terms of less than 1 year to 1110 years, with options to extend the lease term from 1 to 6 years. At the inception of an arrangement, the Company determines whether the arrangement is, or contains, a lease based on the arrangement covering the right to use property, plant or equipment for a stated period of time. For new and amended leases beginning in 2020 and after, the Company separately allocates the lease (e.g., fixed lease payments for right-to-use land, building, etc.) and non-lease components (e.g., common area maintenance) for its leases.

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Operating Leases

The Company leases office space under non-cancelable operating leases in the U.S. and various international locations. As of ~~March 31,~~June 30, 2022, the future minimum lease payments under non-cancelable operating leases were as follows (in thousands):


	As of March 31,		As of June 30,
Operating Leases:	2022		2022
2022	$	15,023
Remainder of 2022			$	8,221
2023		14,261		16,106
2024		9,634		10,925
2025		7,197		8,596
2026		5,822		7,074
2027 and thereafter		12,638		18,109
Total future minimum payments	$	64,575	$	69,031

The Company rents certain information systems to selected qualified customers under arrangements that qualify as either sales-type lease or operating lease arrangements. Leases have terms that generally range from 2 to 5 years.

Note 11. Convertible Senior Notes

Outstanding Convertible Senior Notes

As of ~~March 31,~~June 30, 2022, the Company had three series of convertible senior notes outstanding. The issuances of such notes originally consisted of (i) $1.0 billion aggregate principal amount of 1.25% convertible senior notes due 2027 (the “2027 Notes”), issued on May 19, 2020 for net proceeds to the Company of $975.9 million after deducting offering costs of approximately $24.1 million, (ii) $287.5 million aggregate principal amount of 1.375% convertible senior notes due 2025 (the “2025 Notes”), issued on May 8, 2018 for net proceeds to the Company of $279.1 million after deducting offering costs of approximately $8.4 million, and (iii) $550.0 million aggregate principal amount of 0.875% convertible senior notes due 2025 that were issued by Livongo on June 4, 2020 for which the Company has agreed to guarantee Livongo’s obligations (the “Livongo Notes;” and together with the 2027 Notes, the 2025 Notes and the 2022 Notes (as defined below), the “Notes”). On June 27, 2017, the Company issued, at par value, $275.0 million aggregate principal amount of 3% convertible senior notes due 2022 (the “2022 Notes”), which were redeemed during the quarter ended March 31, 2021 as described below.

The following table presents certain terms of the Notes that were outstanding as of ~~March 31,~~June 30, 2022:

2027 Notes

2025 Notes

Livongo Notes

Interest Rate Per Year

1.25
%

1.375
%

0.875
%
Fair Value as of March 31, 2022 (in millions) (1)
$
843.5

$
1.0

$
553.3

Fair Value as of December 31, 2021 (in millions) (1)
$
940.0

$
1.3

$
605.0

Maturity Date

June 1, 2027

May 15, 2025

June 1, 2025

Optional Redemption Date

June 5, 2024

May 22, 2022

June 5, 2023

Conversion Date

December 1, 2026

November 15, 2024

March 1, 2025

Share Conversion Rate Per $1,000 Principal Amount as of March 31, 2022

4.1258

18.6621

13.94

Remaining Contractual Life as of March 31, 2022

5.2 years

3.1 years

3.2 years



	2027 Notes			2025 Notes			Livongo Notes
Interest Rate Per Year		1.25	%		1.375	%		0.875	%
Fair Value as of June 30, 2022 (in millions) (1)	$	732.5		$	0.4		$	462.6
Fair Value as of December 31, 2021 (in millions) (1)	$	940.0		$	1.3		$	605.0
Maturity Date		June 1, 2027			May 15, 2025			June 1, 2025
Optional Redemption Date		June 5, 2024			May 22, 2022			June 5, 2023
Conversion Date		December 1, 2026			November 15, 2024			March 1, 2025
Conversion Rate Per $1,000 Principal Amount as of June 30, 2022		4.1258			18.6621			13.94
Remaining Contractual Life as of June 30, 2022		4.9 years			2.9 years			2.9 years

(1)

The Notes are classified as Level 12 within the fair value hierarchy, as defined in Note 9.

All of the Notes are unsecured obligations of the Company and rank senior in right of payment to the Company’s indebtedness that is expressly subordinated in right of payment to such Notes; equal in right of payment to the Company’s liabilities that are not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities incurred by the Company’s subsidiaries.

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Holders may convert all or any portion of their Notes in integral multiples of $1,000 principal amount, at their option, at any time prior to the close of business on the business day immediately preceding the applicable conversion date only under the following circumstances:

●

during any quarter (and only during such quarter), if the last reported sale price of the shares of Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding quarter is greater than or equal to 130% of the conversion price for the applicable Notes on each applicable trading day;

●

during the 5 business day period after any 10 consecutive trading day period (or 5 consecutive trading day period in the case of the Livongo Notes) in which the trading price was less than 98% of the product of the last reported sale price of Company’s common stock and the conversion rate for the applicable Notes on each such trading day;

●

upon the occurrence of specified corporate events described under the applicable indenture; or

●

if the Company calls the applicable Notes for redemption, at any time until the close of business on the second business day immediately preceding the redemption date.

On or after the applicable conversion date, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of such Notes, regardless of the foregoing circumstances.

The 2027 Notes and the 2025 Notes are convertible into shares of the Company’s common stock at the applicable conversion rate shown in the table above. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination thereof, at the Company’s election. If the Company elects to satisfy the conversion obligation solely in cash or through payment and delivery, as the case may be, of a combination of cash and shares of the Company’s common stock or units of reference property, the amount of cash and shares of the Company’s common stock due upon conversion will be based on a daily conversion value calculated on a proportionate basis for each trading day in a 25 consecutive trading day observation period.

The Livongo Notes are convertible at the applicable conversion rate shown in the table above into “units of reference property,” each of which is comprised of 0.5920 of a share of the Company’s common stock and $4.24 in cash, without interest. Upon conversion, the Company will pay or deliver, as the case may be, cash, units of reference property, or a combination thereof, at the Company’s election. If the Company elects to satisfy the conversion obligation solely in cash or through payment and delivery, as the case may be, of a combination of cash and units of reference property, the amount of cash and units of reference property, if any, due upon conversion will be based on a daily conversion value calculated on a proportionate basis for each trading day in a 40 consecutive trading day observation period.

For each Note series, the Company may redeem for cash all or part of the Notes, at its option, on or after the applicable optional redemption date shown in the table above (and prior to the ~~41st~~41^st scheduled trading day immediately preceding the maturity date in the case of the Livongo Notes) if the last reported sale price of its common stock exceeds 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading days ending on, and including, the trading day immediately preceding the date on which the Company provides notice of the redemption. The redemption price will be the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any. In addition, calling any 2027 Note or 2025 Note for redemption on or after the applicable optional redemption date will constitute a make-whole fundamental change with respect to that Note, in which case the conversion rate applicable to the conversion of that Note, if it is converted in connection with the redemption, will be increased in certain circumstances as described in the applicable indenture. If Livongo undergoes a fundamental change (as defined in the applicable indenture) at any time prior to the maturity date, holders will have the right, at their option, to require Livongo to repurchase for cash all or any portion of their Livongo Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Livongo Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

Following the adoption of ASU 2020-06 on January 1, 2022 as described in Note 2, the Company accounts for each Note series at amortized cost within the liability section of its condensed consolidated balance sheets. The Company has reserved an aggregate of 8.7 million shares of common stock for the Notes.

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The net carrying values of the Notes consisted of the following (in thousands):

As of March 31,

As of December 31,
2027 Notes

2022

2021
Principal

$
1,000,000

$
1,000,000
Less: Debt discount, net (1)

(17,940)

(250,846)
Net carrying amount

$
982,060

$
749,154

2025 Notes

Principal

$
730

$
730
Less: Debt discount, net (1)

(10)

(166)
Net carrying amount

$
720

$
564

Livongo Notes

Principal

$
550,000

$
550,000
Less: Debt discount, net (1)

0

(74,047)
Net carrying amount

$
550,000

$
475,953


	As of June 30,		As of December 31,
2027 Notes	2022		2021
Principal	$	1,000,000	$	1,000,000
Less: Debt discount, net (1)		(17,107)		(250,846)
Net carrying amount		982,893		749,154

2025 Notes
Principal		725		730
Less: Debt discount, net (1)		(9)		(166)
Net carrying amount		716		564

Livongo Notes
Principal		550,000		550,000
Less: Debt discount, net (1)		0		(74,047)
Net carrying amount		550,000		475,953

Total net carrying amount	$	1,533,609	$	1,225,671

(1)

Included in the accompanying condensed consolidated balance sheet within convertible senior notes and amortized to interest expense over the expected life of the Notes using the effective interest rate method.

The following table sets forth total interest expense recognized related to the Notes (in thousands):


		Quarter Ended					Quarters Ended							Six Months Ended
		March 31,					June 30,							June 30,
2027 Notes:		2022		2021				2022			2021			2022		2021
Contractual interest expense	$	3,125		$	3,125		$	3,125		$	3,125		$	6,250		$	6,250
Amortization of debt discount		831			9,059			833			9,163			1,664			18,222
Total	$	3,956		$	12,184		$	3,958		$	12,288		$	7,914		$	24,472
Effective interest rate		0.8	%		3.4	%		1.6	%		3.4	%		1.6	%		3.4	%

	Quarter Ended						Quarters Ended						Six Months Ended
	March 31,						June 30,						June 30,
2025 Notes:		2022		2021				2022			2021			2022		2021
Contractual interest expense	$	3		$	814		$	2		$	255		$	5		$	1,068
Amortization of debt discount		1			2,719			1			1,778			2			4,498
Total	$	4		$	3,533		$	3		$	2,033		$	7		$	5,566
Effective interest rate		0.9	%		3.9	%		1.8	%		7.8	%		1.8	%		7.8	%

	Quarter Ended						Quarters Ended						Six Months Ended
	March 31,						June 30,						June 30,
Livongo Notes:		2022		2021				2022			2021			2022		2021
Contractual interest expense	$	1,203		$	1,203		$	1,203		$	1,203		$	2,406		$	2,406
Amortization of debt discount		0			4,734			0			4,796			0			9,530
Total	$	1,203		$	5,937		$	1,203		$	5,999		$	2,406		$	11,936
Effective interest rate		0	%		5.2	%		0.9	%		5.2	%		0.9	%		5.2	%

	Quarter Ended
	March 31,
2022 Notes:		2022		2021
Contractual interest expense	$	0		$	104
Amortization of debt discount		0			316
Total	$	0		$	420
Effective interest rate		0	%		9.6	%

Exchanges and Conversions of Convertible Senior Notes Due 2025

In June 2021, the Company entered into privately negotiated agreements with certain holders of the 2025 Notes to exchange approximately $206.4 million aggregate principal amount of 2025 Notes for an aggregate of approximately 3.9 million shares of the Company’s common stock in private placement transactions pursuant to Section 4(a)(2) of the Securities Act of 1933 (the “Securities Act”). In addition, certain holders of the 2025 Notes converted their 2025 Notes in exchange for 1.2 million shares of the Company’s common stock during the six months ended June 30, 2021. As a result of the exchanges and conversions, the Company recorded a charge associated with the loss on extinguishment of

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~~Conversions~~debt, net of ~~Convertible Senior Notes Due 2025~~

~~Certain holders~~transaction fees of ~~the 2025 Notes converted their 2025 Notes in exchange for 1.1~~$31.4 million ~~shares of the Company’s common stock during the quarter ended March 31, 2021. As a result, the Company recorded a charge associated with the loss on extinguishment of debt of $8.1~~and $39.5 million during the quarter and six months ended ~~March 31, 2021.~~June 30, 2021, respectively.

Redemption of Convertible Senior Notes Due 2022

In March 2021, the Company completed a redemption of all of the then outstanding 2022 Notes in exchange for approximately $0.1 million in cash (including accrued and unpaid interest). Prior to that redemption, certain holders of the 2022 Notes converted their 2022 Notes in exchange for 1.1 million shares of the Company’s common stock during the quarter ended March 31, 2021. As a result of the redemption and conversions, the Company recorded a charge associated with the loss on extinguishment of debt of $3.4 million during the quarter ended March 31, 2021.

Note 12. Advances from Financing Companies

The Company utilizes a third-party financing company to provide certain Clients with a rental option. The principal portion of these up-front payments are reported as advances from financing companies in the accompanying condensed consolidated balance ~~sheet.~~sheets. Interest rates applicable to the outstanding advances as of ~~March 31,~~June 30, 2022 ranged from 3.35% to ~~8.25%~~8.50%.

Client lease payments to third party financing companies will reduce the advances from financing companies as of ~~March 31,~~June 30, 2022 by year as follows (in thousands):


	As of March 31,		As of June 30,
	2022		2022
2022	$	10,105
Remainder of 2022			$	6,856
2023		8,024		9,081
2024		2,678		3,682
2025		109		309
Total	$	20,916	$	19,928

Note 13. Legal Matters

From time to time, Teladoc Health is involved in various litigation matters arising in the normal course of business, including the matters described below. The Company consults with legal counsel on those issues related to litigation and seeks input from other experts and advisors with respect to such matters. Estimating the probable losses or a range of probable losses resulting from litigation, government actions and other legal proceedings is inherently difficult and requires an extensive degree of judgment, particularly where the matters involve indeterminate claims for monetary damages, may involve discretionary amounts, present novel legal theories, are in the early stages of the proceedings, or are subject to appeal. Whether any losses, damages, or remedies ultimately resulting from such matters could reasonably have a material effect on the Company’s business, financial condition, results of operations, or cash flows will depend on a number of variables, including, for example, the timing and amount of such losses or damages (if any) and the structure and type of any such remedies. As of the date of these financial statements, Teladoc Health’s management does not expect any litigation matter to have a material adverse impact on its business, financial condition, results of operations, or cash flows.

On May 14, 2018, a purported class action complaint (Thomas v. Best Doctors, Inc.) was filed in the United States District Court for the District of Massachusetts against the Company’s wholly owned subsidiary, Best Doctors, Inc. The complaint alleges that on or about May 16, 2017, Best Doctors violated the U.S. Telephone Consumer Protection Act (the “TCPA”) by sending unsolicited facsimiles to plaintiff and certain other recipients without the recipients’ prior express invitation or permission. The lawsuit seeks statutory damages for each violation, subject to trebling under the TCPA, and injunctive relief. On May 27, 2022, the Court entered an order preliminarily approving the terms of a tentative settlement reached by the parties and conditionally certified the settlement class. The Company will continue to vigorously defend the lawsuit and any potential loss is currently deemed to be immaterial.

On August 27, 2021, a purported securities class action complaint (City of Hialeah Employees’ Retirement System v. Teladoc Health, Inc., et.al.) was filed in the Circuit Court of Cook County, Illinois against the Company and

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certain of the Company’s current and former officers and directors. The complaint was brought on behalf of a purported class consisting of all persons who acquired shares of Teladoc Health common stock issued in the Livongo merger. The complaint asserted violations of Sections 11, 12(a)(2) and 15 of the Securities Act ~~of 1933~~ based on allegedly false or misleading

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statements and omissions with respect to the registration statement and prospectus filed in connection with the Livongo merger. The complaint sought certification as a class action, unspecified compensatory damages plus interest and attorneys’ fees, rescission or a rescissory measure of damages and equitable or other relief. On January 18, 2022, the case was voluntarily dismissed without prejudice in the Circuit Court of Cook County, Illinois and on January 26, 2022, was refiled in the Supreme Court of the State of New York. The refiled case includes substantially the same allegations. The Company believes that these claims are without merit, and the Company and its named current and former officers and directors intend to defend the Company vigorously, including filing a motion to dismiss the complaint.

On June 6, 2022, a purported securities class action complaint (Schneider v. Teladoc Health, Inc., et.al.) was filed in the United States District Court for the Southern District of New York against the Company and certain of the Company’s officers. The complaint is brought on behalf of a purported class consisting of all persons or entities who purchased or otherwise acquired shares of the Company’s common stock during the period October 28, 2021 through April 27, 2022. The complaint asserts violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder based on allegedly false or misleading statements and omissions with respect to, among other things, the Company’s business, operations, and prospects. The complaint seeks certification as a class action and unspecified compensatory damages plus interest and attorneys’ fees. The Company believes that these claims are without merit, and the Company and its named officers intend to defend the Company vigorously.

Note 14. Common Stock and Stockholders’ Equity

~~Capitalization~~

~~Effective October 30, 2020, the authorized number of shares of the Company’s common stock was increased from 150,000,000 to 300,000,000 shares.~~

~~Warrants~~

~~The Company had 0 warrants outstanding as of March 31, 2022 or December 31, 2021.~~

Stock Plans

The Company’s 2015 Incentive Award Plan, 2017 Employment Inducement Incentive Award Plan and Livongo Acquisition Incentive Award Plan (collectively, the “Plans”) provide for the issuance of incentive and non-statutory options and other equity-based awards to its employees and non-employee service providers. The Company had 15,311,401 shares available for grant at June 30, 2022.

All stock-based awards to employees are measured based on the grant-date fair value or replacement grant date fair value in relation to the Livongo transaction, and are generally recognized on a straight line basis in the Company’s condensed consolidated statement of operations over the period during which the employee is required to perform services in exchange for the award (generally requiring a four-year vesting period for each stock option and a three-year vesting period for each restricted stock unit (“RSU”)).

Stock Options

Options issued under the Plans are exercisable for periods not to exceed ~~ten~~10 years, and vest and contain such other terms and conditions as specified in the applicable award document. Options to buy common stock are issued under the Plans, with exercise prices equal to the closing price of shares of the Company’s common stock on the New York Stock Exchange on the date of award. ~~The Company had 10,218,931 shares available for grant at March 31, 2022.~~

~~Activity~~Stock option activity under the Plans was as follows (in thousands, except share and per share amounts and years):


				Weighted-						Weighted-
		Weighted-		Average				Weighted-		Average
	Number of	Average		Remaining	Aggregate		Number of	Average		Remaining	Aggregate
	Shares	Exercise		Contractual	Intrinsic		Shares	Exercise		Contractual	Intrinsic
	Outstanding	Price		Life in Years	Value		Outstanding	Price		Life in Years	Value
Balance at December 31, 2021	3,426,978	$	22.88	5.32	$	242,569	3,426,978	$	22.88	5.32	$	242,569
Stock option grants	45,434	$	79.40	N/A			1,389,672	$	34.36	N/A
Stock options exercised	(267,586)	$	13.40	N/A	$	(15,090)	(427,361)	$	11.65	N/A	$	(19,557)
Stock options forfeited	(15,767)	$	19.63	N/A			(27,219)	$	52.13	N/A
Balance at March 31, 2022	3,189,059	$	24.50	5.16	$	160,501
Vested or expected to vest at March 31, 2022	3,189,059	$	24.50	8.35	$	2,352
Exercisable at March 31, 2022	3,011,138	$	20.36	4.97	$	158,148
Balance at June 30, 2022							4,362,070	$	27.47	6.43	$	44,902
Vested or expected to vest at June 30, 2022							4,362,070	$	27.47	6.43	$	44,902
Exercisable at June 30, 2022							2,893,202	$	21.30	4.70	$	44,110

The total grant-date fair value of stock options granted during the quarters ended ~~March 31,~~June 30, 2022 and 2021 were ~~$1.6~~$23.0 million and ~~$0.4~~$2.4 million, respectively.

The total grant-date fair value of stock options granted during the six months ended June 30, 2022 and 2021 were $24.6 million and $2.8 million, respectively.

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The Company estimates the fair value of stock options granted using the ~~Black Scholes~~Black-Scholes option pricing model. The Company recognizes forfeitures as they occur.

The assumptions used in the Black-Scholes option-pricing model are determined as follows:

Volatility. The expected volatility was derived from the historical stock volatilities of the Company’s stock volatility over a period equivalent to the expected term of the stock option grants.

Expected Term. The expected term represents the period that the stock-based awards are expected to be outstanding. When establishing the expected term assumption, the Company utilizes historical data.

Risk-Free Interest Rate. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with terms similar to the expected term on the options.

Dividend Yield. The Company has never declared or paid any cash dividends and does not plan to pay cash dividends in the foreseeable future and, therefore, it used an expected dividend yield of 0.

~~Forfeiture rate.~~ ~~The Company recognizes forfeitures as they occur.~~

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions and fair value per share:


	Quarter Ended March 31,				Six Months Ended June 30,
	2022		2021		2022		2021
Volatility		56.69% - 57.86%		57.02% - 57.49%		56.69% - 65.57%		57.02% - 58.1%
Expected term (in years)		4.1		4.1		4.1		4.1
Risk-free interest rate		1.13% - 1.52%		0.31% - 0.51%		1.13% - 2.89%		0.31% - 0.65%
Dividend yield		0		0		0		0
Weighted-average fair value of underlying stock options	$	$35.94	$	$107.06	$	$17.72	$	$81.88

For the quarters ended ~~March 31,~~June 30, 2022 and 2021, the Company recorded compensation expense related to stock options of ~~$10.7~~$4.9 million and ~~$28.2~~$27.4 million, respectively. For the six months ended June 30, 2022 and 2021, the Company recorded compensation expense related to stock options of $15.6 million and $55.6 million, respectively.

As of ~~March 31,~~June 30, 2022, the Company had ~~$10.9~~$27.9 million in unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of approximately ~~1.9~~3.0 years.

Restricted Stock Units

The fair value of RSUs is determined on the date of grant. The Company records compensation expense in the condensed consolidated statement of operations on a straight-line basis over the vesting period for RSUs. The vesting period for employees and members of the Board of Directors ranges from ~~one~~ ~~to four years.~~

~~Activity~~RSU activity under ~~RSUs~~the Plans was as follows:


		Weighted-Average			Weighted-Average
		Grant Date			Grant Date
	RSUs	Fair Value Per RSU		RSUs	Fair Value Per RSU
Balance at December 31, 2021	2,133,501	$	168.43	2,133,501	$	168.43
Granted	2,433,620	$	74.74	5,106,274	$	53.79
Vested and issued	(499,486)	$	146.13	(647,554)	$	150.67
Forfeited	(153,581)	$	153.09	(467,136)	$	135.95
Balance at March 31, 2022	3,914,054	$	113.99
Vested and unissued at March 31, 2022	16,507	$	71.96
Non-vested at March 31, 2022	3,897,547	$	113.99
Balance at June 30, 2022				6,125,085	$	77.42
Vested and unissued at June 30, 2022				23,878	$	92.15
Non-vested at June 30, 2022				6,101,207	$	77.36

The total grant-date fair value of RSUs granted during the quarters ended ~~March 31,~~June 30, 2022 and 2021 was ~~$181.9~~$92.8 million and ~~$88.0~~$13.9 million, respectively. The total grant-date fair value of RSUs granted during the six months ended June 30, 2022 and 2021 was $274.7 million and $101.9 million, respectively.

For the quarters ended ~~March 31,~~June 30, 2022 and 2021, the Company recorded stock-based compensation expense related to RSUs of ~~$44.5~~$49.7 million and ~~$50.9~~$51.3 million, respectively.

~~As of March 31,~~ For the six months ended June 30, 2022 and 2021, the Company ~~had $407.8 million in unrecognized~~recorded stock-based compensation ~~cost~~expense related to ~~non-vested~~ RSUs ~~which is expected to be recognized over a weighted-average period~~ of ~~approximately~~ ~~2.3 years.~~$94.2 million and $102.2 million, respectively.

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As of June 30, 2022, the Company had $411.0 million in unrecognized compensation cost related to non-vested RSUs, which is expected to be recognized over a weighted-average period of approximately 2.2 years.

Performance Stock Units

Stock-based compensation costs associated with the Company’s performance stock units (“PSUs”) are initially determined using the fair market value of the ~~Company's~~Company’s common stock on the date the awards are ~~approved by the Compensation Committee of the Board of Directors~~granted (service inception date). The vesting of these PSUs is subject to certain performance conditions and a service requirement ranging from 1 to 3 years. ~~Until the performance conditions are met, stock~~Stock-based compensation costs associated with these PSUs are re-assessed each reporting period based upon the estimated performance attainment on the reporting ~~date.~~date until the performance conditions are met. The ultimate number of PSUs that are issued to an employee is the result of the actual performance of the Company at the end of the performance period compared to the performance targets and generally range from 25% to 200% of the initial grant. Stock compensation expense for PSUs is recognized on an accelerated tranche by tranche basis for performance-based awards. Forfeitures are accounted for at the time they occur consistent with Company policy.

~~Activity~~PSU activity under ~~PSUs~~the Plans was as follows:


		Weighted-Average			Weighted-Average
		Grant Date			Grant Date
	Shares	Fair Value Per PSU		Shares	Fair Value Per PSU
Balance at December 31, 2021	356,249	$	140.01	356,249	$	140.01
Granted	420,274	$	74.21	471,659	$	74.16
Vested and issued	(197,849)	$	109.03	(199,066)	$	109.37
Balance at March 31, 2022	578,674	$	106.35
Vested and unissued at March 31, 2022	0	$	0
Non-vested at March 31, 2022	578,674	$	106.35
Forfeited				(19,444)	$	97.20
Balance at June 30, 2022				609,398	$	103.06
Vested and unissued at June 30, 2022				0	$	0.00
Non-vested at June 30, 2022				609,398	$	103.06

The total grant-date fair value of PSUs granted during the quarter ended ~~March 31,~~June 30, 2022 and 2021 was ~~$30.1~~$4.9 million and $0.0 million, respectively, as 0 PSUs were granted during the quarter ended June 30, 2021. The total grant-date fair value of PSUs granted during the six months ended June 30, 2022 and 2021 was $35.0 million and $67.9 million, respectively.

For the quarters ended ~~March 31,~~June 30, 2022 and 2021, the Company recorded stock-based compensation expense related to PSUs of ~~$7.3~~$2.1 million and ~~$7.2~~$5.9 million, respectively. For the six months ended June 30, 2022 and 2021, the Company recorded stock-based compensation expense related to PSUs of $9.4 million and $13.1 million, respectively.

As of ~~March 31,~~June 30, 2022, the Company had ~~$26.9~~$12.3 million in unrecognized compensation cost related to non-vested PSUs, which is expected to be recognized over a weighted-average period of approximately ~~2.3~~1.6 years.

Employee Stock Purchase Plan

In July 2015, the Company adopted the 2015 Employee Stock Purchase Plan (“ESPP”) in connection with its initial public offering. A total of 1,019,726 shares of common stock were reserved for issuance under this plan as of ~~March 31,~~June 30, 2022. The Company’s ESPP permits eligible employees to purchase common stock at a discount through payroll deductions during defined offering periods. Under the ESPP, the Company may specify offerings with durations of not more than 27 months and may specify shorter purchase periods within each offering. Each offering will have one or more purchase dates on which shares of its common stock will be purchased for employees participating in the offering. An offering may be terminated under certain circumstances. The price at which the stock is purchased is equal to the lower of 85% of the fair market value of the common stock at the beginning of an offering period or on the date of purchase.

During the quarters ended ~~March 31,~~June 30, 2022 and 2021, the Company ~~did not issue any~~issued 148,609 shares and 82,088 shares, respectively, under the ESPP. As of ~~March 31,~~June 30, 2022, ~~570,661~~422,052 shares remained available for issuance.

For the quarters ended ~~March 31,~~June 30, 2022 and 2021, the Company recorded stock-based compensation expense related to the ESPP of ~~$1.5~~($0.4) million and ~~$2.2~~$1.1 million, respectively.

~~As of March 31,~~ For the six months ended June 30, 2022 and 2021, the Company ~~had $0.6 million in unrecognized~~recorded stock-based compensation ~~cost~~expense related to the ESPP ~~which is expected to be recognized over a weighted-average period~~ of ~~approximately~~ ~~0.1 year.~~$1.1 million and $3.3 million, respectively.

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As of June 30, 2022, the Company had $1.3 million in unrecognized compensation cost related to the ESPP, which is expected to be recognized over a weighted-average period of approximately 0.4 year.

Total compensation costs for stock-based awards were recorded as follows (in thousands):


	Quarter Ended				Quarter Ended				Six Months Ended
	March 31,				June 30,				June 30,
	2022		2021		2022		2021		2022		2021
Cost of revenue (exclusive of depreciation and amortization, which is shown separately)	$	2,196	$	2,362	$	2,123	$	1,786	$	4,319	$	4,148
Advertising and marketing		3,711		5,082		3,198		4,815		6,909		9,897
Sales		12,071		21,167		10,709		18,953		22,781		40,120
Technology and development		18,087		26,726		15,785		27,699		33,872		54,425
General and administrative		24,371		30,963		19,185		29,717		43,555		60,680
Total stock-based compensation expense (1)	$	60,436	$	86,300	$	51,000	$	82,970	$	111,436	$	169,270

(1)	~~Excluding~~Excludes the amount capitalized related to internal software development projects.

Note 15. Provision for Income Taxes

The Company’s provision for income taxes were benefits of $1.2 million and $0.8 million for the quarter and six months ended June 30, 2022, respectively.

The Company recorded income tax ~~expense of $0.4 million~~expenses for the quarter and the six months ended ~~March 31, 2022.~~

For the quarter ended March 31, 2022, the Company recognized a reversal of $15.3 million of the net deferred tax liability associated with the convertible senior notes upon the adoption of ASU 2020-06, recorded entirely through the balance sheet.

~~The Company’s income tax expense for the quarter ended March 31,~~June 30, 2021 of ~~$87.0~~$3.2 million and $90.2 million, respectively, primarily ~~was~~ related to the additional valuation allowance recorded on excess stock compensation associated with the Livongo merger.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Special Note Regarding Forward-Looking Statements

Many statements made in this Quarterly Report on Form 10-Q that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements and should be evaluated as such. Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plan and strategies. These statements often include words such as “anticipates,” “believes,” “suggests,” “targets,” “projects,” “plans,” “expects,” “future,” “intends,” “estimates,” “predicts,” “potential,” “may,” “will,” “should,” “could,” “would,” “likely,” “foresee,” “forecast,” “continue” and other similar words or phrases, as well as statements in the future tense to identify these forward-looking statements. These forward-looking statements and projections are contained throughout this Form 10-Q, including the section entitled” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”). We base these forward-looking statements or projections on our current expectations, plans and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances and at such time. As you read and consider this Form 10-Q, you should understand that these statements are not guarantees of performance or results. The forward-looking statements and projections are subject to and involve risks, uncertainties, and assumptions and you should not place undue reliance on these forward-looking statements or projections. Although we believe that these forward-looking statements and projections are based on reasonable assumptions at the time they are made, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements and projections. Factors that may materially affect such forward-looking statements and projections include, but are not limited to, the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”) and in our other reports and United States (“U.S.”) Securities and Exchange Commission (“SEC”) filings. These cautionary statements should not be construed by you to be exhaustive and are made only as of the date of this Form 10-Q. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should evaluate all forward-looking statements made in this Form 10-Q in the context of these risks and uncertainties.

Overview

Teladoc, Inc. was incorporated in the State of Texas in June 2002 and changed its state of incorporation to the State of Delaware in October 2008. Effective August 10, 2018, Teladoc, Inc. changed its corporate name to Teladoc Health, Inc. Unless the context otherwise requires, Teladoc Health, Inc., together with its subsidiaries, is referred to herein as “Teladoc Health,” the “Company,” or “we.” The Company’s principal executive office is located in Purchase, New York. Teladoc Health is the global leader in whole person virtual care focused on forging a new healthcare experience with better convenience, outcomes, and value around the world.

Teladoc Health was founded on a simple, yet revolutionary idea: that everyone should have access to the best healthcare, anywhere in the world on their terms. Today, we have a vision of making virtual care the first step on any healthcare journey, and we are delivering on this mission by providing whole person virtual care that includes primary care, mental health, chronic condition management, and more.

COVID-19 Update

We believe that favorable existing secular trends in the healthcare industry were accelerated by the impacts of the COVID-19 pandemic, driving greater consumer use of virtual care, and increased adoption by employers, health plans, hospitals and health systems, and healthcare providers. In combination with the expansion of our capabilities, we believe that these trends present significant opportunities for virtual healthcare to address the most pressing, universal healthcare challenges through trusted solutions, such as ours, that deliver convenient, affordable, and high-quality care; empower individuals to manage and improve their health; and enable providers to offer their best care for their patients.

We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business. COVID-19 has increased utilization of our telehealth services, but it is uncertain whether such increase in demand will continue. While the COVID-19 pandemic has not had a material adverse impact on our financial condition and results of operations to date, the future impact on our operational and financial performance will depend on certain developments, including the duration and spread of the pandemic, impact on our customers, consisting of employers, health plans,

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hospitals and health systems, insurance, and financial services companies (collectively “Clients”), and members, impact on our sales cycles, and effect on our vendors, all of which are uncertain and cannot be predicted. Public and private sector policies and initiatives to reduce the transmission of COVID-19 and disruptions to our operations and the operations of our third-party suppliers, along with any related global slowdown in economic activity, may result in decreased revenues, decreased collections, and increased costs. Further, the economic effects of the COVID-19 pandemic have financially constrained some of our prospective and existing Clients’ healthcare spending, which may negatively impact our ability to acquire new Clients and our ability to renew subscriptions with or sell additional solutions to our existing Clients. We also may experience increased member attrition to the extent our existing Clients reduce their respective workforces in response to economic conditions. In addition, due to our subscription-based business model, the effect of the COVID-19 pandemic may not be fully reflected in our revenue until future periods. It is possible that the COVID-19 pandemic, the measures taken by the governments and businesses affected and any resulting economic impact may materially and adversely affect our business, results of operations, cash flows, and financial positions as well as our customers.

We have also taken measures in response to the COVID-19 pandemic, and we may take further actions that alter our business operations as may be required by federal, state, local, or foreign authorities or that we determine are in the best interests of our employees, Clients, members, and stockholders. The effects of these operational modifications are unknown and may not be realized until further reporting periods.

Acquisition History

We have scaled and intend to continue to scale our platform through the pursuit of selective acquisitions. We have completed multiple acquisitions since our inception, which we believe have expanded our distribution capabilities and broadened our service offerings.

On October 30, 2020, we completed the merger with Livongo. The total final consideration was $13,876.9 million, consisting of $380.2 million of net cash, $555.4 million related to the conversion feature of the Livongo Notes guaranteed by the Company and 60.2 million shares of Teladoc Health’s common stock valued at approximately $12,941.3 million on October 30, 2020. Livongo is a leading provider to empower people with chronic conditions to live better and healthier lives.

On July 1, 2020, we completed the acquisition of InTouch for aggregate consideration of $1,069.8 million, which was comprised of 4.6 million shares of our common stock valued at $903.3 million on July 1, 2020, and $166.5 million of net cash. InTouch is a leading provider of enterprise telehealth solutions for hospitals and health systems.

Net Income

For the quarter ended ~~March 31,~~June 30, 2022, we recorded a loss of ~~$6,674.5~~$3,101.5 million or ~~$41.58~~$19.22 per share. For the six months ended June 30, 2022, we recorded a loss of $9,776.0 million or $60.72 per share. The quarter and six months ended June 30, 2022 included a non-cash goodwill impairment charge of ~~$6,600.0 million.~~$3,030.0 million and $9,630.0 million, respectively. Refer to Critical Accounting Estimates and Policies: Goodwill Impairment Charge and Note 7, Goodwill, to ~~the Company’s~~our condensed consolidated financial statements for more information.

For the quarter and six months ended ~~March 31,~~June 30, 2021, we recorded a loss of ~~$199.6 million.~~$133.8 million and $333.5 million, respectively.

Refer to the condensed consolidated results of operations in the MD&A for other supplemental financial measures we use to assess our operating performance.

Key Factors Affecting Our Performance

We believe that our future performance will depend on many factors, including the following:

Number of Members and Revenue per Member. Our revenue growth rate and long-term profitability are affected by our ability to increase cross selling capability among our existing members because we derive a substantial portion of our revenue from access and other fees via Client contracts that provide members access to our professional provider network in exchange for a contractual based periodic fee or access fees derived from our Direct-to-Consumer

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(“~~D2C”~~DTC”) members. Therefore, we believe that our ability to add new members, retain existing members, and increase the revenue generated from each member is a key indicator of our increasing market adoption, the growth of our business,

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and future revenue potential, and that increasing our membership and revenue per member is an integral objective that will provide us with the ability to continually innovate our services and support initiatives that will enhance members’ experiences. U.S. paid membership increased by ~~2.7~~4.6 million to ~~54.3~~56.6 million at ~~March 31,~~June 30, 2022, compared to ~~the same period in~~June 30, 2021. Average U.S. revenue per member measures the average amount of access revenue that we generate from a U.S. paid member for a particular period. It is calculated by dividing the U.S. access revenue generated from our U.S. paid members, excluding certain non-member based access fees, by the total average number of U.S. paid members during the applicable period. For the ~~first~~second quarter of 2022, average U.S. revenue per member was ~~$2.52~~$2.60 compared to ~~$2.09~~$2.31 for the same period in 2021. For the six months ended June 30, 2022, average U.S. revenue per member was $2.56 compared to $2.20 for the same period in 2021.

Number of Visits and Utilization. We also recognize revenue in connection with the completion of a general medical visit, expert medical service, and other specialty visits for contracts where the service is not part of access fees. Visit fee revenue is driven primarily by the number of Clients, the number of members in a Client’s population, member utilization of our provider network services, and the contractually negotiated prices of our services. We believe that increasing our current member utilization rate and increasing penetration further into existing and new health plan Clients is a key objective in order for our Clients to realize tangible healthcare savings with our service. Visits increased by ~~35%~~28%, or ~~1.2~~1.0 million, to approximately ~~4.5~~4.7 million for the quarter ended ~~March 31,~~June 30, 2022 compared to the same period in 2021. Visits increased by 31%, or 2.2 million, to approximately 9.2 million for the six months ended June 30, 2022 compared to the same period in 2021. Utilization measures the ratio of visits to total U.S. paid members. It is calculated by dividing visits during a particular period (excluding visit fee only visits) by U.S. paid members in the applicable period and annualizing the result. Utilization increased by ~~593~~492 basis points to approximately ~~23.4%~~24.0% for the quarter ended ~~March 31,~~June 30, 2022, compared to ~~17.5%~~19.1% in the same period in 2021. Utilization increased by 542 basis points to approximately 23.7% for the six months ended June 30, 2022, compared to 18.3% in the same period in 2021.

Number of Platform-Enabled Sessions. A platform-enabled session is a unique instance in which our licensed software platform has facilitated a virtual voice or video encounter between a care provider and our Client’s patient, or between care providers. We believe platform-enabled sessions are an indicator of the value our Clients derive from the platform they license from us in order to facilitate virtual care. Our Clients completed ~~1.2~~1.0 million and 2.2 million platform-enabled sessions during the quarter and six months ended ~~March 31,~~June 30, 2022, respectively, compared to ~~1.1~~1.0 million and 2.1 million during the ~~same period in 2021.~~quarter and six months ended June 30, 2021, respectively.

Chronic Care Enrollment. Our chronic care programs are one of the key components of our whole person virtual care platform that we believe position us to drive greater engagement with our platforms and increased revenue. Chronic care enrollment measures the number of unique individuals enrolled in one or more of our chronic care programs. Chronic care enrollment increased by ~~12%~~13% to ~~0.7~~0.8 million at ~~March 31,~~June 30, 2022, compared to 0.7 million at ~~March 31,~~June 30, 2021.

Seasonality. WeIn the past, we have typically ~~in the past~~ seen the strongest increases in consecutive quarterly revenue during the fourth and first quarters of each year, which coincides with traditional annual benefit enrollment seasons. However, as our business has become more diversified across services, channels, and geographies, we see a growing diversification of Client start dates, resulting from growth in mental health offerings, health plan expansions, cross sales of new services, international growth, and mid-market employer growth, all of which are not constrained by a calendar year start. See “Risk Factors—Risks Related to Our Business—Our quarterly results may fluctuate significantly, which could adversely impact the value of our common stock” included in the 2021 Form 10-K.

Critical Accounting Estimates and Policies

Our discussion and analysis of our results of operations, liquidity and capital resources are based on our condensed consolidated financial statements which have been prepared in conformity with accounting principles generally accepted in the U.S. (“GAAP”). The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities.

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On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, business combinations, goodwill and other intangible assets, income taxes, and other items. We base our estimates on historical and anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results may differ from our estimates and could have a significant adverse effect on our results of operations and financial position. For a discussion of our critical accounting policies and estimates see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2021 Form 10-K. In addition, the following updates our discussion of impairment testing therein as of ~~March 31,~~June 30, 2022.

Goodwill Impairment Charge

AsWe have experienced a ~~result~~pair of triggering events in 2022 due to sustained decreases in our ~~publicly quoted~~ share price, prompting impairment assessments of goodwill and ~~market capitalization continuing into 2022, we conducted additional testing of our goodwill,~~long-lived assets, including definite-lived intangibles, ~~and other long-lived assets~~first as of March 31, ~~2022. As a result~~2022, and again as of this review, we did not identify an impairment to our definite-lived intangible assets or other long-lived assets, but we recorded a $6.6 billion non-deductible, non-cash goodwill impairment charge (or $41.11 per basic and diluted share) for the quarter ended March 31,June 30, 2022.

~~Consistent with prior goodwill~~Both impairment ~~testing, our March 31,~~assessments in 2022 ~~testing~~ reflected a 75%/25% allocation between the income and market approaches. We believe the 75% weighting to the income approach continues to be appropriate as it more directly reflects our future growth and profitability expectations. For our March 31, 2022 impairment testing, as compared to our December 1, 2021 testing, we reduced our estimated future cash flows used in the impairment assessment, including revenues, margin, and capital expenditures to reflect our best estimates at this time. We also updated certain significant inputs into the valuation models including the discount rate which increased reflecting, in part, higher interest rates and market volatility, and we reduced our revenue market multiples, reflecting declining valuations across our selected peer group. Our updates to our discount rate, market multiples, and estimated future cash flows each had a significant impact to the estimated fair value of our reporting unit.

The ~~following~~ table below indicates changes in the most significant inputs to our impairment analysis on each testing date since our last annual test.


Testing dates	Discount Rate	Peer Group Revenue Multiples (current year/subsequent year)	% Excess of Reporting Unit Fair Value over Carrying Value
December 1, 2021	10.5%	7.0x/5.5x	15.0%
March 31, 2022	12.0%	3.5x/3.0x	0% post impairment
June 30, 2022	16.0%	2.0x/1.8x	0% post impairment

In March 2022, we updated the forecasted future cash flows used in the impairment assessment, including revenues, margin, and capital expenditures to reflect current conditions. Other changes in valuation assumptions included increases in interest rates and market volatility, resulting in a higher discount rate, and selection of lower revenue multiples based upon an assessment of a relevant peer group. As a result of this review, we did not identify an impairment to our definite-lived intangible assets or other long-lived assets, but we recorded a $6.6 billion non-deductible goodwill impairment charge (or $41.11 per basic and diluted share) for the quarter ended March 31, 2022.

As of June 30, 2022, we updated valuation assumptions. The discount rate was increased for a company risk premium to reflect the current perception of risks of achieving projected cash flows and, to a lesser extent, to reflect further increases in interest rates and market volatility. Additionally, revenue market multiples were lowered based upon an updated analysis of a consistent peer group. The assessment did not result in an impairment of definite-lived intangible assets or other long-lived assets, but resulted in an additional $3.0 billion non-deductible goodwill impairment charge (or $18.78 per basic and diluted share). For the six months ended June 30, 2022, a $9.6 billion non-deductible goodwill impairment charge (or $59.81 per basic and diluted share) was recognized.

~~Overall, in~~In the event there are ~~future~~further adverse changes in our ~~estimated future~~projected cash flows and/or further changes in key assumptions, including but not limited to an increase in the discount rate, ~~increases,~~ lower market multiples, lower revenue growth, lower margin, and/or a lower terminal growth rate, we may be required to record additional non-cash impairment charges to our goodwill, ~~or impairment charges to~~ other intangibles, and/or long-lived assets. Such non-cash charges ~~would likely~~could have a material adverse effect on our condensed consolidated ~~statements~~statement of operations and balance ~~sheets~~sheet in the reporting period of the charge. Following the ~~March~~June 2022 impairment, there is no excess of reporting unit fair value over the carrying amount, so any further decrease in estimated fair value would result in an additional ~~goodwill~~ impairment charge.

~~In the period following March 31, 2022 there has been a further decline in our~~ The assessment is most sensitive to broader market capitalization, based on our publicly quoted share price. To the extent the decline is sustained, it would require further testing of our goodwill in our next reporting period and it may result in an additional goodwill impairment. Absent further changes to our estimated future cash flows, it may prompt updates to other key valuation inputs,conditions, including the discount rate and market ~~multiples. Further reductions in~~multiples, and to our estimated future cash flows could also result in an additional decline in estimated reporting unit value. As an illustration, if the estimated fair value of the reporting unit at March 31, 2022, decreased by 50%, it would result in a goodwill impairment charge of approximately $4.6 billion.flows.

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Condensed Consolidated Results of Operations

The following table sets forth our condensed consolidated statement of operations data for the quarters and the six months ended ~~March 31,~~June 30, 2022 and 2021 and the dollar and percentage change between the respective periods (dollars in thousands except for per share data):

Quarter Ended March 31,

Year over Year Growth

2022

2021


Variance

%

Revenue

$
565,350

$
453,675

$
111,675

25
%

Expenses:

Cost of revenue (exclusive of depreciation and amortization,
which is shown separately below)

187,025

145,959

41,066

28
%

Operating expenses:

Advertising and marketing

133,600

89,439

44,161

49
%

Sales

58,329

64,793

(6,464)

(10)
%

Technology and development

87,412

78,008

9,404

12
%

General and administrative

104,923

105,172

(249)

0
%

Acquisition, integration, and transformation costs

4,507

6,323

(1,816)

(29)
%

Depreciation and amortization

58,933

48,659

10,274

21
%

Goodwill impairment

6,600,000

0

6,600,000

N/M

Total expenses

7,234,729

538,353

6,696,376

N/M

Loss from operations

(6,669,379)

(84,678)

(6,584,701)

N/M

Loss on extinguishment of debt

0

11,459

(11,459)

(100)
%

Other income, net

(724)

(5,652)

4,928

(87)
%

Interest expense, net

5,480

22,125

(16,645)

(75)
%

Net loss before taxes

(6,674,135)

(112,610)

(6,561,525)

N/M

Income tax expense

388

87,039

(86,651)

(100)
%

Net loss

$
(6,674,523)

$
(199,649)

$
(6,474,874)

N/M

Net loss per share, basic and diluted

$
(41.58)

$
(1.31)

$
(40.27)

N/M

EBITDA (1)

$
(10,446)

$
(36,019)

$
25,573

(71)
%

Adjusted EBITDA (1)

$
54,497

$
56,604

$
(2,107)

(4)
%


	Quarter Ended June 30,								Six Months Ended June 30,
	2022		2021						2022		2021
	$		$			Variance	%		$		$			Variance	%
Revenue	$	592,379	$	503,139	$	89,240	18	%	$	1,157,729	$	956,814	$	200,915	21	%
Expenses:
Cost of revenue (exclusive of depreciation and amortization, which is shown separately below)		182,470		160,273		22,197	14	%		369,495		306,232		63,263	21	%
Operating expenses:
Advertising and marketing		164,574		103,221		61,353	59	%		298,174		192,660		105,514	55	%
Sales		57,930		63,856		(5,926)	(9)	%		116,259		128,649		(12,390)	(10)	%
Technology and development		80,826		80,759		67	0	%		168,238		158,767		9,471	6	%
General and administrative		110,868		111,216		(348)	(0)	%		215,791		216,388		(597)	(0)	%
Acquisition, integration, and transformation costs		2,892		11,421		(8,529)	(75)	%		7,399		17,744		(10,345)	(58)	%
Depreciation and amortization		59,371		51,341		8,030	16	%		118,304		100,000		18,304	18	%
Goodwill impairment		3,030,000		0		3,030,000	N/M			9,630,000		0		9,630,000	N/M
Total expenses		3,688,931		582,087		3,106,844	N/M			10,923,660		1,120,440		9,803,220	N/M
Loss from operations		(3,096,552)		(78,948)		(3,017,604)	N/M			(9,765,931)		(163,626)		(9,602,305)	N/M
Loss on extinguishment of debt		0		31,419		(31,419)	(100)	%		0		42,878		(42,878)	(100)	%
Other expense (income), net		1,760		(217)		1,977	N/M			1,036		(5,869)		6,905	(118)	%
Interest expense, net		4,337		20,473		(16,136)	(79)	%		9,817		42,598		(32,781)	(77)	%
Net loss before provision for income taxes		(3,102,649)		(130,623)		(2,972,026)	N/M			(9,776,784)		(243,233)		(9,533,551)	N/M
Provision for income taxes		(1,188)		3,196		(4,384)	N/M			(800)		90,235		(91,035)	N/M
Net loss	$	(3,101,461)	$	(133,819)	$	(2,967,642)	N/M		$	(9,775,984)	$	(333,468)	$	(9,442,516)	N/M
Net loss per share, basic and diluted	$	(19.22)	$	(0.86)	$	(18.36)	N/M		$	(60.72)	$	(2.16)	$	(58.56)	N/M

EBITDA (1)	$	(7,181)	$	(27,607)	$	20,426	(74)	%	$	(17,627)	$	(63,626)	$	45,999	(72)	%
Adjusted EBITDA (1)	$	46,711	$	66,784	$	(20,073)	(30)	%	$	101,208	$	123,388	$	(22,180)	(18)	%

(1)	Non-GAAP Financial Measures

N/M – not meaningful

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The following is a reconciliation of net loss, the most directly comparable ~~U.S.~~ GAAP financial measure, to EBITDA and Adjusted EBITDA for the quarters and six months ended ~~March 31,~~June 30, 2022 and 2021 (in thousands):

Quarter Ended

March 31,


2022

2021


Net loss

$
(6,674,523)

$
(199,649)

Add:

Goodwill impairment

6,600,000

0

Loss on extinguishment of debt

0

11,459

Other income, net

(724)

(5,652)

Interest expense, net

5,480

22,125

Income tax expense

388

87,039

Depreciation and amortization

58,933

48,659

EBITDA

(10,446)

(36,019)

Stock-based compensation

60,436

86,300

Acquisition, integration, and transformation costs

4,507

6,323

Adjusted EBITDA

$
54,497

$
56,604


	Quarter Ended				Six Months Ended
	June 30,				June 30,
	2022		2021		2022		2021
Net loss	$	(3,101,461)	$	(133,819)	$	(9,775,984)	$	(333,468)
Add:
Goodwill impairment		3,030,000		0		9,630,000		0
Loss on extinguishment of debt		0		31,419		0		42,878
Other expense (income), net		1,760		(217)		1,036		(5,869)
Interest expense, net		4,337		20,473		9,817		42,598
Provision for income taxes		(1,188)		3,196		(800)		90,235
Depreciation and amortization		59,371		51,341		118,304		100,000
EBITDA		(7,181)		(27,607)		(17,627)		(63,626)
Stock-based compensation		51,000		82,970		111,436		169,270
Acquisition, integration, and transformation costs		2,892		11,421		7,399		17,744
Adjusted EBITDA	$	46,711	$	66,784	$	101,208	$	123,388

EBITDA and Adjusted EBITDA

To supplement our financial information presented in accordance with ~~U.S.~~ GAAP, we use earnings before interest, provision for income taxes, depreciation, and amortization (“EBITDA”) and Adjusted EBITDA, which are ~~non-U.S.~~non- GAAP financial measures, to clarify and enhance an understanding of past performance. We believe that the presentation of these financial measures enhances an investor’s understanding of our financial performance. We further believe that these financial measures are useful financial metrics to assess our operating performance and financial and business trends from period-to-period by excluding certain items that we believe are not representative of our core business. We use certain financial measures for business planning purposes and in measuring our performance relative to that of our competitors. We utilize Adjusted EBITDA as the primary measure of our performance.

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

We believe the above financial measures are commonly used by investors to evaluate our performance and that of our competitors. However, our use of the terms EBITDA and Adjusted EBITDA may vary from that of others in our industry. Neither EBITDA nor Adjusted EBITDA should be considered as an alternative to net loss before provision for income taxes, net loss, net loss per share or any other performance measures derived in accordance with ~~U.S.~~ GAAP.

EBITDA and Adjusted EBITDA have important limitations as analytical tools and you should not consider them in isolation or as a substitute for analysis of our results as reported under ~~U.S.~~ GAAP. Some of these limitations are:

●

EBITDA and Adjusted EBITDA do not reflect goodwill impairment;

●

EBITDA and Adjusted EBITDA do not reflect the interest expense on our debt;

●

EBITDA and Adjusted EBITDA eliminate the impact of the provision for income taxes on our results of operations;

●

EBITDA and Adjusted EBITDA do not reflect the loss on extinguishment of debt;

●

EBITDA and Adjusted EBITDA do not reflect other ~~income,~~expense (income), net;

●

Adjusted EBITDA does not reflect the significant acquisition, integration, and transformation costs. Acquisition, integration and transformation costs include investment banking, financing, legal, accounting, consultancy, integration, fair value changes related to contingent consideration and certain other transaction

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costs related to mergers and acquisitions. It also includes costs related to certain business transformation initiatives focused on integrating and optimizing various operations and systems, including upgrading our customer relationship management (“CRM”) and enterprise resource planning (“ERP”) systems. These transformation cost adjustments made to our results do not represent normal, recurring, operating expenses necessary to operate the business but rather, incremental costs incurred in connection with our acquisition and integration activities;

●

Adjusted EBITDA does not reflect the significant non-cash stock compensation expense which should be viewed as a component of recurring operating costs; and

●

other companies in our industry may calculate EBITDA, and Adjusted EBITDA differently than we do, limiting the usefulness of these measures as comparative measures.

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

We compensate for these limitations by using EBITDA and Adjusted EBITDA along with other comparative tools, together with ~~U.S.~~ GAAP measurements, to assist in the evaluation of operating performance. Such ~~U.S.~~ GAAP measurements include net loss, net loss per share and other performance measures.

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

Condensed Consolidated Results of Operations

Revenue. Total revenue was ~~$565.4~~$592.4 million for the quarter ended ~~March 31,~~June 30, 2022, compared to ~~$453.7~~$503.1 million during the quarter ended ~~March 31,~~June 30, 2021, an increase of ~~$111.7~~$89.2 million, or ~~25%~~18%. This increase in revenue was driven substantially by the generation of additional access fees by our membership base, most significantly from our ~~D2C~~DTC mental health service, BetterHelp. Revenue from access fees was ~~$491.3~~$518.7 million for the quarter ended ~~March 31,~~June 30, 2022 compared to ~~$382.1~~$431.1 million for the quarter ended ~~March 31,~~June 30, 2021, an increase of ~~$109.2~~$87.6 million, or ~~29%~~20%. Visit fee revenue increased ~~12%~~7% to ~~$67.9~~$66.7 million and other revenue was ~~$6.1~~$6.9 million, down ~~45%~~30% primarily related to the completion of a long-term development services contract. U.S. revenue grew ~~24%~~18% to ~~$491.2~~$521.4 million and International revenue grew ~~27%~~13% to ~~$74.2~~$71.0 million. For the quarter ended ~~March 31,~~June 30, 2022, 88%, 11% and 1% of our revenue was derived from access fees, visit fees and other revenue, respectively, as compared to 86%, 12% and 2%, respectively, for the quarter ended June 30, 2021.

Total revenue was $1,157.7 million for the six months ended June 30, 2022, compared to $956.8 million during the six months ended June 30, 2021, an increase of $200.9 million, or 21%. This increase in revenue was driven substantially by the generation of additional access fees by our membership base, most significantly from our DTC mental health service, BetterHelp. Revenue from access fees was $1,010.1 million for the six months ended June 30, 2022 compared to $813.2 million for the six months ended June 30, 2021, an increase of $196.9 million, or 24%. Visit fee revenue increased 10% to $134.7 million and other revenue was $13.0 million, down 38% primarily related to the completion of a long-term development services contract. U.S. revenue grew 21% to $1,012.6 million and International revenue grew 20% to $145.1 million. For the six months ended June 30, 2022, 87%, 12% and 1% of our revenue was derived from access fees, visit fees and other revenue, respectively, as compared to ~~84%~~85%, 13% and 3%2%, respectively, for the ~~quarter~~six months ended ~~March 31,~~June 30, 2021.

Cost of Revenue (exclusive of depreciation and amortization, which is shown separately below). Cost of revenue (exclusive of depreciation and amortization, which is shown separately below) was ~~$187.0~~$182.5 million for the quarter ended ~~March 31,~~June 30, 2022 compared to ~~$146.0~~$160.3 million for the quarter ended ~~March 31,~~June 30, 2021, an increase of ~~$41.1~~$22.2 million, or ~~28%~~14%. Cost of revenue increased by $63.3 million, or 21% on a year-to-date basis. The ~~increase was~~increases for both the quarter and year-to-date periods were primarily due to growth in visits associated with higher revenue which resulted in increased provider fees, as well as higher device-related costs.

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Advertising and Marketing Expenses. Advertising and marketing expenses were ~~$133.6~~$164.6 million for the quarter ended ~~March 31,~~June 30, 2022 compared to ~~$89.4~~$103.2 million for the quarter ended ~~March 31,~~June 30, 2021, an increase of ~~$44.2~~$61.4 million, or ~~49%~~59%. On a year-to-date basis, advertising and marketing expenses increased by $105.5 million, or 55%. The ~~increase was~~increases for both the quarter and year-to-date periods were substantially driven by higher digital and media advertising costs from BetterHelp.

Sales Expenses. Sales expenses were ~~$58.3~~$57.9 million for the quarter ended ~~March 31,~~June 30, 2022 compared to ~~$64.8~~$63.9 million for the quarter ended ~~March 31,~~June 30, 2021, a decrease of ~~$6.5~~$5.9 million, or 9%. On a year-to-date basis, sales expenses decreased by $12.4 million, or 10%. The decrease ~~was~~for both the quarter and year-to-date periods were primarily driven by lower stock-based compensation, partially offset by higher sales and partner commissions due to higher results, as well as higher expense associated with conferences and ~~events to support business activity.~~events.

Technology and Development Expenses. Technology and development expenses were ~~$87.4~~$80.8 million for both the quarters ended June 30, 2022 and 2021. The quarter ~~ended March 31, 2022 compared to $78.0 million for the quarter ended March 31, 2021, an increase of $9.4~~reflects higher personnel and staff augmentation costs and higher infrastructure, hosting and software license costs offset by lower stock-based compensation. On a year-to-date basis, technology and development expenses increased by $9.5 million, or ~~12%~~6%. The increase on a year-to-date basis primarily reflects additional personnel and staff augmentation costs; higher professional, recruiting and consulting fees; and higher infrastructure, hosting and software license costs. These increases were associated with ongoing projects and services to continuously improve and optimize our technology portfolio. Partially

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offsetting this increase was lower stock-based compensation. For the quarters ended ~~March 31,~~June 30, 2022 and 2021, research and development costs, which excludes amounts reflected as capitalized software, were $23.0 million and $53.4 million, respectively. For the six months ended June 30, 2022 and 2021, research and development costs were ~~$54.7~~$49.7 million and ~~$53.4~~$106.8 million, respectively.

General and Administrative Expenses. General and administrative expenses decreased $0.3 million to $110.9 million for the quarter ended June 30, 2022 compared to $111.2 million for the quarter ended June 30, 2021. On a year-to-date basis, general and administrative expenses decreased by $0.6 million. For both the quarter and year-to-date periods, lower stock-based compensation, bad debt expenses and other taxes were primarily offset by higher personnel expenses, therapist recruiting costs, bank charges, legal fees and reserves, and other corporate expenses.

Acquisition, Integration, and Transformation Costs. Acquisition, integration, and transformation costs were ~~$4.5~~$2.9 million and $7.4 million for the quarter and six months ended ~~March 31,~~June 30, 2022, respectively, and primarily consisted of ~~integration and transformation~~ costs to integrate and upgrade our CRM and ERP ecosystem. For the quarter and six months ended ~~March 31,~~June 30, 2021, acquisition, integration, and transformation costs were ~~$6.3~~$11.4 million and $17.7 million, respectively, and primarily consisted of acquisition and integration related costs.

~~General and Administrative Expenses.~~ General and administrative expenses were essentially flat at $104.9 million for the quarter ended March 31, 2022 compared to $105.2 million for the quarter ended March 31, 2021. Higher therapist recruiting costs, bank charges, legal fees, dues, subscriptions and licenses, and other corporate expenses were offset by lower stock-based compensation, insurance and bad debt expenses.

Depreciation and Amortization. Depreciation and amortization was ~~$58.9~~$59.4 million for the quarter ended ~~March 31,~~June 30, 2022 compared to ~~$48.7~~$51.3 million for the quarter ended ~~March 31,~~June 30, 2021, an increase of ~~$10.3~~16%. Depreciation and amortization was $118.3 million for the six months ended June 30, 2022 compared to $100.0 million for the six months ended June 30, 2021, an increase of $18.3 million. The higher expense was primarily due to additional amortization expense related to the acceleration of the amortization of certain trademarks, and to a lesser extent, higher amortization associated with higher capitalized software development costs. As it relates to the acceleration of the useful lives for certain trademarks, this change related to ~~the Company’s~~our strategy to integrate and move certain consumer brands under the Teladoc Health brand. This acceleration of amortization resulted in decreasing the weighted average useful life of all trademarks at the date of the change from 9.5 years to 7.5 years. This change will increase annual amortization by approximately ~~$23.0~~$23.2 million in 2022 and 2023.

Goodwill Impairment. ~~The Company took a~~We recorded non-cash goodwill impairment ~~charge~~charges of ~~$6.6 billion~~$3,030.0 million and $9,630.0 million in the quarter and six months ended ~~March 31,~~June 30, 2022, respectively, following goodwill impairment ~~testing~~testings performed as a result of sustained decreases in our publicly quoted share price. The non-cash ~~charge~~charges had no impact on the provision for income taxes. Refer to Critical Accounting Estimates and Policies: Goodwill Impairment Charge and Note 7, Goodwill, to ~~the Company’s~~our condensed consolidated financial statements.

Loss on Extinguishment of Debt. ~~There was no loss~~Loss on extinguishment of debt were $31.4 million and $42.9 million for the quarter and six months ended ~~March 31, 2022 compared~~June 30, 2021, respectively. They were primarily due to ~~$11.5~~the exchanges and conversions of the 2025 Notes.

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Other Expense (Income), Net. Other expense (income), net was an expense of $1.8 million for the quarter ended ~~March 31, 2021.~~

~~Other Income, Net.~~ ~~Other~~June 30, 2022 compared to an income ~~net was~~of ($~~0.7)~~0.2) million for the quarter ended ~~March 31, 2022 compared to ($5.7) million for the quarter ended March 31,~~June 30, 2021 and included foreign exchange remeasurements. ~~In addition,~~Other expense (income), net was $1.0 million for the ~~quarter~~six months ended ~~March 31, 2021 included~~June 30, 2022 compared to ($5.9) million for the six months ended June 30, 2021. The difference was primarily due to a $5.9 million ~~unrealized~~ gain on sale of a non-marketable equity security.

Interest Expense, Net. Interest expense, net consists of interest costs and amortization of debt discount associated with advances from financing companies, our convertible senior notes, and interest income from cash and cash equivalents and short-term investments. Interest expense, net was ~~$5.5~~$4.3 million and ~~$22.1~~$20.5 million for the quarters ended ~~March 31,~~June 30, 2022 and 2021, respectively. Interest expense, net was $9.8 million and $42.6 million for the six months ended June 30, 2022 and 2021, respectively. The decrease in interest expense substantially reflects the adoption of ASU 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity,” which resulted in the elimination of non-cash interest expense associated with the accretion of the recorded debt value to stated value. Refer to Note 11, Convertible Senior Notes, to the condensed consolidated financial statements. The associated non-cash expense was ~~$14.6~~$14.7 million, or ~~$0.10~~$0.09 per share, infor the quarter ended ~~March 31,~~June 30, 2021 and $30.3 million, or $0.20 per share, for the six months ended June 30, 2021.

Provision for Income ~~Tax Expense~~Taxes. ~~Income~~We recorded an income tax ~~expense was $0.4~~benefit of $1.2 million for the quarter ended ~~March 31,~~June 30, 2022 compared to ~~$87.0~~an expense of $3.2 million ~~expense~~ for the quarter ended ~~March 31,~~June 30, 2021. ~~The~~We recorded an income tax benefit of $0.8 million for the six months ended June 30, 2022 compared to an expense inof $90.2 million for the ~~prior year quarter largely reflected an increase in~~six months ended June 30, 2021. For the six months ended June 30, 2021, we recognized a non-cash income tax expense, substantially reflecting the discrete charge for additional valuation ~~allowances needed to reflect the Company’s ability to utilize future net operating losses, primarily associated with~~allowance on excess stock compensation benefits associated with the Livongo merger.

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Liquidity and Capital Resources

The following table presents a summary of our cash flow activity for the periods set forth below (in thousands):

Quarter Ended

March 31,

2022

2021

Condensed Consolidated Statements of Cash Flows - Summary

Net cash used in operating activities

$
(31,747)

$
(18,026)

Net cash used in investing activities

(27,567)

(16,030)

Net cash provided by financing activities

2,816

22,175

Total

$
(56,498)

$
(11,881)


	Six Months Ended
	June 30,
	2022		2021
Condensed Consolidated Statements of Cash Flows - Summary
Net cash provided by operating activities	$	60,722	$	34,191
Net cash used in investing activities		(72,404)		(18,198)
Net cash provided by financing activities		1,482		33,538
Total	$	(10,200)	$	49,531

Our principal sources of liquidity were cash and cash equivalents, comprised substantially of deposit accounts and money market funds, totaling ~~$836.4 million, including restricted cash of $3.8~~$881.2 million as of ~~March 31,~~June 30, 2022. Additionally, we had short-term marketable securities of $2.5 million as of ~~March 31,~~June 30, 2022.

We believe that our existing cash and cash equivalents and short-term investments will be sufficient to meet our working capital, capital expenditure, and contractual obligation needs for at least the next 12 months. Our future capital requirements will depend on many factors including our growth rate, contract renewal activity, number of visits, the timing and extent of spending to support product development efforts, our expansion of sales and marketing activities, the introduction of new and enhanced services offerings, the continuing market acceptance of telehealth, and our debt service obligations. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, technologies, and intellectual property rights. We may be required to seek additional equity or debt financing to fund working capital, capital expenditures and acquisitions, and to settle debt obligations. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all, which would adversely affect our business, financial condition and results of operations.

Historically, we have financed our operations primarily through sales of equity securities, debt issuance, and bank borrowings. See Note 11, “Convertible Senior Notes” of the notes to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q for additional information on the Notes.

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We routinely enter into contractual obligations with third parties to provide professional services, licensing, and other products and services in support of our ongoing business. The current estimated cost of these contracts is not expected to be significant to our liquidity and capital resources based on contracts in place as of ~~March 31,~~June 30, 2022.

Cash ~~Used in~~Provided by Operating Activities

For the ~~three~~six months ended ~~March 31,~~June 30, 2022 cash flows ~~used in~~provided by operating activities consisted of net loss adjusted for certain non-cash items and changes in assets and liabilities. Cash ~~used in~~provided by operating activities was ~~$31.7~~$60.7 million for the ~~three~~six months ended ~~March 31,~~June 30, 2022 compared to ~~cash used in operating activities of $18.0~~$34.2 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021. The year-over-year higher ~~outflow~~inflow was primarily driven by ~~an increase~~higher revenues and a change in ~~accounts receivable and prepaid expenses, substantially related to software licenses and deferred device costs, and higher bonus and payroll tax~~the timing of payments.

Our primary uses of cash from operating activities are for the payment of cash compensation, provider fees, engagement marketing, ~~D2C~~DTC digital and media advertising, inventory, insurance, technology costs, interest expense and acquisition, integration, and transformation costs. Historically, our cash compensation is at its highest level in the first quarter when we pay discretionary employee compensation related to the previous fiscal year.

Cash Used in Investing Activities

Cash used in investing activities was ~~$27.6~~$72.4 million for the ~~three~~six months ended ~~March 31, 2022. Cash used in investing activities consisted of capital expenditures totaling $3.9 million and~~June 30, 2022, driven primarily by payments for capitalized software development costs ~~of $26.9 million.~~associated with ongoing projects and services to continuously improve and optimize our technology portfolio.

Cash used in investing activities was ~~$16.0~~$18.2 million for the ~~three~~six months ended ~~March 31, 2021. Cash used in investing activities consisted of~~June 30, 2021, primarily driven by cash paid for the acquisition of businesses ~~of $55.9 million, investment in capital expenditures totaling~~

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~~$2.1 million~~ and capitalized software development costs, ~~of $11.1 million,~~ partially offset by proceeds from sale of short-term marketable securities and sale of ~~$50.0 million.~~an investment.

Cash Provided by Financing Activities

Cash provided by financing activities for the ~~three~~six months ended ~~March 31,~~June 30, 2022 was ~~$2.8 million. Cash provided by financing activities~~$1.5 million, primarily ~~consisted~~consisting of ~~$3.6 million of~~the proceeds from the exercise of employee stock options, ~~$3.7 million of~~ proceeds withheld from participants in the employee stock purchase plan, and ~~$2.2 million of~~ proceeds from advances from financing companies, partially offset by ~~($3.9) million from~~ a net change in payments against advances from financing ~~companies and other items of ($2.9) million.~~companies.

Cash provided by financing activities for the ~~three~~six months ended ~~March 31,~~June 30, 2021 was ~~$22.2~~$33.5 million. Cash provided by financing activities primarily consisted of ~~$11.9 million of~~the proceeds from the exercise of employee stock options, ~~$8.6 million of~~ proceeds withheld from participants in the employee stock purchase plan, ~~$4.8 million of~~and proceeds from advances from financing companies, ~~$1.2 million of timing associated with net cash proceeds for tax withholding for stock-based compensation and redemption of 2022 Notes, and $4.1 million from~~partially offset by a net change in payments ~~from customers~~ against advances from financing companies.

~~Recently Adopted Accounting Standards~~

We adopted ASU 2020-06 as of January 1, 2022, under the modified retrospective transition method, and accordingly, our prior period financial statements were not restated. Upon adoption of ASU 2020-06, the conversion feature of our convertible senior notes is no longer reported as a component of equity. Instead, the previously-separated equity component is now combined with the liability component, thereby eliminating the amortization of the debt discount arising from the conversion option separation model. As such, we currently anticipate a reduction of ~~approximately $58 million in non-cash interest to be recorded on our convertible senior notes for the year ended December 31, 2022, as compared to the year ended December 31, 2021.~~ To reflect the adoption of ASU 2020-06, we recorded an increase to convertible senior notes of $306.3 million and decreases to additional paid-in capital, accumulated deficit and net deferred tax liabilities of $363.7 million, $72.7 million, and $15.3 ~~million,~~ ~~respectively, as of January 1, 2022.~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk and Foreign Exchange Risk

Cash equivalents that are subject to interest rate volatility represent our principal market risk. We do not expect cash flows to be affected to any significant degree by a sudden change in market interest rates as our Notes and Livongo Notes bear fixed interest rates. We do not enter into investments for trading or speculative purposes.

We operate our business primarily within the U.S. which accounts for approximately ~~87%~~88% of our revenues. We have not utilized hedging strategies with respect to our foreign exchange exposure as we believe it is not expected to have a material impact on our condensed consolidated financial statements.

Concentrations of Risk and Significant Clients

~~The Company’s~~Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments and accounts receivable. ~~The Company deposits its~~We deposit our cash with financial

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institutions in the U.S. and in foreign countries, however, ~~its~~our deposits, at times, may exceed federally insured limits. ~~The Company’s~~Our cash equivalents are invested in institutional money market funds and our short-term investment ~~balance as of March 31, 2022 and December 31, 2021~~ consisted primarily of a domestic certificate of deposit with an original maturity of one year.

No Client represented over 10% of revenues for the quarters or six months ended ~~March 31,~~June 30, 2022 or 2021.

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No Client represented over 10% of accounts receivable at ~~March 31,~~June 30, 2022 or December 31, 2021.

Item 4. Controls and Procedures

Management’s Report on Internal Control over Financial Reporting

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of ~~March 31,~~June 30, 2022, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

No changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter ended ~~March 31,~~June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are subject to legal proceedings, claims and litigation arising in the ordinary course of our business. Descriptions of certain legal proceedings to which we are a party are contained in Note 13, “Legal Matters”, to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q and are incorporated by reference herein.

Item 1A. Risk Factors

For a discussion of potential risks and uncertainties related to our Company see the information in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in the “Special Note Regarding Forward-Looking Statements” section in Part I, Item 2, of this Quarterly Report on Form 10-Q.

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Item 6. Exhibits

Exhibit

Index

Incorporated by Reference
Exhibit
Number

Exhibit Description

Form

File No.

Exhibit

Filing
Date

Filed
Herewith

3.1

Sixth Amended and Restated Certificate of Incorporation of Teladoc Health, Inc.

8-K

001-37477

3.1

5/31/17

3.2

Certificate of Amendment of Sixth Amended and Restated Certificate of Incorporation of Teladoc, Inc.

8-K

001-37477

3.1

6/1/18

3.3

Second Certificate of Amendment of Sixth Amended and Restated Certificate of Incorporation of Teladoc Health, Inc.

8-K

001-37477

3.1

8/10/18

3.4

Certificate of Amendment of the Sixth Amended and Restated Certificate of Incorporation of Teladoc Health, Inc.

8-K

001-37477

3.1

10/30/20

3.5

Fifth Amended and Restated Bylaws of Teladoc Health, Inc.

8-K

001-37477

3.1

2/19/21

10.1

Form of Performance Restricted Stock Unit Agreements under the Teladoc Health, Inc. 2015 Incentive Award Plan.

*

10.2

Executive Severance Agreement, dated July 15, 2015, by and between Teladoc Health, Inc. and Andrew Turitz, as amended by Amendment No. 1 to Executive Severance Agreement, dated October 29, 2019, by and between Teladoc Health, Inc. and Andrew Turitz.

10-K

001-37477

10.34

2/26/20

31.1

Chief Executive Officer—Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*

31.2

Chief Financial Officer—Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*

32.1

Chief Executive Officer—Certification pursuant to Rule13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

**

32.2

Chief Financial Officer—Certification pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

**

~~Table of Contents~~

~~101.INS~~

~~XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the~~

~~Inline XBRL document.~~

~~101.SCH~~

~~XBRL Taxonomy Extension Schema Document.~~

~~101.CAL~~

~~XBRL Taxonomy Calculation Linkbase Document.~~

~~101.DEF~~

~~XBRL Definition Linkbase Document.~~

~~101.LAB~~

~~XBRL Taxonomy Label Linkbase Document.~~

~~101.PRE~~

~~XBRL Taxonomy Presentation Linkbase Document.~~

~~104~~

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Incorporated by Reference

Exhibit
Number

Exhibit Description

Form

File No.

Exhibit

Filing
Date

Filed
Herewith

3.1

Seventh Amended and Restated Certificate of Incorporation of Teladoc Health, Inc.

8-K

001-37477

3.1

6/2/22

3.2

Sixth Amended and Restated Bylaws of Teladoc Health, Inc.

8-K

001-37477

3.2

6/2/22

10.1

Teladoc Health, Inc. Non-Employee Director Compensation Program (as amended).

31.1

Chief Executive Officer—Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Chief Financial Officer—Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Chief Executive Officer—Certification pursuant to Rule13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Chief Financial Officer—Certification pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the

Inline XBRL document.

101.SCH

XBRL Taxonomy Extension Schema Document.

101.CAL

XBRL Taxonomy Calculation Linkbase Document.

101.DEF

XBRL Definition Linkbase Document.

101.LAB

XBRL Taxonomy Label Linkbase Document.

101.PRE

XBRL Taxonomy Presentation Linkbase Document.

104

Cover Page Interactive Data File – The Cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

* Filed herewith.

** Furnished herewith.

3534

Table of Contents

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TELADOC HEALTH, INC.

Date: ~~May 2,~~August 3, 2022	By:	/s/ JASON GOREVIC
	Name:	Jason Gorevic
	Title:	Chief Executive Officer

Date: ~~May 2,~~August 3, 2022	By:	/s/ MALA MURTHY
	Name:	Mala Murthy
	Title:	Chief Financial Officer

3635


	Quarter Ended March 31,				Year over Year Growth
	2022		2021			Variance	%
Revenue	$	565,350	$	453,675	$	111,675	25	%
Expenses:
Cost of revenue (exclusive of depreciation and amortization, which is shown separately below)		187,025		145,959		41,066	28	%
Operating expenses:
Advertising and marketing		133,600		89,439		44,161	49	%
Sales		58,329		64,793		(6,464)	(10)	%
Technology and development		87,412		78,008		9,404	12	%
General and administrative		104,923		105,172		(249)	0	%
Acquisition, integration, and transformation costs		4,507		6,323		(1,816)	(29)	%
Depreciation and amortization		58,933		48,659		10,274	21	%
Goodwill impairment		6,600,000		0		6,600,000	N/M
Total expenses		7,234,729		538,353		6,696,376	N/M
Loss from operations		(6,669,379)		(84,678)		(6,584,701)	N/M
Loss on extinguishment of debt		0		11,459		(11,459)	(100)	%
Other income, net		(724)		(5,652)		4,928	(87)	%
Interest expense, net		5,480		22,125		(16,645)	(75)	%
Net loss before taxes		(6,674,135)		(112,610)		(6,561,525)	N/M
Income tax expense		388		87,039		(86,651)	(100)	%
Net loss	$	(6,674,523)	$	(199,649)	$	(6,474,874)	N/M
Net loss per share, basic and diluted	$	(41.58)	$	(1.31)	$	(40.27)	N/M

EBITDA (1)	$	(10,446)	$	(36,019)	$	25,573	(71)	%
Adjusted EBITDA (1)	$	54,497	$	56,604	$	(2,107)	(4)	%