Form 10-Q
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| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||||
2023
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||||
TELADOC HEALTH, INC.
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Delaware | 04-3705970 | |||||||
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2 Manhattanville Road, |
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Purchase, |
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(Address of principal executive office) |
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(203) 635-2002
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Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Common Stock, par value $0.001 per share | TDOC |
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Indicate by check mark whether the 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 ⌧x No ◻o
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Large accelerated filer |
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Emerging growth company |
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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. ◻o
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Condensed Consolidated Balance Sheets as of September 30, | ||||||||
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| Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months endedSeptember 30, | |||||||
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SHEETS September 30, December 31, 2022 2021 Assets Current assets: Cash and cash equivalents $ 899,631 $ 893,480 Short-term investments 0 2,537 Accounts receivable, net of allowance of $15,311 and $12,384, respectively 201,701 168,956 Inventories 59,344 73,079 Prepaid expenses and other current assets 126,912 87,387 Total current assets 1,287,588 1,225,439 Property and equipment, net 27,270 27,234 Goodwill 4,846,001 14,504,174 Intangible assets, net 1,854,263 1,910,278 Operating lease - right-of-use assets 45,187 46,780 Other assets 43,656 20,703 Total assets $ 8,103,965 $ 17,734,608 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 70,783 $ 47,257 Accrued expenses and other current liabilities 177,111 102,933 Accrued compensation 63,211 91,941 Deferred revenue-current 90,210 75,569 Advances from financing companies 10,086 13,313 Total current liabilities 411,401 331,013 Other liabilities 1,632 1,492 Operating lease liabilities, net of current portion 41,080 41,773 Deferred revenue, net of current portion 3,146 3,834 Advances from financing companies, net of current portion 7,855 9,291 Deferred taxes, net 51,742 75,777 Convertible senior notes, net 1,534,448 1,225,671 Commitments and contingencies (Note 10) Stockholders’ equity: Common stock, $0.001 par value; 300,000,000 shares authorized; 162,195,790 shares and 160,469,325 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively 162 160 Additional paid-in capital 17,299,981 17,473,336 Accumulated deficit (11,198,216) (1,421,454) Accumulated other comprehensive loss (49,266) (6,285) Total stockholders’ equity 6,052,661 16,045,757 Total liabilities and stockholders’ equity $ 8,103,965 $ 17,734,608 Quarter Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Revenue $ 611,402 $ 521,658 $ 1,769,131 $ 1,478,472 Expenses: Cost of revenue (exclusive of depreciation and amortization, which is shown separately below) 185,619 169,041 555,114 475,273 Operating expenses: Advertising and marketing 178,920 111,078 477,094 303,738 Sales 54,634 62,602 170,893 191,251 Technology and development 87,815 80,250 256,053 239,017 General and administrative 112,542 103,016 328,333 319,404 Acquisition, integration, and transformation costs 1,594 4,340 8,993 22,084 Depreciation and amortization 62,008 51,907 180,312 151,907 Goodwill impairment 0 0 9,630,000 0 Total expenses 683,132 582,234 11,606,792 1,702,674 Loss from operations (71,730) (60,576) (9,837,661) (224,202) Loss on extinguishment of debt 0 850 0 43,728 Other expense (income), net 1,571 376 2,607 (5,493) Interest expense, net 1,346 18,895 11,163 61,493 Net loss before provision for income taxes (74,647) (80,697) (9,851,431) (323,930) Provision for income taxes (1,171) 3,643 (1,971) 93,878 Net loss (73,476) (84,340) (9,849,460) (417,808) Other comprehensive loss, net of tax: Currency translation adjustment and other (19,402) (13,423) (42,981) (19,650) Comprehensive loss $ (92,878) $ (97,763) $ (9,892,441) $ (437,458) Net loss per share, basic and diluted $ (0.45) $ (0.53) $ (61.09) $ (2.68) Weighted-average shares used to compute basic and diluted net loss per share 161,727,962 159,435,165 161,217,033 155,926,680 Accumulated Additional Other Total Common Stock Paid-In Accumulated Comprehensive Stockholders’ Shares Amount Capital Deficit Gain (Loss) Equity Balance as of June 30, 2022 161,892,008 $ 162 $ 17,239,092 $ (11,124,740) $ (29,864) $ 6,084,650 Exercise of stock options 125,039 0 666 0 0 666 Issuance of common stock upon vesting of restricted stock units 178,743 0 0 0 0 0 Stock-based compensation 0 0 60,223 0 0 60,223 Other comprehensive loss, net of tax 0 0 0 0 (19,402) (19,402) Net loss 0 0 0 (73,476) 0 (73,476) Balance as of September 30, 2022 162,195,790 $ 162 $ 17,299,981 $ (11,198,216) $ (49,266) $ 6,052,661 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 552,400 1 5,645 0 0 5,646 Issuance of common stock upon vesting of restricted stock units 1,025,363 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 0 180,502 0 0 180,502 Other comprehensive loss, net of tax 0 0 0 0 (42,981) (42,981) Net loss 0 0 0 (9,849,460) 0 (9,849,460) Balance as of September 30, 2022 162,195,790 $ 162 $ 17,299,981 $ (11,198,216) $ (49,266) $ 6,052,661 Balance as of June 30, 2021 159,462,978 $ 159 $ 17,314,749 $ (1,326,129) $ 12,291 $ 16,001,070 Exercise of stock options 216,882 1 5,174 0 0 5,175 Issuance of common stock upon vesting of restricted stock units 235,674 0 0 0 0 0 Issuance of common stock for 2025 Notes 98,217 0 14,868 0 0 14,868 Equity portion of extinguishment of 2025 Notes 0 0 (10,079) 0 0 (10,079) Stock-based compensation 0 0 74,311 0 0 74,311 Other comprehensive loss, net of tax 0 0 0 0 (13,423) (13,423) Net loss 0 0 0 (84,340) 0 (84,340) Balance as of September 30, 2021 160,013,751 $ 160 $ 17,399,023 $ (1,410,469) $ (1,132) $ 15,987,582 Balance as of December 31, 2020 150,281,099 $ 150 $ 16,857,797 $ (992,661) $ 18,518 $ 15,883,804 Exercise of stock options 2,123,935 3 22,953 0 0 22,956 Issuance of common stock upon vesting of restricted stock units 1,490,879 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 5,182,656 5 920,514 0 0 920,519 Equity portion of extinguishment of 2025 Notes 0 0 (668,507) 0 0 (668,507) Recovery of excess common stock issued for acquisition (205,279) 0 (40,329) 0 0 (40,329) Stock-based compensation 0 0 250,027 0 0 250,027 Other comprehensive loss, net of tax 0 0 0 0 (19,650) (19,650) Net loss 0 0 0 (417,808) 0 (417,808) Balance as of September 30, 2021 160,013,751 $ 160 $ 17,399,023 $ (1,410,469) $ (1,132) $ 15,987,582 FLOWS Nine Months Ended September 30, 2022 2021 Operating activities: Net loss $ (9,849,460) $ (417,808) Adjustments to reconcile net loss to net cash provided by operating activities: Goodwill impairment 9,630,000 0 Depreciation and amortization 180,312 151,907 Depreciation of rental equipment 2,185 2,500 Amortization of right-of-use assets 9,266 8,185 Provision for allowances 8,867 11,353 Stock-based compensation 167,098 240,971 Deferred income taxes (5,942) 91,414 Accretion of interest 2,496 46,843 Loss on extinguishment of debt 0 40,631 Gain on sale of investment 0 (5,901) Other, net 3,677 38 Changes in operating assets and liabilities: Accounts receivable (45,267) (19,407) Prepaid expenses and other current assets (39,177) (34,566) Inventory 13,709 (2,661) Other assets (22,854) (3,432) Accounts payable 24,067 (11,115) Accrued expenses and other current liabilities 70,046 15,880 Accrued compensation (32,028) (17,352) Deferred revenue 12,311 20,002 Operating lease liabilities (8,111) (8,202) Other liabilities 2,548 1,502 Net cash provided by operating activities 123,743 110,782 Investing activities: Capital expenditures (10,285) (5,611) Capitalized software (108,588) (35,402) Proceeds from marketable securities 2,507 50,000 Proceeds from the sale of investment 0 10,901 Acquisitions of businesses, net of cash acquired 0 (75,944) Other, net 2,514 3,150 Net cash used in investing activities (113,852) (52,906) Financing activities: Net proceeds from the exercise of stock options 5,646 22,956 Repurchase of 2022 Notes 0 (139) Proceeds from advances from financing companies 6,807 10,677 Payment against advances from financing companies (11,470) (12,053) Proceeds from employee stock purchase plan 3,386 13,996 Cash received for withholding taxes on stock-based compensation, net 594 3,109 Other, net (2,847) (4,224) Net cash provided by financing activities 2,116 34,322 Net increase in cash and cash equivalents 12,007 92,198 Foreign exchange difference (5,856) (1,694) Cash and cash equivalents at beginning of the period 893,480 733,324 Cash and cash equivalents at end of the period $ 899,631 $ 823,828 Income taxes paid $ 901 $ 3,114 Interest paid $ 8,688 $ 10,380 SHEETSSeptember 30,
2023December 31,
2022Assets Current assets: Cash and cash equivalents $ 1,030,527 $ 918,182 Accounts receivable, net of allowance for doubtful accounts of $7,695 and $4,324, respectively 205,866 210,554 Inventories 35,916 56,342 Prepaid expenses and other current assets 114,782 130,310 Total current assets 1,387,091 1,315,388 Property and equipment, net 32,887 29,641 Goodwill 1,073,190 1,073,190 Intangible assets, net 1,728,302 1,836,765 Operating lease - right-of-use assets 32,051 41,831 Other assets 74,452 48,540 Total assets $ 4,327,973 $ 4,345,355 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 25,998 $ 47,690 Accrued expenses and other current liabilities 192,553 168,693 Accrued compensation 84,897 81,554 Deferred revenue-current 99,192 101,832 Total current liabilities 402,640 399,769 Other liabilities 1,693 1,618 Operating lease liabilities, net of current portion 34,353 38,042 Deferred revenue, net of current portion 13,152 11,954 Deferred taxes, net 44,252 50,939 Convertible senior notes, net 1,537,833 1,535,288 Commitments and contingencies (Note 11) Stockholders’ equity: Common stock, $0.001 par value; 300,000,000 shares authorized; 165,557,305 shares and 162,840,360 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively 166 163 Additional paid-in capital 17,535,169 17,358,645 Accumulated deficit (15,199,765) (15,008,287) Accumulated other comprehensive loss (41,520) (42,776) Total stockholders’ equity 2,294,050 2,307,745 Total liabilities and stockholders’ equity $ 4,327,973 $ 4,345,355 OPERATIONSOPERATIONS AND COMPREHENSIVE LOSSThree Months Ended
September 30,Nine Months Ended
September 30,2023 2022 2023 2022 Revenue $ 660,238 $ 611,402 $ 1,941,888 $ 1,769,131 Expenses: Cost of revenue (exclusive of depreciation and amortization, which is shown separately below) 185,960 185,619 566,607 555,114 Operating expenses: Advertising and marketing 186,152 178,920 541,698 477,094 Sales 52,309 54,634 160,329 170,893 Technology and development 84,289 84,590 258,583 250,698 General and administrative 115,716 112,090 355,702 330,011 Acquisition, integration, and transformation costs 5,824 1,594 16,848 8,993 Restructuring costs 411 3,677 16,043 3,677 Depreciation and amortization 94,302 62,008 239,550 180,312 Goodwill impairment 0 0 0 9,630,000 Total expenses 724,963 683,132 2,155,360 11,606,792 Loss from operations (64,725) (71,730) (213,472) (9,837,661) Interest income (12,606) (4,803) (33,075) (6,192) Interest expense 5,646 6,149 16,744 17,355 Other expense (income), net 1,792 1,571 (2,908) 2,607 Loss before provision for income taxes (59,557) (74,647) (194,233) (9,851,431) Provision for income taxes (2,484) (1,171) (2,755) (1,971) Net loss (57,073) (73,476) (191,478) (9,849,460) Other comprehensive income (loss), net of tax: Currency translation adjustment and other (2,740) (19,402) 1,256 (42,981) Comprehensive loss $ (59,813) $ (92,878) $ (190,222) $ (9,892,441) Net loss per share, basic and diluted $ (0.35) $ (0.45) $ (1.17) $ (61.09) Weighted-average shares used to compute basic and diluted net loss per share 165,119,379 161,727,962 164,079,194 161,217,033 Common Stock Additional
Paid-In
CapitalAccumulated
DeficitAccumulated
Other
Comprehensive
Gain (Loss)Total
Stockholders’
EquityShares Amount Balance as of June 30, 2023 164,877,180 $ 165 $ 17,476,451 $ (15,142,692) $ (38,780) $ 2,295,144 Exercise of stock options 93,855 0 746 0 0 746 Issuance of common stock upon vesting of restricted stock units 586,270 1 (1) 0 0 0 Issuance of stock under employee stock purchase plan 0 0 0 0 0 0 Stock-based compensation 0 0 57,973 0 0 57,973 Other comprehensive loss, net of tax 0 0 0 0 (2,740) (2,740) Net loss 0 0 0 (57,073) 0 (57,073) Balances as of September 30, 2023 165,557,305 $ 166 $ 17,535,169 $ (15,199,765) $ (41,520) $ 2,294,050 Balance as of December 31, 2022 162,840,360 $ 163 $ 17,358,645 $ (15,008,287) $ (42,776) $ 2,307,745 Exercise of stock options 171,888 0 1,423 0 0 1,423 Issuance of common stock upon vesting of restricted stock units 2,273,321 3 (3) 0 0 0 Issuance of stock under employee stock purchase plan 271,736 0 5,790 0 0 5,790 Stock-based compensation 0 0 169,314 0 0 169,314 Other comprehensive income, net of tax 0 0 0 0 1,256 1,256 Net loss 0 0 0 (191,478) 0 (191,478) Balance as of September 30, 2023 165,557,305 $ 166 $ 17,535,169 $ (15,199,765) $ (41,520) $ 2,294,050 Balance as of June 30, 2022 161,892,008 $ 162 $ 17,239,092 $ (11,124,740) $ (29,864) $ 6,084,650 Exercise of stock options 125,039 0 666 0 0 666 Issuance of common stock upon vesting of restricted stock units 178,743 0 0 0 0 0 Stock-based compensation 0 0 60,223 0 60,223 Other comprehensive loss, net of tax 0 0 0 0 (19,402) (19,402) Net loss 0 0 0 (73,476) 0 (73,476) Balance as of September 30, 2022 162,195,790 $ 162 $ 17,299,981 $ (11,198,216) $ (49,266) $ 6,052,661 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 0 0 (363,731) 72,698 0 (291,033) Exercise of stock options 552,400 1 5,645 0 0 5,646 Issuance of common stock upon vesting of restricted stock units 1,025,363 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 0 180,502 0 0 180,502 Other comprehensive loss, net of tax 0 0 0 0 (42,981) (42,981) Net loss 0 0 0 (9,849,460) 0 (9,849,460) Balance as of September 30, 2022 162,195,790 $ 162 $ 17,299,981 $ (11,198,216) $ (49,266) $ 6,052,661 FLOWSNine Months Ended
September 30,2023 2022 Cash flows from operating activities: Net loss $ (191,478) $ (9,849,460) Adjustments to reconcile net loss to net cash flows from operating activities: Goodwill impairment 0 9,630,000 Depreciation and amortization 239,550 180,312 Depreciation of rental equipment 1,965 2,185 Amortization of right-of-use assets 8,325 9,266 Provision for allowances for doubtful accounts 4,935 8,867 Stock-based compensation 154,727 167,098 Deferred income taxes (6,658) (5,942) Accretion of interest 2,545 2,496 Other, net 5,251 3,677 Changes in operating assets and liabilities: Accounts receivable (696) (45,267) Prepaid expenses and other current assets 14,070 (39,177) Inventory 18,246 13,709 Other assets (18,362) (22,854) Accounts payable (21,670) 24,067 Accrued expenses and other current liabilities 17,075 70,046 Accrued compensation 433 (32,028) Deferred revenue (1,261) 12,311 Operating lease liabilities (7,133) (8,111) Other liabilities 75 2,548 Net cash provided by operating activities 219,939 123,743 Cash flows from investing activities: Capital expenditures (10,060) (10,285) Capitalized software (109,781) (108,588) Proceeds from marketable securities 0 2,507 Other, net 0 2,514 Net cash used in investing activities (119,841) (113,852) Cash flows from financing activities: Net proceeds from the exercise of stock options 1,423 5,646 Proceeds from employee stock purchase plan 8,597 3,386 Cash received for withholding taxes on stock-based compensation, net 2,609 594 Other, net 0 (7,510) Net cash provided by financing activities 12,629 2,116 Net increase in cash and cash equivalents 112,727 12,007 Effect of foreign currency exchange rate changes (382) (5,856) Cash and cash equivalents at beginning of the period 918,182 893,480 Cash and cash equivalents at end of the period $ 1,030,527 $ 899,631 Income taxes paid $ 6,317 $ 901 Interest paid $ 8,687 $ 8,688
value.value around the world. The Company’s mission is to empower all people everywhere to live their healthiest lives by transforming the healthcare experience.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.
Total revenue and net current year presentation. Unaudited Condensed Consolidated Financial Statements. accounting for income taxes, Quarter Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Access Fees Revenue U.S. $ 465,692 $ 386,181 $ 1,337,264 $ 1,085,325 International 74,387 62,737 212,882 176,764 Total 540,079 448,918 1,550,146 1,262,089 Visit Fee Revenue U.S. 62,766 59,863 191,479 176,187 International 2,800 2,690 8,748 9,131 Total 65,566 62,553 200,227 185,318 Other U.S. 5,555 9,583 17,856 29,617 International 202 604 902 1,448 Total 5,757 10,187 18,758 31,065 Total Revenues $ 611,402 $ 521,658 $ 1,769,131 $ 1,478,472 As of September 30, As of December 31, 2022 2021 Deferred device and contract costs, current $ 30,762 $ 22,304 Deferred device and contract costs, noncurrent $ 9,488 $ 6,249 Total deferred device and contract costs $ 40,250 $ 28,553 Deferred Device and Contract Costs Beginning balance as of December 31, 2021 $ 28,553 Additions $ 41,109 Cost of revenue recognized $ (29,412) Ending balance as of September 30, 2022 $ 40,250 As of September 30, As of December 31, 2022 2021 Raw materials and purchased parts $ 27,565 $ 28,540 Work in process 1,187 597 Finished goods 36,803 49,146 Inventory reserve (6,211) (5,204) Total inventories $ 59,344 $ 73,079 As of September 30, As of December 31, 2022 2021 Prepaid expenses $ 59,141 $ 38,255 Deferred device and contract costs, current 30,762 22,304 Other receivables 24,468 21,168 Other current assets 12,541 5,660 Total prepaid expenses and other current assets $ 126,912 $ 87,387 Weighted Average Remaining Useful Accumulated Net Carrying Useful Life Life Gross Value Amortization Value (Years) September 30, 2022 Client relationships 2 to 20 years $ 1,451,374 $ (267,063) $ 1,184,311 13.9 Trademarks 2 to 15 years 324,098 (84,385) 239,713 7.1 Software 3 to 5 years 252,095 (61,709) 190,386 2.9 Technology 5 to 7 years 343,025 (103,172) 239,853 4.8 Intangible assets, net $ 2,370,592 $ (516,329) $ 1,854,263 10.7 December 31, 2021 Client relationships 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 Software 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 Intangible assets, net $ 2,261,768 $ (351,490) $ 1,910,278 12.0 As of September 30, As of December 31, 2022 2021 Beginning balance as of December 31, 2021 and 2020, respectively $ 14,504,174 $ 14,581,255 Impairment (9,630,000) 0 Additions associated with acquisitions 0 64,269 Purchase consideration adjustments net of deferred tax impacts 0 (122,306) Currency translation adjustment (28,173) (19,044) Ending balance as of September 30, 2022 and December 31, 2021 $ 4,846,001 $ 14,504,174 Testing dates Discount Rate Peer Group Revenue Multiples % 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 As of September 30, As of December 31, 2022 2021 Professional fees $ 13,424 $ 7,124 Consulting fees/provider fees 17,243 19,010 Client performance guarantees 4,896 3,034 Interest payable 5,810 1,480 Income tax payable 4,511 3,098 Insurance 8,568 3,884 Marketing 39,075 2,958 Operating lease liabilities – current 12,864 12,687 Franchise and sales taxes 11,454 9,965 Device replacement cost 5,925 6,263 Accrued rebates 12,581 4,619 Staff augmentation 7,582 1,858 Other 33,178 26,953 Total $ 177,111 $ 102,933 September 30, 2022 Level 1 Level 2 Total Cash and cash equivalents $ 899,631 $ 0 $ 899,631 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 As of September 30, Operating Leases: 2022 Remainder of 2022 $ 4,339 2023 15,979 2024 10,856 2025 8,295 2026 7,224 2027 and thereafter 17,695 Total future minimum payments 64,388 Less: imputed interest (10,444) Present value of lease liabilities $ 53,944 Accrued expenses and other current liabilities $ 12,864 Operating lease liabilities, net of current portion $ 41,080 The following table presents certain terms of the Notes that were outstanding as of September 30, 2027 Notes 2025 Notes Livongo Notes Principal Amount Outstanding as of September 30, 2022 (in millions) $ 1,000.0 $ 0.7 $ 550.0 Interest Rate Per Year 1.25 % 1.375 % 0.875 % Fair Value as of September 30, 2022 (in millions) (1) $ 731.3 $ 0.3 $ 458.7 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 September 30, 2022 4.1258 18.6621 13.94 Remaining Contractual Life as of September 30, 2022 4.7 years 2.6 years 2.7 years 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. As of September 30, As of December 31, 2027 Notes 2022 2021 Principal $ 1,000,000 $ 1,000,000 Less: Debt discount, net (1) (16,269) (250,846) Net carrying amount 983,731 749,154 2025 Notes Principal 725 730 Less: Debt discount, net (1) (8) (166) Net carrying amount 717 564 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 $ 1,534,448 $ 1,225,671 Quarters Ended Nine Months Ended September 30, September 30, 2027 Notes: 2022 2021 2022 2021 Contractual interest expense $ 3,125 $ 3,125 $ 9,375 $ 9,375 Amortization of debt discount 838 9,370 2,502 27,592 Total $ 3,963 $ 12,495 $ 11,877 $ 36,967 Effective interest rate 1.6 % 3.4 % 1.6 % 3.4 % Quarters Ended Nine Months Ended September 30, September 30, 2025 Notes: 2022 2021 2022 2021 Contractual interest expense $ 2 $ 10 $ 7 $ 1,080 Amortization of debt discount 1 48 2 4,546 Total $ 3 $ 58 $ 9 $ 5,626 Effective interest rate 1.8 % 4.7 % 1.8 % 4.7 % Quarters Ended Nine Months Ended September 30, September 30, Livongo Notes: 2022 2021 2022 2021 Contractual interest expense $ 1,203 $ 1,203 $ 3,609 $ 3,609 Amortization of debt discount 0 4,858 0 14,389 Total $ 1,203 $ 6,061 $ 3,609 $ 17,998 Effective interest rate 0.9 % 5.2 % 0.9 % 5.2 % right-of-use asset impairment charges. The As of September 30, 2022 Remainder of 2022 $ 3,375 2023 9,708 2024 4,290 2025 568 Total $ 17,941 2023. The Company recognizes the forfeiture of stock-based awards as they occur. Weighted- Weighted- Average Number of Average Remaining Aggregate Shares Exercise Contractual Intrinsic Outstanding Price Life in Years Value Balance at December 31, 2021 3,426,978 $ 22.88 5.32 $ 242,569 Stock option grants 1,407,809 $ 34.33 N/A Stock options exercised (552,400) $ 10.22 N/A $ (23,208) Stock options forfeited (69,761) $ 57.38 N/A Balance at September 30, 2022 4,212,626 $ 27.81 6.25 $ 23,805 Vested or expected to vest at September 30, 2022 4,212,626 $ 27.81 6.25 $ 23,805 Exercisable at September 30, 2022 2,770,160 $ 22.06 4.50 $ 23,805 The total grant-date fair value of stock options granted during the Nine Months Ended September 30, 2022 2021 Volatility 56.69% - 67.95% 56.52% - 58.14% Expected term (in years) 4.1 4.1 Risk-free interest rate 1.13% - 3.46% 0.31% - 0.70% Dividend yield 0 0 Weighted-average fair value of underlying stock options $ $17.72 $ $72.46 The Company records compensation expense in the consolidated statements 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 1 year to 3 years. Weighted-Average Grant Date RSUs Fair Value Per RSU Balance at December 31, 2021 2,133,501 $ 168.43 Granted 5,649,470 $ 51.94 Vested and issued (826,297) $ 155.01 Forfeited (814,313) $ 112.22 Balance at September 30, 2022 6,142,361 $ 70.72 Vested and unissued at September 30, 2022 23,878 $ 92.15 Non-vested at September 30, 2022 6,118,483 $ 70.77 For the Stock-based compensation costs associated with the Company’s RSUs subject to performance Weighted-Average Grant Date Shares Fair Value Per PSU Balance at December 31, 2021 356,249 $ 140.01 Granted 471,659 $ 74.16 Vested and issued (199,066) $ 109.37 Forfeited (27,530) $ 90.44 Balance at September 30, 2022 601,312 $ 103.44 Vested and unissued at September 30, 2022 0 $ 0.00 Non-vested at September 30, 2022 601,312 $ 103.44 During the years. Quarter Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Cost of revenue (exclusive of depreciation and amortization, which is shown separately) $ 675 $ 2,162 $ 4,994 $ 6,310 Advertising and marketing 3,614 5,244 10,523 15,141 Sales 11,064 17,518 33,845 57,638 Technology and development 17,660 22,910 51,532 77,335 General and administrative 22,649 23,867 66,204 84,547 Total stock-based compensation expense (1) $ 55,662 $ 71,701 $ 167,098 $ 240,971 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. On August 23, 2023, the court granted the defendants' motion to dismiss the complaint. Key Factors Affecting Our Performance and support initiatives that will enhance members’ experiences. U.S. Integrated Care members increased by 8.3 million to 90.2 million at September 30, 2023, compared to the same period in 2022. lags marketing spend. 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 2023. Testing dates Discount Rate Peer Group Revenue Multiples % 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 October 1, 2022 testing date. Quarter Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 $ $ Variance % $ $ Variance % Revenue $ 611,402 $ 521,658 $ 89,744 17 % $ 1,769,131 $ 1,478,472 $ 290,659 20 % Expenses: Cost of revenue (exclusive of depreciation and amortization, 185,619 169,041 16,578 10 % 555,114 475,273 79,841 17 % Operating expenses: Advertising and marketing 178,920 111,078 67,842 61 % 477,094 303,738 173,356 57 % Sales 54,634 62,602 (7,968) (13) % 170,893 191,251 (20,358) (11) % Technology and development 87,815 80,250 7,565 9 % 256,053 239,017 17,036 7 % General and administrative 112,542 103,016 9,526 9 % 328,333 319,404 8,929 3 % Acquisition, integration, and transformation costs 1,594 4,340 (2,746) (63) % 8,993 22,084 (13,091) (59) % Depreciation and amortization 62,008 51,907 10,101 19 % 180,312 151,907 28,405 19 % Goodwill impairment 0 0 0 N/M 9,630,000 0 9,630,000 N/M Total expenses 683,132 582,234 100,898 17 % 11,606,792 1,702,674 9,904,118 N/M Loss from operations (71,730) (60,576) (11,154) (18) % (9,837,661) (224,202) (9,613,459) N/M Loss on extinguishment of debt 0 850 (850) (100) % 0 43,728 (43,728) (100) % Other expense (income), net 1,571 376 1,195 318 % 2,607 (5,493) 8,100 147 % Interest expense, net 1,346 18,895 (17,549) (93) % 11,163 61,493 (50,330) (82) % Net loss before provision for income taxes (74,647) (80,697) 6,050 7 % (9,851,431) (323,930) (9,527,501) N/M Provision for income taxes (1,171) 3,643 (4,814) N/M (1,971) 93,878 (95,849) N/M Net loss $ (73,476) $ (84,340) $ 10,864 13 % $ (9,849,460) $ (417,808) $ (9,431,652) N/M Net loss per share, basic and diluted $ (0.45) $ (0.53) $ 0.08 15 % $ (61.09) $ (2.68) $ (58.41) N/M EBITDA (1) $ (9,722) $ (8,669) $ (1,053) (12) % $ (27,349) $ (72,295) $ 44,946 62 % Adjusted EBITDA (1) $ 51,211 $ 67,372 $ (16,161) (24) % $ 152,419 $ 190,760 $ (38,341) (20) % Quarter Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Net loss $ (73,476) $ (84,340) $ (9,849,460) $ (417,808) Add: Goodwill impairment 0 0 9,630,000 0 Loss on extinguishment of debt 0 850 0 43,728 Other expense (income), net 1,571 376 2,607 (5,493) Interest expense, net 1,346 18,895 11,163 61,493 Provision for income taxes (1,171) 3,643 (1,971) 93,878 Depreciation and amortization 62,008 51,907 180,312 151,907 EBITDA (9,722) (8,669) (27,349) (72,295) Stock-based compensation 55,662 71,701 167,098 240,971 Acquisition, integration, and transformation costs 1,594 4,340 8,993 22,084 Lease abandonment and exit costs 3,677 0 3,677 0 Adjusted EBITDA $ 51,211 $ 67,372 $ 152,419 $ 190,760 To supplement our financial information presented in accordance with GAAP, we use earnings before interest, provision for income taxes, depreciation, and amortization (“EBITDA”), Adjusted EBITDA, and 2022. By geography, U.S. revenue grew 8% to $1,672.8 million and International revenue grew 21% to $269.1 million compared to the nine months ended September 30, 2022. nine months ended September 30, 2023, primarily reflecting higher gross profit, partially offset by higher advertising and marketing costs and, to a lesser extent, higher general and administrative, and technology and development expenses. Nine Months Ended September 30, 2022 2021 Condensed Consolidated Statements of Cash Flows - Summary Net cash provided by operating activities $ 123,743 $ 110,782 Net cash used in investing activities (113,852) (52,906) Net cash provided by financing activities 2,116 34,322 Total $ 12,007 $ 92,198 2023. Historically, we have financed our operations primarily through sales of equity securities, debt issuance, and bank borrowings. our convertible senior notes. 2023. year is paid. products and services. year-over-year period. Risk however, our deposits, at times, may exceed federally insured limits. Our cash equivalents are primarily invested in institutional money market funds. 2022. Procedures Proceedings Factors 2022. Incorporated by Reference Exhibit Exhibit Description Form File No. Exhibit Filing Filed 3.1 Seventh Amended and Restated Certificate of Incorporation of Teladoc Health, Inc. 8-K 001-37477 3.1 6/2/22 3.2 8-K 001-37477 3.2 6/2/22 10.1 * 31.1 * 31.2 * 32.1 ** 32.2 ** 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 Date: By: /s/ JASON GOREVIC Name: Jason Gorevic Title: Chief Executive Officer Date: By: /s/ MALA MURTHY Name: Mala Murthy Title: Chief Financial Officerthethe nine months ended September 30, 20222023 and 2021,2022, in the opinion of management, reflect all adjustments (consisting of normal recurring accruals)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.20212022 (the “2021“2022 Form 10-K”), which includes a complete set of footnote disclosures, including the Company’s significant accounting policies.threetwo professional associations and twelve10 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.the Company.Teladoc Health. 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.6income (loss)loss for the VIE were $56.1 million and $0.0 million, and $57.5 million and ($1.1) million, and $58.8 million and $1.0$1.1 million, for the quartersthree months ended September 30, 20222023 and 2021,2022, respectively. Total revenue and net income (loss)loss for the VIE were $176.6 million and $0.0 million, and $176.9 million and ($3.9) million, and $169.6 million and ($0.2)$3.9 million, for the nine months ended September 30, 20222023 and 2021,2022, respectively. The VIE’s total assets, all of which were current, were $51.0$263.5 million and $58.5$106.7 million at September 30, 20222023 and December 31, 2021,2022, respectively. The VIE’s total liabilities, all of which were current, were $91.0$312.1 million and $94.6$143.8 million at September 30, 20222023 and December 31, 2021,2022, respectively. The VIE’s total stockholders’ deficit was $40.0$48.6 million and $36.1$37.1 million at September 30, 20222023 and December 31, 2021,2022, respectively.Business CombinationsThe Company accounts for its business combinations using the acquisition methodTable of accounting. The purchase price is attributedContentsfair 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 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.reported resultsthe Condensed Consolidated Statements of operations;Operations; if material, the effects of changes in estimates are disclosed in the notesNotes to the condensed consolidated financial statements. 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, allowances for sales and bad debt allowances,for doubtful accounts, and the accounting for business combinations. Other significant areas include revenue recognition (including performance guarantees)guarantees and claims adjustments), the7contingences,contingencies, litigation and related legal accruals, the accounting for stock-based compensation awards, and other items as described in the Summary of Significant Accounting policies in this Quarterly Report and in the 20212022 Form 10-K.August 2020,September 2022, 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 StandardsIn June 2022, the 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 adoption of ASU 2022-03 is not expected to have a material impact on the Company’s financial statements.In September 2022, the FASB issued ASU 2022-04, “Liabilities – Supplier Finance Programs (Subtopic 405-50) – Disclosure of Supplier Finance Program Obligations,” to provide guidance on disclosure requirements for supplier finance programs and improve information transparency by requiring the disclosure of key terms of the program, amounts outstanding that remain unpaid, a description of where those amounts are presented in the balance sheet, and a rollforwardroll forward of any outstanding obligations. ASU 2022-04 is effective for annual reporting periods, including interim periods therein, beginning after December 15, 2022, except for the amendment on roll forward information, which is effective for fiscal years beginning after December 15, 2023. EarlyThe adoption is permitted. The Company is currently evaluating what the impact of adopting ASU 2022-04 maydid not have any impact on itsthe Company’s financial statements.consistingwhich primarily consist of employers, health plans, hospitals and health systems, insurance companies, and financial services companies (collectively “Clients”), as well as individual members who utilize the Company’s solutions, 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,visits and is reported as a component of other revenue when disaggregated revenue is primarilypresented. Revenue associated with virtual healthcare device equipment sales included with itsthe Company’s hosted virtual healthcare platform. Access revenue accounted for 88% and 86% of the Company’s revenue for the quarters ended September 30,platform is also reported in other revenue.82022 and 2021, respectively. Access revenue accounted for 88% and 85% of the Company’s revenue for the nine months ended September 30, 2022 and 2021, respectively.Three Months Ended
September 30,Nine Months Ended
September 30,2023 2022 2023 2022 Revenue by Type Access fees $ 582,070 $ 540,079 $ 1,708,601 $ 1,550,146 Other 78,168 71,323 233,287 218,985 Total Revenue $ 660,238 $ 611,402 $ 1,941,888 $ 1,769,131 Revenue by Geography U.S. Revenue $ 569,322 $ 534,013 $ 1,672,770 $ 1,546,599 International Revenue 90,916 77,389 269,118 222,532 Total Revenue $ 660,238 $ 611,402 $ 1,941,888 $ 1,769,131 2021,2022, the Company refined its definition of internationalother revenue to capture revenues to reflect all international revenues based on location of the customer. Previously, Direct-to-Consumer (“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 inassociated with visit revenues versus access fee, revenues.virtual healthcare device equipment sales, and its hosted virtual healthcare platform. Prior period amounts have been recast to conform with the current presentation.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 is derived from 1) upfront payments for a device, which is amortized ratably over the expected member enrollment period; 2) upfront payments for certain services where payment is required for future periods before the service is delivered to the member, which is recognized when the services are provided; and 3) upfront payments from third-party financing companies with whom the Company works to provide certain Clients with a rental option, which is recognized over the rental period. Deferred revenue that will be recognized during the next twelve-month period is recorded as current deferred revenue and the remaining portion is recorded as non-current deferred revenue.$93.4$112.3 million at September 30, 2023, a net decrease of $1.4 million from December 31, 2022, and $111.3 million at September 30, 2022, and $76.9 million at September 30, 2021. Thea net increase of $14.0$9.3 million and $21.8 million in the deferred revenue balance for the nine months ended September 30, 2022 and 2021, respectively, was primarilyfrom December 31, 2021. These changes were driven by BetterHelp, the Company’s DTC mental health product, InTouch, and Livongo, andincreased cash payments received or due in advance of satisfying the Company’s performance obligations, offset by revenue recognized that werehad been included in the deferred revenue balance at the beginning of the period. The Company anticipates that it will satisfy mostamount of its performance obligation associated withrevenue recognized in the deferred revenue within the prospective fiscal year. Revenue recognized during the quarters ended September 30, 2022 and 2021periods that was included in the opening current deferred revenue at the beginning of the periods was $59.5$88.6 million and $47.2$68.2 million respectively. Revenue recognized duringfor the nine months ended September 30, 2023 and 2022, and 2021 that was included in deferred revenue at the beginning of the periods was $68.2 million and $48.5 million, respectively.$64.5$65.3 million and $23.8of revenue throughout the remainder of 2023, $36.1 million of revenue in the remainder of 2022year ending December 31, 2024, and 2023, respectively,the remaining balance thereafter related to future performance obligations that are unsatisfied or partially unsatisfied as of September 30, 2022.9Prepaidprepaid expenses and other current assets or Otherother assets, depending on term, and consisted of the following (in thousands):As of September 30,
2023As of December 31,
2022Deferred device and contract costs, current $ 31,352 $ 29,956 Deferred device and contract costs, noncurrent 17,999 8,404 Total deferred device and contract costs $ 49,351 $ 38,360 costsdevice and other activitycontract costs were as follows (in thousands):Deferred Device and Contract Costs Beginning balance as of December 31, 2022 $ 38,360 Additions 45,567 Cost of revenue recognized (34,576) Ending balance as of September 30, 2023 $ 49,351 September 30, 2023 Level 1 Level 2 Total Cash and cash equivalents $ 1,030,527 $ 0 $ 1,030,527 December 31, 2022 Level 1 Level 2 Total Cash and cash equivalents $ 918,182 $ 0 $ 918,182 Note 5. Prepaid Expenses and Other Current AssetsPrepaid expenses and other current assets consisted of the following (in thousands):10As of September 30,
2023As of December 31,
2022Raw materials and purchased parts $ 23,854 $ 30,126 Work in process 902 433 Finished goods 18,847 31,977 Inventory reserve (7,687) (6,194) Total inventories $ 35,916 $ 56,342 Note 6. Intangible Assets, Net and Certain Cloud Computing CostsIntangible assets, net consist of the following (in thousands):Amortization expense for intangible assets net of foreign currency remeasurement for intangible assets was $58.2 million and $49.6 million for the quarters ended September 30, 2022 and 2021, respectively. Amortization expense for intangible assets net of foreign currency remeasurement for intangible assets was $171.5 million and $145.3 million for the nine months ended September 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 resulted in the weighted average life of the trademarks decreasing from 9.5 years to 7.5 years as of 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) and $17.4 million (or $0.11 per basic and diluted share) for the quarter and nine months ended September 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.Net cloud computing costs are recorded in other assets within the Company’s balance sheet. As of September 30, 2022 and December 31, 2021, those costs were $21.8 million and $2.6 million, respectively. The associated expense for cloud computing costs, which are recorded in general and administration expense, was $0.6 million and less than $0.1 million for the quarter ended September 30, 2022 and 2021, respectively. The associated expense for cloud computing costs was $1.1 million and $0.1 million for the nine months ended September 30, 2022 and 2021, respectively.Note 7. GoodwillGoodwill consisted of the following (in thousands):11The Company has experienced a pair of triggering events in 2022 due to sustained decreases in the Company’s share price, prompting impairment assessments of goodwill and long-lived assets including definite-lived intangibles, 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 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.
(current year/subsequent year)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 goodwill impairment charge (or $41.11 per basic and diluted share) for the quarter ended March 31, 2022. The non-cash charges had no impact on the provision for income taxes.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 charge (or $18.78 per basic and diluted share). For the nine months ended September 30, 2022, a $9.6 billion non-deductible goodwill impairment charge (or $59.73 per basic and diluted share) was recognized. The non-cash charges had no impact on the provision for income taxes.In the event there are further adverse changes in the Company’s 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 lower terminal growth rate, the Company may be required to record additional non-cash impairment charges to its goodwill, other intangibles, and/or long-lived assets. Such non-cash charges could have a material adverse effect on the Company’s condensed consolidated statement of operations and balance sheet in the reporting period of the charge. Following the 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 impairment charge. The assessment is most sensitive to broader market conditions, including the discount rate and market multiples, and to the Company’s estimated future cash flows.12As of September 30,
2023As of December 31,
2022Prepaid expenses $ 62,248 $ 63,159 Deferred device and contract costs, current 31,352 29,956 Other receivables 12,875 25,091 Other current assets 8,307 12,104 Total prepaid expenses and other current assets $ 114,782 $ 130,310 Teladoc Health Integrated
CareBetterHelp Total Balance as of December 31, 2022 and September 30, 2023 $ 0 $ 1,073,190 $ 1,073,190 Useful
LifeGross Value Accumulated
AmortizationNet Carrying
Value Weighted
Average
Remaining
Useful Life
(Years)September 30, 2023 Client relationships 2 years to 20 years $ 1,456,027 $ (364,027) $ 1,092,000 12.7 Trademarks 2 years to 15 years 324,675 (156,655) 168,020 6.8 Software 3 years to 5 years 416,417 (137,176) 279,241 2.5 Technology 4 years to 7 years 341,672 (152,631) 189,041 3.9 Intangible assets, net $ 2,538,791 $ (810,489) $ 1,728,302 9.5 December 31, 2022 Client relationships 2 years to 20 years $ 1,458,384 $ (291,993) $ 1,166,391 13.5 Trademarks 2 years to 15 years 325,171 (98,303) 226,868 7.0 Software 3 years to 5 years 294,629 (78,373) 216,256 2.7 Technology 4 years to 7 years 343,067 (115,817) 227,250 4.7 Intangible assets, net $ 2,421,251 $ (584,486) $ 1,836,765 10.4 Three Months Ended
September 30,Nine Months Ended
September 30,2023 2022 2023 2022 Acquired intangibles $ 69,189 $ 48,676 $ 172,210 $ 148,327 Capitalized software 22,645 9,524 58,995 23,176 Amortization of intangible assets expense $ 91,834 $ 58,200 $ 231,205 $ 171,503 Years Ending December 31, 2023 $ 100,248 2024 344,537 2025 260,330 2026 199,008 2027 and thereafter 824,179 $ 1,728,302 Note 9. Fair Value MeasurementsThe 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 activemarkets.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 December 31, 2021 consisted primarily of a certificate of deposit held at a financial 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):There were no transfers between fair value measurement levels during any of the periods presented.13As of September 30,
2023As of December 31,
2022Professional fees $ 9,235 $ 10,152 Consulting fees/provider fees 17,598 16,407 Client performance guarantees and accrued rebates 31,615 18,687 Interest payable 5,781 1,480 Income tax payable 757 3,817 Insurance 4,662 5,981 Lease abandonment obligation - current 5,650 3,247 Marketing and advertising 43,078 35,055 Operating lease liabilities – current 10,787 13,592 Franchise and sales taxes 17,086 10,183 Staff augmentation 4,006 3,391 Other 42,298 46,701 Total $ 192,553 $ 168,693 Note 10. LeasesThe 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 10 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 terms 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.Operating LeasesThe Company leases office space under non-cancelable operating leases in the U.S. and various international locations. The future minimum lease payments under non-cancelable operating leases were as follows (in thousands):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.The Company recorded lease abandonment and exit costs of $3.7 million for both the quarter and nine months ended September 30, 2022, which primarily consisted of lease impairments and related charges due to the abandonment and/or exit of excess leased office space. However, the lease liabilities related to these spaces remain an outstanding obligation of the Company as of September 30, 2022.11.10. Convertible Senior Notes2022,2023, 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 Health, Inc. (“Livongo”) on June 4, 2020 for which the Company has agreed to guaranteeassume all of Livongo’s rights and obligations (the “Livongo Notes;” and together with the 2027 Notes and 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.142022:(1)The Notes are classified as Level 2 within the fair value hierarchy, as defined in Note 9.2027 Notes 2025 Notes Livongo Notes Principal Amount Outstanding as of September 30, 2023 (in millions) $ 1,000.0 $ 0.7 $ 550.0 Interest Rate Per Year 1.25 % 1.375 % 0.875 % Fair Value as of September 30, 2023 (in millions) (1) $ 796.9 $ 0.3 $ 502.6 Fair Value as of December 31, 2022 (in millions) (1) $ 768.2 $ 0.3 $ 480.6 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 September 30, 2023 4.1258 18.6621 13.9400 Remaining Contractual Life as of September 30, 2023 3.7 years 1.6 years 1.7 years ●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 five business day period after any ten consecutive trading day period (or five 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.0.59200.592 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 reference15Livongothe Company undergoes a fundamental change (as defined in the applicable indenture) at any time prior to the maturity date of the Livongo Notes, holders will have the right, at their option, to require Livongothe Company 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(1)Included in the accompanying condensed consolidated balance sheetAs of September 30,
2023As of December 31,
20222027 Notes Principal $ 1,000,000 $ 1,000,000 Less: Debt discount, net (1) (12,886) (15,430) Net carrying amount 987,114 984,570 2025 Notes Principal 725 725 Less: Debt discount, net (1) (6) (7) Net carrying amount 719 718 Livongo Notes Principal 550,000 550,000 Less: Debt discount, net (1) 0 0 Net carrying amount 550,000 550,000 Total net carrying amount $ 1,537,833 $ 1,535,288 16ExchangesThree Months Ended
September 30,Nine Months Ended
September 30,2027 Notes 2023 2022 2023 2022 Contractual interest expense $ 3,125 $ 3,125 $ 9,375 $ 9,375 Amortization of debt discount $ 851 $ 838 $ 2,542 $ 2,502 Total $ 3,976 $ 3,963 $ 11,917 $ 11,877 Effective interest rate 1.6 % 1.6 % 1.6 % 1.6 % Three Months Ended
September 30,Nine Months Ended
September 30,2025 Notes 2023 2022 2023 2022 Contractual interest expense $ 2 $ 2 $ 7 $ 7 Amortization of debt discount $ 1 $ 1 $ 2 $ 2 Total $ 3 $ 3 $ 9 $ 9 Effective interest rate 1.8 % 1.8 % 1.8 % 1.8 % Three Months Ended
September 30,Nine Months Ended
September 30,Livongo Notes 2023 2022 2023 2022 Contractual interest expense $ 1,203 $ 1,203 $ 3,609 $ 3,609 Amortization of debt discount $ 0 $ 0 $ 0 $ 0 Total $ 1,203 $ 1,203 $ 3,609 $ 3,609 Effective interest rate 0.9 % 0.9 % 0.9 % 0.9 % Conversionscertain equipment under non-cancelable leases in the U.S. and various international locations. The leases have remaining lease terms of Convertible Senior Notes Due 2025In June 2021,less than one to nine years, with options to extend the lease term from one to five years. At the inception of an arrangement, the Company entered into privately negotiated agreements withdetermines whether the arrangement is, or contains, a lease based on the terms 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.Operating Leases: As of September 30,
20232023 $ 3,881 2024 11,909 2025 9,273 2026 8,082 2027 5,967 2028 and thereafter 14,674 Total future minimum payments 53,786 Less: imputed interest (8,646) Present value of lease liabilities $ 45,140 Accrued expenses and other current liabilities $ 10,787 Operating lease liabilities, net of current portion $ 34,353 holdersinformation 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 two to five years.2025 NotesCompany as of September 30, 2023. See Note. 12, “Restructuring,” for further information.exchange approximately $206.4restructure its operations to reduce operating costs. The Company accounts for restructuring costs in accordance with ASC Subtopic 420-10, "Exit or Disposal Cost Obligations" and ASC Section 360-10-35, "Property, Plant and Equipment-Subsequent Measurement." The costs are recorded to the "Restructuring costs" line item within the Company's Condensed Consolidated Statements of Operations and Other Comprehensive Loss as they are recognized.aggregate principal amount of 2025 Notesrestructuring costs, of which $0.2 million was related to adjustments for an aggregateseverance estimates and $0.2 million was related to adjustments for estimates related to the reduction 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 duringoffice space. During the nine months ended September 30, 2021. As a result of the exchanges and conversions,2023, the Company recorded a charge$16.0 million of restructuring costs, of which $7.9 million was related to employee transition, severance payments, employee benefits, and related costs and $8.1 million was related to costs associated with the loss on extinguishmentoffice space reductions, including $4.9 million of debt, net of transaction fees, of $31.4 million and $39.5 million during the quarter and nine months ended September 30, 2021, respectively.Redemption of Convertible Senior Notes Due 2022In 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 Company utilizes a third-party financing company to provide certain Clients with a rental option. The principal portion of these up-front payments are reportedamounts to be settled by cash disbursements was accounted for as advances from financing companiesa restructuring liability under the line item "Accrued expenses and other current liabilities" in the accompanying condensed consolidated balance sheets. Interest rates applicableCompany's Condensed Consolidated Balance Sheets.outstanding advancesCompany's restructuring, with the severance related portion included in the line item "Accrued compensation" and the lease termination related portion2022 ranged from 3.35% to 8.50%.17Client lease payments to third party financing companies will reduce the advances from financing companies as of September 30, 2022 by year as follows2023 (in thousands):Note 13. Legal MattersFrom 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 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 based on allegedly false or misleading 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 lawsuit vigorously, including through the filing of a motion to dismiss the complaint on April 8, 2022.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 was 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 asserted 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. On August 2, 2022, a duplicative purported securities class action complaint (De Schutter v. Teladoc Health, Inc., et.al.) was filed in the United States18Restructuring Plan Severance Lease Termination Total Accrued Balance, December 31, 2022 $ 796 $ 3,247 $ 4,043 Additions 7,871 3,309 11,180 Cash payments (7,345) (906) (8,251) Accrued Balance, September 30, 2023 $ 1,322 $ 5,650 $ 6,972 District Court for the Eastern District of New York. The claims and parties in De Schutter were substantially similar to those in Schneider. The De Schutter case was transferred on consent to the Southern District court, and the Schneider and De Schutter actions have now been consolidated under the caption In re Teladoc Health, Inc. Securities Litigation. On August 23, 2022, the court appointed Leadersel Innotech ESG as lead plaintiff pursuant to the Private Securities Litigation Reform Act of 1995. The lead plaintiff filed an amended complaint on September 30, 2022, 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 February 24, 2021 to July 27, 2022. The Company believes that these claims are without merit, and the Company and its named officers intend to defend the lawsuit vigorously.On August 9, 2022, a verified shareholder derivative complaint (Vaughn v. Teladoc Health, Inc., et.al.) was filed in the United States District Court for the Southern District of New York against the Company as a nominal defendant and certain of the Company’s officers and directors. The complaint asserts violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust enrichment, and waste of corporate assets in connection with factual assertions similar to those in the purported securities class action complaints described above. The complaint seeks damages to the Company allegedly sustained as a result of the acts and omissions of the named officers and directors and seeks an order directing the Company to reform and improve the Company’s corporate governance. On September 6, 2022, a duplicative verified stockholder derivative complaint (Hendry v. Teladoc Health, Inc., et. al) was filed in the United States District Court for the Southern District of New York. The claims and parties in Hendry were substantially similar to those in Vaughn.14.13. Common Stock and Stockholders’ Equity20152023 Incentive Award Plan 2017and 2023 Employment Inducement Incentive Award Plan and Livongo Acquisition Incentive Award Plan (collectively, the “Plans”“2023 Plans”) provide for the issuance of incentive and non-statutory options and other equity-based awards to its employees and non-employee service providers. Previously, the Company’s 2015 Incentive Award Plan, 2017 Employment Inducement Incentive Award Plan and Livongo Acquisition Incentive Award Plan (together with the 2023 Plans, collectively, the “Plans”) also provided for the issuance of such awards. The Company had 15,095,26314,658,357 shares available for grant under the 2023 Plans at September 30, 2022.condensed consolidated statementCondensed Consolidated Statements of operationsOperations 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”)).19Number of
Shares
OutstandingWeighted-
Average
Exercise
PriceWeighted-
Average
Remaining
Contractual
Life in YearsAggregate
Intrinsic
ValueBalance at December 31, 2022 4,243,934 $ 27.79 6.10 $ 19,541 Stock option grants 87,554 $ 24.27 N/A Stock options exercised (171,888) $ 8.28 N/A $ 2,993 Stock options forfeited (116,323) $ 50.27 N/A Balance at September 30, 2023 4,043,277 $ 27.89 5.53 $ 9,600 Vested or expected to vest at September 30, 2023 4,043,277 $ 27.89 5.53 $ 9,600 Exercisable at September 30, 2023 3,053,345 $ 25.49 4.47 $ 9,600 quartersthree months ended September 30, 2023 and 2022 and 2021 were $0.3$0.4 million and $3.0$0.3 million, respectively. The total grant-date fair value of stock options granted during the nine months ended September 30, 2023 and 2022 were $1.2 million and 2021 were $24.9 million, and $5.8 million, respectively. The Company recognizes forfeitures as they occur. in the Black-Scholes option-pricing model are determined as follows:volatility over a period equivalent to the expected term of the stock option grants.zero.Nine Months Ended
September 30,2023 2022 Volatility 65.58% - 68.22% 56.69% - 67.95% Expected term (in years) 4.3 4.1 Risk-free interest rate 3.68% - 4.34% 1.13% - 3.46% Dividend yield 0% 0% Weighted-average fair value of underlying stock options $13.42 $17.72 quartersthree months ended September 30, 20222023 and 2021,2022, the Company recorded stock-based compensation expense related to stock options granted of $2.4$2.3 million and $23.3$2.4 million, respectively. For the nine months ended September 30, 20222023 and 2021,2022, the Company recorded stock-based compensation expense related to stock options granted of $7.0 million and $18.0 million, and $77.1 million, respectively.2022,2023, the Company had $25.1$16.7 million in unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of approximately 2.82.04 years.RSUs Weighted-Average
Grant Date
Fair Value Per RSUBalance at December 31, 2022 6,481,669 $ 63.63 Granted 7,121,431 $ 26.56 Vested and issued (2,448,261) $ 71.64 Forfeited (1,094,153) $ 50.48 Balance at September 30, 2023 10,060,686 $ 36.64 Vested and unissued at September 30, 2023 43,118 $ 56.25 Non-vested at September 30, 2023 10,017,568 $ 36.67 quartersthree months ended September 30, 2023 and 2022 and 2021 was $18.8$23.1$18.8 million, respectively. The total grant-date fair value of RSUs granted during the nine months ended September 30, 2023 and 2022 was $189.2 million and 2021 was $293.5 million, and $125.0 million, respectively.20quartersthree months ended September 30, 20222023 and 2021,2022, the Company recorded stock-based compensation expense related to RSUs of $53.7$51.9 million and $42.8$53.7 million, respectively. For the nine months ended September 30, 20222023 and 2021,2022, the Company recorded stock-based compensation expense related to RSUs of $148.8 million and $147.8 million, and $142.6 million, respectively.2022,2023, the Company had $351.8$292.1 million in unrecognized compensation cost related to non-vested RSUs, which is expected to be recognized over a weighted-average period of approximately 2.11.91 years.stock unitscriteria (“PSUs”) are initially determined using the fair market value of the Company’s common stock on the date the awards are granted (service inception date). The vesting of these PSUs is subject to certain performance conditions and a service requirement ranging from 1 year to 3 years. Stock-based compensation costs associated with these PSUs are re-assessed each reporting period based upon the estimated performance attainment on the reporting 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 rangeanges from 25%0% 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.Shares Weighted-Average
Grant Date
Fair Value Per PSUBalance at December 31, 2022 629,672 $ 99.07 Granted 1,297,725 $ 26.90 Vested and issued (117,966) $ 153.96 Forfeited (27,049) $ 46.52 Performance adjustment (1) (283,282) $ 0.00 Balance at September 30, 2023 1,499,100 $ 37.00 Vested and unissued at September 30, 2023 0 $ 0.00 Non-vested at September 30, 2023 1,499,100 $ 37.00 (1)The total grant-date fair valueBased on the Company's 2022 results, PSUs were attained at rates ranging from 0% to 86.25% of PSUs granted during the quartertarget award.and 2021 was $0.0 million and $2.5 million, respectively.the Company did not grant any PSUs. The total grant-date fair value of PSUs granted during the nine months ended September 30, 2023 and 2022 was $34.9 million and 2021 was $35.0 million, and $70.4 million, respectively.quartersthree months ended September 30, 20222023 and 2021,2022, the Company recorded stock-based compensation expense related to PSUs of $3.1$2.6 million and $4.2$3.1 million, respectively. For the nine months ended September 30, 20222023 and 2021,2022, the Company recorded stock-based compensation expense related to PSUs of $9.9 million and $12.5 million, and $16.7 million, respectively.2022,2023, the Company had $8.8$36.2 million in unrecognized compensation cost related to non-vested PSUs, which is expected to be recognized over a weighted-average period of approximately 1.31.8 years.1,019,7264,113,343 shares of common stock were reserved for issuance under this plan as of September 30, 2022.2023. The Company’s ESPP permits eligible employees to purchase common stock at a discount through21quartersthree months ended September 30, 20222023 and 2021,2022, the Company did not issue any shares under the ESPP. During the nine months ended September 30, 20222023 and 2021,2022, the Company issued 148,609271,736 shares and 82,088148,609 shares, respectively, under the ESPP. As of September 30, 2022, 422,0222023, 3,121,353 shares remained available for issuance.quartersthree months ended September 30, 20222023 and 2021,2022, the Company recorded stock-based compensation expense related to the ESPP of $0.9$1.2 million and $1.4$0.9 million, respectively. For the nine months ended September 30, 20222023 and 2021,2022, the Company recorded stock-based compensation expense related to the ESPP of $3.6 million and $2.0 million, and $4.6 million, respectively.2022,2023, the Company had $0.4$0.5 million in unrecognized compensation cost related to the ESPP, which is expected to be recognized over a weighted-average period of approximately 0.1 year.Three Months Ended
September 30,Nine Months Ended
September 30,2023 2022 2023 2022 Cost of revenue (exclusive of depreciation and amortization, which is shown separately) $ 1,464 $ 675 $ 4,060 $ 4,994 Advertising and marketing 4,399 3,614 11,527 10,523 Sales 9,110 11,064 27,055 33,845 Technology and development 14,566 16,936 42,984 50,116 General and administrative 23,406 23,373 69,082 67,620 Total stock-based compensation expense 52,945 55,662 154,708 167,098 Capitalized stock-based compensation expense 5,028 4,561 14,606 13,404 Total stock-based compensation $ 57,973 $ 60,223 $ 169,314 $ 180,502 (1)Excludes the amount capitalized related to internal software development projects.15.14. Provision for Income TaxesCompany’s provisionCompany recorded income tax benefits of $2.5 million and $2.8 million for the three and nine months ended September 30, 2023, respectively. The tax benefits recorded were the result of the current period book loss, primarily offset by valuation allowances and the tax shortfall associated with the stock-based compensation awards that vested in the year.taxes weretax benefits of $1.2 million and $2.0 million for the quarterthree and nine months ended September 30, 2022, respectively.recorded income tax expensesconsults 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 the quarter and nine months ended September 30, 2021 of $3.6 million and $93.9 million, respectively. The prior year included $87.0 million, recognizedmonetary damages, may involve discretionary amounts, present novel legal theories, are in the first quarter ended March 31,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.primarily relateda 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 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 Company's 2020 merger with Livongo. The complaint asserted violations of Sections 11, 12(a)(2) and 15 of the Securities Act based on allegedly false or misleading statements and omissions with respect to the additional valuation allowance recorded on excess stock compensation associatedregistration statement and prospectus filed in connection with the Livongo merger.Three Months Ended
September 30,Nine Months Ended
September 30,2023 2022 2023 2022 Teladoc Health Integrated Care $ 374,416 $ 342,817 $ 1,084,438 $ 1,016,800 BetterHelp 285,822 265,150 857,450 742,638 Other (1) 0 3,435 0 9,693 Total Consolidated Revenue $ 660,238 $ 611,402 $ 1,941,888 $ 1,769,131 Three Months Ended
September 30,Nine Months Ended
September 30,2023 2022 2023 2022 Teladoc Health Integrated Care $ 62,805 $ 38,880 $ 135,900 $ 91,467 BetterHelp 25,952 11,150 77,777 61,270 Other (1) 0 1,181 0 (318) Total Consolidated Adjusted EBITDA $ 88,757 $ 51,211 $ 213,677 $ 152,419 Three Months Ended
September 30,Nine Months Ended
September 30,2023 2022 2023 2022 Teladoc Health Integrated Care $ 62,805 $ 38,880 $ 135,900 $ 91,467 BetterHelp 25,952 11,150 77,777 61,270 Other 0 1,181 0 (318) Total consolidated Adjusted EBITDA 88,757 51,211 213,677 152,419 Adjustments to reconcile to GAAP net loss Goodwill impairment 0 0 0 (9,630,000) Interest income 12,606 4,803 33,075 6,192 Interest expense (5,646) (6,149) (16,744) (17,355) Other expense (income), net (1,792) (1,571) 2,908 (2,607) Depreciation and amortization (94,302) (62,008) (239,550) (180,312) Stock-based compensation (52,945) (55,662) (154,708) (167,098) Acquisition, integration, and transformation costs (5,824) (1,594) (16,848) (8,993) Restructuring costs (411) (3,677) (16,043) (3,677) Loss before provision for income taxes (59,557) (74,647) (194,233) (9,851,431) Provision for income taxes 2,484 1,171 2,755 1,971 Net loss $ (57,073) $ (73,476) $ (191,478) $ (9,849,460) As of September 30,
2023As of December 31,
2022United States $ 28,536 $ 25,935 Other 4,351 3,706 Total long-lived assets $ 32,887 $ 29,641 Operations” (“MD&A”).Operations.” 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, 20212022 (the “2021“2022 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.focusedfocusing on forging a new healthcare experience with better convenience, outcomes, and value around the world.COVID-19 UpdateWe 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,23hospitals and health systems, insurance companies, 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 global slowdown in economic activity, may result in decreased revenues, decreased collections, and increased costs. Further, the economic effects of the COVID-19 pandemic and economic conditions 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 or economic effects 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 HistoryWe 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 us and 60.2 million shares of our 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 IncomeFor the quarter ended September 30, 2022, we recorded a loss of $73.5 million, or $0.45 per share. For the nine months ended September 30, 2022, we recorded a loss of $9,849.5 million, or $61.09 per share. The nine months ended September 30, 2022 included a non-cash goodwill impairment charge of $9,630.0 million. Refer to Critical Accounting Estimates and Policies: Goodwill Impairment Charge and Note 7, Goodwill, to our condensed consolidated financial statements for more information.For the quarter and nine months ended September 30, 2021, we recorded a loss of $84.3 million and $417.8 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.MembersU.S. Integrated Care Members. U.S. Integrated Care members represent the number of unique individuals who have paid access and Revenue per Member.visit fee only access to our suite of integrated care services in the U.S. at the end of the applicable period. Our revenue growth rate and long-term profitability are affected by our ability to increase cross selling capability among our existing members over time 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 (“DTC”) members.fee. Therefore, we believe that our ability to add new members and retain existing members, and to increase utilization and penetration further into existing and new health plan Clients is a key indicator of our increasing market adoption, the growth of our business, and our future revenue potential. We further believe that increasing our membership is an integral objective that will provide us with the ability to continually innovate our servicespotential, and that increasing our membership andpotential. Average monthly revenue per U.S. Integrated Care member is an integral objective that will provide us withincreased to $1.41 in the ability to continually innovate our services and support initiatives that will enhance members’ experiences. U.S. paid membership increased by 5.3 million to 57.8 million atthree months ended September 30, 2022, compared to September 30, 2021. Average U.S. revenue per member measures the average amount of access revenue that we generate2023, 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 third quarter of 2022, average U.S. revenue per member was $2.61 compared to $2.40 for$1.40 in the same period in 2021. For2022, primarily due to increasing chronic care revenues over the course of the year. Average monthly revenue per U.S. Integrated Care member decreased to $1.40 in the nine months ended September 30, 2022, average U.S. revenue per member was $2.58 compared to $2.27 for2023 from $1.42 in the same period in 2021.Number2022, primarily due to the impact of Visitsnew members onboarded over the course of the year. The change in average monthly revenue versus the indicated prior period is reflective of the growth and Utilization.timing of onboarding new members and the mix of their fees.We also recognize revenue in connection withBetterHelp paying users represent 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 theaverage number of Clients, the number of members in a Client’s population, member utilizationglobal monthly paying users of our provider networkBetterHelp therapy services andduring the contractually negotiated prices of our services.applicable period. We believe that increasing our current member utilization rateability to add new paying users and increasing penetration further intoretain existing and new health plan Clientsusers is a key objective in order for our Clientsindicator of the increasing market adoption of BetterHelp, the growth of that business, and future revenue potential. Our ability to realize tangible healthcare savings with our service. Visits increasedreach new potential paying users through various advertising channels helped us to increase BetterHelp paying users by 14%, or 0.6 million,5% to approximately 4.60.459 million for the quarterthree months ended September 30, 2023, compared to 0.437 million for the three months ended September 30, 2022, compared to the same period in 2021. Visitsand increased by 25%, or 2.8 million,14% to approximately 13.70.467 million for the nine months ended September 30, 20222023, 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 128 basis points to approximately 22.3% for the quarter ended September 30, 2022, compared to 21.0% in the same period in 2021. Utilization increased by 401 basis points to approximately 23.2%0.409 million for the nine months ended September 30, 2022, compared2022.19.2% in the same period in 2021.Company:Seasonality.Number Our business has historically been subject to seasonality. In our Integrated Care segment, a concentration of Platform-Enabled Sessions. A platform-enabled session isour new Client contracts have an effective date of January 1 as a unique instance in which our licensed software platform has facilitated a virtual voice or video encounter between a care providerresult of many Clients’ introduction of new services at the start of each calendar year. Therefore, while membership increases, utilization and our Client’s patient, or between care providers. We believe platform-enabled sessionsenrollment rates are an indicatordampened until service delivery ramps up over the course of the valueyear. As a result of seasonal cold and flu trends, we historically have experienced our Clients derive from the platform they license from us in order to facilitate virtual care. Our Clients completed 1.0 millionhighest level of visit and 3.2 million platform-enabled sessionsother fee revenue during the quarterfirst and nine months ended September 30, 2022, respectively, comparedfourth quarters of each year.1.0 million and 3.1 millionthe higher cost of customer acquisition during the quarter and nine months ended September 30, 2021, respectively.Chronic Care Enrollment. Our chronic care programs are oneend-of-year holiday season, our BetterHelp segment has historically reduced marketing activity during the fourth quarter. As a result 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 9% to 0.8 million at September 30, 2022, compared to 0.7 million at September 30, 2021.Seasonality. In the past,this dynamic, we have typically seenexperienced fewer new member additions and the strongest increasesoperating income performance in consecutive quarterly revenuethe fourth quarter. Conversely, as marketing activity typically resumes at the start of the year, we typically experience the weakest operating income performance during the fourthfirst quarter as new customer acquisition 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 fromrevenue 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.2520212022 Form 10-K. In addition, the following updates our discussion of impairment testing therein as of September 30, 2022.We have experienced a pair of triggering events in 2022 due to sustained decreases in our share price, prompting impairment assessments ofand long-lived assets, including definite-lived intangibles, 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. We believe the 75% weighting to the income approach continues to be appropriate as it more directly reflects our future growth and profitability expectations. The table below indicates changes in the most significant inputs to our impairment analysis on each testing date since our last annual test.
(current year/subsequent year)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 ouror 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 quarterthree and nine months ended March 31, 2022. The non-cash charges had no impactSeptember 30, 2023. As of the last goodwill testing period, the excess of reporting unit value over carrying value was significant for the remaining unimpaired goodwill, which was the portion of goodwill assigned to the BetterHelp segment on the provision for income taxes.As ofassumptions.assumptions as compared to those used for the March 31, 2022 impairment assessment. The discount rate was increased for a company risk premium to reflect the currentthen-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 June 30, 2022 assessment did not result in an impairment of definite-lived intangible assets or other long-lived assets, but resulteddid result in an additional $3.0 billion non-deductible goodwill impairment charge (or $18.78 per basic and diluted share). For the nine months ended September 30, 2022,As a result, a $9.6 billion non-deductible goodwill impairment charge (or $59.73 per basic and diluted share) was recognized.recognized for the nine months ended September 30, 2022. The non-cash impairment charges had no impact on the provision for income taxes.In the event there are further adverse changes in our 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 lower terminal growth rate, we may be required to record additional non-cash impairment charges to our goodwill, other intangibles, and/or long-lived assets. Such non-cash charges could have a material adverse effect on our condensed consolidated statement of operations and balance sheet in the reporting period of the charge. Following the 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 impairment charge. The assessment is most sensitive to broader market conditions, including the discount rate and market multiples, and to our estimated future cash flows.26Condensed Consolidated Results of OperationsThe following table sets forth our condensed consolidated statement of operations data for the quarters and the nine months ended September 30, 2022 and 2021 and the dollar and percentage change between the respective periods (dollars in thousands except for per share data):
which is shown separately below)(1)Non-GAAP Financial MeasuresN/M – not meaningful27The following is a reconciliation of net loss, the most directly comparable GAAP financial measure, to EBITDA and Adjusted EBITDA for the quarters and nine months ended September 30, 2022 and 2021 (in thousands):EBITDA and Adjusted EBITDAAdjusted EBITDA,free cash flow, which are 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.performance, and are commonly used by investors to evaluate our performance and that of our competitors. 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.business, and that free cash flow reflects an additional way of viewing our liquidity that, when viewed together with GAAP results, provides management, investors, and other users of our financial information with a more complete understanding of factors and trends affecting our cash flows. We use certainthese non-GAAP financial measures for business planning purposes and in measuring our performance relative to that of our competitors. We utilize Adjusted EBITDA as the primarya key measure of our performance.interest;interest income; interest expense; other expense (income),income, net, including foreign exchange gain or loss; provision for income taxes; depreciation and amortization; and goodwill impairment. Adjusted EBITDA consists of net loss before interest income; interest expense; other 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 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; lease abandonment and exitrestructuring costs; and acquisition, integration, and transformation costs.We believe the above financial measures are commonly usedinvestors to evaluate our performanceoperating activities less capital expenditures and that of our competitors. However, ourcapitalized software development costs.thethese non-GAAP terms EBITDA and Adjusted EBITDA may vary from that of others in our industry. Neither EBITDA nor Adjusted EBITDAindustry, and other companies may calculate such measures differently than we do, limiting their usefulness as comparative measures. performance measures derived in accordance with 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 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 expense (income), net;28Contentsrecurring operating costs.●Adjusted EBITDA does not reflect significant lease abandonment and exit costs. Lease abandonment and exit costs may include certain lease impairment costs and certain losses related to early lease terminations;●Adjusted EBITDA does not reflect 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 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.EBITDA and Adjusted EBITDAthese non-GAAP measures along with other comparative tools, together with GAAP measurements, to assist in the evaluation of operating performance. Such GAAP measurements include net loss, net loss per share, net cash provided by operating activities, and other performance measures.EBITDA and Adjusted EBITDAthese non-GAAP measures should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.Three Months Ended
September 30,2023 2022 $ $ Variance % Revenue $ 660,238 $ 611,402 $ 48,836 8 % Expenses: Cost of revenue (exclusive of depreciation and amortization, which is shown separately below) 185,960 185,619 341 0 % Operating expenses: Advertising and marketing 186,152 178,920 7,232 4 % Sales 52,309 54,634 (2,325) (4) % Technology and development 84,289 84,590 (301) 0 % General and administrative 115,716 112,090 3,626 3 % Acquisition, integration, and transformation costs 5,824 1,594 4,230 265 % Restructuring costs 411 3,677 (3,266) n/m Depreciation and amortization 94,302 62,008 32,294 52 % Goodwill impairment 0 0 0 n/m Total expenses 724,963 683,132 41,831 6 % Loss from operations (64,725) (71,730) 7,005 10 % Interest income (12,606) (4,803) (7,803) Interest expense 5,646 6,149 (503) 8 % Other expense (income), net 1,792 1,571 221 n/m Loss before provision for income taxes (59,557) (74,647) 15,090 20 % Provision for income taxes (2,484) (1,171) (1,313) 112 % Net loss $ (57,073) $ (73,476) $ 16,403 22 % Net loss per share, basic and diluted $ (0.35) $ (0.45) $ 0.10 22 % EBITDA (1) $ 29,577 $ (9,722) $ 39,299 404 % Adjusted EBITDA (1) $ 88,757 $ 51,211 $ 37,546 73 % Nine Months Ended
September 30,2023 2022 $ $ Variance % Revenue $ 1,941,888 $ 1,769,131 $ 172,757 10 % Expenses: Cost of revenue (exclusive of depreciation and amortization, which is shown separately below) 566,607 555,114 11,493 2 % Operating expenses: Advertising and marketing 541,698 477,094 64,604 14 % Sales 160,329 170,893 (10,564) (6) % Technology and development 258,583 250,698 7,885 3 % General and administrative 355,702 330,011 25,691 8 % Acquisition, integration, and transformation costs 16,848 8,993 7,855 87 % Restructuring costs 16,043 3,677 12,366 n/m Depreciation and amortization 239,550 180,312 59,238 33 % Goodwill impairment 0 9,630,000 (9,630,000) n/m Total expenses 2,155,360 11,606,792 (9,451,432) (81) % Loss from operations (213,472) (9,837,661) 9,624,189 98 % Interest income (33,075) (6,192) (26,883) (434) % Interest expense 16,744 17,355 (611) 4 % Other expense (income), net (2,908) 2,607 (5,515) n/m Loss before provision for income taxes (194,233) (9,851,431) 9,657,198 98 % Provision for income taxes (2,755) (1,971) (784) 40 % Net loss $ (191,478) $ (9,849,460) $ 9,657,982 98 % Net loss per share, basic and diluted $ (1.17) $ (61.09) $ 59.92 98 % EBITDA (1) $ 26,078 $ (27,349) $ 53,427 195 % Adjusted EBITDA (1) $ 213,677 $ 152,419 $ 61,258 40 % Three Months Ended
September 30,Nine Months Ended
September 30,2023 2022 2023 2022 Net loss $ (57,073) $ (73,476) $ (191,478) $ (9,849,460) Add: Goodwill impairment $ 0 $ 0 $ 0 $ 9,630,000 Interest income $ (12,606) $ (4,803) $ (33,075) $ (6,192) Interest expense $ 5,646 $ 6,149 $ 16,744 $ 17,355 Other expense (income), net $ 1,792 $ 1,571 $ (2,908) $ 2,607 Provision for income taxes $ (2,484) $ (1,171) $ (2,755) $ (1,971) Depreciation and amortization $ 94,302 $ 62,008 $ 239,550 $ 180,312 EBITDA $ 29,577 $ (9,722) $ 26,078 $ (27,349) Stock-based compensation $ 52,945 $ 55,662 $ 154,708 $ 167,098 Acquisition, integration, and transformation costs $ 5,824 $ 1,594 $ 16,848 $ 8,993 Restructuring costs $ 411 $ 3,677 $ 16,043 $ 3,677 Adjusted EBITDA $ 88,757 $ 51,211 $ 213,677 $ 152,419 Teladoc Health Integrated Care $ 62,805 $ 38,880 $ 135,900 $ 91,467 BetterHelp $ 25,952 $ 11,150 $ 77,777 $ 61,270 Other $ 0 $ 1,181 $ 0 $ (318) Adjusted EBITDA $ 88,757 $ 51,211 $ 213,677 $ 152,419 $611.4$660.2 million for the quarterthree months ended September 30, 2023, compared to $611.4 million during the three months ended September 30, 2022, compared to $521.7 million during the quarter ended September 30, 2021, an increase of $89.7$48.8 million, or 17%8%. This increase in revenue was driven substantially by the generation of additional access fees by our membership base most significantly fromin both our DTC mental health service, BetterHelp. Revenue fromIntegrated Care and BetterHelp segments. Total access fees waswere $582.1 million for the three months ended September 30, 2023 compared to $540.1 million for the quarterthree months ended September 30, 2022, comparedan increase of $42.0 million, or 8%. Other revenue, which predominately includes visit fees and, to $448.9a lesser extent, revenue from the sales of our telehealth solutions for hospitals and health systems, was $78.2 million for the quarterthree months ended September 30, 2021,2023 compared to $71.3 million for the three months ended September 30, 2022, an increase of $91.2$6.8 million, or 20%. Visit fee revenue increased 5% to $65.6 million and other revenue was $5.8 million, down 43%10%, primarily related to the completionsales of a long-term development services contract. U.S. revenue grew 17% to $534.0 millionour telehealth solutions for hospitals and International revenue grew 17% to $77.4 million.health systems. For the quarterthree months ended September 30, 2022,2023, 88%, 11%, and 1% of our revenue was derived from access fees visit fees and 12% was derived from other revenue, respectively, as compared to 86%, 12%, and 2%, respectively, forconsistent with the quarterthree months ended September 30, 2021.Total2022. By geography, U.S. revenue grew 7% to $569.3 million and International revenue grew 17% to $90.9 million compared to the three months ended September 30, 2022.2022, compared to $1,478.5 million during the nine months ended September 30, 2021, an increase of $290.6 million, or 20%.2022. This increase in revenuegrowth was driven substantially by the generation of additional access fees by our membership base, most significantlyprimarily from our DTC mental health service, BetterHelp.BetterHelp segment. Revenue from access fees was $1,708.6 million for the nine months ended September 30, 2023 compared to $1,550.1 million for the nine months ended September 30, 2022, compared to $1,262.1an increase of $158.5 million, or 10%. Other revenue was $233.3 million for the nine months ended September 30, 2021,2023 compared to $219.0 million for the nine months ended September 30, 2022, an increase of $288.1$14.3 million, or 23%. Visit fee revenue increased 8% to $200.2 million7%, and other revenue was $18.8 million, down 40%, primarily related to the completionsales of a long-term development services contract. U.S. revenue grew 20% to $1,546.6 millionour telehealth solutions for hospitals and International revenue grew 19% to $222.5 million.health systems and higher visits. For the nine months ended September 30, 2022,2023, 88%, 11%, and 1% of our revenue was derived from access fees visit fees and 12% of was derived from other revenue, respectively, as compared to 85%, 13%, and 2%, respectively, forconsistent with the nine months ended September 30, 2021.quarterthree months ended September 30, 2022 compared to $169.0 million for the quarter ended29September 30, 2021, an increase of $16.6 million, or 10%. Cost2022. On a year-to-date basis, cost of revenue increased by $79.8$11.5 million, or 17% on a year-to-date basis. The increases for2%, to $566.6 million. For both the quarter and year-to-date periods, were primarily due tohigher costs associated with the growth in visits associated with higher revenue which resulted in increasedwas offset by lower consultation costs,fees, as well as higher device-related costs, overall product mix, and to a lesser extent, inventory obsolescence write-downs.lower amortization of device costs.quarterthree months ended September 30, 2022, compared to $111.1 million for the quarter ended September 30, 2021, an increase of $67.8$7.2 million, or 61%.4%, driven mainly by higher digital and media advertising costs. On a year-to-date basis, advertising and marketing expenses increased by $173.4$64.6 million, or 57%.14%, to $541.7 million. The increases for both the quarter and year-to-date periods wereincrease was substantially driven by higher digital and media advertising costs related to BetterHelp.quarterthree months ended September 30, 2022, compared to $62.6 million for the quarter ended September 30, 2021, a decrease of $8.0$2.3 million, or 13%4%. The decrease was primarily driven by lower employee compensation and lower costs related to sales conferences and events, partially offset by higher commission costs. On a year-to-date basis, sales expenses decreased by $20.4$10.6 million, or 11%.6%, to $160.3 million. The decrease for both the quarter and year-to-date periods werewas primarily driven by lower stock-basedemployee compensation and other employee relatedlower commission costs, partially offset by higher costs related to sales conferences and partner commissions driven by increased revenues.events.$87.8essentially unchanged at $84.3 million for the quarterthree months ended September 30, 20222023 compared to $80.3$84.6 million for the quarterthree months ended September 30, 2021, an increase of $7.6 million, or 9%. The quarter2022. This reflects higher personnel costs and higher infrastructure, hosting, and software license costs associated with running operations and ongoing projects and services to continuously improve and optimize our products and services, offset by lower stock-based compensation.employee compensation costs, professional fees, and contract labor costs. On a year-to-date basis, technology and development expenses increased by $17.0$7.9 million, or 7%.3% to $258.6 million. The increase on a year-to-date basiswas primarily reflects additional personnel and staff augmentation costs; higher professional, recruiting and consulting fees; anddriven by higher infrastructure, hosting and software license costs. These increases were associated with ongoing projectscosts, partially offset by lower professional fees and services to continuously improvecontract labor costs and optimize our technology portfolio. Partially offsetting this increase was lower stock-based compensation.recruiting and employee-related costs. For the quartersthree months ended September 30, 20222023 and 2021,2022, research and development costs, which exclude amounts reflected as capitalized software, were $26.1$31.8 million and $53.2$27.1 million, respectively. For the nine months ended September 30, 20222023 and 2021,2022, research and development costs were $75.8$95.4 million and $160.0$78.7 million, respectively.$9.5$3.6 million, or 9%3%, to $112.5$115.7 million for the quarterthree months ended September 30, 20222023 compared to $103.0$112.1 million for the quarterthree months ended September 30, 2021.2022. The increase was primarily driven by higher employee compensation costs, legal costs, corporate and other costs, and bad debt reserves, partially offset by lower professional fees, occupancy costs, and therapist onboarding costs. On a year-to-date basis, general and administrative expenses increased by $8.9$25.7 million, or 3%. For both the quarter and year-to-date periods,8%, to $355.7 million. The increase was primarily driven by higher personnelemployee compensation costs, bad debt expenses, professional fees, operating costs including therapist recruiting costs and call center activities,credit card charges, and other corporate expenses were primarilynon-income taxes, partially offset by lower stock-based compensation, legal expenses,therapist onboarding costs, other professional fees, and other taxes. Generaloccupancy costs.administrative expenses also include lease abandonmentTransformation Costs. Acquisition, integration, and exittransformation costs of $3.7were $5.8 million in bothand $16.8 million for the quarterthree and nine months ended September 30, 2022.Acquisition, Integration,2023, respectively, and Transformation Costs. Acquisition,primarily consisted of costs to integrate and upgrade the CRM and ERP ecosystem. For the three and nine months ended September 30, 2022, acquisition, integration, and transformation costs were $1.6 million and $9.0 million, for the quarter and nine months ended September 30, 2022, respectively, and primarily consisted of costs to integrate and upgrade ourthe CRM and ERP ecosystem.quarterthree and nine months ended September 30, 2021, acquisition, integration, and transformation2022, restructuring costs were $4.3$3.7 million and $22.1 million, respectively, and primarilyalso consisted of acquisitionlosses related to the reduction of office space and integration related costs.severance.Three Months Ended
September 30,Nine Months Ended
September 30,2023 2022 % 2023 2022 % Depreciation $ 2,468 $ 3,808 (35) % $ 8,345 $ 8,809 (5) % Amortization of acquired intangibles 69,189 48,676 42 % 172,210 148,327 16 % Amortization of capitalized software 22,645 9,524 138 % 58,995 23,176 155 % Depreciation and amortization $ 94,302 $ 62,008 52 % $ 239,550 $ 180,312 33 % was $62.0 millionincreased 52% for the quarterthree months ended September 30, 2022 compared to $51.9 million2023 and increased 33% for the quarternine months ended September 30, 2021, an increase2023, both compared to the prior year periods.19%. Depreciationour chronic condition management Clients and members to the Teladoc Health brand on a phased basis, with a smaller subset continuing to be served under the Livongo trade name beyond 2024. In connection with the brand strategy, we accelerated the amortization associated with the Livongo trademark, increasing amortization expense in the years ending December 31, 2023 and 2024, with corresponding reductions thereafter. The change in accounting estimate resulted in additional amortization expense for acquired intangibles of $18.6 million, or $0.11 per basic and diluted share for both the three and nine months ended September 30, 2023.$180.3recognized during either the three or nine months ended September 30, 2023. In the prior year, non-cash goodwill impairment charges of $9,630.0 million for the nine months ended September 30, 2022 compared to $151.9 million for the nine months ended September 30, 2021, an increase of $28.4 million, or 19%. 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 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 $23.2 million in 2022 and 2023.Goodwill Impairment. We recorded non-cash goodwill impairment charges of $9,630.0 million in the nine months ended September 30, 2022,were recognized, following goodwill impairment testingstesting performed as a result of sustained decreases in our publicly quoted share price. The non-cash charges had no impact on the provision for income taxes. Refer to30Critical Accounting Estimatesinterest earned on cash and Policies: Goodwill Impairment Charge and Note 7, Goodwill, to our condensed consolidated financial statements.Loss on Extinguishment of Debt. Losses on extinguishment of debt were $0.9 million and $43.7cash equivalents. Interest income was $12.6 million for the quarter andthree months ended September 30, 2023 compared to $4.8 million for the three months ended September 30, 2022. Interest income was $33.1 million for the nine months ended September 30, 2021, respectively. They2023 compared to $6.2 million for the nine months ended September 30, 2022. The increases for both three and nine months periods were primarily duedriven by higher interest rate yieldsand, to a lesser extent, an increase in cash and cash equivalent balances.exchangesamortization of debt discounts primarily associated with the convertible senior notes. Interest expense was $5.6 million for the three months ended September 30, 2023 compared to $6.1 million for the three months ended September 30, 2022. Interest expense was $16.7 million and conversions of$17.4 million for the 2025 Notes.nine months ended September 30, 2023 and 2022, respectively.Net.net. Other expense (income), net was an expense of $1.8 million for the three months ended September 30, 2023 compared to an expense of $1.6 million for the quarterthree months ended September 30, 2022, compared to an income of $0.4 million for the quarter ended September 30, 2021 and includedprimarily reflecting losses on foreign currency exchange remeasurements.rate fluctuations. Other expense (income), net was an income of $2.9 million for the nine months ended September 30, 2023 compared to an expense of $2.6 million for the nine months ended September 30, 2022, primarily reflecting a gain on the partial sale of a business.($5.5)benefits of $1.2 million for the three months ended September 30, 2022 and income tax benefits of $2.8 million for the nine months ended September 30, 2021. The difference was primarily due to a $5.9 million 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 $1.3 million and $18.9 million for the quarters ended September 30, 2022 and 2021, respectively. Interest expense, net was $11.2 million and $61.5 million for the nine months ended September 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 $13.5 million, or $0.08 per share, for the quarter ended September 30, 2021 and $43.8 million, or $0.28 per share, for the nine months ended September 30, 2021.Provision for Income Taxes. We recorded an income tax benefit of $1.2 million for the quarter ended September 30, 20222023 compared to an expense of $3.6 million for the quarter ended September 30, 2021. We recorded an income tax benefitbenefits of $2.0 million for the nine months ended September 30, 2022.compared(dollars in thousands):Three Months Ended
September 30,Teladoc Health Integrated Care 2023 2022 Variance % Revenue $ 374,416 $ 342,817 $ 31,599 9 % Adjusted EBITDA $ 62,805 $ 38,880 $ 23,925 62 % Adjusted EBITDA Margin % 16.8 % 11.3 % 543 bps Nine Months Ended
September 30,Teladoc Health Integrated Care 2023 2022 Variance % Revenue $ 1,084,438 $ 1,016,800 $ 67,638 7 % Adjusted EBITDA $ 135,900 $ 91,467 $ 44,433 49 % Adjusted EBITDA Margin % 12.5 % 9.0 % 354 bps an expense of $93.9$374.4 million for the three months ended September 30, 2023 on higher chronic care results, as well as higher telemedicine product revenue, including higher revenues from our virtual primary case offering, Primary360. Integrated Care total revenues increased by $67.6 million, or 7%, to $1,084.4 million for the nine months ended September 30, 2021. For2023 on higher chronic care results, as well as higher telemedicine product revenue, including higher revenues from our Primary360 offering.2021, we recognized2023, primarily reflecting higher gross profit, partially offset by higher general administrative and technology and development expenses.Three Months Ended
September 30,BetterHelp 2023 2022 Variance % Therapy Services $ 281,204 $ 263,208 $ 17,996 7 % Other Wellness Services 4,618 1,942 2,676 138 % Total Revenue $ 285,822 $ 265,150 $ 20,672 8 % Adjusted EBITDA $ 25,952 $ 11,150 $ 14,802 133 % Adjusted EBITDA Margin % 9.1 % 4.2 % 487bps Nine Months Ended
September 30,BetterHelp 2023 2022 Variance % Therapy Services $ 845,420 $ 738,079 $ 107,341 15 % Other Wellness Services 12,030 4,559 7,471 164 % Total Revenue $ 857,450 $ 742,638 $ 114,812 15 % Adjusted EBITDA $ 77,777 $ 61,270 $ 16,507 27 % Adjusted EBITDA Margin % 9.1 % 8.3 % 82bps non-cash income tax discrete charge5% increase in average monthly paying users. BetterHelp total revenues increased by $114.8 million, or 15%, to $857.5 million for the nine months ended September 30, 2023, driven by a 14% increase in average monthly paying users.inor 133%, to $26.0 million for the first quarterthree months ended March 31, 2021September 30, 2023, primarily reflecting higher gross profit, partially offset by higher technology and development costs, advertising and marketing costs, and general and administrative expenses. BetterHelp Adjusted EBITDA increased by $16.5 million, or 27%, to $77.8 million for additional valuation allowance on excess stock compensation benefits associated with the Livongo merger.Nine Months Ended
September 30,Consolidated Statements of Cash Flows - Summary 2023 2022 Net cash provided by operating activities 219,939 123,743 Net cash used in investing activities (119,841) (113,852) Net cash provided by financing activities 12,629 2,116 Effect of foreign currency exchange rate changes (382) (5,856) Total increase in cash and cash equivalents $ 112,345 $ 6,151 was cash provided by operating activities, reflectingis our cash and cash equivalents, comprised substantially of deposit accounts and money market funds, totaling $899.6which totaled $1,030.5 million as of September 30, 2022.3111,10. “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.2022.Provided byfrom Operating ActivitiesCashNet cash provided by operating activities was $219.9 million for the nine months ended September 30, 2023 compared to net cash provided by operating activities of $123.7 million for the nine months ended September 30, 2022 compared to $110.8 million for the nine months ended September 30, 2021.2022. The year-over-year higher inflowimprovement was primarily driven by growth in the business as well as lower incentive compensation payments, higher non-income tax refunds, and a change in the timing of payments.Ourhigher interest income.DTCdirect-to-consumer 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.Used infrom Investing Activities2022, driven primarily by2022. Amounts for both periods substantially relate to payments for capitalized software development costs associated with ongoing projects and services to continuously improve and optimize our technology portfolio.used in investing activities was $52.9 million for the nine months ended September 30, 2021, primarily driven by cash paid for the acquisition of businesses and, to a lesser extent, capitalized software development costs, partially offset by proceeds from sale of short-term marketable securities and sale of an investment.Cash Provided by Financing Activities20222023 was $12.6 million and $2.1 million primarily consisting of the proceeds from the exercise of employee stock options, proceeds withheld from participants in the employee stock purchase plan, partially offset by net payments against advances from financing companies.Cash provided by financing activities for the nine months ended September 30, 20212022. The nine months ended September 30, 2022 was $34.3 million. Cashnegatively affected by certain miscellaneous cash outflows that were not present in the current year-to-date period.financingoperating activities primarily consisted ofto free cash flow (in thousands, unaudited):Nine Months Ended
September 30,2023 2022 Net cash provided by operating activities $ 219,939 $ 123,743 Capital expenditures (10,060) (10,285) Capitalized software (109,781) (108,588) Free Cash Flow $ 100,098 $ 4,870 proceeds fromnine months ended September 30, 2023, compared to $4.9 million for the exercise of employee stock options, proceeds withheld from participantsnine months ended September 30, 2022. The year-over-year increase was substantially driven by growth in operating cash flow as capitalized expenditures and capitalized software were essentially unchanged in the employee stock purchase plan, partially offset by net payments against advances from financing companies.RiskNotesconvertible senior notes bear fixed interest rates. We do not enter into investments for trading or speculative purposes.87%86% 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.32quartersthree or nine months ended September 30, 20222023 or 2021.No Client represented over 10% of accounts receivable at September 30, 2022 or December 31, 2021.Procedures2022,2023, 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. the quarter ended September 30, 2022, we implemented a new enterprise resource planning ("ERP")ERP system for selected entities and transaction types included within our consolidated financial statements. During the three months ended June 30, 2023 and September 30, 2023, we implemented this ERP system for additional entities and functions. As a result of thisthese ERP system implementation,implementations, we revised certain existing internal controls, processes, and procedures. There are inherent risks in implementing an ERP system and, accordingly, we will continue to evaluate the design and operating effectiveness of these controls.thisthese ERP system implementation,implementations, there were no changes during the quarter ended September 30, 2022 in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.33Proceedings13,15. “Legal Matters”, to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q and are incorporated by reference herein.Factors2021.2022. 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, 2021.34
Number
Date
HerewithIncorporated by Reference Exhibit
Number Exhibit Description Form File No. Exhibit Filing
Date Filed
Herewith3.1 8-K 001-37477 3.1 6/2/22 3.2 8-K 001-37477 3.2 6/2/22 10.1 S-8 333-273509 99.1 7/28/23 10.2 * 10.3 * 10.4 * 10.5 * 31.1 * 31.2 * 32.1 ** 32.2 ** 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 35TELADOC HEALTH, INC. November 2, 2022November 2, 202236