Teladoc (TDOC): Phone a Doctor Anytime For $40
With increasing health care costs, innovative ways to save money through the use of technology are transforming the health care industry. The remote treatment of patients and centralized patient data are examples of applying technology to decrease costs and improve patient care. Companies like Propeller Health and Adherium have built “smart inhalers” that can remotely monitor a patient’s adherence to a prescribed medication. Artificial hearts from SynCardia allow patients waiting for transplants full mobility so they can wait for their heart transplant at home or anywhere else. One company which has emerged as a leader in “teleheath”, or the ability to speak with a doctor 24/7, is Teladoc.
Founded in 2002, Teladoc (NYSE:TDOC) is the nation’s first and largest provider of telehealth services having taken in $74 million in venture funding. In the past several years, Teladoc has acquired four of their competitors; Consult A Doctor, AmericDoc, StatDoc and BetterHelp. Just last month, Teladoc raised $163.5 million with a very successful IPO which gives them a market cap today of $1 billion. If you had invested in Teladoc on the day their IPO debuted, your investment would be up +7% today provided that you were lucky enough to buy at the lowest price of the day which was $25.91. So what potential does the TDOC solution have going forward?
The TDOC solution connects their 11 million unique members to over 1,100 board-certified physicians and behavioral health professionals. These “Teladocs” can be accessed any time of day or night at a cost of $40 per visit payable by credit card. The solution is delivered with a median response time of less than ten minutes from the time a member requests a telehealth visit to the time they speak with a TDOC physician. TDOC provided 274,000 telehealth visits in the first six months of 2015 compared to approximately 300,000 telehealth visits for all of 2014. Below are some of the key metrics provided by TDOC:
What’s interesting about the TDOC business model is that they generate in excess of 80% of their revenue from clients who purchase access to their “dial-a-doc” network for their employees, dependents and other beneficiaries. These subscription access fees are on a per-member-per-month basis along with a visit fee for each completed visit. With names such as PepsiCo and Bank of America on board, TDOC has built up a diversified U.S. only client base with no one client accounting for more than 10% of their revenues. In Q2 2015, TDOC realized $18 million in revenues up +78% from the $10 million they received in Q2 2014. However, Marketing and General Admin expenses increased +220% and +300% respectively compared to the previous year leading to a Q2 2015 loss of around $16 million. With such a sharp increase in expenses, TDOC anticipates negative EBITDA results through the end of 2017.
Teladoc seems to dominate the “telehealth” space as they continue to acquire their competitors. With the $163.5 million cash raised through their IPO, TDOC is in a position to continue acquiring any competitive threats going forward and this remains an interesting space to watch.