Teladoc Health Inc. Interim CEO Mala Murthy is counting on international markets to reverse a troubling trend for BetterHelp, the virtual health company’s direct-to-consumer behavioral services group.

Speaking to analysts after New York-based Teladoc reported its first-quarter results—a net loss of nearly $82 million, nearly $13 million worse than in the first months of 2023, on revenue of $646 million—Murthy said BetterHelp’s first-quarter revenues slipped 4% to $269 million as the number of people paying for its services fell 11% from a year ago. The unit’s adjusted EBITDA margin fell to 5.7%, about half its average from the last two years.

A key culprit was the rising cost of acquiring new customers via social media advertising, a trend that started to build in the second half of last year. Murthy, Teladoc’s CFO who is leading the company while its board searches for a successor to longtime leader Jason Gorevic, said those higher expenses led her team to pull back on spending. That hurt the top line and will do so as well this quarter: BetterHelp’s revenues are expected to fall between 4% and 8% from a year ago.

Murthy is holding out hope for a relatively quick turnaround, though. She pointed out that Q1 is typically weakest when it comes to profitability and said BetterHelp’s marketing cost per new customer has stabilized in recent weeks. The plan for coming quarters is to turn that trend into renewed growth for BetterHelp—which accounts for more than 40% of Teladoc’s revenues—starting with its international operations.

BetterHelp finished 2023 with about 460,000 paying users, which was 9% higher than a year earlier. People outside the United States account for about 15% of that number and Murthy plans to grow that share, emphasizing Anglophone markets such as the United Kingdom, Canada and Australia where virtual mental health services haven’t yet been as widely adopted as in the United States.

“The plan we have is for us to continue penetrating into those markets first and that is what is driving our confidence in the second-half ramp,” she said. “We have been in these markets. We know the dynamics of the BetterHelp business in these markets. Based on our experience, we have knowledge of the economics of being in these markets.”

A bottom-line bonus: Teladoc’s advertising in international markets has typically been slightly more cost-effective than in the States. Counting on global growth, Murthy and her team are sticking to their full-year forecast for BetterHelp to book sales in line with or slightly above those of 2023.

Any growth also looks more likely than before to come from BetterHelp sticking to its direct-to-consumer knitting. Gorevic in January told the JPMorgan Healthcare Conference that he wanted to grow BetterHelp’s business with employers and insurance plans but Murthy last week put a little daylight between those comments and her goals.

“There are other competitors in the market who have […] tried DTC [and] moved away to B2B,” Murthy said. “We have built scale in DTC and I would say we will continue to focus on DTC. Having said that, I would also say we are looking for ways to improve and accelerate our growth in different ways.”

Shares of Teladoc (Ticker: TDOC) fell about 3% on the earnings news and commentary April 25 but have since held their ground. On the afternoon of April 29, they were changing hands around $13.40. Over the past six months, they have lost more than 15% of their value, leaving the company’s market capitalization at about $2.3 billion.


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