Teladoc Health (NYSE: TDOC) is attributing its direct-to-consumer mental health business BetterHelp’s strong revenue growth to therapist productivity improvements.
The efficiencies include more group therapy sessions and an emphasis on more digital interactions.
“We’ve actually taken a number of initiatives to improve therapists productivity, ranging from group therapy sessions, to more digital interactions,” Mala Murthy, chief financial officer of Teladoc, said during the company’s Q2 earnings call Tuesday. “All of that is resulting, certainly, in the trends that we’re seeing in our growth margin improvement for BetterHelp.”
BetterHelp’s revenue increased by 18% to $292.4 million in the second quarter of 2023. Overall, BetterHelp represented roughly 44% of Teladoc’s Q2 revenue.
The company is also eyeing artificial intelligence initiatives as a way to help boost efficiencies in the future. Specifically, BetterHelp employs AI to help optimize member-therapist matching based on over 100 different criteria.
“On average, we’re matching a patient with a provider every 30 seconds, something no one else in the industry can say,” Jason Gorevic, CEO of Teladoc, said during the Q2 earnings call. “Besides making life better for patients and providers, it’s also helping to drive our strong gross margin performance and competitive advantage.”
Gorevic stressed the importance of employing AI across the business.
The company recently inked a deal with Microsoft (Nasdaq: MSFT) to bring the latter’s open AI services and stack capabilities onto the Teladoc platform. The partnership’s goal is to help automate more clinical documentation during virtual exams, make visits more efficient and improve the quality of medical data.
Although BetterHelp has led Teladoc’s growth in the first half of the year, the company is taking a more measured approach to its guidance for the remainder of 2023.
“Consumer demand has proven resilient through the first half of the year, even with the financial pressures that many households are facing,” Gorevic said. “But given the uncertainty in the broader economy, we’re continuing to incorporate a more cautious outlook at the low end of our guidance range. Regardless, we’ll continue to provide exceptional value to our BetterHelp members.”
Company leadership said the lower sequential growth for BetterHelp will be, in part, due to advertising spend on the segment.
“Last year, over half of the ads, then in the BetterHelp business, took place in the second half of the year,” Murthy said. “This year’s plan calls for the opposite, with over half of the ad spend taking place in the first half. So last year, the cadence looked different due to the dynamics.”
Mental health initiatives are crucial to Teladoc’s expansion beyond just behavioral health. Gorevic noted a strong demand for mental health programs in conjunction with Teladoc’s other integrated and multi-prong care offerings.
“We’re seeing [mental health] as an integral part of our sales for chronic care programs, which we’re very pleased with the continued growth and really strong results in our chronic care programs,” he said. “We believe very strongly that it’s bolstered by our strength in mental health, where we can provide a whole person solution rather than an individual or isolated point solution. We also continue to see mental health as a very important part of primary 360, which we’re very pleased with the results.”
Teladoc’s integrated care segment grew by 5% to $360.1 million in the third quarter.
“The company wrapped 3Q and raised the bottom end of its full-year guided ranges. The quarter was led by strong rev growth in BetterHelp and its Int’l business,” Jefferies wrote in an analyst note. “With investor sentiment decidedly negative, we believe these results will be deemed to be good enough, and accordingly expect the shares to get a lift.”