Overview
There is likely a thesis to sell the stocks that have benefitted from the COVID-19 such as TDOC as the economy re-opens. With Telemedicine generally, and TDOC specifically at least, we do not think this is the right call as behavior changes are likely sticky, and estimates have room to move higher. App downloads are backing off the COVID-19 surge highs, but the new run rate is settling into a higher level than pre-COVID and utilization continues to ramp. With the guidance for 2020 went to $800-$825M from the previous $695-$710M and consensus of $726M, but the real focus will turn to 2021 where we think the step up in estimates could be similar to 2020. As of 1Q20, penetration into convertible patient volume is 5.6% leaving substantial upside, even in the face of competition.
Without a vaccine we do not expect consumer behavior to change and telemedicine to embed into the delivery system. Importantly guidance does not include a resurgence in COVID-19. As the economy re-opens it is as likely for employers to want a telehealth option as a risk mitigation strategy as it will be for consumers.
TDOC | FY Guidance (Dec 2020)
- EPS ($1.27) - (1.13) vs prior guidance ($1.19)-(1.06)
- FactSet's EPS consensus is ($1.09)
- Revenue $800M-825M vs prior guidance $695M-710M
- FactSet's revenue consensus is $726.6M
- Adjusted EBITDA $70M-80M vs prior guidance $60M-70M
- FactSet's adjusted EBITDA consensus is $68.0M
- Total U.S. paid membership to be at least 50M members (vs prior 43M to 45M members) and visit-fee-only access to be available to approximately 19 to 20M individuals.
- Total visits to be between 8M to 9M vs prior guidance 5.5M to 5.9M
Comments from the Call
- Guidance anticipates rising unemployment, COBRA, Medicaid, Exchange offsets
- Guidance does not anticipate a resurgent COVID
- Not willing to comment on long term growth targets, 2020
- Bookings: existing clients are looking for expanded access plus new client interest
- No comment on 2021 selling season
- Post-COVID utilization rates will remain high, but not at "surge" levels.
- Utilization will be “materially higher than it was in the past”
- Added 500,000 MA members in 1Q20
FUNDAMENTAL QUADS, penetration, estimates
We've found a tight relationship between estimate trends as described in our FUndamental Equity Quad structure, and price. Based on our estimates and the importance of NTM revenue (correlation of 0.90) TDOC remains an active long. Our outlook for utilization anticipates significant growth but modest penetration (5.6% as of 1Q20) into the available ambulatory volume within the existing membership.
LINKS TO PRESENTATION MATERIALS
TDOC | Best Idea Long | Virtual Care is Moving Mainstream
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CLICK HERE to access the associated slides.
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Thomas Tobin
Managing Director
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William McMahon
Analyst
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