Teladoc (NYSE: TDOC ) is blaming its disappointing financial results, in part, on BetterHelp’s advertising spending related to customer acquisition.
Despite the advertising woes, the company reported a 40 percent year-over-year increase in revenue for its digital mental health subsidiary, BetterHelp, in the second quarter of 2022. That performance came in at the low end of Teladoc’s expectations.
Teladoc CEO Jason Gorevich said during Wednesday’s earnings call that this could be an indication that consumers are tightening their belts.
“Consumer confidence is now at a multi-decade low as inflation continues to rise,” Gorevik said.
Teladoc’s Q2 revenues were $592.38 million, an increase of 17.7% year over year. While Teladoc beat its Q2 earnings per share forecast by 0.15 and revenue by $5.12 million, Gorevik said, “Our overall financial performance is likely to be lower than our consolidated revenue and adjusted EBITDA guidance by [2022’s] second half”
A second factor playing into Teladoc’s year-end revenue forecasts is slower-than-expected sales in its chronic care business.
For the second earnings call in a row, Teladoc blamed smaller digital health startups for targeted ad production volume.
“We still see smaller private competitors pursuing customer acquisition strategies that we believe are inferior,” Gorevik said. “While we do not see this as sustainable, it is difficult to predict how long this volatility can continue.”
Gorevik emphasized that Teladoc’s leadership position in the D2C market and its scale advantage will allow the company to outperform the industry while maintaining strong financial performance in a bear market.
With lower-than-expected marketing volume, the company is pulling back on advertising spending.
“You’ll see that we’re not going to zero in ad spend in the fourth quarter, but it’s a significant decrease because of the high cost per ad view,” Gorevik said.
Teladoc is still banking on BetterHelp to drive a large percentage of its growth.
“Management acknowledged that lower product spending on marketing at BetterHelp – the mental health business, which generates about a third of its revenue – was a key driver of reduced guidance, but still led that business to grow by 35-40%. F22,” says an analyst at investment banking and financial services firm Jefferies. .
Despite competition in the digital behavioral health space, Jefferies’ memo highlighted promising activity in the market in BetterHelp’s favor.
“Our analysis of website traffic shows that BetterHelp has been gaining share as cerebral website traffic has declined in recent months, although overall [behavioral health] “Traffic is still reduced following surveillance around cerebral warrant exercises,” the note said. “This is encouraging because it should provide a near-term lift for TDOC as it recovers share – but we caution that overall website traffic for the larger players in virtual behavioral health (including BetterHelp) has remained relatively flat over the past year.
