Taking a closer look at the Q3 results, TDOC reported a loss per share of ($0.34), beating the consensus estimates by $0.02. It was also a big improvement over 3Q17, when the company posted a loss per share of ($0.55). Furthermore, Adjusted EBITDA swung to a positive $6.3 mln from a loss of ($600)K in the year ago period.
Much of the improvement in profitability stems from the healthy top-line growth, but, TDOC is also doing a good job in terms of managing costs. For the quarter, total operating expenses, excluding non-cash and one-time items, fell to 64% of revenue, as compared to 77% in the year ago quarter.
Although gross margin did slide quite a bit as compared to 3Q17 -- 69.2% vs. 75.6% -- it did come in within the company's expectations, reflecting the overall mix shift due to the acquisition of Advance Medical.
As an up-and-coming growth stock, most investors are probably more interested in the company's performance on the top line, which continues to impress. For the quarter, revenue surged by 62% to $111.0 mln, ahead of the $109.9 mln expectation. That is actually a slowdown from TDOC's recent growth rates, which have landed in triple digit territory in each of the past four quarters. That said, the company is lapping some very difficult yr/yr comparables, so, to generate 62% growth on top of 112% growth in the year-ago quarter, is quite extraordinary.
Drilling down on some of its key operating metrics, total U.S. paid members grew by 18% to 22.6 mln, and Teledoc Health completed 641K visits, surging by 110% from a year ago. Additionally, its average per member per month spiked to $1.08 from $0.79 in 3Q17.
Overall, organic growth came in at 29%, with the remainder driven by its needle-moving acquisition of Advance Medical, which has now been a part of TDOC for five months. Like TDOC, Advance Medical is a virtual healthcare provider, but, it has a strong presence internationally, including Europe, Asia, and Latin America. With the combination of the two, TDOC now has a global scale and reach that is unmatched in the industry.
With the acquisition progressing smoothly, the company launched Global Care in late September, targeting large multi-national companies and insurers. The service is available all day, every day, and is available in 20 languages delivered through its mobile app. During the earnings call last night, management commented that interest has been very strong for its new Advance Medical related offerings, with opportunities to sell to new clients, as well as existing ones.
Outlook & Conclusion
In its earnings press release, TDOC also provided guidance for Q4. Specifically, the company said it is expecting a loss per share of ($0.38)-($0.36), which was slightly below the ($0.34) consensus. On the top line, the company is forecasting revenue to grow by 59% to $119-$121 mln, and for total visits to hit 720-820K.
TDOC has a few notable tailwinds at its back, including patients' overall comfort with using virtual healthcare, which can be very convenient and cost-effective. Its acquisition of Advance Medical also appears to be paying significant dividends for the company as it greatly expands its global reach.
The main knock on TDOC has been its inconsistent bottom line performance versus analysts' expectations, as it has disappointed on several occasions. But, for this quarter at least, TDOC did a very good job managing costs and was able to exceed estimates. All in all, business appears to be very healthy for TDOC.