As a pandemic-era star fallen from grace in recent times, Teladoc Health (TDOC 2.92%) nevertheless remains prominent in the telehealth space -- in fact, to many it's a bellwether for the segment. Its stock also staged something of a rally at the end of October, buoyed by better-than-expected third-quarter results.
As always, investors focused on the company's revenue and bottom-line performance. While both of those line items are important, another factor is a more compelling watch with Teladoc.
Getting the message out
Teladoc's major weakness these days is BetterHelp, the smaller (and worse-performing) of its two business segments, which concentrates on mental health services.
This unit brought in just under $257 million of the company's overall $640.5 million revenue in Q3. Uncomfortably, its take was down by 10% year over year. This was in marked contrast to segment No. 1, the general integrated care business, which posted 2% growth and brought in nearly $384 million.
The tele-mental health realm has been filled with determined competition lately. As a large and still well-capitalized company, Teladoc is attempting to maintain or grow share with significant marketing efforts.
Its advertising and marketing (A&M) costs have ramped up notably with the pandemic, ditto for their share of total revenue. In COVID-heavy 2021, Teladoc's yearly spend on A&M was nearly $417 million, representing 21% of total revenue. A mere two years later, the tally jumped in both absolute and percentage-of-revenue terms. 2023's almost $689 million swallowed 26% of revenue.
This wasn't a fluke or a one-off. In all three quarters of 2024 reported so far, that percentage was even higher, at either 27% or 28%.
The company has something to prove
Advertising/marketing pushes are a business technique as old as time. Effective campaigns can rope in new, hopefully steady, customers when done effectively. Yet Teladoc's doesn't seem to be helping much, at least not yet.
Investors willing to give Teledoc the benefit of the doubt should highlight that advertising and marketing line in quarterly and annual reports for an indication of whether its efforts are paying off.
