UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2021~~2022

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-37477

TELADOC HEALTH, INC.

(Exact name of registrant as specified in its charter)

Delaware		04-3705970
(State of incorporation)		(I.R.S. Employer Identification No.)

2 Manhattanville Road, Suite 203
Purchase, New York		10577
(Address of principal executive office)		(Zip code)

(203) 635-2002

(Registrant’s telephone number including area

code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	TDOC	The New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:


Large accelerated filer	⌧	Accelerated filer	◻	Non-accelerated filer	◻	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ⌧

As of April ~~28, 2021,~~27, 2022, the Registrant had ~~154,525,777~~ 161,182,633 shares of Common Stock outstanding.

Table of Contents

TELADOC HEALTH, INC.

QUARTERLY REPORT ON FORM 10-Q

For the period ended March 31, ~~2021~~2022

TABLE OF CONTENTS

		Page Number

PART I	Financial Information	2
Item 1.	Financial Statements	2
	Condensed Consolidated Balance Sheets as of March 31, ~~2021~~2022 (unaudited) and December 31, ~~2020~~2021	2
	Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) for the quarters ended March 31, ~~2021~~2022 and ~~2020~~2021	3
	Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the quarters ended March 31, ~~2021~~2022 and ~~2020~~2021	4
	Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, ~~2021~~2022 and ~~2020~~2021	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2422
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3331
Item 4.	Controls and Procedures	3432
PART II	Other Information	3533
Item 1.	Legal Proceedings	3533
Item 1A.	Risk Factors	3533
Item 6.	Exhibits	3634
Exhibit Index		3634
Signatures		3836

Table of Contents

PART I

FINANCIAL INFORMATION

ITEM 1. Financial Statements

TELADOC HEALTH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data, unaudited)


	March 31,		December 31,
	2021		2020		March 31,		December 31,
					2022		2021
Assets
Current assets:
Cash and cash equivalents	$	720,104	$	733,324	$	836,444	$	893,480
Short-term investments		2,530		53,245		2,544		2,537
Accounts receivable, net of allowance of $8,601 and $6,412, respectively		178,341		169,281
Accounts receivable, net of provision of $13,056 and $12,384, respectively						191,528		168,956
Inventories		58,290		56,498		70,654		73,079
Prepaid expenses and other current assets		73,065		47,259		106,875		87,387
Total current assets		1,032,330		1,059,607		1,208,045		1,225,439
Property and equipment, net		28,436		28,551		28,419		27,234
Goodwill		14,451,975		14,581,255		7,899,795		14,504,174
Intangible assets, net		1,997,214		2,020,864		1,883,897		1,910,278
Operating lease - right-of-use assets		44,401		46,647		45,552		46,780
Other assets		28,002		18,357		26,629		20,703
Total assets	$	17,582,358	$	17,755,281	$	11,092,337	$	17,734,608
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	34,377	$	46,030	$	47,412	$	47,257
Accrued expenses and other current liabilities		82,397		83,657		116,689		102,933
Accrued compensation		59,439		94,593		46,075		91,941
Deferred revenue-current		70,458		52,356		83,847		75,569
Advances from financing companies		13,693		13,453		12,664		13,313
Current portion of long-term debt		0		42,560
Total current liabilities		260,364		332,649		306,687		331,013
Other liabilities		1,383		1,616		1,445		1,492
Operating lease liabilities, net of current portion		40,140		43,142		40,163		41,773
Deferred revenue, net of current portion		2,716		2,449		2,884		3,834
Advances from financing companies, net of current portion		10,404		9,926		8,252		9,291
Deferred taxes		84,876		102,103
Deferred taxes, net						57,516		75,777
Convertible senior notes, net		1,352,977		1,379,592		1,532,780		1,225,671
Commitments and contingencies
Commitments and contingencies (Note 10)
Stockholders’ equity:
Common stock, $0.001 par value; 300,000,000 shares authorized as of March 31, 2021 and December 31, 2020; 154,406,164 shares and 150,281,099 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively		154		150
Common stock, $0.001 par value; 300,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 161,434,513 shares and 160,469,325 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively						161		160
Additional paid-in capital		17,016,628		16,857,797		17,177,152		17,473,336
Accumulated deficit		(1,192,310)		(992,661)		(8,023,279)		(1,421,454)
Accumulated other comprehensive gain		5,026		18,518
Accumulated other comprehensive loss						(11,424)		(6,285)
Total stockholders’ equity		15,829,498		15,883,804		9,142,610		16,045,757
Total liabilities and stockholders’ equity	$	17,582,358	$	17,755,281	$	11,092,337	$	17,734,608

See accompanying notes to unaudited condensed consolidated financial statements.

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TELADOC HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share data, unaudited)


	Quarter Ended March 31,				Quarter Ended March 31,
	2021		2020		2022		2021
Revenue	$	453,675	$	180,799	$	565,350	$	453,675
Expenses:
Cost of revenue (exclusive of depreciation and amortization, which is shown separately below)		145,959		72,382		187,025		145,959
Operating expenses:
Advertising and marketing		89,439		32,515		133,600		89,439
Sales		64,793		17,940		58,329		64,793
Technology and development		78,008		19,257		87,412		78,008
Acquisition, Integration and Transformation costs		6,323		3,664
General and administrative		105,172		46,342		104,923		105,172
Acquisition, integration, and transformation costs						4,507		6,323
Depreciation and amortization		48,659		9,710		58,933		48,659
Goodwill impairment						6,600,000		0
Total expenses		538,353		201,810		7,234,729		538,353
Loss from operations		(84,678)		(21,011)		(6,669,379)		(84,678)
Loss on extinguishment of debt		11,459		0		0		11,459
Other (income) expense, net		(5,652)		685
Other income, net						(724)		(5,652)
Interest expense, net		22,125		8,618		5,480		22,125
Net loss before taxes		(112,610)		(30,314)		(6,674,135)		(112,610)
Income tax expense (benefit)		87,039		(711)
Income tax expense						388		87,039
Net loss		(199,649)		(29,603)		(6,674,523)		(199,649)
Other comprehensive loss, net of tax:
Cumulative translation adjustment		(13,492)		(17,554)
Currency translation adjustment and other						(5,139)		(13,492)
Comprehensive loss	$	(213,141)	$	(47,157)	$	(6,679,662)	$	(213,141)

Net loss per share, basic and diluted	$	(1.31)	$	(0.40)	$	(41.58)	$	(1.31)

Weighted-average shares used to compute basic and diluted net loss per share		152,167,606		73,278,857		160,532,301		152,167,606

See accompanying notes to unaudited condensed consolidated financial statements.

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TELADOC HEALTH, INC.

CONDENSEDCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data, unaudited)


								Accumulated											Accumulated
				Additional				Other		Total					Additional				Other		Total
	Common Stock			Paid-In		Accumulated		Comprehensive		Stockholders’		Common Stock			Paid-In		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Gain (Loss)		Equity		Shares	Amount		Capital		Deficit		Gain (Loss)		Equity
Balance as of December 31, 2021												160,469,325	$	160	$	17,473,336	$	(1,421,454)	$	(6,285)	$	16,045,757
Cumulative effect adjustment due to adoption of ASU 2020-06 (see Note 2)												0		0		(363,731)		72,698		0		(291,033)
Exercise of stock options												267,586		0		3,585		0		0		3,585
Issuance of common stock upon vesting of restricted stock units												697,602		1		(1)		0		0		0
Stock-based compensation												0		0		63,963		0		0		63,963
Other comprehensive loss, net of tax												0		0		0		0		(5,139)		(5,139)
Net loss												0		0		0		(6,674,523)		0		(6,674,523)
Balance as of March 31, 2022												161,434,513	$	161	$	17,177,152	$	(8,023,279)	$	(11,424)	$	9,142,610


Balance as of December 31, 2020	150,281,099	$	150	$	16,857,797	$	(992,661)	$	18,518	$	15,883,804	150,281,099	$	150	$	16,857,797	$	(992,661)	$	18,518	$	15,883,804
Exercise of stock options	1,238,112		1		11,907		0		0		11,908	1,238,112		1		11,907		0		0		11,908
Issuance of common stock upon vesting of restricted stock units	976,999		1		(1)		0		0		(0)	976,999		1		(1)		0		0		(0)
Issuance of common stock for conversion/redemption of 2022 Notes	1,058,373		1		270,111		0		0		270,112
Issuance of common stock for 2022 Notes												1,058,373		1		270,111		0		0		270,112
Equity portion of extinguishment of 2022 Notes	0		0		(224,081)		0		0		(224,081)	0		0		(224,081)		0		0		(224,081)
Issuance of common stock for conversion of 2025 Notes	1,056,861		1		288,485		0		0		288,486
Issuance of common stock for 2025 Notes												1,056,861		1		288,485		0		0		288,486
Equity portion of extinguishment of 2025 Notes	0		0		(237,261)		0		0		(237,261)	0		0		(237,261)		0		0		(237,261)
Retirement of shares related to acquisition (see Note 4)	(205,280)		(0)		(40,329)		0		0		(40,329)
Recovery of excess common stock issued for acquisition												(205,280)		(0)		(40,329)		0		0		(40,329)
Stock-based compensation	0		0		90,000		0		0		90,000	0		0		90,000		0		0		90,000
Other comprehensive loss, net of tax	0		0		0		0		(13,492)		(13,492)	0		0		0		0		(13,492)		(13,492)
Net loss	0		0		0		(199,649)		0		(199,649)	0		0		0		(199,649)		0		(199,649)
Balance as of March 31, 2021	154,406,164	$	154	$	17,016,628	$	(1,192,310)	$	5,026	$	15,829,498	154,406,164	$	154	$	17,016,628	$	(1,192,310)	$	5,026	$	15,829,498

Balance of December 31, 2019	72,761,941	$	73	$	1,538,716	$	(507,525)	$	(17,239)	$	1,014,025
Exercise of stock options	671,279		0		14,830		0		0		14,830
Issuance of common stock upon vesting of restricted stock units	642,411		1		(1)		0		0		0
Issuance of common stock for 2022 Notes	655		0		58		0		0		58
Stock-based compensation	0		0		18,421		0		0		18,421
Other comprehensive loss, net of tax	0		0		0		0		(17,554)		(17,554)
Net loss	0		0		0		(29,603)		0		(29,603)
Balance as of March 31, 2020	74,076,286	$	74	$	1,572,024	$	(537,128)	$	(34,793)	$	1,000,177

See accompanying notes to unaudited condensed consolidated financial statements.

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TELADOC HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

Quarter Ended March 31,


2021

2020

Cash flows used in operating activities:






Net loss

$
(199,649)

$
(29,603)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

48,659

9,710

Depreciation of rental equipment

824

0

Amortization of right-of-use assets

2,948

1,518

Allowance for doubtful accounts

3,074

1,247

Stock-based compensation

86,300

18,315

Deferred income taxes

87,004

(2,820)

Accretion of interest

16,829

6,859

Loss on extinguishment of debt

11,459

0

Unrealized gain on investment

(5,852)

0

Other, net

38

105

Changes in operating assets and liabilities:

Accounts receivable

(11,717)

(17,219)

Prepaid expenses and other current assets

(12,799)

101

Inventory

(2,877)

0

Other assets

1,244

137

Accounts payable

(11,989)

(502)

Accrued expenses and other current liabilities

(1,889)

26,971

Accrued compensation

(43,624)

(13,798)

Deferred revenue

17,086

(5,406)

Operating lease liabilities

(3,076)

(1,287)

Other liabilities

(19)

(648)

Net cash used in operating activities

(18,026)

(6,320)

Cash flows used in investing activities:

Capital expenditures

(2,115)

(962)

Capitalized software development costs

(11,144)

(1,966)

Proceeds from marketable securities

50,000

0

Acquisitions of business, net of cash acquired

(55,921)

(9,000)

Other, net

3,150

0

Net cash used in investing activities

(16,030)

(11,928)

Cash flows provided by financing activities:

Net proceeds from the exercise of stock options

11,908

14,889

Repurchase of 2022 Notes

(130)

0

Proceeds from advances from financing companies

4,816

0

Payment from customers against advances from financing companies

(4,098)

0

Proceeds from employee stock purchase plan

8,648

0

Cash received for withholding taxes on stock-based compensation, net

1,218

164

Other, net

(187)

0

Net cash provided by financing activities

22,175

15,053

Net decrease in cash and cash equivalents

(11,881)

(3,195)

Foreign exchange difference

(1,339)

(3,202)

Cash and cash equivalents at beginning of the period

733,324

514,353

Cash and cash equivalents at end of the period

$
720,104

$
507,956

Income taxes paid

$
52

$
0

Interest paid

$
3

$
0


	Quarter Ended March 31,
	2022		2021
Operating activities:
Net loss	$	(6,674,523)	$	(199,649)
Adjustments to reconcile net loss to net cash used in operating activities:
Goodwill impairment		6,600,000		0
Depreciation and amortization		58,933		48,659
Depreciation of rental equipment		770		824
Amortization of right-of-use assets		3,173		2,948
Provision for doubtful accounts		4,591		3,074
Stock-based compensation		60,436		86,300
Deferred income taxes		(2,319)		87,004
Accretion of interest		826		16,829
Loss on extinguishment of debt		0		11,459
Gain on sale of investment		0		(5,852)
Other, net		0		38
Changes in operating assets and liabilities:
Accounts receivable		(27,842)		(11,717)
Prepaid expenses and other current assets		(18,993)		(12,799)
Inventory		2,023		(2,877)
Other assets		(6,047)		1,244
Accounts payable		492		(11,989)
Accrued expenses and other current liabilities		11,706		(1,889)
Accrued compensation		(48,819)		(43,624)
Deferred revenue		7,479		17,086
Operating lease liabilities		(3,626)		(3,076)
Other liabilities		(7)		(19)
Net cash used in operating activities		(31,747)		(18,026)
Investing activities:
Capital expenditures		(3,913)		(2,115)
Capitalized software		(26,918)		(11,144)
Proceeds from marketable securities		0		50,000
Acquisitions of business, net of cash acquired		0		(55,921)
Other, net		3,264		3,150
Net cash used in investing activities		(27,567)		(16,030)
Financing activities:
Net proceeds from the exercise of stock options		3,585		11,908
Repurchase of 2022 Notes		0		(130)
Proceeds from advances from financing companies		2,232		4,816
Payment against advances from financing companies		(3,921)		(4,098)
Proceeds from employee stock purchase plan		3,680		8,648
Cash received for withholding taxes on stock-based compensation, net		103		1,218
Other, net		(2,863)		(187)
Net cash provided by financing activities		2,816		22,175
Net decrease in cash and cash equivalents		(56,498)		(11,881)
Foreign exchange difference		(538)		(1,339)
Cash and cash equivalents at beginning of the period		893,480		733,324
Cash and cash equivalents at end of the period	$	836,444	$	720,104

Income taxes paid	$	261	$	52

Interest paid	$	7	$	3

See accompanying notes to unaudited condensed consolidated financial statements.

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Note 1. Organization and Description of Business

Teladoc Health, Inc., together with its subsidiaries, is referred to herein as “Teladoc Health,” or the “Company,” and is the global leader in whole person virtual care, forging a new healthcare experience with better convenience, outcomes, and value. The Company’s mission is to empower all people everywhere to live their healthiest lives by transforming the healthcare experience.

The Company was incorporated in the State of Texas in June 2002 and changed its state of incorporation to the State of Delaware in October 2008. Effective August 10, 2018, Teladoc, Inc. changed its corporate name to Teladoc Health, Inc. ~~Unless the context otherwise requires, Teladoc Health, Inc., together with its subsidiaries, is referred to herein as “Teladoc Health” or the “Company”.~~ The Company’s principal executive office is located in Purchase, New York. ~~Teladoc Health is the global leader in providing virtual healthcare services with a focus on high quality, lower costs, and improved outcomes around the world.~~

On January 4, 2021, the Company completed the acquisition of the UK-based telemedicine provider Consultant Connect Limited (“Consultant Connect”). Consultant Connect provides a platform that specializes in facilitating healthcare professional-to-professional advice and guidance in the United Kingdom.

On October 30, 2020, the Company completed the merger with Livongo Health, Inc. (“Livongo”), a transformational opportunity to improve the delivery, access and experience of chronic healthcare for ~~consumers~~individuals around the world. ~~Livongo is pioneering a new category in healthcare, called Applied Health Signals, which is transforming the management of chronic conditions.~~

On July 1, 2020, the Company completed the acquisition of InTouch Technologies, Inc. (“InTouch”), a leading provider of enterprise telehealth solutions for hospitals and health systems.

Note 2. Basis of Presentation and Principles of Consolidation

~~Basis of Presentation and Principles of Consolidation~~

The accompanying unaudited condensed consolidated financial statements ~~have been~~for the three months ended March 31, 2022 and 2021, in the opinion of management, reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the condensed consolidated results of operations, financial position and cash flows of Teladoc Health for the periods presented. However, the financial results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year or for any other future period.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with ~~U.S.~~ generally accepted accounting principles (“GAAP”) in the United States (“U.S.”) have been omitted or condensed pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The ~~consolidated~~information in this report should be read in conjunction with the Company’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2021 (the “2021 Form 10-K”), which includes a complete set of footnote disclosures, including the Company’s significant accounting policies.

These financial statements include the results of Teladoc Health, as well as 3 professional associations 13and 12 professional corporations ~~and a~~ ~~service~~ ~~corporation~~ (collectively, the ~~“Association”~~“THMG Association”).

All intercompany transactions and balances have been eliminated. Certain prior year amounts have been reclassified to conform to the current year presentation.

Teladoc Health Medical Group, P.A., formerly Teladoc Physicians, P.A. (“THMG”) is party to several Services Agreements by and among it and the professional associations and professional corporations pursuant to which each professional association and professional corporation provides services to ~~Teladoc Health Medical Group, P.A.~~THMG. Each professional association and professional corporation is established pursuant to the requirements of its respective domestic jurisdiction governing the corporate practice of medicine.

The Company holds a variable interest in the THMG Association which contracts with physicians and other health professionals in order to provide services to the Company. The THMG Association is considered a variable interest entity (“VIE”) since it does not have sufficient equity to finance its activities without additional subordinated financial support. An enterprise having a controlling financial interest in a VIE must consolidate the VIE if it has both power and benefits—that is, it has (1) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance (power) and (2) the obligation to absorb losses of the VIE that potentially could be significant to the VIE or the right to receive benefits from the VIE that potentially could be significant to the VIE (benefits). The Company has the power and rights to control all activities of the THMG Association and funds and absorbs all losses of the VIE and appropriately consolidates the THMG Association.

Total revenue and net income (loss) for the VIE were ~~$51.8~~$60.1 million and ~~$(2.1)~~$2.3 million, and ~~$42.5~~$54.2 million and ~~$(0.1)~~$1.2 million, for the quarters ended March 31, ~~2021~~2022 and ~~2020~~2021, respectively. The VIE’s total assets, all of which were current, were ~~$39.2~~$33.1 million and ~~$28.7~~$58.5 million at March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. ~~Total~~The VIE’s total liabilities, all of which were current, ~~for the VIE~~ were ~~$78.4~~$71.5 million and ~~$65.8~~$94.7 million at March 31, ~~2021~~2022 and December 31, ~~2020, respectively. The VIE’s total stockholders’ deficit was $39.2 million and $37.1 million at March 31,~~ 2021, ~~and December 31, 2020, respectively.~~

~~All intercompany transactions and balances have been eliminated.~~

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respectively. The VIE’s total stockholders’ deficit was $38.4 million and $36.1 million at March 31, 2022 and December 31, 2021, respectively.

Business Combinations

The Company accounts for its business combinations using the acquisition method of accounting. The purchase price is attributed to the fair value of the assets acquired and liabilities assumed. Transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition date. The excess of the purchase price of acquisition over the fair value of the identifiable net assets of the acquiree is recorded as goodwill. The results of businesses acquired in a business combination are included in the Company’s condensed consolidated financial statements from the date of acquisition.

When the Company issues stock-based or cash awards to an acquired company’s ~~shareholders,~~stockholders, the Company evaluates whether the awards are consideration or compensation for post-acquisition services. The evaluation includes, among other things, whether the vesting of the awards is contingent on the continued employment of the acquired company’s stockholders beyond the acquisition date. If continued employment is required for vesting, the awards are treated as compensation for post-acquisition services and recognized as expense over the requisite service period.

Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates and selection of comparable companies. The estimates and assumptions used to determine the fair values and useful lives of identified intangible assets could change due to numerous factors, including market conditions, technological developments, economic conditions, and competition. In connection with determination of fair values, the Company may engage a third-party valuation specialist to assist with the valuation of intangible and certain tangible assets acquired and certain assumed obligations. Acquisition-related transaction costs incurred by the Company are not included as a component of consideration transferred but are accounted for as an operating expense in the period in which the costs are incurred.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company bases its estimates on historical experience, current business and economic factors, and various other assumptions that the Company believes are necessary to form a basis for making judgments about the carrying values of assets and liabilities, the recorded amounts of revenue and expenses, and the disclosure of contingent assets and liabilities. The Company is subject to uncertainties such as the impact of future events, economic and political factors, and changes in the Company’s business environment; therefore, actual results could differ from these estimates. Accordingly, the accounting estimates used in the preparation of the Company’s condensed consolidated financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment evolves. The Company believes that estimates used in the preparation of these condensed consolidated financial statements are reasonable; however, actual results could differ materially from these estimates.

Changes in estimates are made when circumstances warrant. Such changes in estimates and refinements in estimation methodologies are reflected in reported results of operations; if material, the effects of changes in estimates are disclosed in the notes to the condensed consolidated financial statements.

Significant estimates and assumptions by management affect areas including the ~~allowance for doubtful accounts,~~carrying value and useful life of long-lived assets (including intangible assets), the carrying value of ~~long-lived assets (including~~ goodwill, ~~and intangible assets),~~the capitalization and amortization of software development costs, deferred costs, the ~~finalization of purchase~~allowance for doubtful accounts, and the accounting ~~adjustments, Client~~for business combinations. Other significant areas include revenue recognition (including performance guarantees, the ~~calculation of a contingent liability in connection with an acquisition earn-out, the provision~~accounting for income taxes, ~~and related deferred tax accounts, certain accrued liabilities, revenue recognition, contingencies,~~contingences, litigation and related legal accruals, and the ~~value attributed to employee stock options~~accounting for stock-based compensation awards, and other ~~stock-based awards and the periods of benefit for deferred costs~~items as described in the Summary of Significant Accounting policies in this Quarterly Report and in the ~~Company’s Annual Report on~~2021 Form ~~10-K for the year ended December 31, 2020 (the “2020 Form 10-K”).~~

~~Presentation~~

~~Certain prior year amounts have been reclassified to conform to the current year presentation.~~10-K.

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Recently ~~Issued~~Adopted Accounting ~~Pronouncements~~Standards

In August 2020, the ~~Financial Accounting Standards Board~~financial accounting standards board (“FASB”) issued ~~ASU~~Accounting Standards Update (“ASU”) 2020-06—"Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 simplifies the accounting for convertible instruments by eliminating the conversion option separation model for convertible debt that can be settled in cash and by eliminating the measurement model for beneficial conversion features. Convertible instruments that continue to be subject to separation models are (1) those with conversion options that are required to be accounted for as bifurcated derivatives and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. This ASU also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. ~~This standard becomes effective for the~~

The Company onadopted ASU 2020-06 as of January 1, 2022, under the modified retrospective transition method, and ~~may be early adopted during an interim~~accordingly, its prior period ~~of 2021. The Company is currently evaluating the impact~~financial statements were not restated. Upon adoption of ASU 2020-06, the conversion feature of the Company’s convertible senior notes is no longer reported as a component of equity. Instead, the previously-separated equity component is now combined with the liability component, thereby eliminating the amortization of the debt discount arising from the conversion option separation model. As such, the Company currently anticipates a reduction of approximately $58 million in non-cash interest to be recorded on its ~~consolidated financial statements.~~

~~Summary of Significant Accounting Policies~~

~~The following sections reflect updates~~convertible senior notes for the year ended December 31, 2022, as compared to the ~~summary~~year ended December 31, 2021. To reflect the adoption of ~~significant accounting policies described in the 2020 Form 10-K. In addition, on an ongoing basis,~~ASU 2020-06, the Company ~~will continue~~recorded an increase to ~~closely monitor for any significant impact~~convertible senior notes of $306.3 million and decreases to ~~its estimates~~additional paid-in capital, accumulated deficit and ~~assumptions~~net deferred tax liabilities of $363.7 million, $72.7 million and $15.3 million, respectively, as ~~a result~~ of ~~the COVID-19 pandemic, especially on the allowance for doubtful accounts.~~

~~Acquisition, Integration and Transformation Costs~~

Acquisition, Integration and Transformation costs include investment banking, financing, legal, accounting, consultancy, integration, fair value changes related to contingent consideration and certain other transaction costs related to mergers and acquisitions. It also includes costs related to certain business transformation initiatives focused on integrating and optimizing various operations and systems, including enhancing our customer relationship management (CRM) and enterprise resource planning (ERP) systems.

~~General and Administrative Costs~~

General and Administrative costs consist of all operating expenses not included in the other operating expense categories and now include legal and regulatory costs for all current and historical periods presented.

~~Other (Income) Expense, Net~~

Other (income) expense, net includes the impact of foreign currency remeasurement, realized and unrealized gains on investment securities and all other non-operating items not included in other financial statement lines.January 1, 2022.

Note 3. Revenue, Deferred Revenue, and Deferred ~~Costs~~Device and ~~Other~~Contract Costs

The Company generates access fees from ~~Clients~~customers, consisting of employers, health plans, hospitals and health systems, insurance, and financial services companies (collectively “Clients”), as well as individual members, accessing its professional provider network, or hosted virtual healthcare platform orand chronic care management ~~platforms, visit~~platforms. Visit fee revenue is generated for general medical, expert medical service and other specialty ~~visits as well as~~visits. In addition, other revenue is primarily associated with virtual healthcare device equipment included with its hosted virtual healthcare platform. Access revenue accounted for ~~86%~~87% and ~~76%~~84% of ~~our total~~the Company’s revenue for the quarters ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively.

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The following table presents the Company’s revenues disaggregated by revenue source (in thousands):


	Quarter Ended				Quarter Ended
	March 31,				March 31,
	2021		2020		2022		2021
Access Fees Revenue
U.S.	$	350,868	$	107,939	$	421,146	$	327,553
International		37,288		29,114		70,191		54,553
Total		388,156		137,053		491,337		382,106

Visit Fee Revenue
U.S.		54,340		43,484		64,473		57,128
International		122		262		3,455		3,383
Total		54,462		43,746		67,928		60,511

Other
U.S.		10,671		0		5,581		10,671
International		386		0		504		387
Total		11,057		0		6,085		11,058

Total Revenues	$	453,675	$	180,799	$	565,350	$	453,675

During the fourth quarter of 2021, the Company refined its definition of international revenues to reflect all international revenues based on location of the customer. Previously, Direct-to-Consumer (“D2C”) activities were primarily reflected based on the location of operations. In addition, certain activities related to the Company’s international operations are now reflected in visit revenues versus access fee revenues. Prior period amounts have been recast to conform with current presentation.

Deferred Revenue

Deferred revenue represents billed, but unrecognized revenue, and is comprised of fees received in advance of the delivery or completion of the services and amounts received in instances when revenue recognition criteria have not been met. Deferred revenue associated with upfront payments for a device is amortized ratably over the expected ~~Member~~member enrollment period. Deferred revenue that will be recognized during the succeeding twelve-month period is recorded as current deferred revenue and the remaining portion is recorded as noncurrent deferred revenue.

For certain services, payment is required for future months before the service is delivered to the ~~Member.~~member. The Company records deferred revenue when cash payments are received in advance of the Company’s performance obligation to provide services. Deferred revenue, current plus long-term, was $87.1 million at March 31, 2022 and $73.2 million at March 31, 2021. The net increase of ~~$18.4~~$7.6 million and ~~$4.8~~$18.4 million in the deferred revenue balance for the ~~quarters~~three months ended March 31, 2022 and 2021, ~~and 2020,~~ respectively, iswas primarily driven by InTouch and Livongo as well as BetterHelp, the ~~direct-to-consumer behavioral~~Company’s D2C mental health product, and cash payments received or due in advance of satisfying the Company’s performance obligations, offset by revenue recognized that were included in the deferred revenue balance at the beginning of the period. The Company anticipates that it will satisfy most of its performance obligation associated with the deferred revenue within the prospective fiscal year. Revenue recognized during the ~~first three months of~~quarters ended March 31, 2022 and 2021 ~~and 2020~~ that was included in deferred revenue at the beginning of the periods was ~~$32.7~~$51.6 million and ~~$8.7~~$32.7 million, respectively.

~~We expect~~The Company expects to recognize ~~$62.7~~$73.0 million and ~~$4.4~~$5.0 million of revenue in ~~2021~~2022 and ~~2022~~2023, respectively, related to future performance obligations that are unsatisfied or partially unsatisfied as of March 31, ~~2021.~~2022.

~~Deferred Costs and Other~~

~~Deferred costs and other as of March 31, 2021 consist of the following (in thousands):~~

As of

As of

March 31,

December 31,

2021

2020

Deferred device cost, current

$
10,950

$
3,384

Deferred execution credit, current

792

84

Total deferred cost and other, current

11,742

3,468

Deferred device cost, noncurrent

6,190

2,179

Total Deferred cost and other

$
17,932

$
5,647

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Deferred Device and Contract Costs

Deferred device and contract costs are classified as a component of Prepaid expenses and other current assets or Other assets depending on term, and consisted of the following as of March 31, 2022 (in thousands):


	As of March 31,		As of December 31,
	2022		2021
Deferred device and contract costs, current	$	27,335	$	22,304
Deferred device and contract costs, noncurrent		7,636		6,249
Total deferred device and contract costs	$	34,971	$	28,553

Deferred costs and other activity ~~are~~were as follows (in thousands):


	Deferred Device Cost		Deferred Execution Credit			Total	Deferred Device and Contract Costs
Beginning balance as of December 31, 2020	$	5,563	$	84	$	5,647
Beginning balance as of December 31, 2021							$	28,553
Additions		13,827		820		14,647		13,986
Revenue recognized		0		(112)		(112)
Cost of revenue recognized		(2,250)		0		(2,250)		(7,568)
Ending balance as of March 31, 2021	$	17,140	$	792	$	17,932
Ending balance as of March 31, 2022							$	34,971

~~Note 4. Business Acquisitions~~

On January 4, 2021, the Company completed the acquisition of the UK-based telemedicine provider Consultant Connect for a cash consideration of $56.3 million, net of cash acquired, of which $55.9 million was paid in the three months ended March 31, 2021. Consultant Connect provides a platform that specializes in facilitating healthcare professional-to-professional advice and guidance in the United Kingdom. As part of purchase accounting, the Company recognized intangibles related to customer relationships, technology and the brand of $9.8 million, $1.9 million, and $0.6 million, respectively; and goodwill of $47.3 million. The acquisition was considered a stock acquisition for tax purposes and accordingly, the goodwill resulting from this acquisition is not tax deductible.

On October 30, 2020, the Company completed the acquisition of Livongo through a merger in which Livongo became a wholly-owned subsidiary of the Company. Upon completion of the merger, each share of Livongo’s common stock converted into the right to receive 0.5920 shares of Teladoc Health’s common stock and $4.24 in cash, without interest. In addition, in connection with the closing of the merger, Livongo paid a special cash dividend equal to $7.09 per share of Livongo’s common stock to shareholders of Livongo as of a record date of October 29, 2020. The total initial consideration calculated on upon deal closing was $13,938.0 million consisting of $401.0 million of net cash, $555.4 million related to the conversion feature of the Livongo Notes guaranteed by the Company and 60.4 million shares of Teladoc Health’s common stock valued at approximately $12,981.6 million on October 30, 2020. The acquisition was considered a stock acquisition for tax purposes and accordingly, the goodwill resulting from this acquisition is not tax deductible. The total acquisition related costs were $59.0 million and included transaction costs for investment bankers, other professional fees and income taxes for accelerated grants and were recognized in the Company’s consolidated statement of operations in Acquisition, Integration and Transformation costs.

In the first quarter of 2021, the Company identified 205,279 of additional shares of Teladoc Health common stock that were included as part of the merger consideration (“Excess Shares”) and 85,481 of additional shares of Teladoc Health common stock that were not withheld from the merger consideration for withholding tax purposes (“Withholding Shares”). In addition, the Company identified $5.6 million of merger- related cash payments related to the Excess Shares (“Cash Overpayments”). The Company has recovered and cancelled all 205,279 of the Excess Shares and expects to recover the Cash Overpayments in the form of cash. The Company expects to apply the cash value of the Withholding Shares to offset future employment tax obligations of the Company. As a result, the total adjusted consideration was $13,876.9 million consisting of $380.2 million of net cash, $555.4 million related to the conversion feature of the Livongo Notes guaranteed by the Company and 60.2 million shares of Teladoc Health’s common stock valued at approximately $12,941.3 million. The Company does not expect to incur any material charges or expenses related to the recovery of the Withholding Shares and the Cash Overpayments. Accordingly, the Company recorded, in the first quarter of fiscal year 2021, an increase to receivables in current other assets of $20.8 million, a decrease to consolidated stockholders’ equity of $40.3 million and a decrease to goodwill of $61.1 million.

On July 1, 2020, the Company completed the acquisition of InTouch through a merger in which InTouch became a wholly-owned subsidiary of the Company. The preliminary aggregate merger consideration paid was $1,078.5 million, net of cash acquired of $1.1 million, which was comprised of 4.6 million shares of Teladoc’s common stock valued at $918.8 million on July 1, 2020, and $160.7 million of cash. InTouch is a leading provider of enterprise telehealth solutions for hospitals and health systems. The acquisition was considered a stock acquisition for tax purposes and accordingly, the goodwill resulting from this acquisition is not tax deductible. The total acquisition related costs were $12.5 million and included transaction costs for investment bankers and other professional fees and were recognized in the Company’s consolidated statement of operations in Acquisition, Integration and Transformation costs.

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Note 4. Inventories

Inventories consisted of the following (in thousands):


	As of March 31,		As of December 31,
	2022		2021
Raw materials and purchased parts	$	25,006	$	26,164
Work in process		379		313
Finished goods		45,269		46,602
Total inventories	$	70,654	$	73,079

~~The acquisitions described above were accounted for using the acquisition method of accounting, which requires, among other things, the assets acquired~~

Note 5. Prepaid Expenses and the liabilities assumed be recognized at their fair values as of the acquisition date. The results of the acquisitions were included within the consolidated financial statements commencing on the aforementioned acquisition dates.Other Current Assets

~~The following table summarizes the preliminary fair value estimates of the~~Prepaid expenses and other current assets acquired and liabilities assumed for the Livongo and InTouch acquisitions. The Company, with the assistance of a third-party valuation expert, estimated the preliminary fair value of the acquired tangible and intangible assets with significant estimates such as revenue projections. The allocation of the consideration transferred to the assets acquired and the liabilities assumed is preliminary. This can be revised as a result of additional information obtained due to the finalization of the valuation inputs and assumptions as well as completing the assessment of the tax attributes of the business combination. As discussed further in Note 15, the Company recognized a non-cash income tax charge of $87 million during the three months ended March 31, 2021, substantially reflecting the recording of a valuation allowance on stock compensation benefits associated with the Livongo merger. Additional adjustments that could have a material impact on the Company’s results of operations and financial position may be recorded within the measurement period, which will not exceed one year from the acquisition date.

~~Identifiable assets acquired and liabilities assumed (in thousands):~~

Livongo

InTouch

Purchase price, net of cash acquired

$
13,876,931

$
1,069,759

Less:

Accounts receivable

80,084

16,986

Short term investment

52,500

0

Inventory

24,299

8,492

Property and equipment, net

8,952

11,366

Right of use assets

15,056

4,965

Other assets

17,337

2,541

Client relationships

1,050,000

164,580

Technology

300,000

29,190

Trademarks

250,000

32,630

Advances from financing companies

0

(26,012)

Accounts payable

(119,302)

(5,589)

Deferred revenue

(997)

(20,729)

Convertible notes

(453,417)

0

Deferred taxes

(32,984)

(30,102)

Lease liabilities

(18,834)

(5,495)

Other liabilities

(40,343)

(13,042)

Goodwill

$
12,744,580

$
899,978

~~The amount allocated to goodwill reflects the benefits Teladoc Health expects to realize from the growth of the respective acquisitions’ operations, cost savings, and various synergies.~~

The Company’s pro forma revenue and net loss for the quarters ended March 31, 2021 and 2020 below have been prepared as if Livongo and InTouch had been purchased on January 1, 2020. The Company made some pro-forma adjustments related to deferred revenue, deferred costs, amortization of intangible assets, interest expense, stock-based compensation, acquisition costs and transaction expenses.

Unaudited Pro Forma

Quarter Ended

March 31,

(in thousands)


2021

2020

Revenue


$
452,201

$
270,421

Net loss


$
(94,228)

$
(600,573)

The unaudited pro forma financial information above is not necessarily indicative of what the Company’s consolidated results actually would have been if the acquisitions had been completed at the beginning of the respective periods. In addition, the unaudited pro forma information above does not attempt to project the Company’s future

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results. The Company recorded approximately $146.9 million of revenue, net of deferred revenue acquisition related fair value adjustments and $(51.3) million of net loss in total from Livongo and InTouch for the quarter ended March 31, 2021.

~~Note 5. Inventories~~

~~Inventories~~ consisted of the following (in thousands):

As of March 31,

As of December 31,

2021

2020

Raw materials and purchased parts

$
19,202

$
19,591

Work in process

1,253

1,431

Finished goods

37,835

35,476

Total inventories

$
58,290

$
56,498


	As of March 31,		As of December 31,
	2022		2021
Prepaid expenses	$	51,397	$	38,179
Deferred device and contract costs, current		27,335		22,304
Other receivables		22,817		21,170
Other current asset		5,326		5,734
Total prepaid expenses and other current assets	$	106,875	$	87,387

Note 6. Intangible Assets, Net

Intangible assets, net consist of the following (in thousands):


								Weighted								Weighted
								Average								Average
	Useful			Accumulated		Net Carrying		Remaining								Remaining
	Life	Gross Value		Amortization		Value		Useful Life	Useful			Accumulated		Net Carrying		Useful Life
March 31, 2021
									Life	Gross Value		Amortization		Value		(Years)
March 31, 2022
Client relationships	2 to 20 years	$	1,466,769	$	(123,700)	$	1,343,069	15.2	2 to 20 years	$	1,463,335	$	(222,285)	$	1,241,050	14.3
Non-compete agreements	1.5 to 5 years		5,026		(4,940)		86	0.2
Trademarks	3 to 15 years		326,759		(23,018)		303,741	10.2	2 to 15 years		325,958		(58,823)		267,135	7.4
Patents	3 years		200		(200)		0	0
Capitalized software development costs	3 to 5 years		67,202		(27,400)		39,802	2.8
Software									3 to 5 years		155,456		(45,101)		110,355	2.8
Technology	5 to 7 years		339,150		(28,634)		310,516	6.4	5 to 7 years		343,310		(77,953)		265,357	5.3
Intangible assets, net		$	2,205,106	$	(207,892)	$	1,997,214	12.8		$	2,288,059	$	(404,162)	$	1,883,897	11.4
December 31, 2020
December 31, 2021
Client relationships	2 to 20 years	$	1,460,648	$	(100,844)	$	1,359,804	15.4	2 to 20 years	$	1,465,926	$	(199,866)	$	1,266,060	14.5
Non-compete agreements	1.5 to 5 years		5,097		(4,872)		225	0.4
Trademarks	3 to 15 years		326,786		(15,576)		311,210	10.5	3 to 15 years		326,392		(45,555)		280,837	9.5
Patents	3 years		200		(200)		0	0
Capitalized software development costs	3 to 5 years		52,518		(24,771)		27,747	2.8
Software									3 to 5 years		126,188		(40,767)		85,421	2.7
Technology	5 to 7 years		338,150		(16,272)		321,878	6.6	5 to 7 years		343,262		(65,302)		277,960	5.6
Intangible assets, net		$	2,183,399	$	(162,535)	$	2,020,864	13.1		$	2,261,768	$	(351,490)	$	1,910,278	12.0

Amortization expense for intangible assets net of foreign currency remeasurement for intangible assets was ~~$46.6~~$56.6 million and ~~$8.9~~$46.6 million for the quarters ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively.

In January 2022, the Company embarked upon a two-year migration strategy that integrates and moves selected consumer brands under Teladoc Health – which will serve as the primary business-to-business-to-consumer brand that meets all consumer healthcare needs. The evolution of brand names results in the weighted average life of our trademarks decreasing from 9.5 years to 7.4 years as of March 31, 2022, and an acceleration of amortization expense being expensed over 2022 and 2023. This change resulted in additional amortization expense of $5.8 million (or $0.04 per basic and diluted share) in the first quarter of 2022.

Refer to Note ~~7. Goodwill~~

~~Goodwill consists~~7 to the condensed consolidated financial statements for the results of impairment testing of the ~~following (in thousands):~~

As of March 31,

As of December 31,

2021

2020

Beginning balance

$
14,581,255

$
746,079

Additions associated with acquisitions

47,328

13,812,198

Purchase consideration adjustment (see Note 4)

(61,108)

0

Deferred tax adjustment (see Note 15)

(106,532)

0

Cumulative translation adjustment

(8,968)

22,978

Goodwill

$
14,451,975

$
14,581,255

Company’s intangible assets including goodwill.

1211

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Note 7. Goodwill

Goodwill consisted of the following (in thousands):


	As of March 31,		As of December 31,
	2022		2021
Beginning balance as of December 31, 2021 and 2020, respectively	$	14,504,174	$	14,581,255
Impairment		(6,600,000)		0
Additions associated with acquisitions		0		64,269
Purchase consideration adjustments net of deferred tax impacts		0		(122,306)
Currency translation adjustment		(4,379)		(19,044)
Ending balance as of March 31, 2022 and December 31, 2021	$	7,899,795	$	14,504,174

As a result of sustained decreases in the Company’s publicly quoted share price and market capitalization continuing into 2022, the Company conducted additional testing of its goodwill, definite-lived intangibles, and other long-lived assets as of March 31, 2022. As a result of this review, the Company did not identify an impairment to its definite-lived intangible assets or other long-lived assets, but the Company recorded a $6.6 billion non-deductible, non-cash goodwill impairment charge (or $41.11 per basic and diluted share) for the quarter ended March 31, 2022.

Consistent with prior goodwill impairment testing, the Company’s March 31, 2022, testing reflected a 75%/25% allocation between the income and market approaches. The Company believes the 75% weighting to the income approach continues to be appropriate as it more directly reflects its future growth and profitability expectations. For the Company’s March 31, 2022 impairment testing, as compared to its December 1, 2021 testing, the Company reduced its estimated future cash flows used in the impairment assessment, including revenues, margin, and capital expenditures to reflect its best estimates at this time. The Company also updated certain significant inputs into the valuation models including the discount rate which increased reflecting, in part, higher interest rates and market volatility, and the Company reduced its revenue market multiples, reflecting declining valuations across the Company’s selected peer group. The Company’s updates to its discount rate, market multiples, and estimated future cash flows each had a significant impact to the estimated fair value of the reporting unit.

The following table reflects changes in the most significant inputs to the Company’s impairment analysis on each testing date since its last annual test.


Testing dates	Discount Rate	Peer Group Revenue Multiples (current year/subsequent year)	% Excess of Reporting Unit Fair Value over Carrying Value
December 1, 2021	10.5%	7.0x/5.5x	15.0%
March 31, 2022	12.0%	3.0x/2.5x	0% post impairment

Note 8. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities ~~consist~~consisted of the following (in thousands):


	As of March 31,		As of December 31,		As of March 31,		As of December 31,
	2021		2020		2022		2021
Professional fees	$	3,428	$	4,717	$	5,485	$	5,373
Consulting fees/provider fees		10,643		23,167		18,029		19,292
Client performance guarantees		5,964		7,215		10,034		7,653
Legal fees		1,971		2,419
Interest payable		7,295		2,049		5,809		1,480
Income tax payable		4,420		1,627		5,131		3,098
Insurance		5,630		3,139		5,779		3,884
Marketing		4,218		2,815		6,104		3,471
Operating lease liabilities - current		11,829		11,438		13,052		12,687
Earnout		4,138		4,514
Franchise and sales taxes						11,429		9,965
Device replacement cost						5,913		6,263
Other		22,861		20,557		29,924		29,767
Total	$	82,397	$	83,657	$	116,689	$	102,933

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Note 9. Fair Value Measurements

The carrying value of the Company’s cash equivalents, short-term investments, accounts receivable, accounts payable, and accrued liabilities approximates fair value due to their short-term nature.

The Company measures its financial assets and liabilities at fair value at each reporting period using a fair value hierarchy that requires it to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:

Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active

markets.

Level 2—Include other inputs that are directly or indirectly observable in the marketplace.

Level 3—Unobservable inputs that are supported by little or no market activity.

The Company measures its cash equivalents at fair value on a recurring basis. The Company classifies its cash equivalents within Level 1 because they are valued using observable inputs that reflect quoted prices for identical assets in active markets and quoted prices directly in active markets.

The Company’s short-term investments in equity securities without readily determinable fair values are accounted for under the measurement alternative of the FASB ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, with any changes to fair value recognized within other (income) expense, net each reporting period. Under the measurement alternative, equity investments without readily determinable fair values are carried at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar securities of the same issuer; value is generally determined based on a market approachheld as of ~~the transaction date.~~

March 31, 2022 and 2021 consisted primarily of certificates of deposit held at financial institutions. The ~~Company measures its short-term~~amortized cost of these investments, ~~at fair value on a recurring basis and classifies such~~which are classified as Level ~~2. They are valued using observable inputs that reflect quoted prices directly or indirectly in active markets. The short-term investments amortized cost approximates~~2, approximated their fair value.

The Company measured its contingent consideration at fair value on a recurring basis and classified such as Level 3. The Company estimates the fair value of contingent consideration as the present value of the expected contingent payments, determined using the weighted probability of the possible payments.

~~Table of Contents~~

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis using the above input categories (in thousands):


	March 31, 2021								March 31, 2022
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Total
Cash and cash equivalents	$	720,104	$	0	$	0	$	720,104	$	836,444	$	0	$	836,444
Short-term investments	$	0	$	2,530	$	0	$	2,530	$	0	$	2,544	$	2,544
Equity securities without readily determinable fair values	$	0	$	10,852	$	0	$	10,852
Contingent liability	$	0	$	0	$	4,138	$	4,138


	December 31, 2020								December 31, 2021
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Total
Cash and cash equivalents	$	733,324	$	0	$	0	$	733,324	$	893,480	$	0	$	893,480
Short-term investments	$	0	$	53,245	$	0	$	53,245	$	0	$	2,537	$	2,537
Equity securities without readily determinable fair values	$	0	$	5,000	$	0	$	5,000
Contingent liability	$	0	$	0	$	4,514	$	4,514

There were no transfers between fair value measurement levels during the quarters ended March 31, ~~2021~~2022 and December 31, ~~2020.~~

~~The change in fair value of the Company’s equity securities without readily determinable fair values was as follows:~~

Fair value and historical cost basis at December 31, 2020

$
5,000
Upward adjustment due to observable price change in identical securities

5,852
Fair value at March 31, 2021

$
10,852

The change in fair value of the Company’s contingent liability is recorded in Acquisition, Integration and Transformation costs in the consolidated statements of operations. The contingent liability is based on future revenue and profitability expectations. The following table reconciles the beginning and ending balance of the Company’s Level 3 contingent liability (in thousands):

Fair value at December 31, 2020

$
4,514
Payments

(187)
Currency translation adjustment

(189)
Fair value at March 31, 2021

$
4,138

2021.

Note 10. ~~Leasing Operations~~Leases

The Company has operating leases for facilities, hosting co-location facilities and certain equipment under non-cancelable leases in the ~~United States~~U.S. and various international locations. The leases have remaining lease terms of 1 to 11 years, with options to extend the lease term from 1 to 6 years. At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the arrangement covering the right to use property, plant or equipment for a stated period of time. For new and amended leases beginning in 2020 and after, the Company ~~will~~ separately ~~allocate~~allocates the lease (e.g., fixed lease payments for right-to-use land, building, etc.) and non-lease components (e.g., common area maintenance) for its leases.

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Operating Leases

The Company leases office space under non-cancelable operating leases in the ~~United States~~U.S. and various international locations. As of March 31, ~~2021,~~2022, the future minimum lease payments under non-cancelable operating leases ~~are~~were as follows (in thousands):


	As of		As of March 31,
Operating Leases:	March 31, 2021		2022
2021	$	14,589
2022		14,167	$	15,023
2023		12,840		14,261
2024		7,962		9,634
2025		5,744		7,197
2026		4,006		5,822
2027 and thereafter				12,638
Total future minimum payments	$	59,308	$	64,575

The Company rents ~~its~~certain information systems to ~~certain~~selected qualified customers under arrangements that qualify as either sales-type lease or operating lease arrangements. Leases have terms that generally range from ~~two~~2 to ~~five~~5 years.

Note 11. Convertible Senior Notes

Outstanding Convertible Senior Notes

As of March 31, ~~2021,~~2022, the Company had three series of convertible senior notes outstanding. The issuances of such notes originally consisted of (i) $1$1.0 billion aggregate principal amount of 1.25% convertible senior notes due 2027 (the “2027 Notes”), issued on May 19, 2020 for net proceeds to the Company of $975.9 million after deducting offering costs of approximately $24.1 million, (ii) $287.5 million aggregate principal amount of 1.375% convertible senior notes due 2025 (the “2025 Notes”), issued on May 8, 2018 for net proceeds to the Company of $279.1 million after deducting offering costs of approximately $8.4 million, and (iii) $550.0 million aggregate principal amount of 0.875% convertible senior notes due 2025 that were issued by Livongo on June 4, 2020 for which the Company has agreed to guarantee Livongo’s obligations (the “Livongo ~~Notes”~~Notes;” and together with the 2027 Notes, the 2025 Notes and the 2022 Notes (as defined below), the “Notes”). On June 27, 2017, the Company issued, at par value, ~~$275~~$275.0 million aggregate principal amount of 3% convertible senior notes due 2022 (the “2022 Notes”), which were redeemed during the quarter ended March 31, 2021 as described below.

The following table presents certain terms of the ~~Notes:~~Notes that were outstanding as of March 31, 2022:



	2027 Notes			2025 Notes			Livongo Notes			2027 Notes			2025 Notes			Livongo Notes
Interest Rate Per Year		1.25	%		1.375	%		0.875	%		1.25	%		1.375	%		0.875	%
Fair Value as of March 31, 2021 (in millions)	$	1,115.5		$	750.0		$	906.6
Fair Value as of March 31, 2022 (in millions) (1)										$	843.5		$	1.0		$	553.3
Fair Value as of December 31, 2021 (in millions) (1)										$	940.0		$	1.3		$	605.0
Maturity Date		June 1, 2027			May 15, 2025			June 1, 2025			June 1, 2027			May 15, 2025			June 1, 2025
Optional Redemption Date		June 5, 2024			May 22, 2022			June 5, 2023			June 5, 2024			May 22, 2022			June 5, 2023
Conversion Date		December 1, 2026			November 15, 2024			March 1, 2025			December 1, 2026			November 15, 2024			March 1, 2025
Conversion Rate Per $1,000 Principal Amount as of March 31, 2021		4.1258			18.6621			13.94
Remaining Contractual Life as of March 31, 2021		6.2 years			4.1 years			4.2 years
Share Conversion Rate Per $1,000 Principal Amount as of March 31, 2022											4.1258			18.6621			13.94
Remaining Contractual Life as of March 31, 2022											5.2 years			3.1 years			3.2 years

(1)

The Notes are classified as Level 1 within the fair value hierarchy, as defined in Note 9.

All of the Notes are unsecured obligations of the Company and rank senior in right of payment to the Company’s indebtedness that is expressly subordinated in right of payment to such Notes; equal in right of payment to the Company’s liabilities that are not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities incurred by the Company’s subsidiaries.

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Holders may convert all or any portion of their Notes in integral multiples of $1,000 principal amount, at their option, at any time prior to the close of business on the business day immediately preceding the applicable conversion date only under the following circumstances:

●

during any quarter (and only during such quarter), if the last reported sale price of the shares of Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding quarter is greater than or equal to 130% of the conversion price for the applicable Notes on each applicable trading day;

●

during the 5 business day period after any 10 consecutive trading day period (or 5 consecutive trading day period in the case of the Livongo Notes) in which the trading price was less than 98% of the product of the last reported sale price of Company’s common stock and the conversion rate for the applicable Notes on each such trading day;

●

upon the occurrence of specified corporate events described under the applicable indenture; or

●

if the Company calls the applicable Notes for redemption, at any time until the close of business on the second business day immediately preceding the redemption date.

On or after the applicable conversion date, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of such Notes, regardless of the foregoing circumstances.

The 2027 Notes and the 2025 Notes are convertible into shares of the Company’s common stock at the applicable conversion rate shown in the table above. The Livongo Notes are convertible at the applicable conversion rate shown in the table above into “units of reference property,” each of which is comprised of 0.5920 of a share of the Company’s common stock and $4.24 in cash, without interest. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock ~~(or units of reference property, in the case of the Livongo Notes)~~ or a combination thereof, at the Company’s election. If the Company elects to satisfy the conversion obligation solely in cash or through payment and delivery, as the case may be, of a combination of cash and shares of the Company’s common stock or units of reference property, the amount of cash and shares of the Company’s common stock due upon conversion will be based on a daily conversion value calculated on a proportionate basis for each trading day in a 25 consecutive trading day observation period.

The Livongo Notes are convertible at the applicable conversion rate shown in the table above into “units of reference property,” each of which is comprised of 0.5920 of a share of the Company’s common stock and $4.24 in cash, without interest. Upon conversion, the Company will pay or deliver, as the case may be, cash, units of reference property, or a combination thereof, at the Company’s election. If the Company elects to satisfy the conversion obligation solely in cash or through payment and delivery, as the case may be, of a combination of cash and units of reference property, the amount of cash and units of reference property, if any, due upon conversion will be based on a daily conversion value calculated on a proportionate basis for each trading day in a 2540 consecutive trading ~~days~~day observation ~~period (or 40 days in~~period.

For each Note series, the ~~case of the Livongo Notes).~~

~~The~~ Company may redeem for cash all or part of the Notes, at its option, on or after the applicable optional redemption date shown in the table above (and prior to the 41st scheduled trading day immediately preceding the maturity date in the case of the Livongo Notes) if the last reported sale price of its common stock exceeds 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading days ending on, and including, the trading day immediately preceding the date on which the Company provides notice of the redemption. The redemption price will be the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any. In addition, calling any 2027 Note or 2025 Note for redemption on or after the applicable optional redemption date will constitute a make-whole fundamental change with respect to that Note, in which case the conversion rate applicable to the conversion of that Note, if it is converted in connection with the redemption, will be increased in certain circumstances as described in the applicable indenture. If Livongo undergoes a fundamental change (as defined in the applicable indenture) at any time prior to the maturity date, holders will have the right, at their option, to require Livongo to repurchase for cash all or any portion of their Livongo Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Livongo Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

~~In accounting for~~Following the ~~issuance~~adoption of ~~the 2027 Notes, 2025 Notes and the~~ASU 2020-06 on January 1, 2022 ~~Notes,~~as described in Note 2, the Company ~~separated the Notes into liability and equity components. The carrying amount of~~accounts for each Note series at amortized cost within the liability ~~component was calculated by measuring the fair value~~section of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the applicable Notes as a whole. The excess of the principal amount of the liability component over its carrying amount, referred to as the debt discount, is amortized to interest expense from the issuance date to the applicable maturity date. The equity component is not re-measured as long as it continues to meet the conditions for equity classification. The equity component related to the 2027 Notes, 2025 Notes and 2022 Notes was $286 million,

~~Table of Contents~~

$91.4 million and $62.4 million, respectively, net of issuance costs which were recorded in additional paid-in capital on the accompanying condensed consolidated balance sheet. The Company carries the liability component of the Livongo Notes at face value less unamortized debt discount on its condensed consolidated balance ~~sheets and provides the fair value for disclosure purposes only.~~sheets. The Company has reserved an aggregate of ~~13.7~~8.7 million shares of common stock for the Notes.

In accounting for the transaction costs related to the issuance of the 2027 Notes, 2025 Notes and 2022 Notes, the Company allocated the total costs incurred to the liability and equity components of the Notes based on their relative values. Transaction costs attributable to the liability component are being amortized to interest expense over the seven-year term of the Notes (or ~~five-and-a-half year term in the case of the 2022 Notes), and transaction costs attributable to the equity component are netted with the equity components in stockholders’ equity.~~

~~The Notes consist of the following (in thousands):~~

As of March 31,

As of December 31,
2027 Notes - Liability component

2021

2020
Principal

$
1,000,000

$
1,000,000
Less: Debt discount, net (1)

(278,857)

(287,916)
Net carrying amount

$
721,143

$
712,084

2025 Notes - Liability component

Principal

$
220,128

$
276,788
Less: Debt discount, net (1)

(49,672)

(65,923)
Net carrying amount

$
170,456

$
210,865

Livongo Notes - Liability component

Principal

$
550,000

$
550,000
Less: Debt discount, net (1)

(88,623)

(93,357)
Net carrying amount

$
461,377

$
456,643

2022 Notes - Liability component

Principal

$
—

$
46,762
Less: Debt discount, net (1)

—

(4,202)
Net carrying amount

$
—

$
42,560

~~(1)~~

~~Included in the accompanying consolidated balance sheet within convertible senior notes and amortized to interest expense over the expected life of the Notes using the effective interest rate method.~~

The Company estimates the fair value of its Notes utilizing market quotations for debt that have quoted prices in active markets. Since the Notes do not trade on a daily basis in an active market, the fair value estimates are based on market observable inputs based on borrowing rates currently available for debt with similar terms and average maturities.

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The net carrying values of the Notes consisted of the following (in thousands):


	As of March 31,		As of December 31,
2027 Notes	2022		2021
Principal	$	1,000,000	$	1,000,000
Less: Debt discount, net (1)		(17,940)		(250,846)
Net carrying amount	$	982,060	$	749,154

2025 Notes
Principal	$	730	$	730
Less: Debt discount, net (1)		(10)		(166)
Net carrying amount	$	720	$	564

Livongo Notes
Principal	$	550,000	$	550,000
Less: Debt discount, net (1)		0		(74,047)
Net carrying amount	$	550,000	$	475,953

(1)

Included in the accompanying condensed consolidated balance sheet within convertible senior notes and amortized to interest expense over the expected life of the Notes using the effective interest rate method.

The following table sets forth total interest expense recognized related to the Notes ~~(and in the case of the Livongo Notes, subsequent to the acquisition of Livongo)~~ (in thousands):


		Quarter Ended
		March 31,
2027 Notes:		2022		2021
Contractual interest expense	$	3,125		$	3,125
Amortization of debt discount		831			9,059
Total	$	3,956		$	12,184
Effective interest rate		0.8	%		3.4	%

	Quarter Ended
	March 31,
2025 Notes:		2022		2021
Contractual interest expense	$	3		$	814
Amortization of debt discount		1			2,719
Total	$	4		$	3,533
Effective interest rate		0.9	%		3.9	%

	Quarter Ended
	March 31,
Livongo Notes:		2022		2021
Contractual interest expense	$	1,203		$	1,203
Amortization of debt discount		0			4,734
Total	$	1,203		$	5,937
Effective interest rate		0	%		5.2	%

	Quarter Ended
	March 31,
2022 Notes:		2022		2021
Contractual interest expense	$	0		$	104
Amortization of debt discount		0			316
Total	$	0		$	420
Effective interest rate		0	%		9.6	%

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Quarter Ended

March 31,

2027 Notes:


2021

Contractual interest expense

$
3,125

Amortization of debt discount

9,059

Total

$
12,184

Effective interest rate of the liability component

3.4%

Quarters Ended

March 31,

2025 Notes:

2021

2020

Contractual interest expense
$
814

$
988

Amortization of debt discount

2,719

3,076

Total
$
3,533

$
4,064

Effective interest rate of the liability component

7.9
%

7.9
%

Quarter Ended

March 31,

Livongo Notes:

2021

Contractual interest expense

$
1,203

Amortization of debt discount

4,734

Total

$
5,937

Effective interest rate of the liability component

5.2%

Quarters Ended

March 31,

2022 Notes:

2021

2020

Contractual interest expense
$
104

$
2,062

Amortization of debt discount

316

3,761

Total
$
420

$
5,823

Effective interest rate of the liability component

9.6
%

10.0
%

Conversions of Convertible Senior Notes Due 2025

Certain holders of the 2025 Notes converted their 2025 Notes in exchange for 1.1 million shares of the Company’s common stock during the quarter ended March 31, 2021. As a result, the Company recorded a charge associated with the loss on extinguishment of debt of $8.1 million during the quarter ended March 31, 2021.

Redemption of Convertible Senior Notes Due 2022

In March 2021, the Company completed a redemption of all of the then outstanding 2022 Notes in exchange for approximately $0.1 million in cash (including accrued and unpaid interest). Prior to that redemption, certain holders of the 2022 Notes converted their 2022 Notes in exchange for 1.1 million shares of the Company’s common stock during the quarter ended March 31, 2021. As a result of the redemption and conversions, the Company recorded a charge associated with the loss on extinguishment of debt of ~~$3.3~~$3.4 million during the quarter ended March 31, 2021.

Note 12. Advances from Financing Companies

The Company utilizes a third-party financing company to provide certain Clients with a rental option. The principal portion of these up-front payments are reported as advances from financing companies in the accompanying condensed consolidated balance sheet. Interest rates applicable to the outstanding advances as of March 31, ~~2021~~2022 ranged from ~~3.79%~~3.35% to ~~8.49%~~8.25%.

~~Table of Contents~~

Client lease payments to third party financing companies will reduce the advances from financing companies as of March 31, ~~2021~~2022 by year as follows (in thousands):


	As of March 31,		As of March 31,
	2021		2022
2021	$	10,787
2022		9,624	$	10,105
2023		3,502		8,024
2024		185		2,678
	$	24,098
2025				109
Total			$	20,916

Note 13. Legal Matters

From time to time, Teladoc Health is involved in various litigation matters arising in the normal course of business, including the matters described below. The Company consults with legal counsel on those issues related to litigation and seeks input from other experts and advisors with respect to such matters. Estimating the probable losses or a range of probable losses resulting from litigation, government actions and other legal proceedings is inherently difficult and requires an extensive degree of judgment, particularly where the matters involve indeterminate claims for monetary damages, may involve discretionary amounts, present novel legal theories, are in the early stages of the proceedings, or are subject to appeal. Whether any losses, damages or remedies ultimately resulting from such matters could reasonably have a material effect on ~~our~~the Company’s business, financial condition, results of operations, or cash flows will depend on a number of variables, including, for example, the timing and amount of such losses or damages (if any) and the structure and type of any such remedies. As of the date of these financial statements, Teladoc Health’s management does not expect any litigation matter to have a material adverse impact on its business, financial condition, results of operations or cash flows.

On May 14, 2018, a purported class action complaint (Thomas v. Best Doctors, Inc.) was filed in the United States District Court for the District of Massachusetts against the Company’s wholly owned subsidiary, Best Doctors, Inc. The complaint alleges that on or about May 16, 2017, Best Doctors violated the U.S. Telephone Consumer Protection Act (the “TCPA”) by sending unsolicited facsimiles to plaintiff and certain other recipients without the recipients’ prior express invitation or permission. The lawsuit seeks statutory damages for each violation, subject to trebling under the TCPA, and injunctive relief. The Company will vigorously defend the lawsuit and any potential loss is currently deemed to be immaterial.

On ~~December 12, 2018,~~August 27, 2021, a purported securities class action complaint ~~(Reiner~~(City of Hialeah Employees’ Retirement System v. Teladoc Health, Inc., et.al.) was filed in the ~~United States District~~Circuit Court ~~for the Southern District~~ of ~~New York (the “SDNY”)~~Cook County, Illinois against the Company and

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certain of the Company’s current and former officers and ~~a former officer.~~directors. The complaint iswas brought on behalf of a purported class consisting of all persons ~~or entities~~ who ~~purchased or otherwise~~ acquired shares of ~~the Company’s~~Teladoc Health common stock ~~during~~issued in the ~~period March 3, 2016 through December 5, 2018.~~Livongo merger. The complaint ~~asserts~~asserted violations of Sections ~~10(b)~~11, 12(a)(2) and ~~20(a)~~15 of the Securities ~~Exchange~~ Act of ~~1934~~1933 based on allegedly false or misleading statements and omissions with respect to ~~among other things,~~ the ~~alleged misconduct of one of~~registration statement and prospectus filed in connection with the ~~Company’s previous executive officers.~~Livongo merger. The complaint ~~seeks~~sought certification as a class action, ~~and~~ unspecified compensatory damages plus interest and attorneys’ ~~fees.~~fees, rescission or a rescissory measure of damages and equitable or other relief. On ~~November 30, 2020,~~January 18, 2022, the ~~SDNY granted~~case was voluntarily dismissed without prejudice in the ~~Company’s motion to dismiss~~Circuit Court of Cook County, Illinois and on January 26, 2022, was refiled in the ~~complaint, but granted~~Supreme Court of the ~~plaintiff~~State of New York. The refiled case includes substantially the ~~opportunity to refile, which refiling was made on December 30, 2020.~~same allegations. The Company believes that ~~the~~these claims ~~against the Company and its officers continue to be~~are without merit, and the Company and its named current and former officers and directors intend to defend the Company ~~vigorously, including filing a motion to dismiss the amended complaint.~~vigorously.

In addition, on June 21, 2019, a stockholder derivative lawsuit (Kreutter v. Gorevic, et al.) was filed in the SDNY against certain current and former directors and officers of the Company. The derivative lawsuit alleges that the named directors and officers breached their fiduciary duties to the Company in connection with factual assertions substantially similar to those in the purported securities class action complaint described above. The Company believes that the claims set forth in this stockholder derivative lawsuit are without merit and the Company’s motion to dismiss the lawsuit is pending before the SDNY.

~~Table of Contents~~

Note 14. Common Stock and Stockholders’ Equity

Capitalization

Effective October 30, 2020, the authorized number of shares of the Company’s common stock was increased from 150,000,000 to 300,000,000 shares.

Warrants

The Company had 0 warrants outstanding as of March 31, ~~2021~~2022 or December 31, ~~2020.~~2021.

Stock Plans

The Company’s 2015 Incentive Award Plan, 2017 Employment Inducement Incentive Award Plan and Livongo Acquisition Incentive Award Plan (collectively, the “Plans”) provide for the issuance of incentive and non-statutory options and other equity-based awards to its employees and non-employee service providers.

In connection with the closing of the Livongo merger, the Company assumed the Livongo Health, Inc. 2019 Equity Incentive Plan, the Livongo Health, Inc. Amended and Restated 2014 Stock Incentive Plan and the Livongo Health, Inc. Amended and Restated 2008 Stock Incentive Plan (collectively, the “Assumed Plans”). At the effective time of the Livongo merger on October 30, 2020, each outstanding Livongo equity award issued under the Assumed Plans was converted into a corresponding award with respect to the Company’s common stock, with the number of shares underlying such award adjusted based on the “Equity Award Adjustment Ratio” (as defined below), and remained outstanding in accordance with the terms that were applicable to such award prior to the Livongo merger. The exercise price of each outstanding Livongo stock option was also adjusted based on the Equity Award Adjustment Ratio. The “Equity Award Adjustment Ratio” means the quotient determined by dividing (i) the volume weighted average closing price of Livongo common stock on the ~~four~~ ~~trading days ending on October 29, 2020, by (ii) the volume weighted average closing price of the Company’s common stock on the New York Stock Exchange on the~~ ~~four~~ ~~trading days beginning on October 29, 2020.~~

All stock-based awards to employees are measured based on the grant-date fair value or replacement grant date fair value in relation to the Livongo transaction, and are generally recognized on a straight line basis in the Company’s condensed consolidated statement of operations over the period during which the employee is required to perform services in exchange for the award (generally requiring a four-year vesting period for each stock option and a three-year vesting period for each restricted stock unit (“RSU”)).

Stock Options

Options issued under the Plans are exercisable for periods not to exceed ten years, and vest and contain such other terms and conditions as specified in the applicable award document. Options to buy common stock are issued under the Plans, with exercise prices equal to the closing price of shares of the Company’s common stock on the New York Stock Exchange on the date of award. The Company had ~~12,229,932~~10,218,931 shares available for grant at March 31, ~~2021.~~2022.

Activity under the Plans iswas as follows (in thousands, except share and per share amounts and years):


				Weighted-						Weighted-
		Weighted-		Average				Weighted-		Average
	Number of	Average		Remaining	Aggregate		Number of	Average		Remaining	Aggregate
	Shares	Exercise		Contractual	Intrinsic		Shares	Exercise		Contractual	Intrinsic
	Outstanding	Price		Life in Years	Value		Outstanding	Price		Life in Years	Value
Balance at December 31, 2020	5,826,685	$	17.19	5.31	$	1,064,944
Balance at December 31, 2021							3,426,978	$	22.88	5.32	$	242,569
Stock option grants	3,688	$	107.06	N/A			45,434	$	79.40	N/A
Stock options exercised	(1,237,399)	$	9.62	N/A	$	(212,993)	(267,586)	$	13.40	N/A	$	(15,090)
Stock options forfeited	(44,031)	$	14.47	N/A			(15,767)	$	19.63	N/A
Balance at March 31, 2021	4,548,943	$	19.41	5.69	$	738,498
Vested or expected to vest at March 31, 2021	4,548,943	$	19.41	5.69	$	738,498
Exercisable at March 31, 2021	3,700,190	$	16.88	5.33	$	610,040
Balance at March 31, 2022							3,189,059	$	24.50	5.16	$	160,501
Vested or expected to vest at March 31, 2022							3,189,059	$	24.50	8.35	$	2,352
Exercisable at March 31, 2022							3,011,138	$	20.36	4.97	$	158,148

The total grant-date fair value of stock options granted during the quarters ended March 31, 2022 and 2021 were $1.6 million and $0.4 million, respectively.

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~~The total grant-date fair value of stock options granted during the quarters ended March 31, 2021 and 2020 were $0.4 million and $0.3 million, respectively.~~

The Company estimates the fair value of stock options granted using the Black Scholes option pricing model.

The assumptions used in the Black-Scholes option-pricing model are determined as follows:

Volatility. The expected volatility was derived from the historical stock volatilities of the Company’s stock volatility over a period equivalent to the expected term of the stock option grants.

Expected Term. The expected term represents the period that the stock-based awards are expected to be outstanding. When establishing the expected term assumption, the Company utilizes historical data.

Risk-Free Interest Rate. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with terms similar to the expected term on the options.

Dividend Yield. The Company has never declared or paid any cash dividends and does not plan to pay cash dividends in the foreseeable future, and therefore, it used an expected dividend yield of 0.

Forfeiture rate. The Company recognizes forfeitures as they occur.

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions and fair value per share:


	Quarter Ended March 31,				Quarter Ended March 31,
	2021		2020		2022		2021
Volatility		57.02% - 57.49%		46.1% – 47.9%		56.69% - 57.86%		57.02% - 57.49%
Expected term (in years)		4.1		4.3		4.1		4.1
Risk-free interest rate		0.31% - 0.51%		0.87% - 1.64%		1.13% - 1.52%		0.31% - 0.51%
Dividend yield		0		0		0		0
Weighted-average fair value of underlying stock options	$	$107.06	$	42.06	$	$35.94	$	$107.06

~~The Company determined that a Monte Carlo valuation model is most suitable for valuation of options for the replaced and replacement awards from the Livongo merger, for the following reasons:~~

●

~~Options are deeply in-the-money, as such don’t qualify as “plain-vanilla” options.~~

●

With the merger, the exercise pattern of the replaced and replacement options might be different from a regular “plain-vanilla” option that assumes the exercise of the option at the end of the option expiration time. A lattice approach can be used to directly model the effect of different expected periods before exercise on the fair-value-based measure of the option, whereas it is assumed under the Black-Scholes-Merton model that exercise occurs at the end of the option’s expected term.

For the quarters ended March 31, ~~2021~~2022 and ~~2020,~~2021, the Company recorded compensation expense related to stock options of ~~$28.2~~$10.7 million and ~~$3.9~~$28.2 million, respectively.

As of March 31, ~~2021,~~2022, the Company had ~~$97.2~~$10.9 million in unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of approximately ~~1.1~~1.9 years.

Restricted Stock Units

In May 2017, the Company commenced issuing RSUs, pursuant to the 2015 Incentive Award Plan and to certain employees and members of the Board of Directors under the 2017 Employment Inducement Incentive Award Plan.

The fair value of ~~the~~ RSUs is determined on the date of grant. The Company records compensation expense in the condensed consolidated statement of operations on a straight-line basis over the vesting period for ~~RSUs and on an accelerated tranche by tranche basis for performance-based awards.~~RSUs. The vesting period for employees and members of the Board of Directors ranges from one to four years.

Activity under RSUs was as follows:


		Weighted-Average
		Grant Date
	RSUs	Fair Value Per RSU
Balance at December 31, 2021	2,133,501	$	168.43
Granted	2,433,620	$	74.74
Vested and issued	(499,486)	$	146.13
Forfeited	(153,581)	$	153.09
Balance at March 31, 2022	3,914,054	$	113.99
Vested and unissued at March 31, 2022	16,507	$	71.96
Non-vested at March 31, 2022	3,897,547	$	113.99

The total grant-date fair value of RSUs granted during the quarters ended March 31, 2022 and 2021 was $181.9 million and $88.0 million, respectively.

For the quarters ended March 31, 2022 and 2021, the Company recorded stock-based compensation expense related to RSUs of $44.5 million and $50.9 million, respectively.

As of March 31, 2022, the Company had $407.8 million in unrecognized compensation cost related to non-vested RSUs, which is expected to be recognized over a weighted-average period of approximately 2.3 years.

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~~Activity under the RSUs is as follows:~~

Weighted-Average

Grant Date

RSUs

Fair Value Per RSU
Balance at December 31, 2020

3,550,595

$
162.11
Granted

402,210

$
218.88
Vested and issued

(708,798)

$
102.94
Forfeited

(115,243)

$
184.40
Balance at March 31, 2021

3,128,764

$
181.99
Vested and unissued at March 31, 2021

13,755

$
50.90
Non-vested at March 31, 2021

3,115,009

$
182.57

~~The total grant-date fair value of RSUs granted during the quarters ended March 31, 2021 and 2020 were $88.0 million and $39.5 million, respectively.~~

~~For the quarters ended March 31, 2021 and 2020, the Company recorded stock-based compensation expense related to the RSUs of $50.9 million and $9.4 million, respectively.~~

~~As of March 31, 2021, the Company had $473.2 million in unrecognized compensation cost related to non-vested RSUs, which is expected to be recognized over a weighted-average period of approximately~~ ~~2.6 years.~~

Performance Stock Units

~~The Company began issuing grants Performance Stock Units (“PSUs”) to employees under the 2015 Incentive Award Plan in 2018.~~ Stock-based compensation costs associated with ~~our PSUs~~the Company’s performance stock units (“PSUs”) are initially determined using the fair market value of the Company's common stock on the date the awards are approved by the Compensation Committee of the Board of Directors (service inception date). The vesting of these PSUs is subject to certain performance conditions and a service requirement ranging from ~~1-3~~1 to 3 years. Until the performance conditions are met, stock compensation costs associated with these PSUs are ~~re-measured~~re-assessed each reporting period based upon the estimated performance attainment on the reporting date. The ultimate number of PSUs that are issued to an employee is the result of the actual performance of the Company at the end of the performance period compared to the performance ~~conditions~~targets and ~~can range~~generally range from ~~50%~~25% to ~~225%~~200% of the initial grant. Stock compensation expense for PSUs is recognized on an accelerated tranche by tranche basis for performance-based awards. Forfeitures are accounted for at the time ~~the~~they occur consistent with Company policy.

Activity under ~~the~~ PSUs iswas as follows:


		Weighted-Average			Weighted-Average
		Grant Date			Grant Date
	Shares	Fair Value Per PSU		Shares	Fair Value Per PSU
Balance at December 31, 2020	429,319	$	76.60
Balance at December 31, 2021				356,249	$	140.01
Granted	516,031	$	131.67	420,274	$	74.21
Vested and issued	(268,201)	$	74.33	(197,849)	$	109.03
Balance at March 31, 2021	677,149	$	119.47
Vested and unissued at March 31, 2021	0	$	0
Non-vested at March 31, 2021	677,149	$	119.47
Balance at March 31, 2022				578,674	$	106.35
Vested and unissued at March 31, 2022				0	$	0
Non-vested at March 31, 2022				578,674	$	106.35

The total grant-date fair value of PSUs granted during the ~~quarters~~quarter ended March 31, 2022 and 2021 ~~and 2020 were $67.9~~was $30.1 million and ~~$13.1~~$67.9 million, respectively.

For the quarters ended March 31, ~~2021~~2022 and ~~2020,~~2021, the Company recorded stock-based compensation expense related to ~~the~~ PSUs of ~~$7.2~~$7.3 million and ~~$4.6~~$7.2 million, respectively.

As of March 31, ~~2021,~~2022, the Company had ~~$40.1~~$26.9 million in unrecognized compensation cost related to non-vested PSUs, which is expected to be recognized over a weighted-average period of approximately ~~2.5~~2.3 years.

Employee Stock Purchase Plan

In July 2015, the Company adopted the 2015 Employee Stock Purchase Plan (“ESPP”) in connection with its initial public offering. A total of ~~926,109~~1,019,726 shares of common stock were reserved for issuance under this plan as of March 31, ~~2021.~~2022. The Company’s ESPP permits eligible employees to purchase common stock at a discount through payroll deductions during defined offering periods. Under the ESPP, the Company may specify offerings with durations of not

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more than 27 months and may specify shorter purchase periods within each offering. Each offering will have one or more purchase dates on which shares of its common stock will be purchased for employees participating in the offering. An offering may be terminated under certain circumstances. The price at which the stock is purchased is equal to the lower of 85% of the fair market value of the common stock at the beginning of an offering period or on the date of purchase.

During the ~~quarter~~quarters ended March 31, 2022 and 2021, the Company ~~had~~did not ~~issued~~issue any ~~shares under the ESPP. During 2020, the Company issued 49,781~~ shares under the ESPP. As of March 31, ~~2021, 599,103~~2022, 570,661 shares remained available for issuance.

For the quarters ended March 31, ~~2021~~2022 and ~~2020,~~2021, the Company recorded stock-based compensation expense related to the ESPP of ~~$2.2~~$1.5 million and ~~$0.4~~$2.2 million, respectively.

As of March 31, ~~2021,~~2022, the Company had ~~$1.0~~$0.6 million in unrecognized compensation cost related to the ESPP, which is expected to be recognized over a weighted-average period of approximately 0.1 year.

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Total compensation costs for stock-based awards were recorded as follows (in thousands):


	Quarter Ended				Quarter Ended
	March 31,				March 31,
	2021		2020		2022		2021
Cost of revenue (exclusive of depreciation and amortization, which is shown separately)	$	2,362	$	0	$	2,196	$	2,362
Advertising and marketing		5,082		1,259		3,711		5,082
Sales		21,167		2,919		12,071		21,167
Technology and development		26,726		2,104		18,087		26,726
General and administrative		30,963		12,033		24,371		30,963
Total stock-based compensation expense (1)	$	86,300	$	18,315	$	60,436	$	86,300

(1)	Excluding the amount capitalized related to internal software development projects.

Note 15. Income Taxes

~~As a result~~The Company recorded income tax expense of ~~the Company’s history of net operating losses (“NOL”), the Company had historically provided~~$0.4 million for ~~a full valuation allowance against its deferred tax assets for assets that are not more-likely-than-not to be realized, which was partially released in~~ the quarter ended ~~December 31, 2020. The Company’s income tax expense/(benefit) for the quarters ended~~ March 31, ~~2021 and 2020 was $87.0 million and (0.7) million, respectively.~~ 2022.

For the quarter ended March 31, ~~2021,~~2022, the Company recognized a ~~non-cash income~~reversal of $15.3 million of the net deferred tax ~~charge of $87.0 million, substantially reflecting a discrete non-cash charge for an additional valuation allowance on excess stock compensation benefits~~liability associated with the ~~Livongo merger, partially offset by tax benefits on current period losses. This discrete charge also resulted in a $106.5 million measurement period reduction to goodwill.~~convertible senior notes upon the adoption of ASU 2020-06, recorded entirely through the balance sheet.

The Company’s income tax ~~benefit~~expense for the quarter ended March 31, ~~2020~~2021 of $87.0 million primarily was related to additional valuation allowance recorded on excess stock compensation associated with the ~~amortization of acquired intangibles.~~Livongo merger.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Special Note Regarding Forward-Looking Statements

Many statements made in this Quarterly Report on Form 10-Q that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements and should be evaluated as such. Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plan and strategies. These statements often include words such as “anticipates”, “believes”, “suggests”, “targets”, “projects”, “plans”, “expects”, “future”, “intends”, “estimates”, “predicts”, “potential”, “may”, “will”, “should”, “could”, “would”, “likely”, “foresee”, “forecast”,“anticipates,” “believes,” “suggests,” “targets,” “projects,” “plans,” “expects,” “future,” “intends,” “estimates,” “predicts,” “potential,” “may,” “will,” “should,” “could,” “would,” “likely,” “foresee,” “forecast,” “continue” and other similar words or phrases, as well as statements in the future tense to identify these forward-looking statements. These forward-looking statements and projections are contained throughout this Form 10-Q, including the section entitled” “Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations.”~~Operations” (“MD&A”). We base these forward-looking statements or projections on our current expectations, plans and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances and at such time. As you read and consider this Form 10-Q, you should understand that these statements are not guarantees of performance or results. The forward-looking statements and projections are subject to and involve risks, uncertainties and assumptions and you should not place undue reliance on these forward-looking statements or projections. Although we believe that these forward-looking statements and projections are based on reasonable assumptions at the time they are made, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements and projections. Factors that may materially affect such forward-looking statements and projections include, but are not limited to, the section entitled “Risk Factors” in ~~the 2020~~our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”) and in our other reports and ~~SEC~~United States (“U.S.”) Securities and Exchange Commission (“SEC”) filings. These cautionary statements should not be construed by you to be exhaustive and are made only as of the date of this Form 10-Q. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should evaluate all forward-looking statements made in this Form 10-Q in the context of these risks and uncertainties.

Overview

Teladoc, Inc. was incorporated in the State of Texas in June 2002 and changed its state of incorporation to the State of Delaware in October 2008. Effective August 10, 2018, Teladoc, Inc. changed its corporate name to Teladoc Health, Inc. Unless the context otherwise requires, Teladoc Health, Inc., together with its subsidiaries, is referred to herein as “Teladoc ~~Health”~~Health,” the “Company,” or ~~the “Company”.~~“we.” The Company’s principal executive office is located in Purchase, New York. Teladoc Health is the global leader in ~~providing~~whole person virtual care focused on forging a new healthcare ~~services~~experience with ~~a focus on high quality, lower costs,~~better convenience, outcomes and ~~improved outcomes~~value around the world.

Teladoc Health ~~solutions~~was founded on a simple, yet revolutionary idea: that everyone should have access to the best healthcare, anywhere in the world on their terms. Today, we have a vision of making virtual care the first step on any healthcare journey, and we are ~~transforming the access, cost~~delivering on this mission by providing whole person virtual care that includes primary care, mental health, chronic condition management, and quality dynamics of healthcare delivery for all of our market participants. Members rely on Teladoc Health to remotely access affordable, on-demand healthcare whenever and wherever they choose. Our Clients on behalf of their employees or beneficiaries as well as direct-to consumer individuals (D2C) purchase our solutions to reduce their healthcare spending and offer convenient, affordable, high-quality healthcare to their employees or beneficiaries. Our network of physicians and other healthcare professionals, or our providers have the ability to generate meaningful income and deliver their services more efficiently with no administrative burden.more.

COVID-19 Update

We believe that favorable existing ~~macro~~secular trends in the healthcare industry were accelerated by the impacts of the COVID-19 pandemic, driving greater consumer ~~trial and~~ use of virtual care, and increased adoption by employers, health plans, hospitals and health systems, and ~~health care~~healthcare providers. In combination with the expansion of our capabilities, we believe that these trends present significant opportunities for virtual healthcare to address the most pressing, universal healthcare challenges through trusted solutions, such as ours, that deliver convenient, ~~high quality~~affordable, and high-quality care; empower ~~consumers~~individuals to manage and improve their health; and enable providers to offer their best care for their patients.

We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business. ~~The outbreak of~~ COVID-19 ~~in 2020~~has increased utilization of our telehealth services, but it is uncertain whether such increase in demand will continue. While the COVID-19 pandemic has not had a material adverse impact on our financial

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condition and results of operations to date, the future impact on our operational and financial performance will depend on certain developments, including the duration and spread of the pandemic, impact on our ~~Clients~~customers, consisting of employers, health plans,

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hospitals and ~~Members,~~health systems, insurance, and financial services companies (collectively “Clients”), and members, impact on our sales cycles, and effect on our vendors, all of which are uncertain and cannot be predicted. Public and private sector policies and initiatives to reduce the transmission of COVID-19 and disruptions to our operations and the operations of our third-party suppliers, along with any related global slowdown in economic activity, may result in decreased revenues, decreased collections, and increased costs. Further, the economic effects of the COVID-19 pandemic have financially constrained some of our prospective and existing Clients’ healthcare spending, which may negatively impact our ability to acquire new Clients and our ability to renew subscriptions with or sell additional solutions to our existing Clients. We also may experience increased ~~Member~~member attrition to the extent our existing ~~Clients’~~Clients reduce their respective workforces in response to economic conditions. In addition, due to our subscription-based business model, the effect of the COVID-19 pandemic may not be fully reflected in our revenue until future periods. It is possible that the COVID-19 pandemic, the measures taken by the governments and businesses affected and any resulting economic impact may materially and adversely affect our business, results of operations, cash flows, and financial positions as well as our customers.

We have also taken measures in response to the COVID-19 pandemic, ~~including temporarily closing our offices~~ and implementing a work from home policy for our workforce; limiting capacity at our offices that have reopened; implementing additional safety policies and procedures for employees working in our offices that have reopened; suspending employee travel and in person meetings; and adjusting our supply chain and inventory levels. Wewe may take further actions that alter our business operations as may be required by federal, state, local, or foreign authorities or that we determine are in the best interests of our employees, Clients, ~~Members,~~members, and stockholders. The effects of these operational modifications are unknown and may not be realized until further reporting periods.

~~Revenue~~

We have a demonstrated track record of driving growth both organically and through acquisitions. We increased revenue 151% to $453.7 million for the quarter ended March 31, 2021, including an incremental $149.0 million from acquired businesses. Excluding the impact of the InTouch, Livongo and Consultant Connect acquisitions, revenue increased 69%, reflecting the acceleration of the adoption of virtual care stemming from the COVID-19 pandemic and the Company’s broad momentum to transform the healthcare experience.

For the quarter ended March 31, 2021, 86%, 12% and 2% of our revenue was derived from subscription access fees, visit fees and other, respectively. For the quarter ended March 31, 2020, 76% and 24% of our revenue were derived from subscription access fees and visit fees, respectively. We believe our continued strong subscription fee revenue is mainly representative of the value proposition we provide the broader healthcare system.

~~Membership, Visits and Platform Enabled Sessions~~

We completed approximately 3.2 million telehealth visits in the first three months of 2021 and approximately 10.6 million telehealth visits for the full year of 2020. U.S. Paid Membership was 51.5 million at March 31, 2021. We also completed approximately 1.1 million platform-enabled sessions associated with InTouch during the quarter ended March 31, 2021.

Acquisition History

We have scaled and intend to continue to scale our platform through the pursuit of selective acquisitions. We have completed multiple acquisitions since our inception, which we believe have expanded our distribution capabilities and broadened our service offerings.

On January 4, 2021, we completed the acquisition of the UK-based telemedicine provider Consultant Connect for an aggregate consideration of $56.3 million, net of cash acquired, of which $55.9 million was paid in the three months ended March 31, 2021. Consultant Connect provides a platform that specializes in facilitating healthcare professional-to-professional advice and guidance in the United Kingdom.

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On October 30, 2020, we completed the merger with Livongo. Upon completion of the merger, each share of Livongo’s common stock converted into the right to receive 0.5920 shares of Teladoc Health’s common stock and $4.24 in cash, without interest. In addition, in connection with the closing of the merger, Livongo paid a special cash dividend equal to $7.09 per share to shareholders of Livongo as of a record date of October 29, 2020. The total final consideration was $13,876.9 million, consisting of $380.2 million of net cash, $555.4 million related to the conversion feature of the Livongo Notes guaranteed by the Company and 60.2 million shares of Teladoc Health’s common stock valued at approximately $12,941.3 million on October 30, 2020. Livongo is a leading provider to empower people with chronic conditions to live better and healthier lives.

On July 1, 2020, we completed the acquisition of InTouch for aggregate consideration of $1,069.8 million, which was comprised of 4.6 million shares of our common stock valued at $903.3 million on July 1, 2020, and $166.5 million of net cash. InTouch is a leading provider of enterprise telehealth solutions for hospitals and health systems.

Net Income

For the quarter ended March 31, 2022, we recorded a loss of $6,674.5 million or $41.58 per share. The quarter included a non-cash goodwill impairment charge of $6,600.0 million. Refer to Critical Accounting Estimates and Policies: Goodwill Impairment Charge and Note 7, Goodwill, to the Company’s condensed consolidated financial statements for more information.

For the quarter ended March 31, 2021, we recorded a loss of $199.6 million.

Refer to the condensed consolidated results of operations in the MD&A for other supplemental financial measures we use to assess our operating performance.

Key Factors Affecting Our Performance

We believe that our future performance will depend on many factors, including the following:

Number of ~~Members.~~Members and Revenue per Member. Our revenue growth rate and long-term profitability are affected by our ability to increase cross selling capability among our ~~number of Members~~existing members because we derive a substantial portion of our revenue from ~~subscription~~ access and other fees via Client contracts that provide ~~Members~~members access to our professional provider network in exchange for a contractual based ~~monthly~~periodic fee or ~~subscription~~ access fees derived from our ~~D2C Members.~~Direct-to-Consumer (“D2C”) members. Therefore, we believe that our ability to add new ~~Members~~members, retain existing members, and increase the revenue generated from each member is a key indicator of our increasing market adoption, the growth of our business,

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and future revenue potential, and that increasing our ~~Membership~~membership and revenue per member is an integral objective that will provide us with the ability to continually innovate our services and support initiatives that will enhance ~~Members’~~members’ experiences. U.S. ~~Paid Membership was 51.5~~paid membership increased by 2.7 to 54.3 million at March 31, 2022, compared to the same period in 2021. Average U.S. revenue per member measures the average amount of access revenue that we generate from a U.S. paid member for a particular period. It is calculated by dividing the U.S. access revenue generated from our U.S. paid members, excluding certain non-member based access fees, by the total average number of U.S. paid members during the applicable period. For the first quarter of 2022, average U.S. revenue per member was $2.52 compared to $2.09 for the same period in 2021.

Number of ~~Visits.~~Visits and Utilization. We also recognize revenue in connection with the completion of a general medical visit, expert medical service, and other specialty visits for contracts where the ~~majority~~service is not part of ~~our contracts. Accordingly, our visit revenue, or visit fees, generally increase as the number of visits increase.~~access fees. Visit fee revenue is driven primarily by the number of Clients, the number of ~~Members~~members in a Client’s population, ~~Member~~member utilization of our provider network services and the contractually negotiated prices of our services. We believe that increasing our current ~~Member~~member utilization rate and increasing penetration further into existing and new health plan Clients is a key objective in order for our Clients to realize tangible healthcare savings with our service. Visits increased by ~~56%~~35%, or ~~1.1~~1.2 million, to approximately ~~3.2~~4.5 million for the quarter ended March 31, ~~2021~~2022 compared to the same period in ~~2020.~~2021. Utilization measures the ratio of visits to total U.S. paid members. It is calculated by dividing visits during a particular period (excluding visit fee only visits) by U.S. paid members in the applicable period and annualizing the result. Utilization increased by 593 basis points to approximately 23.4% for the quarter ended March 31, 2022, compared to 17.5% in the same period in 2021.

Number ~~Platform Enabled~~ of Platform-Enabled Sessions. A platform-enabled session is a unique instance in which our licensed software platform has facilitated a virtual voice or video encounter between a care provider and our Client’s patient, or between care providers. We believe platform-enabled sessions are an indicator of the value our Clients derive from the platform they license from us in order to facilitate virtual care. ~~Over time, we expect platform-enabled sessions to outpace overall revenue growth as telehealth becomes a bigger part of our Clients’ care delivery strategy.~~ Our Clients completed ~~1.1~~1.2 million platform-enabled sessions during the quarter ended March 31, 2022, compared to 1.1 million during the same period in 2021.

Chronic Care Enrollment. Our chronic care programs are one of the key components of our whole person virtual care platform that we believe position us to drive greater engagement with our platforms and increased revenue. Chronic care enrollment measures the number of unique individuals enrolled in one or more of our chronic care programs. Chronic care enrollment increased by 12% to 0.7 million at March 31, 2022, compared to 0.7 million at March 31, 2021.

Seasonality. We have typically ~~experience~~in the past seen the strongest increases in consecutive quarterly revenue during the fourth and first quarters of each year, which coincides with traditional annual benefit enrollment seasons. ~~In particular,~~However, as a result of many Clients’ introduction of new services at the very end of the current year, or the start of each year, a high concentration of our new Client contracts has an effective date of January 1. Therefore, while Membership increases, utilization is dampened until service delivery ramps up over the course of the year. Additionally, our business has become more diversified across services, channels, and ~~geographies. We continue to~~geographies, we see a growing diversification of Client start dates, resulting from ~~our~~growth in mental health offerings, health plan expansions, cross sales of new services, international growth, and mid-market employer growth, all of which are not constrained by a calendar year start.

As a result of national seasonal cold and flu trends, we typically experience our highest level of visit fees during the first and fourth quarters of each year. Conversely, the second quarter of the year has historically been the period of lowest utilization of our provider network services relative to the other quarters of the year. However, during the COVID-19 pandemic in 2021 and 2020, we did not experience the typical seasonality associated with national cold and flu outbreaks. See “Risk Factors—Risks Related to Our Business—Our quarterly results may fluctuate significantly,

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which could adversely impact the value of our common ~~stock.”~~stock” included in ~~our~~the 2021 Form ~~10-K for the year ended December 31, 2020 filed with the SEC.~~10-K.

Critical Accounting ~~Policies~~Estimates and ~~Estimates~~Policies

Our discussion and analysis of our results of operations, liquidity and capital resources are based on our condensed consolidated financial statements which have been prepared in conformity with accounting principles generally accepted in the ~~United States of America~~U.S. (“~~U.S.~~ GAAP”). The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities.

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On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, ~~accounts receivable, inventories, accounting for~~ business combinations, goodwill and other intangible assets, ~~long-lived assets, capitalized development costs, earnout, rental equipment, advances from financing companies,~~ income taxes, ~~lease liabilities, loss contingencies~~ and ~~the value of securities underlying stock-based compensation.~~other items. We base our estimates on historical and anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results may differ from our estimates and could have a significant adverse effect on our results of operations and financial position. For a discussion of our critical accounting policies and estimates see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2021 Form 10-K. In addition, the following updates our ~~Form 10-K~~discussion of impairment testing therein as of March 31, 2022.

Goodwill Impairment Charge

As a result of sustained decreases in our publicly quoted share price and market capitalization continuing into 2022, we conducted additional testing of our goodwill, definite-lived intangibles and other long-lived assets as of March 31, 2022. As a result of this review, we did not identify an impairment to our definite-lived intangible assets or other long-lived assets, but we recorded a $6.6 billion non-deductible, non-cash goodwill impairment charge (or $41.11 per basic and diluted share) for the ~~year~~quarter ended ~~December~~March 31, ~~2020 filed~~2022.

Consistent with prior goodwill impairment testing, our March 31, 2022, testing reflected a 75%/25% allocation between the ~~SEC,~~income and ~~there have been no material changes~~market approaches. We believe the 75% weighting to the income approach continues to be appropriate as it more directly reflects our future growth and profitability expectations. For our March 31, 2022 impairment testing, as compared to our ~~critical accounting policies during~~December 1, 2021 ~~other than those as discussed~~testing, we reduced our estimated future cash flows used in ~~Note 2, “Basis of Presentation~~the impairment assessment, including revenues, margin, and ~~Principles of Consolidation” of~~capital expenditures to reflect our best estimates at this time. We also updated certain significant inputs into the ~~Notes~~valuation models including the discount rate which increased reflecting, in part, higher interest rates and market volatility, and we reduced our revenue market multiples, reflecting declining valuations across our selected peer group. Our updates to our discount rate, market multiples, and estimated future cash flows each had a significant impact to the ~~Consolidated Financial Statements in this Quarterly Report on Form 10-Q.~~ estimated fair value of our reporting unit.

~~Consolidated Results of Operations~~

The following table ~~sets forth~~indicates changes in the most significant inputs to our impairment analysis on each testing date since our last annual test.


Testing dates	Discount Rate	Peer Group Revenue Multiples (current year/subsequent year)	% Excess of Reporting Unit Fair Value over Carrying Value
December 1, 2021	10.5%	7.0x/5.5x	15.0%
March 31, 2022	12.0%	3.0x/2.5x	0% post impairment

Overall, in the event there are future adverse changes in our estimated future cash flows and/or changes in key assumptions, including but not limited to discount rate increases, lower market multiples, lower revenue growth, lower margin, and/or a lower terminal growth rate, we may be required to record additional non-cash impairment charges to our goodwill, or impairment charges to other intangibles, and/or long-lived assets. Such non-cash charges would likely have a material adverse effect on our consolidated ~~statement~~statements of operations ~~data for~~and balance sheets in the ~~quarters ended~~reporting period of the charge. Following the March 2022 impairment there is no excess of reporting unit fair value over the carrying amount, so any further decrease in estimated fair value would result in an additional goodwill impairment charge.

In the period following March 31, ~~2021~~2022 there has been a further decline in our market capitalization, based on our publicly quoted share price. To the extent the decline is sustained, it would require further testing of our goodwill in our next reporting period and ~~2020~~it may result in an additional goodwill impairment. Absent further changes to our estimated future cash flows, it may prompt updates to other key valuation inputs, including the discount rate and market multiples. Further reductions in estimated future cash flows could also result in an additional decline in estimated reporting unit value. As an illustration, if the ~~dollar and percentage change between~~estimated fair value of the ~~respective periods (in thousands):~~reporting unit at March 31, 2022, decreased by 50%, it would result in a goodwill impairment charge of approximately $4.6 billion.

Quarter Ended March 31,

2021

2020









$

$

Variance

%

Revenue

$
453,675

$
180,799

$
272,876

151
%

Expenses:

Cost of revenue (exclusive of depreciation and amortization, which is shown separately below)

145,959

72,382

73,577

102
%

Operating expenses:

Advertising and marketing

89,439

32,515

56,924

175
%

Sales

64,793

17,940

46,853

261
%

Technology and development

78,008

19,257

58,751

305
%

Acquisition, Integration and Transformation costs

6,323

3,664

2,659

73
%

General and administrative

105,172

46,342

58,830

127
%

Depreciation and amortization

48,659

9,710

38,949

N/M
%

Total expenses

538,353

201,810

336,543

167
%

Loss from operations

(84,678)

(21,011)

(63,667)

303
%

Loss on extinguishment of debt

11,459

0

11,459

N/M
%

Other (income) expense, net

(5,652)

685

(6,337)

N/M
%

Interest expense, net

22,125

8,618

13,507

157
%

Net loss before taxes

(112,610)

(30,314)

(82,296)

271
%

Income tax expense (benefit)

87,039

(711)

87,750

N/M
%

Net loss

$
(199,649)

$
(29,603)

$
(170,046)

N/M
%

2725

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~~EBITDA~~Condensed Consolidated Results of Operations

The following table sets forth our condensed consolidated statement of operations data for the quarters ended March 31, 2022 and ~~Adjusted EBITDA~~2021 and the dollar and percentage change between the respective periods (dollars in thousands except for per share data):


	Quarter Ended March 31,				Year over Year Growth
	2022		2021			Variance	%
Revenue	$	565,350	$	453,675	$	111,675	25	%
Expenses:
Cost of revenue (exclusive of depreciation and amortization, which is shown separately below)		187,025		145,959		41,066	28	%
Operating expenses:
Advertising and marketing		133,600		89,439		44,161	49	%
Sales		58,329		64,793		(6,464)	(10)	%
Technology and development		87,412		78,008		9,404	12	%
General and administrative		104,923		105,172		(249)	0	%
Acquisition, integration, and transformation costs		4,507		6,323		(1,816)	(29)	%
Depreciation and amortization		58,933		48,659		10,274	21	%
Goodwill impairment		6,600,000		0		6,600,000	N/M
Total expenses		7,234,729		538,353		6,696,376	N/M
Loss from operations		(6,669,379)		(84,678)		(6,584,701)	N/M
Loss on extinguishment of debt		0		11,459		(11,459)	(100)	%
Other income, net		(724)		(5,652)		4,928	(87)	%
Interest expense, net		5,480		22,125		(16,645)	(75)	%
Net loss before taxes		(6,674,135)		(112,610)		(6,561,525)	N/M
Income tax expense		388		87,039		(86,651)	(100)	%
Net loss	$	(6,674,523)	$	(199,649)	$	(6,474,874)	N/M
Net loss per share, basic and diluted	$	(41.58)	$	(1.31)	$	(40.27)	N/M

EBITDA (1)	$	(10,446)	$	(36,019)	$	25,573	(71)	%
Adjusted EBITDA (1)	$	54,497	$	56,604	$	(2,107)	(4)	%

(1)	Non-GAAP Financial Measures

N/M – not meaningful

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The following is a reconciliation of net loss, the most directly comparable U.S. GAAP financial measure, to EBITDA and Adjusted EBITDA for the quarters ended March 31, ~~2021~~2022 and ~~2020~~2021 (in thousands):

Quarter Ended

March 31,


2021

2020

Net loss

$
(199,649)

$
(29,603)

Add:

Loss on extinguishment of debt

11,459

0

Other (income) expense, net

(5,652)

685

Interest expense, net

22,125

8,618

Income tax expense (benefit)

87,039

(711)

Depreciation and amortization

48,659

9,710

EBITDA(1)

(36,019)

(11,301)

Stock-based compensation

86,300

18,315

Acquisition, Integration and Transformation costs

6,323

3,664

Adjusted EBITDA(1)

$
56,604

$
10,678

~~(1)~~

~~Non-GAAP Financial Measures:~~


	Quarter Ended
	March 31,
	2022		2021
Net loss	$	(6,674,523)	$	(199,649)
Add:
Goodwill impairment		6,600,000		0
Loss on extinguishment of debt		0		11,459
Other income, net		(724)		(5,652)
Interest expense, net		5,480		22,125
Income tax expense		388		87,039
Depreciation and amortization		58,933		48,659
EBITDA		(10,446)		(36,019)
Stock-based compensation		60,436		86,300
Acquisition, integration, and transformation costs		4,507		6,323
Adjusted EBITDA	$	54,497	$	56,604

EBITDA and Adjusted EBITDA

To supplement our financial information presented in accordance with U.S. GAAP, we use ~~EBITDA~~earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and Adjusted EBITDA, which are non-U.S. GAAP financial measures, to clarify and enhance an understanding of past performance. We believe that the presentation of these financial measures enhances an investor’s understanding of our financial performance. We further believe that these financial measures are useful financial metrics to assess our operating performance and financial and business trends from period-to-period by excluding certain items that we believe are not representative of our core business. We use certain financial measures for business planning purposes and in measuring our performance relative to that of our competitors. We utilize Adjusted EBITDA as the primary measure of our performance.

EBITDA consists of net loss before interest; other ~~(income) expense,~~income, net, including foreign exchange gain or loss; taxes; depreciation and amortization; goodwill impairment; and loss on extinguishment of debt. We believe that making such adjustment provides investors meaningful information to understand our results of operations and the ability to analyze financial and business trends on a period-to-period basis.

Adjusted EBITDA consists of net loss before interest; other ~~(income) expense,~~income, net, including foreign exchange gain or loss; taxes; depreciation and amortization; goodwill impairment; loss on extinguishment of debt; stock-based compensation; and ~~Acquisition, Integration~~acquisition, integration and ~~Transformation~~transformation costs. We believe that making such adjustment provides investors meaningful information to understand our results of operations and the ability to analyze financial and business trends on a period-to-period basis.

We believe the above financial measures are commonly used by investors to evaluate our performance and that of our competitors. However, our use of the terms EBITDA and Adjusted EBITDA may vary from that of others in our industry. Neither EBITDA nor Adjusted EBITDA should be considered as an alternative to net loss before taxes, net loss, net loss per share or any other performance measures derived in accordance with U.S. ~~GAAP as measures of performance.~~GAAP.

EBITDA and Adjusted EBITDA have important limitations as analytical tools and you should not consider them in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:

●

EBITDA and Adjusted EBITDA do not reflect goodwill impairment;

●

EBITDA and Adjusted EBITDA do not reflect the ~~significant~~ interest expense on our debt;

●

EBITDA and Adjusted EBITDA eliminate the impact of income taxes on our results of operations;

●

EBITDA and Adjusted EBITDA do not reflect the loss on extinguishment of debt;

●

EBITDA and Adjusted EBITDA do not reflect other ~~(income) expense,~~income, net;

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●

Adjusted EBITDA does not reflect the significant ~~Acquisition, Integration~~acquisition, integration and ~~Transformation~~transformation costs. Acquisition, ~~Integration~~integration and ~~Transformation~~transformation costs include investment banking, financing, legal, accounting, consultancy, integration, fair value changes related to contingent consideration and certain other transaction

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costs related to mergers and acquisitions. It also includes costs related to certain business transformation initiatives focused on integrating and optimizing various operations and systems, including upgrading our customer relationship management ~~(CRM)~~(“CRM”) and enterprise resource planning ~~(ERP)~~(“ERP”) systems. These transformation cost adjustments made to our results do not represent normal, recurring, operating expenses necessary to operate the business but rather, incremental costs incurred in connection with our acquisition and integration activities;

●

Adjusted EBITDA does not reflect the significant non-cash stock compensation expense which should be viewed as a component of recurring operating costs; and

●

other companies in our industry may calculate EBITDA and Adjusted EBITDA differently than we do, limiting the usefulness of these measures as comparative measures.

In addition, although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and both EBITDA and Adjusted EBITDA do not reflect any expenditures for such replacements.

We compensate for these limitations by using EBITDA and Adjusted EBITDA along with other comparative tools, together with U.S. GAAP measurements, to assist in the evaluation of operating performance. Such U.S. GAAP measurements include net loss, net loss per share and other performance measures.

In evaluating these financial measures, you should be aware that in the future we may incur expenses similar to those eliminated in this presentation. Our presentation of EBITDA and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.

Condensed Consolidated Results of Operations

We completed our acquisitions of Consultant Connect on January 4, 2021, Livongo on October 30, 2020, and InTouch on July 1, 2020. The results of operations of the aforementioned acquisitions have been included in our unaudited consolidated financial statements included in this Quarterly Report from the date of each acquisition.

Revenue. Total revenue was $565.4 million for the quarter ended March 31, 2022, compared to $453.7 million during the quarter ended March 31, 2021, an increase of $111.7 million, or 25%. This increase in revenue was driven substantially by the generation of additional access fees by our membership base, most significantly from our D2C mental health service, BetterHelp. Revenue from access fees was $491.3 million for the quarter ended March 31, 2022 compared to $382.1 million for the quarter ended March 31, 2021, ~~compared~~an increase of $109.2 million, or 29%. Visit fee revenue increased 12% to ~~$180.8~~$67.9 million ~~during~~and other revenue was $6.1 million, down 45% primarily related to the completion of a long-term development services contract. U.S. revenue grew 24% to $491.2 million and International revenue grew 27% to $74.2 million. For the quarter ended March 31, ~~2020, an increase~~2022, 87%, 12% and 1% of $272.8 million, or 151%. Excluding the impact from acquisitions of $149.0 million, revenue increased 69%, reflecting the acceleration of the adoption of virtual care stemming from the COVID-19 pandemic and our ~~broad momentum to transform the healthcare experience. The increase in~~ revenue was ~~significantly driven by an increase in new Clients and the number of new Members generating additional subscription~~derived from access fees, visit fees and ~~visit fees. The number of paid Members increased by 20% from March 31, 2020~~other revenue, respectively, as compared to ~~March 31, 2021. Revenue from the U.S. subscription access fees was $350.9 million~~84%, 13% and 3%, respectively, for the quarter ended March 31, 2021 compared to $107.9 million for the quarter ended March 31, 2020. We generated $37.3 million of international subscription access fees for the quarter ended March 31, 2021 and $29.1 million for the quarter ended March 31, 2020. We completed approximately 3.2 million visits, representing $54.5 million of visit fees for the quarter ended March 31, 2021, compared to 2.0 million visits, representing $43.7 million of visit fees during the quarter ended March 31, 2020, an increase of $10.8 million, or 24%.2021.

Cost of Revenue (exclusive of depreciation and amortization, which is shown separately below). Cost of revenue (exclusive of depreciation and amortization, which is shown separately below) was $187.0 million for the quarter ended March 31, 2022 compared to $146.0 million for the quarter ended March 31, 2021, ~~compared to $72.4 million for the quarter ended March 31, 2020,~~ an increase of ~~$73.6~~$41.1 million, or ~~102%~~28%. The increase was primarily due to growth in visits associated with higher ~~Membership and general medical visits resulting~~revenue which resulted in increased provider fees, ~~and increased physician network operation center costs, and hiring of additional personnel to manage our provider network operations centers, and the impact from acquisitions.~~

as well as higher device-related costs.

Advertising and Marketing Expenses. Advertising and marketing expenses were $133.6 million for the quarter ended March 31, 2022 compared to $89.4 million for the quarter ended March 31, 2021, ~~compared to $32.5 million for the quarter ended March 31, 2020,~~ an increase of ~~$56.9~~$44.2 million, or ~~175%~~49%. The increase was substantially driven by ~~a $39.8 million increase in Member engagement initiatives,~~higher digital and media

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advertising ~~sponsorship of professional organizations and trade shows; the impact~~costs from ~~acquisitions, and a $2.9 million impact driven by the hiring of additional personnel.~~BetterHelp.

Sales Expenses. Sales expenses were $58.3 million for the quarter ended March 31, 2022 compared to $64.8 million for the quarter ended March 31, 2021, ~~compared to $17.9 million for the quarter ended March 31, 2020, an increase~~a decrease of ~~$46.9~~$6.5 million, or ~~261%~~10%. The ~~increase substantially reflects the impact from acquisitions and a $1.4 million increase in staffing and employee-related expenses including sales commissions;~~decrease was primarily driven by lower stock-based compensation, partially offset ~~$1.4 million of lower travel, entertainment~~by higher sales and ~~other expenses.~~partner commissions due to higher results, as well as higher expense associated with conferences and events to support business activity.

Technology and Development Expenses. Technology and development expenses were $87.4 million for the quarter ended March 31, 2022 compared to $78.0 million for the quarter ended March 31, 2021, ~~compared~~an increase of $9.4 million, or 12%. The increase primarily reflects additional personnel and staff augmentation costs; higher professional, recruiting and consulting fees; and higher infrastructure, hosting and software license costs. These increases were associated with ongoing projects and services to ~~$19.3 million for~~continuously improve and optimize our technology portfolio. Partially

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offsetting this increase was lower stock-based compensation. For the ~~quarter~~quarters ended March 31, ~~2020, an increase of $58.7~~2022 and 2021, research and development costs were $54.7 million ~~or 305%. The increase substantially reflects the impact of acquisitions, a $5.9~~and $53.4 million, ~~increase due mainly to the hiring of additional personnel and a $1.8 million increase due to ongoing projects to continuously improve our technology portfolio and other similar items.~~respectively.

Acquisition, Integration and Transformation Costs. Acquisition, ~~Integration~~integration and ~~Transformation~~transformation costs were ~~$6.3~~$4.5 million for the quarter ended March 31, ~~2021 compared~~2022, and primarily consisted of integration and transformation costs to ~~$3.7 million for~~integrate and upgrade our CRM and ERP ecosystem. For the quarter ended March 31, ~~2020, an increase of $2.6 million. These~~2021, acquisition, integration and transformation costs were ~~incurred~~$6.3 million and primarily to drive integration activities resulting from the InTouch, Livongo and Consultant Connect acquisitions. Acquisition, Integration and Transformation costs include investment banking, financing, legal, accounting, consultancy, integration, fair value changesconsisted of acquisition related to contingent consideration and certain other transaction costs related to mergers and acquisitions. It also includes costs related to certain internal business transformation initiatives focused on integrating and optimizing various operations and systems, including upgrading our customer relationship management (CRM) and enterprise resource planning (ERP) systems.costs.

General and Administrative Expenses. General and administrative expenses were essentially flat at $104.9 million for the quarter ended March 31, 2022 compared to $105.2 million for the quarter ended March 31, 2021 compared to $46.3 million for the quarter ended March 31, 2020, an increase of $58.8 million, or 127%. The charge primarily reflects the impact of acquisitions, a $7.0 million increase in employee-related expenses reflecting the acceleration of the adoption of virtual care stemming from the COVID-19 pandemic and a $4.8 million increase in2021. Higher therapist recruiting costs, ~~incurred in our provider network operations centers. Other expenses, including office-related charges,~~ bank charges, ~~therapist recruiting, liability~~legal fees, dues, subscriptions and licenses, and other corporate expenses were offset by lower stock-based compensation, insurance and bad debt ~~expenses; increased a combined total of $9.9 million, reflecting the overall impact of growth on the business.~~expenses.

Depreciation and Amortization. Depreciation and amortization was $58.9 million for the quarter ended March 31, 2022 compared to $48.7 million for the quarter ended March 31, 2021, an increase of $10.3 million. The higher expense was primarily due to additional amortization expense related to the acceleration of the amortization of certain trademarks, and to a lesser extent, higher amortization associated with higher capitalized software development costs. As it relates to the acceleration of the useful lives for certain trademarks, this change related to the Company’s strategy to integrate and move certain consumer brands under the Teladoc Health brand. This acceleration of amortization resulted in decreasing the weighted average useful life of all trademarks at the date of the change from 9.5 years to 7.5 years. This change will increase annual amortization by approximately $23.0 million in 2022 and 2023.

Goodwill Impairment. The Company took a non-cash goodwill impairment charge of $6.6 billion in the quarter ended March 31, 2022, following goodwill impairment testing performed as a result of sustained decreases in our publicly quoted share price. The non-cash charge had no impact on income taxes. Refer to Critical Accounting Estimates and Policies: Goodwill Impairment Charge and Note 7, Goodwill, to the Company’s condensed consolidated financial statements.

Loss on Extinguishment of Debt. There was no loss on extinguishment of debt for the quarter ended March 31, 2022 compared to ~~$9.7~~$11.5 million for the quarter ended March 31, ~~2020, an increase of $39.0~~2021.

Other Income, Net. Other income, net was ($0.7) million ~~or 401%. This increase was due to additional amortization expense substantially related to acquisition-related intangible assets that increased from $317.1 million at~~for the quarter ended March 31, ~~2020~~2022 compared to ~~$2,205.1~~($5.7) million atfor the quarter ended March 31, 2021 and ~~an increase in depreciation expense on an increased base of depreciable fixed assets that increased from $26.2 million at~~included foreign exchange remeasurements. In addition, the quarter ended March 31, ~~2020 to $53.4~~2021 included a $5.9 million ~~at March 31, 2021.~~unrealized gain on a non-marketable equity security.

Interest Expense, Net. Interest expense, net consists of interest costs and amortization of debt discount associated with ~~our bank debt,~~advances from financing companies, our convertible senior notes, interest income from cash and cash equivalents and short-term ~~investments in marketable securities.~~investments. Interest expense, net was ~~$22.1~~$5.5 million and ~~8.6~~$22.1 million for the quarters ended March 31, ~~2021~~2022 and ~~March 31, 2020,~~2021, respectively. The ~~increase~~decrease in interest expense ~~primarily is~~substantially reflects the adoption of ASU 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity,” which resulted in the elimination of non-cash interest expense associated with the ~~2027~~accretion of the recorded debt value to stated value. Refer to Note 11, Convertible Senior Notes, ~~issued~~to the condensed consolidated financial statements. The associated non-cash expense was $14.6 million, or $0.10 per share, in ~~May 2020 and Livongo Notes that the Company agreed to guarantee in October 2020.~~

~~Other (Income) Expense, Net.~~ ~~Other (income) expense, net for~~ the quarter ended March 31, ~~2021 consisted primarily of a $5.7 million unrealized gain on a non-marketable equity security as well as foreign exchange gain or loss.~~2021.

Income ~~tax expense (benefit)~~Tax Expense. Income tax expense was ~~$87.0~~$0.4 million for the quarter ended March 31, ~~2021~~2022 compared to ~~$(0.7)~~$87.0 million ~~benefit~~expense for the quarter ended March 31, ~~2020. We recognized a non-cash income tax charge of $87.0 million, substantially reflecting~~2021. The expense in the ~~discrete charge for additional~~prior year quarter largely reflected an increase in valuation ~~allowance on excess~~allowances needed to reflect the Company’s ability to utilize future net operating losses, primarily associated with stock compensation benefits associated with the Livongo merger.

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Liquidity and Capital Resources

The following table presents a summary of our cash flow activity for the periods set forth below (in thousands):


	Quarter Ended				Quarter Ended
	March 31,				March 31,
	2021		2020		2022		2021
Consolidated Statements of Cash Flows Data
Condensed Consolidated Statements of Cash Flows - Summary
Net cash used in operating activities	$	(18,026)	$	(6,320)	$	(31,747)	$	(18,026)
Net cash used in investing activities		(16,030)		(11,928)		(27,567)		(16,030)
Net cash provided by financing activities		22,175		15,053		2,816		22,175
Total	$	(11,881)	$	(3,195)	$	(56,498)	$	(11,881)

Our principal sources of liquidity were cash and cash equivalents, comprised substantially of deposit accounts and money market funds, ~~and marketable securities,~~ totaling ~~$720.1~~$836.4 million, including restricted cash of $3.8 million as of March 31, ~~2021.~~2022. Additionally, we had short-term marketable securities of ~~$2.6~~$2.5 million as of March 31, ~~2021.~~2022.

We believe that our existing cash and cash equivalents and short-term ~~marketable securities~~investments will be sufficient to meet our working capital, ~~and~~ capital expenditure, and contractual obligation needs for at least the next 12 months. Our future capital requirements will depend on many factors including our growth rate, contract renewal activity, number of visits, the timing and extent of spending to support product development efforts, our expansion of sales and marketing activities, the introduction of new and enhanced services offerings, ~~and~~ the continuing market acceptance of ~~telehealth.~~telehealth, and our debt service obligations. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, ~~and~~ technologies, and intellectual property rights. We may be required to seek additional equity or debt ~~financing.~~financing to fund working capital, capital expenditures and acquisitions, and to settle debt obligations. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at ~~all. If we are unable to raise additional capital when desired,~~all, which would adversely affect our business, financial condition and results of ~~operations would be adversely affected.~~operations.

Historically, we have financed our operations primarily through sales of equity securities, debt issuance, and bank borrowings.

On October 30, 2020, we completed the merger with Livongo. Upon completion of the merger, each share of Livongo’s common stock converted into the right to receive 0.5920 shares of our common stock and $4.24 in cash, without interest. In addition, in connection with the closing of the merger, Livongo paid a special cash dividend equal to $7.09 per share of Livongo’s common stock to shareholders of Livongo as of a record date of October 29, 2020. The total consideration was $13,876.9 million consisting of $380.2 million of net cash, $555.4 million related to the conversion feature of the Livongo Notes guaranteed by the Company and 60.2 million shares of Teladoc Health’s common stock valued at approximately $12,941.3 million on October 30, 2020. Livongo is a leading provider to empower people with chronic conditions to live better and healthier lives.

On October 30, 2020, as part of the Livongo acquisition, we agreed to guarantee Livongo’s obligations under its $550.0 million aggregate principal amount of convertible senior notes due 2025, which had been issued by Livongo on June 4, 2020, prior to our acquisition of Livongo. The Livongo Notes bear cash interest at a rate of 0.875% per year, payable semi-annually in arrears on June 1 and December 1 of each year. The Livongo Notes will mature on June 1, 2025.

On July 1, 2020, we completed the acquisition of InTouch for aggregate consideration of $1,069.8 million, which was comprised of 4.6 million shares of our common stock valued at $903.3 million on July 1, 2020 and $166.5 million of net cash. InTouch is a leading provider of enterprise telehealth solutions for hospitals and health systems.

On May 19, 2020, we issued, at par value, $1 billion aggregate principal amount of 1.25% convertible senior notes due 2027. The 2027 Notes bear cash interest at a rate of 1.25% per year, payable semi-annually in arrears on June 1 and December 1 of each year. The 2027 Notes will mature on June 1, 2027. The net proceeds to us from the offering were $975.9 million after deducting offering costs of approximately $24.1 million.

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See Note 11, “Convertible Senior Notes” of the ~~Notes~~notes to the ~~Consolidated Financial Statements~~condensed consolidated financial statements in this Quarterly Report on Form 10-Q for additional information on the Notes.

We routinely enter into contractual obligations with third parties to provide professional services, licensing, and other products and services in support of our ongoing business. The current estimated cost of these contracts is not expected to be significant to our liquidity and capital resources based on contracts in place as of March 31, 2022.

Cash Used in Operating Activities

~~Cash~~For the three months ended March 31, 2022 cash flows used in operating activities ~~consist~~consisted of net loss adjusted for certain non-cash items and changes in assets and liabilities. Cash used in operating activities was ~~$18.0 million and $6.3~~$31.7 million for the ~~quarters~~three months ended March 31, ~~2021 and 2020, respectively.~~2022 compared to cash used in operating activities of $18.0 million for the three months ended March 31, 2021. The year-over-year ~~increase~~higher outflow was ~~substantially~~primarily driven by ~~the timing of payments~~an increase in accounts receivable and prepaid expenses, substantially related to software licenses and deferred device costs, and higher ~~employee bonuses~~bonus and payroll ~~taxes, offset by higher revenues and other working capital changes.~~tax payments.

Our primary uses of cash from operating activities are for the payment of cash compensation, ~~expenses, providers fee,~~provider fees, engagement marketing, D2C digital and media advertising, inventory, insurance, ~~office expenses,~~ technology ~~costs, market data~~ costs, interest expense and ~~Acquisition, Integration~~acquisition, integration, and ~~Transformation~~transformation costs. Historically, ~~the payment of~~our cash ~~for~~ compensation ~~and benefits~~ is at its highest level in the first quarter when we pay discretionary employee compensation related to the previous fiscal year.

Cash Used in Investing Activities

Cash used in investing activities was $27.6 million for the three months ended March 31, 2022. Cash used in investing activities consisted of capital expenditures totaling $3.9 million and capitalized software development costs of $26.9 million.

Cash used in investing activities was $16.0 million for the three months ended March 31, 2021. Cash used in investing activities consisted of the acquisition of businesses of $55.9 million, ~~net of cash acquired,~~ investment in capital expenditures totaling ~~$2.1~~

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$2.1 million ~~investments in~~and capitalized software development costs of $11.1 million, ~~and~~ partially offset by proceeds from short-term marketable securities of $50.0 million.

Cash ~~used in investing~~Provided by Financing Activities

Cash provided by financing activities ~~was $11.9 million~~ for the three months ended March 31, ~~2020.~~2022 was $2.8 million. Cash ~~used in investing~~provided by financing activities primarily consisted of ~~the purchases of property and equipment totaling $0.9 million, investments in capitalized software development costs of $2.0 million, and $9.0~~$3.6 million of ~~pre-funding associated with~~proceeds from the ~~then-pending InTouch acquisition.~~exercise of employee stock options, $3.7 million of proceeds withheld from participants in the employee stock purchase plan, and $2.2 million of proceeds from advances from financing companies, partially offset by ($3.9) million from a net change in payments against advances from financing companies and other items of ($2.9) million.

~~Cash Provided by Financing Activities~~

Cash provided by financing activities for the three months ended March 31, 2021 was $22.2 million. Cash provided by financing activities primarily consisted of $11.9 million of proceeds from the exercise of employee stock options, $8.6 million of proceeds withheld from participants in the employee stock purchase plan, $4.8 million of proceeds from advances from financing companies, ~~and~~ $1.2 million of timing associated with net cash proceeds for tax withholding for stock-based compensation and redemption of 2022 Notes, and $4.1 million from a net change in payments from customers against advances from financing companies.

Cash provided by financing activities for the three months ended March 31, 2020 was $15.1 million. Cash provided by financing activities consisted of $14.9 million of proceeds from the exercise of employee stock options and $0.2 million of timing associated with cash proceeds for tax withholding for options exercised.

On June 4, 2020, the Livongo Notes referred to in Note 11 were issued on an unsecured basis by Livongo Health, Inc. In connection with the acquisition of Livongo by Teladoc Health, Inc. on October 30, 2020, Teladoc Health, Inc. became the parent guarantor of the Livongo Notes. The guarantee is full and unconditional and ranks equally in right of payment with all existing and future unsecured senior indebtedness. As disclosed below, summary financial information is presented for Teladoc Health, Inc., as Guarantor, excluding its consolidated subsidiaries (other than Livongo), and Livongo Health, Inc., as the Issuer, excluding its consolidated subsidiaries, collectively referred to as the Obligor Group. The summary financial information of the Obligor Group is presented on a combined basis and transactions between the combined entities have been eliminated and investments in and equity in earnings from non-guarantor subsidiaries have been excluded. Financial information for non-guarantor entities has been excluded. For the quarter ended March 31, 2021, revenue of the Obligor Group was $191.4 million, operating loss was $(119.6) million, net loss before taxes was $(147.0) million and net loss was $(234.1) million. As of March 31, 2021, current assets of the Obligor Group were $790.1 million, inter-company receivables were $321.6 million, total assets were $17,268.5 million, current liabilities were $131.2 million, inter-company payables were $50.8 million and total liabilities were $1,600.0 million.

~~Table of Contents~~Recently Adopted Accounting Standards

~~Contractual Obligations and Commitments~~

~~The following summarizes our contractual obligations as of March 31, 2021 (in thousands):~~

Payment Due by Period




Less than

1 to 3

4 to 5

More than

Total

1 Year

Years

Years

5 Years

Operating leases

$
78,157

$
19,414

$
36,824

$
17,913

$
4,006

Non-cancelable purchase commitments

9,652

7,707

1,945

0

0

Debt obligations under the Convertible Notes

1,770,128

0

0

770,128

1,000,000

Interest associated with the Convertible Notes

108,550

20,339

40,679

33,366

14,166

Total

$
1,966,487

$
47,460

$
79,448

$
821,407

$
1,018,172

~~Our existing office~~In August 2020, the financial accounting standards board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06—"Debt—Debt with Conversion and ~~hosting co-location facilities lease agreements provide us~~Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 simplifies the accounting for convertible instruments by eliminating the conversion option separation model for convertible debt that can be settled in cash and by eliminating the measurement model for beneficial conversion features. Convertible instruments that continue to be subject to separation models are (1) those with conversion options that are required to be accounted for as bifurcated derivatives and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. This ASU also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards.

We adopted ASU 2020-06 as of January 1, 2022, under the modified retrospective transition method, and accordingly, our prior period financial statements were not restated. Upon adoption of ASU 2020-06, the conversion feature of our convertible senior notes is no longer reported as a component of equity. Instead, the previously-separated equity component is now combined with the liability component, thereby eliminating the amortization of the debt discount arising from the conversion option ~~to renew and generally provide for rental payments on~~separation model. As such, we currently anticipate a graduated basis. Our future operating lease obligations would change if we entered into additional operating lease agreements as we expand our operations and if we exercised the office and hosting co-location facilities lease options. The contractual commitment amountsreduction of approximately $58 million in ~~the table above are associated with agreements that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services~~non-cash interest to be used, fixed, minimum or variable price provisions and the approximate timing of the transaction. Non-cancelable purchase commitments include inventory purchases, cloud-based software contracts and other goods and services. Obligations under contracts that we can cancel without a significant penalty are not included in the table above. For abandoned facilities, the above contractual obligation schedule does not reflect any realized or potential sublease revenue.

~~Off-Balance Sheet Arrangements~~

During the periods presented, we did not have, nor do we currently have, any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been establishedrecorded on our convertible senior notes for the ~~purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We are therefore not exposed~~year ended December 31, 2022, as compared to the ~~financing, liquidity, market, or credit risk that could arise if~~year ended December 31, 2021. To reflect the adoption of ASU 2020-06, we ~~had engaged in those types~~recorded an increase to convertible senior notes of ~~relationships.~~$306.3 million and decreases to additional paid-in capital, accumulated deficit and net deferred tax liabilities of $363.7 million, $72.7 million, and $15.3 million, respectively, as of January 1, 2022.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk and Foreign Exchange Risk

Cash equivalents that are subject to interest rate volatility represent our principal market risk. We do not expect cash flows to be affected to any significant degree by a sudden change in market interest rates as our Notes and Livongo Notes bear fixed interest rates. We do not enter into investments for trading or speculative purposes.

We operate our business primarily within the ~~United States and currently execute~~U.S. which accounts for approximately ~~92%~~87% of our ~~transactions in U.S. dollars.~~revenues. We have not utilized hedging strategies with respect to ~~such~~our foreign exchange ~~exposure. This limited foreign currency translation risk~~exposure as we believe it is not expected to have a material impact on our condensed consolidated financial statements.

Concentrations of Risk and Significant Clients

~~Our~~The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments and accounts receivable. ~~Although we deposit our~~The Company deposits its cash with ~~multiple~~ financial

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institutions in the U.S. and in foreign countries, ~~our~~however, its deposits, at times, may exceed federally insured limits. ~~Our~~The Company’s short-term ~~investments are comprised~~investment balance as of March 31, 2022 and December 31, 2021 consisted primarily of a ~~portfolio~~domestic certificate of ~~diverse high credit rating instruments~~deposit with an original maturity ~~durations~~ of one ~~year or less.~~year.

No Client represented over 10% of revenues for the quarters ended March 31, ~~2021~~2022 or ~~2020.~~2021.

No Client represented over 10% of accounts receivable at March 31, ~~2021~~2022 or December 31, ~~2020.~~

~~Table of Contents~~

Revenue from Clients located in the United States for the quarters ended March 31, 2021 and 2020 were $415.9 million and $151.4 million, respectively. Revenue from Clients located outside the United States for the quarters ended March 31, 2021 and 2020 were $37.8 million and $29.4 million, respectively.2021.

Item 4. Controls and Procedures

Management’s Report on Internal Control over Financial Reporting

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of March 31, ~~2021,~~2022, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

No changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter ended March 31, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are subject to legal proceedings, claims and litigation arising in the ordinary course of our business. Descriptions of certain legal proceedings to which we are a party are contained in Note 13, “Legal Matters”, to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q and are incorporated by reference herein.

Item 1A. Risk Factors

For a discussion of potential risks and uncertainties related to our Company see the information in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in the “Special Note Regarding Forward-Looking Statements” section in Part I, Item 2, of this Quarterly Report on Form 10-Q.

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Item 6. Exhibits

Exhibit

Index

Incorporated by Reference

Exhibit
Number

Exhibit Description

Form

File No.

Exhibit

Filing
Date

Filed
Herewith

Exhibit Description

Form

File No.

Exhibit

Filing
Date

Filed
Herewith

3.1

Sixth Amended and Restated Certificate of Incorporation of Teladoc Health, Inc.

8-K

001-37477

3.1

5/31/17

Sixth Amended and Restated Certificate of Incorporation of Teladoc Health, Inc.

8-K

001-37477

3.1

5/31/17

3.2

Certificate of Amendment of Sixth Amended and Restated Certificate of Incorporation of Teladoc, Inc.

8-K

001-37477

3.1

6/01/18

Certificate of Amendment of Sixth Amended and Restated Certificate of Incorporation of Teladoc, Inc.

8-K

001-37477

3.1

6/1/18

3.3

Second Certificate of Amendment of Sixth Amended and Restated Certificate of Incorporation of Teladoc Health, Inc.

8-K

001-37477

3.1

8/10/18

Second Certificate of Amendment of Sixth Amended and Restated Certificate of Incorporation of Teladoc Health, Inc.

8-K

001-37477

3.1

8/10/18

3.4

Certificate of Amendment of the Sixth Amended and Restated Certificate of Incorporation of Teladoc Health, Inc.

8-K

001-37477

3.1

10/30/20

Certificate of Amendment of the Sixth Amended and Restated Certificate of Incorporation of Teladoc Health, Inc.

8-K

001-37477

3.1

10/30/20

3.5

Fifth Amended and Restated Bylaws of Teladoc Health, Inc.

8-K

001-37477

3.1

2/19/21

Fifth Amended and Restated Bylaws of Teladoc Health, Inc.

8-K

001-37477

3.1

2/19/21

10.1

Form of Performance Restricted Stock Unit Agreements under the Teladoc Health, Inc. 2015 Incentive Award Plan.

10.2

Executive Severance Agreement, dated July 15, 2015, by and between Teladoc Health, Inc. and Andrew Turitz, as amended by Amendment No. 1 to Executive Severance Agreement, dated October 29, 2019, by and between Teladoc Health, Inc. and Andrew Turitz.

10-K

001-37477

10.34

2/26/20

31.1

Chief Executive Officer—Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Chief Financial Officer—Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Chief Executive Officer—Certification pursuant to Rule13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Chief Financial Officer—Certification pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

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Inline XBRL document.

101.SCH

XBRL Taxonomy Extension Schema Document.

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101.INS

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XBRL Taxonomy Extension Schema Document.

101.CAL

XBRL Taxonomy Calculation Linkbase Document.

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XBRL Definition Linkbase Document.

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XBRL Taxonomy Presentation Linkbase Document.

104

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* Filed herewith.

** Furnished herewith.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TELADOC HEALTH, INC.

Date: May ~~3, 2021~~2, 2022	By:	/s/ JASON GOREVIC
	Name:	Jason Gorevic
	Title:	Chief Executive Officer

Date: May ~~3, 2021~~2, 2022	By:	/s/ MALA MURTHY
	Name:	Mala Murthy
	Title:	Chief Financial Officer

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	Livongo		InTouch
Purchase price, net of cash acquired	$	13,876,931	$	1,069,759
Less:
Accounts receivable		80,084		16,986
Short term investment		52,500		0
Inventory		24,299		8,492
Property and equipment, net		8,952		11,366
Right of use assets		15,056		4,965
Other assets		17,337		2,541
Client relationships		1,050,000		164,580
Technology		300,000		29,190
Trademarks		250,000		32,630
Advances from financing companies		0		(26,012)
Accounts payable		(119,302)		(5,589)
Deferred revenue		(997)		(20,729)
Convertible notes		(453,417)		0
Deferred taxes		(32,984)		(30,102)
Lease liabilities		(18,834)		(5,495)
Other liabilities		(40,343)		(13,042)
Goodwill	$	12,744,580	$	899,978


	Unaudited Pro Forma
	Quarter Ended
	March 31,
(in thousands)	2021		2020
Revenue	$	452,201	$	270,421
Net loss	$	(94,228)	$	(600,573)


Fair value and historical cost basis at December 31, 2020	$	5,000
Upward adjustment due to observable price change in identical securities		5,852
Fair value at March 31, 2021	$	10,852


Fair value at December 31, 2020	$	4,514
Payments		(187)
Currency translation adjustment		(189)
Fair value at March 31, 2021	$	4,138


	As of March 31,		As of December 31,
2027 Notes - Liability component	2021		2020
Principal	$	1,000,000	$	1,000,000
Less: Debt discount, net (1)		(278,857)		(287,916)
Net carrying amount	$	721,143	$	712,084

2025 Notes - Liability component
Principal	$	220,128	$	276,788
Less: Debt discount, net (1)		(49,672)		(65,923)
Net carrying amount	$	170,456	$	210,865

Livongo Notes - Liability component
Principal	$	550,000	$	550,000
Less: Debt discount, net (1)		(88,623)		(93,357)
Net carrying amount	$	461,377	$	456,643

2022 Notes - Liability component
Principal	$	—	$	46,762
Less: Debt discount, net (1)		—		(4,202)
Net carrying amount	$	—	$	42,560


	Payment Due by Period
			Less than		1 to 3		4 to 5		More than
	Total		1 Year		Years		Years		5 Years
Operating leases	$	78,157	$	19,414	$	36,824	$	17,913	$	4,006
Non-cancelable purchase commitments		9,652		7,707		1,945		0		0
Debt obligations under the Convertible Notes		1,770,128		0		0		770,128		1,000,000
Interest associated with the Convertible Notes		108,550		20,339		40,679		33,366		14,166
Total	$	1,966,487	$	47,460	$	79,448	$	821,407	$	1,018,172