Teladoc Health, Inc. Q2 2026 Earnings Call

Ladies and gentlemen, thank you for joining us and welcome to the Teladoc Health Q2 2026 earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Michael Minchak. Michael, please go ahead. Thank you and good afternoon.

Today, after the market close, we issued a press release announcing our second quarter 2026 financial results. This press release and the accompanying slide presentation are available in the investor relations section of the teladochealth.com website. On this call to discuss the results will be Chuck Divita, Chief Executive Officer. Our prepared remarks will be followed by a question and answer session. Please note that we will be discussing certain non-GAAP financial measures that we believe are important in evaluating our performance. Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliations thereof can be found in the press release that is posted on our website. During this call, we will make forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995.

Examples of forward-looking statements include, without limitation, statements regarding our 2026 financial outlook, the timing, availability, and market response of new products and services, including Teladoc One, expected BetterHelp insurance revenue and exit run rate, expected cash pay trends, provider network capacity, advertising and marketing spending and efficiency, the timing and impact of our BetterHelp insurance rollout, and the expected benefits of the actions we are taking. Such statements are based on management's current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to the cautionary statement in today's earnings release and the risk factors in our most recent Form 10-K and Form 10-Q for this quarter, including risks relating specifically to each of our reporting segments. I would now like to turn the call over to Chuck.

Thanks, Mike. Let's begin with the healthcare landscape that we operate in. The industry continues to evolve with changes in client needs and expectations and meaningful shifts in how consumers access care. These changes reinforce our confidence in the strategic priorities we previously outlined and will continue to shape how we innovate, where we invest, how we allocate resources, and where we focus the organization to drive long-term value. Against this backdrop, we have seen continued progress in the second quarter, strengthening our position as the global leader in virtual care while building on this foundation for sustainable financial performance. Our second quarter results were within our guidance ranges on a consolidated basis and reflected distinct dynamics across our two segments. In Integrated Care, we again delivered solid performance with revenue and adjusted EBITDA both above the midpoint of our guidance ranges.

Our ongoing focus on innovation was underscored by the recent launch of Teladoc One, our new connected care model that brings together the full breadth of our clinical and technical capabilities to deliver outcomes for each individual and across populations for our clients. Within BetterHelp, our top priority remains the scaling of insurance and in-network services. For the quarter, insurance-related revenue was near the high end of our expected range. Additionally, we established a baseline national footprint for insurance during the quarter ahead of our prior expected rollout schedule, launching all remaining states in the U.S. Adjusted EBITDA for the segment tracked closely to the midpoint of our guidance range, although segment revenue came in at the lower end of the range due to lower cash pay revenue.

As I will explain in more detail in a moment, through mid-May, operating trends at BetterHelp remained generally consistent with the assumptions and the guidance provided with our first quarter results on April 29th. However, as we moved through the rest of May and into June, the increasing speed of consumer movement towards insurance, provider capacity and network constraints against this increased demand, and a more accelerated decline in cash pay users and other factors became more pronounced and persistent than the assumptions underlying our prior outlook. These developments led us to reassess our plans and priorities and accordingly revise our BetterHelp revenue outlook. Before spending more time on BetterHelp, let me first make some comments on our Integrated Care segment. We've established a leading position by providing a broad range of virtual care services to support physical health and mental wellbeing.

Healthcare continues to be significantly impacted by rising costs, burden of chronic illness, access issues, and other concerns, and we believe our scale, clinical approach, and extensive platform position us well against this market backdrop. We've been accelerating innovation in our products, services, and capabilities to further capitalize on our strengths, lean into this market opportunity, and deliver greater value to our clients. We conduct millions of visits annually in this segment, and earlier this year brought new innovations to our flagship 24/7 care service. The enhanced offering addresses more conditions, provides specialist support to treating clinicians, and includes other value-added features to make these visits more impactful and connected engagement points. We've advanced technology and capability innovations to support our integrated patient care model.

This includes Teladoc Health Pulse, our new intelligence engine, which brings together unique multidimensional data and advanced AI models to power clinical insights, guide targeted actions, optimize experiences, and to surface these insights and other actionable information directly at the point of care for appropriate action by our clinical team.

We've been building one of the most extensive integrated practices in virtual care, broadening and deepening our clinical model, and investing in purpose-built technology to support it. Working to bring this all together in a comprehensive new solution that we believe clearly differentiates us, including by orienting around the care and needs of the individual and not a fragmented product category as is prevalent across the market today. Last week, we introduced this new approach called Teladoc One, which we view as the most comprehensive offering ever brought to market by the company. It is a new care model that delivers a predictive and adaptive experience designed around an individual's healthcare journey rather than a specific or singular condition. For clients, Teladoc One provides the ability to address needs across populations with accountability for both clinical performance and total cost of care impact.

At its core, Teladoc One leverages the full extent of our clinical capabilities delivered through a unified, multidisciplinary care team spanning clinicians, specialists, therapists, coaches, and dieticians. Complemented by AI-enabled capabilities through Pulse to efficiently support care teams, enable timely and effective interventions, enhance engagement, and help people stay on track with their care plans between clinical interactions. The care model is designed to help coordinate care across settings, including with the individual's local care provider when applicable, and to help ensure care needs are addressed timely and consistently. With broad availability beginning January 2027, we will initially apply this care model to populations impacted by cardiometabolic health conditions, a major driver of healthcare cost and market focus for us. Over time, we also see opportunities to extend the model across additional populations, further expanding value for clients and market potential.

We believe that the addition of Teladoc One to our portfolio and our continued focus on innovation and delivering differentiated solutions to clients will further leverage the strengths and potential of our Integrated Care segment. Let me turn back to BetterHelp to provide a more detailed update on the business, our priorities for the remainder of 2026, and our updated outlook as we continue to focus on rapidly scaling insurance in the U.S. and pivoting the business more towards an in-network model. As we have previously discussed, the U.S. cash pay market has been under continued pressure and the principal reason we began building an insurance-covered in-network offering. The BetterHelp revenue growth outlook provided with our first quarter results assumed we would achieve the dual goals of scaling insurance, while at the same time stabilizing and growing overall BetterHelp segment revenues as we progress through the year.

We expected that the combination of strong growth of insurance sessions and growth of cash pay users in non-U.S. markets would increasingly offset the impact of expected declines in U.S. cash pay users, including the movement of potential cash pay users towards insurance and lower planned advertising spending levels compared to the prior year. Operating information available to us through April, including cash pay user trends, advertising and customer acquisition cost factors, insurance session growth, and insurance provider network expansion were within the assumptions underlying our outlook at the time of our first quarter earnings call. Results continued to be generally consistent and reflective of those assumptions through mid-May, including insurance user gains largely offsetting declines in U.S. cash pay users. After that point, certain changes in the business became more pronounced and persistent than we had anticipated.

As we moved through the second half of May and into June, three related developments became increasingly clear to us. First, consumer demand for insurance versus cash pay increased faster than expected and reflective of sustained high levels of consumer preference for insurance. Approximately 70% of potential users indicating a preference for insurance and as much as 80% in certain markets. Second, high preference and demand for insurance caused a greater and faster shift away from cash pay acquisition than we had modeled, including potential users who previously might have entered through the cash pay pathway, increasingly shifting towards insurance or otherwise converting to paying users at a lower rate. The decline in cash pay users and cash pay revenue, therefore, accelerated beyond the decline incorporated in our prior outlook.

Third, while insurance provider capacity continued to increase, it did not expand at the same pace as the increase in demand. Although we had credentialed thousands of providers for the network, available capacity also depends on provider availability for the applicable state and payer, as well as clinical need, appointment time, and length. Higher demand, therefore, exceeded the capacity available to convert this into a greater number of paying users, completed sessions, and revenue. As a result, cash pay revenue declined faster than anticipated, while insurance revenue could not increase at a level sufficient to offset the cash pay decline. The insurance business grew well, and revenue was in line with our expected range. However, because the pace and geographic construct of the demand for insurance exceeded available capacity, overall BetterHelp revenue was pressured as the transition away from cash pay accelerated.

Business patterns can fluctuate over short periods, including during the state-by-state insurance rollout and factors such as varying indications of consumer behavior, provider network requirements, and payer mix considerations. As we moved through June, we concluded that these developments likely represented sustained changes in the business rather than short-term variability, and that assumptions supporting our prior full year BetterHelp segment revenue expectations are no longer representative of the business outlook as we transition more towards an in-network model. Additionally, seeing sustained high levels of consumer preference for insurance, and given the strategic importance of insurance to BetterHelp, we accelerated national insurance availability during the quarter and ahead of our earlier expectation to roll out over the remainder of 2026. The additional 20 states launched comprise nearly one-third of the U.S. population, and therefore, were essential to moving to a national capability for insurance.

We believe the national rollout will provide a more representative view of consumer behavior and operating requirements, as well as further enable the evolution of BetterHelp's advertising and marketing approach towards a more insurance-oriented model over time. Early indications from this emerging national footprint further demonstrated that insurance preference and market-specific capacity requirements were developing differently and more rapidly across the broader footprint as compared to the earlier state-by-state rollout approach. The developments I just covered caused us to conclude that our prior revenue assumptions had to be adjusted, and we made several strategic decisions in response. Those decisions and resulting actions will place further pressure on cash pay revenue, but we believe they are the appropriate actions to strengthen the business and build a durable insurance position over the longer term.

We are highly focused on expanding insurance network capacity, including a greater ability to support and adapt capacity on a market-by-market basis in response to demand dynamics. This includes initiatives to support accelerated provider recruitment, activation, and long-term retention, as well as enhancements to the insurance platform to support productivity, capacity, and user experience. We've made considerable progress in building the insurance offering, including establishing a baseline national footprint a year after launching our first state. We have contracted for over $150 million in-network lives and credentialed more than 8,000 mental health professionals for the network at this point.

Insurance coverage sessions have grown substantially over the rollout, with over 20,000 sessions completed last week alone, representing an estimated annualized revenue run rate on that basis of over $110 million, up from over at $75 million at the time of our first quarter earnings call, and more than double the level from the fourth quarter 2025 earnings call held in February. We are evolving BetterHelp's historical direct-to-consumer cash pay advertising and marketing approach to more prominently reflect insurance objectives. This includes better aligning the expected demand generation of advertising spending levels with available provider capacity, as well as moving from state-level insurance marketing to more national strategies. We believe these and other changes can improve marketing efficiency and user conversion economics over time, as insurance becomes a higher mix of our revenue.

As a result of these actions, we now expect advertising spending in 2026 to be lower than our prior plans, as we continue to focus on supporting overall margin objectives for the business. While reduced advertising spending will have a negative impact on cash pay user acquisition, we believe this evolving approach better aligns us with the growing part of the U.S. market in network services with lesser orientation on the declining U.S. cash pay market. We are reducing near-term emphasis on markets outside the U.S., including associated resource allocation and reduction in advertising levels. This is not expected to be a permanent shift as we continue to see meaningful opportunities outside the U.S. longer term, given the large addressable market and significant unmet need.

Given the importance of the U.S. insurance market to BetterHelp, we believe the highest return use of our product engineering, operational, and marketing resources in the near term is supporting our insurance initiatives in the U.S. We are also reprioritizing certain other previously planned initiatives to support this effort as well. Our updated guidance leads to a BetterHelp segment revenue range of $770 million-$830 million for 2026. Relative to our expectations at the time of the first quarter earnings call, this new range reflects cash pay revenue declining faster than anticipated due to the factors and actions I mentioned. We are reaffirming our expectation for 2026 insurance revenue of $90 million-$105 million.

While the actions we are taking and planned initiatives to address more insurance demand will take time to implement and drive impact, we remain encouraged by the momentum we are seeing and expect these and other moves to further strengthen the insurance business in 2026 and position it for continued strong insurance revenue growth in 2027. With respect to BetterHelp's adjusted EBITDA margin, we continue to expect a range of 3.0%-4.6% for the full year and have aligned our actions to support our ability to invest in the insurance opportunity ahead. While the business dynamics are different than we previously anticipated and presenting more challenges as we make this business model transition at BetterHelp, we are also encouraged by the progress being made towards building out our insurance position and the opportunity ahead in the insurance market.

We believe the actions we are taking are focused on the right areas to make BetterHelp a stronger and more durable business over time. Now let me cover our results for the second quarter. Consolidated revenue was $607 million, and adjusted EBITDA was $66 million, representing a 10.8% margin on a consolidated basis. Net loss per share was $0.21 and includes the following pre-tax per share amounts. Amortization of intangible assets of $0.49 and stock-based compensation of $0.05. Free cash flow for the quarter was $36 million. And we ended the second quarter with $774 million in cash and cash equivalents on the balance sheet. Net debt to trailing adjusted EBITDA was 0.8 times, and 3.6 times on gross debt basis.

Turning to segment results, second quarter Integrated Care revenue was $394 million, an increase of 0.7% over the prior year, and in the upper half of our guidance range. Factors that contributed to the year-over-year revenue increase included international, which was again up by double digits this quarter, boosted by a 30% increase in revenue from hybrid care models and, to a lesser extent, higher chronic care enrollment and visit revenue growth in the segment. In aggregate, these factors more than offset the headwind from lower subscription revenue we've spoken about previously. Approximately 60 basis points of year-over-year growth came from acquisitions. We finished the quarter with 100.3 million U.S. Integrated Care members, slightly above the high end of our guidance range. We've modestly raised our full year outlook by roughly 1 million lives at the midpoint based on results seen thus far.

Our full year range still contemplates some slight moderation as our health plan clients deal with potential changes to their underlying enrollment levels. Chronic care program enrollment was 1.27 million at quarter end, up approximately 6% sequentially and 14% higher year-over-year, driven largely by continued client adoption of multi-condition bundles, which in turn expand the potential enrollee population. Second quarter Integrated Care adjusted EBITDA was $65 million, up 13.6% over the prior year period and represented a 16.5% margin. This was above the high end of our guidance range and up approximately 190 basis points from the second quarter of 2025. Adjusted EBITDA performance was driven by the revenue upside versus our midpoint, as well as disciplined cost management, which more than offset mix-related gross margin pressure from the shift to visit-based arrangements.

BetterHelp's second quarter revenue was $213 million, 11.6% lower than the prior year period and down 2.6% sequentially. Insurance revenue of $22 million was near the high end of our expectation and up approximately $9 million sequentially. This was offset by a greater than expected decline in the cash pay business, including the result of deliberate actions we took during the quarter, including reduced advertising spending as we prioritize the acceleration of the insurance rollout and the achievement of profitability objectives. Average paying users in total declined 11% from the prior year's quarter to 346,000, and were down 4% sequentially, while insurance users increased by over 70% sequentially and reflecting a growing part of BetterHelp's business. BetterHelp's adjusted EBITDA for the quarter was $0.5 million, a 0.2% margin, just slightly below the midpoint of the guidance range.

This was impacted by lower cash pay revenue and additional investments to support the scaling of insurance, including the accelerated nationwide rollout. These items were somewhat offset by a 17% decline in advertising and marketing expense versus the second quarter of 2025. Now turning to guidance. We expect 2026 consolidated revenue of $2.36 billion-$2.45 billion, a 5% reduction at the midpoint versus the prior range, primarily attributable to the updated BetterHelp cash pay outlook. We expect adjusted EBITDA of $271 million-$303 million, up slightly at the midpoint versus the prior range, and representing approximately 85 basis points of margin expansion versus 2025. Our free cash flow guidance remains unchanged at $130 million-$170 million. We now expect full year stock-based compensation expense to be below $50 million, which would represent a decline of over 35% from 2025 and 75% lower than 2023 levels.

We now project net loss per share of $1-$0.75. Note that our cash flow and net loss per share guidance ranges do not incorporate any potential impact from changes in our current debt structure. For the third quarter, we expect consolidated revenue in the range of $569 million-$609 million and adjusted EBITDA in the range of $62 million-$74 million. Moving to the segments. For Integrated Care, we expect 2026 revenue growth of 0.8%-2.4%. There were several factors that contributed to the updated range, including the deferral of a previously expected contract implementation in 2026 to 2027 at the client's request, and a lower relative forecast for FX, where we now expect the tailwind to be approximately 10-15 basis points below our prior expectation.

We continue to expect international revenue growth in the high single digits on an organic constant currency basis. Our full year Integrated Care adjusted EBITDA margin guidance of 15.6%-16.4% is up 40 basis points at the midpoint versus our prior guidance range and represents an increase of approximately 85 basis points over 2025. We are guiding the third quarter Integrated Care revenue flat to up 3% year-over-year, which includes roughly 25 basis points of contribution from prior acquisitions. Adjusted EBITDA margin in the range of 15.7%-17.2%. Looking at the cadence for the balance of the year for Integrated Care, we expect the third quarter to fourth quarter ramp to be slightly greater versus 2025. This includes typical seasonality with respect to flu and infectious disease visits and impact of in-year implementations on the fourth quarter.

Adjusted EBITDA is expected to benefit from continued execution of cost savings and productivity initiatives. Moving to BetterHelp. Based on the factors and actions described earlier, we now expect 2026 segment revenue to decline 19.0%-12.7% versus 2025, reflecting a greater decline in cash pay revenue. We expect insurance revenue in the range of $90 million-$105 million. While the total segment revenue range is wider, we believe it is appropriate based on the uncertainties inherent in cash pay and ongoing business model transition. Key swing factors include the timing and progress of insurance network capacity and platform-related initiatives, growth and mix of insurance-covered sessions, advertising and marketing spend levels, customer acquisition cost trends, and user conversion efficiency and user retention. We are reaffirming our adjusted EBITDA margin guidance of 3.0%-4.6%.

This range contemplates mix impacts, investments to support insurance initiatives, and reduction in advertising and marketing expense in the mid to high 20% range, more in line with the insurance priorities mentioned earlier. For the third quarter, we are guiding to BetterHelp revenue down 24.2%-12.3%. Insurance revenue is expected to be in the range of $25 million-$31 million in the quarter, up 29% sequentially at the midpoint. We expect an adjusted EBITDA margin of 0.5%-2.5%, which is generally consistent with the prior year period at the midpoint. Looking ahead to the fourth quarter, we expect continued sequential growth in insurance revenue. Based on the third quarter insurance revenue range, if fourth quarter results are consistent with the midpoint of the implied fourth quarter range, that would equate to an annualized insurance revenue exit run rate approaching $140 million.

Cash pay revenue in the fourth quarter is expected to be impacted by the actions we are taking to align with and support insurance objectives, as well as lower advertising and marketing spending due to holiday ad pricing dynamics. As a result, and similar to prior years, we expect the fourth quarter to see the highest adjusted EBITDA of the year. In closing, we have made meaningful progress on key initiatives that support our strategic priorities. While there is more work ahead, the team remains focused on disciplined execution and delivering results with urgency. We remain confident in our strategy, and we are taking deliberate actions that we believe will strengthen the durability of our business, improve long-term performance, and create sustainable value for shareholders. With that, we are now ready for questions.

Thank you. We will now begin the question and answer session. Please limit yourself to one question per person. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Our first question comes from Sarah James from Cantor. Sarah, your line is open. Please go ahead. Thank you.

You went from 6,000 to 8,000. I think you have a network 30 or so. How big is the supply gap right now? What do you mean by, you mentioned accelerating insurance adoptions through certain programs that you're doing. Can you be more explicit about that, and how do you think about the ramp going forward? Thanks. Yeah, thanks, Sarah. Appreciate the question.

As you mentioned, we've continued to grow the total number of credentialed therapists pretty significantly over the course of the year, and that continues. That's been able to support the insurance sessions and revenue and things that we had expected. I think this higher level of demand and the strong preference for insurance, now our national rollout, obviously, is why we're making these moves and these changes. I would say there's a number of initiatives going on, but let me bucket them into two areas. First of all, I would say around provider acquisition and retention. This is really things that are aimed at recruitment, both out of the BetterHelp network that you referenced, the cash pay network, as well as therapists that are not in the network that are more traditional in terms of taking insurance.

We've got a number of things going on there to look at our recruitment processes, the effectiveness of that, and how we can scale those more quickly. We are also continuing to look at ways that we can expand delegated credentialing with payers. We have begun in going through the process to pursue NCQA accreditation for delegated credentialing. We think that's going to be a benefit. We've also got some initiatives around the onboarding and engagement of therapists onto the platform and get them using it and serving the patients. The second area is around what I would say about improving existing provider capacity in addition to new recruitment. This is really things like improving the platform, the insurance platform we have, the tooling, looking at scheduling efficiencies. We've done a lot there.

I mentioned in the last quarter some of the things that we had done around AI to support efficiency and documentation, things looking at the experience of the providers and the user experience. We're also putting into place and have been, but we're doing more, looking at state-by-state and payer level initiatives to be able to respond to demand and capacity needs on a more dynamic basis, as that demand and capacity will change over time. There's a number of things underneath that and really why we took the actions to refocus resources and really lean into this insurance opportunity we have.

Thank you. Just any view on the timing of closing the gap of where demand is to where supply is?

Look, we're actively working on it and have been. We reaffirmed our revenue range that I had mentioned in my prepared remarks. We're obviously taking these actions to strengthen our position in 2026 to position for strong insurance revenue growth in 2027. I don't want to speak on the timing of that. I would just say that we've got a number of things underway and really why we have refocused the resources the way we have.

Thank you. Our next question comes from the line of Lisa Gill from JPMorgan.

Lisa, your line is open. Please go ahead. Thanks very much.

In fact, thank you for all the comments on BetterHelp. Just two things I want to try to better understand. One, is the reimbursement under insurance materially different for the provider, where they have a preference for cash pay versus insurance coverage? Secondly, as we make that conversion over to insurance, can you talk about the profitability to Teladoc? Will that look materially different? I know your advertising costs are going to materially change over time as you won't have to do as much direct-to-consumer advertising, and your customer acquisition costs won't be as high. How do I think about that transition and the impact on your margin as well?

Let me take the first comment. Certainly in a cash pay environment, the therapists are approaching that on a cash pay basis for a number of reasons, including flexibility. They don't necessarily have to do all the same documentation requirements that you would have to get reimbursement from a payer. Similar therapy and visit and all that, but different kind of model. In the insurance side of the house, obviously there's more requirements of the therapists, in terms of the documentation, the administration. Obviously there's claim submission that happens and all those kinds of things. It is a bit of a different dynamic, and it's not necessarily for everyone. I think the reimbursement really will focus on kind of supply and demand dynamics, and its market-by-market basis. We continue to evaluate compensation programs that will make sure that those therapists are supported.

It's a little bit of a different animal between the two because of the cash pay versus the payer reimbursement. In terms of the margin view, I would say, first of all, we're going to be very focused on scaling insurance. We see this in-network move and pivot for BetterHelp as a really important one to create a more durable business because of the volatility that comes with the cash pay side. From a margin perspective, we're sort of looking at it this way. We should expect, I've said this before, a lower gross margin % in insurance versus cash pay. Cash pay requires a significant level of advertising and marketing, as you referenced. The gross margin profile is different. We do expect and should expect a lower gross margin % in insurance. It's just the dynamic in insurance.

We would also expect that the lifetime value for insurance will be more reflective of the patient's need and less around whether the cost is as much of a barrier as it is obviously in cash pay, fully out of pocket. We do see the ability over time to improve our ad spend efficiency and the spending levels. We had expected that to occur over time, obviously a bit more accelerated now in terms of the advertising spending levels. We do expect that to create some efficiencies. We're investing ahead of the opportunity here, we expect to see operating leverage kick in as insurance continues to scale further. Beyond that, the margin profile for BetterHelp will depend on those kinds of factors, the pace of the business transition, how cash pay evolves. That's how we're looking at margins under the insurance model.

Thank you. Our next question comes from the line of George Hill from Deutsche Bank.

George, your line is open. Please go ahead. Hey, good evening, guys.

Forgive me if I missed this part, but have we addressed what percentage of the capacity that you currently have in BetterHelp can address the capacity needs in the insured segment? Again, I apologize if I missed this part. Do we need to find a bunch of new therapists to serve the insurance business, or is there a licensing issue why the therapists that serve the cash pay business can't serve the insurance business? Or is it more addressed to Lisa's question, which is there's a compensation issue as opposed to a licensing issue?

Yeah. The therapist network that's part of the cash pay market are experienced a very significant part of BetterHelp's value proposition on the cash pay side. We have continued to recruit and offer insurance to the network as we've rolled out these states, We've seen good, solid interest in therapists looking at the insurance side. We're not just limiting ourselves to the therapist network and the cash pay side. We've been recruiting and going after therapists that aren't necessarily in the cash pay network. It's a combination of both that's occurring. It is a significant network in the cash pay side that gives us an opportunity to bring insurance to market. I think what we're seeing, though, is the demand really outpacing what our expectations were in terms of the movement from cash to insurance.

We've grown the capacity pretty significantly over the last many number of months, as was noted. It's a market-by-market, payer-by-payer dynamic. We don't have capacity constraints uniformly. It varies by market. We're approaching it that way as well. I think it's both. It's a cash pay therapist moving to insurance as well as recruiting therapists that are not in the cash pay network today.

Okay. Maybe just a real quick follow-up. Is there a quick way to frame, can we put a number on by what order of magnitude are we missing capacity? How much revenue are we missing by not having the capacity to capture the volume?

Yeah, I don't want to comment on that. I think, again, we've done well in terms of growing capacity. The insurance sessions are growing well. We're able to be at the higher end of our revenue expectations. Because of the size of the cash pay market in the U.S. and the cash pay user base that's out there, it obviously creates a significant capacity issue when you throttle all that demand towards insurance. That's how we're looking at it and why we've taken these actions to refocus more on insurance, as well as take into consideration more in our advertising and marketing, which is intended to create awareness and demand generation to more increasingly focus on the insurance objective so that we're not out there spending money to generate demand beyond what we have the capacity to fulfill as we grow the network.

Okay. I'll hop back in the queue. Thanks. Our next question comes from the line of Daniel Grosslight from Citi.

Daniel, your line is open. Please go ahead. Hi, guys.

Thanks for taking the question. I'll stick with BetterHelp here, and really focusing on the international segment here, because it's been a pretty consistent area of strength for you in BetterHelp. I get there's a lot to focus on in the U.S., but I'm curious why you've chosen to deprioritize international now, and at what point would you consider re-accelerating investment in international markets?

Yeah, I appreciate the question there. It has been an important part of BetterHelp and continues to be. We are maintaining our position in the markets that we're in today, and international will continue to be an important area for BetterHelp. We really see this more as a near term prioritization action here. We've got finite resources at BetterHelp, and we feel like the product, the engineering, the operating resources, the marketing resources that could benefit our insurance scaling, that the best, highest use of them is to focus on insurance scaling given the demand and the preference we see. I wouldn't see it necessarily as a moving away from those non-U.S. markets. There's still a large market opportunity. There's a lot of unmet need out there that BetterHelp is leading into, and we're going to maintain our positions and presence in those markets.

We have the opportunity once we see these insurance initiatives take hold to revisit those non-U.S. markets in terms of the level of focus we have there. I would more look at that as a near term prioritization item and do see it as a longer term opportunity for the company.

Got it. Okay. As we think about the cash pay part of BetterHelp in 2027, I know you're not giving formal guidance now, but would it be fair to back out what the cash pay is in 4Q and then annualize that as a good run rate for 2027, again, just on the cash pay side, or do you think we'll see continued declines in the cash pay business in 2027 from that 4Q run rate?

Yeah, I don't want to comment on 2027, but I would say that obviously we're making these moves because we see significant additional opportunity in the insurance market and to position us to grow insurance revenues in 2027. We had expected and continue to expect pressure on the U.S. cash pay market. Obviously, that's accelerated further than we were thinking. As you get to the fourth quarter, you've got a couple things going on. You've got that dynamic as well as you, I know you're aware of this, but we have a typically pull back in ad spending during the holiday season, which impacts the cash pay market as well. I wouldn't necessarily take the fourth quarter and annualize that. I would just say that we would expect continued pressure on the cash pay market.

We'd expect to continue to drive insurance revenue growth, including through the actions we're taking. To the earlier question, we'll revisit how we're looking at the non-U.S. markets and how we look to grow there as well.

Got it. Thank you. Our next question comes from the line of Jessica Tassan from Piper Sandler.

Jessica, your line is open.

Hi, guys. Thanks for taking the question. I'm curious if you can give us a sense of just how many insured lives or what level of run rate revenue your 8,000 BetterHelp insured providers can support, and then just How are you thinking about the insurance business growing in 2027, and what level of capacity do you need in order to support that growth?

Then just my quick follow-up would be, can you comment at all on the behavior that you're observing within the BetterHelp insured business? How many visits? What level of acuity? Just what are you seeing in those members? How long are they staying with the product, et cetera? Thank you. Okay. Well, I think, I'll try to tick through those.

The first question, the 8,000 credentialed therapists in total, we continue to grow the total number, which is important, but it's also important their availability from a state perspective, from a payer perspective, obviously capacity and availability for the clinical need, the appointment time, and the length of the time. There's a lot of things that go into it beyond the raw number. Both are important. Continue to grow the credential network, as well as these actions that I mentioned earlier around the provider acquisition and retention, and improvements, frankly, that we can make to the insurance platform to drive that. I don't want to give a number in terms of what the 8,000 equate to. It's more about the capacity and the utilization that's there as well.

I think that's how I would answer that. In terms of the revenue run rate, we've reinstated our guidance there, reinforced our guidance around $90 million-$105 million. These actions are being taken so that we can strengthen our position in 2026 and drive a strong insurance revenue growth in 2027, and that's really what we're going at. In terms of how the users are behaving, it's early. Obviously, this national rollout, we think, is going to give us maybe a bit more representative view of the consumer behavior. Not just the cash pay versus insurance, but how they use the platform, what the ongoing operating requirements are. We had referenced a few things in the last quarter call, and we are seeing good usage in the first 90 days relative to cash pay. We're seeing good session growth, as I mentioned before, the 20,000.

A lot of those factors are coming into play as we think about the outlook moving forward.

Our next question comes from the line of Allen Lutz from Bank of America. Allen, your line is open.

Good afternoon, and thanks for taking the questions. Chuck, I want to follow up on the BetterHelp thread here. You're still expecting the same EBITDA margins despite the issues in cash pay. Cash pay is going to have higher gross profit dollars as you talked about, but it seems like you're able to at least somewhat manage this through lower advertising spend. In response to a prior question, you talked about the trajectory of gross profit margin and the trajectory of advertising spend as you make this shift from cash pay to insurance. I'm not asking for any type of guidance here, but just conceptually, over the next couple of years or however you want to frame it, how should we think about the cadence of gross margin, and the timing of gross margin degradation versus EBITDA margin expansion?

Do we need to see EBITDA margins go down before they go up based on the dynamics here around cash pay? Thank you. Yeah, I don't want to go too far on that last point, but I would say that, yes, we have taken into consideration in the EBITDA margin guidance, the initiatives that we're planning to take and the actions we're taking here, as well as how we're looking at our advertising spending.

That is a big lever. As you know, the cash pay business, there's a significant expenditure to acquire members. There's a high churn with cash pay, and so it has its own set of dynamics in terms of the efficiency of that spend and how that plays into margins. We do believe that over time, that this scaling of insurance will give us a greater ability to impact ad spend efficiency and user acquisition efficiency. Now, this is a bit more accelerated given the preference and demand we're seeing.

We always expected that we would need to evolve that approach over time as insurance continued to scale and grow. I think the fourth quarter dynamic that we've seen in terms of adjusted EBITDA being higher for BetterHelp in the fourth quarter, tending to be at least, than other quarters. That dynamic, I think, is still going to continue to be there even within the insurance market as well, just given the ad spend dynamics around the holidays. Beyond that, I don't necessarily want to get into cadence of gross margin, but we do believe that insurance will create a more durable position for BetterHelp, and I think create a more durable view of how that gross margin and the financial profile of the company is going to proceed going forward.

Makes sense. Thank you very much.

Our next question comes from the line of Jailendra Singh from Truist. Jailendra, your line is open. Please go ahead. Thank you.

Thanks for taking my question. I actually want to maybe talk about Integrated Care business. I know we are still in the middle selling season. Maybe if you can talk about any updates, how the trends have been compared to last year, how does the pipeline look? Are you seeing larger deals, better win rates of more product consolidation? How is Teladoc One affecting selling season conversation? Any update there would be helpful.

Appreciate that, Jailendra. I would say, first of all, with respect to the selling season, I think the operating environment that we are in is really in line with what we've spoken about previously. I would say in the employer market, looking for solutions that align with their goals. I think they are concerned around fragmentation and driving impact from the programs they have in place. With the health plans, as you know, they're working through a number of challenges, higher medical costs, regulatory dynamics, and business decisions they're making around that. That kind of continues to be a similar environment. We are seeing solid interest across the channels in what we're doing. Through the second quarter, I would say the selling season overall was in line with our expectations, and in line with where we were in the first half of 2025.

I would say the conversations we're having with clients are productive. They're, I would say, more strategic in nature, as they look at their challenges and what they want to do and what the benefits of programs like ours can have. The innovation focus we have, our capabilities, the outcomes we can drive, and our focus on reducing fragmentation, I think all those things resonate with them. We have had some nice wins and expansions so far this year. We've also faced some pressures just because of the competitive nature and the market environment. There's a lot of the year left to go, as you referenced. I think we're seeing really good interest across our solutions in virtual care, in chronic care. Adoption of bundles continues to be a theme. We've seen good growth in weight and obesity management programs.

I think all of that is in line with where we expected to be, and we're really excited about bringing Teladoc One to market. This is really the culmination of a lot of work over the last year or so. As you know, the products and services that are brought to market today are focused on a particular problem or a particular need, whereas Teladoc One is a much more comprehensive approach because it's focused on what the individual need is, and not necessarily one condition or a fragmented product solution that's prevalent out in the market today. We launched it last week, actually, with our clients. We had a client forum. I think there was good excitement about what Teladoc is doing in this renewed innovation.

I think they understand why we're going after it this way in terms of this comprehensive model, and why it can really benefit them and benefit their members. We're excited to get it in the hands of our sellers and get it out to clients. It's really new. We just launched it last week, but very encouraging in terms of the market acceptance and awareness of what we're doing, at least from that client forum, and we're going to build on it going forward.

That's super helpful. Just one quick follow-up, and it's a clarification on, I'm sorry if I missed this, but did you say if cash pay trends, did they stabilize in July? Or the trends you saw in Q2 have continued in Q3 here in July?

I don't believe I spoke about July, but certainly as we progressed through the tail end of the second quarter, it caused us to really take the view that these were not short-term variations that we were seeing, that these were more sustained business developments, and really required us to reassess the assumptions that were underlying our prior outlook, given what was evolving in the marketplace, as well as the impact of the actions we're taking. I think all of that factored into how we are setting the expectations going forward.

Great. Thanks a lot. Our next question comes from the line of Sean Dodge from BMO Capital Markets.

Sean, your line is open.

Great. Thanks for taking our questions here. It's Chris Charlton on for Sean. Sticking on Integrated Care, can you share some more color on the competitive dynamics within the chronic care portion and kind of what some of the drivers were behind the big step up in enrollment in the quarter? I know you mentioned greater adoption of the multi-condition bundle and called out weight management, but are there any other areas of strength or demand clout here in how this is setting your expectations for the rest of the selling season and into 2027? Thanks. Yeah. Appreciate the question.

I think there's a couple of things going on, and I referenced those, but I'll just maybe give a bit more detail. Certainly, we're seeing, and have seen, but strong adoption of bundles by clients. Again, it addresses more needs of the people that they're serving, creates more recruitable population for us, and in turn, the ability to increase and improve enrollees. That's important in terms of meeting more needs, but also stickiness with the program, engagement. All of those things kind of factor into the benefits to us of bundle. Weight and obesity programs have seen significant and solid growth, as you mentioned. Those carry a different, lower PMPM than some of the other programs, so there's a little bit of a mix thing going on there.

I think that having more enrollees and having these bundle programs also bodes well with respect to how we bring Teladoc One to the market because it's a more comprehensive offering. In terms of the competitive landscape, it's very competitive, and it has been. I think the actions we're taking to really lean into our strengths, bring new capabilities to market, and really differentiate on this clinical care model that's very comprehensive, obviously enabled by the AI investments that we've made, I think are going to create some distance and differentiation relative to point solutions that are out there. I think that's how we're looking at it. I think we're in the right space. Cardiometabolic health area is a significant part of healthcare expenditure.

A lot of challenges that face those individuals, and by us bringing the full breadth of our clinical capabilities, we think we can help them, and we think we can drive impact for our clients.

Okay. Thanks again. Our next question comes from the line of Elizabeth Anderson with Evercore.

Elizabeth, your line is open. Please go ahead. Just a reminder that if you are muted locally, to please unmute your device. Our next question comes from the line of Charles Rhyee with TD Cowen. Charles, your line is open.

Yeah. Thanks for the question. Is the issue that we're seeing in the accelerated demand as people come to BetterHelp and they go through the process, they realize they can get insurance coverage, and they seek insurance coverage? Then there's a capacity issue where they can't get access to a therapist quickly, and then they decide, "You know what? If I can't get it now, I'm going to hold off, and I don't choose the DTC option." Are these two directly linked? As such, as you talk about trying to expand capacity in the areas where you're having this issue, what does this do in terms of your ability to expand into other regions on the insurance side, or are those two still two separate things?

Yeah, I think the traditional historical advertising and marketing approach for BetterHelp really is about brand awareness and demand generation for the cash pay environment. I think we're seeing the demand generation occur with the level of advertising we were doing. To your point, now that BetterHelp is becoming more aware that we are offering insurance, and as we scale and grow more markets, and during the quarter actually launched all the remaining markets that we now have a baseline footprint nationally. There's more awareness and more interest, which we had expected because it really underscores why we got into insurance to begin with. The pressure on the consumer and affordability and the greater acknowledgement about the need for mental health by payers and more in-network availability.

All of those things have factored in, and really what we needed to do was, as a result of this higher demand and this accelerated cash pay situation, is that we needed to evolve that marketing approach to more and more take into consideration this emerging national footprint. That we weren't generating demand both for cash pay, but also for insurance that we weren't able to meet. That's what's going on there. We think we are evolving that appropriately, and we'll be able to, I think, more effectively tailor the advertising to the capacity that we have. Again, as I said earlier, it's not a uniform challenge. We have capacity that grows and subtracts in different markets.

I think this evolution really is people wanting to use BetterHelp, people wanting to use BetterHelp and use their insurance coverage, and part of that is our demand generation and then ultimately our conversion of that demand into insurance users paying sessions and revenue. That's what's going on and why we really felt that it wasn't a short-term variation that we needed to reevaluate, not just the assumptions underlying our prior outlook, but what actions we could take to really strengthen and lean into this insurance market opportunity that we have ahead of us.

Thank you. Just to follow up, I think from Allen's question earlier, you've maintained the margins guide. How long is this sustainable? Because obviously you are pulling back on the ad spend in the short term as you're trying to adjust to this capacity issue. But clearly you need the advertising for the DTC demand side of the equation. It's sustainable for a certain period, but just curious how long you think this transition will take. Is this something that we think we can get fixed within 2026, or could this take longer? Thank you. Well, I touched on before how we're thinking about the margin.

I think this evolving the advertising and marketing approach to more strongly consider our insurance footprint and capacity, I think is an important part of that answer. We have always and we will continue to focus on the bottom line of the company and making sure that we're good financial stewards in terms of how we deploy advertising and so forth. As I mentioned before, we are investing ahead of this opportunity. We are scaling insurance. We've gone from one state in less than a year to all 50 states and plus D.C. There's some investments that we're making and some operating costs that we believe that we're going to be able to get some leverage out of as we continue to scale insurance.

I think all of that is in play with the answer to that question. I think you should be aware that we are always looking at the bottom line financial performance of the company.

Appreciate it. Thank you very much.

The Q&A session has ended. This concludes today's call. Thank you for attending.