Virtual care giant Teladoc Health has shared its latest update on the performance of BetterHelp, its direct-to-consumer behavioral health platform, highlighting ongoing financial challenges in a shifting market. According to Teladoc’s Q1 2024 earnings report, the BetterHelp revenue outlook 2024 indicates that the platform’s revenue is expected to remain in the red during the first half of the year, marking a continued difficult period for the online counseling service.
Declining Revenue and Membership in Early 2024
BetterHelp’s Q1 results show a 4% decline in revenue compared to the same period last year. More concerningly, membership dropped by 11% year-over-year during the quarter. Teladoc anticipates that these trends will continue into Q2, projecting BetterHelp revenue will decline between 4% and 8% relative to the prior year. This forecast reflects a cautious outlook amidst a challenging environment for digital behavioral health providers.
Company leadership attributes much of BetterHelp’s turbulence to advertising yield costs, a historic difficulty for the company that has intensified in the current market conditions. The cost-per-acquisition (CPA) for new users has risen, making customer growth more expensive and difficult to sustain.
This context sets the stage for the BetterHelp revenue outlook 2024, which remains uncertain but with signs of potential improvement later in the year.
Impact of Advertising Costs and Adjustments to Growth Strategy
Mala Murthy, Teladoc’s interim CEO and CFO, addressed these challenges during the company’s Q1 earnings call. She explained that the company deliberately pulled back on advertising spend during the quarter to better balance growth with profitability.
“Our second quarter guidance reflects challenging cost-per-acquisition through early Q1, which caused us to pull back on our advertising dollars in the quarter in keeping with our goal of balancing growth and margin,” Murthy said. “These factors led to a decline in users in Q1, which is impacting our Q2 revenue growth rate on top of a difficult comparison relative to the second quarter of 2023.”
This measured pullback was necessary to avoid unsustainable spending that could harm margins, but it also contributed to a decline in new membership acquisition and overall revenue for BetterHelp in early 2024. These challenges are central to the evolving BetterHelp revenue outlook 2024.
Signs of Stabilization Bring Hope for the Back Half of the Year
Despite the rocky start, Murthy expressed cautious optimism based on recent trends. She noted that the cost-per-acquisition has shown signs of stabilizing in recent weeks, which bolsters confidence in BetterHelp’s performance during the latter half of 2024.
“These early signals of stabilization give us increased confidence in the back half of the year for the BetterHelp business,” Murthy said.
Teladoc’s outlook for the full year remains cautious, with the company expecting flat to low single-digit revenue growth from BetterHelp in 2024. However, leadership is actively pursuing initiatives designed to drive better growth and retention moving forward—key factors that will influence the BetterHelp revenue outlook 2024 in the months ahead.
Leadership Transition and Strategic Focus
This update comes shortly after the departure of Teladoc’s longtime CEO Jason Gorevic, who stepped down amid ongoing struggles on the public markets. The company’s board of directors is currently conducting a search for a permanent CEO to steer Teladoc through its next phase of growth and transformation.
In the meantime, Murthy has taken the helm as acting CEO, focusing on accelerating growth across both the top and bottom lines while maintaining strategic discipline.
“We are wasting no time in identifying and seizing opportunities to leverage our significant assets and capabilities,” Murthy said. “As an organization, our focus is on accelerating growth on both the top and bottom line over the medium and longer term. My focus as acting CEO is to ensure that our strategy continues to be supported by the appropriate level of investment and that our leadership team is executing on our priorities.”
These strategic priorities play a critical role in shaping the BetterHelp revenue outlook 2024, especially as the company positions itself for recovery and growth.
Doubling Down on International Expansion
One of the key pillars of BetterHelp’s turnaround plan is an increased focus on international markets. The company has recently brought in new leadership for BetterHelp who have injected a broader and more global perspective into the business.
Murthy highlighted that BetterHelp has already seen improvements in customer retention and growth from its international segment, particularly in English-speaking countries like the U.K., Canada, and Australia. These markets represent areas where BetterHelp has an established presence and a solid understanding of customer dynamics.
“On growth levers for this business, we are seeing improvements in retention and at our international business, which are helping offset some of the impact from higher CPAs in the U.S. by improving our overall yield on advertising spend,” Murthy explained. “The success we are starting to see with these levers, along with the effort in select international geographies that we expect to ramp up in the second half of the year, give us confidence in our second-half BetterHelp outcomes.”
The company anticipates that ramping up international expansion efforts will lead to significantly higher membership growth and improved customer retention compared to the first half of the year. This broader geographic diversification is designed to reduce dependency on the highly competitive and costly U.S. advertising market, creating a more sustainable growth model that will positively impact the BetterHelp revenue outlook 2024.
Teladoc’s Overall Business Shows Positive Momentum
While BetterHelp has faced a rough patch, Teladoc’s overall financial results offer encouraging signs of growth. The company reported total revenue of $646.1 million in Q1 2024, marking a 3% increase from the prior year. Notably, the integrated care segment posted an 8% revenue increase, reflecting strength in Teladoc’s broader service offerings beyond direct-to-consumer behavioral health.
EBITDA also grew by 20%, reaching $63.1 million compared to $52.8 million in Q1 2023. This growth underscores Teladoc’s efforts to improve operational efficiency and profitability, even amid challenges in parts of its business.
These broader business successes provide a foundation of stability as Teladoc works to improve the BetterHelp revenue outlook 2024.
Looking Ahead: Navigating a Competitive Behavioral Health Landscape
The digital behavioral health market remains highly competitive, with many providers navigating rising costs, evolving patient expectations, and regulatory pressures. Teladoc’s BetterHelp service exemplifies the complexities faced by virtual care companies as they seek to balance growth, customer acquisition costs, and profitability.
By reining in advertising spend, strengthening leadership, and expanding into international markets with proven demand, Teladoc aims to position BetterHelp for a more sustainable growth trajectory. The company’s ability to stabilize cost-per-acquisition and improve retention metrics will be critical to reversing the early-year declines.
As 2024 progresses, Teladoc’s strategic moves and leadership transition will be closely watched by investors and industry observers eager to see how the virtual behavioral health pioneer adapts to a rapidly changing healthcare landscape. The developments will heavily influence the BetterHelp revenue outlook 2024 as the year unfolds.
