Teladoc Health, Inc. (NYSE:TDOC) Q1 2024 Earnings Call Transcript

Teladoc Health, Inc. (NYSE:TDOC) Q1 2024 Earnings Call Transcript April 25, 2024

Teladoc Health, Inc. misses on earnings expectations. Reported EPS is $-0.49 EPS, expectations were $-0.47. Teladoc Health, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good afternoon. Thank you for attending the Teladoc Health Q1 2024 Earnings Call. My name is Matt, and I’ll be your moderator for today’s call. All lines have be muted during the presentation portion of the call. There’ll be some opportunity for questions and answers at the end. [Operator Instructions] I would like to pass the conference over to our host, Adam Vandervoort, Chief Legal Officer, Teladoc. Adam, please go ahead.

Adam Vandervoort: Thank you and good afternoon. Today, after the market closed, we issued a press release announcing our first quarter 2024 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 are: Mala Murthy, our Acting Chief Executive Officer and Chief Financial Officer; and Laizer Kornwasser, our President of Enterprise Growth and Global Markets. During this call, we will also discuss our outlook. And 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 Teladoc Health’s 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. Also, please note that certain statements made during this call will be forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties, and other factors that could cause the actual results for Teladoc Health to differ materially from those expressed or implied on this call. For additional information, please refer to our cautionary statement in our press release and our filings with the SEC, all of which are available on our website. I would now like to turn the call over to Mala.

Mala Murthy: Thank you, Adam, and thanks, everyone, for joining us today. Before we begin, I’d like to take a moment to reflect on the recent leadership changes at Teladoc Health. First off, on behalf of Teladoc’s more than 5,000 employees, Board of Directors, and executive leadership team, I would like to extend our deepest gratitude to Jason Gorevic for his accomplishments over the past 15 years. Jason leaves a tremendous legacy, having firmly established Teladoc as the industry leader in whole-person virtual care. As we mentioned in our February earnings call, Teladoc is in a time of transition. And as part of this evolution, the Board of Directors decided that it was time to look for a new leader for our company, someone to help us write the next chapter in our growth story.

The Board’s search for a successor is well underway and our permanent CEO is expected to be named later this year. The Board has appointed me to serve as CEO, while they conduct the search, and I’m honored to play this role for a company whose work I believe in so deeply. In the meantime, however, we are wasting no time in identifying and seizing opportunities to leverage our significant assets and capabilities. As an organization, our focus is on accelerating growth on both the top and bottom lines over the medium and longer term. And my focus as Acting CEO is to ensure that our strategy continues to be supported by the appropriate level of investment that our leadership team is executing on our priorities, and that we are accelerating the pace of change and innovation across our business.

With that, turning now to a review of our first quarter performance. I’m pleased to report a solid start to the year across the business, exceeding our financial and operating guidance for both consolidated revenue and adjusted EBITDA in the first quarter. Our team remains laser-focused on our key initiatives, which include, building upon our market leadership position, driving increased product penetration through our large installed base of over 90 million virtual care members, and accelerating our bottom line performance. This focus is evident in our first quarter results. In the Integrated Care segment, we are pleased to see continued strong interest in our whole-person care suite of products. First quarter Integrated Care revenue grew 7.8% year-over-year to $377 million, benefiting from high single-digit growth in our Chronic Care book of business, as well as strong visit revenues, driven by increased infectious disease activity, as well as an 8% increase in membership year-over-year.

Chronic Care enrollment remains strong, up 9% year-over-year in the first quarter. BetterHelp revenue of $269 million declined 3.7% versus a difficult comparison in the first quarter of last year. BetterHelp also generated modestly lower revenue on a sequential basis, driven in part by a decline in paying users following our typical pullback in ad spend in the fourth quarter, which is the most expensive time of the year in our marketing channels. Additionally, as expected, the lower returns on our social media advertising spend we experienced in the second half of 2023 persisted in the first quarter and are impacting our year-over-year growth rates in the first half of this year. We are making progress to improve our yield on advertising spend, which contemplates not only cost per acquisition but also retention and other factors as well.

I will speak to our efforts to reinvigorate growth in our BetterHelp business later in the call. We continue to make progress on our bottom line performance with first quarter consolidated adjusted EBITDA margin of 9.8% improving 140 basis points year-over-year and adjusted EBITDA of $63 million growing nearly 20% year-over-year. We are executing against our cost-saving and productivity initiatives and we remain on track to deliver $43 million in cost savings on a GAAP basis for our business in 2024, and a total of $85 million in 2025. The breadth of our product portfolio continues to drive productive conversations with both prospective and existing clients. Two-thirds of our bookings in the quarter came from cross-selling into our existing book of business with the remaining third coming from new clients, reflecting a continuation of our cross-selling momentum over the past several quarters along with an acceleration in bookings from new business.

Both existing and prospective clients are demonstrating increased interest in our Chronic Care plus bundle solutions, and we remain optimistic about our ability to drive increased product penetration through our install base of nearly 92 million members over the next several years. In Q1, we saw another example of our land and expand strategy playing out as we added our diabetes program into a large health benefits provider, a client who had previously only purchased our telehealth solutions. We are also seeing growing interest in our weight management solution from employers, who are grappling with rising costs for GLP ones and employee demand for these products. The addition of approximately 2.2 million members on a sequential basis since Q4 represents an additional Greenfield opportunity for future cross-sell and product penetration.

And with more than $1 billion in cash and cash equivalents on our balance sheet, our financial strength continues to be another differentiator for our company and provides us with significant capacity and flexibility to invest and innovate in our business. We also continue to see growing benefits from our early and ongoing commitment to Data and Artificial Intelligence with AI models now integrated across nearly all aspects of our business. From provider matching to enrollment optimization to member engagement, this automation is helping us not only reach our revenue and profitability goals but also achieve our mission of improving health by reaching more consumers. One exciting example is our use of Generative AI in member engagement to create hyper-personalized content for individuals, to get them signed up for Teladoc services they need, and then to keep them on track.

Our pilots with this AI use case, while still being carefully studied, are already delivering significant improvement in member engagement over prior approaches. I would now like to spend a few minutes reviewing our first quarter financial results in detail. First-quarter consolidated revenue increased 3% year-over-year to $646 million, while first-quarter adjusted EBITDA was $63 million, representing a margin of 9.8%. First quarter financial performance benefited from higher revenues in our Integrated Care segment and improved expense control. Turning to segment results, Integrated Care revenue increased 8% year-over-year to $377 million in the quarter, with growth relatively balanced across the portfolio. First quarter Integrated Care adjusted EBITDA was $47.7 million, representing a 260-basis-point expansion in margins to 12.6%.

The margin outperformance relative to guidance was largely driven by strong Chronic Care Program Enrollment during the first quarter, which, combined with better expense control, helped deliver improved gross margins and bottom-line performance. Total Chronic Care Program Enrollment was $1.12 million at the end of the first quarter, representing growth of 9% year-over-year. Total US Integrated Care members grew $6.9 million over the prior year, representing 8% growth, and grew by $2.2 million sequentially to $91.8 million. Average Integrated Care revenue per US member of $1.38 was down $0.01 over the prior year’s first quarter, reflecting the timing of new clients onboarding and enrollment ramp. The onboarding of large populations and our expanding membership base represents a long runway for continued cross-selling of our Chronic Care and other B2B products as we execute against our land and expand strategy.

First quarter BetterHelp segment revenue decreased 4% year-over-year to $269 million, driven by an 11% decrease in paying users. First quarter BetterHelp adjusted EBITDA was $15.5 million, representing a margin of 5.7%. As we have discussed previously, the first quarter is typically the seasonally weakest quarter from a margin perspective for our BetterHelp business as marketing expense ramps up following the fourth-quarter holiday season. As such, we continue to expect the first quarter to be the low point of the year for BetterHelp segment margins, and we expect consistent quarter-over-quarter margin improvement through the course of 2024. Consolidated net loss per share in the first quarter was $0.49, compared to a net loss per share of $0.42 in the first quarter of 2023.

Net loss per share in the first quarter includes stock-based compensation of $42.3 million, or $0.25 per share restructuring charges, primarily related to severance of $9.7 million, or $0.06 per share, and amortization of acquired intangibles of $64.2 million, or $0.38 per share. During the first quarter, free cash flow was a net outflow of $27 million compared to a net outflow of $32 million in the first quarter of 2023. As a reminder, the first quarter is our seasonally lowest cash flow quarter given the payment of annual incentive compensation. We ended the quarter with $1.1 billion in cash and cash equivalents on the balance sheet. Turning now to forward guidance beginning with our Integrated Care segment. We expect Integrated Care revenue in the second quarter to be between 2% and 5% versus the prior year period.

As a reminder, in our first quarter call, we called out a delay in launching our B2B consumer engagement efforts due to a technical issue in mapping new client populations with an expected cumulative negative impact of $20 million for the full year, particularly in the second and third quarters. The impact of this delay, coupled with strong year-over-year first-quarter Chronic Care results and the seasonal falloff of infectious disease driven visit revenues versus the first quarter is expected to result in a lower year-over-year second-quarter growth rate compared to our first quarter results. For the full year, as previously guided, we expect Integrated Care revenues to be in the low- to mid-single-digits, reflecting higher revenues in the second half versus the first half of the year, due primarily to the enrollment ramp in Chronic Care and a growing contribution from the nearly six million new integrated tare members we have added since the second quarter of last year.

From an adjusted EBITDA perspective, we expect a 12% to 14% margin in the second quarter and we continue to expect 150 to 250 basis points of margin expansion for the full year, reflecting revenue-driven operating leverage and the impact of our cost-saving initiatives. As it relates to US Integrated Care membership, we expect 92 million to 93 million members for the second quarter and 92 million to 94 million members for the full year, an increase from previous guidance after adding two million members in the first quarter. Turning now to our BetterHelp segment. For the second quarter, we expect BetterHelp revenues to be in the range of a negative 8% to negative 4% over the prior year period. 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.

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. However, we are seeing signs of stabilization in our cost per acquisition in more recent weeks, which gives us increased confidence in the back half of the year for our BetterHelp business, something I will speak to momentarily. For the full year, we continue to expect flat to low single-digit revenue growth in BetterHelp. We do expect BetterHelp’s growth to accelerate in the second half of the year. I’d like to take a moment to discuss what’s giving us increased confidence in the future of our BetterHelp business, which has been challenged in recent quarters. Late last year, we brought in new leadership for BetterHelp, who have helped inject a broader and more global perspective on growth levers for this business.

We are seeing improvements in retention and in our international business, which are helping offset some of the impact from higher CPAs in the US by improving our overall yield on advertising spend. The success we are starting to see with these levers, along with the efforts in select international geographies that we expect to ramp in the second half of the year, give us confidence in our second-half BetterHelp outlook. We expect these initiatives to lead to meaningfully higher membership growth and improved customer retention versus the first half. We are excited about the international opportunity, particularly in selected English-speaking geographies that are relatively underpenetrated compared to the US market, which will allow us to reallocate some advertising and marketing dollars at a higher marginal return as we continue to build out our infrastructure in those markets.

Given these dynamics throughout the year, we expect that to help revenue growth for the full year to be in the flat to low-single-digits range as previously guided despite our lower first-half growth. I would also note that we have thoroughly pressure-tested the assumptions that underpin our BetterHelp guidance for the rest of the year. We take several factors into account when developing both the low-end and the high-end of the range, including recent trends in advertising yields, channel dynamics, consumer sentiment, and other macro factors, and we have taken a close look at each one of these. That said, the impact of difficult-to-predict macro events creates unknowns as it pertains to our yield on advertising in the second half of the year, and we will continue to provide updates on the trends that we are seeing in upcoming earnings calls.

From a margin perspective, we expect BetterHelp adjusted EBITDA margins to be in the 9% to 10% range in the second quarter, and continue to expect margins to be flat plus or minus 50 basis points for the full year. The sequential margin improvements that we expect to see over the course of the year, primarily reflect the cumulative effect of new members added over the course of the year, the cadence of advertising spending, including the typical seasonal pullback in the fourth quarter, and innovation-driven improvements in our yield on advertising spend. On a consolidated basis, we expect second-quarter revenue of $635 million to $660 million and adjusted EBITDA of $70 million to $80 million. Our full-year guidance remains unchanged with the exception of the increase to our US Integrated Care membership that I’ve mentioned previously.

We continue to expect consolidated revenue to be in the range of $2.635 billion to $2.735 billion for the full year, representing revenue growth of 1% to 5%, along with consolidated adjusted EBITDA of $350 million to $390 million, representing growth of 7% to 19% on a year-over-year basis. We expect full-year free cash flow of $210 million to $240 million, driven by both the growth in adjusted EBITDA and an expected decline in capitalized software development costs. We are also maintaining our prior EPS guidance for the full year. Lastly, we are reiterating the three-year outlook that we provided you on our earnings call in February. In closing, I want to recognize my executive team and our broader leadership team for leaning in during this time of change.

I’ve been incredibly pleased with their continued focus on living our values and delivering for our members and clients this year, especially over the past several weeks. We’ve had a solid start to the year, and are poised to deliver significant growth in the second half of 2024. I remain focused on our strategy, our execution, and on our people. With that, we will open it up for questions. Operator?

Operator: [Operator Instructions] First question is from the line of Stephanie Davis with Barclays. Your line is now open.

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Q&A Session

Stephanie Davis: Hey, Mala. Thank you for taking my question and for wearing all of the hats right now. I was hoping you could talk a little bit about some early color on the international strategy and timing for BetterHelp. Can you talk to us about the rollouts, how we should be thinking about the cadence of that? And maybe if — have you seen some of that come through already, which is giving you that confidence in that second-half growth rate?

Mala Murthy: Thank you, Stephanie. Yes, I’m wearing many hats. Happy to be here. So in terms of the growth in international, as we had said on our last call, last year, International as a percentage of our total BetterHelp business was in the mid-teens. It is certainly contributing to the second-half ramp of revenue this year. Remember, this is — it’s not as if we are going into international de novo, we are already in a few markets. Several of them are English-speaking markets such as the UK, Canada, Australia. And the plan we have is for us to continue penetrating into those markets first. And that is what is driving our confidence in the second half ramp because we have been in these markets, we know the dynamics of the BetterHelp business in these markets.

Based on our experience, we have knowledge of the economics of being in these markets. Obviously, as we penetrate these markets and invest more in these markets, we hope to continue to see the return on ad spend, as well as the revenue growth for the balance of both top-line growth and bottom-line growth that I expect to see.

Stephanie Davis: And for like a mini follow-up, is there any way to compare the kind of rollout you’re seeing on those international markets where you’re already in them versus what we’re seeing in the US?

Mala Murthy: Here’s what I would say. I expect International to grow faster than the US. Certainly, that is something that we saw last year. And I do expect that to continue. From a rollout perspective, Stephanie, I would say, we are going to start in the second half and roll out as we, you know, do our ad spending in these markets as we go through the second half. The one thing I will remind you is, Q4 typically in the US is always the seasonally weakest quarter from an ad spending perspective is the quarter where we will typically pull back our ad spend. And I would say that dynamic is in the US. We will evaluate and assess how much of that dynamic also plays out in the international markets.

Operator: Thank you for your question. The next question is from the line of Lisa Gill with JP Morgan. Your line is now open.

Lisa Gill: Hi, Mala. Just trying to understand two things. One, clearly understand the change in leadership and what the Board is going through. But just also curious if you’re looking at any strategic changes to the business. And once again, under pressure on the BetterHelp side, I just heard you talk about international. But are there things that the board is reviewing, would be my first question. And then secondly, just really want to understand the opportunity around that 8% membership growth, which was really strong in the quarter. We didn’t see an increase in either revenue or adjusted EBITDA. Is that just timing? Is there an opportunity for cross-sell? So just really understanding how that’s going to play into the numbers.

Mala Murthy: Yeah. Thanks, Lisa. Great questions. So from an overall Board perspective, and what might that imply for changes, obviously, as I said in our prepared remarks, right now, the focus of the leadership team, my focus, and I would say the focus of the Board as well is for us to be laser-heads down focused on implementing our plans, our investments, our priorities, and frankly leading our employee base, the 5,000 plus employees we have through this period of transition and change. I would say also that I’m pleased with the solid start we have to the year. Hopefully, we have given you enough transparency and color as in our prepared remarks on what is really driving our confidence in our growth, both from a top-line perspective and our bottom-line perspective as we roll through the year.

We’ve kept our overall 2024 guidance as is from a revenue-adjusted EBITDA and a cash flow perspective. We continue to make progress on our cost initiatives that we have talked about in February. So all of those are things that require execution and I would say we are laser-focused on that. Beyond that, look, we are always looking at different parts of our business. We are looking at what top-line growth they bring in and what bottom-line growth they bring in. Certainly, as we said in our prepared remarks, the BetterHelp business has been challenged in recent quarters. And I would say, I am focused on the execution of the various initiatives that we talked about that will give us that second half ramp, whether it’d be improved retention, whether it’d be the fact that we are driving growth in International markets and the growth in the much smaller part of BetterHelp, the better sleep part of that business, which is also growing nicely.

All of these require execution. On the Integrated Care side, I would say I’m pleased with the strong enrollment that we have started out with. Obviously, you know this, the enrollment ramps through the year, and we are certainly working through that. And that is going to drive our revenue growth and our profit, our margin expansion on the Integrated Care side as we go through the year. So the answer to your question in terms of what we are evaluating and assessing is, we are executing. We are focused on driving our plans for this year. And we continue to assess how the various parts of our business are doing, and whether they are driving the — both the top line and the bottom line we see. Beyond that, I would say there isn’t really more to comment on it at this time.

On the second question you had around membership, here’s what I would say. We certainly are pleased with the two million plus member ads that we had in the quarter. Remember, the benefit we have of the membership ads is always the fact that it is the underpinning of our land and expand strategy. So it gives us fertile ground to continue to penetrate cross-sell upsell once we get these members into our fold. And as we sell in additional products, we expect to see the revenue accretion from that in the quarters ahead.

Operator: Thank you for your question. The next question is from the line of Jailendra Singh with Truist. Your line is now open.

Jailendra Singh: Thank you and thanks for taking my questions. I wanted to ask about Chronic Care Program Enrollment metrics. I understand it was up year-over-year, but it actually declined a little over 3% sequentially. Typically we see a pickup from Q — for the Q1 new contract starts and enrollment increase in a new calendar year. So can you provide some color there, Mala? And then what are your expectations around that metric as the year progresses? And more broadly, anything you can share how you’re focused on improving the positioning of the business in Chronic Care longer term in market, which seems to be getting very competitive.

Mala Murthy: Yeah. So look, I would say I expect the enrollment to ramp through the year. That is typically always the case in a traditional year, and this year would be no different. Now, the one thing I would also say is, remember we had talked about the marketing pause in the last earnings call. We had talked about $20 million of revenue impact for this year. I would expect most of the impact of that marketing pause to be in the second and third quarters. But despite that, I would expect for our Chronic Care Program Enrollment to ramp up through the year just like in prior years. Laizer, do you want to handle the Jailendra’s question on competitive

Laizer Kornwasser: Sure. When you look at what our customers and our clients are looking for, we are happy with where we are in the selling season. We’re having productive conversations with both new and existing accounts. As Mala mentioned in her earlier remarks, for the quarter, two-thirds of our existing clients, two-thirds of our growth in bookings came from existing clients and one-third came from new clients. I want to make sure that we highlight that we’re happy with the growth in bookings, not just in our domestic business, but also in our International business. And what are our clients looking for? Our clients are looking for value. They’re looking for a scalable, reputable vendor that they can partner with that has a strong balance sheet that they can continue to partner with to drive value for them and for their consumers. And that hasn’t changed. And I think that is feeding into our conversations with respect to our bookings.

Mala Murthy: And then, Jailendra, just finishing up on your question around the Chronic Care Enrollment. Look, this is a function of the fact that typically when we start off the year, you know, we onboard a number of lives and we also, at the same time, in Q1, is typically the time we would also see, you know, enrollees come on and enrollees roll off. And the net impact of that is what you’re seeing. I would expect, as we ramp up the year, despite the marketing pause, I would expect that to continue to go on into the rest of the year.

Operator: Thank you for your question. The next question is from the line of Jessica Tassan with Piper Sandler. Your line is now open.

Jessica Tassan: Hi, Mala. Thank you so much for the question and congrats on the good quarter and guide. I kind of — I wanted to ask about the three-year outlook that you all issued on the fourth quarter call and then reiterated today. So the low- to mid-single-digit annual consolidated revenue growth, mid-single Integrated Care, low-single BetterHelp, is that target achievable on an organic basis? And just maybe from an Integrated Care perspective, should we think about that growth continuing to be led by Chronic Care. And does it anticipate any new product launches? Just hoping for color around that three-year guide. Thank you.

Mala Murthy: Yeah. Thanks, Jess, for the question. Look, when we put that guide — outlook out there in February, we had thought about the building blocks to those numbers that trajectory both on the Integrated Care side and the BetterHelp side. So let me sort of comment on it one by one. On the Integrated Care side, I would say, as we had stated previously, think of it as a combination of low-single-digit growth on the much more well-penetrated telehealth side, and I would say mid to high-single-digit growth in Chronic Care. So yes, we do expect Chronic Care momentum to help us achieve the overall mid-single-digit revenue growth for Integrated Care. On the BetterHelp side, from a revenue growth perspective, we had said low single digit.

Look, here’s what I would say on the BetterHelp side. The second half ramp that we have talked about, the initiatives that we have going to help us achieve that second half ramp, again, it’s whether it’d be retention International continued momentum on better sleep. These are the inputs into the low-single-digit revenue growth for BetterHelp. And I would say, we will continue to execute against it. And we will continue to monitor it again, assuming that we don’t have something very, very unfavorable happen from a cost-per-acquisition perspective, which will impact our advertising yields. So assuming that we see CPAs in a reasonable range, I would say the building blocks that will help us grow in the second half will continue to be contributors into the low-single-digit revenue growth for BetterHelp.

When it comes to margins, I would say the cost initiative programs that we have that will help us with OpEx leverage along with the revenue growth that we will see on the top line, particularly on the Chronic Care side, will certainly be contributors into our margin expansion that we have put out there. So what I would say in summary is we have thought of the building blocks that go into the long-term outlook. And we will continue to assess, you know, how they perform. And as I said, this year and especially in the second half, BetterHelp will give us a lot more information on that.

Operator: Thank you for your question. Next question is from the line of Sean Dodge with RBC. Your line is now open.

Sean Dodge: Yeah, thanks. Mala, you mentioned in BetterHelp with the new leadership team having seen some improvement in subscriber retention. Can you give us a sense of how long you’re retaining BetterHelp users now on average? How much has that changed over the last couple of years? And then how much room and what kind of levers do you have to continue to drive improvements in that? What can you do to lengthen that?

Mala Murthy: Yeah. So we haven’t given out KPIs metrics, et cetera, specifically on retention, Sean. So I don’t want to go into specific retention metrics. What I will say is the following. We are looking — we are seeing improved member retention primarily because of the innovation that we are driving in the platform, in our user experience, frankly, with the help of AI models that are continually improving our matching of consumers with their various needs with providers. So it’s never one thing that is driving this improvement in retention. It is many things that are driving this improvement in retention. And I would say that, you know, when I talk about the new leadership at BetterHelp, one of the important things to highlight is we are looking now at pressing on more than one lever in the BetterHelp business.

We are looking to beyond the traditional focus on CAC. As we’ve talked about, we’re looking at additional geographies, how can we continue to innovate in the user experience. In some instances, and we have talked about this in the past, we are looking at small surgical targeted pricing changes. All of which, in my view, are things that will improve on our revenue growth. And it’s the innovation that is helping on our member — improve member retention, the user retention. Laizer, is there anything you would like to add to that?

Laizer Kornwasser: Yeah, I guess the only thing I would add is historically at BetterHelp we’ve been very focused on the innovation on patient acquisition. And what I would tell you is we are balancing spending time on increasing the value of that member. And I would say there’s not one specific thing other than being very innovative and testing out little things that are driving value so that our return on our advertising dollars increases.

Operator: Thank you for your question. Next question is from the line of Allen Lutz with Bank of America. Your line is now open.

Allen Lutz: Good afternoon and thanks for taking the questions. Another one on BetterHelp. Mala, have you considered at all moving from just cash pay to participating in health plan networks as a way to drive growth? Is that something that you’ve considered and can you kind of talk about the pros and cons of making a move like that? Thanks.

Mala Murthy: So I would say, look, we assess various initiatives to continually innovate to drive growth, both on the top line and the bottom line. At this point in time, with the scale that BetterHelp has, you know, over a $1 billion in revenue, it is by far one of the largest DTC players. And look, there are other competitors in the market, who have done, tried DTC, moved away to B2B. We have built scale in DTC. And I would say we will continue to focus on DTC. Having said that, I would also say we are looking for ways to improve and accelerate our growth in different ways. I don’t want to comment much more on specifics at this point. To the extent that there is anything relevant to update, we will absolutely do so. But we are looking at various ways to drive top-line to accelerate our top-line growth in BetterHelp.

Operator: Thank you for your question. Next question is from the line of Sarah James with Cantor Fitzgerald. Your line is now open.

Sarah James: Thank you. Mala, I was hoping you could help us a little bit with the pacing of this year. So, specifically, thinking of the items that you have control over, like some of the savings initiatives to get to that run rate of 43 at the end of the year and then the advertising spend, can you help us pace through how the savings initiatives are going to play out? And then on the ad spend, is there any pull forward of that into 2Q versus your normal cadence? And are you thinking about because of the increased efficiency, just lower overall need for ad spend for the year?

Mala Murthy: Yeah. Thanks, Sarah, for the question. So from a pacing perspective, we would be looking for the cost initiatives. And if you think about what those — what are underpinning those cost initiatives, things like offshoring, things like automation, you know, savings from our third-party supplier spend. Several of those are initiatives that are evenly paced through the year. Now, obviously, if you think about something like offshoring and as we offshore, you will get the incremental impact, the full impact of the offshoring as we go later into the year. But I would say to you, several of the others, like third-party supplier spend, et cetera, you will see sort of evenly pave through the year. On your question on ad spend, the way I would think about it is as follows.