Prepared remarks
Ladies and gentlemen, thank you for joining us and welcome to the Teladoc Health Q2 26 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 *1 to raise your hand. To withdraw your question, press *1 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 26 financial results. This press release and the accompanying slide presentation is available in the Investor Relations section of the teladoc.com website. On this call to discuss the results will be Charles Divita, our Chief Executive Officer. 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 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 2000. 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 1, 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-Ks 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 Charles Divita.
Thanks, Mike. Let's begin with the health care 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. Integrated Care: we again delivered a 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 1, 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 this 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 in the guidance provided with our first quarter results on April 29. However, as we moved through the rest of May and into June, the increasing speed of consumer movement towards insurance, provider capacity 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 have established a leading position by providing a broad range of virtual care services to support physical health and mental well-being. Health care continues to be significantly impacted by rising costs, the 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 have 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 primary 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 connected engagement points. We have 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 surface these insights and other actionable information directly at the point of care for appropriate action by our clinical team. We have 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, and 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 1, 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 health care journey rather than a specific or singular condition. For clients, Teladoc 1 provides the ability to address needs across populations, with accountability for both clinical performance and total cost of care impact. At its core, Teladoc 1 leverages the full extent of our clinical capabilities delivered through a unified, multidisciplinary care team spanning clinicians, specialists, therapists, coaches, and dietitians, 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 health care cost and a 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 1 to our portfolio, and our continued focus on innovation and delivering differentiated solutions to clients, will further leverage the strength 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, which is 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, 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 our 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, the 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. But 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 were no longer representing 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, 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 are 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. First, 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 have 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 in 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 $75 million at the time of our first quarter earnings call and more than double the level from the fourth quarter 25 earnings call held in February. Second, 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. Third, 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. We continue to see meaningful opportunities outside the U.S. longer term given the large addressable market and significant unmet need. However, 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 to $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 to $105 million. 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% to 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 present 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 pretax 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 0.8x, and 3.6x on a 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 have 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 have 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 25. 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 thousand and were down 4% sequentially. While insurance users increased by over 70% sequentially, reflecting a growing part of BetterHelp's business. BetterHelp's adjusted EBITDA for the quarter was $500 thousand, 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 25. Now turning to guidance. We expect 2026 consolidated revenue of $2.36 billion to $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 to $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 to $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. And we now project net loss per share of $1 to $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 to $609 million and adjusted EBITDA in the range of $62 million to $74 million. Moving to the segments. For Integrated Care, we expect 2026 revenue growth of 0.8% to 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 to 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% to 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, and adjusted EBITDA margin in the range of 15.7% to 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 fluid 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% to 12.7% versus 2025, reflecting a greater decline in cash pay revenue. Expect insurance revenue in the range of $90 million to $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 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% to 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% to down 12.3%. Insurance revenue is expected to be in the range of $25 million to $31 million in the quarter, up 29% sequentially at the midpoint. We expect an adjusted EBITDA margin of 0.5% to 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.
Questions and answers
Thank you. We will now begin the question-and-answer portion of the call. Please limit yourself to one question per person. To ask a question, please press *1 to raise your hand. To withdraw your question, press *1 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 Fitzgerald. Sarah, your line is open. Please go ahead.
Thank you. So I'm hoping to get a better idea of what the pacing to closing the supply gap looks like for the therapists that are taking insurance. So 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 adoption through certain programs that you are doing. Can you be more explicit about that and how do you think about the ramp going forward? Thanks.
Thanks, Sarah. Appreciate the question. As you mentioned, we have continued to grow the total number of credentialed therapists significantly over the course of the year, and that continues and has been able to support the insurance sessions and revenue and things that we had expected. This higher level of demand and the strong preference for insurance, and now our national rollout, are why we are making these moves and changes. There are a number of initiatives going on, but let me bucket them into two areas. First is provider acquisition and retention. These are efforts aimed at recruitment, both out of the BetterHelp cash-pay network that you referenced, as well as therapists that are not in the network and more traditional in terms of taking insurance. We have a number of things going on 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 to expand delegated credentialing with payers. We have begun the process to pursue NCQA accreditation and delegated credentialing. We think that will be a benefit. We also have initiatives around the onboarding and engagement of therapists onto the platform to get them using it and serving patients. The second area is improving existing provider capacity in addition to new recruitment. This includes improving the insurance platform tooling and scheduling efficiencies. We mentioned in the last quarter some of the things done around AI to support efficiency and documentation. We're looking at provider experience and user experience improvements. We are putting in place and expanding state-by-state and payer-level initiatives to be able to respond to demand and capacity needs on a more dynamic basis as demand and capacity change over time. There are a number of actions underneath that and that's really why we refocused resources and leaned into this insurance opportunity.
And just any view on the timing of closing the gap of where demand is to where supply is?
We are actively working on it and have been. We reaffirmed our revenue range that I mentioned in my prepared remarks. We are taking these actions to strengthen our position in 2026 and to position for strong insurance revenue growth in 2027. I do not want to speak on exact timing. I would just say we have a number of initiatives underway and that is why we have refocused the resources the way we have.
Our next question comes from the line of Lisa Gill from JPMorgan Chase & Co. Lisa, your line is open. Please go ahead.
Thanks very much. And 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? And then 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 will not have to do as much direct-to-consumer advertising, and your customer acquisition cost will not 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, therapists approach that on a cash-pay basis for a number of reasons including flexibility and fewer documentation requirements than you would have with payer reimbursement. On the insurance side, there are more requirements in terms of documentation and administration and claim submission, so it is a different dynamic and not necessarily for everyone. Reimbursement will focus on supply and demand dynamics and is market-by-market. We continue to evaluate compensation programs to support therapists. In terms of margin, we are focused on scaling insurance, and we see this in-network pivot for BetterHelp as important to create a more durable business because of the volatility in cash pay. You should expect a lower gross margin percentage in insurance versus cash pay. Cash pay requires significant advertising and customer acquisition costs and has a different gross margin profile. We expect the lifetime value for insurance to be more reflective of patient need and less constrained by out-of-pocket cost. Over time we expect to improve ad spend efficiency and spending levels, and we are investing ahead of the opportunity so we expect operating leverage to kick in as insurance continues to scale. The ultimate margin profile for BetterHelp will depend on the pace of the transition, how cash pay evolves, and other factors I described.
Our next question comes from the line of George Hill from Deutsche Bank. George, your line is open. Please go ahead.
Hey, good evening. I apologize 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? Do we need to find a bunch of new therapists to serve the insurance business, or is there a licensing issue why therapists that served the cash-pay business cannot serve the insurance business? Or is it more a compensation issue as opposed to licensing issue?
The therapist network that is part of the cash-pay market is a significant part of BetterHelp's value proposition on the cash-pay side, and we have continued to recruit and offer insurance to that network as we rolled out states, and we have seen good interest from therapists. We are not limiting ourselves to that network; we have been recruiting therapists not in the cash-pay network as well. So it's a combination of both. We have grown capacity significantly over recent months. It is a market-by-market, payer-by-payer dynamic and we do not have capacity constraints uniformly; it varies by market. We are approaching it with both recruitment and platform improvements.
Okay. And then maybe just a quick follow-up: is there a quick way to frame or put a number on the order of magnitude of how much capacity you are missing? How much revenue are you missing by not having the capacity to capture the volume?
I do not want to comment with a specific number. We have done well growing capacity and insurance sessions are growing well and were at the higher end of our revenue expectations. But because of the size of the U.S. cash-pay market and the existing cash-pay user base, shifting that demand toward insurance creates a significant capacity issue, which is why we have taken actions to refocus on insurance and adjust advertising and marketing to align demand with capacity.
Our next question comes from the line of Daniel Grosslight from Citigroup. Daniel, your line is open. Please go ahead.
Hi, guys. Thanks for taking the question. I'll stick with BetterHelp here. I'm really focusing on the international segment because it has been a pretty consistent area of strength for BetterHelp. I get there is a lot to focus on in the U.S., but I'm curious why you have chosen to deprioritize international now and at what point would you consider reaccelerating investment in international markets?
I appreciate the question. International has been and remains an important part of BetterHelp. We are maintaining our position in markets where we operate today. This is a near-term prioritization decision because we have finite resources at BetterHelp and we believe the highest-return use of product, engineering, operating, and marketing resources in the near term is supporting the U.S. insurance scaling given the demand and preference we see. I would not view this as moving away from non-U.S. markets long term; we still see large opportunity and unmet need. We will maintain presence in those markets and revisit the level of investment once our insurance initiatives take hold.
Got it. And 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 cash pay in 4Q and annualize that as a run rate for 2027 on just the cash-pay side, or do you think we'll see continued declines in the cash-pay business in 2027 from that fourth-quarter run rate?
I do not want to comment on 2027 guidance. We are making these moves because we see significant opportunity in the insurance market and to position for insurance revenue growth in 2027. We had expected pressure on the U.S. cash-pay market and that has accelerated. As you get toward the fourth quarter, you'll see a couple of things: the ongoing pressure on cash pay and a typical pullback in ad spending during the holiday season which impacts cash pay. I would not necessarily take the fourth quarter and annualize it. Expect continued pressure on the cash-pay market and expect us to drive insurance revenue growth through the actions we are taking. We will revisit international market investments accordingly.
Our next question comes from the line of Jessica Tassan from Piper Sandler & Co. Jessica, your line is open. Please go ahead.
Hi, guys. Thanks for taking the question. I'm curious if you can give us a sense of how many insured lives or what level of run-rate revenue your 8,000 BetterHelp providers can support. And 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? And then a quick follow-up: can you comment at all on the behavior you are observing within the BetterHelp insured business? How many visits, level of acuity, how long are members staying with the product, etc.?
The 8,000 credentialed therapists are important and we continue to grow the network. However, capacity depends on state availability, payer, clinical need, appointment time, and length, so the raw number is not the only factor. We are growing the credentialed network and undertaking provider acquisition and retention initiatives and platform improvements to increase productivity. I do not want to tie an exact number to what the 8,000 equates to in run rate. We have reaffirmed our insurance revenue guidance of $90 million to $105 million for 2026. The actions are intended to strengthen our position in 2026 and drive strong insurance revenue growth in 2027. As for user behavior, it is early and the national rollout will make the data more representative. We are seeing good usage in the first 90 days relative to cash pay and good session growth; I referenced over 20,000 sessions in one week as an indication of that growth.
Our next question comes from the line of Allen Lutz from Bank of America. Allen, your line is open. Please go ahead.
Good afternoon, and thanks for taking the questions. Chuck, I want to follow-up on the BetterHelp thread. You are still expecting the same EBITDA margin despite the issues in cash pay, and cash pay has higher gross profit dollars. It seems you are managing this through lower advertising spend. Conceptually, over the next couple years, 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 these dynamics around cash pay?
I do not want to be overly prescriptive about exact cadence, but we have taken into consideration in our EBITDA margin guidance the initiatives and actions we are taking, including advertising changes. Advertising is a big lever because cash pay requires significant expenditure to acquire members and has higher churn. We believe over time scaling insurance will give greater ability to improve ad spend efficiency and acquisition economics; this is now accelerated given the demand and preference we see. We always expected to evolve the approach as insurance scales. The fourth-quarter dynamic of higher adjusted EBITDA for BetterHelp, given holiday ad spend dynamics, is likely to continue. Beyond that, insurance should create a more durable position for BetterHelp and over time shape how gross margin and the overall financial profile develop.
Our next question comes from the line of Jailendra Singh from Truist Securities. Jailendra, your line is open. Please go ahead.
Thank you, and thanks for taking my question. I want to talk about the Integrated Care business. We're still in the midst of selling season. Can you 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, more product consolidation? And how is Teladoc 1 affecting selling-season conversations?
Great question. The selling season environment is in line with what I described previously. Employers are looking for solutions that align with their goals and are concerned about fragmentation and driving impact. Health plans are dealing with higher medical costs and regulatory dynamics. Selling season overall was in line with expectations and similar to the first half of 25. Conversations with clients are more strategic, focusing on challenges and the benefits of programs like ours. We have had some nice wins and expansions so far this year, though we've also faced pressures given the competitive market. Adoption of multi-condition bundles remains a theme and we have seen good growth in weight and obesity management programs. We're excited about Teladoc 1—it is the culmination of significant work and offers a comprehensive approach focused on individual health journeys rather than product-specific solutions. We launched it last week with clients at a forum and received positive feedback. We will continue to build on this and bring Teladoc 1 into sales conversations.
That is super helpful. Just one quick follow-up: did you say if cash-pay trends stabilized in July? Or have the trends you saw in Q2 continued in July?
I do not believe I spoke about July specifically. In late Q2 the patterns we observed caused us to conclude these were not short-term variations but more sustained developments that required us to reassess assumptions underlying our prior outlook. That view and the actions we described factored into our updated expectations.
Our next question comes from the line of Sean Dodge from BMO Capital Markets. Sean, your line is open. Please go ahead.
Great, thanks for taking our question. This is Christopher Charlton for Sean. Sticking on Integrated Care, can you share more color on the competitive dynamics within the chronic care portion and what drove the big step-up in enrollment in the quarter? You mentioned greater adoption of the multi-condition bundle and called out weight management, but are there other areas of strength or demand and how is this setting expectations for the rest of the selling season and into 2027? Thanks.
We are seeing strong adoption of bundles by clients, which addresses more needs of the people they serve, creates a larger recruitable population, and in turn increases enrollees. That is important for meeting more needs and improving program stickiness and engagement. Weight and obesity programs have seen solid growth; these carry different PMPM economics which affects mix. Having more enrollees and bundled programs also supports Teladoc 1 because it is a comprehensive offering oriented to individuals rather than point solutions. The competitive landscape is intense, but our actions—new capabilities, clinical model, and AI investments—should create differentiation versus point solutions and help us win in the market. Cardiometabolic health is a significant portion of health care expenditure and by leveraging our clinical capabilities we believe we can drive impact for clients.
Our next question comes from the line of Elizabeth Hammell Anderson with Evercore ISI. 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. Please go ahead.
Thanks for the question. I want to clarify whether the accelerated demand you're seeing—people coming to BetterHelp, learning they can get insurance coverage, and then seeking insurance—coupled with capacity constraints that prevent quick access, is directly linked such that people drop out and do not convert to cash-pay. And as you expand capacity in the areas where you have this issue, does that affect your ability to expand into other regions on the insurance side, or are those still separate considerations?
The traditional DTC advertising approach for BetterHelp is about brand awareness and demand generation for cash pay. We are seeing demand for BetterHelp and awareness that we are offering insurance. As we scale markets and have a national footprint, awareness and interest increased more than expected, highlighting why we built the insurance capability. What we needed to do was evolve marketing to account for the national footprint so we were not generating demand for insurance that we could not meet. We are evolving advertising to better align demand with capacity. Capacity constraints are not uniform; they vary by market. The actions we've taken are intended to better tailor advertising to capacity and to grow provider capacity where needed.
Thank you. And one follow-up: you've maintained the margin guide—how long is this sustainable? You're pulling back on ad spend in the short term while adjusting to capacity. Clearly you need advertising for DTC demand. Is this sustainable for a certain period, and might the transition take longer than 2026?
We considered these actions in the margin guidance. Evolving advertising to reflect our insurance footprint and capacity is a major lever. We're focused on bottom-line performance and deploying advertising carefully. We are investing to scale insurance; in less than a year we expanded from one state to all 50 states plus DC, which required investments and some operating costs. We expect to get leverage as insurance scales. We remain focused on financial performance and the durability of the business.
The question-and-answer session has ended. This concludes today's call. Thank you for attending. You may now disconnect.