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H to B Truist Securities
August 6, 2020

↑ Hold to Buy
Teladoc Health, Inc. (TDOC)
Price Target: $282.00
Prior: $200.00
Going where no man has gone before; PT to $282; Upgrade to Buy
Δ Key Drivers
Building the healthcare model of the future; we are buyers on share To From
weakness. 2020 PMPM $1.04 $0.90
Greater proportion of "all-in" deals.
2020 overall utilization 14.1% 12.1%
What's Incremental To Our View
Refects strong trends across paid members &
visit fee only members.
While COVID has changed the perception and willingness of all stakeholders to adopt
N/
and utilize virtual care in some shape or form, resulting in a robust uptake in TDOC's 2020 inTouch revenue $63M
A
and LVGO's revenue stream, our upgrade contemplates a longer term paradigm
Acquisition closed July 1.
shift that we think increases the durability of growth prospects far beyond the next
couple of years. We think LVGO will enable TDOC to enhance 3 revenue tailwinds
by materially bridging the gap between virtual and in-person visits; 1) growing the Price (Aug. 5, 2020) $202.01
addressable market; 2) improving utilization trends; and 3) enhancing TDOC's pricing
52-Wk Range $249.42-$55.30
power.
Market Cap ($M) $19,797
We think the combined entity can grow into its valuation over the next 5 years: Shares ADTV 2,117,556
of TDOC closed down nearly 20% (S&P up ~0.6%), following the announced merger with Shares Out (M) 98.0
Livongo (LVGO, NR). While we are not surprised by the knee-jerk reaction (TDOC paid ~35x
Short Interest Ratio/% Of Float 10.3%
2021 revenue; a dilutive multiple when contemplating TDOC itself was trading at around
~18x EV/Sales on 2021 estimates). However, when looking at what we think will be a durable TR to Target 39.6%
30%+ top-line growth profile through at least 2025, we think the stock is a compelling Buy. Enterprise Value ($M) $19,485.0

Cash And Equivalents $1,312.0

($M)
Total Debt ($M) $1,000.0

2019A 2020E 2021E

Curr. Prior Curr. Prior
Revenue ($M)
1Q $129 $181A $181 --
2Q $130 $241A $218 --
3Q $138 $285 $208 --
4Q $157 $291 $219 --
FY $553 $998 $826 $1,368 $1,008
EV/Sales 35.2x 19.5x 14.2x
Consensus Rev ($M)
FY $549 $991 $1,340
EBITDA ($M) Adjusted
.
FY $32 $88 $77 $174 $133
EV/
PT to $282 (from $200). Our modeled does not yet contemplate LVGO pending merger -- -- --
EBITDA
completion. The raised PT implies a 16x EV/Sales on our raised 2022 estimates (excluding Consensus EBITDA ($M) Adjusted
LVGO). FY $32 $89 $142
FYE Dec

Sandy Draper, CFA Stan Berenshteyn, CFA

404-926-5273 404-439-9719
Sandy.Draper@truist.com Stan.Berenshteyn@truist.com

SEE PAGE 7 FOR REQUIRED DISCLOSURE INFORMATION Page 1

Equity Research
Teladoc Health, Inc.

Teladoc App Tracker: Across both metrics (downloads & weekly active users) both domestically and globally, 2020 has
leapfrogged prior year’s trends.

Source: Truist Securities Data Science & Engineering Team Source: Truist Securities Data Science & Engineering Team

Source: Truist Securities Data Science & Engineering Team Source: Truist Securities Data Science & Engineering Team

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Teladoc Health, Inc.

Livongo App Tracker: Although we have limited access to weekly active users of Livongo, download trends appear to
have materially jumped this year vs what was recognized in the prior 3 years.

Source: Truist Securities Data Science & Engineering Team

Source: Truist Securities Data Science & Engineering Team

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Teladoc Health, Inc.

Raising estimates following 2Q results: (Our estimates do not yet contemplate Livongo estimates,
pending the completion of the merger). Our raised estimate reflect upside surprise to key revenue
drivers, including a better PMPM, higher utilization, and per visit fees (a variance of what we expected
vs what TDOC recognized can be found in our 2Q reaction note: Link). Our 2020 revenue estimate is up
$173M ($110M organically, as we contemplate a $63M contribution from the InTouch acquisition that
closed on July 1) to $998M, which is just ahead of the top end of management’s guidance and implies a
nearly 70% organic growth in 2020. We raise our 2021 estimate to $1368M (from $1008M prior); noting
that $160M of the raise reflects estimated contribution from InTouch. We estimate organic growth in
2021 at 30%. Our 2022 revenue estimate of $1690M is up from $1206M prior, which also reflects a
$208M contribution from InTouch. We model a similar cadence of EBITDA margin expansion vs our prior
model, but the higher estimated revenue drives the EBITDA numbers higher. We now model 2020, 2021,
& 2022 EBITDA at $88M, $174M, and $261M (from $77M, $133M, and $198M), respectively.

Truist
TDOC Low Mid High 2019A 2022E
Subscription Revenue 1300 1400 1500 463 1392
3-year CAGR 41% 45% 48% 44%
Visit Fee Revenue 250 300 350 90 299
3-year CAGR 41% 49% 57% 49%

Total Revenue $1,550 $1,700 $1,850 $553 $1,690

3-year CAGR 41% 45% 65% 45%

EV/revenue 12.0x 16.0x 20.0x

Enterprise value 18,600 27,200 37,000
Market cap 18,764 27,364 37,164
Price $191 $279 $379
Weighting 25% 50% 25%

Price Target $282

% upside to current price 40%
PT Implied Multiple: 16.3x
Source: Truist Securities

$400.00 TDOC PT and low/high range

$379
$350.00
$300.00
$282
$250.00
$200.00 $191
$150.00
$100.00
$50.00
$-

Sources: Factset, Truist Securities

Page 4 of 8
Teladoc Health, Inc.

Sandy Draper, CFA

404-926-5273
Model As of: 8/6/2020
Teladoc - Income
$ in millions 2018 2019 1Q20 2Q20 3Q20E 4Q20E 2020E 2021E 2022E
Revenue 417.9 553.3 180.8 241.0 285.0 291.4 998.3 1,368.3 1,690.1
Cost of revenue 128.7 184.5 72.4 90.8 108.3 116.6 388.0 530.1 646.3
Gross profit 289.2 368.9 108.4 150.3 176.7 174.9 610.2 838.3 1,043.8
gross margin, % 69.2% 66.7% 60.0% 62.3% 62.0% 60.0% 61.1% 61.3% 61.8%

Advertising and marketing 85.1 109.7 32.5 47.6 66.2 57.4 203.8 270.9 324.5
Sales 59.2 64.9 17.9 18.7 22.4 23.3 82.4 101.3 118.1
Tech and Development 54.4 64.6 19.3 23.0 24.8 25.8 92.9 108.8 125.8
General and Administrative 116.9 157.7 45.1 54.4 63.0 65.9 228.4 284.3 327.1
Legal 1.9 6.3 1.2 2.2 - - 3.5 - -
Regulatory 2.1 0.5 - - - - - - -
Other 4.9 6.6 3.7 1.6 - - 5.3 - -
D&A 35.2 39.0 9.7 9.9 10.6 11.0 41.2 50.3 52.8
Operating income (70.4) (80.4) (21.0) (7.2) (10.4) (8.5) (47.1) 22.6 95.5
Interest expense & other (26.1) (29.0) (9.3) (20.9) (21.3) (21.3) (72.8) (85.1) (85.1)
Pretax income (96.5) (109.4) (30.3) (28.1) (31.7) (29.8) (119.9) (62.5) 10.3
Taxes 0.1 (10.6) (0.7) (2.4) - - (3.1) - -
Tax rate 0% 10% 2% 9% 0% 0% 3% 0% 0%
Net Income (96.7) (98.9) (29.6) (25.7) (31.7) (29.8) (116.8) (62.5) 10.3

Basic shares 65.8 71.8 73.3 76.5 83.5 85.5 79.7 86.1 87.1
Diluted shares 65.8 71.8 73.3 76.5 83.5 85.5 79.7 86.1 92.1
Pro forma diluted shares 73.3 76.5 88.5 90.5

GAAP EPS -1.47 -1.38 -0.40 -0.34 -0.38 -0.35 -1.46 -0.73 0.11

Non-GAAP reconcilation
Net Loss (97.1) (98.9) (29.6) (25.7) (31.7) (29.8) (116.8) (62.5) 10.3
Interest expense & other, net 26.1 29.0 9.3 20.9 21.3 21.3 72.8 85.1 85.1
Income tax 0.1 (10.6) (0.7) (2.4) - - (3.1) - -
D&A 35.6 39.0 9.7 9.9 10.6 11.0 41.2 50.3 52.8
EBITDA (35.3) (41.5) (11.3) 2.7 0.2 2.4 (5.9) 72.9 148.3
EBITDA margin -8% -7% -6% 1% 0% 1% -1% 5% 9%
Stock comp 43.8 66.7 18.3 21.9 23.4 24.9 88.6 100.6 112.6
Other - - - - - - - - -
Transaction related costs 4.9 6.6 3.7 1.6 - - 5.3 - -
Adjusted EBITDA 13.4 31.8 10.7 26.3 23.6 27.4 88.0 173.5 260.9
Adjusted EBITDA margin 3% 6% 6% 11% 8% 9% 9% 13% 15%
bps of margin expansion 255bps 306bps 387bps 276bps
Source: Truist Securities estimates Ticker: TDOC
As of: 8/6/2020 Date: 8/5/2020
Price: $202.01

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Teladoc Health, Inc.

Company Description
Teladoc Health, Inc. (TDOC) is the first and largest provider of telehealth services in the U.S., offering consumers
access to 1,100+ board-certified physicians and behavioral health professionals to resolve medical and mental health
issues 24/7/365 via mobile or video consultations. Teladoc physicians are able to diagnose, recommend treatment, and
prescribe medication, unlike nurse call centers. A few of the most common diagnoses that members call Teladoc for
include upper respiratory infection, sinusitis, bronchitis, and urinary tract infection. The company has 4,000+ clients,
~11 million members, conducts ~1,500 consultations per day, and reports 95% member satisfaction. Current customers
include employers (i.e. Accenture, Bank of America, Pepsi, Shell), health plans (Highmark, Aetna, Blue Shield of
California, Highmark, and Centene), hospitals (Henry Ford Health System, Memorial Hermann, and Mount Sinai),
state and public entities, state Medicare and Medicaid members, and agencies. Teladoc was founded in 2002 and is
headquartered in Purchase, NY.

What is telehealth? Telehealth is a real-time, remote consultation with a health care provider, typically in the form
of a phone call or live video. Patients register prior to the visit providing information about their medical history. For
regular medical problems, telehealth consultations provide patients with better access to on-demand healthcare from
any location at a lower cost than a physician office or ER visit. Services provided can include: primary care visit, specialist
consultation, remote patient monitoring at home, and medication prescription. Teladoc’s top 10 diagnoses include:
sinusitis, urinary tract infection, conjunctivitis (pink eye), bronchitis, upper respiratory infection, nasal congestion,
allergies, influenza, cough, and vaginal yeast infection. Telemedicine is growing in two ways: 1) by the number of
services as well as specialties provided; and 2) expanding into categories such as behavioral health and dermatology.

Investment Thesis
Teladoc is the market leader in the rapidly growing telehealth industry. We are seeing accelerating adoption of telehealth
as the global COVID pandemic has 1) driven more office visits to virtual visits, 2) more favorable reimbursement rates
have encouraged doctors to adopt the technology, and 3) positive consumer experience has led to more repeat visits.
We believe that these trends will persist even when the pandemic subsides. Furthermore, we see the combination of
TDOC and LVGO as creating the virtual healthcare company of the future, addressing a global market that could reach
$250 bil over the next 3-5 years. In our view, the combined company should be able to grow revenue by 30-40% through
2025. We rate the stock BUY.

Valuation and Risks

$282 PT: Our PT implies 16x our '22E EV/Revenue estimate and is ahead of its two-year NTM average of ~9x. We
believe that this is justified given our view that TDOC is a leader & market share taker, has revenue upside potential
from many levers, generally sees favorable regulatory tailwinds, recently turned adj. EBITDA positive, is an industry
leader, is the only publicly traded telehealth pureplay, and has a long runway for growth given a still low adoption of
telehealth, and ancillary remote health, services as well as potential game-changing increase in adoption for telehealth
spurred by the COVID19 pandemic and the recently announced pending merger with Livongo.

Downside risk to our rating and PT. 1) Future state telehealth legislation is not accommodating to telehealth and/or
requires only video consultations. 2) The long term sustainability of Teladoc as the telehealth market leader. 3) Failure
of telehealth to become a more mainstream service in the U.S. 4) Failure to successfully integrate and operate the
Livongo acquisition. 5) a re-rating downward of the stock valuation, which has risen substantially due to recent end
market demand.

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Teladoc Health, Inc.

Analyst Certification
I, Sandy Draper , hereby certify that the views expressed in this research report accurately reflect my personal views
about the subject company(ies) and its (their) securities. I also certify that I have not been, am not, and will not be
receiving direct or indirect compensation in exchange for expressing the specific recommendation(s) in this report.

Required Disclosures
Analyst compensation is based upon stock price performance, quality of analysis, communication skills, and the
overall revenue and profitability of the firm, including investment banking revenue.
As a matter of policy and practice, the firm prohibits the offering of favorable research, a specific research rating
or a specific target price as consideration or inducement for the receipt of business or compensation. In addition,
associated persons preparing research reports are prohibited from owning securities in the subject companies.

Rating and Price Target History for: Teladoc Health, Inc. (TDOC-US) as of 08-05-2020
05/02/18 06/04/18 08/08/18 09/24/18 01/14/19 03/04/19 08/05/19 12/02/19 01/22/20 02/27/20 03/26/20 04/15/20 05/12/20
BUY:$48 BUY:$64 BUY:$77 BUY:$100 BUY:$70 BUY:$75 BUY:$80 HOLD:$80 HOLD:$92 HOLD:$110 HOLD:$118 HOLD:$144 HOLD:$200
300
250
200
150
100
50
0
Q3 2018 Q1 Q2 Q3 2019 Q1 Q2 Q3 2020 Q1 Q2

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Teladoc Health, Inc.

target would be unhelpful to making an investment decision. As such, with Research Management‘s approval, an
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I = Initiate Coverage
T = Transfer Coverage

Truist Securities ratings distribution (as of 08/06/2020):

Coverage Universe Investment Banking Clients Past 12 Months
Rating Count Percent Rating Count Percent
Buy 445 63.39% Buy 140 31.46%
Hold 241 34.33% Hold 61 25.31%
Sell 16 2.28% Sell 3 18.75%

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