Teladoc Health is laying off 300 employees or 6% of its workforce, CEO Jason Gorevic said in an email to employees Wednesday.
Gorevic said the telehealth company is eliminating redundant non-clinical roles that resulted from its $18.5 billion acquisition of digital health company Livongo Health in 2020. He also said the company is pushing towards a path to profitability.
“These actions put us on an even stronger financial footing at a time when many of our competitors are questioning their ability to keep their doors open,” Gorevic said in the email.
The layoffs follow a challenging 2022 for the company. It recorded a $9.8 billion net loss for the first three quarters of the year, largely because of a $9.6 billion goodwill impairment charge related to the Livongo merger. Its stock price has sunk from its high of $296.66 a share in February 2021 to $28.22 a share at Tuesday's close.
The Livongo acquisition hasn't gone according to plan for Teladoc. Along with the impairment charges, Livongo also lost Cigna as its preferred digital health tool for chronic care conditions in December 2021.
"They overpaid," said Nathan Ray, a partner in consultancy West Monroe’s healthcare and life sciences practice. "Look at some of the brick-and-mortar acquisitions we're seeing now with groups doing full primary care, including diabetes management, such as One Medical. [Companies like that] have a real asset, not just a call center with a digital presence, and they're going for much less than half of [what Livongo was sold for]."
At last week’s J.P. Morgan Healthcare Conference, Gorevic said Teladoc has $900 million on its balance sheet and positive cash flow and that the goodwill impairment charge doesn’t impact cash or liquidity. He also referenced what he said was the company's competitive advantage over rival telehealth providers to weather economic headwinds.
“Many of the small competitors out there, whether they’re public or private, lack the scale to deliver strong financial results consistently,” Gorevic said. “There are a lot of virtual care companies out there that are more narrowly focused, smaller in scale and are nipping at the edges of single [software] solutions.
Prateesh Maheshwari, investor at San Francisco-based Maverick Ventures, said he wasn't surprised that Teladoc had to cut jobs. He said the company is a bellwether for the digital health industry, which has come back down to Earth after investments peaked in 2021.
"A lot of these firms hired really quickly in 2020 and 2021. They looked at pandemic trends and thought that's how the world would look like for some period of time," Maheshwari said. "So the rationale for these layoffs is it's about rightsizing the organization. I wouldn't be surprised to see more happen."
Teladoc's challenges are representative of the reality facing other tech-enabled service providers, said Dr. Justin Norden, partner at venture capital firm GSR Ventures.
“There have been a lot of layoffs [among] tech-enabled service companies and that will likely continue in 2023,” Norden said. “These companies were growing at low margin or in some cases, even negative gross margin. All of a sudden that is not exciting as an investor.”
Teladoc’s 2022 revenue was approximately $2.4 billion, $1 billion of which came from BetterHelp, its direct-to-consumer mental health service.
Brock E.W. Turner contributed to the reporting of this article