tdoc-20251231
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________
Form 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 2025
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-37477
_______________________________________________
TELADOC HEALTH, INC.
(Exact name of registrant as specified in its charter)
(State of incorporation) (I.R.S. Employer Identification No.)
(Address of principal executive office) (Zip code)
(203) 635-2002
(Registrant’s telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.001 per share TDOC The New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: Not Applicable
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yesx No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes oNox
Indicate by check mark whether the registrant: (1) has filed all reports requiredto be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesx No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. x
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes o No x
The aggregate market value of the common stock held by non-affiliates as of the last business day of the registrant’s most recently completed second fiscal quarter was approximately $1,531,762,802. The registrant has no non-voting stock outstanding.
As of February 17, 2026, there were 178,396,434 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement to be delivered to stockholders in connection with the 2026 annual meeting of stockholders are incorporated by reference in response to Part III of this Report to the extent stated herein.
Table of Contents
TABLE OF CONTENTS
Page
PART I
Special Note Regarding Forward Looking Statements 3
ITEM 1. Business 3
ITEM 1A. Risk Factors 18
ITEM 1B. Unresolved Staff Comments 53
ITEM 1C. Cybersecurity 53
ITEM 2. Properties 55
ITEM 3. Legal Proceedings 55
ITEM 4. Mine Safety Disclosures 55
PART II
ITEM 6. Reserved 56
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 72
ITEM 8. Financial Statements and Supplementary Data 73
ITEM 9A. Controls and Procedures 73
ITEM 9B. Other Information 73
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 76
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance 76
ITEM 11. Executive Compensation 76
ITEM 14. Principal Accounting Fees and Services 77
PART IV
ITEM 15. Exhibits and Financial Statement Schedules 78
EXHIBIT INDEX 79
SIGNATURES 84
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA F-1
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PART I
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Teladoc Health, Inc., together with its subsidiaries, is referred to herein as “Teladoc Health,” the “Company,” or “we.” Many statements made in this Annual Report on Form 10-K that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements and should be evaluated as such. Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plan and strategies. These statements often include words such as “anticipates”, “believes”, “suggests”, “targets”, “projects”, “plans”, “expects”, “future”, “intends”, “estimates”, “predicts”, “potential”, “may”, “will”, “should”, “could”, “would”, “likely”, “foresee”, “forecast”, “continue” and other similar words or phrases, as well as statements in the future tense to identify these forward-looking statements. These forward-looking statements and projections are contained throughout this Form 10-K, including the sections entitled “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We base these forward-looking statements or projections on our current expectations, plans and assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances and at such time. As you read and consider this Form 10-K, you should understand that these statements are not guarantees of performance or results. The forward-looking statements and projections are subject to and involve risks, uncertainties and assumptions and you should not place undue reliance on these forward-looking statements or projections. Although we believe that these forward-looking statements and projections are based on reasonable assumptions at the time they are made, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements and projections. Factors that may materially affect such forward-looking statements and projections include, but are not limited to the section entitled “Risk Factors” in this Form 10-K and in our other reports and Securities and Exchange Commission (“SEC”) filings. These cautionary statements should not be construed by you to be exhaustive and are made only as of the date of this Form 10-K. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should evaluate all forward-looking statements made in this Form 10-K in the context of these risks and uncertainties.
Item 1. Business
Overview
Teladoc Health is the global leader in virtual care. More than 20 years ago, we were founded on a simple, yet revolutionary idea: that everyone should have access to the best healthcare, anywhere in the world on their terms. Our mission is to empower all people everywhere to live their healthiest lives by transforming the healthcare experience. Today, we are transforming virtual care into a catalyst for how better health happens around the world. We connect patients, care providers, healthcare platforms and partners to provide more complete and personalized care. Through our unique technology, breadth of services and depth of clinical expertise, we are delivering and orchestrating care in order to improve health outcomes and reduce healthcare costs around the world.
We are equipping care teams to perform at their highest caliber, providing effective care and support that addresses and resolves comprehensive health needs— physical and mental, simple and complex, urgent and ongoing. By applying the power of technology and insights from millions of health interactions, we are guiding targeted health actions and elevating healthcare experiences to make moments of care more impactful. We work with health plans, employers, health systems, and partners around the world, giving us visibility into best practices and health journeys that enable us to drive impact at scale.
We offer a portfolio of services and solutions, bolstered by technology, artificial intelligence (“AI”), machine learning and human expertise to provide an effective care experience that people value and trust. By combining the latest in data science and analytics with a personalized user experience through a set of highly flexible integrated technology platforms, we completed 17.1 million telehealth visits in 2025 through our business-to-business (“B2B”) and direct-to-consumer (“D2C”) channels. We provide access to healthcare 24 hours a day, 7 days a week, and 365 days a year.
We have two reportable segments: Integrated Care and BetterHelp.
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Our Integrated Care segment delivers high-quality virtual care that is available to more than 100 million members through their employers and insurers. These virtual care services address a broad spectrum of care needs including preventive care, primary care, 24/7 urgent care, mental healthcare, chronic care and expert second opinions. Teladoc Health care teams also coordinate, or orchestrate, care needs by referring patients to high-quality in-person care in their communities when medically appropriate. For hospitals and health systems, we provide highly-scalable connected care solutions -- including hardware, software and services — that help organizations deliver telehealth services to their patients in virtual care and hybrid care models. Services in this segment are distributed primarily on a B2B basis.
Our BetterHelp segment primarily consists of our market leading mental health platform. Online counseling and therapy services are provided via our network of nearly 35,000 licensed clinicians leveraging our platform for web, mobile app, phone, and text-based interactions.
Who We Serve
As of December 31, 2025, approximately 102 million members in the United States (“U.S.”) have access to one or more of our services. The customers of our Integrated Care segment primarily consist of employers, health plans, hospitals and health systems, insurance companies, and financial services companies (collectively “Clients”), as well as individuals who turn to us for care. We help Clients to expand access to high-quality healthcare, improve outcomes, and lower healthcare costs. Our solutions offer our Clients substantial savings opportunities and an attractive return on investment. As part of this segment, we sell to our Clients on behalf of their beneficiaries, including employees and health plan members. In our various sales channels, a range of third parties, including health plans, pharmacy benefits managers, financial institutions, brokers, agents, benefits consultants, and resellers, sell our solutions to various end markets around the world. Our BetterHelp segment primarily provides mental health services to individuals who self-pay or are covered by insurance.
How We Generate Revenue
For the year ended December 31, 2025, 83% of our consolidated revenue was derived from access fees. To a lesser extent, we generate revenue from visit fees as well as sales of hardware and other related services to hospital and health systems, which is reported in “other revenue”.
Integrated Care Segment
Our Integrated Care segment primarily generates revenue on a contractually recurring, access fee basis. Clients pay monthly access fees on a per-member-per-month (“PMPM”) model, a per-employee-per-month (“PEPM”) model, or on a per-participant-per-month (“PPPM”) model, based on the number of actively enrolled members each month.
Access fees are paid by our Clients on behalf of their employees, dependents, policy holders, card holders, beneficiaries, clinicians, or as is the case with certain of our subscribers, fees are paid by our members themselves.
We also generate revenue from Clients on a per-telehealth visit basis. These visit fees are typically paid by Clients and/or members.
Depending on the product, we may generate revenue from Clients through a combination of access fees and visit fees, while certain Clients may have access-fee only or visit fee only arrangements.
This segment also generates revenue from software licenses and implementation fees related to hospitals & health systems Clients who use our technology to deliver virtual care. These Clients also purchase and lease related hardware devices such as robots, carts, and tablets.
Some of our contracts place a portion of our fees at risk or provide an opportunity to earn performance-based payments for achieving specific targets for service-level metrics, cost savings, and/or clinical outcomes.
BetterHelp Segment
In our BetterHelp segment, we primarily generate revenue from paying users, including both those who pay directly out-of-pocket and those who utilize their insurance coverage, who most commonly pay a weekly or monthly fee to access our network of psychotherapists as well as to use our BetterSleep app designed to help people improve their sleep quality and overall well-being.
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The Teladoc Health Brand Portfolio
We deliver products and services to our customers through two flagship brands, Teladoc Health and BetterHelp. Teladoc Health is our primary brand for Integrated Care services, and was named one of America’s Most Trusted Brands by USA TODAY in 2025. BetterHelp, our primary brand for consumer-focused virtual mental health services, is the most recognized virtual mental health brand amongst U.S. consumers. The most common way for individuals to engage with our services is by using a mobile device, reflecting the growing consumer adoption of mobile technology and applications in managing their health.
Our Competitive Strengths
We believe that Teladoc Health is the global leader in virtual care because of our strong competitive advantages that address the most pressing challenges and trends in the delivery of healthcare around the world. We believe our history of innovation and unmatched scale provide us with significant first-mover advantages, and we continue to invest and expand our services and geographic footprint globally. As the first comprehensive virtual care company providing integrated care at scale, we have pioneered solutions and created what we believe are collectively the virtual care industry’s first and only offerings of their kind. Our competitive advantages allow us to deliver solutions that create and demonstrate positive clinical outcomes for our members and strong return on investment for our Clients.
Comprehensive Suite of Virtual Care Clinical Services
We believe that we are the first and only company to offer a comprehensive and integrated virtual care solution that both provides and enables care for a full spectrum of clinical conditions, including wellness and prevention, acute care, chronic conditions, and complex healthcare needs. We also provide a broad range of programs and services, including primary and specialty care, chronic care, mental health, expert medical services, as well as virtual care technology and hardware for care delivery.
Global Footprint Spanning Clients, Medical Operations and Members
We believe we have the only global virtual care footprint spanning a diverse set of Client channels, medical operations, and members. Combining our suite of international clinical capabilities with our technology and operational scale uniquely equips us to meet the needs of multinational organizations.
Unmatched Breadth of Solutions for Clients Across All Channels Served
We deliver a comprehensive set of solutions to a diverse Client population through a highly efficient and effective distribution network wherein we reach Clients and individuals in our Integrated Care segment through our Clients and channel partners. In our BetterHelp segment, we primarily market our solution directly to individuals.
We believe the breadth of our distribution strategy allows us to directly reach individuals and Clients of nearly every size and in nearly every market.
Comprehensive Engagement Model that Drives Utilization
We believe that our ability to drive behavior change on a global scale to deliver the highest utilization of virtual care services in the industry is a key competitive differentiator for Teladoc Health. We utilize a combination of our proprietary engagement science, personalized individual experiences, as well as our deep knowledge and expertise of various populations to increase the adoption of our virtual care services.
Our approach is a unique combination of the application of predictive analytics and modeling, our deep experience with all population demographics, and expertise in applying this knowledge to our member populations on a global scale. We target members using behavioral triggers, advanced predictive modeling, and demographic insights. This increases efficiency and the impact of our communications by reaching the right member, with the right personalized message, in the right micro moments of their day-to-day lives.
We believe that our health engagement capabilities are unique as a result of data, technology, behavioral science, and insights from millions of health interactions that enable us to uncover opportunities, personalize experiences, and
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optimize the performance of our programs. We use these capabilities, to drive awareness and utilization of Teladoc Health services through innovative communications and media strategies designed to reach people in their homes, on the go, and in their moments of need. Our models and communication strategies are continuously being evaluated, analyzed, and evolved to meet ever-shifting consumer behaviors.
Our mobile app is foundational for us as we have redefined virtual care delivery. Our unified mobile app seamlessly offers members access to all of our virtual health services within a single, modern, user-friendly digital experience, under the Teladoc Health brand to support member engagement, multi-program enrollment, and longitudinal relationships with members. In addition, our integrated smart devices, such as our cellular blood glucose monitor, provide additional touch points for engaging members with relevant AI driven nudges to drive behavior change and improved health outcomes.
Purpose-Built Virtual Care Technology, Proven to Perform at Scale
Our proprietary Teladoc Health Prism care delivery platform empowers our multidisciplinary care teams to deliver high-quality virtual care and coaching for our members. This highly scalable, integrated, application program interface (“API”) driven technology platform has been built over 20+ years and has served as a differentiator based on its ability to deliver a broad spectrum of high-quality virtual care services at unmatched scale. Purpose-built care portals within the platform empower Teladoc Health clinicians and health coaches with secure data and functionality that serve the unique requirements of each part of our multi-specialty practice, and support millions of high-quality patient interactions each year. The platform has been built to accommodate the seamless and quick introduction of new clinical and digital services and products.
Within our chronic condition management programs, we leverage and develop a unique combination of cloud-based technology that integrates smart connected devices with sophisticated data science to deliver personalized health insight. For example, we provide a unique and proprietary blood glucose meter to members enrolled in our diabetes program. This Class II, U.S. Food and Drug Administration (“FDA”)-cleared medical device includes a cellular antenna and color touchscreen to provide seamless integration with our platform. Our proprietary software relays the blood glucose measurements and user inputs to our cloud service. The software on the device can also be remotely upgraded through the cellular antenna to deliver usability improvements and program enhancements.
Our Solo platform, which is technology designed for the hospital and health system market, is a complete end-to-end telehealth solution, including patient intake, emergent and scheduled encounters, video conferencing capabilities, access to medical images, full application-specific clinical documentation tools – including interfaces to health system electronic medical records (“EMRs”), and complete operational and clinical reporting and analytics. The technology also supports industry-leading medical devices such as robots, carts, and tablets via a unique network architecture for maximum performance, reliability, and security. The solution supports the entire patient journey and the full range of telehealth use cases encountered by hospitals and health systems. Through our hybrid care models, we are able to combine this proprietary technology with our care delivery services to increase access to high quality care, including in rural and remote areas.
Our Inpatient Connected Care offering enables hospitals, health systems, and other clinical facilities to turn the television in every patient room into a virtual care end-point, utilizing a special purpose set-top box, camera, microphone, software, and networking. Through our technology and workflows, Clients can more efficiently administer admissions, discharge planning, patient education, nursing coverage, and virtual provider consultations, improving efficiency and quality of care, and helping address hospital staffing challenges.
Due to the sensitive nature of our members’ and Clients’ data, we have a heightened focus on data security and protection. We have a rigorous and comprehensive information security program managed by a dedicated team of security engineers and analysts. We have implemented telehealth industry standard processes, policies, and tools through all levels of our software development and network administration, including regularly scheduled vulnerability scanning and third-party penetration testing to reduce the risk of vulnerabilities in our system. In addition, our enterprise security program is periodically evaluated by expert third parties to ensure we are meeting or exceeding standards, best practices, and regulatory requirements. One example of such an independent third-party certification that we have achieved is the Health Information Trust Alliance (“HITRUST”).
Our platforms are compliant with numerous international data and privacy regulations, including the General Data Protection Regulation (“GDPR”), data-in-country rules, and other national requirements. This gives us the opportunity and
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ability to offer our products and services internationally, using the host countries’ languages and currencies, and addressing their specific local needs. We are also able to customize our platform for key partnerships globally.
APIs enable external connectivity and deep integration with a wide range of payors, EMRs, third-party applications, and other interfaces with employers, hospital systems, and health systems, which we believe uniquely positions us as a long-term partner meeting the unique needs of the rapidly changing healthcare industry. We intend to continue to expand our solutions across use cases, care settings, and clinical conditions.
Advanced Data and Analytics Powering Our Care Model
We have taken an innovative approach to data and analytics to support our care model. Supported by rich data, unique operations and logistics expertise, behavioral science and clinical insights, we deliver technology-enabled care at scale.
Teladoc Health Pulse is our intelligence engine that brings together unique, multidimensional data and advanced AI models to power predictive insights, guide targeted actions, and optimize experiences —accelerating innovation to drive healthier results. The platform ingests data from a wide range of sources: including clinical, lab and pharmacy claims data, connected devices, EMRs and health information exchanges. The Pulse platform will then enrich, transform and publish into applications for activation across our teams to create value for various stakeholders. Intelligence is surfaced to our clinicians in real time, providing them with sharper insights and ensuring that the right care is delivered at the right time.
We are further leveraging advanced AI and machine learning to launch innovative offerings, elevate care delivery and create scalable, personalized experiences.
Our machine learning algorithms enable us to match members in the U.S. with available state-licensed, board-certified clinicians anytime, anywhere we operate, with 90% of Teladoc Health’s virtual urgent care visits occurring within thirty minutes of a member’s virtual visit request.
Proprietary connected devices, such as our cellular blood glucose monitors, are able to deliver targeted communications to engage members, including AI-driven “nudges” based on the current context and medical history of the member. These communications are dynamically personalized and optimized using our algorithms, aimed at driving behavior change.
We are advancing AI-enabled risk evaluation and stratification capabilities that can identify rising and high risk members to support targeted clinical interventions aimed at improving clinical outcomes and better controlling costs, delivering greater value to our Clients.
Within our hospital and health systems offering, our Clarity monitoring solution includes AI-enabled software, hardware and services that empower care teams to monitor care settings across multiple use cases, and allow Clients to quickly direct the right resources.
Clinical Capabilities to Deliver High Quality Care and Clinical Outcomes
Our mission is to empower all people everywhere to live their healthiest lives by transforming the healthcare experience. We believe that virtual care is a catalyst for better health and that it improves healthcare access, quality, and outcomes for the populations we serve.
We deliver high-quality clinical care and advice in a virtual setting to our members through our global network of over 40,000 in-house and third-party medical professionals. These providers complete rigorous and specialized training on virtual care practices and protocols, and follow evidence-based clinical practice guidelines for delivering care in a virtual setting.
We are deeply committed to clinical quality. We apply evidence-based clinical guidelines, measure and monitor performance, prioritize patient safety with a dedicated expert team, apply continuous quality improvement methodologies, and research, learn, innovate and share insights to improve virtual care.
We apply analytics to the de-identified data points generated in our millions of visits with patients to continuously improve the clinical quality of our services. These data sets and insights are applied to enhance the ability of providers to
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deliver quality care through tools such as provider dashboards, as well as serving as a foundation for clinical innovation, and collaboration with other leading healthcare organizations that are focused on the advancement of virtual care delivery.
We established The Institute for Patient Safety and Quality of Virtual Care, the healthcare industry’s first Patient Safety Organization (“PSO”) dedicated to virtual care which is certified by the Agency for Healthcare Research and Quality (“AHRQ”). It conducts quality and safety initiatives with and on behalf of key healthcare stakeholders, including other PSOs, to improve the delivery of virtual care in the United States.
We remain well positioned to meet the unique needs, preferences, and circumstances of those whom we collectively serve around the world. We address traditional barriers to care, address social drivers of health, and design our solutions to serve the unique needs of patients and populations. Our global reach, breadth of services, and quality infrastructure enable us to continually assess and enhance our services in order to improve access, experiences, and outcomes at scale.
Our Growth Strategies
We aim to grow by executing across the following enterprise strategic priorities:
Enhance Our Integrated Care Offerings to Deliver Greater Value for Clients and Members
Our comprehensive solution leverages our clinical expertise, data, and scale, to address a complete spectrum of conditions, leveraging an integrated platform that combines smart technologies, AI and machine learning, rich data exchange, digital self-management tools, integrated remote patient monitoring devices, analytics, and scalability to streamline care and drive better outcomes.
As our Clients are looking for solutions to bend the cost curve, increase access, enhance member engagement, and improve the quality of care and overall health outcomes, we are investing to advance our capabilities and product set to drive greater value to Clients across these areas. And as we widen the aperture of what we can do, we expect to further expand our market opportunity.
Recent enhancements to our Prism care delivery platform advance our ability to deliver more value to Clients and members in each virtual care visit. Clinicians are provided with an integrated view of Teladoc Health programs available to each member, and through direct integrations, can seamlessly connect patients to eligible Teladoc Health programs. The platform also surfaces relevant clinical information in real time at the point of care, allowing Teladoc Health clinicians to identify care gaps and address high-value preventive care needs. Clinicians can access provider-to-provider specialist consults to enable them to more quickly confirm care plans and resolve health needs at the point of engagement. The platform also enables collaboration across other sites of care when appropriate, with an ability to coordinate precision referrals to high-quality community care providers. To further enhance the provider experience, AI-enabled transcription capabilities improve the quality and efficiency of clinical documentation.
We are pursuing ongoing innovation in our chronic care program, and have implemented enhancements to our connected devices and new program features to our cardiometabolic health program to improve population health, and prevent the progression of diabetes, hypertension and obesity. In addition, we have developed enhanced clinical intervention models for rising risk and high-risk populations. By applying AI-enabled risk evaluation and stratification capabilities, and leveraging our capabilities as a provider, we can identify and activate intervention opportunities to improve clinical outcomes and drive greater Client ROI and impact.
Our programs are supported by a comprehensive engagement model that utilizes a combination of proprietary engagement science and personalizes individual content, to increase the adoption of our services. This approach targets members using behavioral triggers, advanced predictive modeling, and demographic insights to deliver personalized messages at the right time. We believe there is significant opportunity within our existing membership base to increase engagement by continually driving awareness and usage of our solutions. We expect to refine and enhance our user experience over time, which is a critical driver of new and repeat engagement, and building longer term relationships with our members.
We intend to continue to invest in new expansions and innovation within our broader virtual care solution set, which we believe will drive greater value for our Clients and members, and in turn drive member growth, engagement and retention, while also allowing us to participate in the value that we create, including through outcomes-based arrangements.
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Leverage Our Scaled Mental Health Position to Increase Access and Serve the Needs of More People
Mental health is an enterprise-wide initiative for us. Our mental health business is benefiting from strong secular tailwinds, including a significant unmet need for mental health services, both in the U.S. and globally, greater recognition and awareness of the linkage of mental health and physical health, and wide adoption of the virtual modality for accessing mental healthcare.
Within our Integrated Care segment, we provide a full range of mental health services, including digital tools, coaching, therapy, psychiatry and medication management. We contract with health plans and employers, and over 60 million members have access to our mental health services through these plan sponsors. In addition to further penetrating our existing Client base, we see significant opportunity to increase member engagement and usage of our solutions by driving greater awareness and improving the patient experience. We are continuing to integrate mental health into all of our longitudinal care programs, which has proven to drive better health outcomes. We are also actively building new solutions to bring additional value to our Clients and members, such as our Wellbound employee assistance program offering.
Through our BetterHelp segment, we are also a leading provider of virtual mental health therapy in the consumer market, both in terms of the number of individuals enrolled and the number of licensed professionals who provide services on the platform.
Historically, almost half of individuals seeking care from BetterHelp have never sought therapy before, suggesting that the availability of high quality, convenient, consumer friendly virtual mental healthcare is expanding the mental healthcare market.
BetterHelp has consistently driven strong user satisfaction, evidenced by our consistently high net promoter scores. The scale of our data and provider network, powered by our data science capabilities, creates a competitive advantage for us in providing an optimal match of an individual with a provider, increasing the rate of success in therapy. Further, we have a demonstrated ability to drive clinical outcomes, including symptom reduction and remission.
BetterHelp’s strong brand awareness and reach drive significant traffic to the top of funnel. As we leverage diverse customer acquisition channels to drive traffic, this reduces dependence on any single source of member acquisition.
To provide further flexibility, we are enabling users to use insurance benefits coverage for mental health services through BetterHelp. Currently in the process of rolling out nationwide, we believe this will provide an opportunity to increase conversion rates of high intent users that come to BetterHelp, and can also extend user duration on the platform as compared to cash-pay users.
Build on Our Leading Global Presence
Countries around the world are also dealing with cost and access challenges, leading to a significant addressable market where we currently operate outside of the U.S. With a presence in five continents and strong local relevance, we see a significant opportunity to deepen our penetration in attractive markets where our infrastructure and local expertise is already in place. We will also evaluate potential opportunities to further expand our presence into new markets.
We have developed a highly effective and efficient global distribution network. Our international operations are headquartered in Barcelona, Spain with satellite locations in Canada, Europe, South America, Australia, and Asia. We are able to deliver localized care to our members in these regions. When medically necessary, our clinicians can help members navigate the local health systems to obtain the best healthcare for their situation.
Our international Client base is largely comprised of health and life insurance companies, financial services firms and multinational employers. We deliver integrated virtual care services to members and we look to increase engagement, expand breadth of services, and drive greater value and differentiation with these partners.
We also offer solutions to support the needs of government health systems, as well as public and private hospitals, in countries around the world. We are leveraging our virtual care delivery capabilities, as well as proprietary technology and devices from our hospital and health system business, to support virtual and hybrid care models that address diverse care needs in urban and rural communities.
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Our BetterHelp business also operates in non-U.S. markets and we plan to continue to expand into new countries. While BetterHelp mental health services have historically been offered in the English language, we have launched new localized offerings, with in-market therapists delivering care in the local language. We believe this will open up new opportunities for growth.
Commitment to Driving Operational Excellence
Our enterprise-wide focus on operational excellence enables us to consistently deliver for our Clients and members, and is critical to our ability to achieve our broader business and financial objectives.
We have taken actions to re-focus our operating structure, leading to a more customer centric approach. This has allowed us to deepen our market focus, align product development efforts, improve agility and enhance our overall execution. We intend to focus on additional operational improvements to deliver consistent and reliable performance, and to help ensure Client satisfaction and member engagement. Within our U.S. Integrated Care segment, we have ISO 9001 certification for key processes, as well as ISO 13485 and ISO 27001 certifications for our proprietary devices.
We are focused on our cost structure and have taken actions to streamline the organization, consolidate our real estate footprint, reduce third-party supplier spend, and drive productivity and efficiency gains through offshoring, automation, and process improvement. We have seen progress across several expense categories, including technology and development, general and administrative, and share-based compensation, and those remain areas of ongoing focus. These savings allow us to invest in the business to support strategic initiatives and future growth opportunities.
Sales and Marketing
We sell our Integrated Care services principally through our direct sales organization. Our direct sales team comprises enterprise focused sales professionals, who are supported by product experts, solution architects, lead generation professionals, and sales operations staff. We maintain relationships with key industry participants including benefit consultants, brokers, group purchasing organizations, health plans, as well as hospitals, health systems and other care delivery partners.
We generate Client leads, accelerate sales opportunities, and build brand awareness with marketing programs that target human resources and benefits leaders, technology and health professionals, senior business leaders, and healthcare channel partners. Our principal marketing programs include use of our website to provide information about our company and our solutions, as well as learning opportunities and participation in industry events, trade shows, and conferences.
We sell our BetterHelp services principally by marketing our mental health services directly to potential users. We also rely on relationships with a wide variety of third parties, including Internet search providers such as Google, social networking platforms such as Instagram and Facebook, digital advertising networks, co-registration partners, retailers, and distributors to source new users and to promote or distribute our services.
Research and Development
Our ability to compete depends, in large part, on our continuous commitment to rapidly introduce new products, services, technologies, features, and functionality. We have invested, and expect to continue to invest, significant resources in research and development and acquisitions to enhance our existing solutions and introduce innovative products and capabilities. Our multi-disciplinary team includes a product development team responsible for the design, development, testing, and certification of our solutions. It also includes software engineering teams responsible for solution development and deployment, and a data science team providing the insight that powers our differentiated health actions. We remain focused on developing new products and further enhancing the usability, functionality, reliability, performance, and flexibility of our solutions.
Competition
We view our competitors as those companies that currently (or in the future will) (i) provide virtual care services, such as the delivery of on-demand access to healthcare and chronic condition management and/or (ii) develop and market virtual care technology (devices, software, and systems). Competition focuses on, among other factors, experience in operation, customer service, quality of technology and know-how, ability to generate and demonstrate clinical and financial outcomes for clients, and reputation.
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Integrated Care Segment
Competitors in the virtual care market include MDLive (owned by Cigna), American Well Corporation, Included Health, and Accolade (owned by Transcarent), among other participants. In the chronic condition management market, competitors include Omada Health, Inc., Virta Health Corp., and other participants. In the market for technology solutions for hospitals and health systems, competitors include American Well Corporation as well as smaller technology providers. We also face competition from large health plans that in some cases have developed their own virtual care or chronic condition management tools, as well as large technology companies, such as Amazon, which have developed or acquired their own virtual care solutions.
BetterHelp Segment
In the virtual mental health and other wellness services markets, competitors include platforms such as Grow Therapy, Headway, Rula, Spring Health, and Talkspace.
THMG Association and Uplift Association
We provide business support and administrative services pursuant to a services agreement with our affiliated clinical entities, including Teladoc Health Medical Group, P.A., formerly Teladoc Physicians, P.A. (“THMG”) and Uplift Behavioral Health, P.C. (“Uplift PC”), which operate our Integrated Care and BetterHelp telehealth provider networks, respectively. We do not own THMG or Uplift PC, which are 100% physician-owned independent entities, or the professional corporations with which they contract. Instead, THMG and its affiliated professional corporations (collectively, the “THMG Association”) and Uplift PC and its affiliated corporations (collectively, the “Uplift Association”) are owned by physicians licensed in their respective jurisdictions. Under the services agreements with THMG and Uplift PC, we have agreed to serve, on an exclusive basis, as manager and administrator of the THMG Association’s and Uplift Association’s non-clinical functions and services related to the provision of the telehealth services by providers employed by or under contract with the THMG Association or Uplift Association, respectively. The non-clinical functions and services we provide under the services agreements primarily include member management services, such as maintaining network operations centers for our members to request a visit with the THMG Association’s and the Uplift Association’s providers, member billing and collection administration, and maintenance and storage of member medical records. THMG and Uplift PC have agreed to provide our members, through their providers, access to telehealth services and recommended treatment 24 hours per day, 365 days per year. The services agreements also require THMG and Uplift PC to maintain the state licensure and other credentialing requirements of their providers. The services agreements each have a 20-year term, with the THMG services agreement expiring in February 2040 and the Uplift PC services agreement expiring in June 2045, unless earlier terminated upon mutual agreement of the parties or unilaterally by a party following the commencement of bankruptcy or liquidation proceeds by the non-terminating party, a material breach of the services agreement by the non-terminating party, or a governmental or judicial termination order related to the services agreement. The THMG Association and the Uplift Association are considered variable interest entities and their financial results are included in Teladoc Health’s consolidated financial statements.
Seasonality
Our business has historically been subject to seasonality. In our Integrated Care segment, a concentration of our new Client contracts have an effective date of January 1 as a result of many Clients’ introduction of new services at the start of each calendar year. Therefore, while membership increases, utilization and enrollment rates are dampened until service delivery ramps up over the course of the year. In addition, as a result of seasonal cold and flu trends, we historically have experienced our highest level of visit and other fee revenue during the first and fourth quarters of each year.
Due to the higher cost of customer acquisition during the end-of-year holiday season, our BetterHelp segment has historically reduced marketing activity during the fourth quarter. As a result of this dynamic, we have typically experienced fewer new member additions and strong operating income performance in the fourth quarter. Conversely, as marketing activity typically resumes at the start of the year, we typically experience weak operating income performance during the first quarter as new customer acquisition and revenue growth lags marketing spend.
See “Risk Factors—Risks Related to Our Business and Industry—Our quarterly results may fluctuate significantly, which could adversely impact the value of our common stock.” included elsewhere in this Annual Report on Form 10-K.
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Regulatory Environment
Our operations are subject to comprehensive U.S. federal, state and local, and comparable multiple levels of international regulation in the jurisdictions in which we do business. The laws and rules governing our business and interpretations of those laws and rules continue to expand and become more restrictive each year and are subject to frequent change. Our ability to operate profitably will depend in part upon our ability, and that of our affiliated providers, to maintain all necessary licenses and to operate in compliance with applicable laws and rules. Those laws and rules continue to evolve, and we therefore devote significant resources to monitoring developments in healthcare and medical practice regulation. As the applicable laws and rules change, we are likely to make conforming modifications in our business processes from time to time. In many jurisdictions where we operate, neither our current nor our anticipated business model has been the subject of judicial or administrative interpretation. We cannot be assured that a review of our business by courts or regulatory authorities will not result in determinations that could adversely affect our operations or that the healthcare regulatory environment will not change in a way that restricts our operations.
For additional discussion of our regulatory environment, see “Risk Factors” included in Part I, Item 1A of this Annual Report on Form 10-K.
Telehealth Provider Licensing, Medical Practice, Certification and Related Laws and Guidelines
The practice of medicine, including the provision of mental health services, is subject to various federal, state, and local certification and licensing laws, regulations, and approvals, relating to, among other things, the adequacy of medical care, the medical and clinical licensure laws (including the provision of remote care and cross coverage practice), equipment, personnel, operating policies and procedures, and the prerequisites for the prescription of medication. The application of some of these laws to telehealth is unclear and subject to differing interpretation. Physicians, physician assistants, advanced practice registered nurses, nurses, and mental health professionals who provide professional medical or mental health services to a patient via telehealth must, in most instances, hold a valid license to practice medicine, nursing or to provide mental health treatment in the state in which the patient is located. In addition, the prescription of certain pharmaceuticals, including but not limited to controlled substances and weight-loss drugs, may require additional scrutiny or may be restricted in certain states. We have established systems for ensuring that our affiliated providers are appropriately licensed under applicable state law and that their provision of telehealth to our members occurs in each instance in compliance with applicable rules governing telehealth. Failure to comply with these laws and regulations could result in our services being found to be non-reimbursable or prior payments being subject to recoupments and can give rise to civil or criminal penalties.
U.S. Corporate Practice of Medicine; Fee Splitting
We contract with physician-owned professional associations and professional corporations to deliver our U.S. telehealth services to their patients. We enter into business support services contracts with these physician-owned professional associations and professional corporations pursuant to which we provide them with non-clinical functions and services related to the provision of the telehealth services by the providers, such as maintaining network operations centers for our members to request a visit with the providers, member billing and collection administration, and maintenance and storage of member medical records, and the professional associations and professional corporations pay us for those services out of the fees they collect from patients and third-party payors. These contractual relationships are subject to various state laws that prohibit fee splitting or the practice of medicine by lay entities or persons and are intended to prevent unlicensed persons from interfering with or influencing the physician’s professional judgment. In addition, various state laws also generally prohibit the sharing of professional services income with nonprofessional or business interests. Activities other than those directly related to the delivery of healthcare may be considered an element of the practice of medicine in many states. Under the corporate practice of medicine restrictions of certain states, decisions and activities such as clinician scheduling, contracting, setting rates, and the hiring and management of non-clinical personnel may implicate the restrictions on the corporate practice of medicine. In the past 12 months, Oregon and California have passed laws codifying and strengthening their existing corporate practice of medicine prohibitions in ways which may require us to adjust contractual arrangements with the THMG Association and the Uplift Association.We are aware of a number of states, including Washington, Maine, Connecticut, and North Carolina which are considering similar bills in 2026.
State corporate practice of medicine and fee splitting laws vary from state to state and are not always consistent among states. In addition, these requirements are subject to broad powers of interpretation and enforcement by state regulators. Some of these requirements may apply to us even if we do not have a physical presence in the state, based solely on our engagement of a provider licensed in the state or the provision of telehealth to a resident of the state.
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Regulatory authorities or other parties, including the THMG Association's and the Uplift Association’s providers, may assert that, despite our contractual arrangements with the THMG Association and the Uplift Association, we are directly engaged in the corporate practice of medicine or that our contractual arrangements with affiliated physician groups constitute unlawful fee splitting. In this event, failure to comply could lead to adverse judicial or administrative action against us and/or the THMG Association's and the Uplift Association’s providers, civil or criminal penalties, receipt of cease-and-desist orders from state regulators, invalidation of certain contracts or restrictive covenants, demands to repay reimbursements from third-party payors, loss of provider licenses, the need to make changes to the terms of engagement of the THMG Association's and the Uplift Association’s providers that interfere with our business and other materially adverse consequences. We have observed a general increase in corporate practice of medicine enforcement across the healthcare industry in 2025 which we expect to continue in 2026.
U.S. Federal and State Fraud, Waste, and Abuse Laws
Federal Stark Law
We are subject to the federal self-referral prohibitions, commonly known as the Stark Law. Where applicable, this law prohibits a physician from referring Medicare patients to an entity providing “designated health services” for the provision of such “designated health services” if the physician or a member of such physician’s immediate family has a “financial relationship” with the entity, unless an exception applies. The penalties for violating the Stark Law include the denial of payment for services ordered in violation of the statute, mandatory refunds of any sums paid for such services, civil penalties of up to $30,868 for each violation, and twice the dollar value of each such service and possible exclusion from future participation in the federally funded healthcare programs. A person who engages in a scheme to circumvent the Stark Law’s prohibitions may be fined up to $205,799 for each applicable arrangement or scheme. The Stark Law is a strict liability statute, which means proof of specific intent to violate the law is not required. In addition, the government and some courts have taken the position that claims presented in violation of the various statutes, including the Stark Law can be considered a violation of the federal False Claims Act (described below) based on the contention that a provider impliedly certifies compliance with all applicable laws, regulations and other rules when submitting claims for reimbursement. A determination of liability under the Stark Law could have a material adverse effect on our business, financial condition, and results of operations.
Federal Anti-Kickback Statute
We are also subject to the federal Anti-Kickback Statute. The Anti-Kickback Statute is broadly worded and prohibits the knowing and willful offer, payment, solicitation or receipt of any form of remuneration in return for, or to induce, (i) the referral of a person covered by Medicare, Medicaid or other governmental programs, (ii) the furnishing or arranging for the furnishing of items or services reimbursable under Medicare, Medicaid or other governmental programs, or (iii) the purchasing, leasing, or ordering or arranging or recommending purchasing, leasing or ordering of any item or service reimbursable under Medicare, Medicaid or other governmental programs. Certain federal courts have held that the Anti-Kickback Statute can be violated if “one purpose” of a payment is to induce referrals. In addition, a person or entity does not need to have actual knowledge of this statute or specific intent to violate it to have committed a violation, making it easier for the government to prove that a defendant had the requisite state of mind or “scienter” required for a violation. Moreover, the government may assert that a claim including items or services resulting from a violation of the Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act, as discussed below. Violations of the Anti-Kickback Statute can result in exclusion from Medicare, Medicaid or other governmental programs as well as civil and criminal penalties, including civil monetary penalties of up to $127,973, and criminal fines of $100,000 per violation, and three times the amount of the unlawful remuneration, and imprisonment of up to ten years. Imposition of any of these remedies could have a material adverse effect on our business, financial condition, and results of operations. In addition to a few statutory exceptions, the U.S. Department of Health and Human Services (“HHS”) Office of Inspector General (“OIG”) has published safe-harbor regulations that outline categories of activities that are deemed protected from prosecution under the Anti-Kickback Statute provided all applicable criteria are met. The failure of a financial relationship to meet all of the applicable safe harbor criteria does not necessarily mean that the particular arrangement violates the Anti-Kickback Statute. However, conduct and business arrangements that do not fully satisfy each applicable safe harbor may result in increased scrutiny by government enforcement authorities, such as the OIG.
False Claims Act
Both federal and state government agencies have continued civil and criminal enforcement efforts as part of numerous ongoing investigations of healthcare companies and their executives and managers. Although there are a number
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of civil and criminal statutes that can be applied to healthcare providers, a significant number of these investigations involve the federal False Claims Act. These investigations can be initiated not only by the government but also by a private party asserting direct knowledge of fraud. These “qui tam” whistleblower lawsuits may be initiated against any person or entity alleging such person or entity has knowingly or recklessly presented, or caused to be presented, a false or fraudulent request for payment from the federal government or has made a false statement or used a false record to get a claim approved. In addition, the improper retention of an overpayment for 60 days or more is also a basis for a False Claim Act action, even if the claim was originally submitted appropriately. Penalties for False Claims Act violations include fines ranging from $14,308 to $28,619 for each false claim, plus up to three times the amount of damages sustained by the federal government. A False Claims Act violation may provide the basis for exclusion from the federally funded healthcare programs. In addition, some states have adopted similar fraud, whistleblower, and false claims provisions.
State and Foreign Fraud, Waste, and Abuse Laws
Several states and foreign jurisdictions in which we operate have also adopted or may adopt similar fraud, waste, and abuse laws as described above. The scope of these laws and the interpretations of them vary by jurisdiction and are enforced by local courts and regulatory authorities, each with broad discretion. Some state fraud, waste, and abuse laws apply to items or services reimbursed by any payor, including patients (cash-pay) and commercial insurers, not just those reimbursed by a federally funded healthcare program. A determination of liability under such state fraud, waste, and abuse laws could result in fines and penalties and restrictions on our ability to operate in these jurisdictions.
Medicare Billing Laws
The Centers for Medicare and Medicaid (“CMS”) prior to the Covid-19 pandemic and resulting public health emergency had historically prohibited providers from billing for telehealth services when the patient’s site of care (the “originating site”) was the patient’s home, absent rare exception. During the Covid-19 pandemic and resulting public health emergency, CMS relaxed this rule and allowed for both (1) mental and behavioral health services and (2) non-mental and behavioral health services to be billed by providers when the patient’s originating site was in their home. In 2023, a patient’s home was permanently approved as an originating site for mental and behavioral health services. However, as of December 12, 2025, no equivalent approval has been made for non-mental and behavioral health services. If CMS elects to revert to a more restrictive regime for eligible originating sites, our ability to provide certain services may be restricted.
Other Healthcare Laws
The federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”) and their implementing regulations, (collectively, “HIPAA”), established several separate criminal penalties for making false or fraudulent claims to insurance companies and other non-governmental payors of healthcare services. Under HIPAA, these two additional federal crimes are: “Healthcare Fraud” and “False Statements Relating to Healthcare Matters.” The Healthcare Fraud statute prohibits knowingly and recklessly executing a scheme or artifice to defraud any healthcare benefit program, including private payors. A violation of this statute is a felony and may result in fines, imprisonment or exclusion from government sponsored programs. The False Statements Relating to Healthcare Matters statute prohibits knowingly and willfully falsifying, concealing, or covering up a material fact by any trick, scheme or device, or making any materially false, fictitious, or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items, or services. A violation of this statute is a felony and may result in fines or imprisonment. This statute could be used by the government to assert criminal liability if a healthcare provider knowingly fails to refund an overpayment. These provisions are intended to punish some of the same conduct in the submission of claims to private payors as the federal False Claims Act covers in connection with governmental health programs.
In addition, the Civil Monetary Penalties Law imposes civil administrative sanctions for, among other violations, inappropriate billing of services to federally funded healthcare programs and employing or contracting with individuals or entities who are excluded from participation in federally funded healthcare programs. Moreover, a person who offers or transfers to a Medicare or Medicaid beneficiary any remuneration, including waivers of copayments and deductible amounts (or any part thereof), that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of Medicare or Medicaid payable items or services may be liable for civil monetary penalties for each wrongful act. Moreover, in certain cases, providers who routinely waive copayments and deductibles for Medicare and Medicaid beneficiaries can also be held liable under the Anti-Kickback Statute and civil False Claims Act, which can impose additional penalties associated with the wrongful act. One of the statutory exceptions to the
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prohibition is non-routine, unadvertised waivers of copayments or deductible amounts based on individualized determinations of financial need or exhaustion of reasonable collection efforts. The OIG emphasizes, however, that this exception should only be used occasionally to address special financial needs of a particular patient. Although this prohibition applies only to federal healthcare program beneficiaries, the routine waivers of copayments and deductibles offered to patients covered by commercial payers may implicate applicable state laws related to, among other things, unlawful schemes to defraud, excessive fees for services, tortious interference with patient contracts, and statutory or common law fraud.
Health Information Privacy and Security Laws
There are numerous U.S. federal and state laws and regulations related to the privacy and security of personally identifiable information (“PII”), including health information. In particular, HIPAA establishes privacy and security standards that limit the use and disclosure of protected health information (“PHI”) and requires the implementation of administrative, physical, and technical safeguards to ensure the confidentiality, integrity and availability of individually identifiable health information in electronic form. In addition, numerous states, including California, Colorado, Washington, Nevada, and Connecticut amongst others, have passed consumer privacy laws intended to supplement the protections provided by HIPAA, Teladoc Health, the THMG Association and the Uplift Association and their respective providers, our health plan Clients, and our employee welfare benefit plan Clients are all regulated as covered entities under HIPAA, and are required to comply both with HIPAA and applicable state privacy laws. HIPAA’s requirements are also directly applicable to the independent contractors, agents, and other “business associates” of covered entities that create, receive, maintain, or transmit PHI in connection with providing services to covered entities. We are also at times a business associate of other covered entities when we are working on behalf of our affiliated medical groups.
Violations of HIPAA may result in significant civil and criminal penalties, and a single breach incident can result in violations of multiple standards. Teladoc Health, on our own and as part of our management responsibilities to the THMG Association and the Uplift Association, is required to comply with HIPAA’s breach notification rule. Under the breach notification rule, covered entities must notify affected individuals without unreasonable delay in the case of a breach of unsecured PHI, which has more than a low probability of compromising the privacy, security, or integrity of the PHI. In addition, notification must be provided to the HHS and the local media in cases where a breach affects more than 500 individuals. Breaches affecting fewer than 500 individuals must be reported to HHS on an annual basis. The regulations also require business associates of covered entities to notify the covered entity of breaches by the business associate. Notification must also be made in certain circumstances to affected individuals, federal authorities, and others.
State attorneys general also have the right to prosecute HIPAA violations committed against residents of their states. While HIPAA does not create a private right of action that would allow individuals to sue in civil court for a HIPAA violation, its standards have been used as the basis for the duty of care in state civil suits, such as those for negligence or recklessness in misusing personal information. In addition, HIPAA mandates that HHS conduct periodic compliance audits of HIPAA covered entities and their business associates for compliance. HIPAA also tasks HHS with establishing a methodology whereby harmed individuals who were the victims of breaches of unsecured PHI may receive a percentage of the Civil Monetary Penalty fine paid by the violator. We expect federal and state HIPAA privacy and security enforcement efforts to continue to increase.
The privacy and security of personal information stored, maintained, received or transmitted electronically is an enforcement priority in the U.S. and internationally. While we strive to comply with all applicable privacy and security laws and regulations, as well as our own posted privacy policies, legal standards for privacy, including but not limited to “unfairness” and “deception,” as enforced by the Federal Trade Commission (“FTC”) and state attorneys general, any failure or perceived failure to comply with such requirements may result in proceedings or actions against us by government entities or private parties, or could cause us to lose Clients or members, any of which could have a material adverse effect on our business. For example, we have been subject to litigation alleging improper disclosure and/or use of PII and PHI. Recently, there has been an increase in public awareness of privacy issues in the wake of revelations about the activities of various government agencies and in the number of private privacy-related lawsuits filed against companies. Any allegations about our practices with regard to the collection, use, disclosure, or security of personal information or other privacy-related matters, even if unfounded and even if we are in compliance with applicable laws, could damage our reputation and harm our business.
Many states in which we operate and in which our members reside also have laws that protect the privacy and security of personal information, including health information. These laws may be similar to, or even more protective, and may apply more broadly than HIPAA and other federal privacy laws, or they apply to personal information that HIPAA
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does not regulate. For example, the laws of the State of California protect the personal information of California consumers regardless of the location of the business holding the information and provide additional rights for California consumers. Numerous other states have enacted, or are currently reviewing, legislation that is similar to the laws of California. Where state laws are more protective than HIPAA or apply more broadly than HIPAA, or apply to different personal information than HIPAA, we must comply with the state laws we are subject to in addition to HIPAA. In certain cases, it may be necessary to modify our planned operations and procedures to comply with these more stringent state laws. Not only may some of these state laws impose fines and penalties upon violators, but also some, unlike HIPAA, may afford private rights of action to individuals who believe their personal information has been misused. In addition, state laws are changing rapidly, and there is potential for a new federal privacy law or federal breach notification law, to which we may be subject.
In addition to HIPAA and state information privacy laws, we may be subject to other state and federal laws, including laws that prohibit unfair and deceptive practices which may include deceptive statements about privacy and security policies and practices.
In recent years, there have been a number of well publicized data breaches involving the improper use and disclosure of PII and PHI. Many states have responded to these incidents by enacting laws requiring holders of personal information to maintain safeguards and to take certain actions in response to a data breach, such as providing prompt notification of the breach to affected individuals and state officials.
We are also subject to laws and regulations in non-U.S. countries covering data privacy and the protection of health-related and other personal information. European Union (“EU”) member states and other jurisdictions have adopted data protection laws and regulations, which impose significant compliance obligations. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure, processing, and security of personal information that identifies or may be used to identify an individual, such as names, contact information, and sensitive personal data such as health data. These laws and regulations are subject to frequent revisions and differing interpretations and have generally become more stringent over time.
The GDPR imposes many requirements for controllers and processors of personal data, including, for example, higher standards for obtaining consent from individuals to process their personal data, more robust disclosures to individuals, a strengthened individual data rights regime, shortened timelines for data breach notifications, limitations on retention and secondary use of information, increased requirements pertaining to health data and pseudonymized (i.e., key-coded) data, and additional obligations when we contract with third-party processors in connection with the processing of personal data. The GDPR allows EU member states to make additional laws and regulations further limiting the processing of genetic, biometric, or health data. Failure to comply with the requirements of GDPR and the applicable national data protection laws of the EU member states may result in fines of up to €20,000,000 or up to 4% of the total worldwide annual revenue from the preceding financial year, whichever is higher, and other administrative penalties.
We are also subject to EU laws on data export, as we may transfer personal data from the EU to other jurisdictions, in particular the U.S. These obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other requirements or our practices. In addition, these rules are constantly under scrutiny. For example, following a decision of the Court of Justice of the EU in October 2015 (commonly referred to as the Schrems I), transferring personal data to U.S. companies that had certified as members of the U.S. Safe Harbor Scheme was declared invalid. In July 2016, the European Commission adopted the U.S.-EU Privacy Shield Framework which replaced the Safe Harbor Scheme. However, the U.S.-EU Privacy Shield Framework was also declared invalid by the Court of Justice of the EU in July 2020 (commonly referred to as Schrems II). While Schrems II affirmed the validity of corporate binding rules and standard contractual clauses as legal bases to transfer EU data to the U.S., it also put into place stricter requirements for transfers based on standard contractual clauses. In July 2023, to replace the U.S.-EU Privacy Shield, the EU and U.S. developed and entered into force the EU-U.S. Data Privacy Framework, the UK Extension for the EU-U.S. Data Privacy Framework, and the Swiss-U.S. Data Privacy Framework (collectively “Data Privacy Frameworks”). The Data Privacy Frameworks allow U.S. entities to self-certify compliance after which data transfers to the U.S. entity are permitted. Some countries outside the EU have adopted laws that are similar to the EU GDPR.
International Regulation
We expect to continue to expand our operations in foreign countries through both organic growth and acquisitions. Our international operations are subject to different, and sometimes more stringent, legal and regulatory requirements, which vary widely by jurisdiction, including anti-corruption laws; economic sanctions laws; various privacy, insurance, tax, tariff and trade laws and regulations; corporate governance, privacy, data protection (including GDPR), data mining,
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data transfer, labor and employment, intellectual property, consumer protection, and investment laws and regulations; discriminatory licensing procedures; required localization of records and funds; and limitations on dividends and repatriation of capital. In addition, the expansion of our operations into foreign countries increases our exposure to the anti-bribery, anti-corruption, and anti-money laundering provisions of U.S. law, including the U.S. Foreign Corrupt Practices Act of 1977 (the “FCPA”), and corresponding foreign laws, including the U.K. Bribery Act 2010 (the “U.K. Bribery Act”).
The FCPA prohibits offering, promising, or authorizing others to give anything of value to a foreign government official to obtain or retain business or otherwise secure a business advantage. We also are subject to applicable anti-corruption laws of the jurisdictions in which we operate. Violations of the FCPA and other anti-corruption laws may result in severe criminal and civil sanctions as well as other penalties, and the SEC and the DOJ have increased their enforcement activities with respect to the FCPA. The U.K. Bribery Act is an anti-corruption law that is broader in scope than the FCPA and applies to all companies with a nexus to the United Kingdom. Disclosures of FCPA violations may be shared with the UK authorities, thus potentially exposing companies to liability and potential penalties in multiple jurisdictions. We have internal control policies and procedures and conduct training and compliance programs for our employees to deter prohibited practices. However, if our employees or agents fail to comply with applicable laws governing our international operations, we may face investigations, prosecutions, and other legal proceedings and actions which could result in civil penalties, administrative remedies, criminal sanctions and reputational harm.
We also are subject to regulation by the U.S. Treasury’s Office of Foreign Assets Control (“OFAC”). OFAC administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy, or economy of the U.S. In addition, we may be subject to similar regulations in the non-U.S. jurisdictions in which we operate.
Human Capital Management
At Teladoc Health, we live our values as a company through policies, governance, and deliberate investment in operating responsibly and sustainably.
To fulfill our mission, we aim to create a company and culture that attracts and retains talented individuals who want to build their careers, develop their capabilities, and grow professionally. We design a range of programs and initiatives to nurture talent, encourage curiosity and innovation, increase engagement and connectiveness, and mentor leaders for future roles. We build a range of total reward programs that support employees through fair, equitable, and competitive pay and benefits, and we invest in technology, tools, and resources to transform and increase the quality of work.
As of December 31, 2025, we employed approximately 5,600 people, comprised of approximately 83% full-time employees and 17% part-time employees. In addition, we augment our employee base with contractors to meet resource needs and to increase flexibility in managing our expense base. Of the total employee population as of December 31, 2025, approximately 58% of our employees worked in the U.S. and 42% worked in our international locations. We contract with a network of providers operating through the THMG Association, the Uplift Association, and the BetterHelp platform. In order to ensure predictable availability of providers and a consistent member experience, we expect that the THMG Association and the Uplift Association will hire more employees and rely less on contractors.
We continue to look for ways to expand a range of programs and initiatives that are focused to attract, develop and retain our workforce. We have enhanced our talent efforts in recent years to include:
Supporting Employees through Our Products and Services. We offer our employees full access to our broad portfolio of integrated health solutions, including free mental health resources, digital health devices, and on-demand access to the employee assistance program for employees and their dependents.
Talent Development. We prioritize and invest in creating opportunities to help employees grow and build their careers, through training and development programs. These include online and self-paced courses, live in-class education, professional speaker series, peer-to-peer learning, certification programs, and on-the-job training, as well as executive talent and succession planning paired with an individualized development approach.
Expanding the Voice of the Employee. We strive to build a culture of inclusion which includes regularly soliciting employee feedback through our pulse engagement surveys.
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Focusing on Recruiting and Talent Acquisition. We strengthened talent acquisition in 2025 by stabilizing provider recruiting, segmenting recruiters in business units, activating Employee Value Proposition across channels, enriching our career site, launching targeted campaigns, expanding internships, and scaling global hiring through strategic vendor partnerships, while maintaining practices that broaden access to talent.
Community Impact. We embrace the opportunity and the responsibility to have a meaningful impact in our global community, using our voice and our resources to help expand equitable access to care, and create a better future for families and our neighbors. We continue to work toward further mobilizing our workforce to give back to the communities where we live and work through new volunteer and social impact programs.
Intellectual Property
We own and use trademarks and service marks on or in connection with our services, including both unregistered common law marks and issued trademark registrations in the U.S. and around the world. We also have trademark applications pending to register marks in the U.S. and internationally. We own issued patents in the U.S. and other jurisdictions around the world and pending patent applications. We assert, license, and otherwise use these patent rights to increase the cost to our competitors of using our intellectual property in their product offerings. In addition, we rely on certain intellectual property rights that we license from third parties and on other forms of intellectual property rights and measures, including trade secrets, know-how, and other unpatented proprietary processes and nondisclosure agreements, to maintain and protect proprietary aspects of our products and technologies. We require our employees, consultants, and certain of our contractors to execute confidentiality and proprietary rights agreements in connection with their employment or consulting relationships with us. We also require our employees and consultants to disclose and assign to us all inventions conceived during the term of their employment or engagement while using our property or which relate to our business.
Additional Information
Our website address is teladochealth.com. We make available free of charge at the Investors section of this website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we file or furnish such materials with the SEC. The information on our website is not, and will not be deemed to be, a part of this Annual Report on Form 10-K or incorporated into any of our other filings with the SEC, except where we expressly incorporated such information.
Item 1A. Risk Factors
Our business, financial and operating results are subject to many significant risks and uncertainties, as described below. The following is a summary of the material risks known to us. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business, financial condition, results of operations or prospects, and could cause the trading price of our common stock to decline.
Risk Factors Summary
Our business is subject to a number of risks and uncertainties, including those risks discussed at-length below. These risks include, among others, the following:
•our history of losses and accumulated deficit and the risk that we may not achieve profitability;
•the potential for future non-cash charges for the impairment of goodwill and other intangible assets;
•risk of the loss of any of our significant Clients or partners, or the loss of a significant number of members or BetterHelp paying users;
•our ability to compete successfully in competitive markets, including implementing effective solutions that meet the expectations of our Clients and members;
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•failures of our or our vendors' cybersecurity measures that expose the confidential information of us, our Clients or members;
•our ability to operate in the heavily regulated healthcare industry, and comply with regulations concerning data privacy, including PII and PHI;
•our ability to recruit, retain and develop our workforce, and in particular software engineers, as well as a network of qualified providers;
•our ability to obtain additional capital through debt or equity financings on commercially reasonable terms or at all;
•ongoing legal challenges to, or new actions against, our business model, or the failure of the virtual care market to continue to develop;
•risks associated with a decrease in the number of individuals offered benefits by our Clients or the number of products and services to which they subscribe;
•rapid technological change in the virtual care market or the failure to innovate and develop new applications and services that are adopted;
•our expectations and management of potential growth, including our ability to introduce new products, markets and any change in product or revenue mix that impacts our profitability;
•our ability to establish and maintain strategic relationships with third parties;
•our dependence on a limited number of third-party suppliers for timely access to materials, and the risk of supply chain disruptions, imposition or expansion of tariffs or further cost inflation;
•our level of indebtedness and our ability to fund debt obligations and comply with covenants in our debt instruments;
•our dependence on our relationships with affiliated professional entities;
•risks specifically related to our ability to operate in competitive international markets and comply with complex non-U.S. legal requirements;
•current and potential future legal proceedings against us and that the insurance we maintain may not fully cover all potential exposures; and
•our ability to integrate acquired businesses and achieve fully the strategic and financial objectives related thereto, and their impact on our financial condition and results of operations.
Risks Related to Our Financial Position
We have a history of cumulative losses, which we expect to continue, and we may never achieve or sustain profitability.
We have incurred significant losses in each period since our inception. We incurred net losses of $200.3 million and $1,001.2 million for the years ended December 31, 2025 and 2024, respectively. The net loss for the year ended December 31, 2025 included non-cash goodwill impairment charges totaling $71.8 million as discussed further below. As of December 31, 2025, we had an accumulated deficit of $16,430.2 million. These losses and accumulated deficit reflect the non-cash impairment charges for our goodwill and the investments we have made to expand our business and scope of services. We cannot assure you that we will achieve profitability in the future or that, if we do become profitable, we will be able to sustain or increase profitability. Our prior losses, combined with our expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital. As a result of these factors and cash
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flow needs, we may need to raise additional capital through debt or equity financings to fund our operations, and such capital may not be available on reasonable terms, if at all.
A significant portion of our revenue comes from a limited number of Clients, the loss of which could have a material adverse effect on our business, financial condition and results of operations.
Historically, we have relied on a limited number of Clients for a substantial portion of our total revenue. For the years ended December 31, 2025 and 2024, our top five Clients by revenue accounted for 19% and 18% of our total revenue, respectively, and 31% of our Integrated Care segment revenue for both years ended December 31, 2025 and 2024. In addition, certain health plans that have historically promoted our services to our employer Clients have developed, and may in the future continue to develop, solutions that replicate our services or offer competitive services at discounted prices to our current or prospective Clients, which has resulted in a loss of Clients, and may result in the loss of additional Clients. The further loss of any of our key Clients, or a failure of some of them to renew or expand their relationships with us, could have a significant impact on the growth rate of our revenue, profitability, and our reputation. In addition, mergers and acquisitions involving our Clients could lead to cancellation or non-renewal of our contracts with those Clients or by the acquiring or combining companies, thereby reducing the number of our existing and potential Clients and members.
We may incur additional non-cash impairment charges for our goodwill or incur non-cash impairment charges for our other intangible assets which would negatively impact our operating results.
Goodwill represents the excess of the total purchase consideration over the fair value of the identifiable assets acquired and liabilities assumed in a business combination. Goodwill is not amortized but is tested for impairment at the reporting unit level annually on October 1 or more frequently if events or changes in circumstances indicate that it is more likely than not to be impaired. These events include: (i) severe adverse industry or economic trends; (ii) significant company-specific actions, including exiting an activity in conjunction with restructuring of operations; (iii) current, historical or projected deterioration of our financial performance; or (iv) a sustained decrease in our market capitalization, as indicated by our publicly quoted share price.
Concurrent with the closing of our acquisitions of Telecare Australia Pty Ltd (“Telecare”) on August 8, 2025 and Catapult Health, LLC (“Catapult Health”) on February 28, 2025, we performed a goodwill impairment test on our Integrated Care reporting unit and determined that the carrying value of the reporting unit continued to exceed its fair value. As a result, we recognized an immediate impairment of $12.6 million and $59.1 million of goodwill associated with the Telecare and Catapult Health acquisitions in the three months ended September 30, 2025 and March 31, 2025, respectively, reflecting a total of $71.8 million in 2025.
On October 1, 2025, we performed our annual goodwill impairment test and determined that the BetterHelp reporting unit’s fair value exceeded its carrying value and the Integrated Care reporting unit’s fair value approximated its carrying value. In the event there are adverse changes in our projected cash flows and/or changes in key assumptions, including but not limited to an increase in the discount rate, lower revenue growth, lower margin, and/or a lower terminal growth rate, we may be required to record additional non-cash impairment charges to our goodwill or other intangibles and/or long-lived assets that we hold or acquire in the future. If the carrying value of the Integrated Care reporting unit exceeds its fair value as of the date of any future business combinations, the future business combinations that would be part of the Integrated Care reporting unit could result in further goodwill impairment charges. Such non-cash charges could have a material adverse effect on our consolidated statements of operations and balance sheets in the reporting period of the charge.
In the period following December 31, 2025, there has been a decline in the Company’s market capitalization, based upon the Company’s publicly quoted share price, below the Company’s carrying or book value. If this decline in the share price is sustained, it could require further testing of our goodwill in our next reporting period, which may result in an impairment. Absent changes to our projected cash flows, we would reassess the discount rate to reflect the market’s perception of risks to achieving our projected cash flows and other economic factors. Those factors alone, or in combination with other factors, could cause our carrying value to exceed the fair value, resulting in impairment.
For additional information, see Note 7. “Goodwill” to the consolidated financial statements.
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Risks Related to Our Business and Industry
The virtual care market is volatile, and if it does not continue to develop, if it develops more slowly than we expect, if it encounters negative publicity, or if our solutions do not drive member engagement, the growth of our business will be harmed.
The virtual care market continues to develop, and it is uncertain whether it will continue to achieve and sustain high levels of demand, consumer acceptance, and market adoption. The COVID-19 pandemic increased utilization of virtual care services, but it is uncertain whether such increase in demand will continue in the long-term. Our success will depend to a substantial extent on the willingness of our members to use, and to increase the frequency and extent of their utilization of, our solutions, as well as on our ability to continue to demonstrate the value of virtual care to employers, health plans, government agencies, and other purchasers of healthcare for beneficiaries. Negative publicity concerning our solutions, or the virtual care market as a whole, could limit market acceptance of our solutions. If our Clients or members do not perceive the benefits of our solutions, or if our solutions do not drive member engagement, then our market may not continue to develop, or it may develop more slowly than we expect. Similarly, individual and healthcare industry concerns or negative publicity regarding patient confidentiality and privacy in the context of virtual care could limit market acceptance of our healthcare services. If any of these events occurs, it could have a material adverse effect on our business, financial condition, and results of operations.
The impact of potential changes in the healthcare industry and in healthcare spending is currently unknown, but may adversely affect our business, financial condition, and results of operations.
Our revenue is dependent on the healthcare industry and could be affected by changes in healthcare spending and policy. The healthcare industry is subject to changing political, regulatory, and other influences. The Patient Protection and Affordable Care Act (“PPACA”) made major changes in how healthcare is delivered and reimbursed, and increased access to health insurance benefits to the uninsured and underinsured population of the U.S. PPACA, among other things, increased the number of individuals with Medicaid and private insurance coverage, implemented reimbursement policies that tie payment to quality, facilitated the creation of accountable care organizations that may use capitation and other alternative payment methodologies, strengthened enforcement of fraud, waste, and abuse laws, and encouraged the use of information technology.
Other legislative changes have been proposed and adopted since the PPACA was enacted. These changes include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year pursuant to the Budget Control Act of 2011 and subsequent laws, which began in 2013 and due to subsequent legislative amendments, will stay in effect through 2030. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers, and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. New laws may result in additional reductions in Medicare and other healthcare funding, which may materially adversely affect Client and member demand and affordability for our solutions and, accordingly, our business, financial condition, and results of operations. Additional changes that may affect our business include the expansion of new programs such as Medicare payment for performance initiatives for physicians under the Medicare Access and CHIP Reauthorization Act of 2015, which first affected physician payment in 2019. At this time, it is unclear how the introduction of the Medicare quality payment program will impact overall physician reimbursement.
Such changes in the regulatory environment may also result in changes to our payor mix that may affect our operations and revenue. Further, the PPACA may adversely affect payors by increasing medical costs generally, which could have an effect on the industry and potentially impact our business and revenue as payors seek to offset these increases by reducing costs in other areas. Certain of these provisions are still being implemented and the full impact of these changes on us cannot be determined at this time.
We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments and other third-party payors will pay for healthcare products and services, which could adversely affect our business, financial condition, and results of operations.
We operate in a competitive industry, and if we are not able to compete effectively, our business, financial condition, and results of operations will be harmed.
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The virtual care market is competitive, and we expect it to continue to attract increased competition, which could make it difficult for us to succeed. We currently face competition in the virtual care industry for our solutions from a range of companies, including specialized software and solution providers that offer competitive solutions, often at substantially lower prices, and that are continuing to develop additional products and becoming more sophisticated and effective. Aside from other competing virtual care companies and smaller industry participants, we also face competition from companies that offer solutions for mental health and management of chronic conditions, and enterprise companies who are focused on or may enter the healthcare industry, including initiatives and partnerships launched by these large companies. In addition, large, well-financed health plans, technology companies and retailers have in some cases developed or acquired their own tools and may provide these solutions to their customers at discounted prices. Competition from these parties has and may continue to result in a loss of Clients and will result in continued pricing pressures, which is likely to lead to price declines in certain product segments, and which could negatively impact our sales, profitability, and market share. Increased competition has also resulted in elongated sales cycles for certain products, including chronic condition management solutions, which may continue to reduce our growth and could negatively impact our sales, profitability, and market share.
Some of our competitors may have, or new competitors or alliances may emerge that have, greater name recognition, a larger customer base, longer operating histories, more widely adopted proprietary technologies, greater marketing expertise, larger sales forces, and significantly greater resources than we do. Further, our current or potential competitors may be acquired by third parties with greater available resources. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or customer requirements and may have the ability to initiate or withstand substantial price competition. Any further consolidation in the virtual care market may exert downward pressure on prices of our products and services and may have a material adverse impact on our business, financial condition, or results of operations. In addition, current and potential competitors have established, and may in the future establish, cooperative relationships with vendors of complementary products, technologies, or services to increase the availability of their solutions in the marketplace. Our competitors could also be better positioned to serve certain segments of our markets, which could create additional price pressure. In light of these factors, even if our solutions are more effective than those of our competitors, current or potential Clients or members may accept competitive solutions in lieu of purchasing our solutions. If we are unable to successfully compete, our business, financial condition, and results of operations would be materially adversely affected.
If our existing Clients do not continue or renew their contracts with us, renew at lower fee levels, or decline to purchase additional applications and services from us, or if our individual members do not renew their purchase of our solutions, it could have a material adverse effect on our business, financial condition, and results of operations.
We expect to continue to derive a significant portion of our revenue from the renewal of existing Client contracts and sales of additional applications and services to existing Clients. As part of our growth strategy, for instance, we have focused on expanding our services amongst current Clients. As a result, selling additional applications and services are critical to our future business, revenue growth, and results of operations.
Factors that may affect our ability to sell additional applications and services include, but are not limited to, the following:
•the price, performance, and functionality of our solutions;
•the availability, price, performance, and functionality of competing solutions;
•our ability to develop and sell complementary applications and services;
•the stability, performance, and security of our products and solutions;
•our ability to effectively fulfill our obligations to our Clients and members, including certain supply-chain functions that are performed in-house;
•changes in healthcare laws, regulations, or trends; and
•the business environment of our Clients and, in particular, any headcount reductions by our Clients.
We generally enter into contracts with our Clients for a subscription access or visit fee. Most of our Clients have no obligation to renew their contracts for our solutions after the initial term expires. In addition, our Clients may negotiate
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terms less advantageous to us upon renewal, which may reduce our revenue from these Clients. Individuals who have paid subscription access offer a greater margin than those who have visit fee only access and, over time, the mix of those who have paid subscription access as compared to those who have visit fee only access has declined. Any further increase in the portion of our revenue derived from visit fee only access would likely adversely impact our growth and profitability and could reduce our revenue. Our future results of operations also depend, in part, on our ability to expand into new clinical specialties and across care settings and use cases. If our Clients fail to renew their contracts, renew their contracts upon less favorable terms or at lower fee levels, or fail to purchase new products and services from us, our revenue may decline, or our future revenue growth and profitability may be constrained.
In addition, after the initial term, a significant number of our Client contracts allow Clients to terminate such agreements for convenience at certain times, typically with three months advance notice. We typically incur the expenses associated with integrating a Client’s data into our healthcare database and related training and support prior to recognizing meaningful revenue from such Client. Access fee revenue is not recognized until our products are implemented for launch. If a Client terminates its contract early and revenue and cash flows expected from a Client are not realized in the time period expected or not realized at all, our business, financial condition, and results of operations could be adversely affected.
Similarly, individual members who utilize our BetterHelp or Uplift Health Technologies, Inc. (“Uplift”) services have no obligation to renew their subscriptions, and the number of BetterHelp paying users has been declining in recent periods. In 2025, BetterHelp paying users decreased by 5% to 0.39 million. Failure of additional BetterHelp paying users to renew their subscriptions could cause the revenue of our BetterHelp segment to further decline or constrain any future growth.
Failure to successfully execute on the terms of our contracts could result in significant harm to our business.
Our ability to grow and expand our business is contingent upon our ability to achieve desired performance metrics, cost savings, and/or clinical outcomes improvements under our existing contracts and to favorably resolve contract billing and interpretation issues with our Clients. The healthcare industry has shifted toward value-based care, and increasingly our contracts place a portion of our fees at risk or provide for gain share opportunity based on achieving such metrics, savings, and/or improvements. We cannot guarantee that we will achieve and reach mutual agreement with Clients with respect to contractually required performance metrics, cost savings and/or clinical outcomes improvements under our contracts within the expected time frames. Unusual and unforeseen patterns of healthcare utilization by individuals with diseases or conditions for which we provide services could adversely affect our ability to achieve desired performance metrics, cost savings, and clinical outcomes. Our inability to meet or exceed the targets under our Client contracts could have a material adverse effect on our business, financial condition and results of operations. Also, our ability to provide financial guidance with respect to performance-based contracts is contingent upon our ability to accurately forecast variables that affect performance and the timing of revenue recognition under the terms of our contracts ahead of data collection and reconciliation.
In addition, certain of our contracts are increasing in complexity, requiring integration of data, systems, people, programs and services, the execution of sophisticated business activities, and the delivery of a broad array of services to large numbers of people who may be geographically dispersed. The failure to successfully manage and execute the terms of these agreements could result in the loss of fees and/or contracts and could adversely affect our business and results of operations.
If the number of individuals covered by our employer, health plan, and other Clients decreases, or the number of applications or services to which they subscribe decreases, our revenue will likely decrease.
Under most of our Client contracts, we base our fees on the number of individuals to whom our Clients provide benefits and the number of applications or services subscribed to by our Clients. Many factors may lead to a decrease in the number of individuals covered by our Clients and the number of applications or services subscribed to by our Clients, including, but not limited to, the following:
•failure of our Clients to adopt or maintain effective business practices;
•changes in the nature or operations of our Clients;
•government regulations; and
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•increased competition or other changes in the benefits marketplace.
The number of individuals employed by some of our Clients has decreased, and the number of individuals employed by our Clients may in the future decrease, as a result of economic conditions or other factors, which could negatively impact our revenue. If the number of individuals covered by our employer, health plan and other Clients decreases, or the number of applications or services to which they subscribe decreases, for any reason, our revenue will likely decrease. Similarly, if the engagement of our members with our usage-based services decreases, our revenue could decrease.
We incur significant upfront costs in our Client relationships, and if we are unable to maintain and grow these Client relationships over time, we are likely to fail to recover these costs, which could have a material adverse effect on our business, financial condition and results of operations.
We derive most of our revenue from access fees. Accordingly, our business model depends heavily on achieving economies of scale because our initial upfront investment is costly, and the associated revenue is recognized on a ratable basis. We devote significant resources to establish relationships with our Clients and implement our solutions and related services, and Clients often request or require specific features or functions unique to their particular business processes. Accordingly, our results of operations will depend in substantial part on our ability to deliver a successful experience for both Clients and members and persuade our Clients to maintain and grow their relationship with us over time. Additionally, as our business is growing significantly, our Client acquisition costs could outpace our build-up of recurring revenue, and we may be unable to reduce our total operating costs through economies of scale such that we are unable to achieve profitability. If we fail to achieve appropriate economies of scale or if we fail to manage or anticipate the evolution and in future periods, demand, of the access fee model, our business, financial condition, and results of operations could be materially adversely affected.
If our applications and services are not adopted by our Clients or members, or if we fail to innovate and develop new applications and services that are adopted by our Clients or members, our revenue and results of operations will be adversely affected.
Our longer-term results of operations and any growth will depend in part on our ability to successfully develop and market new applications and services that our Clients and members want and are willing to purchase. In addition, we have invested, and will continue to invest, significant resources in research and development and acquisitions to enhance our existing solutions and introduce new high-quality applications and services. If existing Clients are not willing to make additional payments for such new applications, or if new Clients and members do not value such new applications, it could have a material adverse effect on our business, financial condition, and results of operations. If we are unable to predict user preferences or if our industry changes, or if we are unable to modify our solutions and services on a timely basis, we may lose Clients or members. Our results of operations would also suffer if our innovations are not responsive to the needs of our Clients and members, appropriately timed with market opportunity, or effectively brought to market.
Rapid technological change in our industry and the interoperability with third-party technologies presents us with significant risks and challenges.
The virtual care market is characterized by rapid technological change, changing consumer requirements, short product lifecycles, and evolving industry standards. Our success will depend on our ability to enhance our solutions with next-generation technologies and to develop or to acquire and market new services to access new consumer populations. As our operations grow, we must continuously improve and upgrade our systems and infrastructure while maintaining or improving the reliability and integrity of our infrastructure as the cost of technology increases. Our future success also depends on our ability to adapt our systems and infrastructure to meet rapidly evolving consumer trends and demands while continuing to improve the performance, features, and reliability of our solutions in response to competitive services and offerings. We expect the use of alternative platforms such as tablets and wearables will continue to grow and the emergence of niche competitors who may be able to optimize offerings, services, or strategies for such platforms will require new investment in technology. New developments in other areas, such as cloud computing, have made it easier for competition to enter our markets due to lower up-front technology costs. In addition, we may not be able to maintain our existing systems or replace or introduce new technologies and systems as quickly as we would like or in a cost-effective manner.
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There is no guarantee that we will possess the resources, either financial or personnel, for the research, design, and development of new applications or services, or that we will be able to utilize these resources successfully and avoid technological or market obsolescence. Further, there can be no assurance that technological advances, including with respect to AI and machine learning, by one or more of our competitors or future competitors will not result in our present or future applications and services becoming uncompetitive or obsolete. If we are unable to enhance our offerings and network capabilities to keep pace with rapid technological and regulatory change, or if new technologies emerge that are able to deliver competitive offerings at lower prices, more efficiently, more conveniently, or more securely than our offerings, our business, financial condition, and results of operations could be adversely affected.
Our success will also depend on the availability of our mobile apps in app stores and in “super-app” environments, and the creation, maintenance, and development of relationships with key participants in related industries, some of which may also be our competitors. In addition, if the accessibility of various apps is limited by government actions, the full functionality of devices may not be available to our members. Moreover, third-party platforms, services, and offerings are constantly evolving, and we may not be able to modify our platform to assure its compatibility with those of third parties. If we lose such interoperability, we experience difficulties or increased costs in integrating our offerings into alternative devices or systems, or manufacturers or operating systems elect not to include our offerings, make changes that degrade the functionality of our offerings, or give preferential treatment to competitive products, the growth of our business, financial condition, and results of operations could be materially adversely affected. This risk may be exacerbated by the frequency with which individuals change or upgrade their devices. In the event individuals choose devices that do not already include or support our platform or do not install our mobile apps when they change or upgrade their devices, our member engagement may be harmed.
We use AI and machine learning to operate certain features of our programs and to enable certain business processes, which due to a changing regulatory landscape, could adversely affect our business, financial condition, and results of operations.
We use AI and machine learning to support internal operations, improve efficiency for care delivery teams, and enable certain member‐facing features that provide educational resources, recommendations, or support. We expect to continue investing in these capabilities as part of our broader technology strategy. There are significant risks involved in the development and deployment of AI and machine learning, and there can be no assurance that our or our third-party service providers’ or partners’ use of these technologies will perform as expected, enhance our products or services, or be beneficial to our business, including our efficiency or profitability. For example, the continued use of any AI and machine learning in our products and services, or those of our third-party service providers and partners, may give rise to risks related to, among other things, inaccurate, biased, or harmful recommendations, data privacy, confidentiality, cybersecurity and data provenance concerns, new or enhanced governmental or regulatory scrutiny, litigation or other legal liability, ethical concerns, negative perceptions as to AI among customers, channel partners, or members, and other complications that could erode confidence in our brand, harm our reputation, and adversely affect our business, financial condition, and results of operations. While we have instituted policies applicable to our care delivery teams, including our, the THMG Association’s and the Uplift Association’s employees and consultants that govern the development and use of AI, these individuals may breach or violate the terms of these policies and we may not have adequate remedies for any such breach or violation. Further, our ability to continue to develop or use such technologies may be dependent on access to specific third-party software and infrastructure, such as processing hardware or third-party AI and machine learning, and we cannot control the availability or pricing of such third-party software and infrastructure, especially in a highly competitive environment. In addition, market acceptance and consumer perceptions of AI and machine learning is uncertain.
We face significant competition from other companies with respect to utilizing AI and machine learning. To the extent AI and machine-learning development and utilization from our industry competitors proves to be successful, or more successful than our approach, demand for our programs, and thus our business, could be adversely affected. If we cannot develop, offer, or deploy new AI and machine learning as effectively, as quickly, and/or as cost-effectively as our competitors, or if we cannot access the infrastructure needed to continue our development, our operating results, relationships with clients and partners, and growth could be materially and adversely affected.
The rapid evolution of AI and machine learning will require the application of resources to develop, test, maintain, and improve our programs to help ensure that our AI and machine learning are, and remain, accurate and efficient. We expect our AI and machine learning initiatives will over time require increased investment in technology infrastructure and may require additional specialized headcount. The continuous development, testing, maintenance, and deployment of our AI and machine learning may also increase the cost profile of our offerings and may involve unforeseen difficulties including material performance problems, undetected defects, or errors. We may encounter technical obstacles, and it is possible that we may discover additional problems that may prevent our AI technologies from operating properly, which could adversely affect our business, financial condition, and results of operations. Potential government regulation in the
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space of AI and machine learning also may increase the burden and cost of research and development in this area, subjecting us to reputational harm, competitive harm or legal liability. Implementation standards and enforcement practice are likely to remain uncertain for the foreseeable future, and we cannot yet determine the impact future laws, regulations, standards, or perception of their requirements may have on our business.
A decline in the prevalence of employer-sponsored healthcare or the emergence of new technologies may render our virtual care solutions obsolete or require us to expend significant resources to remain competitive.
The U.S. healthcare industry is massive, with a number of large market participants with conflicting agendas, is subject to significant government regulation, and is currently undergoing significant change. Changes in our industry, for example, away from high deductible health plans, or the emergence of new technologies as more competitors enter our market, could result in our solutions being less desirable or relevant.
For example, we currently derive the majority of our revenue in our Integrated Care segment from sales to Clients that purchase healthcare for their employees (either via insurance or self-funded benefit plans). A large part of the demand for our solutions depends on the need of these employers to manage the costs of healthcare services that they pay on behalf of their employees. Some experts have predicted that future healthcare reform will encourage employer-sponsored health insurance to become significantly less prevalent as employees migrate to obtaining their own insurance over the state-sponsored insurance marketplaces. Were this to occur, there is no guarantee that we would be able to compensate for the loss in revenue from employers by increasing sales of our solution to health insurance companies, individuals, or government agencies. In such a case, our business, financial condition, and results of operations would be adversely affected.
If healthcare benefits trends shift or entirely new technologies are developed that replace existing solutions, our existing or future solutions could be rendered obsolete, and our business could be adversely affected. In addition, we may experience difficulties with software development, industry standards, design, or marketing that could delay or prevent our development, introduction, or implementation of new applications and enhancements.
If we fail to manage our growth effectively, our expenses could increase more than expected, our revenue may not increase and we may be unable to successfully execute on our growth initiatives, business strategies, or operating plans.
The development of our business in recent years has strained our business, technology, operations, and employees. To manage any anticipated future growth effectively, we must continue to maintain and enhance our information technology infrastructure, financial and accounting systems, and controls. For example, we have upgraded our customer relationship management (“CRM”) and enterprise resource planning (“ERP”) systems in connection with our acquisition and integration activities, and implemented a new EMR system for certain products. Any expected benefits from these systems will be gradual or may not be realized at all, and there have been, and in the future could be integration issues or inefficiencies as operators learn the new system. In addition, the introduction of a new system can lead to errors and loss of data or may not work as intended. The integration process between new and legacy systems may lead to temporary manual processes and possible data integrity issues. If our data were found to be inaccurate or unreliable due to error or fraud, or if we, or any of the third-party service providers we engage, were to fail to maintain information systems and data integrity effectively, we may not achieve the intended benefits of the new system and could experience operational disruptions that may impact our members and providers and hinder our ability to provide services, retain and attract members, and manage our member risk profiles. We must also attract, train, and retain a significant number of qualified sales and marketing personnel, customer support personnel, professional services personnel, software engineers, technical personnel, finance and accounting personnel, and management personnel, and the availability of such personnel, in particular software engineers, may be constrained. Additionally, our growth strategy requires the collection, storage, and analysis of a high volumes of data from internal and external sources. Failure to effectively utilize our current data or establish and integrate new systems of data capture may adversely impact our ability to achieve our strategic goals and business plans.
A key aspect to managing our growth is our ability to scale our capabilities to implement our solutions satisfactorily. Clients often require specific features or functions unique to their membership base, which, at a time of significant growth or during periods of high demand, may strain our implementation capacity and hinder our ability to successfully implement our solutions to our Clients in a timely manner. We may also need to make further investments in our technology and automate portions of our solutions or services to decrease our costs. If we are unable to address the needs of our Clients or members, or our Clients or members are unsatisfied with the quality of our solutions or services, they may not renew their contracts, seek to cancel or terminate their relationship with us, or renew on less favorable terms, any of which could cause our annual net dollar retention rate to decrease.
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Failure to effectively manage our growth could also lead us to overinvest or underinvest in development and operations, result in weaknesses in our infrastructure, systems, or controls, give rise to operational mistakes, financial losses, loss of productivity or business opportunities and result in loss of employees and reduced productivity of remaining employees. Our growth is expected to continue to require significant capital expenditures and may divert financial resources from other projects such as the development of new applications and services. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our revenue may not increase or may grow more slowly than expected, and we may be unable to implement our business strategy. The quality of our services may also suffer, which could negatively affect our reputation and harm our ability to attract and retain Clients and members.
We are continually executing a number of growth initiatives, strategies and operating plans designed to enhance our business, including the introduction of new products and solutions, the continued expansion of psychiatric services through Uplift, the continued expansion of BetterHelp into additional international markets and continued expansion of insurance coverage for BetterHelp within the U.S. The anticipated benefits from these efforts are based on several assumptions that may prove to be inaccurate. For example, to effectively market BetterHelp, we must educate consumers about the various purchase options and the benefits of using BetterHelp for mental health, including when such services may not be covered by their health insurance benefits. In addition, some users who traditionally have paid cash for BetterHelp services have, and may in the future, elect to use their insurance coverage going forward, which may result in lower revenue or margin from those users. If we are unable to effectively operationalize insurance acceptance of our BetterHelp business, or unable to successfully launch or expand into new international markets, our business, financial condition, results of operations may be adversely affected.
Moreover, we may not be able to successfully complete these growth initiatives, strategies, and operating plans and realize all of the benefits, including growth targets and cost savings, that we expect to achieve, or it may be more costly to do so than we anticipate. A variety of risks could cause us not to realize some or all of the expected benefits. These risks include, among others, delays in the anticipated timing of activities related to such growth initiatives, strategies and operating plans, increased difficulty and cost in implementing these efforts, including difficulties in complying with new regulatory requirements, and the incurrence of other unexpected costs associated with operating the business. Moreover, our continued implementation of these programs may disrupt our operations and performance. As a result, we cannot assure you that we will realize these benefits. If, for any reason, the benefits we realize are less than our estimates or the implementation of these growth initiatives, strategies and operating plans adversely affect our operations or cost more or take longer to effectuate than we expect, or if our assumptions prove inaccurate, our business, financial condition, and results of operations may be materially adversely affected.
We have continued to implement operational excellence initiatives which include a number of restructuring, realignment and cost reduction initiatives. We may not realize the benefits of these initiatives to the extent or on the timing we anticipated and the ongoing difficulties in implementing these measures may be greater than anticipated and/or offset by inflationary pressures, which could cause us to incur additional costs. In addition, if these measures are not successful or sustainable, we may undertake additional realignment and cost reduction efforts, which could result in significant additional expenses and adversely impact our ability to achieve our other strategic goals and business plans.
Our growth depends in part on the success of our strategic relationships with third parties.
In order to grow our business, we anticipate that we will continue to depend on our relationships with third parties, including our partner organizations and technology and content providers. For example, we partner with a number of price transparency, health savings account, and other benefits platforms to deliver our solutions to their consumers. Identifying partners and negotiating and documenting relationships with them requires significant time and resources. Our competitors may be effective in providing incentives to third parties to favor their products or services or to prevent or reduce subscriptions to, or utilization of, our products and services. In addition, acquisitions of our partners by our competitors could result in a decrease in the number of our current and potential Clients, as our partners may no longer facilitate the adoption of our applications by potential Clients. If we are unsuccessful in establishing or maintaining our relationships with third parties, our ability to compete in the marketplace or to grow our revenue could be impaired and our business, financial condition, and results of operations may suffer. Even if we are successful, we cannot assure you that these relationships will result in increased Client or member use of our applications or increased revenue.
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Our business and growth strategy depend on our ability to maintain and expand a network of qualified providers. If we are unable to do so, any future growth would be limited and our business, financial condition, and results of operations would be harmed.
Our success is dependent upon our continued ability to maintain a network of qualified providers, and demand for such providers in both our Integrated Care and BetterHelp segments has become increasingly competitive. In order to ensure predictable availability of providers and a consistent member experience, we expect that the THMG Association will continue to hire more employed providers and rely less on contractors. If the THMG Association and the Uplift Association are unable to recruit and retain board-certified physicians, advanced practice providers, mental health providers, and other healthcare professionals, or unable to augment their employee bases with contractors to meet resource needs, it would adversely affect our business, financial condition, results of operations, and ability to grow. In any particular market, providers could demand higher payments or take other actions that could result in higher medical costs, less attractive and reliable service for our Clients and members, or difficulty meeting regulatory or accreditation requirements.
Our ability to develop and maintain satisfactory relationships with providers also may be negatively impacted by other factors not associated with us, such as state therapist or psychiatrist licensing laws and standard of care requirements, international credentialing requirements, changes in Medicare and/or Medicaid reimbursement levels and other pressures on healthcare providers and consolidation activity among hospitals, physician groups, and healthcare providers. The failure to maintain or to secure new cost-effective provider contracts may result in a loss of or inability to grow our membership base, higher costs, healthcare provider network disruptions, less attractive service for our Clients and members, and/or difficulty in meeting regulatory or accreditation requirements, any of which could have a material adverse effect on our business, financial condition, and results of operations.
Failure to adequately develop our direct sales force could impede our ability to grow.
We believe that our future growth will depend on the continued development of our direct sales force and our ability to obtain new Clients and to manage our existing Client base. Identifying and recruiting qualified personnel and training them requires significant time, expense, and attention. It can take six months or longer before a new sales representative is fully trained and productive. Our business may be adversely affected if our efforts to train our direct sales force do not generate a corresponding increase in revenue. In particular, if we are unable to hire and develop sufficient numbers of productive direct sales personnel or if new direct sales personnel are unable to achieve desired productivity levels in a reasonable period of time, sales of our services will suffer, and our ability to grow will be impeded.
Our sales and implementation cycle can be long and unpredictable and requires considerable time and expense, which may cause our results of operations to fluctuate.
The sales cycle for our solutions from initial contact with a potential lead to contract execution and implementation varies widely by Client and solution, ranging from a number of days to approximately 24 months. Business interruptions caused by economic conditions have and may continue to delay or lengthen some of our Clients’ sales cycles. Some of our Clients undertake a significant and prolonged evaluation process, including to determine whether our services meet their unique healthcare needs, which frequently involves evaluation of not only our solutions but also an evaluation of those of our competitors, which has in the past resulted in extended sales cycles. For example, this has occurred and may continue to occur with respect to our chronic condition management solutions. Our sales efforts involve educating our Clients about the use, technical capabilities, and potential benefits of our solutions. During the sales cycle, we expend significant time and money on sales and marketing activities, which lowers our operating margins, particularly if no sale occurs. Moreover, our large enterprise Clients often begin to deploy our solutions on a limited basis, but nevertheless demand extensive configuration, integration services, and pricing concessions, which increase our upfront investment in the sales effort with no guarantee that these Clients will deploy our solutions widely enough across their organization to justify our substantial upfront investment. It is possible that in the future we may experience even longer sales cycles, more complex Client needs, higher upfront sales costs, and less predictability in completing some of our sales as we continue to expand our direct sales force, expand into new territories, and market additional applications and services. If our sales cycle lengthens or our substantial upfront sales and implementation investments do not result in sufficient sales to justify our investments, it could have a material adverse effect on our business, financial condition, and results of operations.
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Economic uncertainties or downturns in the general economy or the industries in which we or our Clients operate could disproportionately affect the demand for our solutions and negatively impact our business, financial condition and results of operations.
Economic downturns, market volatility, inflation, tariffs, and uncertainty make it potentially very difficult for our Clients and us to accurately forecast and plan future business activities. During challenging economic times, our Clients may have difficulty gaining timely access to sufficient credit or obtaining credit on reasonable terms, which could impair their ability to make timely payments to us and adversely affect our revenue. If that were to occur, our financial results could be harmed. Furthermore, we have Clients in a variety of different industries. A significant downturn in economic activity attributable to any particular industry may cause organizations to react by reducing their capital and operating expenditures in general or by specifically reducing their spending on healthcare matters, including chronic care and mental health solutions. In addition, our Clients may delay or cancel healthcare projects or seek to lower their costs by renegotiating vendor contracts. To the extent purchases of our solutions are perceived by Clients and potential Clients to be discretionary, our revenue may be disproportionately affected by delays or reductions in general healthcare spending. Also, competitors may respond to challenging market conditions by lowering prices and attempting to lure away our Clients or members.
Similarly, economic conditions may impact the ability of our members to pay for our BetterHelp services, particularly if such services are perceived by members to be discretionary and too expensive or if we are unsuccessful in our efforts to obtain insurance coverage for BetterHelp in all U.S. states and territories. For example, BetterHelp paying users continued to decrease during 2025, and any further decrease in, or reduction in growth of, the number of paying users who utilize our BetterHelp services would negatively impact our business, financial condition and results of operations.
Further, challenging economic conditions, including as a result of increased inflation, may impair the ability of our Clients to pay for the applications and services they already have purchased from us and, as a result, our write-offs of accounts receivable could increase. We cannot predict the timing, strength, or duration of any economic slowdown or recovery. If the condition of the general economy or markets in which we operate worsens, our business, financial condition, and results of operations could be harmed.
Our quarterly results may fluctuate significantly, which could adversely impact the value of our common stock.
Our quarterly results of operations, including our revenue, gross profit, net loss, and cash flows, have varied and may vary significantly in the future, and period-to-period comparisons of our results of operations may not be meaningful. Accordingly, our quarterly results should not be relied upon as an indication of future performance. Our quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of our control, including, without limitation, the following:
•the addition or loss of large Clients, including through acquisitions or consolidations of such Clients;
•seasonal and other variations in the timing of the sales of our services or the cost of BetterHelp customer acquisitions, as discussed above;
•the timing of recognition of revenue, including possible delays in the recognition of revenue due to sometimes unpredictable Client implementation and launch timelines and performance guarantees;
•the amount and timing of operating expenses related to the maintenance and expansion of our business, operations, and infrastructure;
•the effectiveness of our revenue cycle management processes;
•our ability to effectively manage the size and composition of our proprietary network of healthcare professionals relative to the level of demand for services from our members;
•the timing and success of introductions of new applications and services by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors, Clients, or strategic partners;
•Client renewal rates and the timing and terms of Client renewals;
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•the mix of applications and services sold during a period;
•the timing of expenses related to the development or acquisition of technologies or businesses and potential future charges for impairment of goodwill and/or other assets; and
•changes in the value or useful lives of our assets.
We are particularly subject to fluctuations in our quarterly results of operations because the costs associated with entering into Client contracts are generally incurred up front, while we generally recognize revenue over the term of the contract. Further, most of our Integrated Care revenue in any given quarter is derived from contracts entered into with our Clients during previous quarters. Consequently, a decline in new or renewed contracts in any one quarter may not be fully reflected in our revenue for that quarter. Such declines, however, would negatively affect our revenue in future periods and the effect of significant downturns in sales of and market demand for our solutions, and potential changes in our rate of renewals or renewal terms, may not be fully reflected in our results of operations until future periods. Our access fee model also makes it difficult for us to rapidly increase our total revenue through additional sales in any period, with the exception of the first quarter during peak benefits enrollment, as revenue from new Clients must be recognized over the applicable term of the contract. Accordingly, the effect of changes in the industry impacting our business or changes we experience in our new sales may not be reflected in our short-term results of operations. Any fluctuation in our quarterly results may not accurately reflect the underlying performance of our business and could cause a decline in the trading price of our common stock.
We depend on a limited number of third-party suppliers for certain components of our medical devices, and the loss of any of these suppliers, or their inability to provide us with an adequate supply of materials, could harm our business.
We utilize sole source contract manufacturing vendors to build and assemble our medical device products. The hardware components included in such devices are sourced from various suppliers by the manufacturers thereof and are principally industry standard parts and components that are available from multiple vendors. Quality or performance failures of the devices or changes in the contractors’ or vendors’ financial or business condition could disrupt our ability to supply quality products to our Clients and members and thereby have a material adverse impact on our business, financial condition, and results of operations.
For our business strategy to be successful, our suppliers must be able to provide us with components in sufficient quantities, in compliance with regulatory requirements and quality control standards, in accordance with agreed upon specifications, at acceptable costs and on a timely basis. Increases in our product sales, whether forecasted or unanticipated, could strain the ability of our suppliers to deliver an increasingly large supply of components in a manner that meets these various requirements.
Despite the terms in our supply agreements, our suppliers may encounter problems that limit their ability to supply products to us, including financial difficulties, further imposition of tariffs that impact the suppliers' ability to perform their obligations or significantly increase the amount we pay, labor shortages, shutdowns related to a pandemic or other emergency, shipping delays, or damage to their manufacturing equipment or facilities. As a result, our ability to purchase adequate quantities of our products may be limited. If we fail to obtain sufficient quantities of high-quality components to meet demand on a timely basis, we could lose Clients or members, our reputation may be harmed, and our business could suffer. For certain of our contracts, we have obligations to provide a blood glucose meter and other supplies to new members within a certain specified period of time, and/or to provide replacements for defective blood glucose meters within a certain specified period of time. If we are regularly unable to meet those obligations, our channel partners, resellers, or Clients may decide to terminate their contracts.
Depending on a limited number of suppliers, or on a sole supplier, exposes us to risks, including limited control over pricing, availability, quality, and delivery schedules. Moreover, we may not be able to convince suppliers to continue to make components available to us unless there is demand for such components from their other clients. As a result, there is a risk that certain components could be discontinued and no longer available to us, including as a result of economic conditions or other supply chain disruptions. If any one or more of our suppliers cease to provide us with sufficient quantities of components in a timely manner or on terms acceptable to us, we would have to seek alternative sources of supply. Because of factors such as the proprietary nature of our solutions, our quality control standards, and regulatory requirements, we cannot quickly engage additional or replacement suppliers for some of our critical components. Failure of any of our suppliers to deliver products at the level our business requires would limit our ability to meet our sales
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commitments, which could harm our reputation and could have a material adverse effect on our business. We may also have difficulty qualifying new suppliers and obtaining similar components from other suppliers that are acceptable to the FDA or other regulatory agencies, and the failure of our suppliers to comply with strictly enforced regulatory and quality requirements could expose us to regulatory action including warning letters, product recalls, termination of distribution, product seizures, or civil penalties. It could also require us to cease using the components, seek alternative components or technologies, and modify our solutions to incorporate alternative components or technologies, which could result in a requirement to seek additional regulatory approvals or clearances for alternative components used in our medical devices. Any disruption of this nature or increased expenses could harm our commercialization efforts and adversely affect our business, financial condition, and results of operations.
From time to time our devices may also be subject to expiration and/or end-of-life from our manufacturers. Failure to effectively mitigate this via safety-stock, new manufacture, or equivalent products could impair our ability to provide care to members.
Additionally, trade protection measures, such as tariffs and other duties, as well as cost inflation have led to higher material costs in recent years, which we have not always been able to successfully offset, and any future cost inflation mayadversely affect our business, financial condition, and results of operations. Ongoing trade tensions have resulted in multiple rounds of tariffs affecting medical device components, manufacturing equipment, and related supplies. Although tariffs on medical device components remain a risk, our current exemption for custom components under the Nairobi Protocol mitigates this exposure. However, if this exemption were to be rescinded or if new targeted tariffs were enacted that apply to our products or inputs, our manufacturing costs could increase significantly, and it would be difficult and costly to qualify alternative sources within another country with a lower tariff rate or within the United States, as developing and qualifying alternative sources takes significant time, substantial investment and regulatory approvals. Moreover, the dynamic and unpredictable tariff and trade landscape creates substantial uncertainty and significant planning challenges for our operations. Changes in tariff classifications, country-of-origin requirements, or customs procedures can occur with limited notice. This uncertainty complicates our long-term investment decisions regarding manufacturing facilities, supply chain optimization, and research and development locations.
Our international operations pose certain political, legal and compliance, operational, regulatory, economic, and other risks to our business that may be different from or more significant than risks associated with our domestic operations, and our exposure to these risks is expected to increase.