Item7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Teladoc, Inc. was incorporated in the State of Texas in June 2002 and changed its state of incorporation to the State of Delaware in October 2008. Effective August 10, 2018, Teladoc, Inc. changed its corporate name to Teladoc Health, Inc. Unless the context otherwise requires, Teladoc Health, Inc., together with its subsidiaries, is referred to herein as “Teladoc Health,” the “Company,” or “we.” The Company’s principal executive office is located in Purchase, New York. Teladoc Health is the global leader in whole person virtual care focused on forging a new healthcare experience with better convenience, outcomes and value around the world.

Teladoc Health was founded on a simple, yet revolutionary idea: that everyone should have access to the best healthcare, anywhere in the world on their terms. Today, we have a vision of making virtual care the first step on any healthcare journey, and we are delivering on this mission by providing whole person virtual care that includes primary care, mental health, chronic condition management, and more.

COVID-19 Update

We believe that favorable existing secular trends in the healthcare industry were accelerated by the impacts of the COVID-19 pandemic, driving greater consumer use of virtual care, and increased adoption by employers, health plans, hospitals and health systems, and healthcare providers. In combination with the expansion of our capabilities, we believe that these trends present significant opportunities for virtual healthcare to address the most pressing, universal healthcare challenges through trusted solutions, such as ours, that deliver convenient, affordable, and high-quality care; empower individuals to manage and improve their health; and enable providers to offer their best care for their patients.

We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business. COVID-19 has increased utilization of our telehealth services, but it is uncertain whether such increase in demand will continue. While the COVID-19 pandemic has not had a material adverse impact on our financial condition and results of operations to date, the future impact on our operational and financial performance will depend on certain developments, including the duration and spread of the pandemic, impact on our Clients and members, impact on our sales cycles, and effect on our vendors, all of which are uncertain and cannot be predicted. Public and private sector policies and initiatives to reduce the transmission of COVID-19 and disruptions to our operations and the operations of our third-party suppliers, along with any related global slowdown in economic activity, may result in decreased revenues, decreased collections, and increased costs. Further, the economic effects of the COVID-19 pandemic have financially constrained some of our prospective and existing Clients’ healthcare spending, which may negatively impact our ability to acquire new Clients and our ability to renew subscriptions with or sell additional solutions to our existing Clients. We also may experience increased member attrition to the extent our existing Clients reduce their respective workforces in response to economic conditions. In addition, due to our subscription-based business model, the effect of the COVID-19 pandemic may not be fully reflected in our revenue until future periods. It is possible that the COVID-19 pandemic, the measures taken by the governments and businesses affected and any resulting economic impact may materially and adversely affect our business, results of operations, cash flows, and financial positions as well as our customers.

We have also taken measures in response to the COVID-19 pandemic, and we may take further actions that alter our business operations as may be required by federal, state, local, or foreign authorities or that we determine are in the best interests of our employees, Clients, members, and stockholders. The effects of these operational modifications are unknown and may not be realized until further reporting periods.

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Revenue

We have a demonstrated track record of driving growth both organically and through acquisitions. For the year ended December 31, 2021, we increased revenue 86% to $2,032.7 million, including an incremental $500.0 million from acquired business. Excluding the impact of the acquisitions, revenue increased 40% for the year ended December 31, 2021, reflecting the acceleration of the adoption of virtual care stemming from the COVID-19 pandemic and the Company’s broad momentum to transform the healthcare experience. In 2020, revenue increased 98% to $1,094.0 million which included an incremental $128.3 million from our InTouch acquisition and Livongo merger.

For the year ended December 31, 2021, 85%, 13%, and 2% of our revenue was derived from access fees, visit fees, and other, respectively. For the year ended December 31, 2020, 78%, 20%, and 2% of our revenue was derived from access fees, visit fees, and other, respectively.

Acquisition History

We have scaled and intend to continue to scale our platform through the pursuit of selective acquisitions. We have completed multiple acquisitions since our inception, which we believe have expanded our distribution capabilities and broadened our service offering.

On October 30, 2020, we completed the merger with Livongo. Upon completion of the merger, each share of Livongo’s common stock converted into the right to receive 0.5920 shares of Teladoc Health’s common stock and $4.24 in cash, without interest. In addition, in connection with the closing of the merger, Livongo paid a special cash dividend equal to $7.09 per share to shareholders of Livongo as of a record date of October 29, 2020. The total final consideration was $13,876.9 million consisting of $380.2 million of net cash, $555.4 million related to the conversion feature of the Livongo Notes guaranteed by the Company and 60.2 million shares of Teladoc Health’s common stock valued at approximately $12,941.3 million on October 30, 2020. Livongo is a leading provider to empower people with chronic conditions to live better and healthier lives.

On July 1, 2020, we completed the acquisition of InTouch for aggregate consideration of $1,069.8 million, which was comprised of 4.6 million shares of our common stock valued at $903.3 million on July 1, 2020, and $166.5 million of net cash. InTouch is a leading provider of enterprise telehealth solutions for hospitals and health systems.

Key Factors Affecting Our Performance

We believe that our future performance will depend on many factors, including the following:

Number of Members and Revenue per Member. Our revenue growth rate and long-term profitability are affected by our ability to increase cross selling capability among our existing members because we derive a substantial portion of our revenue from access and other fees via Client contracts that provide members access to our professional provider network in exchange for a contractual based periodic fee or access fees derived from our D2C members. Therefore, we believe that our ability to add new members, retain existing members, and increase the revenue generated from each member is a key indicator of our increasing market adoption, the growth of our business, and future revenue potential, and that increasing our membership and revenue per member is an integral objective that will provide us with the ability to continually innovate our services and support initiatives that will enhance members’ experiences. U.S. paid membership increased by 1.8 million to 53.6 million at December 31, 2021, compared to the same period in 2020. Average U.S. revenue per member measures the average amount of access revenue that we generate from a U.S. paid member for a particular period. It is calculated by dividing the U.S. access revenue generated from our U.S. paid members, excluding certain non-member based access fees, by the total average number of U.S. paid members during the applicable period. Average U.S. revenue per member increased to $2.32 in 2021, from $1.12 in 2020. For the fourth quarter of 2021, Average U.S. revenue per member was $2.49 compared to $1.63 for the same period last year.

Number of Visits and Utilization. We also recognize revenue in connection with the completion of a general medical visit, expert medical service, and other specialty visits for contracts where the service is not part of access fees. Visit fee revenue is driven primarily by the number of Clients, the number of members in a Client’s population, member

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utilization of our provider network services and the contractually negotiated prices of our services. We believe that increasing our current member utilization rate and increasing penetration further into existing and new health plan Clients is a key objective in order for our Clients to realize tangible healthcare savings with our service. Visits increased by 38%, or 4.2 million, to approximately 15.4 million for the year ended December 31, 2021, compared to the same period in 2020. Utilization measures the ratio of visits to total U.S. paid members. It is calculated by dividing annual visits by annual U.S. paid members in the year.Visit fee only visits are excluded. Utilization increased by 560 basis points to approximately 20.1% for the year ended December 31, 2021, compared to 14.5% in the same period in 2020.

Number of Platform-Enabled Sessions. A platform-enabled session is a unique instance in which our licensed software platform has facilitated a virtual voice or video encounter between a care provider and our Client’s patient, or between care providers. We believe platform-enabled sessions are an indicator of the value our Clients derive from the platform they license from us in order to facilitate virtual healthcare. Our Clients completed 4.1 million platform-enabled sessions during the year ended December 31, 2021, compared to 2.1 million during the six month period ended December 31, 2020, reflecting the period following the acquisition of InTouch.

Chronic Care Enrollment. Our chronic care programs are one of the key components of our whole person virtual care platform that we believe position us to drive greater engagement with our platforms and increased revenue. Chronic care enrollment measures the number of unique individuals enrolled in one or more of our chronic care programs. Chronic care enrollment increased by 22% to 0.7 million at December 31, 2021, compared to 0.6 million at December 31, 2020.

Seasonality. We typically experience the strongest increases in consecutive quarterly revenue during the fourth and first quarters of each year, which coincides with traditional annual benefit enrollment seasons. In particular, as a result of many Clients’ introduction of new services at the very end of the current year, or the start of each year, a high concentration of our new Client contracts has an effective date of January 1. Therefore, while membership increases, utilization is dampened until service delivery ramps up over the course of the year. Additionally, our business has become more diversified across services, channels, and geographies. We continue to see a diversification of Client start dates, resulting from our health plan expansions, cross sales of new services, international growth, and mid-market employer growth, all of which are not constrained by a calendar year start.

As a result of national seasonal cold and flu trends, we typically experience our highest level of visit fees during the first and fourth quarters of each year. Conversely, the second quarter of the year has historically been the period of lowest utilization of our provider network services relative to the other quarters of the year. However, during the COVID-19 pandemic in 2021 and 2020, we did not experience the typical seasonality associated with national cold and flu outbreaks. 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.

Critical Accounting Estimates and Policies

Revenue

The Company follows the revenue accounting requirements of Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“Accounting Standards Codification (“ASC”) 606”). ASC 606 establishes a principle for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. The core principle of ASC 606 is to recognize revenue to depict the transfer of promised goods or services to Clients in an amount that reflects the consideration the entity expects to be entitled in exchange for those goods or services. This principle is achieved through applying the following five-step approach:

•Identification of the contract, or contracts, with a Client.

•Identification of the performance obligations in the contract.

•Determination of the transaction price.

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•Allocation of the transaction price to the performance obligations in the contract.

•Recognition of revenue when, or as, the Company satisfies a performance obligation.

The Company primarily generates virtual healthcare service revenue from contracts with Clients who purchase access to the Company’s professional provider network or medical experts for their employees, dependents and other beneficiaries. The Company’s Client contracts include a per-member-per-month access fee as well as certain contracts that also include additional revenue on a per-virtual healthcare visit basis for general medical or other specialty visits, or expert medical service on a per case basis. The Company also has certain contracts that generate revenue based solely on a per healthcare visit basis for general medical and other specialty visits. For the Company’s D2C mental health product, members purchase access to the Company’s professional provider network for an access fee.

Revenues are also generated from contracts with Clients for the Company’s chronic care management solutions. Substantially all of this revenue is derived from monthly access fees that are recognized as services are rendered and earned under subscription agreements with Clients that are based on a per participant per month model, using the number of active enrolled members each month for the minimum enrollment period. These solutions integrate devices, supplies, access to the Company’s web-based platform, and clinical and data services to provide an overall health management solution. The promises to transfer these goods and services are not separately identifiable and is considered a single continuous service comprised of a series of distinct services that are substantially the same and have the same pattern of transfer (i.e., distinct days of service). These services are consumed as they are received, and the Company recognizes revenue each month using the variable consideration allocation exception since the nature of the obligations and the variability of the payment being based on the number of active members are aligned.

Revenue is also generated from contracts with Clients for the sale and rental of equipment consisting of virtual healthcare devices which allow physicians to access the Company’s hosted virtual healthcare platform. These contracts also include multiple performance obligations, and the Company determines the standalone selling prices based on overall pricing objectives. In some arrangements, the Company’s devices are rented to certain qualified Clients that qualify as either sales-type lease or operating lease arrangements and are subject to lease accounting guidance.

The Company records access fees from Clients accessing its professional provider network or hosted virtual healthcare platform or chronic care management platforms, visit fee revenue for general medical, expert medical service and other specialty visits as well as other revenue primarily associated with virtual healthcare device equipment included with its hosted virtual healthcare platform.

The Company’s Client agreements generally have a term of one to three years. The majority of Clients have a term of one year and renew their contracts following their first year of services. Revenues are recognized when the Company satisfies its performance obligation to stand ready to provide virtual healthcare services which occurs when the Company’s Clients and members have access to and obtain control of the virtual healthcare service or platform.

For contracts where revenue is generated on a per healthcare visit basis, revenues are recognized when the visits are completed as the Company has delivered on its stand ready obligation to provide access. For other revenue, which primarily includes virtual healthcare devices, the Company’s performance obligation is satisfied when the equipment is provided to the Client and revenue is recognized at a point in time upon shipment.

Certain of the Company’s contracts include Client performance guarantees and pricing adjustments that are based upon minimum member utilization and guarantees by the Company for specific service level performance, member satisfaction scores, cost savings guarantees, and health outcome guarantees. Performance guarantees are estimated at each reporting period based on the Company’s historical performance of the underlying criteria or the customer’s specific performance as of that reporting date. Any estimated adjustments to the contract price for achieving or not achieving the performance guarantee are recognized as an adjustment to revenue in the period. For the years ended December 31, 2021, 2020, and 2019, revenue recognized from performance obligations related to prior periods for the changes in transaction price or Client performance guarantees was $5.6 million, $1.9 million, and $0.8 million, respectively.

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Business Combinations

We account for our business combinations using the acquisition method of accounting. The purchase price is attributed to the fair value of the assets acquired and liabilities assumed. Transaction costs and accelerated grants of stock-based awards directly attributable to the acquisition are expensed as incurred. Acquisition-related transaction costs incurred by us are not included as a component of consideration transferred but are accounted for as an operating expense in the period in which the costs are incurred. Identifiable assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition date. The excess of the purchase price of acquisition over the fair value of the identifiable net assets of the acquiree is recorded as goodwill. The results of businesses acquired in a business combination are included in our consolidated financial statements from the date of acquisition.

When we issue stock-based or cash awards to an acquired company’s shareholders, we evaluate whether the awards are consideration or compensation for post-acquisition services. The evaluation includes, among other things, whether the vesting of the awards is contingent on the continued employment of the acquired company’s stockholders beyond the acquisition date. If continued employment is required for vesting, the awards are treated as compensation for post-acquisition services and recognized as expense over the requisite service period.

Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates, and selection of comparable companies. The estimates and assumptions used to determine the fair values and useful lives of identified intangible assets could change due to numerous factors, including market conditions, technological developments, economic conditions, and competition. In connection with determination of fair values, we may engage a third-party valuation specialist to assist with the valuation of intangible and certain tangible assets acquired and certain assumed obligations. Upon completion of the purchase accounting for the acquisition of Livongo on October 30, 2020, we allocated $1.05 billion of the total acquisition consideration to customer relationship intangibles, an amount which reflects both direct and channel-sourced customers that had been acquired by Livongo since it began offering its diabetes management program in 2014. The fair value of these customer relationships was determined based on the excess earnings method of the income approach. We determined the remaining weighted average useful life to be approximately 15.7 years based on historical Livongo attrition rates, estimated revenues from customers, and other qualitative factors, and we believe that our customer relationships are expected to make contributions to our future cash flows over this period. The Livongo customer relationships typically have a three-year contractual term, but the estimated useful life assumes renewals or extensions and considers historical attrition rates, which were calculated using actual Livongo attrition data, the largest factor in the estimation of the useful life. The weighted average attrition rate used in the determination of useful life was approximately 6.5%.

Goodwill and Other Intangible Assets

As of December 31, 2021, our balance of goodwill was $14.5 billion. 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 the Company’s publicly quoted share price, below our net book value. We currently operate as a single reporting unit under the guidance in ASC 350, “Intangibles- Goodwill and Other.”

When testing goodwill for impairment, we have the option of first performing a qualitative assessment to determine whether it is more likely than not that the fair value of our reporting unit is less than its carrying amount. If we elect to bypass the qualitative assessment, or if a qualitative assessment indicates it is more likely than not that carrying value exceeds its fair value, we perform a quantitative goodwill impairment test. Under the quantitative goodwill impairment test, if our reporting unit’s carrying amount exceeds its fair value, we will record an impairment charge based on that difference.

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To determine reporting unit fair value as part of the quantitative test, we use a weighting of fair values derived from the income approach and the market approach. Under the income approach, we project our future cash flows and discount these cash flows to reflect their relative risk. The cash flows used are consistent with those the Company uses in its internal planning, which reflects actual business trends experienced and our long-term business strategy. As such, key estimates and factors used in this method include, but are not limited to, revenue, margin, and operating expense growth rates, as well as a discount rate, and a terminal growth rate. Under the market approach, we use the guideline company method to develop valuation multiples and compare our reporting unit to similar publicly traded companies.

In order to further validate the reasonableness of fair value as determined by the income and market approaches described above, a reconciliation to market capitalization is then performed by estimating a reasonable control premium and other market factors. Future changes in the judgments, assumptions and estimates that are used in the impairment testing for goodwill could result in significantly different estimates of fair value.

As part of our annual goodwill impairment tests performed as of October 1, 2021 and 2020, no impairment was indicated as our reporting unit fair value significantly exceeded its carrying value.

Other Intangible Assets

Other intangible assets include customer relationships, non-compete agreements, acquired technology, patents, and trademarks resulting from business acquisitions, and capitalized software development costs. As of December 31, 2021, the aggregate balance of these assets was $1,910.3 million. We amortize these definite-lived intangible assets over their estimated useful lives as disclosed in Note 8 to the consolidated financial statements. We also review the useful lives on a quarterly basis to determine if the period of economic benefit has changed. Potential changes in useful lives, whether due to strategic decisions involving our brands, competitive forces, or other factors could result in additional amortization expense taking effect prospectively in the period of the change and could have a material impact on our consolidated financial statements. Customer relationships are amortized over a period of 2 to 20 years in relation to expected future cash flows. The useful lives of the customer relationships are subject to risks and uncertainties including future attrition rates. These considerations include, but are not limited to, the emergence of new competitor offerings, relative competitor pricing and scale, our ability to successfully integrate and manage the acquired customers, our level of success in delivering future innovation, and overall changes in economic and regulatory conditions. Significant changes in any one or a combination of considerations could lead us to update our weighted average attrition rate, which, in turn would impact the assigned useful life and the level of amortization expense recorded for our customer relationship intangibles. For example, a sustained increase in the customer attrition rate related to customers acquired in the Livongo transaction could prompt us to reduce our estimate of the remaining useful life of the customer relationships. Should this occur, a year’s reduction to the estimated life would result in an annual increase in amortization expense of approximately $5 million. Non-compete agreements are amortized over a period of 1.5 to 5 years using the straight-line method. Trademarks are amortized over 3 to 15 years using the straight-line method. Technology is amortized over 5 to 7 years using the straight-line method. Patents are amortized over 3 years using the straight-line method. Capitalized software development costs are amortized over 3 to 5 years using the straight-line method.

Definite-lived intangible assets are re-evaluated whenever events or changes in circumstances indicate that their estimated useful lives may require revision and/or the carrying value of the related asset group may not be recoverable by its projected undiscounted cash flows. If the carrying value of the asset group is determined to be unrecoverable, an impairment charge would be recognized in an amount equal to the amount by which the carrying value of the asset group exceeds its fair value. There were no events or changes in circumstances which indicated that the carrying value of the definite-lived intangible assets may not be recoverable during the year ended December 31, 2020.

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December 2021 Impairment Testing

As a result of a sustained decrease in our Company share price following our annual impairment test on October 1, 2021, we concluded that a triggering event had occurred and conducted impairment testing of our goodwill, definite-lived intangibles and other long-lived assets as of December 1, 2021. As a result of this review, each of our asset groups identified for the purpose of testing the recoverability of our definite-lived intangibles and other long-lived assets passed the recoverability test by a significant margin. In addition, no goodwill impairment was indicated and the fair value of our reporting unit exceeded our carrying value but declined to an excess of approximately 15%. Consistent with the test performed on October 1, 2021, this estimate reflected a 75%/25% allocation between the income and market approach. We believe the 75% weighting to the income approach was appropriate as it more directly reflects the Company’s future growth and profitability expectations. There were no changes in our projected cash flows used in the impairment tests performed on each of these two dates. However, certain significant inputs to the valuation models were modified reflecting our view of the market’s perception of the associated risks of achieving our projected cash flows and other economic factors, as might be implied by the decline in the Company’s share price. The following table indicates the most significant changes to inputs and their resulting impact:

Between the October 1, 2021, and December 1, 2021, assessments, our estimate of the reporting unit’s fair value decreased by approximately $3,200 million. The Company performed a sensitivity analysis of the key inputs to its valuation models and determined across a range of reasonable assumptions that no impairment was indicated at either assessment date in 2021.

Overall, in the event there are future adverse changes in our projected cash flows and/or changes in key assumptions, including but not limited to an increase in our discount rate, lower market multiples, lower revenue growth, lower margin, and/or a lower terminal growth rate, we may be required to record a non-cash impairment charge to our goodwill, other intangibles and/or long-lived assets. Such a non-cash charge would likely have a material adverse effect on our consolidated statements of operations and balance sheets in the reporting period of the charge.

While management believes the assumptions used in our impairment test are reasonable, the fair value estimate is most sensitive to our discount rate and market multiple assumptions as these amounts are reflective of the market’s perception of our ability to achieve our projected cash flows. The above table illustrates the changes in discount rates and selected peer revenue multiples between our October 1, 2021, and December 1, 2021, testing dates and the impact of those changes on our goodwill impairment testing results.

In the period following December 31, 2021, there has been a further 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 our share price is sustained, it would require further testing of our goodwill in our next reporting period and it may result in an impairment of our goodwill. Absent changes to our projected cash flows, we would adjust our discount rate and market multiple assumptions as these amounts are reflective of 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 reporting unit carrying value to exceed its fair value, resulting in impairment. Should the fair value of our reporting unit decline a further $3,200 million, which was selected as an illustrative example because it approximates the decrease in estimated fair value between the Company’s October 1, 2021 and December 1, 2021 assessments, it would result in a goodwill impairment charge of approximately $800 million, all else held constant. A decline in fair value of twice that magnitude, or approximately 30%, could result in an impairment charge of approximately $4,000 million, all else held constant.

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Livongo Customer Relationships

Upon completion of the purchase accounting for the acquisition of Livongo on October 30, 2020, we allocated $1.05 billion of the total acquisition consideration to customer relationship intangibles, an amount which reflects both direct and channel-sourced customers that had been acquired by Livongo since it began offering its diabetes management program in 2014. The fair value of these customer relationships was determined based on the excess earnings method of the income approach and incorporated assumptions including revenue growth, cash flows and other factors.

Following the guidance in the Financial Accounting Standards Board (“FASB”) ASC 350, we determined the remaining weighted average useful life of the customer relationships to be approximately 15.7 years. The Livongo customer relationships typically have a three-year contractual term, however, in accordance with the guidance, our determination of the estimated useful life assumed renewals and extensions, and reflected actual historical attrition rates which comprised the largest contributing factor to the estimate of the useful life. The weighted average attrition rate used in the determination of useful life was approximately 6.5%.

Due to a number of both macro and micro-economic factors, there are risks and uncertainties related to the attrition rates that are at least reasonably likely to occur. These factors include, but are not limited to, the emergence of new competitor offerings, relative competitor pricing and scale, our ability to successfully integrate and manage the acquired customers, our level of success in delivering future innovation, and overall changes in economic and regulatory conditions. Significant changes in any one or a combination of these types of factors could lead us to update our weighted average attrition rate, which, in turn would impact the assigned useful life and the level of pre-tax amortization recorded on our customer relationship intangibles.

Income Taxes

Our income tax expenses, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management's best assessment of estimated current and future taxes to be paid. The objectives for accounting for income taxes, as prescribed by the relevant accounting guidance, are to recognize the amount of taxes payable or refundable for the current year and deferred tax assets and liabilities for future tax consequences of events that have been recognized in the financial statements. Deferred income taxes reflect the tax effect of temporary differences between asset and liability amounts that are recognized for financial reporting purposes and the amounts that are recognized for income tax purposes. These deferred taxes are measured by applying currently enacted tax laws. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The assumptions about future tax consequences require significant judgment and variations in the actual outcome of these consequences could materially impact our results of operations. We recognize tax liabilities based on estimates of whether additional taxes and interest will be due. We adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the tax liabilities. Interest and penalties, if any, related to accrued liabilities for potential tax assessments are included in income tax expense. As of December 31, 2021, we had approximately $110.8 million of unrecognized tax benefits.

Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Determination of valuation allowances recorded against deferred tax assets requires significant judgment and use of assumptions, including past operating results, estimates of future taxable income and the feasibility of tax planning strategies. To the extent that new information becomes available which causes the Company to change its judgment regarding the adequacy of existing valuation allowances, such changes to tax liabilities will impact income tax expense in the period in which such determination is made. In 2020, we released a portion of the valuation allowance against the deferred tax assets attributable to our U.S. NOLs as the acquired intangibles from the InTouch and Livongo

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acquisitions serve as a source of income for which we, more likely than not, will be able to realize the benefits of the deferred tax assets. In 2021, upon filing its U.S. federal and state tax returns for the year ended December 31, 2020, the Company updated its deferred tax asset for NOLs and the related valuation allowance to reflect the amounts included on the tax returns and the current year losses. At the end of the year, the valuation allowance is $335.8 million.

Components of Results of Operations

Cost of Revenue(exclusive of depreciation and amortization, which is shown separately)

Cost of revenue (exclusive of depreciation and amortization, which is shown separately) primarily consists of fees paid to the physicians and other health professionals in our provider network; product cost; costs incurred in connection with our provider network operations and data center activities, which include employee-related expenses (including salaries and benefits), costs related to Client support; provider network, medical records, magnetic resonance imaging, medical lab tests, translation, postage, medical malpractice insurance, and deferred device costs. Cost of revenue includes costs of technology enabling multiple modes of real-time communication, including via web browser, mobile application, voice / telephony, and text. These expenses increase or decrease as the level of revenue changes. Cost of revenue (exclusive of depreciation and amortization, which is shown separately) is driven primarily by the number of general medical visits, expert medical services, and other specialty visits completed in each period and are closely correlated or directly related to delivery of our solutions and monthly access fees. Many of the elements of the cost of revenue (exclusive of depreciation and amortization, which is shown separately) are relatively variable, and can be reduced in the near-term to offset any decline in our revenue. Our business and operational models are designed to be highly scalable and leverage variable costs to support revenue-generating activities. Cost of revenue (exclusive of depreciation and amortization, which is shown separately) does not include an allocation of depreciation and amortization.

Advertising and Marketing Expenses

Advertising and marketing expenses consist primarily of costs of digital and media advertisements, personnel and related expenses for our marketing staff and communications materials that are produced for member acquisition and to generate greater awareness and utilization among our Clients and members. Marketing costs also include third-party independent research, trade shows and brand messages, public relations costs, and stock-based compensation for our advertising and marketing employees. Our advertising and marketing expenses exclude certain allocations of occupancy expense as well as depreciation and amortization.

We expect our advertising and marketing expenses to increase for the foreseeable future as we continue to increase the size of our digital and media advertising and marketing operations including member acquisition and engagement activities and expand into new products and markets. Our advertising and marketing expenses will fluctuate as a percentage of our total revenue from period to period due to the seasonality of our total revenue and the timing and extent of our advertising campaigns and marketing expenses. We will continue to invest in advertising and marketing by promoting our brands through a variety of marketing and public relations activities.

Sales Expenses

Sales expenses consist primarily of employee-related expenses, including salaries, benefits, commissions, employment taxes, travel and stock-based compensation costs for our employees engaged in sales, account management and sales support in addition to commissions paid to external brokers. Our sales expenses exclude certain allocations of occupancy expense as well as depreciation and amortization. We expect our sales expenses to continue to increase in the short-to-medium-term as we strategically invest to expand our business and to capture an increasing amount of our market opportunity.

Technology and Development Expenses

Technology and development expenses include the costs of operating our on-demand technology infrastructure that are not directly related to changes in revenue or volume of visits, including licensed applications, information technology infrastructure, security, and compliance. The technology and development line item also contains amounts charged to expense for research and development, which include costs of new product development, costs to add new

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features or improve reliability or scalability of existing applications, and other software development and engineering costs to the extent that they are not capitalized. The research and development expenses may enable future revenue growth but are not directly related to current revenues.

Technology and development expenses include personnel and related expenses for software engineering, information technology infrastructure, security and compliance, product development and support for our efforts to add new features and ensure the reliability or scalability of our existing solutions. Technology and development expenses also include outsourced software engineering services, the costs of operating our on-demand technology infrastructure (whereas costs directly associated with revenue are presented separately in cost of revenues), licensed applications, and stock-based compensation for our technology and development employees. Our technology and development expenses exclude certain allocations of occupancy expense, capitalized software development costs, and depreciation and amortization.

We expect our technology and development expenses to increase for the foreseeable future as we continue to invest in the development of our technology platform. Our technology and development expenses may fluctuate as a percentage of our total revenue from period to period due to the seasonality of our total revenue and the timing and extent of our technology and development expenses, including the ability to capitalize software development costs. Historically, the majority of our technology and development costs have been expensed, except those costs that have been capitalized as software development costs.

Acquisition, Integration, and Transformation Costs

Acquisition, integration, and transformation costs include investment banking, financing, legal, accounting, consultancy, integration, fair value changes related to contingent consideration, and certain other transaction costs related to mergers and acquisitions. It also includes costs related to certain business transformation initiatives focused on integrating and optimizing various operations and systems, including enhancing our customer relationship management (“CRM”) and enterprise resource planning (“ERP”) systems, incurred in connection with our acquisition and integration activities.

General and Administrative Expenses

General and administrative expenses include personnel and related expenses of, and professional fees incurred by our executive, finance, legal, business development, operations, and human resources departments. They also include stock-based compensation costs related to our board of directors and our employees and most of the facilities costs including utilities and facilities maintenance. Our general and administrative expenses exclude any allocation of depreciation and amortization.

We expect our general and administrative expenses to increase for the foreseeable future as we continue to grow our business. Our general and administrative expenses may fluctuate as a percentage of our total revenue from period to period due to the seasonality of our total revenue and the timing and extent of our general and administrative expenses.

Depreciation and Amortization

Depreciation and amortization consist primarily of depreciation of fixed assets, amortization of capitalized software development costs, and amortization of acquisition-related intangible assets.

Loss on Extinguishment of Debt

Loss on extinguishment of debt consists of costs associated with debt refinancing including the write off of origination and termination financing fees and the redemption/conversion of convertible senior notes.

Other (Income) Expense, Net

Other (income) expense, net includes the impact of foreign currency remeasurement, realized and unrealized gains on investment securities, and all other non-operating items not included in other financial statement lines.

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Interest Expense, Net

Interest expense, net consists of interest costs associated with convertible senior notes and advances from financing companies, net of interest earned on cash and cash equivalents and short-term investments.

Income Tax Expense (Benefit)

Income tax expense (benefit) reflects management's best assessment of estimated current and future taxes to be paid. The objectives for accounting for income taxes, as prescribed by the relevant accounting guidance, are to recognize the amount of taxes payable or refundable for the current year and deferred tax assets and liabilities for future tax consequences of events that have been recognized in the financial statements. See above for Critical Estimates and Policies.

EBITDA and Adjusted EBITDA

To supplement our financial information presented in accordance with U.S. generally accepted accounting principles (“GAAP”), we use earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and Adjusted EBITDA, which are non-U.S. GAAP financial measures, to clarify and enhance an understanding of past performance. We believe that the presentation of these financial measures enhances an investor’s understanding of our financial performance. We further believe that these financial measures are useful financial metrics to assess our operating performance and financial and business trends from period-to-period by excluding certain items that we believe are not representative of our core business. We use certain financial measures for business planning purposes and in measuring our performance relative to that of our competitors. We utilize Adjusted EBITDA as the primary measure of our performance.

EBITDA consists of net loss before interest; other (income) expense, net, including foreign exchange gain or loss; taxes; depreciation and amortization; and loss on extinguishment of debt. Adjusted EBITDA consists of net loss before interest; other (income) expense, net, including foreign exchange gain or loss; taxes; depreciation and amortization; loss on extinguishment of debt; stock-based compensation; and acquisition, integration, and transformation costs.

We believe the above financial measures are commonly used by investors to evaluate our performance and that of our competitors. However, our use of the terms EBITDA and Adjusted EBITDA may vary from that of others in our industry. Neither EBITDA nor Adjusted EBITDA should be considered as an alternative to net loss before taxes, net loss, loss per share or any other performance measures derived in accordance with U.S. GAAP as measures of performance.

EBITDA and Adjusted EBITDA have important limitations as analytical tools and you should not consider them in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:

● EBITDA and Adjusted EBITDA do not reflect the loss on extinguishment of debt;

● EBITDA and Adjusted EBITDA do not reflect other (income) expense, net;

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In addition, although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and both EBITDA and Adjusted EBITDA do not reflect any expenditures for such replacements.

We compensate for these limitations by using EBITDA and Adjusted EBITDA along with other comparative tools, together with U.S. GAAP measurements, to assist in the evaluation of operating performance. Such U.S. GAAP measurements include net loss, net loss per share and other performance measures.

In evaluating these financial measures, you should be aware that in the future we may incur expenses similar to those eliminated in this presentation. Our presentation of EBITDA and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.

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Consolidated Results of Operations

The following table sets forth our consolidated statement of operations data for the years ended December 31, 2021 and 2020 and the dollar and percentage change between the respective periods (dollars in thousands). Refer to Part II, Item 7: Management’s Discussion & Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 1, 2021, for management’s discussion and analysis of financial condition and results of operations for 2020 compared to 2019.

Year Ended December 31, Variance %

Expenses:

Operating expenses:

Other (income) expense, net (5,088) 545 (5,633) NM

(1) Non-U.S. GAAP Financial Measures.

NM – not meaningful

The following table reconciles net loss, the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA for the years ended December 31, 2021 and 2020 (in thousands):

Year Ended

December 31,

Add:

Loss on extinguishment of debt 43,748 9,077

Other (income) expense, net (5,088) 545

Income tax expense (benefit) 44,137 (90,857)

Acquisition, integration, and transformation costs 26,643 88,236

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Consolidated Results of Operations

We completed our acquisitions of Livongo on October 30, 2020, and InTouch on July 1, 2020. The results of operations of the aforementioned acquisitions have been included in our audited consolidated financial statements included in this Form 10-K from their respective acquisition dates.

Revenue. Total revenue was $2,032.7 million for the year ended December 31, 2021, compared to $1,094.0 million for the year ended December 31, 2020, an increase of $938.7 million, or 86%. Excluding the impact from acquisitions, revenue increased 40%, driven primarily by mental health specialties. Total access fees increased $884.7 million, or 104%, comprised of an $810.2 million, or 119% increase in U.S. access fees and a $74.5 million, or 44% increase in international access fees. Also contributing to the increase in total revenue was visit revenue, which totaled $254.2 million during the year ended December 31, 2021, compared to $221.5 million during the year ended December 31, 2020, an increase of $32.7 million, or 15%. In addition, total other revenues were $46.5 million for the year ended December 31, 2021, compared to $25.2 million for the year ended December 31, 2020, an increase of $21.3 million, or 84%, primarily reflecting a full year’s sales of the Company’s telehealth solutions for hospitals and health systems.

Cost of Revenue (exclusive of depreciation and amortization, which is shown separately below). Cost of revenue was $650.3 million for the year ended December 31, 2021, compared to $390.8 million for the year ended December 31, 2020, an increase of $259.5 million, or 66%. Excluding the impact of acquisitions, cost of revenue increased by 42%, reflecting increased provider fees and physician network operation costs in line with revenue growth.

Advertising and Marketing Expenses. Advertising and marketing expenses were $416.7 million for the year ended December 31, 2021, compared to $226.2 million for the year ended December 31, 2020, an increase of $190.5 million, or 84%. This increase was primarily driven by higher digital and media advertising in support of D2C mental health specialties, as well as higher engagement member marketing. In addition, the increase included the impact of acquisitions, and an increase in personnel costs due to increased hiring.

Sales Expenses. Sales expenses were $250.6 million for the year ended December 31, 2021, compared to $154.1 million for the year ended December 31, 2020, an increase of $96.5 million, or 63%. This increase substantially reflects the impact from acquisitions.

Technology and Development Expenses. Technology and development expenses were $311.9 million for the year ended December 31, 2021, compared to $164.9 million for the year ended December 31, 2020, an increase of $147.0 million, or 89%. In addition to substantially reflecting the impact of acquisitions, the increase was driven by hiring of additional personnel, professional fees, and ongoing projects to continuously improve and optimize our technology portfolio.

Acquisition, Integration, and Transformation Costs. Acquisition, integration, and transformation costs were $26.6 million for the year ended December 31, 2021, compared to $88.2 million for the year ended December 31, 2020, a decrease of $61.6 million. The higher level of costs incurred in 2020 was driven by non-recurring transaction costs and charges associated with the InTouch and Livongo acquisitions, including investment banking, financing, legal, accounting, and consultancy costs. In contrast, the 2021 costs included residual acquisition-related costs associated with the Livongo merger as well as costs associated with integrating and optimizing various operations and systems, including enhancing our CRM and ERP systems.

General and Administrative Expenses. General and administrative expenses were $438.0 million for the year ended December 31, 2021, compared to $506.7 million for the year ended December 31, 2020, a decrease of $68.7 million, or 14%. The decrease was primarily driven by a $211 million year-over year reduction in stock-based compensation driven primarily by the acceleration of stock-based awards expense related to the Livongo acquisition. Partially offsetting the decrease was the full year impact of acquisitions, as well as increases reflecting the overall growth of the business including personnel costs, indirect taxes, bank charges, therapist recruiting, and legal and other professional costs.

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Depreciation and Amortization. Depreciation and amortization was $204.2 million for the year ended December 31, 2021, compared to $69.5 million for the year ended December 31, 2020, an increase of $134.7 million, or 194%. The year-over-year increase was driven primarily by the impact of acquisitions, which resulted in an increase of $130.6 million in amortization of finite-lived intangibles and an increase of $4.2 million in depreciation of property and equipment.

Loss on Extinguishment of Debt. Loss on extinguishment of debt was $43.7 million for the year ended December 31, 2021, compared to $9.1 million for the year ended December 31, 2020, an increase of $34.6 million driven primarily by exchanges, redemptions and conversions of convertible senior notes due in 2022 and 2025 as discussed in Note 11 to the Consolidated Financial Statements.

Other (Income) Expense, Net. Other (income) expense, net was $(5.1) million for the year ended December 31, 2021, compared to $0.6 million for the year ended December 31, 2020. The change consisted primarily of a $5.9 million gain on the sale of a non-marketable equity security and foreign exchange remeasurements.

Interest Expense, Net. Interest expense, net consists of interest costs and amortization of debt discount associated with the Company’s convertible senior notes, offset by interest income from cash and cash equivalents and short-term investments. Interest expense, net was $80.4 million and $60.0 million for the years ended December 31, 2021 and 2020, respectively. The increase in interest expense primarily is associated with the full year impact of the 2027 Notes issued in May 2020 and the Livongo Notes that the Company agreed to guarantee in October 2020 as part of the acquisition.

Income tax expense (benefit). Income tax expense was $44.1 million for the year ended December 31, 2021, compared to $(90.9) million benefit for the year ended December 31, 2020. The income tax expense in 2021 largely reflects an increase in the valuation allowances needed to reflect the Company’s ability to utilize future NOLs, primarily associated with stock compensation benefits associated with the purchase of Livongo and partially offset by the impact of current period losses. The tax benefit in 2020 largely reflects the recognition of current period losses due to the partial release of the U.S. valuation allowance due to acquired intangibles from the purchases of InTouch and Livongo, as well as increased excess stock-based compensation deductions.

Liquidity and Capital Resources

The following table presents a summary of our cash flow activity for the periods set forth below (in thousands):

Year Ended

December 31,

Consolidated Statements of Cash Flows - Summary

Net cash provided by (used in) operating activities $ 193,990 $ (53,511)

Net cash used in investing activities (72,981) (590,975)

Net cash provided by financing activities 40,947 859,136

Our principal sources of liquidity are cash and cash equivalents, totaling $893.5 million and short-term marketable securities of $2.5 million as of December 31, 2021. During 2021, we experienced positive operating cash flow and we continue to anticipate increasing positive operating cash flow results for 2022.

We believe that our existing cash and cash equivalents and short-term investment will be sufficient to meet our working capital, capital expenditure, and contractual obligation needs for at least the next 12 months. Our future capital requirements will depend on many factors including our growth rate, contract renewal activity, number of visits, the timing and extent of spending to support product development efforts, our expansion of sales and marketing activities, the introduction of new and enhanced services offerings, the continuing market acceptance of telehealth, and our debt service obligations. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, technologies, and intellectual property rights. We may be required to seek additional equity or debt financing to fund working capital, capital expenditures and acquisitions, and to settle debt obligations. In the event that additional

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financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all, which would adversely affect our business, financial condition and results of operations.

Historically, we have financed our operations primarily through sales of equity securities, debt issuance, and bank borrowings.

See Note 11 to the consolidated financial statements for additional information on our convertible senior notes.

We were in compliance with all debt covenants at December 31, 2021 and 2020.

We routinely enter into contractual obligations with third parties to provide professional services, licensing, and other products and services in support of our ongoing business. The current estimated cost of these contracts is not expected to be significant to our liquidity and capital resources based on contracts in place as of December 31, 2021.

Cash Provided by (Used in) Operating Activities

Cash flows provided by (used in) operating activities consist of net loss adjusted for certain non-cash items and the cash effect of changes in assets and liabilities. Cash provided by (used in) operating activities was $194.0 million and $(53.5) million for the years ended December 31, 2021 and 2020, respectively. The year-over-year increase was driven by strong revenue growth, including contributions from acquisitions. In addition, our results for the year ended December 31, 2020 included significant payments associated with the Livongo transaction.

Our primary uses of cash from operating activities are for the payment of cash compensation, provider fees, engagement marketing, D2C digital and media advertising, inventory, insurance, technology costs, interest costs, and acquisition, integration, and transformation costs. Historically, our cash compensation payments are at the highest level in the first quarter when we pay discretionary employee compensation related to the previous fiscal year.

Cash Used in Investing Activities

Cash used in investing activities was $73.0 million for the year ended December 31, 2021 and primarily consisted of net cash paid for the acquisition of businesses of $78.7 million, and capitalized software development costs of $55.4 million, partially offset by proceeds from the sale of marketable securities and the sale of an investment of $50.0 million and $10.9 million, respectively. Cash used in investing activities for the year ended December 31, 2020 of $591.0 million consisted primarily of net cash paid for acquisitions of $567.4 million and capitalized software development of $22.0 million.

Cash Provided by Financing Activities

Cash provided by financing activities for the year ended December 31, 2021 was $40.9 million and primarily consisted of $25.8 million of proceeds from the exercise of employee stock options and $16.8 million of proceeds from participants in the employee stock purchase plan. Cash provided by financing activities for the year ended December 31, 2020 was $733.3 million, which was driven primarily by $1 billion in proceeds from the issuance of convertible notes due in 2027 offset by the $228.2 million repurchase of convertible notes due in 2022.

Recently Issued Pronouncements

In August 2020, the FASB issued ASU 2020-06—"Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 simplifies the accounting for convertible instruments by eliminating the conversion option separation model for convertible debt that can be settled in cash and by eliminating the measurement model for beneficial conversion features. Convertible instruments that continue to be subject to separation models are (1) those with conversion options that are required to be accounted for as bifurcated derivatives and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. This ASU also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled

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in cash or shares, except for certain liability-classified share-based payment awards. This standard becomes effective for the Company on January 1, 2022. The Company will adopt the new standard by application of the modified retrospective method, with resulting transition adjustments recorded to the January 1, 2022 balance of retained earnings to be reflected in its Form 10-Q for the first quarter of 2022.Due to the elimination of the conversion option separation model taking effect in 2022, the Company currently anticipates a reduction of approximately $58 million in non-cash interest to be recorded on its convertible notes for the year ended December 31, 2022, as compared to the year ended December 31, 2021.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk and Foreign Exchange Risk

Cash equivalents that are subject to interest rate volatility represent our principal market risk. We do not expect cash flows to be affected to any significant degree by a sudden change in market interest rates as our Notes and Livongo Notes bear fixed interest rates. We do not enter into investments for trading or speculative purposes.

We operate our business primarily within the United States which accounts for approximately 87% of our revenues. We have not utilized hedging strategies with respect to our foreign exchange exposure as we believe it is not expected to have a material impact on our consolidated financial statements.

Item 8. Financial Statements and Supplementary Data

Our Consolidated Financial Statements are listed in the Index to Consolidated Financial Statements and Supplemental Data filed as part of this Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Form 10-K, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of December 31, 2021, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control system is designed to provide reasonable assurance regarding the preparation and fair presentation of published financial statements.

Our management, including our Chief Executive Officer and our Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission

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(COSO) in Internal Control-Integrated Framework (2013 framework). Based on this assessment, management, including our Chief Executive Officer and our Chief Financial Officer, concluded that we maintained effective internal control over financial reporting at the reasonable assurance level as of December 31, 2021.

No changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Ernst & Young LLP, independent registered public accounting firm, is appointed by the Board of Directors and ratified by our Company’s stockholders. They were engaged to render an opinion regarding the fair presentation of our consolidated financial statements as well as conducting an audit of internal control over financial reporting. Their accompanying reports are based upon audits conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States).

February 28, 2022

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Teladoc Health, Inc.

Opinion on Internal Control over Financial Reporting

We have audited Teladoc Health, Inc.’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Teladoc Health, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations and other comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”) and our report dated February 28, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

New York, New York

February 28, 2022

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Item 9B. Other Information

None.

Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

PART III

Information required by Items 10, 11, 12, 13 and 14 of Part III is omitted from this Annual Report and will be filed in a definitive proxy statement or by an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report.

Item 10. Directors, Executive Officers and Corporate Governance

We will provide information that is responsive to this Item 10 in our definitive proxy statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report, in either case under the caption “Corporate Governance and Board Matters,” and possibly elsewhere therein. That information is incorporated in this Item 10 by reference.

Our board of directors has adopted a Code of Business Conduct and Ethics that applies to all of our employees, officers and directors. The full text of our Code of Business Conduct and Ethics is posted on the Investors section of our website, www.teladochealth.com. We intend to disclose any amendments to our Code of Business Conduct and Ethics, or waivers of its requirements, on our website.

Item 11. Executive Compensation

We will provide information that is responsive to this Item 11 in our definitive proxy statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report, in either case under the captions “Executive Compensation” and “Director Compensation,” and possibly elsewhere therein. That information is incorporated in this Item 11 by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

We will provide information that is responsive to this Item 12 in our definitive proxy statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report, in either case under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information,” and possibly elsewhere therein. That information is incorporated in this Item 12 by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

We will provide information that is responsive to this Item 13 in our definitive proxy statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report, in either case under the caption “Certain Relationships and Related-Party Transactions,” and possibly elsewhere therein. That information is incorporated in this Item 13 by reference.

Item 14. Principal Accounting Fees and Services

We will provide information that is responsive to this Item 14 in our definitive proxy statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report, in either case under the caption “Audit Matters,” and possibly elsewhere therein. That information is incorporated in this Item 14 by reference.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)(1)Our Consolidated Financial Statements are listed in the Index to Consolidated Financial Statements and Supplemental Data filed as part of this Form 10-K.

(2) Schedule II—Valuation and Qualifying Accounts.

Allowance for Doubtful Accounts Receivable (in thousands):

Balance at Balance at

Beginning End

of Period Provision Write-offs Other of Period

Income Taxes Valuation Allowance (in thousands):

Balance at Balance at

Beginning End

of Period Provision Write-offs Other of Period

All other schedules are omitted as the required information is inapplicable or the information is presented in the consolidated financial statements and notes thereto in Item 8 above.

(3)A list of exhibits is set forth on the Exhibit Index immediately prior to the signature page of this Form 10-K, and is incorporated herein by reference.

Item 16. Form 10-K Summary

Not applicable.

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Exhibit Index

Incorporated by Reference

ExhibitNumber Exhibit Description Form File No. Exhibit FilingDate FiledHerewith

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21.1 Subsidiaries of the Registrant. *

101.INS XBRL Instance Document. *

101.SCH XBRL Taxonomy Extension Schema Document. *

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101.CAL XBRL Taxonomy Calculation Linkbase Document. *

101.DEF XBRL Definition Linkbase Document. *

101.LAB XBRL Taxonomy Label Linkbase Document. *

101.PRE XBRL Taxonomy Presentation Linkbase Document. *

*Filed herewith.

**Furnished herewith.

+Management contract or compensatory plan.

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Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

TELADOC HEALTH, INC.

Date: February 28, 2022 By: /s/ JASON GOREVIC

Name: Jason Gorevic

Title: Chief Executive Officer and Director

Date: February 28, 2022 By: /s/ MALA MURTHY

Name: Mala Murthy

Title: Chief Financial Officer

Date: February 28, 2022 By: /s/ RICHARD J. NAPOLITANO

Name: Richard J. Napolitano

Title: Chief Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date: February 28, 2022 By: /s/ DAVID B. SNOW, JR.

Name: David B. Snow, Jr

Title: Chairman of the Board

Date: February 28, 2022 By: /s/ CHRISTOPHER BISCHOFF

Name: Christopher Bischoff

Title: Director

Date: February 28, 2022 By: /s/ KAREN L. DANIEL

Name: Karen L. Daniel

Title: Director

Date: February 28, 2022 By: /s/ SANDRA FENWICK

Name: Sandra Fenwick

Title: Director

Date: February 28, 2022 By: /s/ WILLIAM H. FRIST, M.D.

Name: William H. Frist, M.D.

Title: Director

Date: February 28, 2022 By: /s/ CATHERINE JACOBSON

Name: Catherine Jacobson

Title: Director

TDOC US Equity

TDOC · 10-K · period ended 2021-12-31

Item7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accounting Fees and Services

Item 15. Exhibits and Financial Statement Schedules

Item 16. Form 10-K Summary

TDOC US Equity☆

TDOC · 10-K · period ended 2021-12-31

Item7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 9C Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal Accounting Fees and Services

Item 15. Exhibits and Financial Statement Schedules

Item 16. Form 10-K Summary

TDOC US Equity