Case 1:22-cv-04525-ARR-RER Document 1 Filed 08/02/22 Page 1 of 22 PageID #: 1
`
`THE ROSEN LAW FIRM, P.A.
`Phillip Kim, Esq. (PK 9384)
`Laurence M. Rosen, Esq. (LR 5733)
`275 Madison Ave., 40th Floor
`New York, New York 10016
`Telephone: (212) 686-1060
`Fax: (212) 202-3827
`Email: pkim@rosenlegal.com
`lrosen@rosenlegal.com
`
`Counsel for Plaintiff
`
`
`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF NEW YORK
`
`
`
`
`WALTER DE SCHUTTER, Individually and on
`behalf of all others similarly situated,
`
`
`Plaintiff,
`
`v.
`
`TELADOC HEALTH, INC., JASON
`GOREVIC, and MALA MURTHY,
`
` Defendants.
`
`
`
`
`
`Case No.
`
`CLASS ACTION COMPLAINT FOR
`VIOLATION OF THE FEDERAL SECURITIES
`LAWS
`
`JURY TRIAL DEMANDED
`
`CLASS ACTION
`
`Plaintiff Walter De Schutter (“Plaintiff”), individually and on behalf of all other persons
`
`similarly situated, by Plaintiff’s undersigned attorneys, for Plaintiff’s complaint against
`
`Defendants (defined below), alleges the following based upon personal knowledge as to Plaintiff
`
`and Plaintiff’s own acts, and information and belief as to all other matters, based upon, inter alia,
`
`the investigation conducted by and through his attorneys, which included, among other things, a
`
`review of the Defendants’ public documents, announcements, United States Securities and
`
`Exchange Commission (“SEC”) filings, wire and press releases published by and regarding
`
`Teladoc Health, Inc. (“Teladoc” or the “Company”), and information readily obtainable on the
`
`

`

`Case 1:22-cv-04525-ARR-RER Document 1 Filed 08/02/22 Page 2 of 22 PageID #: 2
`
`Internet. Plaintiff believes that substantial evidentiary support will exist for the allegations set
`
`forth herein after a reasonable opportunity for discovery.
`
`NATURE OF THE ACTION
`
`1.
`
`This is a class action on behalf of persons or entities who purchased or otherwise
`
`acquired publicly traded Teladoc securities between October 28, 2021 and April 27, 2022,
`
`inclusive (the “Class Period”). Plaintiff seeks to recover compensable damages caused by
`
`Defendants’ violations of the federal securities laws under the Securities Exchange Act of 1934
`
`(the “Exchange Act”) and Rule 10b-5 promulgated thereunder.
`
`JURISDICTION AND VENUE
`
`2.
`
`The claims asserted herein arise under and pursuant to §§10(b) and 20(a) of the
`
`Exchange Act (15 U.S.C. §§78j(b) and §78t(a)) and Rule 10b-5 promulgated thereunder by the
`
`SEC (17 C.F.R. §240.10b-5).
`
`3.
`
`This Court has jurisdiction over the subject matter of this action under 28 U.S.C.
`
`§1331 and §27 of the Exchange Act.
`
`4.
`
`This Court has jurisdiction over each defendant named herein because each
`
`defendant has sufficient minimum contacts with this judicial district so as to render the exercise
`
`of jurisdiction by this Court permissible under traditional notions of fair play and substantial
`
`justice.
`
`5.
`
`Venue is proper in this judicial district pursuant to §27 of the Exchange Act (15
`
`U.S.C. §78aa) and 28 U.S.C. §1391(b) as the alleged misstatements entered and subsequent
`
`damages took place within this judicial district.
`
`6.
`
`In connection with the acts, conduct and other wrongs alleged in this Complaint,
`
`Defendants, directly or indirectly, used the means and instrumentalities of interstate commerce,
`
`
`
`
`2
`
`

`

`Case 1:22-cv-04525-ARR-RER Document 1 Filed 08/02/22 Page 3 of 22 PageID #: 3
`
`including but not limited to, the United States mail, interstate telephone communications and the
`
`facilities of the national securities exchange.
`
`PARTIES
`
`7.
`
`Plaintiff, as set forth in the accompanying Certification, purchased the Company’s
`
`securities at artificially inflated prices during the Class Period and was economically damaged
`
`thereby.
`
`8.
`
`Defendant Teladoc provides virtual healthcare services in the U.S. and
`
`internationally
`
`through Business-to-Business (“B2B”) and Direct-to-Consumer (“D2C”)
`
`distribution channels. The Company offers its customers various virtual products and services
`
`addressing, among other medical issues, mental health through its BetterHelp D2C product, and
`
`chronic conditions.
`
`9.
`
`Defendant Teladoc is a Delaware corporation with principal executive offices
`
`located at 2 Manhattanville Road, Suite 203, Purchase, New York 10577. Teladoc’s common
`
`stock trades in an efficient market on the New York Stock Exchange (“NYSE”) under the trading
`
`symbol “TDOC.”
`
`10.
`
`Defendant Jason Gorevic (“Gorevic”) has served as Teladoc’s Chief Executive
`
`Officer at all relevant times.
`
`11.
`
`Defendant Mala Murthy (“Murthy”) has served as Teladoc’s Chief Financial
`
`Officer at all relevant times.
`
`12.
`
`Defendants Gorevic and Murthy are sometimes referred to herein as the
`
`“Individual Defendants.”
`
`13.
`
`Each of the Individual Defendants:
`
`(a)
`
`directly participated in the management of the Company;
`
`
`
`
`3
`
`

`

`Case 1:22-cv-04525-ARR-RER Document 1 Filed 08/02/22 Page 4 of 22 PageID #: 4
`
`(b)
`
`was directly involved in the day-to-day operations of the Company at the highest
`
`levels;
`
`(c)
`
`was privy to confidential proprietary information concerning the Company and its
`
`business and operations;
`
`(d)
`
`was directly or indirectly involved in drafting, producing, reviewing, and/or
`
`disseminating the false and misleading statements and information alleged herein;
`
`(e)
`
`was directly or indirectly involved in the oversight or implementation of the
`
`Company’s internal controls;
`
`(f)
`
`was aware of or recklessly disregarded the fact that the false and misleading
`
`statements were being issued concerning the Company; and/or
`
`(g)
`
`14.
`
`approved or ratified these statements in violation of the federal securities laws.
`
`The Company is liable for the acts of the Individual Defendants and its employees
`
`under the doctrine of respondeat superior and common law principles of agency because all of
`
`the wrongful acts complained of herein were carried out within the scope of their employment.
`
`15.
`
`The scienter of the Individual Defendants and other employees and agents of the
`
`Company is similarly imputed to the Company under respondeat superior and agency principles.
`
`16.
`
`The Company and the Individual Defendants are referred to herein as the
`
`“Defendants.”
`
`SUBSTANTIVE ALLEGATIONS
`
`Background Information
`
`17.
`
`Teladoc provides virtual healthcare services in the U.S. and internationally
`
`through B2B and D2C distribution channels, serving employers, health plans, hospitals and
`
`health systems, insurance and financial services companies, and individual members. The
`
`
`
`
`4
`
`

`

`Case 1:22-cv-04525-ARR-RER Document 1 Filed 08/02/22 Page 5 of 22 PageID #: 5
`
`Company offers its customers various virtual products and services addressing, among other
`
`medical issues, mental health through its BetterHelp D2C product, and chronic conditions.
`
`18.
`
`Teladoc touts itself as “the first and only company to provide a comprehensive
`
`and integrated whole person virtual healthcare solution that both provides and enables care for a
`
`full spectrum of clinical conditions[.]” Despite recent market concerns over new entrants to the
`
`telehealth field, such Amazon and Walmart, the Company has continued to assure investors of
`
`the Company’s dominant market position in the industry.
`
`Materially False and Misleading Statements
`
`19.
`
`On October 28, 2021, the day after Teladoc held a conference call with investors
`
`and analysts to discuss the Company’s third quarter 2021 results (the “Q3 2021 Earnings Call”).
`
`On that call, Defendant Gorevic provided preliminary FY 2022 revenue guidance of $2.6
`
`billion, while simultaneously downplaying anticipated headwinds to the Company’s chronic
`
`care business, stating, in relevant part:
`
`I want to provide some initial perspective on our expectations for 2022. As you
`know, it’s not our typical practice to comment on forward outlook at this point in
`the year. But we believe the additional color is appropriate given our insights at
`this stage of the selling season and our outlook on consolidated revenue growth
`for next year. First, we are as confident as ever in our multiple levers for growth
`in 2022 and beyond. Our unique ability to deliver longitudinal, Whole-person care
`is a significant competitive advantage. And our leading position in all B2B and
`DTC channels enables us to fuel continued growth.
`
`Given our insights at this stage of the selling season, our preliminary outlook for
`consolidated revenue next year is approximately $2.6 billion … Chronic care is
`just one of those levers for growth and is increasingly converging with others …
`However, as we work through the 2022 planning process, we expect to be more
`conservative about growth expectations for standalone Chronic Care.
`
`Our preliminary outlook assumes standalone Chronic Care revenue will grow
`approximately 25% to 35%. And we believe strongly that our Chronic Care
`capabilities will also continue to unlock growth across our integrated suite of
`products and solutions. Our Whole-person care approach is clearly resonating
`with clients and consumers as their expectations for virtual healthcare delivery
`
`
`
`
`5
`
`

`

`Case 1:22-cv-04525-ARR-RER Document 1 Filed 08/02/22 Page 6 of 22 PageID #: 6
`
`continue to move up the value chain and expand from transactional episodic
`demand toward integrated longitudinal care.
`
`20.
`
`Also on the Q3 2021 Earnings Call, in response to a Credit Suisse analyst’s
`
`request for more color on Defendants’ conservative view of chronic care for 2022, Defendant
`
`Gorevic stated, in relevant part:
`
`[W]hen we talk about Chronic Care management and our outlook, we’ve done a
`lot of work to make sure that we’re very focused on the discipline that we bring
`and have always brought to our management of the pipeline and are forecasting
`process … We’ve -- I would say have been very successful in selling into the
`health plan channel over the course of this year and our pipeline’s still looks
`strong with new opportunities. Many of those opportunities, either the existing
`sales that we’ve made or the ones in our pipeline are the permission and the
`partnership with the health plan to go sell to their self-insured clients.
`
`That takes a couple of years to unlock the full value of it because you have to go
`through the renewal cycle and the selling cycle to those self-insured clients. And
`so, we’re trying to be very realistic about the sort of on-ramp of those clients in
`the health plan segment. With respect to the employer market, that’s a market
`where our products are extremely attractive. And historically, we’ve been very
`successful at selling into the employer market directly when we sell directly to
`large employers. That’s a market where the benefits managers have, I would say,
`paused over the course of this year more than we’ve seen it in the past and it’s
`really due to COVID and them being focused on the pandemic and return to work.
`
`21.
`
`Despite expressing measured caution over the staggered “on-ramp” of certain
`
`clients and the ongoing COVID-19 pandemic, Defendant Gorevic continued by assuring
`
`investors, in relevant part:
`
`As I talked to our employer sales team, they see th[e employer market] picking up
`substantially as we get to the end of the year. And people are starting to get back
`to the office. And the benefits manager is starting to think about more of a return
`to normal. And so, they are optimistic as we look into next year’s selling cycle.
`
`22.
`
`Similarly, also in response to the Credit Suisse analyst, Defendant Gorevic
`
`addressed potential slowdowns in two other chronic care channels, while again simultaneously
`
`assuring investors of the limited impact of those market conditions:
`
`
`
`
`6
`
`

`

`Case 1:22-cv-04525-ARR-RER Document 1 Filed 08/02/22 Page 7 of 22 PageID #: 7
`
`And then there are two channels that I would say are just moving a little more
`slowly than we had originally anticipated. And again, we want to be conservative
`in our outlook. The broker channel, we had high expectations and we’re just
`starting to see that pick up now. It took a while to educate the brokers.
`
`We have a large distributed broker network. And it took a little while to educate
`them on a product set that they really didn’t have access to before. We’re now
`starting to see that pick up substantially and we’re excited about next year’s
`selling season for that. And then lastly, International. I think the international
`markets, we have to go through some both regulatory hurdles in terms of local
`certifications and approvals, but also localizing our products to various
`international markets. And we’re doing that in a fairly methodical approach,
`market-by-market. So, I think we will see growth internationally, but we don’t
`have, really, anything in our plan for next year on a substantial basis.
`
`And then maybe the last thing I’ll say is that’s been -- I would say positively
`offset by our growth in the hospital and health system market where we’ve, we’ve
`noted before that we’ve seen especially risk-bearing hospitals really lean into the
`Chronic Care solutions. And that’s going better than we had expected. So, when
`you put all of that together and we take, I would say critical look at the pipeline
`and our forecast, that’s where we landed on that 25% to 35% outlook. Again,
`that’s a contributor to our overall outlook of approximately 2.6 billion in revenue
`next year.
`
`23.
`
`On February 22, 2022, Teladoc issued a press release announcing the Company’s
`
`fourth quarter (“Q4”) and FY 2021 results. That press release highlighted “[f]ull year 2022
`
`Revenue guidance of $2.55 to $2.65 billion, representing 25% to 30% growth” (emphasis in
`
`original), and provided FY adjusted EBITDA guidance of $330 - $355 million.
`
`24.
`
`That same press release quoted Defendant Gorevic, who stated, in relevant part:
`
`“Teladoc Health took a huge step forward in bringing true whole-person care to
`life for consumers and clients in 2021 … We successfully delivered against
`performance metrics [and] solidified our position as the partner of choice for our
`clients … Teladoc Health is clearly differentiated by the breadth and depth of our
`offerings, an integrated suite of virtual care services that connect individuals with
`chronic, primary, acute and specialty care. We saw meaningful growth and
`penetration across several key areas of our business, [including] in mental health
`through [inter alia] BetterHelp in the [D2C] space …”
`
`“… We … are equally excited about our role in 2022 and beyond as we continue
`to innovate, further evolving whole-person care, introducing new services like
`
`
`
`
`7
`
`

`

`Case 1:22-cv-04525-ARR-RER Document 1 Filed 08/02/22 Page 8 of 22 PageID #: 8
`
`Chronic Care Complete, expanding into new markets and deepening our
`relationships with our clients and consumers[.]”
`
`25.
`
`That same day, Teladoc held a conference call with investors and analysts to
`
`discuss the Company’s Q4 and FY 2021 results (the “Q4/FY 2021 Earnings Call”). On that call,
`
`Defendant Gorevic expressed his confidence in meeting Teladoc’s revenue guidance for FY
`
`2022, stating, in relevant part:
`
`For [FY 2022], we expect revenue to be in the range of $2.55 billion to $2.65
`billion, representing growth of 25% to 30%. Our expectations for strong growth
`are a result of the broad-based momentum we continue to see across our suite of
`products and services and across geographies. We have over 90 million total
`individuals with access to the Teladoc platform today, and we see a significant
`opportunity for long-term growth by expanding our relationships and going
`deeper with our existing clients and members as we execute against our key
`strategic priorities across primary care, mental health and chronic care solutions.
`
`26. With respect to Teladoc’s revenue and adjusted EBITDA guidance for FY 2022,
`
`Defendant Murthy stated the following on the Q4/FY 2021 Earnings Call:
`
`For [FY] 2022, we expect revenue to be in the range of $2.55 billion to $2.65
`billion, representing growth of 25% to 30% over the prior year. We expect total
`membership of 54 million to 56 million members, representing growth of 1% to
`5% year-over-year, with the remainder of revenue growth driven by expanding
`revenue per member driven both by increased product penetration and product
`mix.
`
`We expect adjusted EBITDA in 2022 to be in the range of $330 million to $355
`million, representing a 12.9% to 13.4% adjusted EBITDA margin and an
`expansion of approximately 90 to 140 basis points over 2021 after normalizing for
`last year’s purchase price accounting benefit. We expect total visits in 2022 to be
`between 18.5 million and 20 million visits, representing growth of 20% to 30%
`over the prior year.
`
`
`27.
`
`Additionally, also on the Q4/FY 2021 Earnings Call, in discussing “the expected
`
`cadence of revenue and adjusted EBITDA growth over the course of [FY 2022,]” Defendant
`
`Murthy stated, in relevant part:
`
`
`
`
`8
`
`

`

`Case 1:22-cv-04525-ARR-RER Document 1 Filed 08/02/22 Page 9 of 22 PageID #: 9
`
`On the revenue side, we expect the timing of new chronic care client onboarding
`to be more heavily weighted towards the second half of this year. This includes
`the launch of large new health plan clients signed over the past several months …
`which are scheduled to onboard in the second half of this year. We, therefore,
`expect to see strong sequential growth in revenue over the course of the year.
`Specific to the second quarter, we expect an approximate $40 million to $50
`million step-up in revenue from 1Q to 2Q.
`
`On the expense side, we normally see higher engagement marketing spend in the
`first half of the year as we prepare to onboard new clients and members. It’s also
`typical for us to see higher advertising spend early in the year as we take
`advantage of lower media pricing in the market following the conclusion of the
`more expensive holiday season. We expect that to be the case again this year, as
`we have seen a more advantageous media buying landscape early this year, which
`has resulted in a slightly lower customer acquisition cost.
`
`This will impact the quarterly cadence of adjusted EBITDA, and we expect will
`result in a significant margin expansion progression over the course of 2022,
`particularly in the second half due to our expected revenue and enrollment ramp
`for the chronic care programs launching later this year as well as the typical
`seasonality of advertising spend over the course of the year.
`
`28.
`
`On the same call, Defendant Murthy also assured investors of Defendants’
`
`visibility into Teladoc’s second half of FY 2022 results, stating, in relevant part:
`
`It’s important to note that the revenue and EBITDA ramp described is not
`dependent on significant new sales. The deals mentioned are contracts that have
`been signed over the past several months, but are disproportionately scheduled to
`onboard in the second half [of 2022]. And we, therefore, have good visibility into
`the second half revenue and EBITDA progression.
`
`29.
`
`On February 28, 2022, Teladoc filed an annual report on Form 10-K with the
`
`SEC, reporting the Company’s financial and operating results for the quarter and year ended
`
`December 31, 2021 (the “2021 10-K”). That filing assured investors of the Company’s
`
`continued dominant market position and unique competitive strengths, stating, inter alia:
`
`We believe that Teladoc Health is the leading global virtual healthcare provider
`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 long-standing operational excellence 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
`
`
`
`
`9
`
`

`

`Case 1:22-cv-04525-ARR-RER Document 1 Filed 08/02/22 Page 10 of 22 PageID #: 10
`
`healthcare company providing whole person care at scale, we have pioneered
`solutions and created what we believe are collectively the telehealth industry’s
`first and only offerings of their kind.
`
`
`*
`
`*
`
` *
`
`
`We believe that we are the first and only company to provide a comprehensive
`and integrated whole person virtual healthcare 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.
`
`30. With respect to Teladoc’s BetterHelp business, the 2021 10-K stated, in relevant
`
`part:
`
`We plan to continue driving growth through investments in our D2C channels …
`BetterHelp is the leader in the D2C therapy market, both in terms of the number
`of individuals enrolled and the number of providers who provide services on the
`platform. 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. We leverage diverse customer acquisition channels and increased organic
`sources of traffic, which reduces dependence on any single source of member
`acquisition. Even with our strong historical growth, we believe there is substantial
`untapped growth potential, both domestically and internationally, as almost half
`of BetterHelp members have never sought therapy before.
`
`31. With respect to Teladoc’s chronic care business, the 2021 10-K stated, in
`
`relevant part, that “[o]ur 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.”
`
`32.
`
`Appended as exhibits to the 2021 10-K were signed certifications pursuant to the
`
`Sarbanes-Oxley Act of 2002, wherein the Individual Defendants certified that “[t]he [2021 10-
`
`K] fully complies with the requirements of Section 13(a) or Section 15(d) of the [Exchange
`
`Act], as amended[,]” and that “[t]he information contained in the [2021 10-K] fairly presents, in
`
`all material respects, the financial condition and results of operations of the Company.”
`
`
`
`
`10
`
`

`

`Case 1:22-cv-04525-ARR-RER Document 1 Filed 08/02/22 Page 11 of 22 PageID #: 11
`
`33.
`
`The statements referenced in ¶¶ 19-32 above were materially false and/or
`
`misleading because they misrepresented and failed to disclose the following adverse facts
`
`pertaining to the Company’s business which were known to Defendants or recklessly disregarded
`
`by them. Specifically, Defendants made false and/or misleading statements and/or failed to
`
`disclose that: (1) increased competition, among other factors, was negatively impacting
`
`Teladoc’s BetterHelp and chronic care businesses; (2) accordingly, the growth of those
`
`businesses was less sustainable than Defendants had led investors to believe; (3) as a result,
`
`Teladoc’s revenue and adjusted EBITDA projections for FY 2022 were unrealistic; (4) as a result
`
`of all the foregoing, Teladoc would be forced to recognize a significant non-cash goodwill
`
`impairment charge; and (5) as a result, Defendants’ public statements were materially false
`
`and/or misleading at all relevant times.
`
`The Truth Emerges
`
`34.
`
`On April 27, 2022, post-market, Teladoc issued a press release announcing its Q1
`
`2022 financial results, including revenue of $565.4 million, which missed consensus estimates
`
`by $3.23 million, and “[n]et loss per share of $41.58, primarily driven by [a] non-cash goodwill
`
`impairment charge of $6.6 billion or $41.11 per share[.]” In addition, the Company revised its
`
`FY 2022 revenue guidance to $2.4 - $2.5 billion, down from previous guidance of $2.55 - $2.65
`
`billion, and revised its FY 2022 adjusted EBITDA guidance to $240 - $265 million, down from
`
`previous guidance of $330 - $355 million, “to reflect dynamics we are currently experiencing in
`
`the [D2C] mental health and chronic condition markets.” Specifically, according to Defendant
`
`Gorevic, as quoted in that press release:
`
`In the D2C mental health market, higher advertising costs in some channels are
`generating a lower-than-expected yield on our marketing spend. In the chronic
`condition market, we are seeing an elongated sales cycle as employers and health
`
`
`
`
`11
`
`

`

`Case 1:22-cv-04525-ARR-RER Document 1 Filed 08/02/22 Page 12 of 22 PageID #: 12
`
`plans evaluate their long-term strategies to deliver the benefits and care that their
`populations need.
`
`
`35.
`
`Later that day, Teladoc held a conference call with investors and analysts to
`
`discuss the Company’s Q1 2022 results. In his prepared remarks on that call, Defendant Gorevic
`
`stated the following regarding how increased competition, lower growth, and lower yield from
`
`marketing spend were negatively impacting the Company’s BetterHelp results:
`
`Over the past several weeks, we’ve seen lower-than-expected yield on marketing
`spend for BetterHelp, which is a reversal of the trends we experienced exiting
`2021 and in the early part of 2022. One example of this is paid search advertising,
`where we’ve seen a notable increase in rates for keywords associated with online
`therapy.
`
`We believe the biggest driver of this dynamic is smaller private competitors
`pursuing what we think are low- or no-return customer acquisition strategies in an
`attempt to establish market share.
`
`Some of those same providers are also exploiting the temporary suspension of
`certain regulations associated with the national health emergency concerning the
`prescription of controlled substances. We believe
`these strategies are
`unsustainable in the long-term. This dynamic is likely to persist at least
`throughout the remainder of this year, however, resulting in growth and margin
`contribution from BetterHelp that is below our expectation in February.
`
`
`*
`
` *
`
` *
`
`
`[G]iven the persistency of these trends over the past several weeks and the
`broader economic backdrop, we’ve incorporated this updated view into our
`forward outlook, including an assumed 10% lower revenue yield per dollar of ad
`spend for the full year.
`
`36.
`
`Likewise, Defendant Gorevic stated the following regarding how increased
`
`competition and other factors were negatively impacting the Company’s chronic care results:
`
`[W]e’re also seeing our chronic care sales pipeline developed more slowly than
`anticipated. Last October, we discussed two trends in the marketplace that we saw
`leading to an elongated selling cycle. The first was in the employer market, where
`we saw benefit managers focused on COVID and return to work, which we felt
`was contributing to a longer decision-making process. The second was a large
`
`
`
`
`12
`
`

`

`Case 1:22-cv-04525-ARR-RER Document 1 Filed 08/02/22 Page 13 of 22 PageID #: 13
`
`pipeline of health plan deals that were simply harder to predict when it comes to
`timing given the size and complexity of those clients.
`
`At the beginning of this year, we were encouraged by very strong fourth quarter
`bookings and a robust late-stage pipeline. However, as we progressed through the
`first part of the year, we’re seeing clear signs of the slower bookings pace
`continuing.
`
`In addition to the factors we discussed last fall, we’re seeing clients inundated
`with a number of new smaller point solutions, which has created noise in the
`marketplace … [W]e are in the process of taking a closer look at some of these
`forces that are impacting the near-term conversion of pipeline to revenue, and
`we’ll continue to make adjustments as necessary to address them.
`
` …
`
` [W]e’re not seeing deals progress at the pace that we expected.
`
`
`37.
`
`Additionally, Defendant Gorevic revealed
`
`that BetterHelp had played a
`
`disproportionate role in necessitating Teladoc’s revised FY 2022 guidance, stating, inter alia:
`
`When comparing the impact to guidance from the items we’ve just discussed,
`approximately three quarters of the reduction to our 2022 revenue outlook is
`driven by lower expected growth at BetterHelp with the remainder primarily
`attributed to the lower expected revenue from our suite of chronic care products.
`
`For adjusted EBITDA, approximately two thirds of the reduction is driven by
`lower yield on advertising spend from BetterHelp. The remainder of the revision
`is driven primarily by our lower chronic care revenue outlook as well as a modest
`increase in our assumption for wage growth due to higher inflation as we grow
`our headcount in technology and development.
`
`As a result of these updates, we now expect revenue of $2.4 billion to $2.5 billion
`and adjusted EBITDA of $240 million to $265 million for fiscal year 2022 … We
`are not providing today any guidance with respect to periods after 2022, and
`we’re evaluating whether there will be effects to our long-term revenue growth
`outlook.
`
`38.
`
`On the same call, in her prepared remarks, Defendant Murthy stated the following
`
`regarding Teladoc’s $6.6 billion non-cash goodwill impairment charge:
`
`Net loss per share in the first quarter was $41.58 compared to a net loss per share
`of $1.31 in the first quarter of last year. Net loss per share in the first quarter
`includes a non-cash goodwill impairment charge of $41.11 per share or $6.6
`billion. The goodwill impairment was triggered by the sustained decline in
`Teladoc Health share price with the valuation and size of the impairment charge
`
`
`
`
`13
`
`

`

`Case 1:22-cv-04525-ARR-RER Document 1 Filed 08/02/22 Page 14 of 22 PageID #: 14
`
`driven by a combination of recent market-based factors, such as an increased
`discount rate and decreased market multiples for a relevant peer group of high-
`growth digital health care companies as well as updates to our forecasted cash
`flows consistent with the revised guidance disclosed today.
`
`39.
`
`On April 28, 2022, investor news resource Seeking Alpha published an article
`
`entitled “Teladoc draws downgrades after 1Q revenue miss[,]” noting that the Company’s
`
`“shares have lost more than a third of value to reach a 52-week low on Thursday after the
`
`telehealth company missed Street forecasts for its 1Q 2022 revenue prompting many analysts to
`
`downgrade the stock[,]” while citing analysts from Citi, Credit Suisse, and Wells Fargo, stating:
`
`The financials “reveal cracks in TDOC’s whole health foundation as increased
`competitive intensity is weighing on growth and margins,” Citi analyst Daniel
`Grosslight said after discussions with the management.
`
`The issues were particularly notable in the company’s fastest growing direct-to-
`consumer mental health and chronic care segments, which, according to the
`analyst, were expected to drive growth over the next three years.
`
`Despite the reluctance to make widespread changes to the thesis based only on
`one poor quarter, Grosslight said: “We are doubtful that we will see the
`competition-driven headwinds abate anytime soon.”
`
`Expecting Teladoc (TDOC) shares to trade in a narrow range over the next twelve
`months, the analyst downgrades the stock to Neutral from Buy, with the price
`target lowered to $43 from $115 per share, implying a downside of ~23.2% to the
`last close.
`
`Credit Suisse analysts led by A.J. Rice downgraded Teladoc (TDOC) to Neutral
`from Outperform, noting, among other things, the company’s underwhelming full
`year outlook. The price target slashed to $35 from $114 per share indicates a
`downside of ~38% to the last close.
`
`“TDOC is seeing an elongated sales cycle as employers and health plans evaluate
`their long-term strategies to deliver the benefits and care their populations need,”
`the team noted.
`
`The analysts argue that, as a result the company has lowered its estimate for
`revenue yield for dollar of ad spend and recognized a $6.6B goodwill impairment
`to reflect ~75% and ~66% decline in revenue and EBITDA, respectively.
`
`
`
`
`
`14
`
`

`

`Case 1:22-cv-04525-ARR-RER Document 1 Filed 08/02/22 Page 15 of 22 PageID #: 15
`
`Q1 results disprove its Bullish thesis and signals “significant uncertainty for the
`trajectory of revenue and margins over both the near and intermediate term,”
`Wells Fargo’s Stephen Baxter and Stan Berenshteyn wrote as they downgraded
`the stock to Equal Weight from Overweight. The price target lowered to $40 from
`$104 per share implies a downside of ~29% to the last close.
`
`
`
`40.
`
`On this news, the Company’s stock price fell $22.48 per share, or 40%, to close at
`
`$33.51 per share on April 28, 2022, damaging investors.
`
`41.
`
`As a result of Defendant