160105 TDOC initiation

Steven A. Rubis rubiss@stifel.com (214) 706-9451
Stifel Equity Trading Desk (800) 424-8870
Initiation of Coverage
Initiating Coverage with a Hold Rating; Business Model Uncertainty Suggests Caution
We are initiating coverage on the shares of Teladoc, Inc. with a Hold rating. While we respect management and believe
Teladoc faces a significant growth runway, we believe there are several risk factors that outweigh the positives. Our
primary concerns are: (1) business model risk - PMPM fees + Per Visit Fees, (2) client issues, (3) a limited addressable
market opportunity, (4) the Texas Medical Board standoff, and (5) valuation. We believe we need to seek greater clarity
around our primary concerns and more attractive valuation levels before potentially becoming constructive, all else being
equal.
Why We like Telemedicine. In our view, telemedicine represents an attractive
investment opportunity for three reasons. First, telemedicine in theory represents a
low-cost, outcomes-driven tool that may likely help solve / abate physician access
and physician shortage issues. Second, telemedicine consults should represent a
fraction of the cost of an office / emergency room visit, and drive better, more
efficient care. Lastly, telemedicine remains a nascent industry that theoretically
benefits from a long growth runway, as well as multiple growth levers e.g.,
members, visits, indications, et al. We believe an investment in telemedicine today
presupposes that telemedicine will evolve into a mainstream healthcare tool over
time.
Given Our Affinity Towards Telemedicine, Why Are We Cautious Regarding
Teladoc? We see five areas of primary concern regarding shares of Teladoc. We
believe that the current TDOC model may be more costly than an in-person visit
(see Exhibit 6, and Exhibit 11 and Exhibit 12). Second, we believe competition is
calling into question TDOC’s dual monetization structure (PMPM fees + Per Visit
Fees), and clients are considering / testing alternative models. We believe the total
addressable visit market is more limited than the 417M opportunity cited by
management. In our view, in current form TDOC only truly addresses urgent care
and emergency room visits, which limits addressable visits to well below 100M
annually, and a fraction of the $12B estimate set forth by management (see
Exhibit 27 to Exhibit 34). Third, we are concerned with both revenue and revenue
growth quality, as revenues are highly levered to PMPM fees rather than actual
visits. Poor utilization rates (sub 5% system-wide) vividly illustrate our concern.
Lastly, we believe consensus expectations may be too high as the majority of price
target expectations are almost double the current share price.
Valuation. We believe shares should trade at an EV multiple of 2.5x to 3.5x 2017
revenues. FactSet consensus suggests shares should be valued at 7.0x (a range
of 6.0x to 7.8x) on the same basis. Given our concerns, we cannot justify valuing
Teladoc higher than cornerstone franchises ATHN and MDSO.
Changes Previous Current
Rating Hold
Target Price NA
FY16E EPS — $(1.01)
FY17E EPS — $(0.33)
FY16E Revenue — $118.6
FY17E Revenue — $168.5
Price (01/05/16): $17.99
52-Week Range: $35 – $15
Market Cap.(mm): 697.3
Shr.O/S-Diluted (mm): 38.8
Enterprise Val. (mm): $572.5
Avg Daily Vol (3 Mo): 383,645
LT Debt/Total Cap.: 12.3%
Net Cash/Share: $3.22
Book Value/Share: $4.97
Dividend($ / %) $0.00 / 0.0%
S&P Index 2,012.66
52-week range since shares began trading
7/1/15.
EPS 2015E 2016E 2017E
Q1 $(0.43)A $NE $NE
Q2 (0.44)A NE NE
Q3 (0.33)A NE NE
Q4 (0.38) NE NE
FY Dec $(1.58) $(1.01) $(0.33)
Revenue 2015E 2016E 2017E
FY Dec $76.3 $118.6 $168.5
EBITDA 2015E 2016E 2017E
FY Dec $(48.5) $(31.3) $(3.7)
One Year Price Chart
January 5, 2016
Teladoc, Inc.
TDOC – NYSE
Hold
Digital Healthcare
Stifel does and seeks to do business with companies covered in its research reports. As a result, investors should be
aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should
consider this report as only a single factor in making their investment decision.
All relevant disclosures and certifications appear on pages 40 - 43 of this report.

Investment Rationale
We are initiating coverage on the shares of Teladoc, Inc. with a Hold rating. Our cautious outlook stems from
our concerns around business model risk, key clients questioning the company’s value proposition, low
utilization rates, a limited total addressable market, muddled reimbursement landscape, concerns about the
Texas market, and valuation. In our view, these concerns suggest that a premium valuation is not likely prudent
at this time, despite seemingly attractive growth rates. Ultimately, what we see as low revenue quality (per
member per month (PMPM) fees significantly overshadow actual usage fees) suggests seemingly attractive
growth rates may deteriorate over time. We outline the concerns that comprise our investment hypothesis,
below.
Business Model Risk. We believe the most significant risk revolves around the sustainability of Teladoc’s dual
monetization business model. The company currently monetizes its platform through PMPM subscription fees
and per visit consultation fees. According to management, the PMPM fees cover the administrative and back-
office coordination Teladoc supports, as well as member engagement services. Currently, Teladoc argues that
its telemedicine services drive substantial cost savings compared to traditional in-person visits. The issue is
that Teladoc’s cost savings calculations typically include the per visit fee only, and exclude the PMPM fees
generated from clients. At issue is the fact that when PMPM fees are included in the cost savings calculation
the associated cost savings with Teladoc is significantly less than the company claims, and in some cases
could be more costly. Currently, competitors are focused on go-to-market strategies revolving around per visit
consult fees only; the competition is trying to disintermediate the PMPM model completely. Cost savings
questions and competitive pressures are leading some clients to question the value of the PMPM model.
Client Behavior. Due to questions about the inherent cost savings associated with Teladoc’s telemedicine
services, clients are beginning to question the PMPM revenue model. First, Teladoc’s cost savings argument
seems to breakdown once the ROI analysis moves from solely looking at per visit fees to including PMPM fees,
as well. In some instances, Teladoc may be more expensive when including the per visit and PMPM fees in the
analysis. We believe the questions around cost savings are causing clients to question the value of Teladoc’s
model, especially PMPM fees. Recently, high profile clients, Highmark BlueCross BlueShield and Home Depot,
moved away from using Teladoc’s telemedicine services on an exclusive basis. Each entity now offers their
employees a choice between Teladoc and Doctors on Demand, which only charges a per visit fee. We believe
there is a significant burden of proof on Teladoc to prove the value of the PMPM model. In our view, should
competitor models based solely on per visit fees exhibit similar utilization to Teladoc, clients will likely see little
value in the PMPM model, thus impairing the long-term sustainability of the PMPM model. We believe client
behavior will be a key focal point of FY16.
Revenue Quality. Our cautious stance on Teladoc stems in part from our concerns around revenue quality.
We believe Teladoc operates a dual monetization model, whereby the company generates revenues from (1)
per member per month subscription fees, plus (2) per visit consultation fees. We believe competitors and
clients alike are beginning to question the value of the PMPM monetization structure. Teladoc provides
member engagement services, tools to drive increased utilization as part of the PMPM structure. In our view,
while Teladoc believes it has robust patient engagement and utilization capabilities, the 3% to 4% utilization
rates causes skepticism around these claims. We believe current utilization trends suggest relative under-
penetration when compared to the company’s total addressable visit market of 417 million visits, and our more
conservative estimate of roughly 76 million visits. Today, the majority of revenues are generated from the
PMPM pricing structure.
We would be more excited about PMPM were the company to completely drop the visit fee monetization
structure, or price visits more aggressively. The quality concerns stem from the fact that over 80% of Teladoc’s
revenues come from PMPM fees. In our view, the fundamental presupposition associated with telemedicine,
and by extension Teladoc, is that such services are supposed to drive a patient shift away from in-person
services to telemedicine services. The success and validity of this presupposition is a function of visits and by
extension per visit revenues. We potentially would be more constructive on Teladoc if the business exhibited
better utilization, better utilization growth, and a more sustainable monetization structure; either PMPM or visit
fees only, not the dual structure employed today, all else being equal.
A Comment on PMPM versus Per Visit. Ultimately, we do not believe that the PMPM or per visit fee is
superior to one another. In our view, the problem facing Teladoc is that the dual monetization structure seems
unsustainable in our view. We believe the dual monetization associated with PMPM plus per visit fees harkens
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Teladoc, Inc. (TDOC) January 5, 2016

back to the business models of legacy HCIT vendors who charge hefty installation fees and recurring
maintenance fees. We believe the PMPM model would be quite attractive were Teladoc to offer a monetization
structure based on a PMPM fee attached to unlimited consults. Additionally, the PMPM fee model plus a more
aggressively priced per visit fee schedule (per visit fees less than a typical PCP copay) might work as well. We
believe the per visit fee model, ex-PMPM fees, represents the best model, because it provides the clearest cost
savings rationalization. Given the sheer size of the total addressable market based on either members or
possible visits, we are uncertain as to why Teladoc needs to operate the dual monetization model. As long as
clients and competitors question and attack the dual monetization model, we will harbor concerns regarding the
long-term sustainability of the dual monetization model.
Utilization. Teladoc believes that one of its strengths revolves around generating patient utilization on behalf of
its platform for clients, which is monetized via the PMPM subscription model. We estimate that in 2014,
Teladoc’s utilization rate was 3.7%, which simplistically assumes every visit in FY14 represented a unique user.
Using a factor of 1.36 visits per user, we estimate that the unique user utilization rate was roughly 2.7%.
According to management, utilization over the nearest four quarters, excluding one anomalous client, resulted
in 6.6% total utilization. Management also suggested that employer or broker clients’ utilization is closer to
13%. Additionally, management claims that the best clients post 40% to 60% utilization rates.
Teladoc also points to its capabilities around segmenting and marketing to a client’s patient base. Teladoc’s
abilities stem from the data associated with delivering over one million consultations since inception. According
to management, Teladoc segments patients at a client into 14 micro segments and filters them up into six
macro segments in order to drive better utilization. While one million patient visits are impressive, we believe
one million visits are likely too small of a data set to drive robust engagement. In our view, an average visit rate
of 1.36 visits suggests consumers do not repeat usage enough to drive significant insight into driving increased
utilization. Ultimately, we need to see improved platform utilization based on reported systemwide network
trends to potentially be more constructive.
Total Addressable Market. A major component of high growth revenue stories revolves around the
characteristics of the associated total addressable market opportunity. We believe the majority of investors and
Teladoc believe that the company and telemedicine in general faces a vast and significant total addressable
market opportunity. The problem we see revolves around the aspirational total addressable market and what
we believe may represent the actual total addressable market. We believe that our analysis of Teladoc’s total
addressable market is quite informative to the debate around the sustainability of the PMPM monetization
model, and whether Teladoc’s dual monetization model (PMPM plus per visit fees) will be sustainable long-
term. The bottom line is that we believe Teladoc’s current monetization model unnecessarily complicates things
and, in our view, the company would be better served focusing on driving massive utilization and adoption via
compelling pricing via the PMPM model. Ultimately, we see the winner in the current era of telemedicine as the
vendor most acutely focused on driving adoption via aggressive pricing, which presupposes a very simple
monetization structure.
In terms of the actual addressable market opportunity, we believe Teladoc faces an opportunity of roughly $2.2
billion to $4.4 billion based on the dual monetization structure. According to the company, Teladoc sees its total
addressable market opportunity to be anywhere from $12 billion to $29 billion. Ultimately, we think the company
should consider simplifying its monetization model to look more like Netflix in order to drive massive adoption
and utilization. We believe the total addressable market opportunity associated with such a business model is
between $6.4 billion and $11.4 billion annually.
Muddled Reimbursement Landscape. We believe the muddled yet evolving reimbursement landscape
continues to represent a headwind to telemedicine adoption. Different government programs exhibit different
propensities to reimburse different strands of telemedicine services. Currently, the most reimbursable form of
telemedicine revolves around video visits. In our view, the muddled reimbursement landscape contributes to
the general lack of awareness of telemedicine among consumers. A major problem facing not only Teladoc, but
the telemedicine industry revolves around the fact that most consumers have no idea that telemedicine is an
actual benefit within their health plan offering. On a positive note, roughly 26 states currently offer telemedicine
private-pay parity laws, and an additional 10 states are working on such legislations. We believe universal
private-pay parity will help significantly drive greater awareness, but investors must recognize that telemedicine
still faces a steep adoption curve. The bottom line is that while we believe the muddled reimbursement
landscape is a near-term headwind, we believe the headwind should abate over time.
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Texas and Telemedicine. A key controversy facing Teladoc revolves around the company’s contentious
relationship with the Texas Medical Board that is not likely to go away soon. We note that in April 2015, the
Texas Medical Board adopted revisions to rule 190.8, which requires a face-to-face visit occur prior to a
physician being able to prescribe medication to patients. Teladoc subsequently filed an anti-trust lawsuit in
Federal Court in order to obtain a preliminary injunction against the decision, which was ultimately granted in
May 2015. Teladoc notes the preliminary injunction marks the sixth occasion in the past four years whereby the
legal system has sided with Teladoc over the Texas Medical Board. While the legal system seems to side with
Teladoc, we believe the Texas Medical Board is not likely to change its restrictive stance toward telemedicine.
Our view is based on two parts: (1) the medical board will likely continue to see telemedicine as a channel that
eases possible drug abuse (the reason for adoption of rule 190.8), and more importantly (2) we believe the
State of Texas seems to be fully behind urgent care and stand-alone emergency rooms. Anyone who has
recently visited the North Dallas, Texas, suburbs will note that urgent care and stand-alone emergency rooms
are as prevalent as convenience stores are in most major metropolitan areas. In terms of the preliminary
injunction, the court seemed to rule based on the review of evidence around cost savings, which compared the
cost of a physician or emergency room visit to a Teladoc visit. The analysis was used to establish that the
Texas Medical Board rule adoption excluded a competitor offering a lower-cost service. We believe this
analysis will likely be debated significantly in subsequent legal actions. Our view holds that Teladoc cost
savings analysis must include more than the simple per visit fee to establish cost savings. If one utilizes the
Beth Israel New York pricing fee (the closest Teladoc gets to Direct-to-Consumer) the typical $40 cost basis for
Teladoc increases to the average price of a physician visit or higher. Investors should stay tuned.
Underlying Technology Provides Support. While we believe there are reasons to be concerned about
Teladoc’s monetization, we also believe the underlying technology of the Teladoc platform seems quite solid.
The current Teladoc platform represents the company’s third generation technology platform. Management
believes the primary underlying technology advantage of Teladoc revolves around efficient supply and demand
matching of patients to physicians that can scale over large patient populations. According to management,
most competitors max out near $3 million or $4 million in revenue and are unable to overcome the complexities
associated with scaling above these revenue run rates. Furthermore, the underlying administrative platform that
facilitates consults represents a key differentiator. To a lesser extent, we believe the high clinical quality
associated with Teladoc’s platform may be an extension of its technology. Our one concern around technology
revolves around the fact that the majority of Teladoc’s consults seem to be telephonic as the majority of
consults originate via call center.
Valuation. We believe the fair value for Teladoc shares falls between roughly 2.5x and 3.5x FY17 revenue
estimates. We believe the inherent risks and uncertainties in the Teladoc business model, and concerns about
revenue quality, more than offset the attractiveness of the perceived revenue growth profile. In terms of digital
healthcare and HCIT, we believe that athenahealth (Buy, $158.23) represents the valuation starting point, as
we believe it is the best positioned company in the space. Currently, athenahealth trades at roughly 5.9x our
2016 revenue estimate and our $190 target price is based on an EV multiple of 6.8x our 2016 revenue
estimate. Risks to our target price include: (1) Volatility around valuation multiples; (2) Lack of successful
product innovation; (3) Unforeseen customer attrition; (4) Epocrates integration; (5) Lack of traction around
athenaCoordinator Enterprise (aCE); and (6) Lack of adoption of More Disruption Please partners.
Additionally, Medidata Solutions (Buy, $47.30) currently trades at an EV multiple of 4.1x our 2017 revenue
estimate and our target price of $60 is based on an EV multiple of 5.6x our 2017 revenue estimate. Risks to our
target price include: (1) Valuation multiples; (2) Volatility associated with the switch from quarterly to annual
guidance; (3) Lack of successful product innovation; (4) Unforeseen customer attrition; (5) A lack of enterprise
platform sales; and (6) A deterioration in the biopharma industry. We believe the EV multiple range of 2.5x to
3.0x FY17 revenues may provide an appropriate discount to potentially become constructive on TDOC shares
given our concerns, all else being equal.
Currently, FactSet shows that 10 sell-side analysts covering Teladoc all rate the shares a Buy with target prices
between 6.0x and 7.8x FY17 revenue estimates. We believe consensus valuation assumptions do not
accurately reflect the lingering concerns associated with the Teladoc business model. Given the small revenue
base and lack of a long-term track record, we believe valuing Teladoc at a premium to either athenahealth or
Medidata Solutions does not seem warranted at this time. We would be more comfortable with a premium
valuation that is above athenahealth or Medidata Solutions were the business model more clearly levered to
actual consults and no doubts about cost savings or monetization model existed.
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Investment Risks
Business Model. We believe a core problem facing Teladoc revolves around the long-term sustainability of
operating a per member per month plus a per visit fee monetization model. We believe key clients and
competitors are questioning the sustainability of this dual monetization model by attacking Teladoc’s ROI
claims. We note that most of Teladoc’s savings claims focus on a per visit fee only, and do not include the per
member per month fees charged by the company. High profile clients are beginning to move away from using
Teladoc exclusively and allowing competitors to serve their employee and member bases telemedicine
services, as well. We believe Teladoc will spend ample time defending the long-term sustainability of its dual
monetization business model throughout FY16.
Telemedicine Reimbursement. The reimbursement landscape in the United States remains muddled, but
evolving. Roughly 26 states currently offer private pay telehealth parity laws, and 10 more have legislation in
process. Medicare remains quite restrictive in terms of what telemedicine services it will reimburse, really only
chronic care management. Medicaid is actually quite progressive in terms of telemedicine reimbursement, but
Medicaid telemedicine reimbursement is muddled due to the nuances of state by state requirements. We
believe the reimbursement landscape needs to continue to evolve in order to help drive better utilization at
Teladoc and others.
User Engagement. We believe the fundamental presupposition of investing in Teladoc holds that telemedicine
will become a mainstream service over time. In our view, telemedicine remains a nascent service that faces a
steep adoption curve. We see the muddled reimbursement environment and visit cost structure as hurdles to
robust utilization and engagement. In our view, long-term sustainability and success of Teladoc and
telemedicine hinges on the ability to drive meaningful utilization rates (greater than 10%) and illustrate an ability
to cause patients to migrate from in-person visits to telemedicine consults. We believe these trends are still
evolving.
Cost Savings. Another presupposition of telemedicine revolves around the belief that shifting patients away
from in-person visits to telemedicine consults can result in significant cost savings. Currently, the dual
monetization model of Teladoc calls this fundamental premise into question. Analyses show that a per visit fee
monetization model alone likely saves costs, especially for the employer or health plan. However, an analysis
of both a per visit fee model combined with a per member per month fees suggests cost savings are
significantly less. Furthermore, we believe providing cost savings to the employer or health plan is not enough
to drive robust engagement. Many consumers fail to know or realize that telemedicine may be a free
component of their benefits. Additionally, for those who fail to have telemedicine as a health benefit, per visit
costs seem to be high compared to a traditional copay.
Financial Estimates. We note management has executed on the financial expectations it has set for investors
since its July 2015 IPO earlier this year. Nevertheless, we believe financial performance execution remains a
key risk, given the business model risk and testing of competitors by high profile clients.
Valuation. We believe Teladoc shares should trade between 2.5x and 3.5x our 2017 revenue estimate of
$168.5 million on an enterprise value basis. Sell-side consensus suggests shares should trade at a valuation
between an EV multiple of 6.0x and 7.8x 2017 revenues of $170 million to $184 million. Given the looming
business model risks, as well as our concerns around under-utilization, lack of visit revenues, and a more
limited total addressable market than investors believe, suggests consensus valuation expectations are high. In
our view, revenue quality concerns offset the attractiveness of the absolute revenue growth rate.
Teladoc Investment Positives
While we are initiating coverage of Teladoc with a cautious view, we recognize that the Teladoc investment
story does include positive characteristics. Our view is that the current risks associated with the dual
monetization business model and utilization outweighs the investment positives. Nevertheless, we provide an
outline of what we see as possible investment positives associated with Teladoc below.
Nascent Market. The fact that Teladoc seems to be under-utilized relative to the total addressable market
suggests the company may face a long growth runway. Should fundamental concerns abate, the company
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seems well-positioned to benefit from a long-term secular trend revolving around the adoption of telemedicine
services.
Growth Levers. The Teladoc story seems to have several growth levers as well. These levers range from
increasing the member base to driving increased utilization of Teladoc services among its member base.
Additional growth levers revolve around adding new indications to its telemedicine services platform, as well as
branching into new areas and even expanding addressable clinical use cases.
Macro Tailwinds. Should business model concerns abate, we believe Teladoc would be poised to benefit from
three strong macro tailwinds. The first revolves around the physician access crisis, which simply holds that
Americans are unable to see a physician in a timely manner in many markets. Secondly, Teladoc and
telemedicine would be well-positioned to help solve the looming physician shortage crisis that may result in a
physician shortage of roughly 46,000 to 90,000 doctors by 2020. Lastly, should Teladoc and telemedicine
prove sustainable cost savings associated with telemedicine, we believe Teladoc and its competitors will
become essential tools in the effort to significantly reduce the national health expenditure cost burden that
faces the U.S.
Long-Term Growth Rates. Given the nascent nature of telemedicine, we believe Teladoc may benefit from
significant growth for the foreseeable future. We believe the sustainability of strong growth will be a function of
business model sustainability and ultimately the ability to drive robust utilization and shift patients from the in-
person setting to the telemedicine setting.
Teladoc and the Six Dimension of Digital Healthcare
We believe our six dimensions of digital healthcare rubric provide an objective and unbiased model for
evaluating digital healthcare companies. The six dimensions of digital healthcare include: technology, platform,
network effects, distribution, analytics, and capital allocation. In our view, Teladoc exhibits many positive
characteristics across the six dimensions, but business model risk, pricing issues, and low utilization / visits
suggest the company faces some continued development before we can view Teladoc as a core digital
healthcare holding.
Technology. We take a mixed view of Teladoc’s technology. We believe the complete retooling of the
underlying platform several years ago represents a significant positive. At the same time, the fact that the
majority of visits are via phone rather than video represents a concern for us. The company utilizes application
programming interfaces to connect with several partners. We believe the company’s support of partnering and
working with other entities represents a positive. Our concerns around telephonic visits stems from the
muddled and evolving reimbursement landscape. We believe the majority of reimbursement seems to be
levered to video visits rather than telephonic visits. Based on Teladoc’s documents, 60% of consults at Teladoc
are originated in a call center. Of the remaining 40% via web/mobile, roughly 30% are video and 70% are
phone. We note that most competitors are focused on facilitating video consults for the most part.
Platform. We believe TDOC faces the opportunity of building a robust platform to facilitate telemedicine for
patients and providers. Currently, we believe the TDOC story revolves around being a point telemedicine
solution driven by member growth, but we believe an ability to illustrate robust utilization and visit growth is
essential. The company has developed a solid foundation for matching patients with the best available
physician within the TDOC network. Currently, TDOC serves the following indications for its patients: sinusitis,
urinary tract infections, pink eye, upper respiratory infections, nasal congestion, bronchitis, allergies, influenza,
yeast infections, and cough and cold. Over time, the company expects to build out expertise in several
additional areas, including: dermatology, anxiety, smoking cessation, grief counseling, marriage counseling,
and sexual health. We note that the company utilizes APIs to connect to several partners including
HealthEquity and Castlight Health. The main challenge to unlocking the full value of the platform revolves
around business model risks, and an ability to drive more robust utilization / visits.
Network Effects. We believe TDOC may benefit from network effects over time, but we find it difficult to see
the network effects benefits today. The primary problem is that there is no evidence that initial utilization of the
TDOC platform will drive greater utilization of the platform. For the most part, between 1% and 3% of a client
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base seems to utilize Teladoc or a similar telemedicine services platform when offered. Of these telemedicine
users, each user generates on average only 1.36 visits per year, and typically 80% of users only use the
platform once in a given year. Over time, we believe Teladoc needs to prove that the platform benefits from
network effects via increased utilization and greater number of visits among users. Furthermore, we believe the
company’s ability to build out expertise in new treatment areas will create a more encompassing platform. As
the company builds out its indication offerings, we believe users of TDOC for more basic indications may
consider using TDOC for additional services, as well as for additional visits. We believe the company needs to
exhibit significant improvement in utilization and visits in order to illustrate possible benefits from network
effects. Ultimately, to consider TDOC a true network effects business, we would have to see considerably
greater utilization, visit traffic, as well as proof the platform can shift patients away from the in-person setting to
the telemedicine setting.
Distribution. A major controversy revolves around TDOCs ability to scale, especially in terms of visits and
utilization. The company has illustrated scale mostly around membership growth with roughly 12.6 million
members. However, utilization is only about 3% and the company is on track to deliver roughly 550,000 visits
out of a 417 million total addressable visit market. We believe the more important area of scale revolves around
visits rather than members, as the purpose of telemedicine is to move low-acuity care away from the traditional
clinic to lower cost channels. In our view, TDOC can likely continue to add members to its membership base,
but driving actual visits on the platform will remain difficult. We believe per visit pricing remains too high to drive
robust patient engagement, especially when one compares the cost of a visit to a copay, or when an ROI
calculation includes not only per visit fees, but also the per member per month fees. A major concern we hold
revolves around the fact that we believe Teladoc’s total addressable visit market is likely substantially less than
417 million visits. We believe investors should be concerned about the overall relative under-utilization of
Teladoc for physicians visits, and believe the company must illustrate substantially better utilization in order to
be more constructive. Additionally, we believe key Teladoc clients (Highmark and Home Depot) are now
questioning the business model as these clients are no longer exclusively using Teladoc for telemedicine
services.
Analytics. From an analytics perspective, we believe the company claims an ability to drive robust user
engagement among its enterprise clients. According to the company, Teladoc can use the significant number of
cumulative visits and cohort data to better understand and predict the flow of visits. In our view, management
believes these abilities justify the PMPM pricing model. Our view is that clients may not necessarily agree with
this outlook illustrated by recent actions of Highmark and Home Depot.
Capital Allocation. We note that as of September 30, 2015, Teladoc held roughly $152.0 million in cash and
cash equivalents. Our view continues to prefer companies reinvesting cash into either R&D or transformative
acquisitions over share repurchases. Over the past several years, Teladoc has acquired several businesses
which are now part of the company’s telemedicine platform. One concern is that the company’s membership
growth may be a function of acquisitions. While we like management’s focus on attempting transformative
acquisitions, we view the transactions with skepticism given modest utilization and substantial levels of PMPM
related revenues. We outline Teladoc’s major acquisitions below.
StatDoctors. Acquired in May 2015, StatDoctors represents an eHealth service company operating a network
of board-certified emergency medicine physicians specializing in telemedicine. Teladoc paid roughly $30.5
million, which consisted of $13.7 million in cash and $16.8 million in stock. We believe the asset may help
Teladoc further penetrate emergency room and urgent care visits. According to SEC filings, StatDoc generated
roughly $2.3 million in revenue in 2014, or roughly 15x 2014 revenues.
Better Help. Acquired in January 2015, Teladoc paid roughly $4.5 million for the behavioral health
telemedicine platform. The acquisition helps broaden the Teladoc service platform into direct-to-consumer and
behavioral health arenas. Better Help operates a network of 800 counselors and all providers have at least
three years and 2,000 hours of hands-on experience. Since inception the business has served 200,000 people
through 2,000,000 sessions.
AmeriDoc. Acquired in May 2014, AmeriDoc is a provider of on-demand healthcare services that provides
access to physicians via a cloud-based platform via telephone, secure video, and secure email. We note that
AmeriDoc provides 24/7 physician access with unlimited consults and even provides access to pediatricians.
The company was founded in 2007 and works with more than 350 physicians. We note that Teladoc paid
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roughly $17.2 million for AmeriDoc. Based on Teladoc’s SEC filings, we note that AmeriDoc generated $3.2
million in revenue in 2013, which suggests Teladoc paid roughly 5.4x 2013 revenues.
Consult A Doctor. Acquired in August 2013, Consult A Doctor provides telemedicine services for patients via
phones, emails, and video. Based on SEC filings, Teladoc paid roughly $16.6 million for the company.
According to Teladoc’s SEC filings, Consult A Doctor generated roughly $3.2 million in revenue for the January
1, 2013 to August 29, 2013 period. The acquisition price equates to roughly 5.2x sales.
Company Overview
Teladoc represents a leading telehealth platform that facilitates the delivery of telemedicine services to
employers and health plans, and increasingly health systems. The company provides telemedicine services via
its platform to members of the employer and health plan lives they serve. Teladoc’s telemedicine services
revolve around providing on-demand healthcare anytime, anywhere, via mobile devices, the Internet, video and
phone. The company currently services roughly 12.5 million members and works with 1,000 physicians and
1,500 behavioral health professionals.
In Exhibit 1, we provide an overview of some of the key statistical highlights associated with the Teladoc
business model. The company boasts a large user base and large client base across employers and health
plans, as Teladoc serves 4,000-plus clients of which 160 are Fortune 1000 companies, and the company
serves more than 20 health plans. The scale of the plan form is attractive as Teladoc benefits from a 95%
member satisfaction rate and a Net Promotor Score above 70. Roughly 92% of patient issues are resolved and
the company averages 1,500-plus visits per day. In 2015, Teladoc is on track to provide a telemedicine visit
more than once a minute. We note the company also benefits from high revenue visibility. Our primary areas of
concern revolve around Teladoc’s 9x ROI for clients (assumes per visit fees only) and the size of the total
addressable market based on visits.
Exhibit 1: Teladoc Key Statistics
Source: Company documents
We provide a dashboard of key operating statistics for Teladoc on an annual basis in Exhibit 2. We note that
the company may likely continue to benefit from membership growth as new employers and health plans are
added as customers. Currently, Teladoc faces pressure around membership growth as Highmark BlueCross
BlueShield will no longer use Teladoc exclusively. Additionally, Home Depot will no longer exclusively provide
Teladoc to its employees as of January 1, 2016. While we note strong growth rates in terms of total visits, our
primary concern remains the significant under-penetration relative to the aspirational total addressable market
(417 million visits) and the conservative total addressable market (outpatient and emergency room visits only).
Our model estimates utilization rates growing 2.5x between 2013 and 2017E. Given the nascent nature to
telemedicine in general, we would expect utilization to increase much faster during this period.
Additionally, we estimate the number of unique Teladoc visits and associated penetration in Exhibit 2. We
assume a factor of 1.36 visits per member, based on the Health Affairs CALPERS Teladoc study, as well as
12.6 Million Unique Members 95%+ Member Satisfaction +90% Revenue Visibility
4,000+ Total Clients 92% of Patient Issues Resolved 104% Avg. Net Dollar Retention
160 Fortune 1000 Clients 1,500+ Average Visits Per Day +9x Client ROI
20+ Health Plan Clients <10 Minute Physician Response Time 417 Million Annual Addressable Visits
Teladoc Key Statistics
Page 8

additional studies. We divide the total number of visits by 1.36 in order to obtain our estimated unique visit
count. Based on unique visits, utilization is estimated to grow from 1.5% in 2013 to roughly 3.8% in 2017E.
Given the nascent characteristics of telemedicine, we would expect utilization to improve at a much faster rate.
Exhibit 2: Teladoc Operating Dashboard
Source: Company documents and Stifel estimates
Currently, the majority of Teladoc visits are for low-acuity treatments. In Exhibit 3, we provide a list of the key
indications Teladoc currently serves via its telemedicine services. Additionally, we show certain indications the
company’s has identified as growth areas for the future. Currently, Teladoc serves several easily treatable, low-
acuity ailments via its telemedicine platform. We believe the key to the long-term Teladoc investment
opportunity involves the company expanding into treating even higher-acuity issues of chronic care
management. Management believes the near-term growth opportunity revolves around behavioral health. The
key growth areas are dermatology, anxiety, grief counseling, marriage counseling, sexual health, and smoking
cessation.
Exhibit 3: Teladoc Common Areas of Treatment
Source: Company documents and Stifel formatting
Teladoc’s telemedicine services follow a five step process: register, request, connect, visit, and resolve.
According to the company, Teladoc will deliver more than 50,000 visualized consults, the most in the industry.
We provide an illustration of the sources of Teladoc’s consults in Exhibit 4. According to management, roughly
60% of consults come via call center request, whereas 40% of consults come via web/mobile. In terms of the
(Millions) 2013 2014 2015E 2016E 2017E
Members 6.200 8.100 12.636 17.690 22.998
Y/Y Growth 30.6% 56.0% 40.0% 30.0%
Visits 0.127107 0.298833 0.550445 0.871298 1.189158
Y/Y Growth 135.1% 84.2% 58.3% 36.5%
Visit TAM 417.0 417.0 417.0 417.0 417.0
Visit Penetration 0.0% 0.1% 0.1% 0.2% 0.3%
Visit TAM (Outpatient and ER Only) 76.0 76.0 76.0 76.0 76.0
Visit Penetration 0.2% 0.4% 0.7% 1.1% 1.6%
Utilization 2.1% 3.7% 4.4% 4.9% 5.2%
Unique Visits 0.093461 0.219730 0.404739 0.640660 0.874381
Unique Member Utilization 1.5% 2.7% 3.2% 3.6% 3.8%
Sinusitis Bronchitis Dermatology Grief Counseling
Urinary Tract Infection Allergies Anxiety Marriage Counseling
Pink Eye Influenza Smoking Cessation Sexual Health
Upper Respiratory Infection Yeast Infection
Nasal Congestion Cough and Cold
Growth AreasTop Indications
Page 9

40% web/mobile consults, roughly 70% are telephonc versus 30% visualized. While we recognize Teladoc’s
strong performance in visualized consults, we would expect this number to be much larger. The majority of
Medicaid reimbursement revolves around visualized consults rather than telephonic. Furthermore, the majority
of competitors, Doctor on Demand and American Well, seem to be primarily focused on the visualized consult
market.
Exhibit 4: Telephonic Delivery Needs to Evolve Toward Video Delivery
While the majority of Teladoc’s monetization comes via the business-to-business-to-consumer model, the
company does offer a hybrid consumer offering. We illustrate the costs of utilizing Teladoc if the telemedicine
platform is not a benefit within a corporate wellness plan or health insurance plan. Consumers in the State of
New York can sign up for Teladoc via a partnership with the Beth Israel Medical Center, a member of Mount
Sinai Health System. We illustrate the pricing associated with the hybrid offering in Exhibit 5. While we note
the per year membership pricing seems quite attractive, adding a per consult fee on top of the membership
seems to negate the attractiveness of the offering, in our view. We believe the Beth Israel pricing illustrates the
problems associated with utilizing both a PMPM or subscription model plus a per visit pricing model. In our
view, telemedicine providers need to pick one model or the other rather than attempting to monetize both ways.
Exhibit 5: Teladoc’s Consumer Pricing through Beth Israel New York
While we note that Teladoc management points to strong member engagement, we believe the company’s
engagement metrics have significant room for improvement. Our issues with member engagement are two-fold:
(1) we believe pricing is too expensive to drive robust utilization among consumers, (2) evidence suggests that
the majority of consumers are still a long way from adopting telemedicine, and (3) utilization rates seem quite
low even among key Teladoc clients.
60%
40%
Call Center Web/Mobile
30%
70%
Visualized Telephonic
Analyzing the
Web/Mobile Split
Per Consult Individual Acct. Family Acct.
Model Per Visit Per Visit + Membership Per Visit + Membership
Subscription Fees None $29.99 Per Year $49.99 Per Year
Consult Fees $49.00 $39.00 $39.00
Assume 3 Visits $147.00 $117.00 $117.00
Plus Membership $0 $29.99 $49.99
Total Consumer Cost $147.00 $146.99 $166.99
Page 10

Our view on Teladoc holds that member engagement should be higher, and that we would prefer to see greater
overall visit revenues. Ultimately, we believe there are certain issues with the business model that may hinder
overall utilization of the service. First, the lack of a direct-to-consumer offering, in our view, limits the total
addressable opportunity. Second, we believe the combined model of PMPM plus a per visit fee may be too
expensive. Our pricing concerns revolve around the company’s per visit fee and the way a common consumer
likely thinks about visiting the doctor. We believe most consumers focus on the upfront cost of visiting the
doctor i.e., a copay, and likely are less concerned with the expenses incurred after a visit occurs. After all, the
common U.S. healthcare consumer likely has little ability to even estimate the post-visit costs of seeing a
physician. In our view, Teladoc, and telemedicine services in general, need to price a visit aggressively in order
to drive robust utilization and adoption.
In Exhibit 6, we provide a comparison of the copays for an emergency room visit, urgent care visit, and primary
care visit associated with an Anthem BlueCross BlueShield insurance plan. Under this insurance plan, which
covers an individual and two dependents, an ER visit copay is $250, an urgent care copay is $75, and a PCP
copay is $30. We do not have any specific knowledge as to whether or not Teledoc comes as a covered benefit
under an Anthem plan. Most importantly, we fall into the consumers that have absolutely no idea whether or
not Teladoc comes as a covered benefit as part of our health plan.
On the right side of Exhibit 6, we illustrate the cost of a TDOC visit to a consumer based on its quasi-direct-to-
consumer model on a monthly basis and annual basis. Investors should note that TDOC offers a discount to
these consumers when opting for an annual subscription versus a monthly subscription. We note that a single
visit via Teladoc, should the consumer be required to pay, costs anywhere from $49 (no membership) to $99
(family account membership). In our view, the comparison suggests that when considering where to go for
care, there seems to be little incentive to utilize telemedicine in the primary care setting. Additionally, while the
costs are likely less for an ER visit, we believe substituting telemedicine for an ER visit may be a difficult sell in
certain instances. At the recent Stifel Healthcare conference, Teladoc management spoke about how 25% of
pediatric emergency room visits could easily be served via telemedicine. The problem is that the barrier
associated with a parent wanting the peace of mind of seeing and interacting with a person regarding their
child’s health will likely trump the costs savings associated with telemedicine, at least near-term. We believe
this illustrates the steep adoption curve telemedicine services face before they can be considered mainstream
services.
Exhibit 6: Pricing Comparison Teladoc versus Selected Anthem Copays
Source: Company documents, and Stifel estimates. Notes: 1.) TDOC’s Beth Israel pricing allows consumers to opt for a monthly subscription or annual
subscription. 2.) The TDOC subscription term is one full year regardless of a monthly or annual term and provides no refund for early termination. Therefore, we
believe a single visit must include the per visit fee plus the associated subscription costs. 3.) The terms for a monthly individual subscription are $39 per consult
plus a monthly fee of $2.99 per month over 12 months. 4.) The terms for a monthly family subscription are $39 per consult plus a monthly fee of $4.99 per month
over a 12-month period. 5.) The terms for an annual individual subscription are $39 per consult plus an annual fee of $29.99 (a $5.89 discount). 6.) The terms for
an annual family subscription are $39 per consult plus an annual fee of $49.99 (a $9.89 discount).
$250
$75
$30
$49
$75
$99
$69
$89
ER Visit Urgent Care
Visit
PCP Visit TDOC (Per
Visit)
TDOC
(Individual,
Per Month)
TDOC
(Family, Per
Month)
TDOC
(Individual,
Annual)
TDOC
(Family,
Annual)
While Teladoc may save costs for the employer or health plan,
we believe pricing may hold back more robust utilization. A
lack of benefit awareness, and muddled reimbursement
landscape do not help.
Page 11

We illustrate the usage trends associated with Teladoc’s telemedicine platform stemming from a study of
CALPERS a Teladoc client in Exhibit 7. In February 2014, Health Affairs published a study of Teladoc usage
based on the CalPERS client base. The study analyzed 306,027 eligible Teladoc enrollees, of which 2,718
actually utilized the Teladoc service during the study period. Those who used the service averaged roughly
1.36 visits during the study period. We highlight the key data points from the study regarding Teladoc usage
metrics in Exhibit 7, which we believe are instructive for investors.
Exhibit 7: CALPERS Utilization Trends Associated with Teladoc
Source: Uscher-Pines, Lori and Ateev Mahrotra, Analysis of Teladoc Use Seems To Indicate Expanded Access to Care For Patients Without Prior Connection to
a Provider, Health Affairs, February 2014
In Exhibit 8, we illustrate the most commonly treated indications on the Teladoc platform associated with the
Health Affairs CalPERS study. We note that the top nine indications represented nearly 80% of all Teladoc
treatments. In our view, Teladoc certainly faces an opportunity to expand the treated indications served by its
platform, but also suggests the total addressable market in terms of visits is considerably less than the 417
million visits discussed by management.
Exhibit 8: Most Commonly Treated Indications Among CalPERS Teladoc Users
Source: Uscher-Pines, Lori and Ateev Mahrotra, Analysis of Teladoc Use Seems To Indicate Expanded Access to Care For Patients Without Prior Connection to
a Provider, Health Affairs, February 2014
We illustrate telemedicine utilization rates based on a study by Dale Yamamoto of Red Quill Consulting, which
studied the feasibility of telemedicine replacing in-person services in Exhibit 9. Based on roughly 100,000
Telemedicine visits, the Yamamoto study found that roughly 1% to 2% of eligible patient populations actually
utilized telemedicine services. Additionally, 80% of those patients using telemedicine only utilized such services
once. The average number of visits per patient according to the Yamamoto study is 1.3 visits per year, which is
similar to the 1.36 factor established in the CalPERS study. We believe the Yamamoto study certainly
illustrates the promise and relative immaturity of the telemedicine market. At the same time, we believe the
overall weak utilization rates illustrated by the Yamamoto study show that telemedicine platforms, including
Teladoc, need to improve their value propositions or do more to drive robust patient engagement.
Eligible Enrollees 306,027
Teladoc Users 2,718
Teladoc Visits 3,701
Utilization 0.9%
Visit Factor 1.36
Single Visit 2,066 76%
Three+ Visits 200 7%
Health Affairs CalPERS Study Trends
Condition Number Percentage Condition Number Percentage
Acute Respiratory Illness 1151 31.1% Influenza and General Viral Illness 172 4.7%
Urinary Tract Infections and Symptoms 439 11.9% General Advice, Counseling, Refills 169 4.6%
Skin Problems 335 9.1% Eye Problems 138 3.7%
Abdominal Pain, Vomiting, Diarrhea 231 6.2% Ear Infections (Internal and External) 137 3.7%
Back and Joint Problems 190 5.1% All Others 739 20.0%
Page 12

Exhibit 9: Telemedicine Utilization Trends
Source: Yamamoto, Dale, Assessment of the Feasibility and Cost of Replacing In-Person Care with Acute Care Telehealth Services, Red Quill Consulting, Inc.,
December 2014
In Exhibit 10, we provide an illustration of several consumer markets for primary care according to PwC’s
Health Research Institute. Based on the PwC data, the majority of office visits are associated with the least
healthy population. We note that the PwC data suggests the overwhelming majority of care utilization falls into
physician office visits with limited usage of the emergency department and ancillary (outpatient) services. We
believe the PwC data suggests that the real opportunity for telemedicine revolves around helping cut down on
office visits for the chronically ill. Furthermore, we believe the PwC data suggests that increasing the 1.36 visit
per person rate for telemedicine usage may be difficult to achieve. Lastly, the data suggests to us that the
opportunity associated with replacing in-person emergency room visits and outpatient visits with telemedicine
may be somewhat limited in the near-term, as well.
Exhibit 10: An Analysis of the U.S. Population by Care Type
Source: Pwc, Medical Expenditure Panel Survey, 2012, and HRI Analysis
A major aspect of the Teladoc story revolves around the cost savings associated with telemedicine services
versus in-person visits. In Exhibit 11, we illustrate the average cost savings across several types of in-person
visits versus a telemedicine visit via Teladoc, based on a Teladoc analysis. When only the per visit fees are
considered, the cost of telemedicine is quite attractive versus in-person visit channels. The approximate
savings when considering visit fees only between Teladoc and in-person channels ranges from about $91 for
primary care to a high of roughly $1,437 for emergency room visits. While we recognize the analysis below
illustrates a cost savings, we believe one must consider the per member per month fees when analyzing actual
cost savings. In our view, the fact that clients such as Highmark and Home Depot are beginning to offer
telemedicine choice suggests that even clients do not necessarily view the analysis in Exhibit 11 as the true
cost savings.
Number of Visits Per Year Percent
1 81%
2 13%
3 4%
4 1%
5+ 1%
Complex Healthy Healthy
Frail Chronic Chronic Mental Healthy Adult Adult
Demographics Elderly Disease Disease Illness Families Skeptics Enthusiasts
Lives (millions) 5.8 24.9 176.3 9.4 62 12.1 23.1
Lives Mix 1.8% 7.9% 56.2% 3.0% 19.8% 3.9% 7.4%
Total Lives (millions) 313.6
Care Utilization by Category
Total 15.7 11.9 6.9 5.7 1.6 0.9 1.4
Discharges 0.4 0.2 0.1 0.0 0.0 0.0 0.0
Ancillary Visits 0.8 1.1 0.4 0.2 0.1 0.0 0.1
ED Visits 0.5 0.4 0.2 0.1 0.1 0.1 0.1
Office Visits 13.9 10.2 6.2 5.3 1.4 0.7 1.2
Page 13

Exhibit 11: Teladoc ROI Claims – Visit Fee Only
In Exhibit 12, we provide an analysis of cost savings of using Teladoc compared to in-person visits. In this
analysis, we include the per visit fees and per member per month fees associated with the Teladoc model in
order to determine cost savings. We note that including the PMPM fees significantly changes the actual cost
savings across the in-person verticals. Including the PMPM fees in the cost savings calculation actually makes
a Teladoc visit more expensive in the primary care vertical and the associated savings across the specialist
and urgent care channels falls from a range of $123 to $156 to a range of $17 to $50.
Exhibit 12: Teladoc ROI Claims – Visit plus Per Member Per Month Fees Only
Source: Company documents and Stifel estimates
We note that management identifies several growth areas which range from expanding footprint / penetration to
the expansion of products and services. In our view, the most valuable growth revolves around increasing the
member base footprint, but more so expanding the utilization of Teladoc’s services among its installed base.
Management seems focused on expanding into new care categories, especially behavioral health. We believe
Action
ER Visit $1,477
Teladoc $40
Urgent Care $163
Teladoc $40
Specialist $196
Teladoc $40
PCP Visit $131
Teladoc $40
Average Cost
$1,437 Savings
$123 Savings
$156 Savings
$91 Savings
Action
ER Visit $1,477
Teladoc $146
Urgent Care $163
Teladoc $146
Specialist $196
Teladoc $146
PCP Visit $131
Teladoc $146
Average Cost
$1,331 Savings
~$17 Savings
~$50 Savings
~$15 More Expensive
Page 14

these efforts are attractive, but we are slightly skeptical of the company’s myriad growth plans given the relative
under-utilization of the company’s telemedicine services among its consumer base.
Exhibit 13: Outlining Teladoc’s Growth Strategies
Industry Overview
We note that telehealth / telemedicine represents a nascent industry that faces a significant growth opportunity.
The promise of telehealth / telemedicine services holds that technology can create a more efficient healthcare
delivery system at a lower cost. We believe the promise of lower costs and greater efficiencies seems to
fluctuate depending on business model employed and constituents served. We believe the fundamental
presupposition of telehealth / telemedicine revolves around removing low acuity physician / healthcare provider
touch points from the traditional in-person consultation system. Over time the success or failure of telehealth /
telemedicine will revolve around visit volumes and system utilization rates. Furthermore, the industry must
evolve from simply removing low-acuity visits from the in-person system to somehow driving greater efficiency
in terms of physician visitations with more chronically ill patients, too.
The Existential Question Facing Telemedicine. We believe that telemedicine faces an existential question
around what the appropriate business model for telemedicine looks like in the future. The first mover of
telemedicine, Teladoc, supports a model that consists of a per member per month (PMPM) fee and a per visit
fee. The company believes its business model facilitates significant utilization and member engagement.
Competitors are attacking Teladoc’s PMPM model, and many competitors now believe the future will revolve
around business models solely focused on per visit fees. We believe the answer likely falls somewhere in the
middle, but we do believe both business models may be priced too high in order to drive robust consumer
adoption of telemedicine.
The Telemedicine Utilization Dilemma. In our view, telemedicine faces a utilization dilemma given anemic
utilization rates across the industry. We note that Teladoc claims a 6.6% utilization rate excluding its largest
customer. In some instances, Teladoc claims clients have a 40% to 60% utilization rate. We believe the true
utilization rate for Teladoc and the industry falls closer to 3% to 4%.
Expand
Footprint / Penetration
Expand
Specialties
Expand
Scope of Products
& Services
Expand
Clinical Use Cases
New Accounts
New Channels
Existing Health Plans
Increase Utilization
Direct-to-Consumer
Behavioral Health
Dermatology
2nd Opinion / Specialty
Advice
STI / HIV Testing
Diabetes
Health Kiosk
Mobile Apps / Hubs
Biometric Devices
At-Home Tests
Home Care
Post Discharge
Wellness / Screening
Chronic Care
Teladoc's Growth Strategies
Page 15

Teladoc spends ample time framing the company’s total addressable market in terms of visits. The company
believes its total addressable visit market is roughly 417 million annual physician visits. With Teladoc on track
to deliver between 540,000 and 550,000 visits in FY15, we wonder why are visits, and therefore, utilization
rates not higher.
We believe the per visit fee may represent the impediment to widespread consumer adoption of telemedicine.
In our view, current business models are priced to make money (clearly nothing wrong with this) rather than
drive adoption and stickiness of the service. In our view, telemedicine adoption would likely be more robust
were telemedicine companies willing to price visits aggressively say at a rate near or below the copay of a
primary care physician (PCP) visit. In our view, the winning telemedicine business model and company will be
the one most clearly focused on driving utilization first and monetization second. Our concern for Teladoc is
that the PMPM model signals that the company may be focused on monetization first and customer adoption
second. We believe the recent trend of clients and others opening up their telemedicine opportunities to all
business models illustrate our concerns. We worry that Teladoc’s current business model may be more
appropriate for a mature telemedicine market.
Lastly, we believe the burden of proof around PMPM falls squarely on Teladoc, as they seem to be the only
vendor employing the PMPM model. Competitors believe the right model foregoes PMPM fees. Clients are now
even questioning the PMPM value proposition as clients move from being exclusive with Teladoc to providing
several telemedicine service options.
Telehealth Reimbursement. A lack of clarity and universal reimbursement for telehealth provides an
impediment to robust adoption among both physicians and consumers. Physicians are reluctant to utilize these
services as they are unsure whether or not they will be compensated. Consumers are reluctant to utilize these
services because they (1) do not know if telemedicine is a plan benefit, and (2) lack of clear reimbursement
means providers and others may not push for utilization to telemedicine.
We attempt to provide an overview of the nuances of telehealth / telemedicine reimbursement, below. We invite
investors to check out Chiron Health’s website, as well as the Center for Connected Health Policy to
understand the topic in greater detail; telemedicine reimbursement seems to be incredibly complex.
Currently, 26 states have laws mandating private insurance coverage of telemedicine, and another 10 states
have proposed or pending parity laws. Medicare remains the most restrictive in terms of telemedicine
reimbursement. Reimbursement under Medicare represents a function of modality. Currently, Medicare only
reimburses for telemedicine services provided via video conferencing, and does not reimburse for store-and-
forward, remote patient monitoring, or mHealth. The current exception under Medicare revolves around Chronic
Care Management (CCM). Medicare will reimburse providers $42 per month for care coordination of chronically
ill Medicare patients with two or more chronic medical conditions under CPT code 99490. We note that both
Allscripts and athenahealth are focused on the CCM market via relationships with private telemedicine
providers CareSync and Chiron Health.
Medicaid does reimburse for telemedicine, but the Medicaid telemedicine reimbursement landscape consists of
50 unique policies. Currently, 46 state Medicaid programs reimburse for live video, the exceptions being Iowa,
Massachusetts, New Hampshire, and Rhode Island. Additionally, states can restrict reimbursement based on
four factors: medical specialty type, type of service provided, location of the patient, and location of the
provider. Roughly 14 state Medicaid programs offer reimbursement for remote patient monitoring. Three state
Medicaid programs reimburse for all three. Roughly 26 states will reimburse either a transmission, facility fee,
or both. Nine state Medicaid programs offer some form of reimbursement for store-and-forward.
Telehealth versus Telemedicine. Investors should note the distinction between telehealth and telemedicine.
The industry typically uses telehealth as the all-encompassing term, which includes everything from a video-
based physician consult to monitoring to mHealth. The term telemedicine represents the more narrow term,
which typically describes a video-based or phone-based consultation between a physician and patient. We
point investors to the American Hospital Association and American Telemedicine Association for more details
on the definition of these terms.
Three Core Modalities of Telehealth. The telehealth industry defines three core modalities. First, the real-time
modality revolves around live provider and patient communication via video-conferencing. The store and
forward modality involves capturing and storing images and clinical data, among other things, securely on a
Page 16

device for physician review at a later time. Lastly, remote monitoring describes a system where data from
sensors and monitors are sent to a central monitoring center that allows a caregiver to monitor a patient
remotely.
The Macro Forces Driving Interest in Telehealth / Telemedicine
We see several macro factors driving the U.S. health system toward telehealth / telemedicine. The hope of the
U.S. healthcare complex holds that telehealth / telemedicine can help solve the physician access crisis,
looming physician shortages, and help lower the burden of healthcare costs. While these macro factors
represent significant drivers of interest in telehealth / telemedicine, we believe current industry players must
evolve business models in order to fully solve these problems.
The Physician Access Crisis. A major problem facing the U.S. healthcare complex revolves around physician
access. In 2014, Merritt Hawkins conducted a physician wait time survey, which found the average wait to see
a physician was roughly 18.5 days. The survey found the average wait to be 45.4 days in Boston at the high
end, and the survey found the average wait to be 10.2 days in Dallas at the low end. Clearly, patients are not
always able to wait so long to see a physician. We believe telemedicine provides a solution that can help
alleviate the physician access crisis. Telemedicine can alleviate practice burden by taking on the lowest acuity
visits, which frees up physicians to serve higher acuity problems. The hope is that telemedicine can help
alleviate wait times for physicians in certain instances. We note that according to Merritt Hawkins 2015
physician access scores that Massachusetts offers the highest physician access in the U.S., whereas Texas is
ranked 47th
in terms of physician access.
Physician Supply Constraints. Another problem facing the U.S. healthcare system revolves around the
looming physician shortage. In March 2015, IHS, Inc. conducted a study around physician supply and demand
trends on behalf of the Association of American Medical Colleges. The study found that physician demand
continues to outstrip supply, which projects a possible physician shortfall between 46,100 and 90,400 by 2025.
We believe telemedicine will likely prove to be an important resource in alleviating possible physician
shortages, as telemedicine may allow practicing physicians to reallocate downtime to see additional patients.
Exhibit 14: Projecting Possible Physician Shortages in the U.S. 2013 to 2025E
Source: IHS, Inc., The Complexities of Physician Supply and Demand: Projections from 2013 to 2025, March 2015, and Stifel formatting
11,000
30,800
65,500
90,400
11,000
21,800
35,100
46,100
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
2013 2014 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E
Physicians
Projected Physician Shortage Scenarios
75th Percentile 25th Percentile
Page 17

The U.S. Healthcare Cost Burden. We believe the single largest problem facing the U.S. healthcare complex
revolves around the significant cost burden the U.S. currently faces. Currently, the U.S. generates nearly $2.7
trillion in healthcare expenditures, which represents roughly 17.1% of national GDP. We note that many
Organisation for Economic Co-operation and Development (OECD) nations exhibit lower national health
expenditures as a percentage of national GDP (10% to 11% range). While we recognize that U.S. healthcare
expenditures continue to grow to some extend due to the changing demographics of the population (baby
boomer retirements), we do believe U.S. national health expenditures are quite high.
In Exhibit 15, we illustrate national health expenditures as a percent of GDP for the U.S. and select OECD
nations for the 1980 to 2013 period. In the U.S., national health expenditures (NHE) as a percentage of GDP
continue to grow, but expenses as a percent of national GDP seems to far outpace many OECD countries.
Based on the data below, national health expenditures as a percentage of GDP increased roughly 4.7%
between 1980 and 2013 on average for the non-U.S. countries shown below. Between 1980 and 2013, national
health expenditures as a percentage of GDP in the U.S. increased roughly 8.4%. In 1980, U.S. national health
expenditures as a percentage of GDP were roughly 8.7%. Had NHEs grown at the non-U.S. average of 4.7%,
we believe U.S. NHEs as a percent of GDP in 2013 would be closer to 13.4%. We believe the backdrop of the
Affordable Care Act (ACA) and the Centers for Medicare and Medicaid Services (CMS) reimbursement reform
provides a deflationary spending environment for U.S. healthcare. We believe the U.S. healthcare complex will
continue to seek out new tools and services that can help reduce the NHE cost burden over time. In our view,
telemedicine represents one of these possible tools.
Exhibit 15: National Health Expenditures Remains a Costly Problem for the U.S.
Source: The Commonwealth Fund, U.S. Health Care from a Global Perspective, October 8, 2015, and Stifel formatting
Analyzing Consumer Interest in Telehealth / Telemedicine
We believe Telehealth / Telemedicine represent an important tool to drive greater efficiency and lower costs of
care over the next several years and decades. In our view, Telehealth / Telemedicine remain a nascent
industry as consumers and caregivers alike are just beginning to adopt Telehealth / Telemedicine services.
Based on our research, both consumer and physician interest in such services seem to be high. Nevertheless,
adoption continues to face a significant uphill battle. Below, we provide survey data that illustrates current
consumer and physician adoption and interest trends associated with Telehealth / Telemedicine.
0
2
4
6
8
10
12
14
16
18
NHEas%ofNationalGDP
U.S. National Health Expenditures Compared to OECD Countries
US (17.1%)
FR (11.6%)
SWE (11.5%)
GER (11.2%)
NETH (11.1%)
SWIZ (11.1%)
DEN (11.1%)
NZ (11.0%)
CAN (10.7%)
JAP (10.2%)
NOR (9.4%)
AUS (9.4%)*
UK (8.8%)
Non-US Avg. (10.7%)
Page 18

In Exhibit 16, we illustrate patient interest in telemedicine based on a survey conducted by Software Advice in
January 2015. The survey queried roughly 519 consumers of which 381 (roughly 73%) were non-telemedicine
users and 138 (roughly 27%) were telemedicine users. While the survey exhibited a significant rate of non-
telemedicine usage, roughly 76% of respondents were significantly interested in utilizing telemedicine services.
Based on the survey, roughly 24% (6% not interested plus 18% minimally interested) were unlikely to utilize
telemedicine services.
Exhibit 16: Patient Interest in Telemedicine
Source: Irwin, Kathleen, “Patient Interest in Adopting Telemedicine,” Software Advice, January 27, 2015, and Stifel formatting
We illustrate patient preferences for telemedicine compared to the emergency room (ER) based on the
Software Advice survey in Exhibit 17. Roughly 71% of respondents preferred telemedicine to the ER, whereas
roughly 16% preferred the ER, while 4% were neutral. Clearly, consumer interest in telemedicine seems high,
yet utilization of such services remain quite low.
Exhibit 17: Patient Telemedicine Preferences Compared to Emergency Room (ER)
Extremely
Interested
15%
Very Interested
24%
Moderately
Interested
37%
Minimally Interested
18%
Not at all Interested
6%
Patient Interest in Telemedicine
Strongly Prefer
Telemedicine
28%
Somewhat Prefer
Telemedicine
43%
Neutral
12%
Somewhat Prefer
ER
12%
Strongly Prefer ER
4%
Patient Preferences for Telemedicine Vs. ER
Page 19

In Exhibit 18, we illustrate what consumers believe to be the perceived benefits of telemedicine according to
the Software Advice survey. We believe the fact that only 4% of respondents cited cost effectiveness as a
perceived benefit may help to explain the weak utilization rates of telemedicine. For the most part, consumers
like telemedicine for not having to travel, staying in the comfort of home, as well as the high quality of care. In
our view, for telemedicine to become a much stickier and mainstream phenomenon, consumers need to
believe telemedicine is more cost effective than other channels, consumers need to believe telemedicine is
more efficient, and finally consumers need to believe telemedicine is easier than traditional channels. Until
these perceived benefits are higher, we believe telemedicine will face significant impediments to utilization
growth.
Exhibit 18: Perceived Benefits of Telemedicine
Another key problem that seems to be driving a lack of telemedicine utilization revolves around insurance
coverage of telemedicine solutions. Based on the Software Advice survey, only 20% of survey respondents
were aware that their insurance covered telemedicine services. Roughly 24% of survey respondents were
aware that their insurance did not cover telemedicine services. The 56% of consumers who were unsure of
telemedicine coverage illustrates the limited awareness and utilization of telemedicine among consumers
today. We believe Teladoc argues that it provides engagement services via its PMPM cost structure. In our
view, the greatest way to drive awareness and engagement revolves around providing per visit fees that are
more competitive than a PCP copay.
Exhibit 19: Telemedicine Insurance Coverage
4%
8%
9%
10%
11%
20%
21%
21%
Cost Effective
Avoid Waiting Room
Easy to Use
Shorter Wait Time
Quick Access to Care
Comfort of Home
High Quality of Care
Do Not Have to Travel
Perceived Benefits of Telemedicine
Not Sure
56%
Does Not Cover
Telemedicine
24%
Does Cover
Telemedicine
20%
Patient Awareness of Telehealth Coverage
Page 20

In Exhibit 20, we illustrate consumer / patient willingness to consider a telemedicine video visit based on a
survey from American Well. The American Well survey queried 2,019 consumers of which 64% were willing to
consider a video visit. Clearly, consumers are interested in utilizing telemedicine solutions. However, roughly
36% of respondents expressed no interest in a telemedicine video visit, which was 12% higher than the 24% of
respondents who were not interested in telemedicine according to the Software Advice survey.
Exhibit 20: Assessing Patient Willingness to Consider a Video Visit
Source: American Well Telehealth Index: 2015 Consumer Survey, January 2015, and Stifel formatting
We illustrate the different options a patient may consider for care in the middle-of-the-night based on the
American Well survey. The relative majority, roughly 44%, were most likely to visit the ER. At the same time,
roughly 43% of respondents were willing to consider utilizing a digital channel to resolve their issue in the
middle-of-the-night. Roughly 21% of respondents were open to a video visit, roughly 17% would turn to a 24-
hour nurse line, and roughly 5% would consult an online symptom checker. These results clearly show there is
a role for telemedicine services for off-hours care.
Exhibit 21: Where Do Consumers Turn for Care in the Middle of the Night?
Yes
64%
No
36%
Patient Willingness to Have a Video Visit
ER
44%
Video Visits
21%
24 Hour Nurse Line
17%
Online Symptom
Checker
5%
Ambulance
4%
Other
9%
Options a Patient Might Consider in the Middle of the Night
Page 21

In Exhibit 22, we illustrate consumer preferences around the affordability of telemedicine services based on
the American Well survey. The majority, roughly 62%, felt that telemedicine services need to cost less than an
in-person physician visit, whereas 27% felt telemedicine should cost the same or more than an in-person visit.
Additionally, visit-only telehealth models seemingly cost less than traditional in-person visits. In our view, such
comparisons are a bit misleading for two reasons. In the specific case of Teladoc, the company utilizes a
PMPM fee, which when included in the analysis suggests telemedicine could be more expensive than some in-
person visits. Secondly, the average cost of a telemedicine visit is roughly $49, which seems significantly
higher than traditional PCP copays and some urgent care copays. We believe that while telemedicine may
save money for employers and health plans, current visit fees may cause telemedicine to be a non-starter for
consumers. In our view, telemedicine services need to be priced aggressively compared to their associated
consumer copays in order to drive robust consumer adoption. We see this as a primary reason for anemic
utilization rates industry wide.
Exhibit 22: Assessing the Affordability of Telemedicine Services
In Exhibit 23 to Exhibit 26, we illustrate physician adoption and utilization trends associated with telemedicine
based on a Robert Graham Center report titled Family Physicians and Telehealth: Findings from a National
Survey, published October 30, 2015. The survey analyzed 1,557 responses of which only 15% (roughly 225
family physicians) reported utilizing telemedicine services.
We illustrate the demographics of respondents reporting usage of telemedicine services in Exhibit 23. The
most likely users of telemedicine were either isolated rural (roughly 29%) or small rural (roughly 25%), whereas
urban counterparts were unlikely to use telemedicine services
Exhibit 23: Which Providers Are Likely to Utilize Telemedicine?
Source: Robert Graham Center, Family Physicians and Telehealth Findings from a National Survey, October 30, 2015, and Stifel formatting
Not Sure
11%
About the Same
22%
More
5%
Less
62%
How Much Should Online Cost vs. In Person?
$750
$140
$95
$49
Emergency Room Urgent Care PCP Telehealth
Cost of Care
Our primary concern is that the comparison fails
to consider PMPM fees in the case of Teladoc.
While Telehealth appearsleast expensive, we
believe Telehealth may not be when compared to
patient copays.
11%
22%
25%
29%
Urban (n=1082)
Large Rural (n=180)
Small Rural (n=127)
Isolated Rural (n=68)
Distribution of Analysis Sample by Practice Location
Page 22

In Exhibit 24, we illustrate the likelihood of a family physician utilizing telemedicine services in the presence of
other provider types at the practice. We believe the report found that about 20% to 25% of family physicians
would utilize telemedicine in the presence of other providers at the practice. We believe these relatively low
percentages suggest that family physicians working in small practices may be more likely to utilize telemedicine
services.
Exhibit 24: Other Physician Types May Drive Telemedicine Adoption
The report also found that physicians working in integrated health systems were the most likely to utilize
telemedicine services, see Exhibit 25. We believe the greater likelihood of usage at integrated health systems
versus privately owned practices may stem from access to resources.
Exhibit 25: Telemedicine Usage Based on Type of Practice
16%
17%
19%
19%
23%
25%
25%
26%
Other (n=144)
Nurse Practitioner / Physician Assistant (n=1022)
Specialist Physician (n=421)
Other PCP (pediatrics, internal medicine) (n=538)
Behavioral Specialist (n=404)
Pharmacist (n=336)
Community Health Worker (n=124)
Physical Therapist (PT/OT) (n=307)
Percentage of Family Physicians Using Telehealth by the Presence of Other
Clinicians at the Primary Practice Location
9%
14%
25%
26%
Privately Owned (n=573)
Hospital or Health System Owned (n=663)
Integrated Health System (n=75)
Other (n=227)
Percent of Family Physicians Using Telehealth by Practice Ownership
Page 23

In Exhibit 26, we illustrate the perceived barriers to telemedicine adoption among family physicians. The most
prevalent perceived problem seems to revolve around reimbursement of telemedicine by insurers.
Exhibit 26: What Keeps Physicians from Adopting Telemedicine
22%
27%
34%
41%
43%
20%
43%
47%
56%
55%
Other (n=325)
Liability Issues (n=595)
Cost of Equipment (n=704)
Lack of Training (n=828)
Reimbursement By Insurers (n=829)
Differences in Perceived Barriers to Using and Not Using Telehealth
Non-Users
Users
Page 24

Teladoc’s Total Addressable Market
A major component of high growth revenue stories revolves around the characteristics of the associated total
addressable market opportunity. We believe the majority of investors and Teladoc believe that the company
and telemedicine in general faces a vast and significant total addressable market opportunity. The problem we
see revolves around the aspirational total addressable market and what we believe may represent the actual
total addressable market. We believe that our analysis of Teladoc’s total addressable market is quite
informative to the debate around the sustainability of the PMPM monetization model, and whether Teladoc’s
dual monetization model (PMPM plus per visit fees) will be sustainable long term. The bottom line is that we
believe Teladoc’s current monetization model unnecessarily complicates things and, in our view, the company
would be better served focusing on driving massive utilization and adoption via compelling pricing through the
PMPM model. Ultimately, we see the winner in the current era of telemedicine as the vendor most acutely
focused on driving adoption via aggressive pricing, which presupposes a very simple monetization structure.
In Exhibit 27, we provide a summary of our Teladoc total addressable market analysis with what we believe to
be the near-term addressable market opportunity highlighted in yellow. Our analysis looks at several scenarios,
which span what we believe to be the aspirational total addressable market opportunity to what we believe
represents a more conservative look at the total addressable market opportunity. We note that our first four
listed total addressable market scenarios are based solely on a per visit fee structure, and exclude all PMPM
fees. In our highlighted scenario, we look at the insurable lives opportunity across several insurance segments
in order to develop a conservative total addressable market opportunity, which encompasses not only per visit
fees, but also PMPM fees. We explain and illustrate each of these scenarios, below.
Exhibit 27: An Overview of Teladoc’s Total Addressable Market Opportunity
Source: Company documents, CDC, and Stifel estimates
We attempt to illustrate what the total addressable market opportunity associated with what we believe to be
the ideal monetization model for telemedicine in Exhibit 28. Our ideal telemedicine monetization model
consists of a PMPM subscription fee combined with unlimited physician consults and no per visit fees. We
assume a low PMPM starting point of $2.99, which coincides with Teladoc’s Beth Israel New York pricing, and
equates to $35.88 annually, which is about one-quarter that of Netflix. We note that in a PMPM only model that
TDOC may look to a PMPM fee higher than the $2.99 we use in our illustration. The purpose of the aggressive
PMPM subscription fee is to drive robust utilization in a similar fashion to Netflix. Providing a subscription fee
model at a price point where a consumer forgets or does not care about the subscription cost creates a sticky
user base. As the service gains traction, the company can then raise its PMPM fees based on new or additional
services, as well as raise fees based on underlying performance and value. Once the product goes
mainstream, the service evolves from an elastic price demand curve to an inelastic price demand curve.
Ultimately, telemedicine remains a nascent industry, which in our view suggests vendors should be cautious
about over-monetizing their telemedicine services, given a lack of mainstream adoption. In the current era of
telemedicine, we believe the vendor most acutely focused on driving adoption through attractive pricing will be
the winner.
TAM Analysis Summary Low Mid High
Baseline (Aspirational) $15,940.6 $17,984.3 $20,027.9
Stifel Adjusted (Aspirational) $10,669.3 $12,037.2 $13,405.0
Baseline (Conservative, ex Ambulatory Visits) $2,967.6 $2,967.6 $2,967.6
Baseline (Conservative, ex Ambulatory Visits, 30% Say No) $2,077.3 $2,343.7 $2,610.0
PMPM (Lives) + Visit (Lives) $2,214.6 $3,301.5 $4,388.4
Page 25

Exhibit 28: A Look at Stifel’s Ideal Telemedicine Monetization Model
Source: Company documents, eHealth, and Stifel estimates
In Exhibit 29, we illustrate what we believe to be Teladoc’s total addressable market based on the per fee visit
monetization structure. According to company documents, Teladoc believes the total addressable market in
terms of visits is roughly 417 million, based on an analysis of CDC visit data. Our analysis parses out the three
component verticals of Teladoc’s visit TAM, which includes ambulatory visits, outpatient visits, and emergency
room visits. Visits across these verticals total roughly 1,008 million ambulatory visits, 101 million outpatient
visits, and 130 million emergency room visits. Based on Teladoc’s analysis of the CDC visit data, the company
believes roughly 33% of all visits are addressable by Teladoc’s telemedicine platform. We then calculate two
total addressable market scenarios in aggregate and by component using a high per visit fee of $49 and a low
per visit fee of $39. Our analysis suggests that Teladoc’s total aggregate visit opportunity is roughly 409 million.
Applying our $39 and $49 per visit fee structure, we achieve an estimated total addressable market of between
$15.0 billion and $20.0 billion. We note that the only limiting factor associated with Teladoc’s analysis revolves
around the estimated number of treatable visits by Teladoc.
Exhibit 29: Calculating TDOC’s Total Addressable Market
Source: Company documents, CDC, and Stifel formatting
We illustrate what we believe are the treatable and untreatable categories of CDC physician visits based on
Teladoc’s analysis. In our view, the addressable indication opportunity for Teladoc revolves around general and
family, dermatology, cardiovascular, psychiatry, and urology, which equates to roughly 32.6% of total CDC
physician visits. The majority of untreatable visits seem to revolve around more complex indications (neurology,
oncology, ophthalmology) or areas where preference likely defers to an in-person visit (Pediatrics and
OB/GYN). The total unaddressable visit opportunity equates to roughly 67.5% of all CDC visits.
Stifel's Ideal Employer Employer Individual &
Telemedicine Monetization Model Large & Mid Small Uninsured Family Medicare Medicaid Government
Lives (millions) 80.0 44.0 42.0 23.0 49.0 54.0 26.0
PMPM (USD) $2.99 $2.99 $2.99 $2.99 $2.99 $2.99 $2.99
Annual Fee (USD) $35.88 $35.88 $35.88 $35.88 $35.88 $35.88 $35.88
TAM (Millions, USD) $2,870.4 $1,578.7 $1,507.0 $825.2 $1,758.1 $1,937.5 $932.9
Total TAM $11,409.8
Addressable TAM (Employer and Medicaid) $6,386.6
We think the ideal telemedicine business model utilizes a PMPM fee with unlimited
consults and no per visit fee. Our analysis suggests associated TAM is compelling.
Teladoc TAM Analysis TDOC TAM Ambulatory Outpatient ED
Total Visits (MMs) 1,239 1,008 101 130
Estimated Treatable 33% 33% 33% 33%
Teladoc Visit Opportunity (MMs) 409 333 33 43
TAM (High - $49 per visit, MMs) $20,027.9 $16,299.4 $1,629.0 $2,099.6
TAM Mix 81.4% 8.1% 10.5%
TAM (Low - $39 per visit, MMs) $15,940.6 $12,973.0 $1,296.5 $1,671.1
TAM Mix 81.4% 8.1% 10.5%
Conservative TAM (excludes Ambulatory Visits)
TAM High ($49 per Visit, MMs) $3,728.6 $0.0 $1,629.0 $2,099.6
TAM Low ($39 per Visit, MMs) $2,967.6 $0.0 $1,296.5 $1,671.1
TAM ComponentsAggregate
Page 26

Exhibit 30: An Illustration of TDOC’s Addressable Visit Sources
Source: Company documents, CDC, and Stifel formatting
In Exhibit 31, we use Teladoc’s TAM by visit analysis and make an adjustment for the number of patients likely
to never use telemedicine, as well as an adjustment for the total addressable number of estimated visits. Our
analysis starts with an aggregate visit opportunity of roughly 1.239 million visits, and then apply a factor of 30%
(midpoint of 24% and 36%) to reflect the number of consumers not willing to utilize telemedicine. Our visit TAM
estimate is then based on the 77% of respondents who strongly preferred, somewhat preferred, or were neutral
toward telemedicine services. We are left with an aggregate possible visit opportunity of roughly 867.0 million
visits, which we then apply the 33% estimated treatable visit factor to the 867.0 million visits. This yields an
aggregate possible visit opportunity TAM of roughly 274 million visits, which equates to a TAM between roughly
$10.7 billion ($39 per visit fee) and $13.4 billion ($49 per visit fee). Lastly, our conservative TAM estimates
exclude all ambulatory visits, as we believe based on our pricing analysis that Teladoc’s costs do not
necessarily compare favorably to ambulatory physician visits. Based on our conservative TAM (outpatient plus
emergency room), we estimate the total addressable market lies between $2.1 billion ($39 per visit fee) and
$2.6 billion ($49 per visit fee).
Exhibit 31: An Adjusted Look at TDOC’s TAM According to Visits Analysis
Source: Company documents, American Well, CDC, and Stifel Formatting
General and Family 21.2% Internal Medicine 13.9% Otolaryngology 2.1%
Dermatology 3.9% Pediatrics 13.1% General Surgery 1.9%
Cardiovascular 2.9% OB/GYN 7.9% Neurology 1.4%
Psychiatry 2.6% Ortho 6.3% All Other 12.9%
Urology 2.0% Ophthalmology 5.5% Total 67.5%
Total 32.6% Oncology 2.5%
TDOC Addressable TDOC Unaddressable
TDOC TAM Ambulatory Outpatient ED
Total Visits (MMs) 1,239 1,008 101 130
Not Willing to Use Telemedicine 30% 30% 30% 30%
Visits Adj. (Unaddressable) 372 302 30 39
New Visits 867 706 71 91
Strongly Prefer (28%) 243 243
Somewhat Prefer (43%) 373 373
Neutral (12%, we assume 6%) 52 52
Total (77%) 829 668 71 91
Estimated Treatable 33% 33% 33% 33%
Adj. Addressable Visits Aggregate 274 220 23 30
TAM High ($49 per Visit, MMs) $13,405.0 $10,795.0 $1,140.3 $1,469.7
TAM Low ($39 per Visit, MMs) $10,669.3 $8,592.0 $907.6 $1,169.8
Conservative TAM (excludes Ambulatory Visits)
TAM High ($49 per Visit, MMs) $2,610.0 $0.0 $1,140.3 $1,469.7
TAM Low ($39 per Visit, MMs) $2,077.3 $0.0 $907.6 $1,169.8
Aggregate TAM Components
Page 27

We illustrate what the telemedicine visit total addressable market might look like based on IBISWorld revenue
estimates in Exhibit 32. Our analysis starts with telemedicine industry revenue estimates from IBISWorld for
the 2014 to 2020 period. We then assume that all revenue is associated with a per visit fee and run one
scenario based on a $39 per visit fee and a second scenario based on a $49 per visit fee. Next, we calculate
the total number of assumed visits based on these per visit fee scenarios. Then we attempt to calculate the
assumed penetration rate based on Teladoc’s visit TAM of roughly 417 million visits. Lastly, we apply an
average visit per user factor of 1.36 in order to achieve the unique visit penetration rate.
We believe that our analysis based on IBISWorld estimates suggests the PMPM model may be more lucrative
given weak expectations for overall visit volume penetration by 2020. Furthermore, we think our IBISWorld
analysis suggests that the right model for Teladoc may revolve around PMPM fees with unlimited consults for
members e.g., the Netflix of telemedicine. After all, a PMPM model only monetized at $2.99 or $4.99 per
month, based on a 313 million American population yields a TAM of between $11.2 billion and $18.7 billion.
Exhibit 32: Backing into the Telemedicine Total Addressable Visit Opportunity
Source: Company documents, American Telehealth Association (ATA), CDC, IBISWorld, Softwareadvice.com, and Stifel estimates
In Exhibit 33, we attempt to understand Teladoc’s total addressable market opportunity based on lives across
several insurance population verticals and PMPM fees. Our analysis multiplies the number of lives in each
vertical by a $0.50 PMPM fee multiplied by 12, which yields the annual total addressable market opportunity.
We use a $0.50 PMPM fee as that is what Teladoc is expected to charge on a PMPM basis in FY16. Our
analysis suggests the PMPM total addressable market is roughly $1.9 billion. Our more conservative estimate,
which includes the large, mid, and small employer market, as well as Medicaid, yields a TAM of $1.1 billion.
Based on Teladoc’s current 12.6 million membership base, Teladoc represents about 4.0% of a 318.0 million
addressable lives opportunity, and Teladoc represents about 10.2% of a 124.0 million addressable lives
opportunity.
Telehealth Market Summary 2014 2015 2016 2017 2018 2019 2020
Telehealth Revenue $465.7 $645.0 $931.2 $1,406.7 $1,981.2 $2,695.1 $3,461.3
Y/Y Growth 39% 44% 51% 41% 36% 28%
Telemedicine Revenue (13% of Mix) $60.5 $83.9 $121.1 $182.9 $257.6 $350.4 $450.0
Y/Y Growth 39% 44% 51% 41% 36% 28%
Visit Volume @ $39 Per 1.6 2.2 3.1 4.7 6.6 9.0 11.5
Visit Volume @ $49 Per 1.2 1.7 2.5 3.7 5.3 7.2 9.2
ATA Visits (based on 0.8M baseline) 0.8 1.2 1.7 2.5 3.3 4.3
Visit Penetration @ $39 Per 0.4% 0.5% 0.7% 1.1% 1.6% 2.2% 2.8%
Visit Penetration @ $49 Per 0.3% 0.4% 0.6% 0.9% 1.3% 1.7% 2.2%
Vist Factor (1.36 visits per user) 1.36 1.36 1.36 1.36 1.36 1.36 1.36
Unique Visit Penetration @ $39 Per 0.3% 0.4% 0.5% 0.8% 1.2% 1.6% 2.0%
Unique Visit Penetration @ $49 Per 0.2% 0.3% 0.4% 0.7% 0.9% 1.3% 1.6%
Page 28

Exhibit 33: Analyzing the TAM Based on Insurable Lives and Average Visits
Source: eHealth, GoHealth, Health Affairs, and Stifel estimates
In Exhibit 34, we attempt to understand Teladoc’s total addressable market based on the number of insurable
lives across several market segments. Our analysis multiplies the number of lives in each respective vertical by
the cost per visit multiplied by the visit per year factor in order to calculate the estimated total addressable
market. We assume a $39 per visit fee and a 0.2 visit factor. Our visit factor estimate comes from the PwC
market segment analysis we illustrated and discussed in the Teladoc Corporate Overview section of this report.
The 0.2 coincides with 0.1 outpatient and 0.1 emergency room visits across the majority of population verticals
put forth in the PwC analysis that we believe the Teladoc telemedicine platform services. The estimate total
addressable market in aggregate equates to roughly $2.5 billion. We believe the current addressable market is
likely limited to the employer markets (Large, mid, and small), as well as the Medicaid market. Assessing these
limitations reduces the TAM estimate to roughly $1.1 billion.
Exhibit 34: Analyzing the TAM on Insurable Lives and PMPM Fees
Source: Company documents, eHealth, GoHealth, Health Affairs, and Stifel estimates
Competition
We believe Teladoc’s competition encompasses not only other private pure play telemedicine vendors, but also
urgent care centers and free standing emergency rooms. The telemedicine industry essentially competes with
any way healthcare can be delivered outside of the traditional in-person visit at a primary care physician’s office
or a hospital. Based on our total addressable market analysis, we believe telemedicine may not yet represent a
compelling alternative to traditional primary care physician visits. Furthermore, we believe traditional pure play
telemedicine business models continue to evolve. Teladoc’s business model combines a per member per
month subscription fee with per visit fees, whereas several competitors are attempting to go to market on visit
fees alone. The primary problem facing all vendors seems to revolve around pricing, as utilization rates for the
promising technology remain quite low. While each business model seems to have its own merits, we believe
the entity that most closely focuses on driving adoption / utilization of telemedicine in general will likely
represent the long-term winner. A major trend among marquee clients seems to revolve around allowing
different telemedicine models to compete against one another, as entities such as Home Depot, CVS, and
Walgreens, among others are utilizing several of the major telemedicine providers rather than an exclusive
provider. We note that the burden of payment varies as to whether the service is delivered direct-to-consumer
or delivered as part of a group benefit. We profile several key competitors, below.
Employer - Employer - Individual &
Large & Mid Small Uninsured Family Medicare Medicaid Government
Lives (millions) 80.0 44.0 42.0 23.0 49.0 54.0 26.0
PMPM (USD) $0.50 $0.50 $0.50 $0.50 $0.50 $0.50 $0.50
TAM (Millions, USD) $480.0 $264.0 $252.0 $138.0 $294.0 $324.0 $156.0
Total TAM $1,908.0
Penetration
TDOC as % of Total Lives 4.0%
TDOC as % of Addressable TAM Lives 10.2%
Employer Employer Individual &
Large & Mid Small Uninsured Family Medicare Medicaid Government
Lives (Millions) 80.0 44.0 42.0 23.0 49.0 54.0 26.0
Cost Per Visit (USD) $39.00 $39.00 $39.00 $39.00 $39.00 $39.00 $39.00
Visit Per Year 0.20 0.20 0.20 0.20 0.20 0.20 0.20
TAM (Millions, USD) $624.0 $343.2 $327.6 $179.4 $382.2 $421.2 $202.8
Total TAM $2,480.4
Page 29

160105 TDOC initiation

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