Recently, Catherine, who is called "wooden Sister" among domestic netizens. Cathie Wood is on fire.

The head, known as the "female Buffett", manages a number of active funds such as Ark Innovation, as well as index funds such as 3D Printing.

As of April 14, Mu Tou's flagship fund, Ark Innovation ETF, had more than $24 billion in assets.

"We want the company we (hold) to invest actively, and we don't want to make a profit right now," Mu said in a recent interview with CNBC. We want them to invest actively because we are entering a lot of winner-take-all markets. "

So Fengyunjun quickly checked Ark Innovation's position to see if there was an opportunity to copy homework and pick up some leftovers.

Then Fengyunjun found out that wooden Sister's top 25 list included companies from last year's fire, such as Tesla, Inc. (TSLA.O), Roku (ROKU.O), Spotify (SPOT.N), Shopify Inc (SHOP.N), Zoom Video Communications Inc (ZM.O), KE Holdings Inc. (BEKE.N), Tencent (00700.HK), Nintendo (7974.T) and so on.

And most of these companies have long been covered by Fengyunjun, which is unfortunate. Of course, there are some slips, such as some health care companies: Teladoc Health (TDOC.N), CRISPR THERAPEUTICS (CRSP.O), INVITAE CORP (NVTA.N), EXACT SCIENCES (EXAS.O).

Today, Fengyunjun will analyze the one with a relatively large market capitalization: Teladoc Health.

First, gain a dominant market position through large-scale acquisitions and marketing.

Teladoc Health is the ancestor of telemedicine.

Teladoc consists of the words "tele" and "doctor", as the name implies "remote doctor".

The company is doing three main businesses: video online diagnosis and treatment, enterprise-level telemedicine software and hardware solutions, personal networking diagnostic equipment and corresponding health consultation. Among them, video online diagnosis and treatment is the most important business.

Teladoc Health was founded in 2002 and listed on the New York Stock Exchange in July 2015.

In 2020, Teladoc's revenue reached $1.094 billion, an increase of 98% over the same period last year. 2013-2020 CAGR reached 77%.

The company has not made a profit so far, with gross profit margin and operating profit margin of 64.3% and-46.3% respectively in 2020.

It seems that Teladoc is very much in line with what Sister Mu said, "invest heavily, don't make a profit."

Let's start with a lot of investment.

There are two kinds of investment, one is investment in business operation, such as R & D and sales, and the other is foreign investment, that is, acquisition.

From 2013 to 2019, Teladoc's management expense rate, marketing expense rate and R & D expense rate were basically on a downward trend, with the three rates being 28.5%, 31.6% and 11.7% respectively in 2019, while the proportion of depreciation and amortization increased to 7.0% in 2019, an increase of 3.2 percentage points over 2013.

In 2020, due to the merger with Livongo, the rates of all three expenses increased, especially the rate of management expenses increased by 17.0% compared with the same period last year.

The proportion of R & D expenditure is the lowest, which is only equivalent to 1 / 3 of marketing expenses, and the company's performance is more marketing-driven than technology-driven.

On the other hand, the increase in the share of depreciation and amortization is due to the fact that the company has acquired one company almost every year since 2013, with two companies each in 2015 and 2020.

Since 2013, the company has paid a cumulative consideration of $16.039 billion for acquisitions.

At present, the company's light brands have Teladoc, Livongo, Advance Medical, Best Doctors, BetterHelp, HealthiestYou a total of 6.

These acquisitions not only bring new customers to the company, but also help the company enter new markets because of the particularity of the healthcare industry, such as the acquisition of France's MedecinDirect in 2019.

Excluding the impact of acquisitions, Teladoc's endogenous growth rate since 2017 is 43 per cent, 36 per cent, 24 per cent and 75 per cent, respectively, which is also excellent, but significantly lower than the overall revenue growth rate.

From 2016 to 2020, the CAGR of total revenue was 73 per cent, while the endogenous CAGR was only 43 per cent.

Generally speaking, Teladoc's investment is more foreign acquisition and marketing, which is different from the general belief that technological breakthroughs can be achieved through research and development and then gain access to the market.

It accounts for nearly 30% of the telemedicine market in the United States.

The customers of Teladoc Health are mainly companies or institutions, and the number of customers directly facing consumers (direct-to-consumer) is relatively small.

Customers include:

More than 50 health insurance companies, such as Aetna, Blue Cross and Blue Shield of Alabama

More than 500 hospitals and medical institutions, such as Jefferson Health, Mass General Brigham)

More than half of the Fortune 500 companies (such as Accenture PLC and Bank of America Corporation), as well as brokers, dealers and consultants.

By the way, the company's CEO Jason Gorevic served as chief marketing officer at Empire BlueCross BlueShield from 2002 to 2005. Empire BlueCross BlueShield is an American health insurance company and a current customer of Teladoc.

Interestingly, many financial services customers bundle Teladoc services into insurance, credit cards and other financial products to sell. This point will be mentioned later.

Teladoc's business model is divided into paid subscriptions and pay-per-visit.

In 2020, 79% of revenue came from subscriptions, 19% from pay-per-visit and 2% from other income, with subscriptions accounting for the vast majority of revenue. Other income refers to the sale of telemedicine hardware.

By region, subscription revenue comes from the United States and from outside the United States (international).

In 2019, membership subscription revenue in the United States was $737 million, accounting for 85% of CAGR in 2017-2020.

International membership subscription revenue was $124 million, accounting for 15%, compared with 89% of CAGR in the same period.

The United States contributes most of its subscription revenue, and international revenue is growing even faster.

Income by number of visits can also be divided into the United States and the international, with $206 million and $820000 respectively in 2020. From 2017 to 2020, the CAGR of the United States by number of visits was 80%.

According to IBIS World, the market for telemedicine (telehealth) in the United States will be about $3.2 billion in 2020. In the same year, Teladoc revenue in the United States was about $944 million (excluding other income), accounting for 29.5%. The company does have a dominant market share.

The business model is better than that of competitors

Teladoc's competitors include MDLive, Doctors on Demand, Amwell (AMWL.N), Amazon.Com Inc (AMZN.O) and so on.

Among them, only Amwell and Amazon.Com Inc are listed companies, but Amazon.Com Inc's main business is e-commerce. So we choose Amwell as the comparison object.

Amwell was founded in 2006. Similar to Teladoc, Amwell focuses on providing telemedicine services to customers and deploying telemedicine solutions to medical institutions.

In 2020, Amwell revenue was $245 million, while only about $1.094 billion in Teladoc grew 65 per cent, lower than Teladoc's endogenous growth rate of 75 per cent.

Amwell's business model is also divided into paid subscriptions and pay-per-visit.

Amwell's subscription revenue was more than twice the number of visits in 2018 and 2019, but it surpassed subscription revenue in 2020.

This is obviously different from Teladoc.

This reflects the difference in the business model between the two companies.

Teladoc believes that in-person recruitment, certification, training and signing up are needed to enable doctor resources to acquire skills that match telemedicine.

According to the 2020 annual report, Teladoc has in-house health professionals and a global panel of experts (Global Expert Panel) of more than 50, 000 people, covering more than 450 sub-professions in well-known medical institutions around the world.

But due to certain restrictions, a global panel of more than 50, 000 experts was signed with Teladoc's VIE (variable interest entity) Teladoc Health Medical Group.

VIE is an entity that does not have equity control, but is actually controlled by other means. Teladoc Health Medical Group is the consolidated company of Teladoc.

Amwell also has its own remote hospital Amwell Medical Group (AMG for short). But the AMG service is mainly paid by the number of visits, while Teladoc Health Medical Group serves all users.

If the doctor's service is compared to a commodity, then Teladoc is mainly self-employed, while Amwell is both proprietary and platform, and self-income exceeds platform income for the first time in 2020.

By the end of 2020, the number of AMG doctors was 4500, an increase of 150% year-on-year due to the sharp increase in demand for telemedicine under COVID-19 's epidemic; at the same time, the number of third-party doctors on the Amwell platform reached 68000, a year-on-year increase of 1233%.

The surge in costs has naturally led to a decline in profitability.

Last year, Amwell's gross profit margin and operating margin were 36.1% and-92.7% respectively, down 10.2% and 29.1% respectively from a year earlier.

According to the 2019 and 2020 annual reports, the number of Teladoc's global expert groups is more than 50, 000, which has not changed much.

Teladoc's operating margin continued to rise from 2015 to 2019, reaching-14.5 per cent in 2019. The operating profit margin in the first three quarters of last year was-6.7%, which is close to breaking even. This is enough to show that TeladocHealth's model is better.

However, Teladoc's full-year loss increased and its operating margin fell to minus 46.3 per cent due to fees incurred from the merger with Livongo.

See here, some old friends may have doubts, Teladoc this global expert group is so powerful?

Under the heavy pressure of the COVID-19 epidemic in 2020, the number of people has hardly changed?

IV. The utilization rate of members is only about 10%.

This is actually because the usage rate of Teladoc members is very low!

For Teladoc, monthly membership is the mainstream form of payment, with B-end customers paying for its employees, that is, seeing a doctor and paying for the company or insurance.

In some cases, B-end customers will adjust the number of monthly members purchased according to the level of member activity.

In addition, if members use the Teladoc service more often than the number of times included in the member subscription fee, they will need to pay extra by the number of times.

By the end of 2020, the number of paying members of Teladoc in the US had reached 51.8 million, an increase of 41 per cent compared with the same period last year.

The average revenue contributed by each paying member in the United States was $16.7 in 2020, up from $12.0 in 2019.

The average income contributed by members depends on the type of service included in the paid package, the price of each service, and the price of the membership service of the newly acquired company (such as Livongo acquired in 2020).

Friends who know something about the American health care system may wonder that the average income contributed by each member in 2020 is only 16.7 US dollars, which is too cheap. It costs more than that for everyone to see a doctor.

Don't worry, let's move on.

In 2020, the total number of telemedicine visits to Teladoc reached 10.6 million, a sharp increase of 156% over the same period last year, far exceeding the 78% and 58% growth in the previous two years.

The main reason behind this is the epidemic.

In terms of breakdown, the number of visits by paid members in the United States increased by 153% last year, while the number of visits by users who only paid by number of times in the United States decreased by 43%, indicating that the company has converted more pay-per-view users into members.

If you further divide the number of telemedicine visits by paying members by the average number of paying members at the end of the year, the u.s. paid member usage rate in 2020 will be 16.0%.

In other words, in 2020, only 16 out of 100 paying members in the United States used the Teladoc service (regardless of how many times a paying member used it). The u.s. usage rate for paid members was only 9.3% in 2019.

The core of this business model is more like an insurance that can cover telemedicine diagnosis fees.

Contact Fengyunjun mentioned earlier Teladoc customers include a large number of insurance companies, as well as many financial services customers will bundle the company's services into insurance, credit cards and other financial products to sell, it does not seem so surprising that the utilization rate is low.

Fifth, the pricing is very clever

On the one hand, low utilization rate can lower the average price of members, on the other hand, because it is paid by the company or insurance, as long as the total cost is cheaper than the employee (insured) offline medical treatment, it will work naturally.

A 2016 study found that services using Teladoc can save an average of $472 compared to seeing a general practitioner, and an average of $1908 a year using the company's diabetes service, Teladoc said.

Not to mention that telemedicine has great advantages over traditional medicine in terms of response time and convenience. Teladoc says its median response time for telemedicine in 2020 is less than 10 minutes.

This is the business model developed in the face of abnormally high medical costs in the United States.

Let's take a look at pay-per-view. Pay-per-view can be divided into pay-per-view for members after exceeding the package, and pay-per-view for pay-per-view users only.

If you divide the corresponding income by the number of times, you can find that the average additional pay-per-view price for American members in 2019 is $50.0, while the average price for pay-per-view users is $65.6.

65.6, 50.0, 16.7, a comparison of the three numbers, it is difficult not to buy members.

In 2019, Amwell's AMG contributed $54 per visit, lower than Teladoc's 65.6 per visit, but still higher than Teladoc's 50.0 per visit. The pricing of Teladoc products is more attractive than that of Amwell.

Fengyun can't help but want to like Teladoc's business model. CEO Jason Gorevic is a former chief marketing officer.

But at the same time, it also thought: if such a business model is to be established, it must be large in scale, because only in this way can the utilization rate of members be low enough. This should be the reason why the company keeps buying.

But can Teladoc rest easy?

Amazon.Com Inc's entry into the game increases variables.

When Fengyunjun was looking up information about Amwell, he saw the news that Alphabet Inc-CL C (GOOG.O) invested $100m in Amwell last August, which will use Alphabet Inc-CL C's cloud services.

Teladoc uses Amazon.Com Inc AWS and Microsoft Corp (MSFT.O) Azure.

For these large cloud computing companies, telemedicine companies are undoubtedly good customers to promote their growth.

But what if cloud computing companies do telemedicine in person?

In July 2019, Amazon.Com Inc launched Amazon Care, a telemedicine service for his employees.

On March 17 this year, Amazon.Com Inc even proposed to push Amazon Care to the whole United States in the summer.

Amazon.Com Inc's competitive advantage is that telemedicine naturally needs cloud infrastructure, which is Amazon.Com Inc's strongest business. If you can cross-sell Amazon Care to Amazon.Com Inc AWS customers, thereby reducing sales costs, Amazon Care can have more customer cost advantages than Teladoc.

At this time, can the pricing of Teladoc continue to dominate?

Seventh, the combination of software and hardware, the utilization rate is high, the combined Livongo mode is better.

So we have to go back to the medical business model.

What is a good medical business model? That is, of course, sustainable income.

Teladoc is similar to insurance products, with membership usage as low as 10 per cent, which is clearly not a good example of sustainable income. And Teladoc's products are not patentable like drugs or devices.

What should I do? Of course, we will continue to buy.

Last year, Teladoc merged with Livongo, a company that uses smart wearers to provide chronic disease management. Before the merger, Livongo was also listed on Nasdaq under the symbol LVGO.O.

In the first half of 2020, Livongo's revenue was $160 million, equivalent to nearly 40% of Teladoc Health's revenue in the same period ($422 million). Teladoc paid as much as $13.938 billion for the merger of Livongo, with the vast majority (12.982 billion) in the form of Teladoc shares.

Anyway, their own stock prices are seriously overvalued, so there seems to be nothing wrong with using bubbles to grab another bubble, right?

Livongo's income is also based on member subscriptions, but one of its advantages is the combination of software and hardware.

Livongo's solutions include diabetes, hypertension, weight management, and behavioral health management. Diabetes solution is the flagship product, weight management and diabetes are actually related, behavioral health management includes cognitive behavioral therapy, positive psychology, etc., and other businesses of Livongo also complement each other. The Behavioral Health solution was acquired by Livongo through its acquisition of myStrength in February 2019.

To use these programs, users first need to sign up for membership, and then buy Livongo's blood glucose meter, sphygmomanometer, weight scale and other networking equipment to monitor the corresponding data.

Livongo analyzes the data and gives health advice in the background. Users can pay monthly or pay-per-view to get these suggestions. Livongo does not provide data-based health counseling services separately to people who do not use their own equipment.

Livongo's contracts with customers are usually 1-3 years long and are paid monthly.

As of the end of the first half of last year, Livongo had 410000 diabetic members, an increase of 112.6% over the same period last year. The value of new contracts signed in the first half of last year reached $198 million, up 61.7 per cent from a year earlier.

Livongo members refer to users who have been using its paid solution and have been active for no more than 4-6 months. This means that Livongo users have a 100% usage rate.

Livongo's model is more like a paid subscription than Teladoc's original business. The acquisition of Livongo is a good supplement to Teladoc's original remote diagnosis and treatment.

From a financial point of view, the acquisition of Livongo is also good for Teladoc.

Livongo's revenue grew 149% and 120% year-on-year in 2019 and the first half of 2020, respectively, faster than Teladoc.

In the first half of last year, Livongo's gross margin and operating margin were 75.4 per cent and-4.4 per cent respectively, better than Teladoc's 61.3 per cent and-6.7 per cent in the same period.

The price of being "kidnapped" by capital

Teladoc has grown rapidly through constant acquisitions, but magic always comes at a price.

At the financial level, with the exception of 2019, the company's annual adjusted cash burning rate (net cash flow from operating activities plus net cash flow from investment activities excluding securities trading) is a net outflow, with a net outflow of $647 million in 2020.

The proportion of goodwill and intangible assets in total assets has been increasing since 2015, reaching 93.5% by the end of 2020.

The asset-liability ratio of reducing goodwill and intangible assets is as high as 162%.

Livongo's revenue in 2019 and the first half of 2020 was about $170 million and $160 million, respectively. In the 2020 deal between Teladoc and Livongo, the consideration paid was as high as $13.938 billion, which can only be said to be too valuable for chronic disease management.

Mr. Fengyun did not comment on whether the deal was priced fairly. But these risks need to be made clear, that is, if these goodwill are impaired in the future, Teladoc is likely to be insolvent and the company's profitability will be greatly affected.

With the continuous acquisition, Teladoc's depreciation amortization as a percentage of revenue has been increasing year by year, reaching 7.1% by 2020.

There is another consequence of frequent acquisitions: the company is highly fragmented.

As of March 23, the company's CEO Jason Gorevic held less than 1%, Hemant Taneja, a representative of investment institutions, held 4.45%, and executives held a total of 6.47%.

Jason Gorevic, who has been on the board of Teladoc since 2009, is a key figure in leading Teladoc's IPO and rapid revenue growth, but has no control over the company.

So who controls Teladoc?

As of the end of last year, 75.99 per cent of Teladoc was held by investment institutions.

As of March 23 this year, shareholders holding more than 5 per cent of shares were Vanguard, Blackrock (BLK.N) and Ark Investment Management, with shares of 7.44 per cent, 6.04 per cent and 5.08 per cent, respectively.

Among them, Blackrock and Ark Investment Management have the only right to vote on most of their shares, while Pioneer has few voting shares.

In Fengyunjun's view, these funds are mainly index investment, buying is also passive, and the group does not make decisions, or even distinguish between right and wrong. Last year's merger of Teladoc and Livongo, for example, could only be decided by a shareholder vote.

Is this a progress or retrogression of corporate governance?

End

Teladoc is the ancestor of Internet telemedicine. The company's advantage lies in its nearly 30% market share in the United States, relatively manageable costs brought by a team of self-built doctors, and products that are cheaper than competitors.

But its disadvantage is that the utilization rate of members is only about 10%, the end users are not sticky enough, the products are software products based on third-party cloud services, and lack of patents such as pharmaceuticals or medical device companies. After the cloud service provider Amazon.Com Inc personally leaves the stage to do telemedicine, the company will face continuous challenges.

Teladoc has not made a profit so far, and because of the fragmented equity in continuous epitaxial acquisitions, the key figures leading the company and CEO Jason Gorevic hold less than 1% of the shares, and more than 70% of the shares are held by institutional investors.

Livongo, which merged last year, has better user stickiness and financial data than Teladoc, but the company also paid a ridiculously high premium. The proportion of goodwill and intangible assets of the merged company is more than 90%, and the impairment in the later stage will have a significant negative impact.