Credit Suisse https://www.credit-suise.com previewed CY1Q21 earnings for their Healthcare Technology & Distribution coverage starting with telehealth companies (TDOC, AMWL,TLMD, e-Brokers (EHTH, SLQT, GOCO), distributors (ABC, CAH, MCK OMI), DTC players (HIMS, GDRX,) and other names included in their coverage are (ACCD, TVTY, PINC, ONEM).
As for telehealth companies, Credit Suisse analysts expect TDOC to exceed (at least to the mid-point) of their quarterly revenue outlook of $445-$455 min primarily driven by PMPM (driven by business mix, up-sell, cross-sell, and VPC offering).
Legacy TDOC membership is unlikely to get the “pop” in 1Q21 as the company had done in the previous first quarter. This should be expected given the pull forward of membership in 2020 since health plans/employers accelerated launch dates in response to COVID-19. While 1Q21 results are likely to be ahead, analysts see TDOC largely reiterating their outlook at this point in the year.
Separately, with AWML issuing their 2021 outlook and 1Q21 commentary very late in 1Q21, it is unlikely that the actual 1Q21 results will significantly deviate from their commentary (sequential decline vs 4Q20.) However, if the company increases visibility on the benefits related to Google partnership, VPC offering, Cleveland Clinic partnership etc., there could be some upside to 2021 expectations.
Overall, investor sentiment for the telehealth group remains mixed on the argument that near term concerns such as the evolving competitive landscape resulting from recent transactions, telehealth push from Amazon/Zoon/Epic, and the likelihood of a “back to normal” environment pressuring telehealth volumes in 2H21, are likely to more than offset any positive results/updates from the companies. Credit Suisse analysts do not view any of these concerns representing any major fundamental risks for the group and remain bullish on the group with TDOC being their top pick.
As for e-Brokers, Credit Suisse analysts see upside likely across the board and see all three companies (EHTH, SLQT, GOCO) exceeding current revenue expectations for 1Q21. Intra-quarter commentaries from all three companies suggest that enrollment trends were strong in 1Q21.
For EHTH, analysts see upside to be primarily driven by better than expected MA approved policies which should more than offset the miss on MA LTV. Analysts believe consensus is too high on MA LTV for 1Q21 (representing 4.7% Y/Y decline vs our outlook of down 10% Y/Y). EHTH’s 1Q21 churn rate trends should show the initial impact of their retention efforts implemented last year, which will have a favorable impact on their MA LTV in 4Q21.
For GOCO, given the recent trends, analysts see upside to the current MA LTV expectations (in addition to the potential upside on MA Approved policies). For SLQT, comps are easy on MA Approved policies as FY3Q20 results were unfavorably impacted by a timing related shift. While both SLQT and GOCO are unlikely to report any formal metrics around the churn rate, analysts expect both the companies to provide some qualitative commentary around the churn trends and recapture rates on their book.
With respect to the full year outlook, analysts see EHTH gaining guidance if the 1Q21 results and the churn rate experience in the quarter are better than expectations. Analysts look forward to updates on agents hiring and on-boarding. With all three companies planning to add several internal agents in 2021, this is an important area to focus on in 2021.
As for distributors, analysts see ABC and MCK most likely to come in ahead of expectations, an in-line to ahead quarter from OMI, and an in-line result from CAH. With ABC’s leading market share in specialty drug distribution, analysts expect another strong quarter driven by the resiliency in the company’s business mix.
With MCK, analysts expect their exposure to specialty (primarily oncology) will provide resiliency similar to ABC in addition to the upside provided by COVID-19 vaccine distribution volumes. There will be a considerable focus on MCK’s FY22 outlook.
Taking into consideration a wide range of variables (e.g., COVID-19 vaccine distribution, kitting/ancillary supplies, segment profitability, and other miscellaneous tailwinds/headwinds), analysts expect MCK to guide their adjusted EPS in a range of $18.70-$19.50, bracketing the current consensus. The key variables driving the low and high end of MCK’s FY22 adjusted EPS ranges will likely be around the company’s assumptions related to J&J vaccine distribution, share repurchase, and pace of utilization recovery in Med-Surg.
Among other names previewed, analysts see in-line results at ONEM, ACCD (already previewed), GDRX, HIMS, and TLMD, and ahead results at PINC (only on revenue, primarily driven by direct sourcing business) and TVTY (driven by a sequential step-up in Silver Sneakers visits).
For ONEM, analysts believe their membership outlook for 2Q21 and beyond is conservative. As a result, if the company has an increased visibility for their membership gains for the remainder of 2Q21, the company could raise their 2Q21 outlook which will include the 2nd.MD transaction (closed in early March).
Analysts expect ACCD to reflect a 23-25% organic growth plus around $45-$50 min revenue contribution from 2nd.MD, yielding FY22 revenue outlook of $250-$260 min which will essentially bracket the current expectations.
For more information, ask questions, or to provide feedback, or want to provide news, email Jailendra Singh at jailendra.singh@credit-suisse.com or call 212-325-8121.