UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-37477

TELADOC HEALTH, INC.

(Exact name of registrant as specified in its charter)

Delaware	04-3705970
(State of incorporation)	(I.R.S. Employer Identification No.)
2 Manhattanville Road, Suite 203
Purchase, New York	10577
(Address of principal executive office)	(Zip code)

(203) 635-2002

(Registrant’s telephone number including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	TDOC	The New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧  No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ⌧  No  ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	⌧	Accelerated filer	◻	Non-accelerated filer	◻	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes  ☐  No  ⌧

As of July 24, 2020, the Registrant had 81,228,458 shares of Common Stock outstanding.

TELADOC HEALTH, INC.

QUARTERLY REPORT ON FORM 10-Q

For the period ended June 30, 2020

TABLE OF CONTENTS

		Page Number
PART I	Financial Information	2
Item 1.	Financial Statements	2
	Consolidated Balance Sheets as of June 30, 2020 (unaudited) and December 31, 2019	2
	Consolidated Statements of Operations (unaudited) for the quarters and six months ended June 30, 2020 and 2019	3
	Consolidated Statements of Comprehensive Loss (unaudited) for the quarters and six months ended June 30, 2020 and 2019	4
	Consolidated Statements of Stockholders’ Equity (unaudited) for the quarters and six months ended June 30, 2020 and 2019	5
	Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2020 and 2019	6
	Notes to Unaudited Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
PART II	Other Information	35
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 6.	Exhibits	37
Exhibit Index		37
Signatures		39

1

PART I

FINANCIAL INFORMATION

ITEM 1. Financial Statements

TELADOC HEALTH, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data, unaudited)

	June 30,		December 31,
	2020		2019
Assets
Current assets:
Cash and cash equivalents	$	1,308,843	$	514,353
Short-term investments		2,932		2,711
Accounts receivable, net of allowance of $5,113 and $3,787, respectively		76,902		56,948
Prepaid expenses and other current assets		14,433		13,990
Total current assets		1,403,110		588,002
Property and equipment, net		9,606		10,296
Goodwill		742,314		746,079
Intangible assets, net		213,474		225,453
Operating lease - right-of-use assets		30,440		26,452
Other assets		19,884		6,545
Total assets	$	2,418,828	$	1,602,827
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	10,816	$	9,075
Accrued expenses and other current liabilities		75,153		46,905
Accrued compensation		37,579		34,201
Total current liabilities		123,548		90,181
Other liabilities		5,257		11,539
Operating lease liabilities, net of current portion		27,940		24,994
Deferred taxes		18,976		21,678
Convertible senior notes, net		948,178		440,410
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value; 150,000,000 shares authorized as of June 30, 2020 and December 31, 2019; 79,099,433 shares and 72,761,941 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively		79		73
Additional paid-in capital		1,879,573		1,538,716
Accumulated deficit		(562,810)		(507,525)
Accumulated other comprehensive loss		(21,913)		(17,239)
Total stockholders’ equity		1,294,929		1,014,025
Total liabilities and stockholders’ equity	$	2,418,828	$	1,602,827

See accompanying notes to unaudited consolidated financial statements.

2

TELADOC HEALTH, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data, unaudited)

	Quarter Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Revenue	$	241,030	$	130,276	$	421,829	$	258,849
Expenses:
Cost of revenue (exclusive of depreciation and amortization shown separately below)		90,780		41,634		163,162		86,311
Operating expenses:
Advertising and marketing		47,578		26,616		80,093		53,020
Sales		18,687		15,832		36,627		32,044
Technology and development		23,029		16,665		42,286		32,652
Legal and regulatory		2,232		2,019		3,454		3,605
Acquisition and integration related costs		1,627		1,136		5,291		2,148
General and administrative		54,383		38,549		99,503		74,531
Depreciation and amortization		9,893		9,848		19,603		19,448
Total expenses		248,209		152,299		450,019		303,759
Loss from operations		(7,179)		(22,023)		(28,190)		(44,910)
Loss on extinguishment of debt		7,751		0		7,751		0
Interest expense, net		13,151		7,211		22,454		13,732
Net loss before taxes		(28,081)		(29,234)		(58,395)		(58,642)
Income tax (benefit) expense		(2,399)		90		(3,110)		832
Net loss	$	(25,682)	$	(29,324)	$	(55,285)	$	(59,474)
Net loss per share, basic and diluted	$	(0.34)	$	(0.41)	$	(0.74)	$	(0.83)
Weighted-average shares used to compute basic and diluted net loss per share		76,512,870		71,721,246		74,919,194		71,322,586

See accompanying notes to unaudited consolidated financial statements.

3

TELADOC HEALTH, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, unaudited)

	Quarter Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Net loss	$	(25,682)	$	(29,324)	$	(55,285)	$	(59,474)
Other comprehensive loss, net of tax:
Net change in unrealized gains on available-for-sale securities		0		5		0		60
Cumulative translation adjustment		12,880		4,311		(4,674)		468
Other comprehensive loss, net of tax		12,880		4,316		(4,674)		528
Comprehensive loss	$	(12,802)	$	(25,008)	$	(59,959)	$	(58,946)

See accompanying notes to unaudited consolidated financial statements

4

TELADOC HEALTH, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data, unaudited)

								Accumulated
				Additional				Other		Total
	Common Stock			Paid-In		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Loss		Equity
Balance of December 31, 2019	72,761,941	$	73	$	1,538,716	$	(507,525)	$	(17,239)	$	1,014,025
Exercise of stock options	671,279		0		14,830		0		0		14,830
Issuance of common stock upon vesting of restricted stock units	642,411		1		(1)		0		0		0
Issuance of common stock for 2022 Notes	655		0		58		0		0		58
Stock-based compensation	0		0		18,421		0		0		18,421
Other comprehensive loss, net of tax	0		0		0		0		(17,554)		(17,554)
Net loss	0		0		0		(29,603)		0		(29,603)
Balance as of March 31, 2020	74,076,286		74		1,572,024		(537,128)		(34,793)		1,000,177
Exercise of stock options	927,684		1		18,682		0		0		18,683
Issuance of common stock upon vesting of restricted stock units	109,768		0		(0)		0		0		0
Issuance of stock under employee stock purchase plan	35,901		0		2,473		0		0		2,473
Issuance of common stock for 2022 Notes	3,949,794		4		693,802		0		0		693,806
Equity portion of extinguishment of 2022 Convertible Notes	0		0		(715,151)		0		0		(715,151)
Equity component of 2027 Notes, net of issuance costs	0		0		285,601		0		0		285,601
Stock-based compensation	0		0		22,142		0		0		22,142
Other comprehensive loss, net of tax	0		0		0		0		12,880		12,880
Net loss	0		0		0		(25,682)		0		(25,682)
Balance as of June 30, 2020	79,099,433	$	79	$	1,879,573	$	(562,810)	$	(21,913)	$	1,294,929
Balance as of December 31, 2018	70,516,249	$	70	$	1,434,780	$	(408,661)	$	(13,070)	$	1,013,119
Exercise of stock options	564,102		1		8,853		0		0		8,854
Issuance of common stock upon vesting of restricted stock units	383,060		0		0		0		0		0
Stock-based compensation	0		0		13,523		0		0		13,523
Other comprehensive loss, net of tax	0		0		0		0		(3,788)		(3,788)
Net loss	0		0		0		(30,150)		0		(30,150)
Balance as of March 31, 2019	71,463,411		71		1,457,156		(438,811)		(16,858)		1,001,558
Exercise of stock options	350,219		1		6,846		0		0		6,847
Issuance of restricted stock units	85,035		0		0		0		0		0
Issuance of stock under employee stock purchase plan	35,716		0		1,875		0		0		1,875
Stock-based compensation	0		0		17,368		0		0		17,368
Other comprehensive loss, net of tax	0		0		0		0		4,316		4,316
Net loss	0		0		0		(29,324)		0		(29,324)
Balance as of June 30, 2019	71,934,381	$	72	$	1,483,245	$	(468,135)	$	(12,542)	$	1,002,640

See accompanying notes to unaudited consolidated financial statements.

5

TELADOC HEALTH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

	Six Months Ended June 30,
	2020		2019
Cash flows used in operating activities:
Net loss	$	(55,285)	$	(59,474)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		22,655		22,443
Allowance for doubtful accounts		2,290		1,014
Stock-based compensation		40,243		30,891
Deferred income taxes		(3,457)		(1,472)
Accretion of interest		16,576		12,347
Loss on extinguishment of debt		7,751		0
Changes in operating assets and liabilities:
Accounts receivable		(24,773)		(7,237)
Prepaid expenses and other current assets		1,595		1,251
Other assets		36		74
Accounts payable		1,844		374
Accrued expenses and other current liabilities		25,208		10,358
Accrued compensation		(1,818)		(9,133)
Operating lease liabilities		(2,788)		(794)
Other liabilities		(847)		(2,385)
Net cash provided by (used) in operating activities		29,230		(1,743)
Cash flows (used in) provided by investing activities:
Purchase of property and equipment		(1,641)		(1,248)
Purchase of internal-use software		(6,449)		(2,975)
Proceeds from marketable securities		0		22,695
Sale of assets		0		7
Investment in securities		0		(5,000)
Pre-funding associated with the pending acquisition		(13,500)		(11,207)
Net cash (used in) provided by investing activities		(21,590)		2,272
Cash flows provided by financing activities:
Net proceeds from the exercise of stock options		33,513		15,701
Proceeds from issuance of 2027 Notes		1,000,000		0
Issuance costs of 2027 Notes		(24,070)		0
Contingent consideration fair value adjustment		0		210
Repurchase of 2022 Notes		(228,130)		0
Proceeds from employee stock purchase plan		2,473		1,875
Cash received (paid) for withholding taxes on stock-based compensation, net		4,492		(1,886)
Net cash provided by financing activities		788,278		15,900
Net increase in cash and cash equivalents		795,918		16,429
Foreign exchange difference		(1,428)		25
Cash and cash equivalents at beginning of the period		514,353		423,989
Cash and cash equivalents at end of the period	$	1,308,843	$	440,443
Income taxes paid	$	59	$	309
Interest paid	$	5,609	$	6,102

See accompanying notes to unaudited consolidated financial statements.

6

Note 1. Organization and Description of Business

Teladoc, Inc. was incorporated in the State of Texas in June 2002 and changed its state of incorporation to the State of Delaware in October 2008. Effective August 10, 2018, Teladoc, Inc. changed its corporate name to Teladoc Health, Inc. Unless the context otherwise requires, Teladoc Health, Inc., together with its subsidiaries, is referred to herein as “Teladoc Health” or the “Company”. The Company’s principal executive office is located in Purchase, New York. Teladoc Health is the global leader in providing virtual healthcare services with a focus on high quality, lower costs, and improved outcomes around the world.

On July 1, 2020, the Company completed the acquisition of InTouch Technologies, Inc., the leading provider of enterprise telehealth solutions for hospitals and health systems. See Note 15 “Subsequent Events”.

Note 2. Basis of Presentation and Principles of Consolidation

Basis of Presentation and Principles of Consolidation

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring accruals and adjustments) necessary to present fairly the financial position, results of operations and cash flows of the Company at the dates and for the periods indicated. The interim results for the quarter and six months ended June 30, 2020 are not necessarily indicative of results for the full 2020 calendar year or any other future interim periods. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Form 10-K for the year ended December 31, 2019

The unaudited consolidated financial statements include the results of Teladoc Health, its wholly owned subsidiaries, as well as two professional associations, eleven professional corporations and a service corporation (the “Association”).

Teladoc Physicians, P.A. became Teladoc Health Medical Group, P.A. on January 1, 2020. Teladoc Health Medical Group, P.A. is party to several services agreements by and among it and the professional corporations pursuant to which each professional corporation provides services to Teladoc Health Medical Group, P.A. Each professional corporation is established pursuant to the requirements of its respective domestic jurisdiction governing the corporate practice of medicine.

The Company holds a variable interest in the Association which contracts with physicians and other health professionals in order to provide services to Teladoc Health. The Association is considered a variable interest entity (“VIE”) since it does not have sufficient equity to finance its activities without additional subordinated financial support. An enterprise having a controlling financial interest in a VIE, must consolidate the VIE if it has both power and benefits—that is, it has (1) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance (power) and (2) the obligation to absorb losses of the VIE that potentially could be significant to the VIE or the right to receive benefits from the VIE that potentially could be significant to the VIE (benefits). The Company has the power and rights to control all activities of the Association and funds and absorbs all losses of the VIE.

Total revenue and net (loss) income for the VIE were $57.7 million and $0.9 million, respectively, for the quarter ended June 30, 2020 and $17.4 million and $(0.2) million, respectively, for the quarter ended June 30, 2019. Total revenue and net (loss) income for the VIE were $100.2 million and $0.8 million, respectively, for the six months ended June 30, 2020 and $38.5 million and $(0.3) million, respectively, for the six months ended June 30, 2019. The VIE’s total assets were $22.9 million and $13.6 million at June 30, 2020 and December 31, 2019, respectively. Total liabilities for the VIE were $59.8 million and $51.3 million at June 30, 2020 and December 31, 2019, respectively. The VIE’s total stockholders’ deficit was $36.9 million and $37.7 million at June 30, 2020 and December 31, 2019, respectively.

The functional currency for each of the Company’s foreign subsidiaries is the local currency. All assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the exchange rate on the balance sheet date. Revenues and expenses are translated at the weighted average exchange rate during the period. Cumulative

7

translation gains or losses are included in stockholders’ equity as a component of accumulated other comprehensive income (loss).

The Company operates in a single reportable segment – health services. Revenue earned by foreign operations outside of the United States were $30.5 million and $26.1 million for the quarters ended June 30, 2020 and 2019, respectively. Revenue earned by foreign operations outside of the United States were $59.9 million and $51.3 million for the six months ended June 30, 2020 and 2019, respectively. Long-lived assets from foreign operations totaled $1.6 million and $2.2 million as of June 30, 2020 and December 31, 2019, respectively.

All intercompany transactions and balances have been eliminated.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

Recently Issued Accounting Pronouncements

In December 2019, FASB issued ASU 2019-12 Simplification of Income Taxes (Topic 740). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for public companies for annual periods beginning after December 15, 2020, including interim periods within those fiscal years. We have early adopted ASU 2019-12 on our consolidated financial statements and disclosures effective January 1, 2020, with no material impact to the financial statements.

In January 2017, the FASB issued ASU 2017-04, Goodwill Simplifications (Topic 350). ASU 2017-04 simplifies the test for goodwill impairment. The new guidance eliminates Step 2 from the goodwill impairment test as currently prescribed in the U.S. generally accepted accounting principle. This ASU is the result of the FASB project focused on simplifications to accounting for goodwill. The new guidance was effective for the first quarter of 2020 and was adopted in the quarter-ended December 31, 2019.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires an entity to utilize a new impairment model known as the current expected credit loss ("CECL") model to estimate its lifetime "expected credit loss" and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL model is expected to result in more timely recognition of credit losses. ASU 2016-13 requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. ASU 2016- 13 is effective for public companies for annual periods beginning after December 13, 2019, including interim periods within those fiscal years. The standard applies as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The guidance was effective and adopted in the quarter ended March 31, 2020, with no material impact to the financial statements.

Summary of Significant Accounting Policies

There have been no changes to the significant accounting policies described in the 2019 Form 10-K that have had a material impact on the consolidated financial statements and related notes. The Company has not experienced any significant impact to it’s estimates and assumptions as a result of the COVID-19 pandemic. On an ongoing basis, the Company will continue to closely monitor for any changes to the related impacts, especially on the allowance for doubtful accounts.

8

Note 3. Revenue

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

The Company’s agreements generally have a term of one year. The majority of clients renew their contracts following their first year of services. Revenues are recognized when the Company satisfies its performance obligation to stand ready to provide telehealth services which occurs when the Company’s clients and members have access to and obtain control of the telehealth service. The Company generally bills for the telehealth services on a monthly basis with payment terms generally being 30 days. There are not significant differences between the timing of revenue recognition and billing. Consequently, the Company has determined that client contracts do not include a financing component. Revenue is recognized in an amount that reflects the consideration that is expected in exchange for the service and includes a variable transaction price as the number of members may vary from period to period. Based on historical experience, the Company estimates this amount.

Subscription access revenue accounted for approximately 76% and 85% of our total revenue for the quarters ended June 30, 2020 and 2019, respectively. Subscription access revenue accounted for approximately 76% and 84% of our total revenue for the six months ended June 30, 2020 and 2019, respectively.

.

The following table presents the Company’s revenues disaggregated by revenue source (in thousands):

	Quarter Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Subscription Access Fees:
U.S.	$	152,021	$	85,530	$	259,960	$	166,509
International		30,150		25,711		59,264		50,686
Visit Fee Revenue:
U.S. Paid Visits		39,041		15,083		69,939		33,331
U.S. Visit Fee Only		19,471		3,546		32,057		7,667
International Paid Visits		347		406		609		656
Total Revenues	$	241,030	$	130,276	$	421,829	$	258,849

As of June 30, 2020, accounts receivable, net of allowance for doubtful accounts, were $76.9 million. The allowance for doubtful accounts reflects our best estimate of expected losses inherent in the accounts receivable balance. The Company determines the allowance based on historical experience, specific account information and other currently available evidence.

For certain services, payment is required for future months before the service is delivered to the client or member. The Company records deferred revenue when cash payments are received in advance of the Company’s performance obligation to provide services. The net increase of $12.3 million and $4.6 million in the deferred revenue balance for the six months ended June 30, 2020 and 2019, respectively, are primarily driven by the direct-to-consumer behavioral health product and cash payments received or due in advance of satisfying the Company’s performance obligations, offset by revenue recognized that were included in the deferred revenue balance at the beginning of the period. The Company anticipates that it will satisfy most of its performance obligations associated with the deferred revenue within the prospective fiscal year.

9

The Company’s contracts do not generally contain refund provisions for fees earned related to services performed. However, the Company’s direct-to-consumer behavioral health service provides for member refunds. Based on historical experience, the Company estimates the expected amount of refunds to be issued which are recorded as a reduction of revenue. The Company issued refunds of approximately $2.4 million and $0.6 million for the quarter ended June 30, 2020 and 2019, respectively. The Company issued refunds of approximately $3.7 million and $1.2 million for the six months ended June 30, 2020 and 2019, respectively.

Additionally, certain of the Company’s contracts include client performance guarantees that are based upon minimum Member utilization and guarantees by the Company for specific service level performance of the Company’s services. If client performance guarantees are not being realized, the Company records, as a reduction to revenue, an estimate of the amount that will be due at the end of the respective client’s contractual period. For the quarter and six months ended June 30, 2020 and 2019, revenue recognized from performance obligations related to prior periods for the aforementioned changes in transaction price or client performance guarantees, were not material.

The Company has elected the optional exemption to not disclose the remaining performance obligations of its contracts since substantially all of its contracts have a duration of one year or less and the variable consideration expected to be received over the duration of the contract is allocated entirely to the wholly unsatisfied performance obligations.

Note 4. Business Acquisitions

On April 30, 2019, the Company completed the acquisition of the Paris-based telemedicine provider MedecinDirect in which MedecinDirect became a wholly-owned subsidiary of the Company. The aggregate merger consideration paid was $11.2 million with additional potential earnout consideration. The acquisition was considered a stock acquisition for tax purposes and accordingly, the goodwill resulting from the acquisition is not tax deductible.

Note 5. Intangible Assets, Net

Intangible assets, net consist of the following (in thousands):

								Weighted
								Average
	Useful			Accumulated		Net Carrying		Remaining
	Life	Gross Value		Amortization		Value		Useful Life
June 30, 2020
Client relationships	2 to 20 years	$	235,906	$	(72,523)	$	163,383	12.8
Non-compete agreements	1.5 to 5 years		4,960		(4,508)		452	0.9
Trademarks	3 to 15 years		42,319		(8,524)		33,795	12.2
Patents	3 years		200		(200)		0	0
Internal-use software and other	3 to 5 years		42,546		(26,702)		15,844	2.6
Intangible assets, net		$	325,931	$	(112,457)	$	213,474	11.4
December 31, 2019
Client relationships	2 to 20 years	$	237,182	$	(60,647)	$	176,535	13.1
Non-compete agreements	1.5 to 5 years		4,958		(4,260)		698	1.4
Trademarks	3 to 15 years		42,606		(7,143)		35,463	12.9
Patents	3 years		200		(200)		0	0
Internal-use software and other	3 to 5 years		34,850		(22,093)		12,757	2.3
Intangible assets, net		$	319,796	$	(94,343)	$	225,453	12.4

Amortization expense for intangible assets was $9.0 million and $9.0 million for the quarters ended June 30, 2020 and 2019, respectively. Amortization expense for intangible assets was $17.9 million and $17.7 million for the six months ended June 30, 2020 and 2019, respectively.

10

Note 6. Goodwill

Goodwill consists of the following (in thousands):

	As of June 30,			As of December 31,
	2020		2019
Beginning balance	$	746,079