Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- American Well Corp reported a strong start to the year with significant new customer wins and a positive revenue mix, indicating robust market acceptance of their platform.
- The company has successfully expanded into the government sector, specifically modernizing the military health system, demonstrating scalability and enhanced cybersecurity capabilities.
- American Well Corp is making strides in cost reduction, aiming for a significantly lower cost structure as reflected in forward guidance, which supports future profitability.
- The company's technology and platform, especially the Converged platform, are well-received by clients, showing high user satisfaction scores and NPS ratings, which drives long-term customer relationships.
- American Well Corp has a strong balance sheet, which is expected to support the company's operations and growth well beyond the projected timeline to achieve profitability in 2026.
Negative Points
- There was a slight decline in total visits in Q1 2024 compared to the previous year, influenced by external factors such as the Change Healthcare security breach and disruptions from large client migrations.
- Revenue for Q1 2024 showed a decrease of 7% year-over-year, primarily due to declines in subscription revenue related to legacy platform usage.
- The company is still operating at a loss, with a reported adjusted EBITDA of negative $45.7 million for the quarter, although this is part of a controlled path towards future profitability.
- American Well Corp faces challenges in the highly competitive digital health market, requiring continuous innovation and adaptation to maintain and grow its market share.
- While the company is reducing its R&D spend, this necessary cost-cutting could potentially slow down the pace of innovation compared to competitors who may continue to invest heavily in R&D.
Q & A Highlights
Q: Can you provide more details on the renewals with clients like Mountain and Cleveland Clinic, including the length of these renewals and any new capabilities added?
A: (Robert Shepardson, CFO) The duration of our agreements typically spans around three years. These renewals signify a strong vote of confidence in our Converge platform. Clients are looking to add new elements such as virtual primary care, which is proving to be valuable for both members and sponsors. Additionally, we're seeing growth in automated interactions and virtual nursing, which helps address staff shortages in hospitals.
Q: With the recent shutdown of UnitedHealth's Optum virtual care platform, what does this indicate about the market for virtual care and the role of payers?
A: (Robert Shepardson, CFO) The challenges faced by tech companies in healthcare underscore the complexity of what we do. It reaffirms our strategy of providing technology that connects trusted providers with consumers, rather than replacing traditional care models. The commitment to hybrid and digital care remains strong across the industry.
Q: What are the key milestones for the DHA program this year, and how do they impact the visibility and setup for 2025?
A: (Robert Shepardson, CFO) We've already achieved the first milestone with the go-live of our behavioral health solution. The next milestones include the deployment of Converge and automated care, with a full enterprise rollout expected by the end of the year. These milestones are on track and support our positive outlook for 2025.
Q: Can you discuss the impact of the Change Healthcare security breach and the temporary disruption from a large client migration on visit volumes and revenue?
A: (Ido Schoenberg, CEO) The breach significantly impacted our ability to conduct visits as patients could not proceed without seeing their co-pay information. We resolved these issues by finding an alternative to Change Healthcare. The large client migration was our biggest to date and coincided with high demand, but we successfully managed these challenges.
Q: With the closure of digital health operations by Optum and Walmart, do you see opportunities for Amwell in the retail space?
A: (Ido Schoenberg, CEO) The closures highlight the complexities of digital health and the need for integrated solutions across the healthcare ecosystem. We believe our infrastructure is well-positioned to benefit from these market dynamics, supporting trusted healthcare providers and enhancing access to care.
Q: How are changes in your go-to-market strategy affecting your approach to new and existing clients?
A: (Ido Schoenberg, CEO) We've redefined our market segments to focus on areas where we have the highest right to win and can generate better margins. Our sales team is now structured to manage relationships over the long term, focusing on expanding relationships with existing clients and effectively engaging new ones.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
