American Well Corp Q4 FY2024 earnings call

Key Achievements in 2024 - Completed stage launch of full solution across Military Health System, a significant growth initiative. - Made progress towards cash flow positive results in 2026, strengthened cash position, drove efficiency with cost reduction, improved revenue quality and margins. - Established leaner leadership structure, expanded Mark Hirschhorn's role to COO. - Divested Amwell Psychiatric Care, adding $30 million in cash to balance sheet. - Signed agreement to add Vida Health to clinical programs, expanding patient access to obesity and diabetes care. - Delivered value with DHA deployment, programs fully deployed across Military Health Systems with positive feedback, remainder to be live in first half of 2025, final expansion in early Q3. - Completed renewals with several Blue Cross Blue Shield plans and large national health plans. - HSC in Ireland expanded use of Digital Behavioral Health programs. ### Priorities for 2025 - Growth: Execute on Military Health System deliverables, open new government channels, pursue new payer and health system contracts, add third-party clinical solutions. - Realize higher mix of recurring revenue: Align product initiatives with revenue quality goals to improve subscription-based software mix. - Efficiency: Reduce overall costs, focus on core portfolio, monetize platform.

Total revenue for Q4 was $71 million, flat to Q4 2023. Subscription revenue was $37 million in Q4, up 36% from a year ago. Visits in Q4 were approximately 1.4 million, 18% lower than a year ago. AMG's Q4 visit revenue was $29.2 million, down 9% y-o-y. Average revenue per visit was $77, up 7% y-o-y. Service and Carepoint's revenue was $4.9 million in Q4, down from $7.3 million in the previous quarter. Gross profit margin was 48% in Q4, higher by 11 points compared to Q3. For the full year, gross margin was 39%, slightly higher than 37% in 2023.

2025 Guidance - Revenue expected to be in range of $250 million to $260 million, excluding over $25 million from APC in 2025. Subscription revenue expected to be nearly 60% of total revenues. - Adjusted EBITDA expected to be in range of negative $55 million to negative $45 million, a 60% improvement year-over-year. - First quarter 2025 revenue expected to be in range of $59 million to $61 million, adjusted EBITDA in range of negative $18 million to negative $20 million. - Anticipate $190 million in cash at end of 2025 and over $150 million in cash at year-end 2026.

• Uncertainty around government contract funding approvals, particularly for military-related initiatives. - Long sales cycles in the government sector which can impact revenue recognition. - Potential customer churn and market competition affecting revenue growth and margin expansion.

Q: Can you talk about how DHA is progressing relative to initial expectations and key milestones for the rest of 2024?

A: DHA deployment is going better than expected, most components customized and implemented, enterprise deployment expected to be completed this year, seeing good traction and feedback.

Q: What is the timing of the sustainment contract for the DHA contract?

A: DHA announced sole source grant in Q4 for extension, closing extension is low risk, expect to be notified when ready.

Q: Is the revenue impact from divested business entirely in visit revenue?

A: Annualized revenue impact from divestiture is in excess of $25 million and all visits.

Q: Can you share expectations for ACV growth in 2025 for health plans and health systems?

A: Expect ACV for health plans and health systems to continue expanding as we grow footprint and add new clients.

Q: How much visibility do you have into 2025 guidance outside of DHA?

A: Over 90% visibility from contractual subscription revenue and transactional visit volume expertise, with conservative range for achievable numbers.

Q: What changes are expected in sales strategy for government business in 2025?

A: Focus on selling what we have today, implementing and activating now, with awareness of at least 6 material government opportunities to pursue.

Q: How does the 2026 free cash flow goal factor in with 2025 growth and cost savings?

A: Double-digit growth expected for 2026, if growth doesn't materialize, cost containment strategies will be accelerated to achieve cash flow breakeven.

Q: Can you talk about the funding vehicle for digital first in the government and its timing?

A: DHA shared intent to offer sole source to Leidos in Q4, contract discussions ongoing, likelihood of funding is low from our perspective.

Q: What specific government RFPs are being targeted?

A: Unable to share specific names, sales cycle is long, but relationship with Leidos and track record position us well for government opportunities.

Q: How much of EBITDA improvement is from cost reduction efforts?

A: Vast majority of EBITDA improvement is from shift from transactional visit revenue to subscription revenue, with 1/3 from cost reductions.

Q: How is the APC divestiture impacting behavioral health care delivery?

A: AMG provides behavioral health services with automated programs and other partners, legacy APC was not strategically helpful for technology-enabled psychiatric care.