American Well Corporation Q2 FY2025 earnings call

• Extended engagement with Military Health System to power their digital-first initiatives for 1 year, with virtual visits nearly tripling and high satisfaction. - Won strategic deal with Florida Blue for white-labeled brand access to integrated clinical programs. - Progress on cost initiatives with adjusted EBITDA improvement, streamlining teams and leveraging AI. - Subscription software revenue benefited from MHS deployment, targeting margin expansion. - AMG business is foundational for client expansions and recurring software revenues.

Total revenue for the second quarter was $70.9 million, which is 13% higher than Q2 of 2024. Normalizing for the sale of Amwell Psychiatric Care (APC), Q2 revenue was 25% higher year-over-year. Subscription software revenue was 57% of total revenue at $40.4 million, up 47% from the previous year. Total visits in the second quarter were approximately 1.2 million, which is ~22.3% lower than the previous year. Amwell Medical Group (AMG) visit revenue was $22.8 million, 20.8% lower than the previous year, but normalized for APC sale, visits were flat year-over-year. Average revenue per visit was $73, 9% lower y-o-y but 8.3% higher after APC sale normalization. Gross margin in Q2 was 56.1%, a bright spot.

• 2025 revenue revised to $245M-$250M (down from prior $250M-$260M). - Adjusted EBITDA guidance narrowed to -$50M to -$45M. - Q3 2025 revenue expected to be $53M-$56M, adjusted EBITDA -$15M to -$13M. - Goal of positive cash flow from operations in 2026, targeting over 60% adjusted EBITDA improvement vs 2024.

• Budget restrictions from Department of Defense affecting inclusion of behavioral and automated care programs in DHA contract extension. - Market challenges for healthcare organizations including consumer engagement, service/data fragmentation, regulatory compliance. - Clinical program vendors facing high customer acquisition costs and integration pressures.

Q: Any update on sales pipeline trends?

A: Market focused on cost, Amwell's platform with AI helps in conversations, seeing strong traction with wins like Florida Blue.

Q: R&D expenses into next year?

A: Expected at least 10% decrease y-o-y as part of cost reduction to achieve cash flow breakeven in 2026.

Q: DHA extension as beachhead for government pipeline?

A: Strong validation in government sector with good results, scalable on time/budget, optimistic about replicating value in adjacent organizations.

Q: Gross margin expectations for second half?

A: Margin range likely consistent with guidance, second quarter positively impacted by implementation work, remainder of year somewhat flattish.