Amwell's Strategic Partnerships and Growth Plans for 2024-2026
2024-03-05
American Well recently held its Q4 2023 earnings call, where key speakers, such as Sue Dooley, head of investor relations, Dr. Ido Schoenberg, chairman and CEO, and Bob Shepardson, CFO, discussed the company's performance in the fourth fiscal quarter and year-end of 2023.
During the call, caution was emphasized regarding the forward-looking statements made, acknowledging their susceptibility to risks and uncertainties. The company announced the migration of a significant portion of its installed base to its new platform, Converge, and highlighted a substantial partnership with Leidos for Defense Health, securing a $180 million task order to modernize and provide digital care enablement for the Defense Health Agency's beneficiaries.
Amwell outlined its plans to optimize its organization for growth and profitability, which included completing the replatforming period, returning to growth, and outlining its path to adjusted EBITDA breakeven. The company achieved several milestones in Q4, such as launching digital behavioral health programs for the DHA's Digital First initiative and successfully migrating strategic clients like Elevance and Highmark.
In terms of financials, Amwell reported that 60% of total visits in Q4 were scheduled visits. The average annual contract value (ACV) for health plans was $902,000, and for health systems, it was $415,000. The company's total revenue for Q4 was $71 million, marking a 14% increase from the previous quarter but an 11% decrease from the previous year. The decline in gross profit margin was attributed to lower subscription software revenue and a revenue mix shift.
Amwell achieved a 10% reduction in headcount in 2023 and saw a 5% decrease in GAAP R&D expense compared to the previous quarter. The decline in SG&A expenses in the second half of 2023 was primarily due to lower stock-based compensation. Adjusted EBITDA for Q4 showed a 4% improvement from the previous quarter and a 15% improvement from the previous year. The company ended Q4 with $372 million of cash and marketable securities.
Looking ahead, Amwell provided guidance for 2024 and 2025, expecting revenue in the range of $259 million to $269 million for 2024 and revenue in the range of $335 million to $350 million for 2025. Adjusted EBITDA is projected to improve by approximately 70% in 2025 compared to 2024. The company aims to achieve adjusted EBITDA breakeven in 2026 with a cash and investments balance of around $150 million.
Amwell's focus post the replatforming period is on growth and transforming its cost structure. They have restructured their sales and marketing teams and aim to sell their full portfolio of offerings through a hunter-farmer model. The company is investing in the government market segment, particularly with the Military Health System, and expects DHA to be a steady contributor to revenue beyond 2025.
The company views its relationships with clients as lifelong and aims to provide value and retain them in the long term. They believe execution risk is minimal from their current position and are confident in their ability to continue providing services to the government through the MHS contract. Amwell plans to expand its Converge platform and increase stickiness with customers during migrations.
Amwell's sales approach for Converge has shifted from innovation to execution, focusing on software subscription and efficient execution to drive growth. The company aims to help various individuals, including women and men in uniform, by providing better care. The outlook for Converge is positive, with a scalable and safe infrastructure that has proven itself in the market.
Overall, Amwell's Q4 2023 earnings call covered various topics, including financial performance, strategic partnerships, growth plans, and the company's focus on optimizing its organization for profitability and growth.