American Well Corporation Class A

Good afternoon and welcome to Amwell's fourth quarter and full year 2020 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. We ask that you limit yourself to one question. Please be advised that today's conference is being recorded. Leading today's call are Dr. Ido Schoenberg, Chairman and Co-Chief Executive Officer, and Keith Anderson, Chief Financial Officer. Ido and Keith will offer their prepared remarks and then they will take your questions. The Amwell press release and webcast link are available on the investor relations section of Amwell's website. Please note that we will be discussing certain non-GAAP financial measures that we believe are important in evaluating Amwell's performance. Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliations thereof can be found in the press release that is posted on our website. Also, please note that certain statements made during this call will be forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties, and other factors that could cause the results for AMWEL to differ materially for those expressed or implied in this call. And now I'll turn the call over to Dr. Ido Schoenberg, CEO of AMWEL. Ido?

Good evening and welcome to our 2020 fourth quarter earning call. 2020 was a significant year in many ways, especially in the world of healthcare. The pandemic stressed and challenged the entire healthcare ecosystem. Throughout the pandemic, Amwell empowered the providers of healthcare to continue to deliver care to their patients and also care for greater numbers of patients through virtual and remote care. The pandemic, while terrible, only accelerated our transformation impact timetable by about three to five years. Patients and members have now embraced receiving care virtually. Providers of care are comfortable, in some cases encouraging, delivering care virtually to their patients across the care continuum, well beyond rudimentary urgent care or pre-pandemic telehealth-focused. The pandemic did not stop doctors and nurses, and Amol kept many of them in practice, delivering care to their patients. For example, we powered cardiologists, whose offices were abruptly closed to enable them to continue seeing their patients and monitoring them remotely. We helped obese see pregnant mothers as they progressed through their pregnancy and enabled endocrinologists to follow up on their diabetic patients. In other words, the pandemic highlighted the power and differentiation of the AMWEL platform. we were able to demonstrate how the Amul platform could enable overall kill delivery in the new hybrid world. In 2020, we delivered over 245 million in revenues and are forecasting between 260 and 270 million for 2021, representing growth of over 35% over the last two years. In 2020, Our platform supported 6 million visits, which is about five times the volume we saw in 2019. Most importantly, we added over 65,000 active providers to our platform, bringing the total number of active providers to over 72,000 at the end of the year. It was incredible to see that 68,000 of them were not our AMG providers, but rather our clients' own providers. During this transformative year, we watch with admiration the selfless work of our clients and partners, especially the healthcare providers, in their heroic and courageous fight against COVID. Prior to the pandemic, and even in January of 2020, Many view telehealth as complementary, optional replacement service to simple urgent care. We now proved that this utility is only a small part of telehealth. COVID helped solidify Amr's role as enabling digital care delivery infrastructure across the entire healthcare continuum. It rapidly became apparent the telehealth does not replace in-person care. Instead, and especially through AMREL, it complements it and can be instrumental in strengthening existing patient-provider relationship. For example, the Chartist Group estimated that over 50% of visits were done virtually at the height of the pandemic, up from less than 1% before COVID. And today, The analysis is showing that the proportion of visits conducted virtually has stabilized around 15 to 20%. Also, according to McKinsey, health systems, independent practices, and other providers saw virtual visits increase by 50 to 175 times compared to pre-COVID. and more providers 57 percent view telehealth more favorably than before covid and 64 percent are more comfortable using it our conversations with payers and providers also changed substantially in 2020 from focusing on affordable complementary services to empowering mission critical technologies Digital connectivity enablement became a high priority for most of our clients and partners. Simplicity, reliability, modularity, extensibility and efficiency took priority over other features and functions. The ability to integrate with existing digital assets through easily supportable solutions also became very important. We were very attentive to the new market needs and took significant measures to quickly address them. We saw visits in April 2020 as highs over 40,000 per day versus approximately 5,500 in January. Reacting to the tidal wave of demand, we grew capacity by about 10 times in 2020. We launch a series of platform modules and care points aimed to dramatically simplify connectivity and make it more accessible and affordable. We also streamline integration with many other assets of our clients and partners. These innovations also include the super simple and popular AMO Now that help and is helping further accelerate provider adoption across delivery networks. They also include the deeply integrated Amul Connect EHR module, the new affordable Amul Touchpoint tablet, the Amul C500 care point that is both home and hospital enabled, and the revolutionary Amul Hospital TV care point that we discussed on our Q3 call. We experienced significant growth across all segments of our business last year. Compared to 2019, in 2020, active client providers grew over 13 times from 5,000 to 68,000. We grew total visits five times from over 1 million to 6 million. Client provider visits accounted for over 70% of our total annual visits, up from 35% in 2019. And AMG provider visit volume more than doubled from 750,000 to 1.6 million. Maybe even more important within our visit results is the continued shift to specialty visits. Behavioral health visits grew by 1,000%. Surgical care grew over 2,000%, and dentistry doubled. These trends created clear separation between Amwell and legacy telehealth players aiming to offer affordable and convenient alternatives to physical services. We have always focused on enabling and empowering trusted payers and providers and not on creating alternatives to their offerings. The transformation in the market's view of telehealth from a service to a platform is fast and profound. As the pandemic stabilized late in 2020, most of our clients began preparing to significantly expand the frequency and scope of use of our platform. In reaction to this tectonic market shift, we decided to accelerate our investment in innovative technology that powers our platform as well as its models and programs. Looking ahead, we see a rapidly evolving landscape in which trusted healthcare players develop hybrid models of care. They increasingly rely on AMREL to deliver an easy-to-use yet comprehensive platform to enable the full spectrum of their telehealth needs. Importantly, this care will be longitudinal, enabling the relationship between providers and patients over time as well as supporting interdisciplinary team-based care delivery models. We recognize that many of our clients and partners have their own preferences and investments as it relates to tele-adjacent technologies like navigation or remote patient monitoring. We are therefore making sure that our platform does not overlap or compete with these assets, but rather makes it seamless for our clients and partners to integrate and embed their own choices. In 2021, we will continue our investment in our post-COVID technology platform build-out that we briefly discussed on our third quarter call. we named the next release of the rapidly evolving annual platform Converge. At our upcoming client forum on April 28, we will present it and feature new functions and dynamics. In advance of the forum, and to help you frame our future and outlook for 2021, I will share that the key focus of Converge is the continued evolution of enabling care from episodic to longitudinal with a recurring relationship at its core. It also provides new possibilities for our clients, partners, and third parties to further expand and diversify use cases enabled through our platform. The combination of our technology and its ubiquitous adoption across the ecosystem are likely to generate significant long-term competitive advantage for Armwell. Converge capabilities will also expand our TAM by both increasing our value to existing clients and opening new markets and opportunities for us. The release of Converge is an important multi-year milestone for Armwell. An early example of a new longitudinal capabilities is demonstrated in the virtual primary care module, which we recently deployed. We believe that our VPC module is demonstrative of how healthcare will be experienced in the future. It provides patients a simple and convenient choice of online and in-person options, including referrals, imaging, and lab services. It preserves the long-term and recurring relationships with the primary care providers and others, while allowing payer sponsors to control utilization patterns without compromising on member experience, trust, quality, and value. We are excited about the technology innovations we will present to the market this year. I encourage you our investor partners to attend our client forum in April. We believe that our innovative solutions uniquely address a strong and urgent need in the market. And now I would like to tell the call over to Keith to review our financials.

Thank you, Ido, and good afternoon, everyone, and thank you for joining us for our fourth quarter call. Before diving into our detailed results, I want to reiterate Ido's comments about how pleased we are with how we ended the year, and I'm happy to report that we have exceeded every forecast metric and are seeing continued momentum across all of our business lines. The conversations we're having with our current and prospective customers highlights their acknowledgement of the unique capabilities of our platform to deliver true longitudinal care coordinated by your health plan or your doctor. This theme has been the core of our strategic partnership conversations as we believe the new healthcare will require coordination of a full spectrum of care. Now, a couple of points on our full year 2020 performance before we dig into the quarter. We ended the year generating over $245 million in revenue, which equates to 65% growth over the prior year. A large part of this growth was due to subscription average contract values expanding from $282,000 to $334,000 in 2019 to 2020 for our health system customers, and from $546,000 to $612,000 for our health plan customers. The number of health system customers also grew from 140 to 158 in 2019 to 2020, and from 56 to 58 for our health plan customers. In terms of active providers, at the end of the year, there were over 72,000 active providers on the AmWell platform delivering care to their patients. While this is a 10X increase over the prior year and highlights the hard work of our team in many cases bringing full hospital system doctor groups on the platform in rapid fashion, the explosion of our customers' own providers plugging into the Amwell platform is the most important long-term metric as these non-Amwell doctors grew 13 times from 5,100 providers in 2019 to over 68,000 at the end of 2020. As referenced, during the same period, the number of our own AMG providers grew from over 1,800 in 2019 to 4,500 at the end of 2020. As we first highlighted during the IPO and then on our Q3 call, this intended shift in care delivered by our customers' own providers is a critical dynamic that has been accelerated by the pandemic. To illustrate, 66% of all visits in 2019 were performed by Amwell providers. In 2020, this dramatically shifted to where almost 70% of all 5.9 million visits, or 4.3 million, were performed not by Amwell providers, but by our customers' own providers. Reminding you that one of the primary tenets of Amwell is not to compete against the providers of healthcare, but to enable and facilitate their ability to deliver care to their patients. It is this fundamental difference in our business model that will allow Amwell to capture the network effect of care delivered virtually and all that surrounds and coordinates full longitudinal care. Now turning to our fourth quarter financial results. I'm happy to report total revenue of $60.4 million, which is a 34% increase this quarter last year. Our subscription revenue came in at $26.3 million. The 15% increase over the previous year can be attributed to new customers, expanded programs within the health plan populations, and an increase in the volume of platform visits performed by our health system and health plan customers' own providers. In terms of visits, our visit volume remains elevated in comparison to pre-COVID-19 levels, driving a steep increase in our visit revenue, which totaled $26.2 million this quarter of 75% over the previous year. In this quarter alone, 1.6 million visits were performed on our platform, bringing our total visits in 2020 to over 5.9 million. This is up 11% sequentially versus the 1.4 million visits performed on the platform in Q3. As we forecasted, we saw AMG visits decline 5% sequentially from Q3, but within AMG visits, it's notable that we continue to experience significant growth in AMG specialty visits, which is on top of the dramatic increase in Q3 over and above Q2, which was the peak of the pandemic. This shift to more specialized visits versus simple urgent care has driven our average price per visit up to $73 per visit in 2020 versus $54 per visit in 2019. As I stated earlier, we continue to experience outsized usage of our platform by our customers' own providers, and 77% of all visits performed on the platform were conducted by our health plan and health system customers' own providers. Recall, this percentage was 73% last quarter, so the dynamic in Q4 was similar to the peak of the pandemic in Q2. an overall trend that we see continuing throughout 2021 as healthcare delivery systems move to more hybrid care models, combining physical and virtual care. Our services and care points revenue of $7.9 million was an increase of 10% year over year, but a decrease of 5% compared to last quarter, where if you recall from our third quarter call, we discussed some pull forward buying in the Q3 due to the expiration of the CARES Act and the spending of these remaining funds in Q3. Gross margin for the quarter was 37.4 compared to 32.7 last quarter versus 44.7 last year. Versus last quarter, we continued to realize additional high margin subscription revenue due to those contracts that contain volume components. The year-over-year margin decrease was a direct result of revenue mix shift to more visits versus 2019. G&A expense experienced a 36% decline versus last quarter as our IPO occurred in Q3 and there were related one-time non-cash stock-based comp awards to our executives that were triggered by our successful IPO. With the IPO now behind us, Q4 G&A resembles a more normalized spend level in the mid $20 million range. We are reporting an adjusted EBITDA loss of $35.4 million compared to $16.9 million lost last year. On a macro level, this was due to revenue makeshift to lower margin visits, continued investment in the platform, and expenses incurred typically of a public company versus last year when we were private. From a balance sheet perspective, we ended the year with cash and investments of approximately $1 billion, and Amwell continues to have no debt. Now turning to forward guidance. For the full year 2021, we expect revenue to be in the range of $260 to $270 million, representing a 35% compound growth over 2019. Similar to 2020, we are expecting visit revenue to account for approximately 50% of overall revenue, driven by forecasted visit volumes between 1.5 and 1.7 million AMG visits. we are forecasting an adjusted EBITDA loss between 157 and 147 million. As we did during our IPO, in an effort to be transparent and given all the moving parts and uncertainty amidst the COVID-19 crisis, I want to provide a few high-level thoughts on framing 2021. Most notably, we are projecting in 2021 AMG visit volumes at levels similar to during the pandemic, with the midpoint of our range at 1.6 million visits the same volume as we delivered in total in all of 2020. Now, that is an important data point. It's said differently. We see visit volumes coming out of the pandemic as foundational and not episodic. The underlying data supports that both our provider and health plan member customers have embraced delivering and receiving care virtually and are doing so on the Amwell platform. While we're projecting more normalized flu season later in 2021, we continue to observe a mixed shift towards specialty visits versus urgent care, and thus are forecasting revenue per visit to continue to increase to around the $80 per visit range versus $73 in 2020 and $54 in 2019. Subscription revenue from our innovator customers and revenues from sales of our care points and services are projected to return to more normalized levels as discussed during our IPO. Regarding R&D spend, as Iter discussed earlier and we highlighted on the third quarter call, we expect R&D expense as a percentage of revenue to continue throughout 2021 at the same levels as the fourth quarter of 2020. This temporary increase is driven by foundational changes in customer sentiment to use digital connectivity as part of mainstream healthcare. And thus, we have decided to accelerate the Converge platform project in advance of these longitudinal care type products. We'll talk more about this at our upcoming client forum in April. For the first quarter of 2021, we are expecting revenue will be lower than in the fourth quarter of 2020. in part simply because of a fewer number of days, but more so the turn of two large contracts due to M&A that we identified and discussed during our IPO. Also, the run of care points in Q3 and Q4 of last year, pulling revenue forward into those quarters and out of the first quarter of this year. And finally, specific educational marketing campaigns by the health plans that occurred in the fourth quarter of last year. Looking beyond 2021, the Converge platform will expand our TAM through expanded partnerships and functionality and is the basis of some of our inorganic strategic discussions related to longitudinal care. I want to highlight, though, that while we have accelerated this platform investment into 2021, our timeline to achieve EBITDA profitability remains unchanged. In closing, I'd like to reiterate how pleased we are to report yet another strong quarter, as this is only our second quarter since becoming a public company. I look forward to reporting progress toward our goals and forecasts this year in 2021. We are well capitalized for growth and positioned to maintain a leadership position in the telehealth market, and I look forward to supplementing this foundational growth with our inorganic strategy. With that, I'll turn the call back to Ido for his closing remarks.

Thank you, Keith. I want to thank all our incredible team members for their hard work over the year, supporting our customers and partners during their challenging times. It is clear to me that our platform enhances providers' abilities to deliver high-quality care to their patients today. The investments we are making will help us continue that well into the future.

With that operator, we'll open the call to questions.

Thank you. To ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound or hash key. Again, we ask that you limit yourself to one question. Please stand by while we compile the Q&A roster. Your first question comes from the line of Ricky Goldwasser with Morgan Stanley. Your line is open.

Yeah, hey, good evening, and congrats on the quarter and guidance. You know, clearly there's a lot of demand for your services. You are pulling forward the investments in product development. When we think about your long-term guidance of 20% to 30% top-line growth that you provided at IPO, is that the right way for us to think about, jumping here to 2022, but to think about 2022 and beyond? Or are you now seeing sort of a step-up in demand that is shaping how you think about that long-term? revenue opportunity. And then somewhat related, you know, Keith, you talked about the revenue per visit assumption of $80. What are the underlying assumptions that you're making regarding reimbursement for telehealth visit in any potential changes in the parity versus in-person or rebasing it to a different level?

So, Ricky, I think there was about five questions embedded in there. So I'll take the first couple, and then I'll hand it over to Ido, you know, to talk about reimbursement and then some of the more conceptual answers to your last question. Yes, we are seeing – so, I mean, to answer your first two questions, we are seeing it step up in demand. We are going to stick with what our IPO revenue growth targets were right now, but we look forward to updating you, you know, throughout the year, you know, especially coming out of the client forum in April that I'm hoping you'll attend. You know, we are seeing the TAM expand, you know, through the platform expansion. You know, and we're already achieving, as I mentioned, you know, if you normalize for, you know, the two contracts, we actually are in the mid-20s percent growth this year for subscription. So, you know, yes, we are sticking to what we said during the IPO, you know, in terms of long-term growth, but we will update that, you know, as we go through the year. In terms of the price per visit, we're saying around the $80 range, but, you know, it's The shift that happened in Q4 is continuing in Q1, you know, to more specialty. And going back to what the overall mission statement of the business is and what our strategy is, it's to provide backup supplemental care and really empower the providers, you know, of care, your doctor, your health plan, and the health plan's own providers to deliver that care. So we're seeing, you know, urgent care uh... become more secondary specialty care you know become more primary on the as we support those providers of care so you know we're seeing as you know you know quoted some explosive growth on our specialty side you know it's now making up about half of our overall visit volume you know uh... which is exciting and that's what's driving you know the the eighty dollar range uh... uh... revenue per visit You know, in this last quarter, we saw significant growth on our platform providers. Those are non-AMWEL doctors, you know, delivering care on the platform. You know, sequentially, that was north of 15%, quarter over quarter. So, the shift, you know, we saw in Q4, and we're seeing continued in the Q1 of this year.

Ido? Thank you, Keith. And, Rick, it's good to hear your voice. One cannot overstate the enormity of what happened in 2020, and I think it will take years to fully understand it. The trend is very palpable, although the velocity of the change is hard to predict. Therefore, we are very comfortable with reiterating our growth assumptions going forward, not ignoring the enormous upside that still exists. If you need to summarize the trend, telehealth moved from an alternative acute care service into an enabling platform, which is part of everyday healthcare. We've talked about it only a year ago as a vision, and it really has become a reality. We believe, especially with the release of Converge, that our technology gap as an enabler is significant, and we think that the number of providers adopting it is a great indication of what's going to happen going forward. So we are very comfortable stating that we believe that there will be a preference towards technology revenue that is obviously infinitely more efficient and much more scalable going forward. And we're going to learn a lot this year about the velocity of this change. And when we have more data, we could come back and reanalyze our future guidance.

Thank you.

Our next question comes from the line of Robert Jones with Goldman Sachs. Your line is open.

Great. Good evening. Thanks for taking the question. Keith, I appreciate all the data points you shared, particularly as it relates to 2021, but I was hoping to get maybe even a better sense of what you're expecting as it relates to the health systems and health plan expectations for new ads and revenue. If I heard you correctly, it sounds like you're expecting AMG will make up about 50% of revs. Sounds like the innovator revs will be a little bit better than what you saw. And so looking at what that means on just projections for subscription seems like a little bit of a deceleration, if I'm thinking about that right. Anything more you're willing to share just around what underpins the assumptions on the health system and health plan subscription assumptions for the guidance?

I mean, for the health systems, it's adding new health systems as well as the expansion of the average contract value. So you saw our average contract value expand nicely. As I said on the call, we see both of those dynamics continuing to happen into 2021. So the name of the game there is you know, land and expand. So landing new hospital system logos, expanding the current customers that we have through, you know, both the rollout of additional modules as well as getting back to, you know, the cell phone plan. We want their providers to deliver more care virtually. So, you know, those visit counts adding into the subscriptions, that was part of the increase in Q4. So we're seeing that happen. On the health plan side, just to be complete, you know, there is more expansion through the population, expansion, you know, of new programs like virtual primary care, you know, and other programs out to the membership base. So, you know, it's land and expand on the system side. and expansion through the population on the health plan side.

Okay. So if I'm hearing you correctly, not a big deviation from what you had talked about before as far as new additions for health systems or health plans in 21?

We would say that our conversations are really exciting, you know, in terms of pipeline, in terms of And I guess Converge, if you look at the announcement of Converge, that's a reflection of the level of conversations we're having with our partners. These are the biggest players in the space, and it shows the demand there to deliver the care on the platform. So they were bringing forward their designs for longitudinal care and what they wanted to do virtually on the platform, so we had to accelerate our expansion on the platform. You know, we're really encouraged and excited about, you know, the level and depth of the conversations we're having.

Okay, great.

Thank you. Just to add a detail, when you analyze what is subscription revenue, subscription is recognized revenue for an enterprise implementation of a hospital or a delivery network. It's safe to assume that in 2020 everybody was focused on their day job and the idea of implementing a new infrastructure was really far and foreign for everybody. It's also safe to assume that everybody is up right now. Everybody realizes that you have to have digital connectivity infrastructure really in order to survive and in order to grow. And that's the conversation that Keith was alluding to. The discussion there is not about the price of AMG doctors or the capacity of doctors that we have. The whole discussion is about simplicity, integration, modularity, scalability, and many other features and functions where we believe we have a significant advantage around. So overall, when you think about subscription revenue, we're actually fairly bullish when we look into the future. Got it. That's helpful. Thank you both.

Thanks Bob.

Your next question comes from the line of Sean Wieland with Piper Sandler. Your line is open.

Thank you. So what can you tell us about the virtual primary care launch with United that you announced? Can you size that for us with respect to the 21 guidance and give us a little bit more detail on that launch?

So Sean, terrific to hear your voice and thank you for joining the call. You know that we cannot discuss any specific client's details or numbers. That is something that we really care deeply about. However, I'm glad that you brought the topic of virtual primary care modules and programs, which we believe are very important. And as I said in the call earlier, really a way that most people in our opinion would experience healthcare going forward. So for those on the call that are less familiar, this is the technology and service infrastructure that allow people to start their interaction with the healthcare system, not only telehealth, but the entire healthcare system online. So you go online and then you have a highly personalized experience using artificial intelligence and very empathetic people that offer you a choice of the entire spectrum of services. from online programs and people to labs, imaging, and physical referrals. This infrastructure is really designed from the get-go to encourage and support recurring longitudinal relationships. um so for the consumer uh it really is a wonderful way to experience healthcare it's trusted it's immediate it's personal uh it has an element of a of a choice for the payer sponsor uh for the risk bearer uh it's an opportunity to really pre-negotiate the network and the options that you see and to make it also very efficient financially We are very glad that a very large client chose it as its backbone, and we will let this client and others tell the market when they're ready about their experiences. But when you talk about the superiority of our technology, whether it's convergent and virtual primary care is definitely part of that family, part of our platform. And when I said I was bullish about the future, this is definitely part of what I meant.

So, Sean, there's, yeah, I mean, to go a level deeper for your model. So, you know, there's two parts. I see a revenue coming out of virtual primary care. There's direct and indirect. You know, on the direct side, there is an access fee that is either paid in per member per month or a blanket access fee, you know, depending on the plan that we are working with. There's a transaction fee, you know, and this is, you know, the interaction with the member by the plan provider. And this is really where it's all going and what got – you know, those plans that have been announced, as well as plans we're talking to, get them really excited. And then there's the clinical fee, because this is a new way. I mean, this is full longitudinal, full spectrum, fully coordinated care that is being delivered on our platform. And so that takes time to bring their doctors up to speed on how the coordination of care is going to impact them, where they need to plug in, where they need to have you know, a primary node coordinator, you know, so as backup we have our AMG doctors, you know, at the ready that if someone has a bad experience using, you know, virtual primary care for the first time, they're not going to use it again. So our doctors, you know, and I'll get to the visit impact in a second, our doctors, you know, we are assuming are going to be helping out in the beginning a lot. and tapering off as more and more of their doctors become part of, you know, the care coordination plan. Then there's the indirect part. You know, this is fully coordinated longitudinal care, or at least that's the thesis of our partnership with, you know, the one customer that you referred to. So there's a lot more programs. This is, you know, a goal for us and a goal for them, bringing more programs, bringing more coordination, bringing more holistic care to the forefront, you know, to deal with these members. There's also maybe RPM, you know, I mean, to be able to, regardless of the age, add, you know, add some of the RPM functions that, you know, I'll let Ido comment about in a second. But as it relates to the visits, you know, this is an important point. You know, we are projecting or forecasting the same number of visits in 2021 as 2020, but the components are really different. You know, there was a significant number of visits that were performed in, you know, March, April, May that were just simple one-off urgent care demand. Okay, I think I have COVID, you know, dealing with different components. That has completely shifted in our 2021, you know, forecast where, you know, you know, those components are being replaced by our specialists, being replaced by, you know, their provider doctors, you know, your doctor plugging in and delivering care to you. So, you know, a big part, not a big part, but a component of, you know, the visit forecast, the same number on zip code as 2020 includes those virtual primary care, backup care, our AMG doctors. So, Ido, do you want to talk about some of the other components that we see coming in as the indirect revenue that we've been talking about?

Yes, absolutely. Thank you, Keith. I mean, Sean, I wish we could talk more freely, but as I said earlier, we're limited about what we can say about some specific clients. But to help you understand the dynamics, Implementing virtual primary care is a no-brainer for a payer for obvious reasons. It's so efficient, it's so member-friendly, and things of that nature. The way we monetize that infrastructure is A, by technology subscriptions, B, by the volume, how often this technology is being used. And then by the scope of services, more modules, more programs. Then there are clinical fees. So all these are direct fees that relate to the scope of deployment. No one is deploying this overnight nationally. You deploy it over time, state by state. It's staged. You add more modules. You add more programs. But the direction is very steady. And we know this is going because it adds so much value for everyone. The indirect effect is even more profound because, as you remember, unlike others, we have one platform. And it's all connected. So imagine that the option that you see on the virtual primary care platform are excellent centers that are also onboard clients. And because we allow them to change the business model and participate in very large payer programs, they become more sticky and we become more available to them as well. On the flip side, the ability to tie this service with additional services scheduled visits, urgent care visits, and many other things that we're doing with people on one platform is extremely valuable for others because it's not standalone. The fact that our platform is modular, the fact that we don't compete with our clients and partners is very important. We don't try to push our AMG providers and replace them with other providers on the country. We use them as a support mechanism to really foster existing patient-provider relationship, and therefore the acceptance and the likelihood to offer a greater choice and greater capabilities on our platform is much greater versus other people that are trying to do VPC.

Thank you for that. Very quick follow-up. Is all of the above material or immaterial to the 21 revenue guidance?

Well, it's included in the guidance, and we have certain assumptions that we have. We are very comfortable with our guidance. As I said, there is always the possibility to sometime do more, but we are not ready to go there yet. A lot of the progress of deployments like that depend on factors that we simply don't control. They are driven by the client, by the market, by other factors, and we really want to make sure that our guidance is extremely robust, and that's what it is.

I mean, they're rolling it out state by state. We're very comfortable with our guidance. I guess that's our response to the question, Sean.

Okay. Thank you very much.

Your next question comes from the line of Kevin Caliendo with UBS. Your line is open.

Great. Thanks. Thanks for taking my call. I'd love to get your guys' take on the market consolidation we've seen in the last couple months in the telehealth space. There have been a couple of higher-profile deals. In any way, shape, or form, does that impact the landscape or your competitive positioning or how you think about, you know, the opportunity set? And also, you know, M&A was always going to be a big part of the story, you know, we thought going forward, and we still expect it to be. We'd love to hear your take on your M&A pipeline, the valuations in the marketplace currently to that end. Thank you.

Hi, Kevin. Again, that doesn't really count like a question, but I'll take it as one. We are very clear about who we are and what our strategy is. For example, in order to be an efficient connector, you cannot be owned by one of the parties. That doesn't really work. It creates bias and it does create a problem. So when a telehealth operator gets acquired by a health plan, that's a helpful dynamic for a competitive situation because obviously many of the target clients are less comfortable interacting with that vendor. Know that the ownership of a payer necessarily is proper for a healthcare IT plan, unless you believe that it's a utility or service plan. So that's good. On the other hand, we see some M&A activity with people that are trying to construct a longitudinal solution in the sense of doing more than one thing, doing telehealth and doing navigation and transparency, for example. We think that while it may look impressive in world numbers and in scale, that's a mistake. When we talk to many of our customers, they have strong opinions about the different components they want to build. Digital connectivity platform is definitely a clear option and hopefully they choose us as often as possible. but then they have a strong opinion about other elements that they want to pile on top of it, the ability of the platform to interact with those solutions is much more important than bringing the entire solution yourself. And there are many examples where you see that one telehealth company began to sell longitudinal programs regarding chronic illness and things of that nature, and several clients really had a hard time swallowing the entire thing. We believe that the whole point of integration is diversity and inclusion in the sense that you let others accept what they do and you remain incredibly true to yourself going forward. As far as the M&A, we are and will continue to look at options to further improve the value and competitive advantage of our platform and our technology. That's the most important thing for us. We help our clients improve patient outcomes, clinical and financial. I'm sure that it's not lost on anyone on the call that a few months from now, valuations will be much higher than they are today, and that's a good dynamic. Some of the SPAC activity is a little different than it was before, and that's a good dynamic. We are going to be incredibly careful as we look for great opportunities to grow organically and organically from a strategic lens, but also from a valuation and monetary lens. And we are very encouraged by the fact that the market is going back to reality in some cases, and the opportunities become much more attractive.

As head of M&A, we're having a lot of conversations. That's the beauty of the platform is you can plug them in, you can integrate them quickly. Some of the different areas that Ido said on his prepared remarks of the TAM expansion, You know, we are focused internationally. We are focused on different functionality aspects of the platform so that it can be used in even more settings. You know, the partnership with Google is opening up opportunities that, you know, are beyond what we had when we went public last year. So, you know, we look forward to continuing to execute on the inorganic strategy and making, you know, announcements at the appropriate time.

That's really helpful. If I can add a quick follow-up. Pulling forward the R&D spend for Converge, is it fair to assume R&D should maybe decline in 2022? Maybe without – you have to provide guidance in 2022, but maybe just thinking about the color of cadence on spend and the roadmap?

Temporary, temporary increase. You know, it really was being driven by our customers. You know, I mean, and it's a reflection of our conversations with them. So we were looking to methodically roll out these different functionalities, you know, over a longer period, you know, over the next two to three years. You know, virtual primary care is one example. The functionalities that, you know, beyond, you know, the one health plan we're working with, the other ones that we're in conversations with, you know, are asking for these things to be enabled on the platform. So based on all of those, we've accelerated, you know, the different aspects of the platform, you know, into 2021. It is temporary, and it'll go back to, you know, more normalized levels in 2022. Thanks so much, guys.

Your next question comes from the line of Jalindra Singh with Credit Suisse. Your line is open.

Thank you. I know, Keith, you just touched upon this Google partnership. I was just trying to ask that more broadly. You have these several interesting partnerships going on in terms of Google, Cleveland Clinic on expert opinion services. I was wondering if you could provide some color around how much, if any, revenue contribution or margin benefit is captured in your 2021 outlook. or even just more broadly, maybe elaborate more on your Google partnership in terms of some more tangible benefits we should expect the company to start realizing in the coming quarters or years.

So, hi, Janendra. It's good to hear your voice. We did not include any assumptions that relate to the Google or Cleveland Clinic relationship in our model. It was too early and too less specific in order to do that. However, that is not to say that we don't accept some pretty wonderful things coming down the pipe from those relationships. And as I mentioned earlier, you're welcome to join our client forum in April to begin to see it with your own eyes. The launch of Converge is related to some of the strategic relationships that you've mentioned. Converge, like any one of our platforms, is one code base. That's fairly unique. There's nothing like it in the market, where the same platform is serving pairs, providers, integrated with devices, with consumer-facing structures and other things. It's designed to do transactional and longitudinal and support hybrid care, people that you see in person and online. It's deeply integrated, which is very hard for large tech companies to do within a long list of assets, including many, many electronic health records and other platforms. And very importantly, and related to your question, it is open. So most platforms, especially telehealth platforms, are closed-based. Whatever you see is what the vendor has built. uh we are a platform also in the sense that you see you can see the convergence opening up to third parties it allows our clients and partners to also offer their innovations on our platform and that's enormously helpful because it offers a much a bigger array of use cases uh much more diversity and much more flexibility for our clients and partners uh the converge is modular So it really allows you to build and pay for what you need today, getting very comfortable that it will be there for you in the future. And the future is going to be fairly sizable in the sense of speed and enormity of change that we believe we're going to experience. So it's a platform that is designed to truly offer a comprehensive array of capabilities, but at the same time, it's incredibly simple. It's simple in the way that it's run in a context-sensitive way. You only see what you need at a time that you see it and the user experience is truly unique. It's global ready, it's scalable, and it's incredibly efficient in way of hosting costs and other ways. And that's also very, very important when we look into the future and the numbers that we can see going forward.

I guess to go more specifically into the model, Jill Sandra, you know, we're cautious. This is only our second quarter as a public company. So until those relationships put points on the board beyond what they're currently doing, we're not going to put them in the model, the guidance, or the forecast. So our relationship with Cleveland Clinic is fantastic. You know, we are generating revenue both from Cleveland Clinic as well as from, you know, the JV. What they were doing in Q4, yes, we have that in the model. So we're waiting for points to be put on the board before we're comfortable putting them in the forward guidance, you know, as well as some of the efficiencies that we're realizing from, you know, the partnership with Google. You know, there was some of that dynamic aspect in Q4. You know, that is in the model. It is happening. I can touch it, you know, and so then it made it into our guidance. you know we're just conservative in terms of okay there's a lot of opportunities the google partnership gets me as the cfo very excited you know in terms of the operational efficiencies and then you know the whole executive team in terms of you know the opportunities globally but you know we don't have those in the model yet because i need to see some points put on the board before you know they make it into our forecast all right great thanks guys thank you sandra

Your next question comes from the line of Charles Rhee with Callen. Your line is open.

Yeah, thanks for taking the question. Maybe I can ask this question about you're talking, Keith, how the visits this year is kind of a new base level, and this is where you expect to grow off of. And you guys were talking about this shift to specialist care being greater than 50% of visits in the past year. Does this change or affect how you recruit providers for the AMG network? And, you know, maybe following up to someone else's question regarding M&A, is this an area where you could deploy capital to help expand this quicker, or is that not necessarily where you would be looking to use the balance sheet?

Thanks. It's a great question. On the M&A side, there's a lot of interesting models out there using providers more efficiently. That is far and away our biggest area of cause. That is one that through different technologies, different processes, yes, we can become more efficient. That is one that gets me excited. A lot gets me excited, I guess. That one especially. In terms of the mixed shift, you know, it was around half in 2020 were specialists. We see that continuing into 2021, you know, as more of the straight-up urgent care has shifted to, you know, the health plan's own providers delivering care and the health system's your own doctor delivering care to you. We see that, you know, continuing. We saw it in Q4. You know, that is driving up, you know, the revenue or the price per visit to, you know, the $80 range from, you know, $54 and $74, you know, in 2020. In terms of recruiting, you know, it's The pandemic has really, and Ido said this in his prepared remarks, you know, OBs, cardiologists, those specialists have now embraced delivering care to their specific patients. So, you know, if they're doing it, those specialists delivering care to their patients, you know, it's natural for them to want to supplement their practice with plugging into our platform and delivering care. So, you know, from a... Part of the reason why we bought Aligned in 2019 is, you know, there's a psychiatrist shortage out there, and, you know, the need is going the other direction. So, you know, for our health system customers, we wanted to make sure that we had, you know, the right team on the field, you know, to be able to support their unmet need. But, you know, for the overall AMG providers on the platform, yes, we are seeing more of a shift to, you know, the specialists. Ido, do you want to take, you know, the overall aspects of AMG? But, you know, within the model, that is what we're seeing in Q4 and what we are forecasting that continuation, you know, throughout 2021.

Hi, Charles. Thank you for the great questions. So, as you know, we see AMG as a buffer, as a service to our client, and not as a replacement to their own services. We also try to enable not only acute care, but the full spectrum. So, if you think about it, the incredible growth of client-active providers that we experience in the 2020 and we expect to continue and grow rapidly into the future is mostly in 2000 plus medical centers. Most of them are academic. Most of them are specialists. Of course, in order to envelope a specialist, it is infinitely more complicated than to have an acute care visit with a video online and provide a zip-up. You have a different level of integration. The rules are much more complicated with multidisciplinary care that is required and so on and so forth. so our role is to increase financial and clinical outcomes when you think about financial clinical outcomes you're mostly talking about the impact of chronic care and specialists that is enabled by our platform as we try to get better supporting those specialists sometimes like in the case of the line we grow amg as a giant sandbox that also serves as a buffer for our clients and as we figure out and streamline the workflow for AMG, we immediately make this information available and those technologies and services available to our ecosystem with the overarching goal to allow them to be as successful as they can with their own resources and not necessarily with AMG.

Great. Thank you. Thanks, Charles.

Your next question comes from the line of Ravi Misra with Barenburg Capital Markets. Your line is open.

Hi. Thank you for taking the question. So just maybe a little bit of an extension of that visit mix shift in AMG specialty. I'm just curious, how sustainable do you think that is? I mean, if your kind of institutional partners are – kind of shifting more of their visits to urgent care? Or do you think over time they're also going to be doing especially care given that revenue shift? And does that put your AMV profile at risk there? And maybe my second question is just around the investments, Keith, next year, it looks like you're guiding above consensus on a sales level, but you're also kind of investing a little bit more. Is that entirely R&D with Converge that's just pulled forward out of future years? Or should we think of this as the new normal in terms of the incremental spend going through the model in the out years? Thanks.

Keith, I think you're on mute. I know you're talking.

The second question is the easiest. The answer is yes. It is R&D confined to 2021. That line goes back to a more normalized level in 2022. GNA goes down to what typically you're seeing with us and our competitors in terms of percentage of revenue, and same with sales and marketing. That question, you know, let's answer that one first. In terms of the second one, in terms of, you know, visit volumes, we're the specialist visits are actually more attractive in terms of what our providers want, you know, our health system and health plan customers want. I mean, the goal is, again, going back to the mission statement of the business, to have your doctor deliver care to you or your health plan coordinate the care and have, in most cases, that planned doctor deliver care to you. So where the specialists are really supplementing care, the urgent care, yes, we're going to have those doctors ready to go and provide the backup care when needed. But if all the doctors of the doctor group, cardiologists, OBs, endocrinologists, all of them are there providing the care. And then if they can't, we need to have those specialists, you know, in the warehouse ready to provide the care so that there's not, you know, any gaps or any delays. So... You know, we're seeing this shift continue into 2021. You know, you're seeing the price per visit or the revenue per visit continue nicely from $54 in 19 to $74 in 2020 to, you know, $80 range in 2021. That dynamic is already happening in Q4. You know, so we don't report on a quarterly basis price per visit. It's already happening. So, you know, this shift, is intentional. The shift is strategic. And, you know, it's the ultimate realization of you know, Ido and Roy's vision in terms of providing backup care, not competing against the providers of care, you know, we are a technology company. So, you know, we see that business, you know, that revenue shifting up into the subscription line, you know, and it's already happening. So, you know, I don't know if you have anything you want to follow up, but, you know, that is the dynamics within the model that, you know, I think you were getting at.

So, Ravi, I would state it maybe in another way. We are a technology company, but we complement the offering with services to provide a complete offering to our clients. So back in the days when we built the infrastructure, it became very apparent that without having a national network of providers, starting with acute care and then to other disciplines, No one can operate our technology. You have to have that. And it took enormous effort to create it, and it's still very valuable in the way of this buffer. The next frontier after acute care and primary care is specialty care. it's very hard to organize psychiatrists, psychologists, and different types of other specialists. On the one hand, we are really enabling our customers to do that, and they're doing it a lot on our platform. But on the other hand, sometimes in order to pave the way, we also organize those services as a complete solution and use that as an add-on. And the example is a good one. where we found that if you can be in a psychiatry, it will really be the emergency room. You can really help these child patients earlier and provide some value. So this complementary buffer has moved from primary care into specialty care. Our intent is not to build the largest hospital in the cloud of specialists. That will not make sense. Our role is to connect more specialists to the ecosystem through our platform, but we will create more and more examples, potentially with some house programs that we're going to offer to our customers because they need it and not everybody is able to do it themselves, and because this is the best way to truly streamline our technology.

Great, thank you. And then maybe just one more on Converge. Looking forward to kind of seeing more detail on that at the upcoming event. But just how do we think about that from your kind of land and expand or this kind of ACV upsell strategy? Is it something that kind of enables you to just easily implement more modules per customer? Or is there something else? Can you just add a little bit more color on the business model around that? Thank you.

Yeah, Robbie, let's kick that to April 28th. You know, that's, we've got a whole day planned on it. We're going to have customers. Let's kick that to the 28th.

But the short answer is yes.

Your next question comes from the line of David Larson with BTIG. Your line is open.

Hi. Congratulations on a good quarter. Can you talk a little bit about Amazon's announcement to push more services across the U.S. in their health care area, especially with telehealth. And one of the plans we talked to said that what's intriguing about this is that Amazon, in some cases or in some cities, may have a nurse that can show up at the patient's home the next morning at 9 a.m. if they had a telehealth visit at 2 a.m. that same night, and that nurse could bring medications with them And then at the home, like there are different devices that could potentially be used, like a stethoscope, things for respiratory, measuring respiratory, you know, breathing habits, and also like lab services that can be delivered at the home. Any thoughts around that? And do you have any, you know, potential plans to get into more of like this home health arena in a digitized way? Thanks.

So again, this is in some ways, David, two questions. We're not going to opine about what Amazon is doing. I would just say, you know, welcome to the swamp. It's much more complicated than you think. And we encourage the... additional availability of convenient primary care, you cannot have enough of it. Amazon brings enormous amounts of assets in the world of drug delivery, in the world of consumer experience and things of that nature. And if it relates to primary care in certain models, that could be a fantastic thing, which is very, very different from the role of Amwell. We always talked about the fact that care is moving into the home, and you need a very deep degree of integration with devices, better analytics, new care plans, better integration with multidisciplinary teams, deep understanding of the clinical flows and the financial flows and so on and so forth. It's very hard. We spent a decade and a half building it. It's not the DNA of big tech, and big tech did not have a track record of doing that. in world technology. In addition to that, the relationship in the ecosystem are not as easy as they are for us. We did that for many years. We are trusted by the parties. Amazon maybe less so in some ways. So we think that what they bring to certain employers could be very helpful, and yet does not compete directly with most of the value proposition that we offer companies. at this time. When you come to see Converge, you will realize the enormity of complexity that you need to truly serve complicated patients with multiple existing relationships and financial arrangements and regulations. in their most convenient location, which is their home. We certainly totally agree with that notion. We just think it's really, really hard to create a solution. And very importantly, no one company can do that. That is, in our opinion, impossible. We need a very big coalition that is tightly integrated to reach that outcome.

Your next question comes from the line of Eric Percher with Nephron Research. Your line is open.

Thank you. A non-converged health system question. You noted the delayed pandemic impact on subscription, and we're at a point where health systems must now move from temporary to industrialized solutions. So what is your view on the timeline? Has the health system sales cycle contracted? And maybe what is the competitive environment?

So it was really interesting to see the dynamics in 2020. People were caught completely by surprise by the pandemic, in the sense that telehealth was 1% of the visits at the beginning of 2020. We tend to forget that. 1% of the visits were done virtually in January of 2020. And then it went up to 50%, and now it's 15% to 20%. So these are amazing numbers. And what happened at the beginning is that people used whatever they knew. They used FaceTime, they used Zoom, lots of products. And that was very, very helpful because it was very familiar both to the patient and the doctor, but there are enormous list of shortcomings that became very apparent to people very, very quickly. So right into the year, the dialogue changed and people realized that the level of success that is required for digital connectivity is much, much bigger than any of the tools that they had. And that was very opportunistic and very helpful to us. I don't know any leader of any delivery network that is not thinking now about digital health connectivity infrastructure. Some are ready to do it sooner than others, but it's not an optional thing. It's just as important as your EMR in many ways, maybe even more important in order to survive into the future. So the urgency is there. The clarity of what they want to buy is there as well. The ability to implement it at this speed do vary. But we believe that in the next few years, I don't see any practice or any provider that is unable to effectively, in a fully integrated way, interact with their patients both online and in person through a hybrid model. That probably spells bad news to anyone that has the model of docking the box in the cloud that is competing with that preferred option.

Eric, I mean, from my perspective, when I look at the individual business lines, product lines, you know, they're being a lot more thoughtful. You know, coming out of the pandemic, their doctors are asking for this. And as we discussed on the Q3 call, we're seeing happen even more. They're using it as a patient recruiting tool. So if you go to the products that Ido mentioned, you know, on his prepared remarks, You know, the C-500 care point can be used both in the hospital and in the home. You know, the Amwell Hospital TV, same thing. So, I mean, what they're trying to do or what part of their plan is, is, A, patient recruiting. You know, they want to bring more of their doctors on the peripheral into the mainstream, delivering care through the hospital system. That's the Amwell Now product. But they're also trying to expand their footprint into the community with the C500 card, you know, with the hospital TV. So the conversations we're having with them, they're asking for this functionality. They're asking, do you have this capability? And it's very, very differentiating. You know, I would say versus COVID when, you know, it was more emergency-based, okay, how quickly can we get your COVID module, you know, and how many C500 cards or any cards can we get to, you know, man our satellite emergency rooms. Now they're being very, very thoughtful. Do you have this functionality? How quickly can we bring these doctors on the peripheral into the mainstream? So... You know, we're really excited about how differentiated our value proposition is for the hospital system customers, you know, and part of, you know, the converged buildup.

I would just very quickly add one more thing. What's really interesting is that finally, after a decade and a half, people realize the power of connectivity. For the first time in a really long time, many of our customers tell us, so how can we, providers, connect with payers, and payers turn to us and say, how can we enable our provider network to be included in our guest and care in our vision? And that's very refreshing, and that's a zone where we are extremely comfortable in and have very strong advantage.

Your next question comes from the line of David Grossman with Steeple. Your line is open.

Thank you. So you guys have done a great job of covering all the big points here. So I'm just going to limit it to two quick financial questions. Keith, perhaps you could share with us what the solely diluted share count is if once you start making money, at least based on the options and shares that are out there. And then the second quick one would be, sorry if I missed this, but can you tell us or help us understand how much of the average revenue per health system increase was, you know, number of modules versus utilization or any other factors that impacted that.

So I'll come back to you on the fully diluted because I normally quote that on a treasury stock method. And so I'll call you up and give you that one. But in terms of you know, where the mix is coming from on the systems. Like I said, the name of the game there is land and expand. So I mean, you can see how the average contract value expanded you know, nicely, that is being driven, you know, both by the logos and by the expansion of the contract value. So what's keeping the contract value down is the number, you know, the denominator that is being added, you know, at a very good pace. So we're seeing our typical customer. I know we gave some quotes of what the typical contract looks like. You know, we have some of the larger health systems, you know, really getting up there in many, many millions in terms of total contract value.

Right. So is there any stat you can share in terms of number of modules and how that's increasing on average or anything like that, you know, for client independently, you know, kind of quarters in the denominator too well?

Yeah, we haven't disclosed that, you know, we, during the IPO, we listed you know, all of the modules, you know, that we have, you know, I would just say what we disclosed during the IPO and in the S-1.

Great. Thanks very much.

There are no further questions at this time. I will turn the call back over to Dr. Ido Schoenberg.

Thank you so much. I want to thank everyone for joining. Many of you are dear friends and follow us for many, many years. I really appreciate the time and effort that you're making. Together we are helping bring care to millions of people, and that's really important. So we look forward to continuing the dialogue in person very soon.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.