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.