American Well Corporation Class A

good afternoon and welcome to amwell's first quarter 2021 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 please be advised that today's conference is being recorded leading today's call are dr edo schoenberg chairman and co-chief executive officer and keith anderson chief financial officer Ito and Keith will offer their prepared remarks and then they will take your question. The AMWEL press release and webcast link are available on the investor relations section of AMWEL's website. Please note that we will be discussing certain non-GAAP financial measures that we believe are important in evaluating AMWEL's performance. Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliation 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 Security Litigation Reform Act of 1995. such for forward-looking statements are subject to risk, 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. Edo Schoenberg, CEO of AMWEL. Edo?

Good evening, and thank you for joining our first quarter earnings call. We opened the year with $58 million in quarterly revenues. Gross margin was 38% and our active providers grew to over 80,000. We see growing evidence for expansion trajectory of our role as technology platform that enables all types of care. Our source of revenue continues to evolve as contribution from subscriptions grew to 43% of our revenues in Q1 versus 40% in the same quarter last year. Overall visits continue to grow as 1.6 million visits were performed on our platform this quarter versus 725,000 this quarter last year. Visit mix continues to evolve towards more specialty services as revenue per visit expanded from the low 70s for the full year last year to already in the low 80s range this quarter. Scheduled visits continue to significantly expand. We see scheduled visits outpacing on-demand visits as a positive indicator reflecting growing demand to enabling telehealth technology across the care continuum. Our dialogue with our clients and partners in Q1 is reflective of post-pandemic sentiment. There is a renewed interest in telehealth enablement technology with special focus on interoperability, deep integration, and hybrid models of care. Our recent win of a large mid-Atlantic blue is a great example. In addition, we're pleased to see core selectivity with Google Cloud beginning to realize. After the quarter, on April 28, we unveiled our Converge platform to our clients and partners. With over 1,000 clients and partners, it was our most attended forum since inception. Our clients' and prospects' reaction to Converge was extremely positive. One client said, Converge helps us see telehealth not as an alternative to normal care, but as an integrated way to deliver care. Another simply called Converge a game changer. We discussed the key features of Converge on our last call. On this call, I would like to provide you with more details about the expected business impact of our new Amwell platform. As we shared, Converge is designed to automate much of the upgrade process. Clients will receive Converge as part of their current subscription. Each subscriber will receive a configuration of Converge that accommodates their existing scope of subscription to the term of their existing contract. The first wave of upgrades will focus on hospital systems and move quickly to health plans, with initial deployment being executed this month. We expect to convert a significant number of clients this year with a balance over the next 18 months. We feel confident that our investment in Converge will have significant positive multi-year impact on our financial performance starting in 2022. we expect Converge to increase client retention, attraction, addressable market, and upsell opportunities. Converge is designed to also improve our margins and reduce our cost of implementation and support. I would like to share a few examples explaining how we plan to achieve this impact on our business with Converge. Our new super modern architecture is comprised of a single cloud-based technology. This allows for new ways for our ecosystem clients and partners to exchange information and services based on common identifier in a common platform. Expanding for transactional to longitudinal capabilities, means much better support over the full continuum of care and inclusion of automation to drive efficiency and improve outcomes. Our new ability to create streamlined integration with EMRs and many other digital assets reduces our clients' cost of ownership, simplifies deployments, and complements our clients' existing investments. It allows them to maintain full control and ownership of their brand experience, workflows, and relationships. The greatly increased modularity of our platform enable us to offer more variability in our product line. Clients can simply turn on various modules and programs to accommodate their evolving needs. This means better return on investment for our clients as they are able to pay for components they use as they use them. It also gives us better ability to offer best-of-breed components as they become available with significantly lower development and integration costs. The fact that Converge is an open platform designed to host third-party apps means the ability to offer even more flexibility, customizability, and innovation to our clients. A great example was provided by Google Cloud, who created our first third-party app. Powered by sophisticated natural language processing, it offers real-time automated medical grade caption and translation. We trust Google's app could have significant contribution to making care more accessible and impactful to many more people. Apps open a new revenue stream for Armwell, mostly in 2022 and beyond. We plan to share more details on apps and the business model that governs their deployment later this year. Our single context-driven user interface creates one meeting place for all digital care delivery use cases. This, in turn, drives a simple and exhilarating user experience with a much shorter learning curve and faster path to adoption. Converge is positioned to support the rapid adoption of digital connectivity by existing trusted providers, payers, and other ecosystem players. It is designed to scale exponentially while remaining reliable and efficient. Finally, Converge is designed to work globally. With its open architecture, it allows us to expand beyond the United States much faster and more efficiently. We are thrilled by the feedback of our clients and partners and will continue to update you as we deploy Converge across our client base and beyond. We now see a clear market move from buying telehealth clinical services to growingly relying on our most technology and infrastructure to enable the full continuum of digital care delivery in visits and between them. As this trend accelerates while the pandemic subsides, we expect the high-margin contribution of our technology to become significantly more dominant in fueling our growth. And with that, I would like to turn to Keith to share with you more details. Keith?

Thanks, Ido, and thank you, everyone, for joining us on our first quarter call. As Ido highlighted, we believe Q1 demonstrates a foundational level of utilization of digital health performed on our platform. Well, later in my prepared remarks, I will unpack our performance this quarter. I want to first provide some insights in the specific themes and dynamics that customers are citing as compelling differentiation that strategically also lends some insights into key components of our inorganic strategy. Coming out of the pandemic, conversations with current and prospective customers have been much more thoughtful as they are now viewing virtual care as a significant and permanent component of their overall care delivery plan. Customers are coming to the table with more crystallized views on the role they want the Emerald platform to play. Many have expanded their views of telemedicine and are discussing full longitudinal care strategies that require an interoperable platform with virtual care delivery at its core. Providing a platform that enables and facilitates our customers' own doctors to deliver care to their specific patients or members is further differentiating for Amwell as our customers, having now thought out their virtual care strategy, view our business model and structure as one of partnership versus a potential competitor. for example some plan or health system customers with more evolved virtual care strategies are keying in on animals ability to highlight their own chronic condition management or care coordination programs if that is a particularly key strength or differentiator for them they want their core strengths to be acknowledged and incorporated within their virtual care strategy the theme of longitudinal care at the core of converge is also driving our expanded inorganic strategy in the areas of interoperability, care coordination, device agnostic patient monitoring, and the ability for Amwell to provide programs to manage chronic conditions if the health plan or system doesn't have their own strategy. As Iter discussed at our client forum two weeks ago, our recently launched Converge platform demonstrates our nimbleness as a company to acknowledge how quickly our clients have embraced and advanced virtual care as a key component of their overall model. Now, turning to our first quarter results, we reported total revenue of $57.6 million, an increase year over year of 7%, driven mainly by solid subscription growth and also continued expansion of visit revenue. Total subscription revenue in the quarter was $24.6 million, an increase of 13% compared to the first quarter of 2020, but 20% if normalized for the two customers lost due to M&A that we discussed on our last call. The growth is a result of new logos and increased volume of module and program subscriptions. In terms of total visits, 1.6 million visits were conducted this quarter on the annual platform, representing a 100% increase over the 725,000 visits booked on this quarter last year and a take-up from Q4. As Ido mentioned, in this quarter, AMLO passed a significant milestone, having exceeded 10 million total visits performed on the platform since inception, with 5.9 million of that volume in 2020 alone. Equally important is the continued trend of empowering our health plan and health systems' own providers to deliver care virtually, as in the first quarter, now 80% of all visits performed on the platform were conducted by our customers' own providers. This is compared to 50% in the first quarter last year and 75% in Q4. Total visit revenue was $27.8 million this quarter, a 6% sequential increase over Q4, and a 5% increase this quarter last year when COVID volume significantly began ramping up. AMG volume continues to shift to higher-acuity specialty visits, as while total AMG visits decreased approximately 6%, both sequentially and year-over-year, to 340,000, the average price per visit rose to the low $80 range, resulting in continued increase of visit revenue. While we discussed on our last call the expectation of the full year average price per visit to be in the low $80 range, up from $73 last year, the acceleration to this $80 range out of the gate in the first quarter was driven by the significant increase in behavioral health visits. While it is sad that a significant component of the increase is coming from behavioral visits, we are happy, especially in these times, that these folks are getting the care they need and in the manner and medium which they prefer versus not getting care and their conditions getting worse. As we forecasted, our services and care points revenue of $5.2 million was relatively flat year over year. 2020 was an anomaly, I mean, on so many levels, but as it relates to our care point sales, COVID hit in Q1 of last year when we were shipping out carts as fast as we could produce them as health systems were rapidly expanding their emergency room and COVID-related programs to deal with the surge. We experienced another surge at the end of the year in Q4 as systems rushed to spend the remainder of the unprecedented federal grants that contained use-it-or-lose-it-type expiration dates. This pulled some revenue from Q1 into Q4 and created an even more odd distribution of CarePoint's revenue. A more normalized profile for care points is back-end weighted, since the nature of a typical health system budget is approval at year-end, then a progressive ramp-up the following year, and ending in Q4, spending any remaining funds. Gross margin was 38%, an increase of 50 basis points over Q4, and was due to revenue mix shift more weighted to higher margin subscription revenue and efficiency measures implemented on the services side. Challenging margin expansion this quarter was the initiation and migration onto the Converge platform, a dynamic that will continue the remainder of this year. R&D expense in the first quarter was $23 million, representing 40% of total revenues compared to 28% of total revenues in the first quarter of 2020. While we are forecasting an overall increase in R&D spend in 2021 due to the Converge project, Spend was lower this quarter than in Q4 due to the stop and start of the various converged subprojects that involve integration with specific strategic and functional partners. We still expect the overall total R&D spend to be made at the same levels as we discussed on our last earnings call, which was similar on a percentage basis to revenue in Q4 of last year. Sales and marketing spend of $13.7 million is a decrease in $1.4 million sequentially versus Q4 and flat year over year. Spend was lower this quarter mainly due to the timing of marketing campaigns and client services that are expected to occur later this year. Q&A expense in the quarter was in line with our expectations at $21.4 million and lower versus Q3 and Q4 of last year as we are now past our IPO and the related non-recurring expenses. We are reporting an adjusted EBITDA loss of $26.4 million compared to a loss of $35.4 million last quarter and $17.7 million last year. The sequential favorable decrease loss was primarily related to lower R&D and sales and marketing spending that we just discussed, but which we believe will increase over the remainder of the year as converged spending increases and marketing events take place. Regarding our annual guidance, at this point in the year, we are reiterating our previous guidance ranges of $260 to $270 million for revenue, AMG visit volume between $1.5 and $1.7 million, and an adjusted EBITDA loss between $157 and $147 million. Since we IPO-ed in a very atypical year, in terms of a typical revenue distribution over the quarters, steady subscription revenue growth combined with our assumption of returning to a more normalized flu season results in a more back-end weighted quarterly revenue profile, similar to what we saw in 2019. For Q2, we are expecting similar levels of services and care points revenues in Q1, as well as similar visit revenue as we enter the summer. As we look toward the second quarter, I also want to unpack a dynamic within our most important KPI, total active providers. As Ido mentioned, the number of active providers increased again sequentially over Q4, ending the quarter with over 81,000 total active providers delivering care on the AMLO platform. But looking at Q2 last year, it was the peak of the pandemic, and in that single quarter alone, we more than doubled the number of active providers from 24,000 to 57,000, For the remainder of 2020 and through Q1 of this year, we added another 24,000 providers. As detailed in our filings, we define active providers as those providers that deliver care on the platform over the last 12 months. So it is expected next quarter when Q2 2020, the peak of the COVID crisis, rolls off the measurement period, we will experience a lockstep decrease in active provider count as some of these lower activity providers will now be excluded from the 12-month measurement period. So mathematically, we are expecting a reset to levels similar to last quarter, but are then forecasting similar continual growth as we've seen over the last couple of quarters, especially due to the adoption of Converge. In conclusion, we are pleased with another good quarter as we are operating according to plan and believe it represents a solid start to the year. The launch of Converge is the next step in the evolution of our platform, and we look forward to the competitive and operational advantages steepening the slope of our growth and expanding our efficiencies. And I'll turn the call back over to Ido for his closing remarks.