American Well Corporation Class A

Good afternoon and welcome to AMWEL's third 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. Ido Shonenberg, Chairman and 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 links 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 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 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 from those expressed or implied in this call. And now, I would like to turn the call over to Dr. Ido Schoenberg,

CEO of Amwell.

Good evening and welcome to our third quarter earnings call. In the past quarter, we registered $62 million in revenues, reflecting stable subscriptions to our legacy platform and steady paid visit demand. The reception to our next generation platform, Converge, is significantly better than we hoped. as we are seeing clear signals of strong demand to our new platform from existing and new clients. Overall, we continue to believe Converge will growingly fuel our results in 2022 and beyond as more revenue is generated from existing client expansion and as new clients complete their deployments and begin using Converge. We are also pleased to note that larger than expected number of clients have already committed to upgrading to Converge, but some are waiting to expand their purchases and usage of additional care points, modules, and programs until their transition to Converge is complete. As for our clinical services, we experienced some increase in visits quarter over quarter, as the Delta variant led more people to use our urgent care services. However, at this point we are maintaining a conservative view on Q4 visits, assuming relatively soft cold and flu demand due to masks and social distancing. While we are confirming our overall range of visit volume expectations, we are seeing disproportionate contribution coming from urgent care lower-fee visits due to the Delta variant. Because of these dynamics, we are setting our final 2021 full-year guidance to a range of $246 million to $253 million. In Q3, our gross margins were 43%, reflecting the continued costs of supporting our legacy platform and also commencing the conversion of our clients into Converge and benefiting from initial efficiencies associated with this transition. Provider adoption growth on our platform is stronger than ever, as total active providers grew from 71,000 in Q2 to 80,000 with AMG active providers steady at 4,000. We are also seeing a great expansion of the use cases on our platform across the continuum, way beyond urgent care. We expect our rapidly growing provider base to become a major catalyst of scope and frequency expansion as converged deployments continue. We also saw a significant increase in the number of visits per active patient compared to Q3 of last year, which we believe indicates the growing demand for longitudinal care and virtual primary care programs. Most of our visits in Q3 were scheduled versus on demand. demonstrating sustained adoption by providers who are making telehealth a key part of their practices. Converge platform completion and deployment is moving rapidly. Together with HIMSS Analytics, we completed a survey of key decision makers in healthcare organizations and found that 56% of health systems plan to invest more in virtual care over the next two years. Health plans also plan to increase investment in virtual care, with 88% of health plans intending to add more programs focusing on a range of needs from virtual primary care to behavioral health and chronic condition management. As we continue to roll out our first products on the Converge platform, we are noting that healthcare organizations are increasingly looking to consolidate their virtual care investments onto one platform. As demonstrated in the survey, health systems focus most on patient satisfaction and provider adoption, and we are seeing positive feedback on both metrics with Converge. Over 4,000 providers have already used the Converge platform during its initial rollout. With 43 enterprise clients now successfully using Converge, we have collected excellent feedback on our new offering and its significant value. For example, clients appreciate that our new platform video connection time is twice as fast on Converge versus our legacy platform. Most of these clients are using Converge through the use of AMUL NOW, while a growing number are using Converge EHR. At this point, we converted all AMUL NOW Enterprise users to Converge and have begun deploying Converge EHR with health systems focusing on Cerner and Epic clients. As a reminder, AMUL NOW is our entry-level, simplest product that has minor contribution to our revenues as a standalone offering. It does, however, share the common Converge platform, and we are encouraged to see it functioning so well in fully operational live environments. These successful deployments demonstrate the new platform's robustness. They also serve as an important foundation for future same-store expansion. Converge enables innovation agility and faster speed to market with greater efficiency. For example, the level of effort in time and resources to release new software versions of Converge is less than 5% of the effort required to release new versions of our legacy platform. The integration of Conversa and SilverCloud onto Converge will enhance our already powerful and comprehensive digital care platform and enable hybrid delivery of physical, virtual, and automated care. These two companies bring important assets in data science, AI tools, and best practices in automation to drive proven clinical and financial outcomes optimization. Both feature important capabilities to enable our clients and partners to create and share chronic care, behavioral health, and other longitudinal programs while significantly expanding the reach of providers and greatly improving their efficiency and impact. The integration of both companies with Converge is progressing well and according to plan. Already in Q3 alone, we've seen cross-selling within both our customer base. In summary, the receptivity to our new offering is excellent. Clients with relatively modest needs appreciate Convergys' simplicity, reliability, and most of all extensibility. Large enterprises value the comprehensiveness of our platform and its ability to integrate well with their existing assets. We believe that all entities will value the open nature of our platform and its ability to facilitate a diverse array of apps, modules, and programs from Amwell, our clients, partners, and independent third parties. Investments in digital health solutions are at historical high, driving a tidal wave of innovation. The need for a common integrated platform to host, showcase and enable broad spectrum of digital products is bigger than ever before, especially as it will streamline exchange of data, services and capabilities across the ecosystem. Many customers and prospects commented that Converge flexibility and openness make it a smart future ready investment. While other telehealth vendors focus on virtual care service provision and compete with payers and providers, we focus on enabling and powering their offering while promoting intersegment connectivity. Together, we offer consumers a single, simple, delightful and cohesive healthcare experience. With that, I would like to introduce you to our new CFO, my friend and partner, Bob Shepardson, who many of you already know from his previous ventures. Bob joined Amwell on October 31st. I would also like to use this opportunity to thank my dearest friend, Keith Anderson, who will be departing at the end of the year for his exceptional service and important contribution to Amwell over the past incredible three years. Keith?