American Well Corporation Class A

Ladies and gentlemen, good afternoon. My name is Abby and I will be your conference operator today. At this time, I would like to welcome everyone to the AMWEL third quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. And if you would like to ask a question during that time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 a second time. We ask that you do please limit yourself to one question. Thank you. And I would now like to hand the call over to Sue Dooley, Head of Investor Relations with Amwell. You may begin.

Hello, everyone. Welcome to Amwell's conference call to discuss our third fiscal quarter of 2024. This is Sue Dooley of Amwell Investor Relations, and joining me today are Amwell's chairman and CEO, Dr. Ido Schonberg, and Mark Hirshhorn, our CFO. Earlier today, we distributed a press release detailing our announcement. Our earnings release is posted on our website at investors.amwell.com and is also available through normal news sources. The conference call is being webcast live on the IR page of our website, where a replay will be archived. Before we begin our prepared remarks, I'd like to take this opportunity to remind you that during the call, we will make forward-looking statements regarding projected operating results and anticipated market opportunities. This forward-looking information is subject to the risks and uncertainties described in our filings with the SEC. Actual results or events may differ materially. Except as required by law, we undertake no obligation to update or revise these forward-looking statements. On the call, we'll refer to both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is provided in our posted earnings release. With that, I would like to turn the call over to Ido.

Thank you, Sue, and good evening, everyone. To begin tonight's call, I would like to take a moment to welcome Mark Hirshhorn to Armwell as our Chief Financial Officer. Many of you may already know Mark. We have known and respected Mark for many years and believe he is the right leader for Armwell at our current stage of transformation. We thank Bob Shepardson for his contributions as AMWEL CFO into working to ensure a seamless transition. Q3 was a busy quarter for our company. We continue to execute on the key strategies that support our path to cash flow positive. Here are the headlines. First, for the Defense Health Agency, we announced that GoLive will convert scheduled visits in late August. With our latest partners, we are proceeding according to plan towards full enterprise GoLive anticipated in Q4. Second, we have continued to align our cost structure to fit our strategy with great focus on efficiency and effectiveness. And finally, we have positioned our growth organization to deliver high-quality growth in 2025 with an eye on higher margin revenue. In Q3, we delivered value for our clients as we maintained and grew existing deployments while implementing new logos. Our solution is resonating in the market and sums up patient and provider ratings across converged deployments remained well over 90%. Now, let me go into a little more detail on this progress. We reached an important milestone in the initiative of modernizing the Military Health System for Defense Health Agency, working closely with our latest partners. In Q1, we previously shared that we went live with our behavioral health programs, the first major milestone in this initiative. Today, we can add that we have completed the second milestone. Convert scheduled and group visits are now also live and being used by members of the armed forces and their dependents. Based on this progress, we are planning for enterprise-wide deployment for the DHA by the end of 2024. Serving our women and men in uniform is a true honor and privilege. As we strive to offer them the best possible care, we believe that, together with our latest partners, we are also unlocking exciting growth opportunities for Armwell in the government sector. Next, implementing our cost-based transformation is reflected in our improved 2024 EBITDA guidance that was reported in tonight's release. We are focused on this metric that adds visibility to our financial strength, especially when you consider our strong balance sheet with ample cash and no debt. Mark will provide you with more details shortly. Finally, we are driving growth changes resulting in good visibility into accelerating high margin growth in 2025. Our pipeline quality is improving and RFP traction is increasing. For example, notable Q3 expansions included Sanford Health and WellSTAR for virtual nursing. We also had a sizable win with Capital Blue Cross for integrating SORD Health musculoskeletal program. In parallel, we documented significant renewals, including Baystate Health, AdventHealth, and Children's Medical Center of Dallas. Wrapping up my remarks, I would like to speak for a moment about the market for digitally enabled healthcare. At this time, it is evident that more and more people are going online first for their interactions with their healthcare providers. Based on our recent discussions with our clients and partners, it is clear that they expect this secular trend to accelerate over the next few years. They also believe participating in the opportunities it creates is critical to their business. Yet realizing digitally enabled care is difficult. Payers struggle with offering a true digitally enabled whole person solution that spans across the care continuum and includes effective care orchestration. They are also hard-pressed to report and prove ROI for clinical interventions. Providers are also looking for ways to participate in this new digitally-enabled care transformation, but want to ensure that patients are engaged while their workflows and reimbursements are maintained. Consumer acquisition is expensive, and digitally-enabled programs are fragmented and constantly evolving. Also, the current state of both patient and provider experiences are isolated, cumbersome, and not always personalized. We believe that our converged platform addresses many of these pain points for our customers and helps them realize their digitally enabled care aspirations. We empower them to form a single clinical consumer engagement pathway to many, if not all clinical programs. We aim to enable the provision of exceptional patient experience while providing efficient engagement within the broader care journey. Then, through a layer of navigation and orchestration capabilities, we facilitated access to a growing number of AMWEL and third-party clinical programs. In this way, we offer value to payers, their employer accounts, patients, and the clinical program innovators who seek to extend their clinical footprints. Finally, through offering clinical programs for health systems, we aim to complement EHRs in the areas that relate to patient engagement and health system efficiency. Embedded in providers EHR, we create a pathway for payers and employers to seamlessly offer hybrid care programs featuring trusted provider brands. In summary, we are pursuing a well-defined and singular differentiated approach to the market. It empowers participants in the healthcare ecosystem to realize the efficiency gains and improve outcome that this new digital-enabled healthcare landscape promises. With that, I would like to turn to Mark to review our financials, some key metrics, and our guidance. Mark?

Thank you, Ido, and good afternoon to everyone on the call. It's a real honor to be back in the CFO seat at such an equally exciting and critical time to support Amwell's mission of enabling the digital care aspirations of healthcare organizations. I'm inspired to move the company forward and to constructively engage with all of you on this exciting journey. I want to thank Ido and the board for their vote of confidence, and most importantly, my new Amwell colleagues who have welcomed me with genuine enthusiasm. The team here is so very talented and great teams win every time. I'd like to first focus on Amwell's financial results and visit metrics from our third quarter. Then I'll review our guidance for the remainder of the year. Most importantly, we have demonstrated continued progress with our most strategic objective, specifically the cost alignment initiatives that reinforce our confidence and our path to being cash flow positive in 2026. Furthermore, I will also address some headwinds in our visits business. So now let me share some of our Q3 financial results. Total revenue was $61 million for the quarter, which is flat to the year-ago quarter. Subscription revenue was $26.2 million in Q3, down 5% from last quarter. As was mentioned on the Q2 results call, we had a $1.5 million benefit related to the change in the timing of our revenue associated with certain contracts. So Q3 is in fact in line with our expectations. We expect a material uplift in Q4 subscription software revenue, and we expect that total subscription software revenue for the year will come in at approximately flat to 2023. Turning to visit metrics, we completed approximately 1.4 million visits in the third quarter, which is 4.6 percent lower than a year ago. We've seen some market-wide and client execution-related softness in visits and expect this to continue through this Q4. Scheduled visits represented 70 percent of our total visits, continuing to highlight the evolution of our company from providing virtual, on-demand urgent care to a platform provider enabling hybrid care. Visit volume on Converge held steady at approximately 70 percent of total Q3 visits. AMG visit revenue trended slightly higher than last year at $27.5 million in Q3. However, the number of AMG visits was slightly lower than a year ago. Average revenue per visit was $83, which is 7% higher this quarter than last year. This increase was driven by a mixed shift within AMG visits focused on specialty programs. Our AMG business continues to be strategically important to enabling client expansions and supporting new client wins. Our services and care points revenue was 7.3 million for the quarter versus 6.6 million last quarter. The increase was driven primarily by increased professional services associated with our government business. Historically, our services and care points revenues vary from quarter to quarter. The nature of our business drives variable revenues from customer buying patterns for marketing programs and for care points, as well as the timing of professional services milestones that precede deployments. Services and care points revenue are projected to represent approximately 10% of our total 2024 revenue. Turning to gross profit, our third quarter gross profit margin remained at 37%. flat to Q2. For the full year, we expect our gross margin to approximate the levels we saw in 2023. My Amwell colleagues have done excellent work towards normalizing R&D spending. Despite gearing up for our government business and all the related spend, our gap R&D expense in Q3 declined 5% compared to Q2. This is 6% lower than the previous quarter after adjusting for $4.7 million of capitalized software development costs. Compared to a year ago, capitalized software development costs is 11.5% lower. We continue to expect total R&D expenses to decline at a mid-teens percent this year versus 2023, with much of the remaining decline to be in Q4 and into Q1 of 2025. as we proceed to complete the bulk of our software configuration work for our government customers. Sales and marketing expenses were $16.8 million. That's $1.6 million lower than last quarter, driven by our enhanced focus on cost initiatives. Overall, we expect gap sales and marketing costs to decline mid-single digits year over year. Consistent with Amwell's other primary cost components, G&A expense was $25.2 million, which is $3.3 million lower than last quarter. They recall that our Q2 G&A expense was artificially high due to a one-time transformation charge. Fortunately, we are now experiencing reduced G&A expenses as we realize the benefits from our transformation initiatives, and we expect to further reduce our costs as we continue to organize the company around a new lower cost structure. Lastly, as far as non-cash charges are concerned, we don't expect any material changes in this category through year end. There's a great energetic team here at Amwell that is fully aligned with creating the novel healthcare products, services, and efficiencies that we successfully deliver to our clients every single day. We're delivering on the promise of our planned cost initiatives and we are well on our way to reshaping our foundational cost basis. As a result, adjusted EBITDA for the quarter was negative $31 million versus negative $35 million last quarter and negative $39 million for Q3 in 2023. A quick note on our balance sheet. We ended the third quarter with $245 million in cash and marketable securities and zero debt. Let me wrap up with a few words on our outlook. While we have made significant progress this year towards ensuring a path to being cash flow positive in 2026, I did note earlier that we have seen softness in visits as certain clients face their own executional challenges in the market. With this in mind, this afternoon we are revising our 2024 revenue guide, and based on our strong execution on costs, we're also raising our adjusted EBITDA guidance. We now expect full-year 2024 revenue to be in the range of 247 to 252 million. Importantly, the strategic elements of our revenue base remain on track, and we continue to anticipate subscription revenue to be roughly equivalent to what we generated in 2023. Our revised range for AMG visits is between 1.4 and 1.5 million visits, compared to the previous range of 1.6 and 1.7 million visits. And now for our improved guidance on adjusted EBITDA. Now that the third quarter is behind us, we have better clarity on our expectations for Q4. So we are bettering our guide for full year 2024 adjusted EBITDA to a negative $142 to $137 million from our prior range of negative $150 million to $145 million. We are currently in the process of planning for next year and will provide 2025 guidance when we report our Q4 2024 results next February. We are encouraged by the strides we have made in our business, and in Q3, we made solid progress towards the goals which support our confidence in our path to generating positive cash flow in 2026. Thank you all for listening. With that, I'd like to turn the call back to Ido for some closing remarks. Ido?

Thank you, Mark. With Q3 behind us, we are well on our way to executing on key strategic deliverables for the year. These include excellence in our work for the government, our sales transformation efforts, and a meaningful realignment of our core structure, all of which propel us along our path to cash flow positive in 2026. We will now open the call for questions. Operator, please go ahead. Thank you.

Thank you. At this time, I would like to remind everyone in order to ask a question press star and then the number one on your telephone keypad. To be able to take as many questions as possible, we ask that you please limit yourself to one question. Again, it is star one to ask a question. And your first question comes from the line of Craig Hettenbach with Morgan Stanley. Your line is open.

Yes, thank you. Ido, on your comments of focusing on high-quality profitable growth in 2025, can you just expand on that? Is that a comment on just competitive backdrop that you're seeing or anything Amwell-specific in terms of strategy that you're gearing towards that for next year?

Hi, Greg. It's definitely the latter. We did a lot of work focusing on the strategy that enhances our ability to grow our core services that are subscription heavy for our addressable market in both payers and providers. From where we stand today, we have very good visibility into high quality growth already in 25 that is dominated by subscription revenue and is less vulnerable for a visit fluctuation. That's not only true in a way of one time. We believe that's going to be a multi-year trend going forward where the enabling functions of our platform of Converge and its related services are going to be the hallmark of what we sell, de-emphasizing any other businesses and focuses that are less creative and less relevant to our overall strategy.

That's helpful. Thank you.

And your next question comes from the line of Eric Persher with Nefron Research. Your line is open.

Hi. This is Dolphin for Eric. Thank you for taking our questions. Mark, I just want to clarify your comments around the cash flow positive for 2026. It seems like you're confirming your, the company still has that target. And when you look at the path to achieving that target, What type of risks do you see? Thank you.

Sure. I am confirming the 2026 cash flow positive results for the year. And the execution risks associated with achieving that target will likely be twofold. One is obviously seeing some of that new revenue come together, as Ido alluded to. We've got great visibility into 2025 revenue. We'll need to see some additional revenues come together to achieve the type of gross margin levels we'll need at our new stabilized cost base. So it will continue to be a focus. on achieving overall revenue growth and continuing to find that level of costs that we've been working so hard through 2024 to achieve and are currently on that run rate to see that significant reduction for full year 2025. Thank you. You're welcome.

And your next question comes from the line of Ryan McDonald with Needham & Company. Your line is open.

Thanks for taking my questions. Maybe just to get a clarifying point on the, as you're looking at the DHA contract rollout, you know, I think that obviously the expectation all along has been sort of a fourth quarter enterprise-wide deployment, but I think you heard the comment by year end. Should we be reading into that at all as sort of maybe a slight pushback in that Ryan Vonderhaar, Deployment timeframe, and then, as we think ahead to 2025 just any updates on sort of the contract renewal process with with the DHA as well, thank you.

Erez Agmoni, DHA, Hi Ryan, so the answer is no, we did not mean anything by the nomenclature we use to describe the end of the year, overall, we did deploy this very large project on time. with good results and hopefully happy customers and partners as we continue. So we have all the reasons to believe that the important milestone of going enterprise-wide is going to still be maintained on time. Having said that, the final decision on the exact timing scope is always with the customer, and there could be some changes, although we don't have any reason to believe that there will be changes at this time. As you remember, the current funding vehicle that we are using continues until roughly next summer. And in order to continue, it needs to be renewed by the DHA. We are partners with the Leidos partnership, and they are the primary on this relationship. Recently, the DHA announced its intent to offer a sole source to Leidos and even name our products in that intent. To be clear, intent is not yet final. This is a process that needs to go through, but is likely to get finalized in the not so distant future. Once it's finalized and assuming that everything goes well, Leidos will win the sole source opportunity, and we don't see any reason to believe that we will not continue to be part of that project long term. Our track record of deployment, the KPIs we achieved, the complexity of this project that is going well, or they keep us fairly optimistic that this is heading in the right direction. But of course, it's not yet certainty and some changes can happen going forward.

And your next question comes from the line of Jessica Tassin with Piper Sandler. Your line is open.

Hi, guys. Thank you for taking the question. And Mark, congratulations on the new seat. I was hoping you guys could just help us understand how does SilverCloud kind of interact or get integrated with other virtual behavioral health providers in a given network? Basically, can you help us understand why the coexistence of SilverCloud and an alternative virtual care provider in the behavioral health space would not be cannibalistic and instead might be complementary? Thanks.

Sure. Hi, Jessica. That's an interesting question. I will generalize it a little bit and then I'll answer specifically. Our main purpose is to offer our customers a singular pathway for consumers who basically engage in the routing to a growing number of clinical layer programs. Some of those programs are offered by Amwell. like SilverCloud or Urgent Care or Virtual Primary Care or Therapy or a million others. Others are offered by third parties, and in some cases, some are even offered by our own clients. Our role is really to make sure that we match the patient with the right program, bring this patient to the program with as much information to see the ground running and start the program well. and be able to move from one program to another in a way that takes the whole person in account and is able to report on the ROI back to the sponsors. SilverCloud, which was selected by the DHA in a very recent example, but many others like the NHS and so on, has a proven clinical program with very good return over many, many years. So we feel good about that clinical program. However, it's very possible that some of our customers will have alternative programs that they prefer for various reasons, and that does not cannibalize into the main value proposition of Amwell, which is the orchestration of the singular experience and the singular care orchestration to a large number of clinical programs. Having a lot of native programs fully embedded in what we offer really helps many of our customers to sign a one-stop shop agreement with us, so we think that's an advantage. But we fully expect some not to use all our programs, and SilverCloud would be a good example.

Awesome. Thank you. And your next question comes from the line of Stan Berenstain with Wells Fargo. Your line is open.

Hi, thanks for taking my questions. Mark, welcome. You know, a question for you on the platform as it pertains to DHA. So, when you're talking about orchestration and routing capabilities, you're routing to these third parties. Presumably, you're also providing revenue opportunities for these third parties. Do you have an opportunity to monetize that routing capacity in the sense of getting like a finder's fee in those instances? Thanks.

Absolutely, Stan. The answer is yes. As you know, the cost of acquisition of a patient is very high and very often those programs really need to engage with those consumers directly and that's expensive and simply hard because access to some of those individuals is not always available. Also, trying to engage into a single topic like back pain or things of that nature is much more difficult than engaging to a pathway that can take your entire set of needs. The value proposition is much stronger. So we, together with our customers, create one path, and then through this one path, we route the patient to the program. We also allow for passing information when applicable and getting information back to us so we can turn back and offer a report to the payer sponsors that is unified, which is harder than it may sound. The net of it is that acquisition of a consumer through us to any clinical program vendor is much cheaper, and the stickiness is much higher. And eventually, we already have agreements in place with long list of partners like SOAR that we announced tonight, or Dario, or many others. And we do rev share some of the revenues to finance the acquisition of the patients and the integration of reporting and other elements that we provide to them. Maybe a while ago, I gave the analogy of an app store. And there is a lot similar in that way that the rev share opportunity is there. And we fully expect that to grow over the years to come.

So just to put a final point on it, you're going to expect a kind of a steady run rate from DHA specifically, but this would be incremental, right? These finder fees that you would get by pushing volumes or sort or dowry or what have you, that would be incremental to the subscription revenue you're generating. Is that correct?

No. So I gave you a general answer as it relates to our relationship with the clinical program. The DHA agreement is really enabling the connectivity between DHA military providers and men and women in uniform and their family around the globe. We are not selling any specific therapy with exception of automated programs like SilverCloud. When we currently, our agreement is comprehensive. A long list of automated programs and automated behavioral health programs of SilverCloud plus many other features and functions are all baked in. into one agreement that will go live globally, hopefully, by the end of this year. So the nature of relationship is much more comprehensive here and much more binary, which is different from how we work with other payers and providers.

Got it. Thanks so much.

And your next question comes from the line of Jalindra Singh with Truist Securities. Your line is open.

Thank you, and thanks for taking my questions. Apologies if I missed this, but I want to talk about GLP-1 medication, weight management solutions, et cetera. This is clearly one of the major focus for employers and payers these days. I know this is not your core focus, but just curious if you see any opportunities in that area given your provider and payer partnerships, either in terms of, you know, working with the PBMs or various third-party weight management vendors? Any thoughts that would be really helpful?

Hi, Jillian. Well, absolutely. So maybe referring back to my answer with Stan, really demonstrate the same idea. We don't necessarily have any expertise or advantage in providing GLP weight management solution ourselves. However, there are plenty of vendors, some of which we are interacting with, that provide different programs. Some are better than the others. Weight management is one element of a whole person care that we facilitate. Our mission and value in the ecosystem is to provide this one path of access to one orchestration to dynamic set of clinical programs. Saying it another way, if a large payer would want to add one GLP program versus the other, we really strive to make it incredibly simple and easy to embed that program in this singular experience to allow for bidirectional exchange of information to improve the program outcomes and to report on returns. plus sometimes a cycle between different programs for the same patient to increase efficiency and effectiveness and improve outcomes. We saw some specifically GLP weight loss programs that were successful. We actually saw recently one that was incredibly unsuccessful. And we really don't opine. It's our clients who decide what programs to use or change over time.

Okay, thank you.

And your next question comes from the line of Charles Rhee with TD Cowan. Your line is open.

Yeah, thanks for taking the question. Apologies if I missed this earlier. But, you know, looking at the revised guidance and looking at the midpoint, It kind of applies to lower sequential step-up in 4Q revenues relative to sort of historicals. You know, it seems like it suggests maybe a smaller potential seasonal benefit. Is this a function of sort of the visit softness you kind of referred to earlier or relates to other drivers or potentially sort of a new normal type of cadence going forward?

Hey, Charles, it's Mark. You know, that softness that we saw in Q3, and of course, we're now a third of the way through Q4, is continuing. And as we feel and believe that it's both a contribution from a number of clients overall in the macro environment, we do see just a lower overall pull through in visits. The nice thing about our buildup of our 2025 revenues is that there's far less dependence on those variable revenues, and we have a very significant contribution of incremental subscription revenue. So it will not have the same type of impact as it had throughout 2024.

Okay, got it. And, you know, one of your competitors is in the midst of a rollout with TRICARE for virtual behavioral care. Can you tell what kind of impact this could have on maybe the automated programs that you're providing to DHA?

Yeah, absolutely. I think it's wonderful that the TRICARE members have the optionality among multiple vendors to But we are far from a vendor. We're actually an operating partner. We are not one of many that can be selected. We are, in fact, the de facto provider through Leidos and through this DHA contract. We have a guaranteed subscription revenue month over month in what will hopefully be this multi-year contract where we are by default enabling the government to provide these services to the military and their dependents. The addition of any vendors to TRICARE, again, is wonderful as there's new choices. but it is just an addition of yet another vendor providing choice to their members.

Okay, got it. Thank you.

And press star one if you would like to ask a question. And your next question comes from the line of David Larson with BTIG. Your line is open.

Hi, congratulations, Mark, for joining the AMWEL team. I think it's great that they have somebody in the seat with prior public company CFO experience. Can you maybe talk a little bit about, you mentioned the phrase a leaner sort of cost efficient or cost reduction program that you envision for AMWEL. Just any more details or color around that would be great. And then did I hear you reaffirm the 25 sort of EBITDA guide? I think it was minus 35 to minus 45 with break-even EBITDA in 26. Any color there would be helpful. Thank you.

Sure. Well, thank you for the kind words. I'm also extremely excited about being here. You had a couple questions. So one is the, let's say, the confirmation of us being cash flow positive in 2026 is correct. However, I did not reconfirm any figures for 2025. That will come in February of 2025 when we share our Q4 results as well as our plan for all of 2025 guidance. The question had referred to our costs initiatives. Those were set into place earlier this year, but they continue. I have the privilege now through the board and, of course, with Edo's direction to turn over every stone and look to right-size the company's cost basis, knowing that we're evaluating every aspect of the business, leaning towards repeatable higher value revenue streams in 2025 and beyond. The focus on this quality revenue exercise is likely going to enable us to find other opportunities to redirect resources, and we are all aligned with the focus on reducing costs further each sequential quarter.

That's very helpful. Thank you. And then just one quick follow-up. Can you talk a bit about the relationships that you have with key clients, in particular do you meet with them on like, let's say a monthly basis, or do you provide them executive dashboard data on a real-time basis where they can see, okay, these are my members, these are the gaps in care that have been closed, these are the avoidable hospital admissions or ER visits that were actually avoided, and my cost trend is improving by X amount. I mean, what we've been hearing from health plans loud and clear is that They're migrating away from the PMPM or PEPM model, and they're moving towards what is the sort of clinical outcome benefit that's being delivered. Just any more color there will be helpful. Thank you.

Sure, David. So our relationship with our client is fairly intimate. We've been operating for almost two decades. We know the players well. We understand their business. And it's fairly close. You're absolutely right that at the heart of the service that we provide, being able to understand ROI and measure outcomes is key. And there could be models of payment with value-based arrangements that are beneficial for everybody. And that's why our focus is so great on improving and making the consumer experience much better. creating orchestration layer that is central to all clinical programs. So we know where people go and monitor their outcome. And that information is indeed in very high demand. Our clients vary and there are so many use cases. So I'm hard pressed to say that every client wants all the data all the time and uses it in the same level of effectiveness. But as a general trend, There's no question that what you alluded to is where the market is going, and some of our more advanced customers are actually leveraging us in that way. The reports of the activity on this magical moment when a member becomes a patient and is managed effectively online through hybrid care, monitoring it very, very carefully and proving ROI is really a key feature and key part of what our customers expect us to do in a key investment area for the company. And that's really part of our high quality, high margin revenue that we focus on in the next quarter and years to come.

Thanks very much.

And your final question comes from the line of Jack Wallace. Your line is open.

Hey, thanks for letting me in the queue here. Mark, welcome to the team. There are two things that I was paying attention to coming into this quarter. One was the expense line, and it looks like we had another good quarter there and a raise in the EBITDA guide. The second was the subscription revenue line, which looked like it came in right where you'd the message coming into the quarter, but then maybe more importantly is the full year guidance for the subscription revenue appears to be reiterated. Now that implies a call to mid to high single digit million dollar sequential step up in 4Q over 3Q. My understanding coming into the quarter was very little, if any, contribution was expected by the enterprise role for the MHS in that step up. Mark, can you kind of help us better understand the sources of the sequential increase in expected subscription revenue in the fourth quarter, and really what that means for a jumping-off point for next year. Thank you.

Certainly. You're correct in assuming that that subscription revenue contribution is new, that is coming from, as we expect, to begin recognizing revenue from our new contract. as we continue through this quarter and achieve the milestone that we believe we will. We've got no indication to suggest that we're going to miss the milestone as we've been executing on target throughout this year. We closed this year with anticipation towards going enterprise, and as we meet that milestone, we are then in a great position to engage and begin billing for the full enterprise value commencing in January. We have both tremendous confidence in our ability to do that, and we're equally pleased with our ability to add that material amount of subscription revenue

um for full year 2025. thank you appreciate it welcome and ladies and gentlemen that concludes our question and answer session i would now like to turn the conference back over to mr ito schoenberg for closing remarks thank you operator and thank you everyone for joining we look forward to talking with you soon take care And this concludes today's conference call. We thank you for your participation. You may now disconnect.