American Well Corporation Class A

Hello, everyone, and welcome to Amwell's conference call to discuss their fourth fiscal quarter and full year 2025. Joining us on the call today are Amwell's chairman and CEO, Dr. Ido Schoenberg, and Mark Hirshhorn, Amwell's CFO and chief operating officer. Earlier today, a press release was distributed detailing their announcement. The earnings report is posted on the Amwell website at investors.amwell.com, and it's also available through normal news sources. This conference call is being webcast live on the IR page of the website, where a replay will be archived. Before they begin 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 risk and uncertainty as described in the 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 four looking statements. On this call, we'll refer to both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is provided in the earnings release. With that, I would like to turn the call over to Ido.

Thank you, Operator, and good afternoon, everyone. 2025 was a pivotal year for Armwell. We sharpened our focus, executed a major transformation, and entered 2026 with clear visibility towards the goal of cash flow breakeven from operations in Q4. Today, I'll cover three areas. The market trends driving our strategy, our 2025 execution highlights, and our plan for 2026. Mark will then walk you through our detailed financial and guidance. After that, we'll take your questions. The healthcare landscape entering 2026 is defined by a clear shift towards operational efficiency. Payers and health systems are aggressively pursuing platform consolidation, guaranteed ROI, and industrial strength automation. Managing countless point solutions, one for diabetes, one for MSK, one for mental health, another for wellness, et cetera, creates massive administrative overhead. It creates security vulnerabilities and it creates disjointed member experiences. It forces sponsors to act as system integrators, a role for which they are often ill-equipped. The pressures are mounting. The Medicare population is aging rapidly. Pharmacy costs are surging. Overall healthcare costs keep climbing, especially in behavioral health and GLP-1 usage. Clinician shortages are worsening. Subsidies are evaporating. Payer margins are compressing rapidly. Technology-enabled care is no longer optional. It's essential. The promise of hybrid care is now clear. Combine automation with smart use of clinician time to reduce costs and improve outcomes. AI is accelerating this shift. It's transforming engagement, intake, decision support, care delivery workflows, risk stratification, and outcomes measurement. It creates tremendous opportunity and real risk that must be managed. Pairs and health systems get this. They're adopting technology-enabled care not as an experiment, but as their primary lever for cost reduction, better outcomes, and meeting patient expectations. And increasingly, they want to deliver through a unified platform. A technology-enabled care or tech platform delivers clear advantages. Sponsors keep their brand front and center. They have full data access. They own the relationship and get credit for the value they enable. Patient engagement becomes more efficient and effective. Our tech platform enables API-first ecosystems. It allows sponsors to consolidate the digital stack on one infrastructure. Clinical programs can be added, swapped, or retired quickly. We facilitate vendor rationalization. The process of auditing digital health partnerships and aggressively cutting underperforming programs. Vendor management gets simpler. Vendor sprawl with its fragmented IT strategies, data silos, and day-to-day inefficiencies is reduced. Outcomes tracking across whole person and cohorts becomes actionable. This platformization reduces integration costs. It unifies data lakes for better analytics. It enables risk stratification to identify and intervene with high-risk members early. And it drastically improves the member experience by providing a single, simple, personalized, and familiar front door for all care needs. With AI and especially agentic AI-powered clinical programs multiplying rapidly, the ability to experiment and iterate is critical. so is ensuring that authorized clinicians govern the care process through smart integration. In 2025, we made a decisive choice, focused exclusively on offering the best tech platform in the market. The benefits flow to every stakeholder. For patients, personalized, simple access, to a growing array of AI-powered care programs. For payers, employers, and government sponsors, reduce costs, improve outcomes, and exceptional experiences while staying agile to improve ROI as programs evolve. Member experience becomes critical in 2026 as ACA subsidies expire and drive member disenrollment, adversely impacting payer risk mix. Sponsors also obtain robust ROI using AMO's proven platform-native clinical programs, urgent care, behavioral health, and virtual primary care, with the flexibility to integrate any third-party solution. It also allows payers to maintain network adequacy especially in behavioral health services where supply-demand gap is reaching new heights. The effective integration of partners like VIDA, a digital companion to combat GLP-1 inappropriate utilization, or SOAR to manage MSK costs are great examples. For health systems, they can extend remote access to their own providers. They can offer services through our platform beyond their catchment area. And they can augment their care with third-party programs. All sponsors can use their tech platform as required infrastructure to unlock federal funding, programs like Access, Balance, or the Rural Health Transformation. Finally, resilience is now a key purchasing criterion. Pairs are looking for partners with zero trust architecture and proven resilience. Amwool's contract with the Defense Health Agency serves as a powerful validation. It demonstrates that our platform meets the most stringent security standards in the world. With tech as our sole focus, we are building deeper, long-term relationships with the payers, government, and health systems. We completed our transformation from a telehealth provider to dependable, trusted enterprise infrastructure. The AMWEL platform has become an essential utility. It solves existential needs for our customers by effectively enabling consolidation, automation, and clinical ROI. This aligns our success with our client's success and creates a path to higher quality, higher margin growth. We expect our high quality growth will be fueled by the powerful secular trend of tech adoption. As AI reshapes healthcare, We offer our customers a consistent, safe, and effective framework to adopt it while remaining flexible and agile. Following our focus commitment in 2025, we moved quickly. We divested non-core activities. The sale of APC is one example. We restructured our company and dramatically reduced our cost base. We realigned our roadmap and go to market investments. Clients and prospects responded. 2025 brought significant commercial momentum. In the payer segment alone, we executed over 15 payer contracts renewals, representing the vast majority of our existing payer subscription revenue. Coupled with our new logo wins, We validated our platform strategy, strengthened our recurring high-quality revenue base, and positioned us well for same-store expansion. Examples include the DHA renewals last summer, Blue Cross Blue Shield of Florida going live this January, and most importantly, our three-year renewal with Elevance. As we enter 2026, we have responsibly reduced non-core, lower quality activities. Our 2026 top line is smaller, but now it's primarily high quality, high upside, sticky revenue. This gives us clear visibility to reach our cash flow break-even goal in Q4 of this year. In 2026, will deploy with strict fiscal discipline innovations that widen our competitive advantage. AI-enhanced patient experience, faster third-party integration, better clinical data utilization, and faster, easier deployments. We've assembled a strong and fresh leadership team, experienced executives with proven track records from world-class companies, united and energized around our clear mission. We have a focused execution path and a market that clearly values what we offer. We start 2026 with healthy cash reserves, no debt, a strong and dependable recurring revenue base, and a clear path to multi-year growth. Our journey wasn't short or easy. My deep appreciation goes to our team members, clients, and partners for standing with us through this journey. We carry this trust with us as we execute and deliver in 2026 and for years to come. With that, I'll turn it over to Mark.

Mark? Thanks, Ido, and good afternoon, everyone. On today's call, I'll start with a few highlights from our full year 2025, then walk through our fourth quarter financial performance, and finally, provide an update on our initial guidance for the first quarter and full year 2026. Starting with the full year, 2025 marked an important period of refocus and financial progress for Amwell. Total revenue for the year was $249.3 million. Importantly, subscription revenue continued to become a larger and more durable component of our business, representing 53% of total revenue, up from 45% in 2024. This deliberate shift reflects our strategic emphasis on higher quality, more predictable SaaS-based revenue streams. From a profitability standpoint, we made meaningful progress. For the full year, we reduced both net loss and adjusted EBITDA losses by approximately $100 million each, driven by disciplined cost actions and a more focused operating model. Turning to the fourth quarter, we delivered solid results across revenue and adjusted EBITDA, reflecting stronger subscription retention, increased visit volume in specialty care and virtual primary care, and meaningful cost efficiencies driven by the successful execution of our transformation plan. We also began to see early benefits from AI integration across our operations. Overall, our fourth quarter performance reinforces that the actions we initiated at the start of 2025 are translating into durable financial improvement and accelerating operating leverage. Starting with revenue, total revenue in the quarter was $55.3 million, representing a 22.1% year-over-year decline. Subscription revenue was $28.8 million, down 22% year-over-year. The decline was driven primarily by the step-down in our DHA contract this past summer, churn that occurred earlier in 2024, and to a lesser extent, our reprioritization of certain parts of the business to focus on our core payer and government markets. Amwell Medical Group, or AMG, visit revenue was $23.7 million, down 18.7% year-over-year, reflecting the sale of APC as well as some remaining churn from 2024. In terms of volumes, paid AMG visits were flat at approximately 340,000 visits in the quarter. Total platform visits were a million visits down 28.4% year-over-year from the 1.4 million visits in the fourth quarter of 2024, which is consistent with the portfolio changes I just described. Cost of goods sold in the quarter was $27 million, resulting in a gross profit of $28.3 million, which was down 17.6% year-over-year. Gross margin was 51.2%, representing a 280 basis point decline year over year. While we experienced some near-term margin pressure, we continue to see our revenue mix shifting toward higher margin SAS offerings, which we believe will support margin expansion over time as our scale improves. Turning now to operating expenses, total operating expenses, including depreciation and amortization, were $55.3 million. That's a 30.7 percent reduction year over year. Operating expenses as a percentage of revenue improved meaningfully to 96.7 percent compared to 108.7 percent in the fourth quarter of last year, reflecting the benefits of our transformation actions and continued cost discipline. Adjusted EBITDA for the quarter was a loss of $10.3 million. That's an improvement from a loss of $12.7 million in the third quarter of 2025 and a 55 percent improvement from the $22.8 million in the fourth quarter of 2024. Net loss was $25.2 million compared to $30.7 million in the third quarter, representing a 43.5 percent improvement year over year. Turning now to the balance sheet, we reported cash burn of approximately $19 million in the fourth quarter. We ended the year with approximately $182 million in cash and marketable securities, and importantly, no debt. Now I'd like to turn to guidance. For the full year 2026, we expect revenue in the range of $195 million to $205 million. We expect AMG visits between 1.32 million and 1.37 million visits, adjusted EBITDA loss in the range of $24 million to $18 million, and this first quarter of 2026, we expect revenue in the range of $48 million to $53 million, and an adjusted EBITDA loss in the range of $7 million to $5 million. Based on our current outlook and continued execution, we expect the company to achieve positive cash flow from operations in the fourth quarter of this year. This guidance reflects our expectations around continued subscription stability, visit volume trends in specialty care and virtual primary care, ongoing cost discipline and incremental benefits from automation and AI-driven efficiencies across the business. In closing, 2025 was a year of refocus and progress. We concentrated on our core markets, payers and government entities, while positioning the company to return to delivering durable growth. At the same time, we made meaningful progress reducing cash burn and losses by nearly $100 million, putting us on a clear path forward to achieving positive cash flow from operations by the fourth quarter of this year. These results would not have been possible without the hard work and dedication of our entire team, and I want to sincerely thank them for their efforts. We look forward to keeping you updated on our progress this year. With that, I'll turn it back to Ido for his closing remarks. Ido?