American Well Corp Q1 FY2025 earnings call

• Progress with Military Health System: Entire global Military Health System enterprise using the platform for virtual visits, patient and provider satisfaction over 90%; automated Digital Behavioral Health programs deployment timing shifted to Q3 due to DHA leadership transition but on time and budget with partners.
• Financial progress: Software revenue grew over 30% Y/Y; adjusted EBITDA improved for the fourth quarter in a row; targeting margin expansion and over 60% improvement in adjusted EBITDA for 2025 vs 2024.
• Leadership addition: Dan Zamansky joined as Chief Product and Technology Officer from Amazon Healthcare, bringing experience to drive synergies and profitable growth.
• Commercial growth: Healthy pipeline building, client renewals including Penn State Hershey, University of Chicago, Corewell Health; HSE in Ireland renewal for digital behavioral health.
• Market trends: Shift towards technology-enabled care; Amwell's platform helps payers/providers offer unified experience, provides own clinical programs, and integrates third-party innovators.

Total revenue for the first quarter was $66.8 million, which is 12% higher than Q1 2024. Normalizing for the sale of Amwell Psychiatric Care, revenue was 25% higher than Q1 2024. Subscription software revenue was 48% of total revenue at $32.2 million in Q1, up 30% from the previous year. AMG first quarter visit revenue trended 14.3% lower than last year at $26.6 million, but normalizing for APC, visits were 6.6% higher than a year ago. Service and care point revenue was $8 million for the quarter. Gross margin was 52.8% in Q1, higher by 4.3 percentage points compared to Q4, reflecting higher software mix and cost initiatives.

2025 revenue guidance: $250 million to $260 million, with subscription revenue to be nearly 60% of total. Q2 2025 revenue guidance: $62 million to $67 million; adjusted EBITDA guidance: -$12 million to -$10 million. DHA automated and Digital Behavioral Health programs remaining enterprise go lives shifted to Q3, software revenue expected to be ~60% of total by year end 2025; anticipate $190 million in cash at end of 2025 and over $150 million at end of 2026.

• Market uncertainties: Economic uncertainty and tariffs impacting customer sentiment and IT budget evaluations.
• DHA contract risk: Theoretical chance of contract non-renewal, but high confidence in renewal as contract is advanced and aligns with DHA priorities; worst case would require pivoting to reach cash flow goals.

Q: Outside of the DHA, talk about bookings trends for Converge and Dan's strategic priorities?

A: Ido Schoenberg mentioned good receptivity to Amwell platform in market beyond DHA, growing understanding of need for singular experience; Dan brings expertise in AI, streamlining consumer experience, matching with clinical programs, and data analytics.

Q: About gross margin rate and EBITDA guide?

A: Mark Hirschhorn said software revenues have higher margins, timing of care points affects overall margin, EBITDA guide not changed due to remaining revenue to generate from expansion work.

Q: Impact of macro noise, tariffs on sales timeline and direct tariff exposure?

A: Ido Schoenberg said Amwell platform seen as solution to efficiency, savings, growth; direct tariff exposure minimal as hardware is small part and software is US-manufactured.

Q: DHA contract economics and government opportunities?

A: Mark Hirschhorn said no material changes expected in contract economics; Ido Schoenberg mentioned good track record with DHA and relevance to their pillars.

Q: Tariffs and exposure across business?

A: Ido Schoenberg said direct tariff exposure minimal, Amwell platform provides ROI with efficiency, savings, etc., with examples like WELLSTAR and NHS.

Q: DHA revenue breakdown and usage?

A: Mark Hirschhorn said don't break out exact contribution; Ido Schoenberg said audience is huge (9.6 million military and families), serves various use cases, live in 5 regions.

Q: Churn, pipeline, selling season, and demand from health systems vs payers?

A: Mark Hirschhorn said churn lower than anticipated, pipeline growth, significant interest in product from payers and health systems, activity in RFPs/RFIs.