Telehealth company Amwell continues to struggle in the stock market, and both its bottom- and top-line results in the first quarter missed Wall Street analysts' estimates.
The company, formerly American Well, brought in revenue of $59.5 million in the first quarter, down 7% from $64 million a year ago, and it reported a quarterly loss of $73.4 million, according to its first-quarter financial results (PDF). That compares to a loss of $398 million during the same quarter last year when it took a hefty impairment charge as a result of its stock market performance.
Amwell shares have lost about 65.7% since the beginning of the year versus the S&P 500's gain of 5.6%.
Analysts expected revenue of $60.5 million in the first quarter. Amwell came out with a quarterly loss of 25 cents per share compared to analysts' estimates of a loss of 18 cents per share.
The company's subscription revenue came to $25 million during the quarter, and Amwell Medical Group visit revenue totaled $31.1 million.
Amwell disclosed in early April that it could be delisted from the New York Stock Exchange because the average closing price of its common stock was less that $1 per share. The company was still trading at less than $1 per share on Friday.
At the end of 2023, the company cut 10% of its workforce to slash expenses as its losses ballooned to $679 million. Amwell's losses in 2023 included significant goodwill impairment charges totaling $436 million caused by a sustained decline in its share price during the first three quarters.
But, the virtual care giant is plotting accelerated revenue growth and a path to EBITDA profitability in 2026, boosted by a major contract with the Defense Health Agency (DHA).
In November, Amwell announced it inked a major contract with the DHA to expand its reach into the government and public sectors. In partnership with Leidos, Amwell will provide a hybrid care technology platform designed to power the “digital first” transformation of the Military Health System, according to the company.
The contract, worth up to $180 million, will deploy Amwell's Converge platform to replace the Military Health System's video connect solution. The project will start at five initial sites followed by a phased enterprise rollout.
Ido Schoenberg, M.D., chairman and CEO of Amwell, told investors during the company's earnings call that the company will see the "lion's share" of the revenue impact from the DHA contract in the fourth quarter.
"As we deploy our offering in the government sector, modernizing the Military Health System, we also expand into a new sizable market," he noted. "In addition, we believe that implementing our platform in the demanding government environment is demonstrating important proof points that are also relevant in our existing commercial markets."
For 2024, Amwell expects revenue in the range of $259 million to $269 million but is projecting a 30% jump in revenue by the end of 2025 with revenue expected to come in between $335 million and $350 million, primarily driven by go-lives of contracted software backlog.
"We expect the change in our revenue mix toward subscription software to lift gross margins from the high 30% area in 2024 to over 50% in 2025," Amwell Chief Financial Officer Bob Shepardson told investors during the earnings call. "After configuring our platform for operation and the government ecosystem, it will be fully available and ready to deliver complete hybrid care across the entire MHS enterprise with minimal future development required."
For 2024, Amwell is projecting adjusted EBITDA in the range of between a loss of $160 million to a loss of $155 million. For 2025, the company is forecasting adjusted EBITDA in the range of between a loss of $45 million to a loss of $35 million.
The company also aims to reach adjusted EBITDA break-even in 2026.
"We believe our technology offering is unique and will continue to drive favorable high-margin software revenue mix and our strong balance sheet fuels us well beyond our needs to achieve profitability," Schoenberg told investors last week.
Shepardson added, "We believe we are just beginning to catalyze on the opportunity in front of us, and this guidance marks the early days for the long-term profitable growth trajectory we envisioned."
Amwell also is betting big on its Converge platform to help support a digital-first approach to healthcare as virtual care evolves post-pandemic. Amwell spent the past year making significant investments in its new virtual care platform. Converge makes all of Amwell’s products and programs, plus third-party applications, available in one place, like an app store that embeds third-party solutions, according to executives.
During the previous quarter, Amwell migrated some of its largest payer clients to the Converge platform, executives said.
"The market for digital health is just starting and we are well positioned to benefit. What we do is complicated. Value to patients, providers and payers is significant, and we believe our deep integrations and vast deployments form long-term bonds with healthcare organizations that make up a big part of the U.S. ecosystem. We are proud of what we've accomplished in the past three years and believe it is beginning to pay off," Schoenberg said.
Total virtual care visits reached 1.67 million during the quarter with 68% of visits taking place on the company's new Converge platform, up from 54% through the Converge platform in the fourth quarter, Schoenberg said.
Visits were down slightly from 1.7 million telehealth visits during the first quarter of 2023, impacted by the Change Healthcare security breach and a "temporary disruption" associated with Amwell's largest client migrations to Converge, Shepardson said during the earnings call.
The Change Healthcare hack impacted the company because customers couldn't see their copays, Schoenberg said.
"We resolved those issues before quarter's end," Shepardson said.
Without the disruptions from the Change attack, Amwell's virtual care visits would have been flat year over year, as opposed to slightly declining, he said.
The competitive telehealth market continues to evolve and, in the past two weeks, major players have exited the sector. UnitedHealth Group's Optum announced it was going to sunset its telehealth service and, in a surprising move, Walmart plans to shut down all 51 of its health centers and its virtual care service.
These recent moves could actually be a tailwind for Amwell. "We are here; we're still serving a big part of the U.S. ecosystem. When there are less players, the math is that we are likely to net benefit it," Schoenberg told investors during the earnings call.
He added, "United, like many others, reaffirmed their deep commitment to hybrid care and digital care. So it's important to understand that those people that exited, including Walmart and others, did not say that easier access to health services is not something that's important, they just realized that some of their initial models really were struggling a little bit to find their way."
"We see that as affirming our view where we offer technology to connect existing trusted providers with consumers, and opening the gate to a tidal wave of technology and innovation that we believe could be very, very impactful," Schoenberg said.
Amwell management also said health systems continue to invest in hybrid care solutions, which opens up opportunities for the company.
"There is a dramatic rise in the sophistication of health systems. The RFPs that we see and the dialogue with health systems, both existing customers and new ones, is a very different dialogue than the one that we held only a couple of years ago," Schoenberg said. "The ROI is really front and center to those dialogues, and it's no longer enough to talk about a broad platform. It's very important to dig deeper into specific solutions."
He added, "We believe that if telehealth two or three years ago was part of the innovation, differentiation and vision part of the health system, it's really much closer today to the operational mundane part of the infrastructure that has very clear goals and very clear ROI to be proven by the partner."