Amwell trimmed its 2023 revenue outlook as it faces some headwinds in converting customers to its new technology platform and saw its net losses balloon in the first half of the year.
The telehealth provider brought in $62.4 million in second-quarter revenue, down 3% from the same quarter a year ago. Subscription revenue came in at $28 million, down 5% from a year ago. Amwell Medical Group revenue also declined 6% year over year and came in at $28.1 million in the second quarter.
Amwell also reported a net loss of $93.5 million, or a loss of 33 cents per share, a 35% increase from a net loss of $69.6 million a year ago.
The company's second-quarter results missed Wall Street estimates with analysts expecting an EPS loss of 22 cents per share and revenue of $65.8 million.
The bulk of the company's second-quarter losses stemmed from a noncash goodwill impairment charge of $27.3 million as a result of "sustained decreases in the company's publicly quoted share price and market capitalization," according to a filing (PDF) with the U.S. Securities and Exchange Commission.
Amwell posted a nearly $400 million net loss in the first quarter driven by a hefty impairment charge of $330 million as a result of its stock market performance and "associated market capitalization." The company's losses have grown to $492 million in the first half of 2023.
The company's stock was trading at $2.04 at market close Wednesday, down from a high of $35.54 in October 2020.
The company downgraded its 2023 revenue guidance to the range of $257 million to $263 million, compared to its previous guidance of $275 million to $285 million.
The company's cash and short-term securities as of quarter-end were approximately $458.7 million.
Amwell has spent the past year making significant investments in its new virtual care platform, Converge. 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.
The company has been strategically migrating health system and payer customers over to the new platform and is betting big on its Converge platform to help support a digital-first approach to healthcare as virtual care evolves post-pandemic.
As healthcare organizations continue to face financial pressures, executives are cautious spending, and this impacts Amwell's sales cycle, Ido Schoenberg, chairman and co-CEO told investors during the company's second-quarter earnings call.
"These conversations about Converge are leading to more involved, more strategic investigations of how Converge can enhance patient and provider experience and improve operational efficiency. We are finding this new elevated dialogue can also take additional time in the sales process and in some instances, influence the timing of bookings commitments. Because of this, our booking performance in H1 was somewhat muted versus our expectations and will impact our full-year results," Schoenberg said.
He added, "The shift to Converge platform requires changes to our selling approach from a point solution-focused sale to an ROI-based solution-driven methodology, which we believe will result in long-term partnerships and high customer value and retention."
The company is shifting its selling approach in order to establish its solution as a "must-have in any environment," he said.
Amwell executives are bullish that its Converge platform will propel future growth as it goes beyond just a telehealth solution to broadly support hybrid care delivery. The platform has capabilities to support virtual nursing care, chronic care management and remote monitoring.
"I would suggest in summary that our role as an enabling of a digital-first experience has become much more meaningful if it was somewhat of a sideshow before, a convenient alternative to care. It's becoming very quickly the main pathway, the main way that people interact with healthcare," Schoenberg told investors.
Chief Financial Officer Bob Shepardson said Amwell's second-quarter results also were impacted by customer churn on its legacy platform as the company works to migrate customers over to its Converge platform, a headwind that the company anticipated.
About 43% of the company’s virtual visits occurred through Converge in the second quarter, up from 36% last quarter. The company is aiming to have 50% of telehealth visits on the Converge platform by the end of the year.
Amwell ended the quarter with 106,000 active providers, up 5% from the same period a year ago but down 2% from the first quarter.
The company logged 1.5 million total visits in the second quarter, down 4% over last year. "We believe total visits declined year over year due to a combination of factors. First, we saw some impact of declines on the legacy platform. And second, we believe we are returning to a more typical seasonality and visit volume, which was less prominent during the pandemic," Shepardson said.
AMG visits declined 3% in the second quarter.
Amwell expects adjusted EBITDA for 2023 in the range of negative $165 million to negative $160 million, compared to previous guidance of negative $150 million to negative $160 million.
"Although we are facing some near-term headwinds associated with re-platforming, we remain confident in the elements of our long-term model and our path to cash flow breakeven bolstered by the following elements. We have clear visibility to steadily normalizing our R&D spend with much of Converge development behind us," Shepardson said.
The company now estimated it can reach profitability at a level of around $400 million, significantly lower than its early 2022 estimate of $500 million, he noted.
"As we are approaching about 50% of visits on Converge at this point, we've got real-world experience versus our early '22 assumptions behind the path to profitability framework that we put out at that time. We know more, we have better data and the product is highly successful," Shepardson told investors.
He added, "In the second half, I think one of the most important things we can do is continue aggressively in migrating the balance of our health system customers and our largest health plan customers as well."
Amwell is pursuing the right strategy by focusing on developing and offering a "total-health digital platform as opposed to simply urgent care," wrote BTIG analyst David Larsen in a note.
"We view the reduced revenue guidance as being reflective of a broader market slow-down," Larsen wrote, but noted that analysts were "negatively surprised at the magnitude of the 2023 revenue guidance revision."