Telehealth giant Amwell saw its losses balloon to nearly $400 million in the first quarter as it was hit with a hefty impairment charge caused by a sustained decline in its share price.
The company took a noncash goodwill impairment charge of $330 million as a result of its stock market performance and "associated market capitalization compared to the book value of our equity as of quarter end," Amwell Chief Financial Officer Bob Shepardson told investors and analysts Wednesday during the company's first-quarter 2023 earnings call.
Companies opt for impairment when the value of assets or goodwill on their books is no longer fully recoverable.
Amwell (formerly American Well) ended the quarter with $507 million in cash and marketable securities. "We are fortunate to have a substantial cash position as it provides the resources to fund this temporary period of investing and the flexibility to pursue strategic opportunities that are aligned with our goals," Shepardson said.
The company's stock was trading at $2.12 at market close Wednesday, down from a high of $35.54 in October 2020. Amwell's share price dipped nearly 5% in after-hours trading.
Telehealth companies have been taking a hit on the stock market, and virtual care companies have seen their market values contract since hitting a high during the peak of the COVID-19 pandemic.
As a result of the impairment charge, Amwell posted a net loss for the quarter of $398 million, or a loss of $1.42 per share attributable to common stockholders, basic and diluted, compared to a loss of 26 cents per share a year ago.
The company reported an adjusted EBITDA loss of $44.6 million compared to a loss of $47 million during the same period a year ago.
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 systems and payer customers over to the new platform.
Ido Schoenberg, M.D., co-CEO, called Converge a "unique whole-person one-stop-shop platform that supports the delivery of hybrid healthcare."
In the first quarter, Amwell marked go-lives of the Converge platform at Carilion Health, Oluf Medical, Aultman Health and Intermountain Health.
"In February, we completed a full system launch with health partners out of Minnesota. This enterprisewide go-live is integrated with Epic and used by clinical teams across many specialties, and health partners' clinicians are already conducting as many as 3,000 visits per day," Schoenberg said.
The Boston-based company raked up $138 million in research and development costs in 2022, up 30% compared to 2021, as reported in its full-year 2022 earnings report. Amwell spent $26 million on R&D in the first quarter of this year.
Shepardson said the fourth quarter of 2022 represented peak R&D spend, and those investments will decline in the second half of the year.
The company is betting big on its Converge platform to help support a digital-first approach to healthcare as virtual care evolves post-pandemic.
"In a world where a digital-first approach to hybrid care is a certainty, it's also clear in my discussions with our clients that in the healthcare market, spending always requires rigorous prioritization. Hospital budgets are constrained and the challenges facing providers and payers include widespread technological fragmentation, staffing shortages in an urgent need to improve patient experience and outcomes," Schoenberg told investors Wednesday.
"These all drive a demand to evolve to a digital-first model and leveraging technology to achieve operational goals. Despite the inherent challenges our clients and prospects are facing today, we think these investment priorities play right into our strengths. As we take our solution to the market, we are listening carefully, adapting with agility, and driving with urgency," he said.
With Converge, Amwell is providing a "unified, fully integrated hybrid care enablement platform, which glues together payers, providers, innovators, and patients," and represents a large unmet need in the market.
Amwell's platform includes automated care programs for maternity ED discharge, chronic disease and pre-colonoscopy, among others, that are proving to have robust clinical and financial outcomes for customers, Schoenberg said.
No two clients have the same hybrid care goals, he noted. "Clients are looking to solve the most pressing priorities and the success of their peers provides powerful motivation to act, and increasingly we believe they will choose to partner rather than build a homegrown solution on which to deploy the right hybrid combination of virtual, automated, and in-person care," Amwell's CEO said.
The company is now partnering with digital chronic condition management platform DarioHealth to add a cardiometabolic program to its suite of digital offerings.
Amwell says it works with about 2,000 hospitals and payers that reach more than 90 million lives.
The company brought in $64 million in first-quarter revenue, which was flat compared to a year ago and $15 million lower than last quarter. Revenue missed Wall Street estimates. Analysts expected the company to bring in $65 million in revenue this quarter.
"The bulk of this decline was accounted for by lower professional services revenue compared to Q4, which was very busy as we implemented strategic clients onto Converge. Subscription revenue was $28.7 million in Q1, relatively flat compared to the year-ago quarter and down $2 million from last quarter," Shepardson said.
The company expects subscription revenue growth in the first half of 2023 to be impacted by the softness in bookings last year as it focuses on its strategic initiatives related to the Converge transition, he noted.
The total number of active providers using its virtual care platform grew to around 108,000 during the quarter, up 8% compared to 100,000 a year ago.
Amwell saw flat growth in telehealth visits, totaling 1.7 million, the same as last quarter and down from 1.8 million visits a year ago.
The company is in the process of migrating its customers over to the new Converge platform. About 36% of the company’s virtual visits occurred through Converge in the first quarter, up from 28% compared to the fourth quarter.
During the first quarter, Amwell Medical Group visits grew 9% and AMG revenue grew 6% year over year to reach $32.5 million.
Amwell expects full-year 2023 revenue in the range of $275 million to $285 million and adjusted EBITDA to be in the range of loss of $150 million to a loss of $160 million.