Amwell co-CEO to Amazon on telehealth play: 'Welcome to the swamp'

Telehealth giant Amwell saw a massive jump in virtual visits during the COVID-19 pandemic, tallying up 5.9 million visits in 2020, up 400% from 1.1 million visits in 2019.

In the fourth quarter, virtual visits totaled 1.6 million, up 300% from the prior year, company executives reported during Amwell's fourth quarter and full year of 2020 earnings call Thursday.

The pandemic pushed telehealth into the mainstream, but Amwell didn't reach this level of growth overnight, the company's co-CEO Ido Schoenberg said during the earnings call.

Amwell, founded in 2006, spent a decade and a half building the infrastructure necessary to enable providers to provide care remotely to patients in their homes, he said.

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That's why the executive didn't sound too shaken by Amazon's plans to expand its own virtual care services.

"I would just say welcome to the swamp. It's much more complicated than you think," Schoenberg said in response to an analyst's question about Amazon's expansion into telehealth.

Schoenberg said he welcomed Amazon's moves to widen the availability of convenient primary care. "Amazon brings an enormous amount of assets in way of drug delivery, in a way of consumer experience and things of that nature and it relates to primary care in certain models that could be a fantastic thing, which is very, very different from the role of Amwell."

Providing care to patients in their homes requires a deep degree of technology integration, robust analytics, a strong understanding of clinical workflows and care plans and financial relationships with payers, he said.

"It's very hard. It's not the DNA of big tech," he said. "We think that what they bring to certain employers could be very helpful and yet does not compete directly with most of the value proposition that we offer at this time."

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Amwell's revenue jumps but losses widen

The company posted $60 million in revenue for the fourth quarter of 2020, up 34% from the $45 million in 2019. 

This result topped the average analyst's revenue estimate of $54 million.

Subscription revenue during the fourth quarter grew 13% to $26 million, compared to $23 million in the same period a year ago. Visit revenue was $26 million, up 73% from $15 million in the fourth quarter last year.

Schoenberg told Yahoo Finance that the company's modest revenue growth in the fourth quarter was in large part because revenues haven't caught up to the costs required for the "sudden and swift build-up of the platform's infrastructure."

Amwell's total active providers grew to around 72,000 in the fourth quarter of 2020, up from about 7,000 during the same time in 2019. 

The company's losses widened in the fourth quarter to a loss of $51 million, compared to a loss of $23 million a year ago.

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Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) also trended in the wrong direction. Amwell recorded an adjusted EBITDA loss in the fourth quarter of $35.4 million, versus an adjusted EBITDA loss of $16.9 million in the prior-year period.

Amwell's gross margin also slipped to 37% from 45% in the prior-year period, due primarily to a shift in the company's revenue mix.

For the full year, Amwelll reported annual revenue reached $245 million, up 65% from $149 million in 2019. In 2020, subscription revenue reached $98 million, up 17% from $84 million. Visit revenue grew 185% to $117 million compared to $41 million in 2019.

Chief financial officer Keith Anderson said on the earnings call that a large part of this growth was due to subscription average contract values expanding from $282,000 to $334,000 in 2019 to 2020 for its health system customers and from $546,000 to $612,000 for health plan customers. In 2020, the number of health system customers also grew from 140 to 158.

Amwell saw total year-end active providers hit 72,000, a 950% increase from the prior year.

While the company's revenue soared in 2020, its net losses also soared. Amwell posted a $229 million net loss for the full year, compared to an $88 million loss in 2019. 

During the earnings call, Anderson said the company incurred additional expenses in 2020 related to going public in the fall. He noted that Amwell is on track to become profitable.

Amwell went public in August after raising $742 million with the sale of 41.2 million class A shares at $18 apiece. Following earnings, the company's stock declined on Thursday. Amwell shares, which closed on their first day of trading at $25, are at $17.

From a balance sheet perspective, the company ended the year with cash and investments of approximately $1 billion and Amwell continues to have no debt, according to Anderson.

Amwell expects $265 million in revenue for 2021, nearly flat over 2020, and a loss in the range of $147 million to $157 million.