Amwell expects fewer telehealth visits in fall, winter as delta variant creates uncertainty

woman on couch uses telehealth app to talk to doctors
Amwell expects fewer telehealth visits in the second half of 2021 as masking and social distancing measures better protect people from the typical flu season, which would drive more virtual urgent care visits. (Amwell)

As the delta variant continues to drive the nation's latest coronavirus surge, telehealth giant Amwell expects fewer telehealth visits through the fall and winter.

The company is projecting an $8 million impact on its 2021 revenue as a result of the drop in projected virtual care visits. Amwell adjusted its 2021 revenue guidance to between $252 million and $262 million from the previous range of $260 million to $270 million, executives said during the company's second-quarter 2021 earnings call Wednesday.

"The recent emergence of the delta variant has introduced some uncertainty to our second half visits outlook," said Ido Schoenberg, M.D., chairman and CEO of Amwell, during the call.

"With mask mandates quickly returning and also acknowledging other trends we are observing within visit mix and volumes, we need to account for these other dynamics and a likely weaker cold and flu season due to these variant-related protective measures," he said, also noting the company does not expect extra COVID-related demand.

"Consequently, we are adjusting down our visit forecast for the remainder of the year to account for these factors,” he said.

The company now projects 200,000 fewer telehealth visits in the second half of 2021 as masking and social distancing measures better protect people from the typical flu season, which would drive more virtual urgent care visits.

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Amwell had previously projected total visits in 2021 would fall in the range of 1.5 million to 1.7 million and has lowered that projection to between 1.4 million and 1.5 million visits.

"At $80 average revenue per visit equates to a change in about $8 million of total revenue. Thus, we are lowering the top end of our range $8 million, from $270 million to $262 million. A low flu season in our forecast model equates to approximately 1.4 million visits, a further 100,000-visit decrease," Schoenberg said.

He added, "While no one has a crystal ball with COVID and now especially with the delta variant, our revised guidance range reflects a moderated flu season on the high end and a low flu season on the low end of guidance versus a normal flu season, which we originally assume when we provided guidance in March."

He pointed to guidance from the American Academy of Pediatrics recommending that all children, staff, and teachers in grades K-12 wear masks, regardless of vaccination status. The Centers for Disease Control and Prevention also recently issued guidance recommending all individuals, including those who are vaccinated, wear masks indoors.

Schoenberg told investors a full-blown resurgence in COVID-19 cases could lead to an uptick in telehealth visits beyond the original projections.

"I can tell you, for example, that even from July to August, we've seen an average growth in urgent care AMG (Amwell Medical Group) visits of 17%. However, we noticed a growth of 40% in the Southern hard-hit states," he said.

If that trend continues nationally through the end of the year, it would significantly affect demand.

"It's also possible that the reverse will happen, which is what we see in England," he said. "We will see a decrease of the delta variant and coupled with removal of masks and social distancing, which is likely going to create a flu season that is much more prominent.

RELATED: Amwell telehealth visits more than double in Q1 2021 but revenue, visit volume growth slow

Q2 financial results

Amwell brought in $60 million in revenue in the second quarter, down 12% from $69 million in the second quarter of 2020, when telehealth adoption exploded from the surge in COVID-19 cases. Revenue was up 5% from $58 million in the first quarter of 2021.

The company's second-quarter revenue missed the Wall Street analyst consensus estimate of $61.70 million by 2.4%.

Subscription revenue was $27 million, up 9% compared to $25 million the same period a year ago. Visit revenue dropped slightly from $27.8 million to $27.5 million in the most recent quarter.

Amwell went public in August after raising $742 million with the sale of 41.2 million class A shares at $18 apiece. 

Telehealth visits declined 19% during the quarter as the company performed 1.3 million visits compared to 1.6 million visits in the first quarter of 2021, pointing to a potential deceleration in telehealth usage. Schoenberg said total visits reflected a typical decline of urgent care visits entering the summer period.

Telehealth visits hit a peak of 2.2 million in the second quarter of 2020, compared to 700,000 telehealth visits in the first quarter of 2020.

Amwell's gross margin grew from 38% in the first quarter of 2021 to 44% in the second quarter.

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"This was accomplished through a favorable shift to more higher-margin technology revenues and a set of efficiency contributors that started to realize, including our migration to Google Cloud, Amwell Medical Group technology improvements and initial deployments of Amwell now on Converge," Schoenberg said.

In April, Amwell launched a new telehealth platform with an open architecture to support other digital health applications like remote monitoring. The platform, called Converge, enables all of the company's products, programs, modules and devices, as well as applications from third parties, to be available in one place with a single code base, the company said.

The company started to deploy Converge in hospitals and delivery networks, with 38 Amwell Now clients are already live on Converge, powering 1,300 providers on the new platform. 

The company's losses narrowed to a loss of $38 million in the second quarter, compared to a loss of $40 million in the previous quarter and a loss of $88 million in the first quarter of 2020.

Amwell reported quarterly losses of 15 cents per share, which beat the analyst consensus estimate of a loss of 19 cents per share. 

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) trended in the wrong direction. Amwell recorded an adjusted EBITDA loss in the second quarter of $23.7 million, versus an adjusted EBITDA loss of $13 million in the prior-year period. 

The company improved its EBITDA loss compared to the first quarter when it recorded a loss of $26.4 million as a result of expanded gross margins and operational efficiencies, company executives said.

Amwell saw total active providers hit 71,000, down 12% from 81,000 in the first quarter as COVID-focused providers rolled off the telehealth platform.

Amwell Medical Group visits increased to 25% of total visits versus 20% last quarter.

"In Q2, we were pleased to show significant progress in shifting the mix of our revenues more towards enabling technology versus visits. We expect this shift to continue in 2022 and beyond, and after our Converge roll-out to drive better margins and profitability," Schoenberg said.

The company reaffirmed its previous outlook for its technology subscription revenues and services and care points revenues as these businesses are operating at or above original forecast levels, executives said.

SilverCloud Health and Conversa Health acquisitions

In July, the company announced plans to acquire two digital health companies to expand its services beyond telehealth visits. The virtual care company is scooping up SilverCloud Health, a digital mental health platform, and Conversa Health, which offers automated virtual healthcare.

Amwell paid $210 million for SilverCloud Health and $110 million for Conversa, with both transactions paid for with a similar mix of approximately 50-50 cash and stock, Schoenberg said.

The companies are expected to achieve $15 million in revenue in 2021 and more than $30 million in 2022. 

RELATED: Amwell rolls out new telehealth platform that integrates with digital health tools

"While both of these companies have been wildly successful in their own right, the combination of both of them at the same time on the Converge platform opens up many opportunities for Amwell to further deliver on our core mission: to provide the environment, the platform and the tools for our customers' own providers to deliver care to their patients or members," Schoenberg said.

He said that the Converge platform, coupled with Amwell's recent acquisitions, sets the telehealth company apart.

"Together we uniquely provide a single, integrated, scalable and dependable platform that combines physical, virtual and automated care delivery enablement. We believe that use of our platform will continue to materially increase over the next few years as healthcare workflows go through significant transformation and focus more on efficiency, impact and reach," he said.

For 2021, the company expects an adjusted EBITDA loss between $154 million and $146 million from the previous range of a loss of between $157 million and $147 million.

The company also expects gross margin and operational efficiencies of $12 million netted against $10 million EBITDA burden from the two acquisitions.