The rise of the highly infectious delta variant in the third quarter had an unexpected impact on telehealth company Amwell's virtual care visits as urgent care services grew but specialty and behavioral health services dropped.
The company saw a quarter-over-quarter increase in visit volume in the third quarter. Amwell performed 1.4 million visits in the third quarter, up from 1.3 million virtual care visits in the second quarter of 2021. But visit volume growth was flat year over year as the company performed 1.4 million visits the same period a year ago.
A light flu season so far and the delta variant caused some mix volatility, with more urgent care and fewer specialty visits during the latest quarter.
"Throughout 2020 in the beginning of 2021, we saw behavioral visits correlated with COVID. But toward the end of Q3 and continuing so far in the fourth quarter, we unexpectedly observed a decoupling of this correlation with urgent care visits, continuing to expand while growth in specialty and behavioral visits less so," said Chief Financial Officer Keith Anderson during the company's third-quarter earnings call Wednesday.
"At this point, we are maintaining a conservative view on Q4 visits, assuming relatively soft cold and flu demand due to masks and social distancing. While we are confirming our overall range of visit volume expectations, we are seeing this proportionate contribution coming from urgent care, lower fee visits due to the delta variant," he said.
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The company expects full-year revenue between $246 and $253 million, down from the previous range of $252 to $262 million. The narrowed outlook is mainly to account for decreases in visit volume and shifts in visit-type mix toward urgent care versus specialty due to the COVID-Delta variant, executives said.
Amwell reported total visit revenue of $30 million in the third quarter, up 9% over last quarter and a 6% increase over last year's third quarter.
Unpacking the mix, AMG specialty volume continued at 50% higher levels over last year but sequentially was outpaced by urgent care visits, Anderson said.
Urgent care visits are cheaper, so the higher urgent care mix had an unfavorable impact on total revenue per visit. The company saw its third-quarter 2021 revenue drop about 1% to $62.2 million from $62.6 million in the same quarter a year ago.
That was lower than Wall Street expectations. Analysts expected quarterly revenue of $65 million.
Subscription revenue was $26.7 million, compared to $25.8 million in the third quarter of 2020.
Visit revenue came to $30 million, up 5% compared to $28.5 million a year ago.
Amwell reported a net loss during the quarter of $51 million compared to a loss of $65 million a year ago.
The company’s earnings per share came to a loss of 20 cents per share for the quarter, beating analysts' consensus estimates of a loss of 24 cents per share.
Adjusted EBITDA was a loss of $31.5 million, compared to a loss of $24 million in the prior quarter.
The majority of the increased loss came from increases in Amwell’s R&D and sales and marketing spend and a new executive hire.
The company ended the quarter with $790 million of cash that includes payments made in the third quarter for the acquisitions of SilverCloud and Conversa.
“With almost $800 million in cash in our balance sheet, we have ample funds to execute both on our inorganic strategy, as well as to fund our path to profitability,” Anderson said.
Amwell reported a gross margin of 43.5%, compared to 32.7% a year ago.
The company had 80,000 active providers on its platform, compared to about 71,000 last quarter and 62,000 last year. The addition of all 9,000 new active providers came from clients adding their own providers to the Amwell platform, Anderson said.
Strategic initiatives to fuel growth
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 has transitioned 43 enterprise clients to the platform to date, said co-CEO and Chairman Ido Schoenberg during the earnings call.
“In the third quarter, we were pleased to see further acceleration of user adoption and use case expansion on the Amwell platform," he said. "This was demonstrated by strong growth in active providers and recurring consumer visits."
Schoenberg adds, "The transition to Converge is moving forward well. The addition of Conversa Health and SilverCloud Health further enhances our differentiation as a single, digital care delivery platform designed to serve the full care spectrum across physical, virtual and automated modalities. We were thrilled to see so many existing and new clients and partners already commit to Converge as their long-term platform."
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Converge features a hybrid combination of digital-first capabilities with strong ties to traditional and trusted care pathways, he said.
“It is apparent that our ability to contain and embed a whole spectrum of third-party innovative apps, modules and programs will further solidify Amwell as a dependable, future-ready choice for providers, payers and innovators," he said.
Amwell is strategically preparing for a world where 25% to 30% of healthcare services are actually going to be rendered over technology, co-CEO and President Roy Schoenberg told Fierce Healthcare in October.
“That’s a dramatic departure from the realistically 0.8% prior to COVID. The world has changed. Converge is the first platform that is designed for a world where a big chunk of healthcare is traveling over technology,” he said.
Amwell also recently acquired 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.
The two companies’ technologies provide automated companionship for medical issues, Schoenberg said.
“It opens up the doors up for us to reimagine how we can be next to patients when they live with their healthcare challenges; how can technology open up shop and be an always-on companion to people with long-term healthcare challenges, such as heart failure, cancer and diabetes," he said.
Looking ahead, Amwell projects AMG visit volume will end the year at the lower quartile of the range of 1.4 million to 1.5 million.
The company also favorably increased and narrowed its range by $10 million to an EBITDA loss of $143 million to $136 million from previous guidance of $154 million to $146 million due to the visit mix shift to higher-margin urgent care visits, as well as for other efficiencies unlocked within gross margins, continued favorability within R&D spend and sales and marketing, Anderson said.