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American Well Corp (AMWL)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 delivered $59.5M revenue, down 7% YoY and sequentially lower vs Q4; gross margin compressed to 31% and adjusted EBITDA was ($45.7)M, driven by one-time payer migration costs and a Change Healthcare disruption that temporarily suppressed visits .
  • Converge migration accelerated: 68% of total visits ran on Converge (vs 52% in Q4), with ARPV rising to $77 on mix shift; management called Q1 the low point for subscription revenue and expects sequential increases through Q4 .
  • Guidance reiterated: 2024 revenue $259–$269M, AMG visits 1.6–1.7M, and adjusted EBITDA ($160)M to ($155)M; preliminary 2025 guide calls for ~$335–$350M revenue and adjusted EBITDA ($45)M to ($35)M, with gross margin rising to >50% on higher subscription mix .
  • Strategic execution: Behavioral health went live at DHA sites; large payer migrations (Elevance, Highmark) completed; renewals and an expansion at an East Coast Blue plan support reacceleration of bookings and higher subscription mix into 2025 .

What Went Well and What Went Wrong

What Went Well

  • Converge scaling: Visits on Converge reached 68% (vs 52% Q4), with strong client feedback and platform performance; scheduled visits rose to 63% of total, underscoring hybrid care evolution .
  • DHA milestone: Digital behavioral health program went live at initial sites; enterprise rollout targeted for Q4, supporting the 2025 step-up in subscription revenue and margins .
  • Commercial momentum: Renewals with Highmark, Intermountain, El Camino Health, Penn State, Cleveland Clinic, plus a sizable expansion with an East Coast Blue plan; “robust enterprise selling motion” emphasized to drive subscription mix .
  • Management quote: “We are putting our re-platforming behind us and are optimizing our cost structure… We continue into 2024 with growing conviction around the value we deliver and the profitable growth that we aim to achieve.” .

What Went Wrong

  • Top-line softness: Revenue declined 7% YoY to $59.5M; subscription revenue fell 9% sequentially to $24.9M as legacy platform declines persisted .
  • Margin pressure: Gross margin fell ~300 bps QoQ to 31%, largely due to lower subscription/services revenue and one-time payer migration costs .
  • Visit headwinds: Total visits (~1.67M) were modestly lower YoY; the Change Healthcare security breach and temporary migration disruptions prevented co-pay processing, throttling throughput in early Q1 before resolution .
  • Expense friction: Sales & marketing and G&A rose sequentially on severance and stock-based comp vesting; adjusted EBITDA worsened to ($45.7)M (vs ($36.9)M Q4) .

Financial Results

Revenue, EPS, Gross Margin, Adj. EBITDA vs Prior Periods and Estimates

MetricQ3 2023Q4 2023Q1 2024Consensus (Q1 2024)
Total Revenue ($USD Millions)$61.9 $70.7 $59.5 N/A (SPGI unavailable)
GAAP Diluted EPS ($USD)($0.48) ($0.17) ($0.25) N/A (SPGI unavailable)
Gross Margin (%)35% 34% 31% N/A (SPGI unavailable)
Adjusted EBITDA ($USD Millions)($38.5) ($36.9) ($45.7) N/A (SPGI unavailable)

Note: SPGI Wall Street consensus for Q1 2024 was unavailable due to service limits; therefore, we cannot quantify a beat/miss vs estimates.

Segment Revenue Breakdown

Segment Revenue ($USD Millions)Q3 2023Q4 2023Q1 2024
Subscription$28.4 $27.3 $24.9
AMG Visit Revenue$26.7 $32.1 $31.1
Services & Carepoints$6.8 $11.3 $3.6

KPIs

KPIQ3 2023Q4 2023Q1 2024
Total Visits (Millions)1.4 1.6 1.7
Scheduled Visits (% of total)65% 60% 63%
Average Revenue per Visit ($USD)$77 $72 $77
Visits on Converge (%)50% 52% 68%
Cash & Equivalents ($USD Millions)$319.4 (cash) ~$372.0 $308.6

Guidance Changes

MetricPeriodPrevious Guidance (Q4 2023)Current Guidance (Q1 2024)Change
Revenue ($USD Millions)FY 2024$259–$269 $259–$269 Maintained
AMG Visits (Millions)FY 20241.6–1.7 1.6–1.7 Maintained
Adjusted EBITDA ($USD Millions)FY 2024($160) to ($155) ($160) to ($155) Maintained
Revenue ($USD Millions)FY 2025 (prelim.)$335–$350 $335–$350 Maintained
Adjusted EBITDA ($USD Millions)FY 2025 (prelim.)($45) to ($35) ($45) to ($35) Maintained
Gross Margin (%)FY 2024 → FY 2025“High-30% area” → “>50%” “High-30% area” → “>50%” Maintained
Adjusted EBITDA BreakevenFY 2026Objective to breakeven Objective to breakeven Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2023, Q4 2023)Current Period (Q1 2024)Trend
DHA deployment$180M task order; initial phase in 2024; enterprise rollout anticipated end-2024; mostly subscription mix Behavioral health live; Q2–Q3 services revenue to ramp; lion’s share of revenue in Q4; enterprise rollout targeted Q4 Execution progressing; revenue visibility increasing
Converge migrationsCrossed 50% of visits in Q3; 52% in Q4; major payer migrations planned 68% of visits on Converge; large payer migrations completed; platform scaling well Accelerating adoption
Cost normalization (R&D, SG&A)R&D down; headcount reduced ~10% by Q4; path to mid-teens reduction in 2024 R&D normalized; mid-teens decline in 2024 given government work; >$15M comp savings; SG&A efficiencies targeted Continued cost discipline
AI/automation & virtual nursingHighlighted automated programs and virtual nursing case studies Emphasis on automated care and AI as key differentiators; behavioral collaborative care highlighted Strategic focus sustained
Market/competitionTelehealth exits (validation of complexity); payer focus on digital primary care Optum/Walmart exits viewed as net positive structurally; United committed to hybrid care Industry consolidation favors platform players
Payer/provider demandHealth systems ROI focus; payers pursuing digital-first and VPC Renewals/expansions; Elevance VPC launch; Blue plan automation programs Strengthening pipeline and upsell

Management Commentary

  • “The guidance we gave on our last call described a 30% jump in our 2025 top line, reach with subscription software that will drive gross margin expansion to over 50%.” .
  • “Visits on Converge were over 68%… we believe the first quarter was our low point for the year for subscription; subscription will increase each quarter in 2024.” .
  • “You can expect to see the lion’s share of [DHA] impact in the fourth quarter… services revenue will come on in Q2 and Q3 in a meaningful way.” .
  • “Our headcount actions will result in over $15M in compensation-related savings… we expect adjusted EBITDA breakeven in 2026 with a cash balance of approximately $150M.” .

Q&A Highlights

  • Renewals and upsell: 3-year duration typical; expansions span virtual primary care, automated interactions (colonoscopies, diabetes), collaborative behavioral care via SilverCloud .
  • Change Healthcare impact: Without the breach, visits would have been flat YoY; migration disruptions further dampened volume early in Q1 before remediation .
  • DHA revenue cadence: Services revenue ramps in Q2–Q3; subscription-heavy revenue recognized with Q4 go-lives; project viewed as durable beyond 2025 .
  • Go-to-market transformation: Shift to combined hunter-farmer model; fewer quota carriers with broader “end-to-end” portfolio; comp plans incentivize high-margin subscription .
  • Demand environment: Health systems focus on ROI and operational efficiency; payers pushing digital-first and VPC; bookings reacceleration expected with Converge proof points .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 2024 revenue and EPS was unavailable due to service limits; we cannot determine a beat/miss. Management reiterated FY 2024 revenue ($259–$269M) and adjusted EBITDA ranges and confirmed the 2025 step-up driven by contracted backlog and DHA enterprise rollout .

Key Takeaways for Investors

  • Converge adoption is accelerating (68% of visits), setting the stage for subscription-led margin expansion through 2025; expect sequential subscription revenue growth each quarter in 2024 from contracted go-lives .
  • Near-term noise (Change Healthcare breach, payer migrations) depressed Q1 visits and margins; these were resolved and are not indicative of underlying demand or platform performance .
  • 2024 remains a transition year with services revenue concentrated in H2 from DHA deployments; the “lion’s share” of revenue inflection should manifest in Q4 .
  • 2025 outlook implies ~30% top-line growth and gross margin >50% on increased subscription mix; adjusted EBITDA improves ~70% to ($45)M–($35)M, de-risked by contracted backlog .
  • Cost structure is normalizing: R&D trending mid-teens lower in 2024 (moderated by government customization) with >$15M comp savings; SG&A efficiencies expected to continue .
  • Strategic positioning benefits from industry exits and consolidation; payers/providers increasingly prefer integrated hybrid care platforms and ROI-driven automation—AMWL’s partnerships (DHA, Elevance, Cleveland Clinic) are strong validation .
  • Path to breakeven in 2026 remains intact with expected cash of ~$150M at breakeven; execution on DHA milestones and sustained bookings reacceleration are the key watch items .