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American Well Corp (AMWL)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 revenue was $61.0M, roughly flat year over year, with gross margin at 37% and adjusted EBITDA loss improving to ($31.0)M from ($35.0)M in Q2; management emphasized continued cost alignment and reiterated the path to cash flow positive in 2026 .
  • Mix continues to shift toward subscription and scheduled visits: subscription revenue was $26.2M, AMG visit revenue $27.5M, services $7.3M; total visits were ~1.4M with 70% scheduled and ~70% on Converge, ARPV rose to $83 (+7% y/y) .
  • Guidance was revised: FY24 revenue lowered to $247–$252M (from $259–$269M) and AMG visits to 1.4–1.5M (from 1.6–1.7M) due to visit softness, while FY24 adjusted EBITDA guidance improved to ($137)M–($142)M (from ($150)M–($145)M) on cost actions; gross margin expected to approximate 2023 levels .
  • Strategic catalysts: DHA rollout reached another milestone (scheduled and group visits live) with enterprise go‑live still anticipated by year‑end and sole‑source intent to Leidos noted; subscription uplift expected in Q4 and to drive a higher-margin mix in 2025 .

What Went Well and What Went Wrong

What Went Well

  • Gross margin stabilized at 37% for Q3 (flat q/q) as mix and cost actions took hold; adjusted EBITDA improved to ($31.0)M from ($35.0)M in Q2 and ($38.5)M in Q3’23, reflecting cost alignment progress .
  • Platform adoption and quality: 70% of visits are scheduled and ~70% occur on Converge; ARPV rose to $83 (+7% y/y), aided by specialty mix; management cited >90% patient/provider ratings on Converge deployments .
  • Government momentum: Converge scheduled and group visits are live for the Defense Health Agency; enterprise rollout remains anticipated by year‑end, and DHA issued an intent to sole‑source to Leidos that specifically names Amwell’s products (process not yet final) .
    • Quote: “We are proceeding according to plan towards full enterprise go-live anticipated in Q4.” — Ido Schoenberg (CEO) .

What Went Wrong

  • Visit softness persisted: total visits declined ~4.6% y/y to ~1.4M, with management pointing to market-wide and client execution headwinds that are continuing into Q4; FY24 revenue and AMG visit guidance were lowered .
  • Subscription revenue dipped sequentially to $26.2M (down 5% q/q) due to a $1.5M timing benefit in Q2; management expects a material Q4 uplift to keep full-year subscription roughly flat y/y .
  • Q3 net loss remained sizable at ($44.0)M (vs. ($49.9)M in Q2), though improved; management continues to rely on non‑GAAP levers and capitalized software to show progress, while reiterating no debt and ~$245M cash liquidity .

Financial Results

Summary Metrics

MetricQ1 2024Q2 2024Q3 2024
Revenue ($USD Millions)$59.5 $62.8 $61.0
Gross Margin %31% 37% 37%
Adjusted EBITDA ($USD Millions)($45.7) ($35.0) ($31.0)
Cash & Equivalents ($USD Millions)$309 $277 ~$245

YoY EPS and Revenue for Q3

MetricQ3 2023Q3 2024
Revenue ($USD Millions)$61.9 $61.0
Net Loss per Share, Basic & Diluted ($)($9.54) ($2.87)

Revenue Mix

Revenue Component ($USD Millions)Q1 2024Q2 2024Q3 2024
Subscription Software$24.9 $27.5 $26.2
AMG Visit Revenue$31.0 $28.7 $27.5
Services & Carepoints$3.6 $6.6 $7.3

KPIs

KPIQ1 2024Q2 2024Q3 2024
Total Visits (Millions)~1.67 ~1.50 ~1.40
% Scheduled of Total63% 66% 70%
% Visits on Converge≈68% ~70% ~70%
Avg Revenue per Visit (ARPV)~$77 $80 $83

Non‑GAAP Adjusted EBITDA Reconciliation (Selected Items)

  • Q3’24 net loss ($44.0)M; add D&A $8.3M; subtract interest/other income ($3.9)M; tax ($0.1)M; SBC $10.6M; severance/strategic transformation $2.9M; subtract capitalized software ($4.7)M → adjusted EBITDA ($31.0)M .
  • Note: Q3’23 included a $78.9M goodwill impairment, inflating GAAP loss; no goodwill impairment in Q3’24 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)FY 2024$259–$269 $247–$252 Lowered
Adjusted EBITDA ($M)FY 2024($150)–($145) ($142)–($137) Raised (less negative)
AMG Visits (Millions)FY 20241.6–1.7 1.4–1.5 Lowered
Subscription RevenueFY 2024~Flat vs 2023 ~Flat vs 2023 Maintained
Gross MarginFY 2024Approximate 2023 levels Approximate 2023 levels Maintained

Earnings Call Themes & Trends

TopicQ1 2024 (Prior-2)Q2 2024 (Prior-1)Q3 2024 (Current)Trend
DHA rollout and timingBehavioral health live; milestones toward Q3/Q4; enterprise expansion planned Q4 On track; enterprise go‑live end of Q4; strongest impact in Q4 and 2025 Scheduled/group visits live; enterprise go‑live anticipated by year‑end; sole‑source intent to Leidos noted (not final) Execution progressing; procurement visibility improving
Cost structure/EBITDA pathCost actions, reiterated 2026 profitability path EBITDA guidance improved; continued SG&A/R&D actions EBITDA guidance improved again; cash flow positive confirmed for 2026 Improving cost discipline; higher confidence
Mix shift & ConvergeMigration to Converge drove 68%+ of visits; subscription focus ~70% of visits on Converge; subscription guide ~flat y/y ~70% on Converge; push to higher‑margin subscription in 2025 Stable platform mix; subscription emphasis increasing
Partnerships/programsNew Hello Heart partner referenced Hello Heart signed in Q2 Sword Health MSK win at Capital Blue Cross; Hello Heart PR Oct 8 Expanding portfolio and payer integrations
Visits/macrosQ1 impacted by Change Healthcare and migrations —Visit softness continues (market/client execution); lowers FY revenue/AMG visits guide Variable visit demand; de‑risking mix

Management Commentary

  • “We are aligning our cost structure to fit our strategy… while building our growth organization to deliver high quality, higher margin revenue.” — Ido Schoenberg (CEO) .
  • “Adjusted EBITDA for the quarter was negative $31 million… We ended the third quarter with $245 million in cash and 0 debt.” — Mark Hirschhorn (CFO) .
  • “We have completed the second milestone. Converge scheduled and group visits are now also live… We are planning for enterprise‑wide deployment for the DHA by the end of 2024.” — Ido Schoenberg .
  • “We expect a material uplift in Q4 subscription software revenue… total subscription software revenue for the year will come in at approximately flat to 2023.” — Mark Hirschhorn .
  • “We are revising our 2024 revenue guide… and raising our adjusted EBITDA guidance.” — Mark Hirschhorn .

Q&A Highlights

  • 2025 growth quality: Management aims to skew toward subscription-heavy, higher-margin growth with de‑emphasis on less accretive lines; visibility into 2025 subscription gains is “very good” .
  • 2026 cash flow positive: CFO reaffirmed the target; risks center on achieving incremental revenue to reach required gross margin at the new cost base, while continuing cost reductions .
  • DHA deployment timing and renewal: Enterprise go‑live still anticipated by year‑end; renewal beyond mid‑2025 expected via Leidos (sole‑source intent naming Amwell noted but not final) .
  • Monetization of routing to third‑party programs: Amwell has rev‑share agreements (e.g., Sword, Dario) to monetize orchestration; DHA commercial model differs (bundled subscription) .
  • Visit softness and Q4 cadence: Lower pull‑through in visits continues into Q4; 2025 revenues expected to depend less on variable visit volume as subscription mix rises .

Estimates Context

  • S&P Global Wall Street consensus for Q3 2024 EPS/revenue and near-term periods was unavailable at time of retrieval due to data access limits; as a result, beat/miss analysis versus consensus cannot be provided here [Values retrieved from S&P Global unavailable].

Key Takeaways for Investors

  • Mix shift and margin setup: Despite lowered FY revenue/AMG visit guides, cost actions are working and subscription mix is rising; gross margin remains stable at 37% with a roadmap to expand in 2025 as subscription revenue scales .
  • Execution catalyst: DHA enterprise go‑live remains targeted by year‑end; management expects a Q4 subscription uplift and a higher subscription run‑rate into 2025, reducing dependence on volatile visits .
  • Liquidity and runway: ~$245M cash and no debt provide runway to 2026 cash flow positive, enabling sustained cost transformation and selective growth investments .
  • Portfolio leverage: Expanding partner programs (Sword, Hello Heart) and strong Converge penetration (~70% of visits) support higher‑margin, orchestrated hybrid care across payers and providers .
  • Risk watch: Visit softness persisting into Q4, potential timing variability in DHA and client execution, and reliance on non‑GAAP levers (capitalized software, SBC) to show progress; however, guidance explicitly de‑risks FY24 revenue and improves EBITDA .
  • 2025 narrative: Shift to subscription‑heavy revenue and DHA enterprise ramp are key to margin expansion and EBITDA improvement; monitor Q4 subscription step‑up as the near‑term proof point .

Additional Relevant Press Releases (Context)

  • CFO transition (Oct 15): Appointment of Mark Hirschhorn as CFO to drive operational efficiency and profitable growth focus .
  • Clinical portfolio expansion (Oct 8): Hello Heart added to clinical programs on Converge, deepening payer/employer value proposition .
  • Investor conferences (Oct 28): Management participation in multiple investor events, signaling proactive engagement with the investment community .