Amwell, formerly American Well, cut 10% of its workforce at the end of 2023 to slash expenses as its losses ballooned to $679 million.
The company's losses in 2023 included significant goodwill impairment charges totaling $436 million caused by a sustained decline in its share price during the first three quarters.
The headcount reduction will produce more than $15 million in compensation-related savings, Amwell chief financial officer Bob Shepardson said during the company's fourth-quarter and full-year 2023 earnings call Wednesday.
But the virtual care giant is plotting accelerated growth and a path to profitability in 2025, boosted by a major contract with the Defense Health Agency. Amwell executives said the DHA contract will have a significant impact on Amwell’s future financials.
Amwell also is betting big on its Converge platform to help support a digital-first approach to healthcare as virtual care evolves post-pandemic. Amwell spent the past year making significant investments in its new virtual care platform. Converge makes all of Amwell’s products and programs, plus third-party applications, available in one place, like an app store that embeds third-party solutions, according to executives.
"We improved focus and efficiency in our company and are committed to continue optimizing our organization to streamline and propel growth. Based on the 2023 achievements, we begin 2024 with high conviction regarding our path to profitability," Ido Schoenberg, M.D., chairman and CEO of Amwell, told investors during the company's earnings call.
Schoenberg highlighted the successful migration of more than half of the company's volume onto its new platform, Converge, and the accumulation of ROI proof points.
Amwell is evolving from a telehealth vendor to a hybrid care enablement partner that "healthcare organizations are turning to as they seek to modernize and achieve operational goals," Schoenberg said.
"It's also transformation from selling video visits to connecting and mobilizing digital app and provider networks within and between client organizations," he said, adding, "I believe we're better positioned than ever to deliver the profitable growth promised by our large market opportunity in highly differentiated SaaS-based software infrastructure."
The company is focused on expanding its tech partnerships with current customers and winning new clients in 2024, expecting a return to bookings growth, executives said.
In November, Amwell announced it inked a major contract with the Defense Health Agency (DHA) to expand its reach into the government and public sectors. In partnership with Leidos, Amwell will provide a hybrid care technology platform designed to power the “digital first” transformation of the Military Health System, according to the company.
The contract, worth up to $180 million, will deploy Amwell's Converge platform to replace the Military Health System's video connect solution. The project will start at five initial sites followed by a phased enterprise rollout.
"We will modernize and provide digital care enablement for the Defense Health Agency benefiting that organization's 9.6 million beneficiaries. We are progressing well with deploying our solution for the US military enabling the DHS digital-first initiative," Schoenberg said.
However, the virtual care company saw its revenue decline year over year. The company brought $70.7 million in revenue in the fourth quarter, down 11% from the same period a year ago. Subscription revenue came to $27.3 million and Amwell Medical Group visit revenue totaled $32.1 million, down 8% from a year ago.
Amwell narrowed its losses in the fourth quarter with a loss of $50 million, or a loss of 17 cents per share, compared to a loss of $61 million in the same quarter a year ago. The company reported 103,000 total active providers on its platform during the fourth quarter.
The company's top and bottom line beat Wall Street estimates for the fourth quarter.
Amwell reported 1.6 virtual visits in the fourth quarter, a small decline versus 1.7 million last year, as early and severe flu season did not repeat this year, according to Shepardson. "So, the relatively strong visit volume reflects growth within some of our strategic payer clients. Scheduled visits represented 60% of the total," he said.
For the full year, Amwell brought in $259 million in revenue, down 6% from $277 million in 2022. That includes subscription revenue of $112 million and AMG visit revenue of $120 million. The company's losses also grew from a loss of $272 million in 2022 to a loss of $679 million, due to those hefty impairment charges.
Amwell reported 6.3 million total virtual visits in 2023.
The company has approximately $372 million in cash and short-term securities.
Amwell is projecting slower revenue growth in 2024, forecasting revenue to total $259 million to $269 million. Adjusted EBITDA is projected to be in the range of between a loss of $160 million to a loss of $155 million. Amwell plans to invest more in R&D this year to support the Defense Health Agency’s “Digital First” initiative.
"Our 2023 financials reflect the headwinds associated with our re-platforming, but we believe we are coming out the other side," Shepardson told investors during the earnings call. "Our business has moved meaningfully ahead in terms of putting in place our growth transformation, normalizing and rationalizing costs and growing our contracted backlog."
"Turning to our outlook, the progress we made this year significantly adds to our financial visibility and meaningfully de-risks our path to profitability. The impact of our plans supporting the DHA including the enterprise expansion is not fully visible within a single year of guidance for 2024," Shepardson said.
As Amwell moves beyond the initial phase of deployment for the DHA and re-accelerates bookings, the company's financial story "changes fairly dramatically in 2025," Shepardson said.
Amwell is projecting a 30% boost in revenue in 2025, jumping to $335 million to $350 million.
That revenue growth will be primarily driven by go-lives of contracted software backlog, including Amwell's planned enterprise-wide DHA deployments.
"Moving on to 2025 profitability, we expect an approximate 70% improvement in our adjusted EBITDA to a range of a loss of $45 million to a loss of $35 million," he said. "We expect the change in our revenue mix towards subscription software to lift gross margins from the high 30% area in 2024 to over 50% in 2025. After customizing our platform for operation in the government ecosystem, it will be fully scalable and ready to deliver complete hybrid care across the entire Military Health System enterprise with minimal future development required."
Amwell expects to achieve adjusted EBITDA breakeven in 2026 with a cash and investments balance of approximately $150 million.
"We are encouraged by the strides we've made in our business. We believe we are just beginning to capitalize on our market opportunity. This guidance marks the early days for the long-term profitable growth trajectory we envision, Shepardson told investors.
Amwell executives believe the company is well positioned in the market as organizations move toward hybrid care and solutions that optimize the provider and patient experiences.