Amwell’s Earnings Call: Mixed Results and Strategic Focus

American Well Corporation ((AMWL)) has held its Q3 earnings call. Read on for the main highlights of the call.

The recent earnings call for American Well Corporation (Amwell) presented a mixed sentiment, highlighting both achievements and challenges. While the company celebrated significant strides in subscription revenue growth, cost reduction, and improved margins, these were tempered by declines in total revenue and visit volumes. The management emphasized their strategic focus on AI integration and divestitures to bolster future performance.

Increased Subscription Revenue

Subscription revenue was a bright spot for Amwell, reaching $30.9 million, which marks an 18% year-over-year increase. This growth is significant as subscription revenue now constitutes 55% of the total revenue, up from 43% a year ago, indicating a successful shift towards a more stable and predictable revenue stream.

Improved Gross Margin

Amwell reported an expansion in its GAAP gross margin to 52%, compared to 37% a year ago. This improvement is attributed to a favorable mix of software and services revenue, showcasing the company’s ability to optimize its revenue streams for better profitability.

Significant Reduction in Operating Expenses

The company achieved a notable 16% reduction in operating expenses compared to the previous year. Particularly, sales and marketing expenses saw a dramatic drop of 46%, reflecting Amwell’s efforts to streamline operations and enhance cost efficiency.

Positive Guidance Adjustment

Amwell adjusted its full-year adjusted EBITDA guidance to a range of negative $45 million to negative $42 million, an improvement from the prior range of negative $50 million to negative $45 million. This adjustment indicates a positive outlook and confidence in achieving better financial performance.

Strong Cash Position

Ending the quarter with approximately $201 million in cash and marketable securities and zero debt, Amwell maintains a robust financial position. This strong cash reserve provides the company with the flexibility to invest in growth initiatives and navigate market challenges.

Decline in Total Revenue

Total revenue for the quarter was $56.3 million, reflecting an 8% decrease year-over-year. This decline was influenced by a reduction in contributions from Leidos and the divestiture of APC, highlighting areas where the company faces revenue challenges.

Decrease in Total Visit Volume

The company experienced a 21% drop in total visit volume, with approximately 1.1 million visits recorded. This decline underscores the challenges in maintaining visit numbers, which are crucial for revenue generation.

Lower Average Revenue per Visit

Average revenue per visit decreased by 14% compared to the previous year’s Q3. However, when adjusted for the sale of APC, the average revenue per visit was 3.5% higher, suggesting some underlying growth when excluding divestiture impacts.

Forward-Looking Guidance

Looking ahead, Amwell’s guidance focuses on achieving cash flow breakeven by the end of 2026. This goal is supported by enhancing their enterprise-grade platform and ensuring operational efficiency. Despite an 8% decrease in total revenue, the company noted a slight increase when adjusted for the sale of APC. The revised full-year guidance anticipates revenue between $245 million and $248 million, with adjusted EBITDA projected between negative $45 million and negative $42 million.

In summary, Amwell’s earnings call reflects a balanced narrative of progress and challenges. While the company has made commendable advancements in subscription revenue and cost management, it continues to face hurdles in total revenue and visit volumes. The forward-looking guidance suggests a strategic focus on achieving cash flow breakeven and operational efficiency, positioning Amwell for potential future success.