- Amwell missed Wall Street expectations on earnings and revenue for the first quarter as it worked to expand its new virtual care platform Converge, resulting in rising R&D costs and customer churn.
- The Boston-based vendor saw a slight quarter-over-quarter decline in subscription revenue due to customer migration that hasn't been balanced out by new platform subscriptions on Converge. However, Amwell CEO Ido Schoenberg said revenue growth on the subscription side would resume in the second half of the year, as the vendor expects to start recognizing revenue from some "large" go-lives.
- Amwell's revenue grew 11% year over year to $64.2 million in the quarter, while expenses swelled to almost $135 million, up 40% year over year, the telehealth company said in results released Monday. Net loss climbed to $70.3 million, compared to a loss of almost $40 million at the same time last year.
In the highly fragmented digital health landscape, telehealth vendors are racing to build up their offerings to provide more longitudinal, comprehensive and differentiated services to compete for increasingly picky clients — and diversify revenue as virtual care visits continue to fluctuate.
Amwell, which went public in 2020 amid the pandemic's digital health craze, is leaning heavily on infrastructure to get ahead.
"I believe in the end healthcare will choose to specialize in the business of care and its leaders will choose to leverage trusted partners who complement, not compete with, them to ensure best practices for digital healthcare are enabled and future-ready," Schoenberg told investors on a Monday call.
The vendor's goal is to add efficiency and reduce burnout as hospitals continue to report their pressured finances from COVID-19 expenses, labor costs and inflation. Some analysts are wary these macro forces could cool down hospital software buying patterns.
Amwell reported 1.8 million total visits in the first quarter, up 15% compared to the fourth quarter of 2021. Total visits on Converge grew 40% quarter over quarter, to make up a tenth of Amwell's total volume.
In the quarter, Amwell focused on customer migrations to the platform, and had a record number of active providers on Converge.
Amwell launched Converge, which combines its own products and technology while supporting other digital health applications like remote monitoring, last spring and is "making good progress" on development, Schoenberg said.
R&D expenses climbed 63% year over year to $37 million, which executives chalked up to bringing Converge over the finish line.
"We expect R&D to ramp-up in the first half of 2022 as we complete the more intensive development work on the platform then flatten and decline in the second half," CFO Bob Shepardson told investors.
A substantial part of the platform is already being deployed among Amwell's provider clients. The vendor plans to go live with the payer elements of the Converge platform "very soon," with that process continuing throughout 2022 and into next year, Schoenberg said.
Also in the quarter, Amwell launched a new musculoskeletal program in partnership with Sword Health and a dermatological program on Converge.
The launches tie in with Converge's "app store" concept, where a program created by a third party is embedded in the platform, Schoenberg said.
Converge now has more than 40 modules and automated programs that "we will use to drive expansion of high-margin reoccurring revenue within our existing customers and also provide the motivator for new customer adoption," Schoenberg said. "A substantial part of what we offer today is made by Amwell, but in the future ... we definitely expect to have lots of other third-parties contribute their own, even if they sometimes overlap or compete with our own house offering."