Q3 2020 American Well Corp Earnings Call
Ladies and gentlemen, this just operator today's conference will begin momentarily until that time your lines will again be placed on hold thank you for your patience.
[music].
Good afternoon, and welcome to AMN Wells third quarter Twentytwenty Conference call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session. Please be advised that todays conference is being recorded leading todays call or Ito Schulenberg, Chairman and Chief Executive Officer, and Keith Anderson, Chief Financial Officer.
No one keep offer there.
Our prepared remarks, and then they will take your questions. Yeah, I'm will press release and webcast make all available on the Investor Relations section of M. wealth website.
Please note that we will be discussing certain non-GAAP financial measures.
And we believe are important in evaluating wells perform.
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Detailed on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliations can.
Can be found in the press release that is posted on our website also.
Also please note that certain statements made during this call will be forward looking statements as defined in the private.
On the Carrot. These litigation Reform Act of 995, such forward looking statements are subject to risks uncertainties and other factors that could cause the results for n. with m. well to differ materially those extra expressed or implied in this call.
And now I'll turn the call over to eat.
Sean Burke, chairman and CEO of them well you know.
[noise] would evening and thank you for joining us first earning call as a public company.
I want to use this opportunity to thank our new Investor partners for your trust and confidence you number.
With.
We're thrilled to see so many world class groups participate in our IPO.
I also want to thank our long time Investor partners for your many years of consistent support and faith in us.
Since we last reported during our IPO, we continue to see good momentum is reflected in our third quarter results.
Our third quarter revenue of 63 million increased 80% compared to last years third quarter.
The number of active providers are not about to move 62000 increased 930% compared to last year's count at the end of the third quarter.
We had 1.4 million.
Visits during Q3, an increase of 450% as compared with Q3 of 2019.
Recognizing that many of you are new to our story I would like to spend some time talking about our company more generally before we refocus.
Our recent performance.
When Roy and I started to downwind, almost a decade and a half ago. It was apparent to us digital care delivery would transform health care.
We continue to believe the fundamental way that carried delivered is materially changing.
This is a profound transformation.
We continue to fall significantly over the next few years.
Carries moving home.
Digital technologies, so our shrink a new hybrid model of care.
One that combines physical and digital care.
With far better information about health status and gaps in care providers will be able to craft more personalized continues and engaging care plans.
New technologies will streamline consumer engagement in health care and simplify their interaction with health.
Services ensures providers and other participants.
Finally, effective last mile interventions, we leverage technology and drive much better clinical and financial outcomes.
Hi, quality care will become more affordable annex.
First of all to everyone.
Even with all these changes we are confident that the contribution more trusted traditional players, especially providers and payers will remain relevant and necessary even a decade.
Our mission is to help realize this vision.
Tourism by connecting in enabling these key players in healthcare, namely providers insurers patience and innovators to deliver greater access to more affordable higher quality care.
Our contribution is in the way of offering connectivity.
Our technology platform enables the key players to interact in a better way.
We do not and will not compete with our client and partners or seek to replace them.
Most importantly, we will strive to strengthen existing patient provider relationships to allow hybrid.
Online in all flanking activity across the full continuum of care.
With our platform people engage with providers, they recognize and trust covering older health care needs.
We make special effort to cater to providers needs and count the number of.
Active provide is using our mill is a key performance indicator.
As more providers from our community use our platform, we can offer more trusted services across more therapeutic areas in a very scalable way.
We believe that our platform is unique.
And valuable.
We plan to further expand and enhance our investment in eight to offer our clients the most impactful capabilities.
Our clinical and other services are designed to help our clients and partners realize the value of our technology more quickly and.
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As the model of care evolved in increasingly relies on digital connectivity, we expect our revenues from subscriptions to our technology to grow faster than our services.
Consequently, we will focus our investments in making our technology even.
More innovative valuable and comprehensive.
As we offer more capabilities, we also expect our user and client experience to become simpler and easier in every way.
A good example to our commitment is our new animal now product.
But that we announced this morning, and recently introduced in better version to our existing clients.
It is increasingly easy to use and allows.
Providers to very quickly connect with their patients with little or no prior training.
We are very encouraged by the strong adoption over the beta version.
I will now is commercially available today.
We also unveiled new care points this morning.
Care points, our last mile connectivity instruments to our platform.
Under our new tablet softer and the new C. 500 cards are designed to offer additional very simple and easy ways for providers to engage with our platform and through it across our ecosystem.
We believe that ease of use has become even more important during the pandemic.
We are receiving pre orders for the C 500 for Q1 delivery.
The new tablet softer is commercially available today.
These new offerings like the rest of our products are designed to be part of an integrated spectrum of capabilities, so that our clients.
It's always have the most appropriate technology for their needs.
Indeed, we aim to further expand our offering of one stop shop for digital connectivity across our entire ecosystem.
We take great pride of the huge number of clients and partners that already using.
On our platform.
We will make every effort to continue and deserve their trust.
His new one joints, we see clear network effect.
The addition of these new players to the integrated ecosystem is adding value not only to them.
But also to the rest of the parties.
It's.
Indeed, a big part of our value is driven by the magnitude of our connected relationships.
We attribute our success to our culture.
The first pillar is putting our customers first.
We will never do.
Do anything that stands in the way of great care or the interests of providers patients in our entire community of clients and partners that support them.
The second pillar is one team.
We recently strengthened our team in welcoming the Bora Jackson to.
Our board.
With her incredible experience across health care business and academics, coupled with her inc. packable reputation Ms. Jackson is bound to make important contribution to our mill.
Our team perseverance was tested recently with coffee it.
Working.
From home around the cloak, our team performed admirably, allowing both our services and technology to prevail and perform well despite unprecedented demand.
Our teams since our mission is a privilege and a fiduciary more commitment to our community.
Can drink coffee and we saw a huge growth in active providers.
So many discovered and try tell held for the first time in so many loved it.
Coupled with dramatic changes in reimbursement, we believe that call, we provided strong tailwind to telehealth adoption and popularity.
New CMS coverage that may persist after covisint is especially conducive to onwards model of telehealth.
While visit volumes are lower than the numbers, we have seen in March and April there is still much higher than before quarter end.
More importantly, we see clear growth in our clients' readiness to invest in infrastructure to prepare for a new normal.
This is well demonstrated in the growth in subscriptions to our platform in orders of care points.
The last and final pillar.
To our culture is deliver awesome.
We strive to offer truly helpful innovation that excites and delights our customers.
AMOLED was honored to be named number one in telehealth satisfaction and more direct to consumer providers by JD power a great recognition.
None of our effort.
Today, only a small fraction of healthcare is leveraging the enormous potential of digital connectivity.
As health care embraces connectivity, we will offer more collaborative tools.
We are building a powerful global techno.
Analogy platform that will enable better more affordable and convenient care to millions of people.
We plan to realize this vision through both organic and inorganic investments.
We will strive to make our acquisition strategically accretive always with a view to.
Building strong culture alignment and adding complementary digital assets that are designed to integrate into one and two and cohesive technology driven offering.
The recent nomination of our new CTO, So can't gluten demonstrates our commitment to expand and excel.
Well, our innovative technology investments.
Just before the IPO, we announce our partnership with Google Cloud.
While we cannot yet share tactical details about our work together, we did start to collaborate we have much in common with our friends at Google Our cultures.
As a line well, where both extremely passionate about our mission to improve healthcare.
Google Cloud brings powerful capabilities that will greatly enhance our collaborative offering.
It also brings enormous global reach that could accelerate our impact in United States and abroad.
In addition to our core performance, we are especially encouraged by the quality of our customers partners and investors.
We see their collaboration with US is an important vote of confidence in our unique strategy.
We have seen significant increase in the demand to our technologies.
Services this year and we believe this reflects the confidence that our healthcare ecosystem clients and partners have in our ability to support them now during the pandemic, but more importantly over the coming highly transformative years.
And with that I would like to turn to Keith.
To share with you more on our operational and financial performance indicators.
Thanks Al and thank you to everyone for joining us. This afternoon I want to reiterate those comments about how pleased we are with the outcome of the IPO, our third quarter results and the momentum we're seeing across our business.
Given that this is our.
Public earnings release, I'd like to spend the first couple of minutes to describe our business model. So that you can better understand the key trends and drivers of Amwell.
In terms of revenue about 90% of revenue is recurring in nature and is primarily split between subscriptions and visits and supported by services and care points our.
Our primary customer.
First our health plans and health Systems addition.
Additionally, we have a third smaller group of customers from we call innovators or use our platform and individualized ways to support their respective businesses.
These include the likes of Philips, who offers programs such as sleep therapy and separately large metropolitan 911.
Summers offices, who during the peak of the crisis used our platform to assist those 911 calls that could be addressed with virtual care.
Our health plan and health system contracts are typically three years in length and our structured for subscription expansion.
For example, even sales of our care points hardware devices to our health system customers all.
Certainly add to subscription revenue as health systems by more software modules to direct more care through the air point by the health systems own doctors overall subscription revenue increases. This is because our current health system contracts contain volume components and software modules are required to deliver specific care through that.
That specific care point.
This type of flywheel also exists on the health plan side.
As health plans expand our virtual care services to a higher percentage of their total membership and as they add services such as behavioral health to their initial urgent care services, our subscription revenue grows.
We also expect this.
Let me now it could be accelerated with our virtual primary care products.
Now before diving into our third quarter financial results I'd like to spend a moment recapping our recent IPO.
On September 20, Onest, we completed our IPO by issuing 51.2 million shares at $18 per share.
The total proceeds from this transaction.
Which included a 100 million dollar investment from Google totaled approximately $922 million, we are thrilled with the results as it reflects pricing above the initial range and upsized offering and the full exercise of the underwriter's greenshoe.
We feel that this positive start positioned us well for a successful first quarter in the public.
The second.
Turning to our third quarter financial results I'm Happy to report total revenue was $62.6 million, which is an 80% increase from this quarter last year.
Our subscription revenue came in at $25.8 million, the 18% increase can be attributed to new customers that we signed in the quarter our expand.
Spansion within the health plan populations and an increase in the volume of platform visits performed by our health system customers own providers.
As our visit volume remains elevated in comparison to pre COVID-19 levels, we experienced a steep increase in our visit revenue totaling $28.5 million up nearly three.
300% or four times over the previous year.
In this quarter alone 1.4 million visits were performed on our platform, bringing our total visits to over $4 million for the first nine months of this year.
Is down 30% sequentially versus the 2 million visits performed on the platform last quarter during the peak of.
The crisis, but down only 24% for AMG visits of note, we experienced a 23% increase quarter over quarter and AMG specialty visits as we are seeing the impact of co but on the populations mental health.
While this is an unfortunate concerning health trend we're glad.
That we can support our members through our specialty because it capabilities.
We continue to experience outside usage of our platform by our customers own providers at 73% of all visits performed on the platform. We're done not by AMG providers, but by health plan and health systems own providers. This.
This is compared.
38% in the same quarter last year, and it's a trend that we see continuing as health care delivery systems move more to hybrid care models, combining physical and virtual care.
As we discussed during the IPO this as a realization of the vision Ito and Roy had when they started the company 15 years ago not to compete with.
Third to care providers, but rather give them the tools and provide a medium to enable virtual care delivery to meet the needs of their patients and more health plan members.
Our care points and services revenue of $8.3 million was an increase of 47% in the quarter.
While we are pleased with the strong numbers some of the increase was.
Unexpected as some of our health system customers use their remaining funds from the federal family care Cobot recovery Act to increase their third quarter care points orders. We view this as a pull forward of some services and care points revenue into Q3 that we're expecting in Q4, similarly, but on the services side fuel.
Two of our larger health plan customers concentrated their marketing spend in the quarter for a targeted campaign to increase awareness of their plans virtual care benefits and preparation for potential next basic over 19. These were specific programs that were completed in Q3.
Gross margin for the quarter was 32.7%.
Compared to 45.1% last year this.
This year over year decrease was the direct result of revenue mix as visit revenue represented a higher percentage of total revenue in this quarter versus the same in 2019.
R&D spend of 25.3 million represents an increase of 86% year over year, but remained.
Intelligibly flat at 40% of revenue.
R&D spend this quarter came in slightly below expectations as we slowed select hiring decisions to allow our new chief Technology officer, Sir can coupon to develop as new product and platform functionality plan.
While our sales and marketing spend at 13 point.
$8 million was an increase of 18% year over year. It was a decrease relative to revenue levels from 31% last year to 21%. This was expected due to travel restrictions and industry conference cancellations.
DNA experienced a 200% year over year increase totaling $43 million.
Reorder about $30 million of the increase was due to onetime noncash stock based comp awards to our executives that were triggered by our successful IPO with the balance of the increase being onetime nonrecurring IPO expenses.
With the IPO now behind Us in Q4 and throughout next year, we see GNS spend norm.
Realizing back to the low mid $20 million range.
Adjusted EBITDA loss of $26.2 million compared to a 20.3 million loss last year was primarily due to revenue mix shift to lower margin visits and additional expenses incurred typical of a public company versus last year, when we were priced.
Adequate.
From a balance sheet perspective, we ended the third quarter with cash and investments of approximately $1.1 billion, which included IPO proceeds and $922 million.
Amwell has no outstanding debt.
I want to confirm that as a result of our IPO combining our aid.
And C class shares we ended the quarter with 234.2 million shares outstanding.
Now I'll review, our initial 2020 outlook.
With this being our first quarter as a public company and because of our strong performance. This quarter I want to provide our initial outlook for 2020 to help frame expectations for the fourth quarter.
Looking ahead, we expect to see revenue between 235 and $239 million for the year, reflecting a year over year growth of 58% at the midpoint of the range and an adjusted EBITDA loss of $105 million to $110 million.
As we did during our IPO in an effort to be transparent and given.
When all the moving parts and uncertainty amidst the COVID-19 crisis I want to provide a few high level thoughts on framing 2021.
Visit forecast remains uncertain.
As discussed during our IPO, what we initially saw from the data from the southern Hemisphere flu season has played out in the beginning of Q4 and thus we continue.
So expect lower than normal flu volumes supporting the theory that COVID-19, social distancing results in fewer flu incidents.
Regarding R&D, we expect the increased spend we discussed during the IPO to continue into 2021 and potentially for the entire year and maybe at elevated levels versus those experienced in the latter part.
Part 2020.
As a reminder, this key additional kobin related spend discussed during the IPO was driven by foundational changes in sentiment to use digital connectivity as part of mainstream health care, we continue to aggressively expand the platform for anticipated future demand and have accelerated new solutions development driven.
And by our customers demand to broaden requirements to move more care into the cloud.
Finally, highlighting that the substantial visit growth we experienced in 2020, while supporting our members. During the pandemic has set an artificial heightened comparable revenue base upon which to measure us on a year over year basis next year.
Well Matt.
Many of you have already correctly accounted for the year over year trends based on normalized metrics I simply am pointing this dynamic outs due to the heightened comparative base.
In closing I would like to reiterate how thrilled we are to be able to report such a strong performance for our first quarter as a public company.
Going forward, we feel well capitalized for growth and position.
To maintain a leadership position in the Tele medicine market.
With that I will turn the call back over to Ito for his closing remarks.
Thank you Keith.
Before turning the call over to your questions I would like to take this time to thank our investors, new and old who you trust in facing Us Indian Army.
Sure.
I would also like to use this opportunity to thank the amazing one on we'll team for putting our customers and community first, especially during the past few months and delivering awesome.
You should be very proud is ROI in IR in the incredible work.
We're all doing.
Digital care delivery is already transforming healthcare.
We believe this is only the beginning.
There is still much work to do and a huge opportunity to dramatically improve clinical and financial outcomes.
I'm confident that Amazon is well position.
You have to contribute significantly to our community and leverage the strong tailwinds to create as much value also to our shareholders.
I look forward to meeting you will when it is possible again into keeping you up to date with our progress.
We will now open the call to questions.
And operator.
At this time in order to ask a question you will need to press star one on your telephone to withdraw your question press the pound key we'll pause for just a moment to compile that you're in a roster.
And your first question is from Ricky Goldwasser of Morgan Stanley.
Yes, hi, good evening, congratulations for a first quarter out of the gate.
A couple of questions here first of all when we think about the implied guidance for the fourth quarter Theres some acceleration in sequential.
Revenue declined safely.
Pull forward of demand and the special programs, what sequential decline a b in the fourth quarter versus the third and what are you assuming in terms of coal that impact fourth quarter utilization.
Thanks Ricky.
Steve.
I mean simply put we haven't factored coal that into Q4 visits and web visits being you know what the peak of the crisis almost 50% of our revenue you know, there's there's a potential that you know that that revenue could increase.
There was some pull forward of care points revenue as I said.
During my part of the call.
But overall, we haven't factored what we're seeing right now you know in some hotspot areas in terms of visit increases, but overall, we feel really good about the business. All the other areas are performing as planned as we laid out and discussed during the IPO. So it's just a matter of where we.
We see or where we originally forecasted the visits.
When we went public two months ago.
Okay.
Then you know you talk about the accelerating in solutions.
Beat declines demand can.
Can you talk a little bit about what type of demand and what type of modules, you're seeing from new prospects.
Declines in.
The boat models are you.
Selling to existing clients that are looking.
To add and what they already have.
So Rick you can you hear me now.
We can hear you now.
Great sorry, it's good to hear your voice and thank you for your questions and your raise support.
In essence say, we had a really interesting year I'm sure all of us see a deed.
During the call read our clients were laser focused.
Going on literally surviving.
Physically operationally and financially.
Our average a drilling times four months will reduce to Sundance a two two weeks.
And we just two systems. So we can really fighting survive the crisis.
So the crises say somehow subside, although we're not really sure how long before our a much a our clients actually realized they huge value.
Certainly helps in a way that was surprisingly a environment.
Just to give you some numbers you may have seen our.
A recent survey that showed that if it last year, 8% of consumers have been using tele health.
This year is 22.
Any providers have been using tele health a 22 of them have you presented the newsy telehealth last year this year, 80% of.
Providers have be using tele health in over 90% of them said they are going to continue and use the oster really cold.
When you look at the mix between AMC and no name GE debt also changed very dramatically.
You were saying.
The 3% of our visits are currently known a mg and that means many many things obviously many of these people are especially if they're usually trusted providers with full access to the record that can see patients in person and really cover the full continuum of care.
So I would suggest that what we've seen is nothing short of historical change in their readiness to accept digital connectivity is the legitimate main pathway of care.
That's a big difference between the use of tele sales through the call center for.
So acute care all urgent care.
But a two to something that these use really all over the place for infinite their numbers all the modality.
In the same way that MRC at the beginning we're very very simple tele health and became something much much bigger complex care is.
In home and we the enormous needs of our clients.
The needs really are a cost entire model of care from accessing much more information that you need to collect it from remote patient monitoring in many other resources to better analytics to new care plans.
Move it need to be charted taking advantage of this new way information new ways to engage consumers in ways to connect with providers in a way that is fully integrated with payers and delivering on last night.
The list is very long or any is coming from really all over it plays from.
Our clients that all of a sudden this year is through the tailing of quick read I ready to make the leap and make the jump to a re completely changed their business the way that they do a business as such we decided that we need to accommodate these.
Enormous demand by accelerating a lot of our development development in all those areas of course, and when I say that is some of this development will be done by partners I mentioned, Google and others and we are definitely going to be as inclusive as we can trying to not do anything that is related.
Done by someone else, but rather integrate and these their capabilities. Some of it may be inorganic in case. There is another group that she is doing it better than us or has some serious advantage and some of it is just mentioned will be done by further expand again accelerating develop.
Men plans that we had is thinking about the future that a really realize much far faster, but anyone who does a predicted.
Just one final quick follow up on that what do you think about the new products introduced him well now it kind of like the tablet to care point.
But I think about it is margin expansion also into kind of like the primary care market.
So are we thinking about this correctly and then they.
Hey can you maybe kind of help us think about how you quantifying that incremental market opportunity. In addition to that market opportunity right.
Slide.
On the IPO.
Sure. So in essence, a we are trying to really match and listening very carefully to our clients and tried to create things that are very helpful for them in this very new normal in the new time and will now.
Our product that you just mentioned these answering a need that these very very simple and many of the delivery network drives plug. The struggling also a financially they don't have the capitala or operational resources to integrate a very large system, a very quickly and they need something that you still keep a compliant.
Very secure ready to go and fully future ready to integrate into more sophisticated elaborated requirement that they many hands while at the initial a part of the crisis the reusing commercial tools.
As we all know and use a is consumers add these tools proved to be very problematic.
There are a number of ways that I just mentioned and therefore, there was the need for this very very simple product that it doesn't cost very much. This can deploy very very quickly to simply connect providers a two way patients.
Others that does not replace.
They need.
A more robust a platforms do many many other things that are not part of the scope of the one now a feature that is truly a starting point that allows it to wire and bring many more providers.
Into the mix in a fraction the all the time.
Hey, the tablet softer is another example, a many cases you have a lot of tablets in the organization and you may not have the time or the resources to byway acquired dedicated devices, but you still need fleet management and you still need a lot of capabilities that we can offer.
Through this new software. So you can realize conductivity, a very quickly and very effectively a for your organization. So when we look at it we don't see that as a new market, but rather is diversification of our offering to allow our different customers to use the right tool at the right.
Our time, knowing that when they need to use different capabilities and different tools. They have that option. It through a single infrastructure of course. The fact is we are ramping up so many providers pretty staggering. If you think about it we went from 4000 active providers to 58000 within.
Year and that doesn't seem to stop it end anytime soon so that capability is all those services are not only relevant to our health systems client, it's very relevant to Dick greater ecosystem, namely employers the payers they even government.
That could benefit from it so when we think about new tools that feed the needs of providers, we don't only seen narrowly on providers, but rather we think about the entire community who is leveraging this single platform.
Thank you.
The next question is from Robert Jones of.
Of Goldman Sachs.
Great. Thanks for the questions and congrats on the first the first earnings call here I guess, maybe just to go back to some of the comments you made around behavioral obviously, that's a a rapidly growing and important area in the teller.
Space could you talk a little bit just of the clinical capabilities and professionals you feel like you have there today do you feel like you have the infrastructure to meet.
Not only the demand today, but as we look out over the next several quarters just given how coveted this physician group is.
So I mean, there's there's if you recall we.
Within a company called align Tele health.
Back in 2019 and that was focused on the highest acuity of the behavioral sector telesites dietary within the four walls of the hospital as well as you know once people or discharge. We also have psychiatrists and therapists that said.
We brought in our specialty care visits and they make up the far majority of the visits there.
You know Q2 was a peak across the board for all the visits.
Q3.
You know I would say after the first month really started to you know to taper off as you saw of the overall business but.
With rising Lee and I guess, you know, it's just the state of the mental health of of the general population that we saw and are seeing that continue.
Likes in both the specialty care, mainly the behavioral as well as you know they tell us psychiatry visits coming back now specifically on the Telo psychiatry.
You know a lot of the emergency rooms were shot to anything but you know very high emergency covert related patients or acute like car accidents or heart attacks or whatnot. They since open for you know emergency psychiatric situations, we're starting to see those come back as well.
But coming off the peak of Q2, you know we are seeing just an overall decline in.
The visits from.
From the peak.
No that makes sense, if I and I think Keith if I wanted to go back just for a point of clarification on on the what the non A.M.G. visits did sequentially I was just curious if you could maybe.
Way back in on that I thought one our math, we would've thought they would have been up sequentially. I believe you said they were down sequentially, but then I guess more importantly beyond the numbers any insight you can share on the type of visits you're seeing relative to what you'd seen year to date I'm thinking just in the context of of new use cases versus more visits.
Versus potentially more visits per provider.
Just any context, there would be helpful.
I mean, you know touched on systematically you know in his opening remarks, we are not a call center. So when you look at what's happening within the platform visits the non am Geneva that we're seeing a nice steady increase.
And the scheduled visits which means that specific doctors are increasing the level of care that they are delivering to their specific patient virtually and that's the name of the game for our company Thats the vision that Ito and really had when they took the company public and we're seeing yes. It took a pandemic you know to convince you know.
Some of the physicians in some of the patients but were seeing those trends continue and that's that's really what we're all about so while you see obviously during the peak of the pandemic.
A lot more interactions with people you know worried about having covance not able to get care and other places.
You know we are seeing the overall volumes decline, but we are seeing if you unpack those numbers increases in the areas that show are confirming im showing continued embrace men of receiving care virtually.
And Robert I would like to maybe complement that and hopefully gives an anomaly.
And people are locked in their home they have to talk to a doctor or whether its ideally a or not.
We are confident in our opinion was a really an accelerator always showing good many providers that they can effectively communicate with their patients and indeed the line share over a visit today.
Our between existing providers and they're a patients and these are non named G. visits the compensated through our subscription revenue from those they helped say ill say assistance a when people think about Tenda hills that typically think about three use cases, it's really.
I didn't care behavioral health in some kind of provider to provider Ray conductivity capability of course, there are few more but that's that the lion's share of the over the markets in our case, we literally are talking about hundreds of use cases, there are really two many it to mention there.
So many ways they tell platforms supporting a different to utilities.
And.
I'll kind forum and many other forums that we couldn't be here you can read and see much more goes a use cases, essentially we're seeing that mainstream health care.
Now using digital content connectivity in mainstream health care it covers a truly everything.
We are not selling the clinical service I mean, essentially we are sending to Quinn activity.
To the clinical service an envelope in gate with everything that is required in order to support these clinically financially.
Really in a operationally and that's a fundamental change in between us and many of the traditional linear tend to help.
Please.
No I appreciate that thanks Keith.
Thanks, Bob.
Your next question is from Sean Wieland of Piper sand.
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Yeah.
Hi, Thanks, and let me add congrats on your IPO and your first call here. So you started at the top are saying a number of providers is the K P. KPI that we want to watch can you just go into a little more detail on your ability to drive that.
And how how do you drive that number of providers and the level of visibility you have on that into Q4 and 2021.
Hi, Sean again, good to hear very voice and thank you for asking a very important to Christians.
Not easy.
It's not easy.
Two way to a onboard providers and retain a providers. There are many obvious things in many many less obvious things that one needs to do in order to support their providers and the first a thing and I'm not sure about the exact executive who is the right order will things, but they're all very.
These are important things is integration into workflows.
Are you really need to make sure that the digital connectivity is as simple and as integrated as a possible and the work that we do with the likes of Cerner epic and many others, but especially cerner because theyve been I think is doing.
Bring enormous amounts of investment together with US is demonstrative of the type the old the old before.
The second element is to offer enough transparency and the integration of the digital visit so it's covered so it's reimbursed there are many things we don't control like if CMS.
Reimbursement in some cases or even commercial pairs reimbursement for different CPT codes.
What we do control is they ease of use of collecting co pays submitting claims and things of that nature and that's a very very helpful.
So far I think these things, though with the obvious it two ways to.
People there are many other things that are less obvious because if you stop here that would be kind of generic we believe that as providers shift into risk and in general a also a very motivated to really improve the care they give to their patients and doing it in the most efficient way there.
So many of the things we can do it to help them if they can get compensated for two keeping their patients in the home it whether we suppose surgery or in the community with my own a patient.
Our ability to integrate into a remote data monitoring devices or things of that nature.
Analyze the information in presenting it in a smart way you've been very important example of service that we believe it's important to full providers.
We can get their attention over their patients with different engagement tools, that's another a way of helping the providers.
If we allow them to use automation in some ways to create that care plans. They feel good about and integrated it we don't really believe in DM into silo that these parallel to the main pathway of care, but rather an integrated therefore between providers and automation that use.
Really focused on achieving a singular goal and that's a very very very helpful. So in way over trend I'm talking about is really two things I'm talking about the ability to move it tele health from transaction to re occurring.
Capabilities some of them are automated some of them are physical I mean, if we can help doctors spend only that globally at physical time with their patients and allowing other communications modalities to prevail that's very helpful for everyone.
In many many ways.
And the other element is included.
Asian.
If our system our platform is an island any doesn't allow as many participants to be present.
In a very dynamic way, we're missing out on a lot of contribution and it doesn't really matter, if it's a medical device or a new natural language processing.
Translation capability or post discharge a full off day with the patients with reminders of things of that nature. So what you should expect from US is really to listen very carefully to the list of requirements or how providers are looking to manage their patients and get paid for managing.
All patients successfully in the future and how can we allow them to integrate those capabilities into an interface that is familiar is simple intuitive there for them. So I know I said the mouth full I know as you can tell I can talk for a little longer to but that's what we are building.
That's how we plan to continue and earn the hearts and minds. They overpaid providers. We have 150, a deliberate networks that are using our platform and today and we have some really interesting dialogue with them, we listen very carefully to what they need.
There is always on win now and now the products were going Downmarket now to organizations that are smaller.
In in a more narrow in their in their agenda, but just as important in.
In the in the community.
So getting to the provider is one thing and I see that youre.
Your question really a lose to the bigger question, which is how can you make it sticky how can you add value all the time to those providers. So the remain engaged and operate and provide the care that they normally a care through our platform and I think that we need to earn that right every.
Every day and we definitely have big plans on how to do that.
So Sean when you get the queue or when you when you read through the queue youre going to be able to see you know what breaks apart. The overall increase in active providers I mean, the lion share is coming from you know the our customers own providers the plans and the hospital system.
Stones.
And then a few fraud or we don't go into that detail in the Q, but you know what's more leaning towards the specialists the higher acuity doctors you know wanting to have this functionality to be able to further deliver care. So you look at the increase in the LNG doctors, we slightly increased at its mainly I think as.
Batch earlier, you know, we are adding more and more specialists, we're seeing huge spikes in that part of our business rather than a simple urgent care doctors its the non AMC that we're really monitoring and seeing you know the expansions in the areas that get us really excited the amwell now product as Ito said.
Bob is really going to bring into the fold those doctors or on the peripheral you know into delivering care virtually with a much simpler product that no. It's still on the platform, but you know it's a it's a zoom like product.
That's all very helpful. A lot to unpack I will leave it there. Thanks.
Yes.
Thanks, Thank you Sean.
The next question is from Kevin Glendale of CBS.
Hi, Thanks for taking my call guys.
Hopefully this will be a little bit simpler we were hoping to get a break down of subscription revenues between the health system in the health.
And sort.
Sort of I guess.
Talking about going forward, how that mix might might change for you guys in terms of subscriptions as we look towards 2021 and.
He said earlier providers.
The 80% of them are now using tele health is that a fully penetrated market as there are still opportunities.
Where people just aren't.
Up to speed on their tele health offerings.
So on why we're not prepared maybe two and a.
Break down the numbers on your first part of the call I'd be thrilled to and maybe start answering the second day parts.
When you.
The role of Tele sales and digital conductivity is enormous it's not a binary thing it's not a transaction.
The beginning of connectivity with patient that has a really a giant canvas say ovais over party opportunities. The fact that 80% of providers in the United States. These few were exposed.
<unk> for the first time to tyndale, he's very exciting I have to assume though that that transaction was relatively simple.
Per per design it Dave there were locked in their home or patients were locked in the home and they just connected there to a very simple a modality or video or even phone.
So it may be in some in some cases, but you did open the floodgate in having many many providers realize that that's a an opportunity the connectivity, which is not the only counted in visits and that's a really important thing to realize we are not the visits come in.
We also know trying to.
A sales visits so sales clinical services, but we are rather creating connectivity among the players in order to interact in a new way, which we think has enormous a promise. Therefore, we see that first step is only that we.
We believe that the value that could be.
Consideration the bike when activity is not only great. A clinically we also think that it will generate a lot of value to do from participant and as a result also it will allow us to monetize the value that we generate a with a different participants to help maybe.
Onto slide somehow.
Jen.
When you onboard the provider you are creating a virtual network.
That ability of interacting with this provider is not only important to the provider or the patient. It's also very important to the employer. It's also very important Portland, the payer in some cases two to the government to de risk bearers in many I've.
Theres that participate in this process. So we wouldn't be lives of however, if you disconnect. This provider a lot of these goodness say is not a possible. The long story short. This is a starting point and certainly not an endpoint to what's possible with on boarding you provide us too.
And Kevin.
I can't let the first part of your question totally go we are [laughter] harra.
You know things are playing out as expected you know from the IPO, except a couple of the aspects of visits that we discussed earlier on.
The newer products that we're rolling out you know really are bringing and we'd.
We just got this also during the IPO.
The health plan subscription parts of the revenue you know.
Versus you know the even mix between visits and subscriptions on the plans. It's really as we discussed the flywheel you know, it's really starting to to increase and bring more of the subscription part of the business.
Yes over to the plan side.
Okay. That's really helpful guys. Thanks, so much.
Thanks, Kevin.
Thank you Kevin.
The next question is from Joe lenses Singh of Credit Suisse.
Yeah, Thanks, and congrats on the first quarter as a public company.
Apologies if I missed this but did you give outlook for AMG, either that or total visits for the fourth quarter.
No we didn't I mean, we as you know we're going to provide that on annual guidance, but you know given given what we're seeing across the country and unfortunately, some extreme hot spots in certain areas.
As for the US you know, it's it's the most volatile aspect of our business and you know that's why we did not guide.
Guide for that for the rest of the year.
Okay. That's fair, but then you also made a statement that the current consensus seems to be reflecting your view about less fluid there. So some.
Headwinds on visits next year is it fair to say that your views about the 2021 has not necessarily changed over the past two to three months.
Jill Undrawn I, we're going to give guidance you know in February for next year I mean, we're still monitoring it we want to see how the flu season plays out we want to see you know.
We are seeing some some big spikes in certain areas of the country. It's just premature to say what we're what we're going to see next year I mean, we weren't expecting we're hoping these spikes didn't happen for the greater greater population, but we are seeing them. So im just going to reserve that until until we give full year guidance.
Okay Fine and then on that.
Gross margin of 32.7% in the quarter.
Some low margin AMG visits are included.
How should we think about the gross margin sequential trend in fourth quarter and when we think about your long term gross margin target of 50% can you talk about the drivers to get there what could be the potential source of upside to your for your thoughts.
Good deal.
Yes, so as we discussed on the IPO, our specialty visits I mean, there's there's massive economies of scale you know I mean for the specialists they are more expensive and and to be able to make sure. I mean, we have to hit our vessel delays and return the calls under five minutes so for all of us.
The states that we offer specialist care you have to have a certain number of specialists on there to make sure that you you meet those escalators. So theres massive economies of scale. They are more expensive providers. Once we further expand that business and made us excited seeing.
The ability to support those.
Those specialists as this as behavioral visits in the quarter the spiking that we're seeing.
So that will accelerate the margins in that area no. The other aspect to gross margins for this quarter as we said that there was an acceleration for care points.
Given the kovar to recovery funds.
Those are lower margin, but.
As well as you know there were two programs to very targeted marketing programs by two large hot there are health plans that.
That is lower margin business as well in terms of Q4, we are expecting the gross margins in that quarter end this quarter that we thought assets.
At the time of the IPO. We know there are some aspects when there are hosting expenses that come in Q4 as well as some other.
Aspects of our business that happened in this last quarter of the year. So you will always have you know.
All things being equal a lower margin quarter versus the other remaining three quarters.
All right. Thanks.
Maybe more generally on these if you think about the our business the rebate.
Quota bidding so the past somehow ended this so the future when you look into the pounds traditional tele sales. These were going to hire a bunch of doctors and grown to try to sell them.
For a margin to sell is when you look into the future doctors and other participants were going to use our platform in order to interact with each other in a new way is that portion of the call center like businesses diminishes versus the proportion of it.
Technology enablement, obviously like any type of technology. The margins are very very different and you can see this shift but he is not going to happen overnight. It's still very important tool for those services, a two day, but over time as more and more providers into community assumed their role in connecting with the wrong patients in other patient.
That to trust their brand.
You're going to see improvement in the margins. So that's one element. The second element is carry itself is going to rely less on people and in more on automation soil patient care today really includes almost holistically an interaction with the first.
That is very very expensive and not necessarily accessible and lot of the interaction we leverage all the goodness of a high unmet need peaks and many other tools that are going to make the human time and much less than the automated time much more but that does not discount the value of.
First automation to could be known this amount of intellectual property from clinical innovator or that is still very valuable, but very very high margin. As you are deployed and as a result, you can democratize help you can offer great care to many more people, but as you do that you do that very efficient so in the next.
Two years, you should definitely expect our margins to evolve overtime nothing in health care was overnight, but thats the subject to victory that we are going as a technology company and that's very may be confusing to some that are used to look at tele health as a service company.
We are a technology company an event.
See more and more of that in the next few years.
Hello, Andrew I'm looking back at my notes from the IPO. This was an area that I know Youre focused on you know if you think about the flywheel on the health plan side, you know in with the new products that are coming out and the evolution of virtual a primary care youre eventually going to see.
Those visits revenues lower margin revenues transfer into subscription revenues like we're seeing on the health system side. So you know, it's like we talked about at the IPO more of the new products coming out on the plan side transferring that visit revenue lower margin business revenue fee for service into subscription rights.
Revenue and then on the health system side, you know just a continuation of of what Theyre doing there and the increase in what gets you know our company. So excited monitoring the non AMG providers our customers providers.
Perfect. Thanks.
I'm showing to.
And your next question is.
Charles Rhyee of Cowen.
Yes, thanks for taking the questions and congratulations as well on the on your first quarter out here.
I wanted to follow up on a couple of points that has come up here you know one.
You know you guys mentioned that a lot of the affiliated visits a report here were.
But actually scheduled and Keith I don't know if you guys give the percentage, but it is there a percent that you can kind of tell us how many those visits were actually scheduled versus sort of on demand and then secondly, if we think about that going forward and obviously, we have a lot of physicians on the platform today, but if we think about sort of the higher.
Actually a higher performing physicians, a pretty clean specialists you know what what is there a way for you guys to know what percent of their total.
Total you know sort of daily volumes is virtual versus physical or is there any way to kind of get a sense of how much of the practice is shifting to virtual for for those or taking the most advantage of.
Hi, Charles say again, good to hear your voice good to have you way with us and.
We are new to the public markets and we really try to focus on certain Cape the eyes that does clearly a helpful for everybody to really understand they are a progress that year over year, and we are making a conscious effort.
No to break down to anything that maybe providing some.
Pieces of information that over time, I'm not showing good food picture, so with your permission or will it confined with sales to give you a more directionally directionally answers.
I would say that a what's very very clear.
Or is that once people emerge from quote to the main a crack so very colgate sometime in September into into now into that in last few months is there now a having many discussions with us about the new normal.
About how to implement the infrastructure for chronic.
Pvp that youve paired design hybrid.
The popularity of a neutral in primary care a that we worked on for the last few years and add their array in them and say that we created really conducive or indicative it to the say to this trend.
How far.
It will lead to go I'm not entirely sure I think it would be faster than we hoped it before.
Thats for sure.
Because it because of the redness of all the players, including the payers to cover and participate in those the hybrid they I believe.
Modalities and so a scheduled visits required many things that we are developing you do a cause for example, very good consumer engagement and ways to two to three and direct.
We dosed the available these schedules a deep integration into DMR and many many other other.
Five things, Yeah, I would say directionally that you're going to see a continued trend all the non energy providers using our platform more and more often a with a greater and greater proportion of people that are doing it.
On his schedule day basis as more and more.
The specialty care is becoming available on our platform and the likelihood of finding my you only called Audris often apologies on on demand is literally don't exist to of course, you need to do is scheduling.
But the story is not only in those transactions. The story is how to drill to realize the food care team.
Team in how to automate as much of their goals as possible. So the time to spend with them is as effective as the his boss.
Hey, Charles I mean, that's something that we monitor internally and really you know it conveys to watch the success of our products you know in terms of you know the pandemic delivering care virtually weather.
That forced upon people, yes is it is it continuing as it now a concrete you know part of the health care delivery medium absolutely and that's one of the things scheduled visits means patients are embracing it physicians are telling their patients. We can do that is virtually no. It's just an internal.
Benchmark or or litmus test you know.
As we come out of the pandemic. So it's not insignificant, but it's just something we don't want to report publicly.
Yes, no. That's I appreciate that and I understand that and just a follow up on you know going back to the the fourth quarter guide here or is it right to think that.
The sequential decline is really tied to the visit revenue because I would imagine subscription revenue generally speaking shouldn't shouldn't you have around like that is that fair of course it okay.
Okay 'cause it because you mentioned that there was some spend from a managed care client offer some programs is that separate.
That would have been that would be the subscription revenue, but that does not necessarily repeat just know them more.
Marketing program, so you'll see that in the care points and services. You know there are some of the older health system contracts that have you know.
Immediate recognition.
Berlin of their increase volume. So you know those fees are like a toll on the platform. We take a toll you know the new contracts are like the cell phone plan that we discussed during the IPO. So no. There was some component of that in Q3, you know that we don't we don't project that we don't forecast.
Total expenses because they are the old contracts, but you know I guess directionally at showing what's happening for our health system customers. You know there was a lot more unexpected volume you know that they were delivering care virtually no about some of the the increase in subscription.
Okay. Thanks.
I'll just ask one more you mentioned.
Engine right course to Billy just scheduled visits requires deep integration into the health systems, you Amar et cetera.
Earlier in the pandemic clearly you noted that physicians and intend to connect with their patients were just using anything available.
Are you hearing from then from your house.
Those are some clients that as they look to to drive.
Data integration for telehealth into their daily workflow getting their physicians also those other other platforms back onto.
On the M., all or whoever they are using.
Yes, absolutely obviously.
I cannot speak for our clients there are many of them, but the I would say that the initially if fluctuation that you saw with very very simple a videoconferencing tools and so on it made sense. When there was a war when there was no other rate choice, but very quickly.
Showed some very.
How serious deficiencies in number of create the currently areas I mentioned, the security and in the <unk>, and then regulations and but many other things as well as some of our clients actually prohibited the use of those tools anymore in our moving oil.
Older.
Doctors, a two to a different elements of our platform and the am one now product is extremely helpful. Because it gives you the feeling over there with very very simple conductivity tools, but getting you all the benefits over ability to interact with the platform that is infinitely your health care platform, which is much more rate.
Slide, but I believe that I still believe that simple connectivity tools were helpful. I'm not going to be enough if korea, the new normal for longer at least over at leases out. Many many things that direct missing and we are glad to see a many many of our clients.
They feel that way it to a I would be a for example is share they.
They did about 40 for two of our clients. They already adopted the beta version or will they now.
Which was pretty surprising we didnt expected that.
How much will be a war welcome. It also because it's a it's a really a much better replacement to non health care tools that are used by many providers.
Great. Thank you.
And we have time for one last question you have a question from Ravi means.
His wrath of Tennenbaum capital markets.
Taking the question before to being part of many more of these in the future.
So just on the.
And GE are paid visit kind of mix shift.
You're talking about higher utilization in specialty.
They are trying to figure out just how sticky should we assume that that ASP is in the following quarter and lets you know I'm trying to understand also you're saying you're not kind of factoring in much of a bolus.
From the kind of cobot mix shift here, but say there there were to be one.
How should we think about.
What lines of your revenue model would be impacted here I mean would this be kind of a mix.
A negative mix driver on your revenue per visit for AMG here, what should we kind of assume that non AMG would take care of most of that and lead to more subscription revenue and then maybe if I could put my second question right up front.
On the Google partnership just any more details beyond kind of you know you're talking about a little bit more about enhanced offerings are.
Accelerated footprint in the U.S., no U.S. or any other kind of information you could provide there would be great. Thank you.
Hi.
Sure. So you absolutely.
Just right to assume that look our focus is driven by all the other indicators that outperforming could just as well or even better than during that time they over our IPO.
As the new way accompanying the public sector, we really didn't want to include any trocars deploy relates to.
People research only because there is really no way to know.
How much a this is going to happen in our opinion is as good as our others Youre absolutely right to assume that if you're going to see core which are which is possible even probable. According to some you're going to see a surge in visits see if only to.
Oh God based on what the experience on the a few months from now very simply put when people are locked in their home or will people are very anxious or obviously concerned or could be even sick.
They access to tell sales. These is often used and we've seen it many times so a.
Could you win and then they're likely to use every tuning the rationale, but the most popular tool would be going to the service the benefit they received from their employers and their payers and hitting those services, which means that they're going to hit on our aims you revenues and you're going to see a very big spike.
In those their revenues are on their spirit.
Hillary urgent care things of that nature, it's not related to core we'd like his situation. That's the immediate spike is that you're going to see and there are secondary longer term impact of such potential surge as a result, more people would be forced to encounter tend to have some will do for the first.
Sure and I'm, even more doctors are going to do more tele health, whether they like it to north radio not and they're going to Ben discover the benefits of that and as a result, we believe that the level of urgency at the level of acceptance of investment in parallel conductivity platform is going to be further accelerate a.
Not really broken I don't think we need to think the trend is very very clearly already based on what you. All went through in the last few months. So I don't think the company actually requires is such a surge and his people of course, we pray and hope that that will will never happen and there was nothing good good but that's what.
It's going to do in Q4 in case, we are going to see that the search.
As it relates to with Google I as I mentioned in my opening remarks.
I really can't get into tactic, but I'm happy to give you a high level a description of.
Oh, the two main benefits said that we see.
These sales relationship.
The first area of benefit is really product enhancements and even today, a Google announced their innovation that relates to natural language processing the ability to to almost understand a clinical tax and is.
Result offer much better his decision support two different participants, especially patients the end to end provider. That's it that's a great example, Dave.
They have some other area. It development see me a high end consumer engagement in device sales data collection.
He cloud the capabilities and really many many other things that are beyond the time that we everybody on the call you should assume that our technology teams already working together very very well to really understand this long list of assets and see how they are in.
Corp. into our offering could benefit a our our ecosystem and a we've only been at it for for for a couple of months, but I can assure you that we are thrilled and buy it won't be found by by the synergies by and we work really really well together interest.
Definitely expected those things they too to show up.
In the market when we're done.
The second element is the fact that Google is a global company.
It was really touches a Italy every place on Earth and we believe they unlike.
Okay. The service business something else, which is very location driven the technology driven as we proved in the Israel. For example is really true almost anywhere when you want to connect a group of patients with a group of fighters. That's universal appeal, that's an unmet need that these two and.
Anywhere it with the Google reach and we definitely plan to work together to bring a our capabilities to any place a nurse.
And weve tools that are increasingly simple like down one now product as we announced this morning.
We can do that in a way that.
Requires much less barriers to be implemented by offering a lot of big value and we're going to continue to look at the same K.P. Ais a both here and abroad, which is we really want to get to as many providers as possible as quickly as possible. So they can make them so for.
Well to as many people as possible and then layer on as much support to those services. So we can really improved financial and clinical outcomes.
Ladies and gentlemen, this concludes today's conference call. Thank you for all parties.
Relating you may now disconnect.
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