Q4 2021 American Well Corp Earnings Call
As a leader and innovator in our space.
And with converge, we registered large multiyear bookings in Q4 that are indicative of new clients receptivity to our new platform.
We expect the strong momentum should continue to build as converge functionality is completed and as we work to continue to bring in large new healthcare payers and systems on converge and add modules for existing customers.
Turning to some of our newer initiatives, we are well underway with the integration of newly acquired Conversant silver cloud, which advance our approach to long term longitudinal care and higher margin revenue mix over time.
With Congress, we enter 2021 with subscriptions to 117 nine automated virtual care programs designed to remotely manage patients on behalf of leading healthcare organizations across the country with some notable Q4 wins, including expansions at existing unwell legacy.
In converge health system customers.
These programs are enhancing patient access and experience while improving outcomes.
Automated programs help providers to identify patients who need more support and reduce the burn out among frontline workers by Offloading some of their workloads.
And we are also building momentum with silver cloud or digital mental health delivery module.
During Q4, we won several large health systems bookings for silver cloud.
The cloud is also a success in international markets. We were recently one is strategic contract in the UK, providing nationwide the effort health services to over 3 million wells citizens.
Now I would like to shift to some highlights from our services team.
Our services team is currently busy converting existing health system customers from our legacy platforms to converge.
As we look to describe our progress we believe visit some converge the most meaningful metric of progress converting our business to the new platform.
We ended Q4 with about 10% of our visits on converge and it is our goal to significantly increase that metric during 2022.
In addition to the successful migrations, we're seeing growing engagement across all our products.
Our EHR integrated solutions are a big driver of our number of active providers, which grew 26% over a year ago.
And the number of visits for patients grew a healthy 14% over a year ago, something we view as indicative of sustained adoption among patients.
To wrap up Q4 highlights I want to add that I'm proud of how our teams are executing putting in place the crucial elements of our solution lending new names driving engagement and executing towards our mission to define the fundamental infrastructure enabling.
The future of healthcare delivery.
Next I'd like to spend some time briefly reviewing what we are seeing in the market for our solution.
It is now well accepted the pandemic dramatically accelerated telehealth adoption.
It is also clear that with this acceleration urgent care visits has been commoditized.
Providers payers and innovators are now seeking to realize the much broader potential of hybrid care and are facing significant challenges.
These include complicated and confusing rules and regulations differ.
Difficulty to simply and practically implement and integrate sophisticated workflows.
Disparity of point solutions, and portals and fragmented non integrated documentation and payment systems.
Our conversations with our customers are indicating that the market is primed for more complete unified solution for digital health delivery.
One that requires a true partner to define and implement their digital health strategy.
At Anvil, we are defining and distribution enablement platform for health care that addresses many challenges and solve for the industry requires.
It's not just about the virtual visit it is extending care beyond telehealth to a digital care continuum.
More than connecting providers and patients for a video visit we are creating and managing the logistics to support the emerging hybrid care delivery model.
We are delivering on that vision with converge.
For example, a provider network using converge at the heart of their it infrastructure, we'll be able to significantly increase the reach and impact of their providers.
Optimizing the use of physical virtual and automated interventions.
Payers will be able to share insights on the gaps in care and empower providers to address these important gaps.
Patients will be continuously connected to their health care system and enjoy the convenience and efficiency over digital first health care experience.
All of this means a powerful impact on clinical and financial outcomes benefiting all segments.
In addition, <unk>.
<unk> rapid innovation requires a modular infrastructure that unifies, a fragmented landscape and future proofs providers and payers supporting their ability to adopt new functionality.
Innovation is on the rise and converge will be the infrastructure to help health systems prioritizing embed all those solutions into harmonize ecosystem.
And ecosystem, which streamlines the exchange of data services and capabilities underpinning a truly hybrid multimodal solution, including natural language processing as well as AI and analytics that are moving from the sidelines to center stage.
Will converge, we are expanding well beyond traditional telehealth.
Transformational vision defining a new digital care delivery system that empowers providers can offer meaningful new ways for patients to receive health care.
We are addressing a growing 10 with a more complete solution set and the market is taking notice.
Now I'd like to take a moment to highlight a couple of our key priorities for the coming year, which are aligned behind our overall mission and our goal of achieving sustainable high margin revenue growth.
We will complete the build out of converge, we will make the final investments that we'll complete this distribution system and enable the digital transformation that extends beyond the traditional care model.
This final effort has the essential converged features in high demand by our large providers and payers, including on demand and white label enablement capabilities.
With converged near to complete the major focus for us in 2022 will be to migrate existing customers to the platform and drive sales with new customers.
We will also strive to demonstrate the modularity and flexibility of our solution by helping our customers expand the use of our solution and adopt new innovative elements of hybrid digital care.
With some of our largest new converged customers. We are building out infrastructure elements that will apply broadly to the market and set the standard for best practice in digital health care delivery accelerating our ability to deploy our solution in the future.
Finally, our customer footprint in mind share gives us a unique point of view at the forefront of the digital health landscape.
Silver cloud them Converse are great example of carefully chosen investments that allow us to leverage converge to deliver crucial elements of longitudinal care to our customers and their patients.
While the future M&A is not needed for us to achieve our goals, our strong balance sheet and promising financial model enable us to invest internally and externally for growth and to further differentiate our solution.
With these top priorities and focus we believe that we are well positioned to add new customers.
Spend within our installed base grow the mix of our higher margin revenue and over time demonstrate the potential of our long term operating model.
Now I would like to turn the call over to Bob will cover our Q4 financials and some key metrics from the quarter plus our guidance for 2022 and path to profitability.
Thank you.
And thanks to everyone for joining the call. This evening.
Today Im going to touch on some key operating metrics from 2021.
Run through our fourth quarter results.
<unk>, our initial outlook for 2022 and conclude my comments by sharing our view on <unk> path to profitability framework.
First I would like to review a few key metrics and try to put those in context.
Active providers on our platform specifically non AMG active providers as one measure of platform adoption among our customers.
We ended the quarter with over 91000 active providers 88000 of which were non AMG.
That's relative to 76000 in third quarter of 'twenty one.
And 68000 for Q 'twenty four growth of 16% in the quarter and 30% for the year.
Turning to visits as a further measure of the continued acceptance of virtual care. We saw healthy total visits of $5 8 million in 2021, which rival 2020, a time when many many care facilities were closed and virtual care was the pandemic must have.
And 2021 virtual visits became more engrained as a standard of care.
Casual visits increased 30% over 2020 and grew to 70% of our total visit volume.
Specialty visits inclusive of behavioral, which we view as an important part of our long term strategy towards more longitudinal care grew almost 50% versus 2020 am.
<unk> declined about 10% in 2021 and were $1 4 million.
Average annual contract value or HCV is a good indicator of the value we are delivering to our customers and the success of our land and expand strategy.
And a real bright spot for the quarter.
<unk> plan, ACB increased 18% to $723000 and 2021 compared to 2020.
ACB for health systems saw a more modest increase from $334000 to $356000 as well.
We expected during this time of converged transition.
Also as expected average customer accounts across both health plans and health systems or relatively flat at year end.
We expect both HCV and customer accounts, especially for health systems to Reaccelerate in the second half of the year. Once the full features and functionality of converge our broadly available in the market and recent customer bookings are implemented in go lives.
We exited 2021 with 49 customers on the converged platform, primarily on AML now our entry level experience for patients and providers. We also have several customers deployed on converge EHR, which integrates scheduled visits a key feature of our platform.
The metric we would like to highlight today that we think demonstrates our progress and customer migration is that approximately 10% of our visits were taking placed on converge at year end, we expect that percentage to rise significantly over the course of 2022 with health systems, leading the way.
And now onto Q4 results total revenue was $72 7 million for the quarter, reflecting growth of 20% over Q4 of last year.
Normalizing for M&A, driven churn in our customer base, which we have discussed in prior calls growth versus <unk> 20 was 24%.
Components of revenue are as follows subscription.
Revenue grew 14% to $30 $1 million in Q4 compared to Q4 of 2020 again normalizing for M&A, driven churn growth versus <unk> was 22%.
Subscription revenue in Q4 increased versus <unk> 21, primarily due to several go lives in late third quarter and fourth quarter as well as a small amount of revenue from <unk> and silver cloud.
Visit revenue continues to be influenced by the pace of the pandemic for example visit revenue of $31 2 million.
<unk> grew 19% and AMG visits in the quarter at 392000 were up 10% versus last year.
Reflecting a rise in urgent care visits in Q4 due to the omicron variants average revenue per visit was $80 for the quarter up from $74 a year ago in <unk>, 'twenty, but lower than in prior quarters of 'twenty one.
Our AMG business is an important differentiator in the market and critical to many of our clients and we view the offering as a supporting element of our converged strategy. As we have said previously our primary focus going forward is to drive high margin recurring revenue associated with sales of the converged platform.
Plus a growing number of modules and services like AMG.
Our services and care points revenue grew 45% to $11 $4 million with this strength being driven by the timing of marketing engagement campaigns on behalf of our customers.
As a reminder, these programs are dependent on our clients' marketing campaign strategies and our variable.
Two aspects of our business have remained stable over time and provide us great visibility and a loyal customer footprints.
Largely due to the revenue contribution of our services and care points business gross margin was 350 basis points lower than last quarter at 40% in general we believe as we ramp up converts deployments the shift toward higher margin revenue will lift gross margins.
Turning to operating expenses and in support of our converged strategy, we ramped R&D spending in Q4 to $33 $8 million from an average of approximately $25 million per quarter over the last year.
Also contributing to the increase is that Q4 was our first full quarter consolidating the spending of silver cloud and converse.
Sales and marketing spending also increased in Q4 to $21 3 million, mainly due to increases attributable to the acquisitions. We expect R&D to continue to increase in the first half of 'twenty two as converged spending peaks and then begin to decline during the back half.
Finally, I have a few comments on our EBITDA profitability as we prioritize the investments in converge and absorbed costs associated with silver cloud and convert our.
Our adjusted EBITDA was impacted and in Q4 represented a loss of $41 $1 million.
This is up about $5 7 million compared to Q4 of 'twenty. We view this rate of loss is temporary and important strategically.
Transitioning to the balance sheet, we ended the quarter with $746 million in cash and short term investments our balance sheet is healthy and provides us the resources to fund this temporary period of investing and allows us the flexibility to consider and pursue strategic opportunities that are aligned with our goals.
Turning now to our 2022 outlook.
For the full year 2022, we expect revenue to be in the range of 275 million to $285 million.
We expect a modest bump in subscription revenue roughly flat subscription revenue from coram, while products as we continue to focus on our migration to converge plus upside subscription revenue contributions from our automated care and behavioral health programs through silver cloud and converse are consistent with our <unk>.
Common Terry at the time of these acquisitions.
We also are taking a conservative view on visits with paid volume expected to be largely flat over 2021 at around one four to $1 5 million visits we expect care points in services to remain stable at 10% of revenue and we anticipate revenue seasonality similar to prior years.
Our revenue outlook reflects some previously described impacts on our 2021 bookings, including delays by some health systems, who have chosen <unk>, but are waiting for the completion of converge in order to go live on that platform and some who were prioritizing COVID-19 related challenges over adding new features to their existing <unk>.
Restructure or transitioning to a new software platform. These are timing issues and we believe the healthy Q4 bookings.
Joe talked about earlier will begin to convert to revenue in the second half of 2022.
Combined with converged bookings accelerating in the second half we should exit the year set up for a strong 2023.
Now onto our guidance on profitability.
For the full year 2022, we expect our EBITDA loss will be in the range of $190 million to $200 million underlying.
Underlying our profitability outlook, our three strategic investments, we are making which are temporary in nature and will set us up for significant success going forward.
First are the elevated converge related R&D investments as well as the cost of maintaining the legacy <unk> platform during the transition.
Second is a somewhat higher level of services spend we plan on to ensure customer migrations to converge seamlessly and pave the way for future success.
Finally, there is the impact of consolidating the losses associated with our acquisitions.
Importantly, we believe we will contain all of these impacts to 2022 and as we put this period of investment behind US, we will be positioned nicely for future profitable growth.
Rest of our GAAP and non-GAAP guidance can be found in our press release.
Now that I've completed my first quarter as <unk> CFO I'm more pleased than ever to be here as we turn the page from telehealth to health care delivery infrastructure from our legacy platform to converge I would like to take this time of transition as we begin the year to make some additional commentary about our longer range view of our income statement.
This quarter, we are providing a new graphic at the end of the earnings release intended to illustrate our path to profitability framework I'd.
I would like briefly to summarize and we will welcome your questions. After you have had time to taken the details.
Our model assumes the three temporary impacts to EBITDA that we just described these items lowered our adjusted EBITDA margin by 10 percentage points in 2021, and our guidance today assumes an additional impact of 25% to 30 percentage points during 2022.
As we look to 2023, our acquisitions will be integrated <unk>.
Synergies will begin to be realized and we expect our R&D spending to decline on an absolute basis by 40% to 50% compared to 2022.
With a temporary costs meaningfully abating and our revenue mix shifting toward higher margin revenue. We believe an increase in our gross margins will combined with operating leverage across the income statement, resulting in an improvement in our 2023, adjusted EBITDA margin of well over 50%.
From there, we see a clear path to adjusted EBITDA breakeven on approximately $500 million in revenue.
I hope that's some helpful context. This model is firmly rooted in our belief that our market can support 20% revenue growth ongoing and that our high margin visible subscription revenue will grow more rapidly than visit revenue as well as our care points in services revenue.
And while it is further out with breakeven behind us we see a path to 20 plus percent EBITDA margins.
That is a matter of time and execution.
Finally to provide you with some additional detail into our plans for steady state R&D spending we intend to normalize R&D at a level of approximately 30% of our subscription revenue.
This is in line with SaaS companies today, and we believe this rate of investing provides us the resources, we need to continue to invest deliver on our vision lead our market and achieve sustainable profitable growth.
Before handing the call back to <unk> for some final remarks, I would like to summarize Q4 completed a strategic year for US one in which we made important investments and good progress towards our goals I look forward to working with all of you as well on this journey with that I will turn the call back to <unk> for some final remarks.
Thank you Bob.
We are proud of our team our progress in Q4 and the full year of 2021.
The opportunity in front of us is clearly large and expanding.
Before I end the call and take your questions I want to summarize by pointing out that the heart of many of our customers growth properties is a focus on digital first hybrid care programs.
We are optimally suited to enable these programs given our unique vision and our differentiated solution.
We have a substantial install base.
Vision is grounded in customer mind share from the largest payers in the country and health systems, representing over 2000 hospitals and over 90000 providers.
Converted the connective tissue that will integrate disparate assets and operating environments required to deliver on the potential of hybrid digital health care.
The market is moving towards us.
We believe ours is the right vision and we are willing neural way, making the right investments and executing well to deliver on the promise of this meaningful opportunity.
Thank you for your time.
Operator, please open the call for Q&A.
Okay.
At this time I would like to remind everyone in order to ask a question. Please press star followed by the number one on your telephone keypad.
We ask that you please limit yourself to one question and one follow up.
Your first question comes from the line of Ricky Goldwasser with Morgan Stanley . Your line is open.
Yes, hi, good evening, Thank you for all the detail.
So.
Bob Thank you for taking sort of thing.
At our road map.
And your targets for 2025 and the profitability.
Just to start how should we think about the cadence of the 20% revenue growth from 2025 should we assume.
In 2010, when you'll kind of be above 20%.
As we expect to see kind of a pent up demand from contract migration just helpful to think about the cadence.
And then.
Just the additional underlying assumptions that you're making in terms of.
Okay.
Subscription revenue. Your question is does it make sense of kind of a gross margin target.
2025.
Thanks Ricky.
Yes so.
Look what we thought it was.
Really important to give people a view of.
Especially with the spend this year how.
The income statement would work going forward.
The estimate of 20% revenue growth I wouldn't take as is it going to be 25% in 'twenty, three and 'twenty three and 'twenty four.
I would think of it as over over this period of time, the composite revenue growth for the enterprise should be around 20%.
I think a conservative assumption.
That bakes in a higher.
Growth rate for the software business call it mid twenties, and a mid teens growth rate for visits that would get us to a composite growth rate of around 20% and that.
In and of itself when you think about the impact on EBITDA is really meaningful because you were talking.
About software with.
The benefits of converge, probably taking gross profit margins on our software business into the mid to high seventies.
And the visit business getting incrementally more efficient but.
At a much lower growth in gross profit margin there so the pick up.
And gross margin is substantial from around 40, low <unk> now and well into the <unk> by 2025, just from the disparate growth rates and the pickup.
In efficiency that we're going to see from running one platform on converge as opposed to multiple platforms.
On our legacy.
Thank you that's very helpful and just one follow up question.
On your prepared remarks, you talked about the move towards more scheduled pathogen specialty Sanjay maybe you can give us some context on why you are seeing.
The option.
Telehealth from.
Eric and candidly sauce.
On a year year and half to go to a more sort of steady state.
Mentor.
Okay.
Thank you Ricky.
It is really astounding to see how far we can in such a short period of time.
So for many years as telehealth was an adjacent service alternative too.
To the rest of health care and focused on urgent care as a convenience in case, it was too hard or too long to wait for my job very much because of Covid, but also based on other factors what happened is that the mainstream healthcare players starting with providers have discovered the power and efficiency.
C or digital connectivity with their own patients.
That is not a simple substitute, but rather a whole transformation.
Really expand the use of digital technology, not only to origin care, but really across the entire care continuum and opens opportunities to collect data continuously to analyze them to rethink care plans and really bring in other important participant starting with payors.
And the ability to integrate Gibson care and work in an efficient way that is much more appropriate and efficient.
To really improve the outcomes.
It is also important to state that while in the early pandemic days.
Utilization of Telehealth was very simplistic in the sense that in towards the video conferencing that replaces the enrolment music, but shortly thereafter, our clients have discovered.
<unk> technology can bring so many other elements some of which I. Just described that eventually are really transforming the way people experience a healthcare and are really contributing to a dramatic rise in access to care in efficiency in many ways democratizing healthcare.
What we saw even with our own health systems, it's very dramatic in the sense that when we started it was almost like a sideshow.
For allowing people to talk to some of the doctor with some of the time.
Now very quickly becoming a necessary mainstream modality.
Communication and connection between them and they're trusting patients.
Your next question comes from the line of Charles <unk> with Cowen Your line is open.
Yes, thanks, thanks for taking the questions.
Maybe one you highlighted earlier, obviously this year.
Yes, there is some impact from customers with maybe delayed purchasing modules or other clients, who have selected ammo, but are are waiting to deploy converts first.
Yeah.
Maybe just overall if you look at the number of health systems clients that you have how many have at least raised our hands to say, we will be migrating to converge.
And so those that are choosing not to what are some of the reasons why.
Someone might not want to transition over to converge.
Thank you for the question Charles I'm hard pressed to think about the single client that.
Users to upgrade to converge.
It's very easy for us to think about so many that are strongly raising their hands waiting for the upgrade.
The receptivity to the new platform is much better than we ever hoped our clients are very excited to do that and of course, the timing issue that both mentioned is really the key factor that is driving it together with the availability of the various modules depending on the complexity and the.
And the needs.
Each and every year clients, so I'd like to point out that all of this will be behind us by the end of the year when the entire spectrum of functionality will be available across the ecosystem to all our clients.
Okay. That's helpful.
Maybe as a follow up Bob when I look at the slide here.
You kind of bucket the three things right the M&A impact the converge impact and I'm, assuming that the services spend to support clients that's in that bucket.
But obviously the core EBITDA loss improved.
Improved dramatically and I know you highlighted.
A number of factors.
Is this all just really just mix shift as we get more subscription revenue.
Or what else is it could be contributing to this.
Big improvement and I guess the question really is what's what's the visibility you have.
Getting that part of it realized.
Charles look a big chunk of it is what I mentioned on the R&D line item, which we have a lot of visibility on.
<unk>.
We expect that to decline by 40% to 50% in 'twenty three relative to the spend in 'twenty two.
So that's a dramatic increase.
Increase.
Our decrease in cost and then on the on the its a more modest impact from mix shift from faster growth on the on a year over year basis on subscription versus versus visits but but the two if you just look at the low end of my estimates and.
In terms of what they would deliver.
Somewhere in the $100 million to $110 million.
<unk>.
A benefit from those two items from gross profit improvement and from R&D and.
And so if you think about the walk from the guidance of call it midpoint of 195 negative.
And take 105 off of that that in and of itself is a huge.
Delta in terms of the.
The negative EBITDA margin that we expect that that we think we can achieve in 2023.
Going from around 70% negative to around 25 so.
Those are those are the two biggest components and we would expect to see as I said, some some operating leverage across the other items as well.
Great. Thank you.
Your next question comes from the line of Cindy Motz with Goldman Sachs. Your line is open.
Thanks, a lot for taking my questions and for the extra information.
I just wanted to follow up a little bit more on the converge migration.
I know you said to think about it in terms of visits.
People seem really.
Excited about it happy with it.
But in terms of are you being asked to like with the ramp in R&D are you finding that it is people are asking for more things are unexpected complexity, just just trying to get an idea of that.
And because I had thought maybe there would be some delays because of the omicron variants, maybe distraction, but just curious about that R&D number and I know you said it would go down but maybe just a little more color on what you know.
They may be asking for.
Thank you Cindy.
Many things I'm trying to answer it fully.
As I mentioned earlier we.
So two things.
Influencing our view to the year, one that you mentioned the almond growing dynamics don't corn dynamics really does two things.
One is unpredictable and we saw that in the last day of Q2.
Two quarters.
2021 for example, the unexpected separation between demand for urgent care and behavioral health.
It was a surprise.
And we adjusted conservatively our view into the year.
On the.
The second element was that during one <unk>. Despite the fact that the population overall was much more re next hospitals, where flu and that impacted the ability of some of our clients to implement a new project or extend it.
Existing ones.
Another thing that happened is the appetite for very large enterprise platform grew much faster than we realized.
<unk> talked about the bookings of Q4, we are very proud of what's happening in the market as some of the largest most sophisticated organizations.
Choosing converge as you can imagine when you deal with such scale.
The cycle is longer deployment cycles, and integration is longer but it's very much worth it because the outside is also much more significant and much more sticky.
Deployments, usually signifies the potential relationship with five years or even a decade. When you think about the spaniel digital care. The degree today, when we begin to deploy such clients will negotiate it with such clients.
Didn't only focus on what we've developed so far in our short term plans, but really shared some of the multi year roadmap.
<unk> really continue there and theyre really hard pressed us to begin to expand and accelerate our growth and the way. It is still a very lucrative both for them and for us we.
We leverage our healthy balance sheet in order to make that investment in acceleration and are going to end the year with a platform is far broader farm will differentiate and far more capable than we originally planned well beyond the original.
Glenn and also in that way securing some very a sought after eight clients in the market that we believe we can grow together.
For many years I hope that answers your questions.
Sure that makes sense. Thank you very much and just as a follow up.
In terms of I know you broke it out with the converge adjusted EBITDA impact how should we think about 2022 like is it I assume is it more back ended that we start to see improvement are.
I know you don't give quarterly guidance, but if you could give us any help there just on the cadence that would be great for 2020. Thanks Cindy.
I'd say topline that.
If you think about our.
Our seasonality.
Overall.
Quarterly breakup in 'twenty two should be similar we think to what we saw in 2021. So that's kind of the topline qualitatively I would say, we would expect to see on the subscription side as <unk> talked about some of the fourth quarter bookings that we saw.
To be implemented and start to generate revenues in the back half of 'twenty two.
We go live on those from a cost perspective, youre going to see R&D continue to ramp from that fourth quarter number.
Through the first half of the year and then start to tail off in the back half of the year.
And so those are I think really the two most important.
Line items there.
The.
From a from an M&A loss perspective.
I don't think there will be really much in the way of.
Quarterly differential there the big driver is really on the cost side going to be the ramp up and then the subsequent ramp down in R&D.
Okay. Thank you.
Sure.
Okay.
Your next question comes from the line of Glenn Sam Tangela with Jefferies. Your line is open.
Hi, Yes, good evening and thanks for taking my questions.
I just wanted to go back to some of your comments you made in your prepared remarks with respect to the overall.
The competitive landscape it kind of sounds like the.
91000 physicians that you mentioned that are currently using the platform could you maybe comment on the exclusive nature of those relationships.
What investors are really trying to get their arms around is how the competitive landscape may be evolving in telehealth more broadly in terms of what youre seeing in VITAS.
That sort of leads into my second question for Bob Youre forecasting subscription revenue growth in the mid twenties through 2025, and I think we understand 2023 will probably be a little bit of a bigger year.
Maybe you can move that in the transition year, and you probably play a little bit of catch up but what gives you the confidence in those growth rates in 'twenty four 'twenty five and could you maybe talk through that algorithm of how the revenue model works. Once you convert one of these clients to conversion can you charge them more like is there an upsell attached to it just any thoughts.
Those those general questions, sorry, there's kind of a long question, but any thoughts would be appreciated.
Sure Glenn I'll take the first one and let Bob take the second.
As it relates to the.
The competitive landscape, we are really seeing two trends that are important.
Is the I would say the simple and it's not necessarily the low end.
Where you really seek.
<unk> connectivity and Thats, a very crowded market with zoom and.
Teams and long list of many other knowing the players are playing and we definitely see a lot of vehicle and petition there. The products are similar if prices are a big issue for that type of use case.
It is very difficult to differentiate.
In addition to that as I mentioned earlier, what we are seeing is that the growing number of our customers are looking for things well beyond.
Productivity workflow integration and many things that I described earlier the growth that you saw in our equity providers is mostly non AMG is or not we could providing urgent care and auto services as part of our network. These are really our clients' providers its an indicator or traction.
Within our 2000 hospital clients and they use our platform for various things almost all of them require well beyond simple connectivity.
Coming more and more sophisticated with very.
A large number of the mall.
Modules. The most sophisticated you are the bigger you are the more confident we are that we provide more value and differentiate although I'm going now is actually also very well received.
For our synchrony connectivity.
Yes.
As far as what you call the exclusivity is not uncommon to see.
With some of our clients are using multiple video platform for simple connectivity needs.
These don't essentially compete or growing CRE that with growing the economy.
Sunday, but right now they don't come near to what we offer and provide and when you think about digital care delivery platform, we feel quite secure that we don't I'm not recalling any client of ours.
It has two of those they typically have one infrastructure.
Because of the power of having one connected.
Platform doesn't actually make much sense to have a few unless that we've been using situation like M&A or things of that nature that eventually resolved by having one platform take over the other and I'll, let Bob answer the second part.
Hey, Glenn So I.
I guess, a couple of ways to address that.
The second part of your question.
Im going to let Ido address some of the some of the vision aspects here, but.
We look at it we've got and I know Theres a lot of Tam fatigue out there on the part of investors but.
We see at least a $75 billion Tam for <unk>.
For our market and looking at.
Some of our brethren that have out there at 150 to 250.
We may be a little bit conservative in that estimate.
But as we think about growth, we certainly have that underpinning it but we also have.
This land and expand strategy where.
Once we're in.
There are ample opportunities to upsell in the way, we structure, our contracts, especially with some of the larger more sophisticated multi silo buyers.
Our.
Have a lot of volume sensitivity.
Across the usage there so to give you a sense I mean, we estimate.
Our our bookings.
And the last year or two and kind of where we are right now.
Bookings are probably split 40, 60, something like that between new customers and Upsells.
Over time over the next few years I would expect that that gets closer to 75% of our software bookings are from Upsells.
And.
And so that that's when.
When you think about the Tam when you think about the types of customers we have.
And how their service offerings are going to evolve over this time, we still think we're in the very early innings of the evolution.
Of the care delivery modes that we're going to see.
And they will become much more hybrid in nature.
To think that we could grow our topline software subscriptions at a rate in the mid 20, it doesn't seem like.
It doesn't seem too heroic.
Okay Super helpful. Thanks for the details.
Thanks.
Your next question comes from the line of Eric Percher with Stefan Research. Your line is open.
Yes.
Thank you question on behavioral trend I know has we end 'twenty one there's been a discussion of decoupling from Covid could you speak to your expectations for 'twenty two I think a reminder on.
How impactful behavioral relates to the overall organization and some of the expectations for silver cloud would be helpful.
Absolutely Eric.
So I want to really point out that when he spoke of a behavioral I was really focusing on our <unk>.
Ability to hedge the paid visits done either an urgent care or be have reordered.
The AMG.
Revenue part of our business.
When you think about the able health.
Much broader scale the opportunity is to really serve enormous unmet need in the market by connecting and amplifying the available therapies and other types of providers in the market. So they can go ahead and do a much better job and we've mentioned. The example of what simple cloud is doing in the UK.
Within HSA for many years with proven results extracting much more services for each share for each therapy.
<unk>.
And I would also suggest that the ever in health is a much broader topic, then therapy alone in the sense that our variable element in every type of Lindsay tooling on chronic care.
Graham the Fellini requires the collaboration and many other elements to really achieve the outcomes that are promised as part of that program.
We've converge we are now able to really inject the ever health elements in a very efficient way combining physical virtual and automated to every seeing our clients are doing and not by selling those services ourselves, but rather by connecting available services in a very few.
<unk> way to an ecosystem that is using a unified the platform I hope that's helpful.
And I guess the question there would be is there a metric relative to the high.
Percentage of visits that our behavioral and I also my second question here is going to be.
In that R&D ramp down is there an expectation of sunsetting of legacy system as early as 'twenty three 'twenty four 'twenty five.
I'll start with the and the answer is absolutely. Yes. We are so important to maybe note that it's not the legacy system, but their floor.
Yeah.
We have a quite immune systems running in parallel and we are definitely planning to sunset.
All of them I also like to point out the behavioral health visit is one facet of different health care.
Lot of the Irvine health.
CBD for example.
<unk> is totally operated and does not require even a single visit in order.
To be effective and maybe I'll, let <unk> complete my answer.
Thanks Peter.
Eric.
I don't think we have made.
Decisions yet on exactly how we're going to report silver cloud for instance, going forward.
Our kpis.
Whether.
You'll see just the impact of blended across HCV or.
Or in another way so.
I guess.
The way that right now you can see its impact is on visit revenue average average average revenue per visit.
And.
And on the silver cloud side.
Again, I don't think we've really.
Put a pin in that so I will keep you posted but but that's probably not something we're going to address until maybe this time next year.
Thanks on both points.
Yes.
Your next question comes from the line of Stan Bernstein with Wells Fargo. Your line is open.
Hi, Thanks for taking my questions.
I guess I'd like to ask a question on the Oracle acquisition of Cerner.
Maybe a two parter here so first maybe high level what are your expectations for your strategic partnership with Cerner. After this deal goes through.
And then maybe related to that.
Has this merger in any way change the buying behavior of health systems that are currently using cerner.
Any comment on that would be great.
Sure. So I don't recall, any any pushback or otherwise from.
Joining declines I'm will cerner clients.
Related to the acquisition.
We also didn't notice any change in our relationship with Cerner at least not so far.
You know we have many common clients say, we are willing to greatness and those clients are happy.
And Thats grateful, both cerner and well we complement each other well.
Our initial a very unusual dialogue.
Oracle.
Dave.
So we have no reason to believe why this relationship will not continuing the growth.
Got it got it that's helpful and then.
Also I want to go back to actually a comment you made last quarter. It was in reference to a survey by hands, where you called out 56% of health systems are planning to invest in virtual care I am curious as your sales reps are speaking to health systems on the ground are through zoom or whatever it is.
Our health systems communicating.
This type of.
Meaningful adoption beyond what they already have in terms of growing their capabilities longer term is that something that you're hearing or is that just your expectations without any yes.
Commentary from clients.
Yes. So of course, we are spending a lot of time with clients and I would suggest that there are two things that we see.
One is that the COVID-19 related the pandemic related visits are definitely on the decline.
So the seeds from patients that are trying to reach our digitally because they can't do it otherwise is really the.
Driving.
Smaller ray attraction, but on the flip side the discovery well.
The enormous video digital connectivity is definitely there and the dialogue has changed from quick wins to connect.
Because of necessity to really a sea change in thinking about how they are going to really connect.
With patience and participate with the digital care distribution platform that is really connecting.
Entity as the didn't connect before saying it differently.
Was a time where hospital, we don't have an EHR and now nobody has even been thinking about the hospital without the new charter.
Im pretty sure that based on our dialogue with.
With our customers' growing need the leaders in those organizations are seeing don't imagine a future where the digital envelope of their relationship with their patients and the rest of the ecosystem.
Not be enabled by an enterprise grade solution.
Alright, thank you.
Your next question comes from the line of Allen Lutz with Bank of America. Your line is open.
Thanks for taking the questions.
I guess, how much revenue from converse and silver cloud what theyre in the quarter and then do you still expect revenue for those businesses to double in 2022.
Thanks Al.
<unk>.
<unk>.
<unk> silver cloud and converse.
The guidance we gave.
On the M&A call it still.
Very much what we expect to see so.
And have a minimum of.
Around $30 million topline.
We're not breaking out revenues.
For the two of them.
Going forward or historically here I will tell you.
It was a.
Small single digit.
Kind of number in the quarter.
And what we're seeing.
In aggregate out of out of the two acquisitions.
Is just terrific opportunity.
From a cross sell perspective, both ways.
And to their base and them into our base.
And we're really looking forward to.
Moving forward on the integration.
And realizing a lot of these synergies.
Thanks, Bob and I think another one for you.
The increase in ACB across health systems, and health plans was helpful. I guess can you talk about how much of that was due to a new module growth.
If any of that was due to price and then if you think about I guess, just how do you think about price as a lever to growth within converge over the next few years. Thanks.
I wouldn't call it price I think it's really up sell right.
New modules.
And volume based triggers.
The way we are structuring some of these contracts is the way I would be thinking about it.
And we really only saw meaningful movement on the health plan side and that was really just more.
More adoption.
And in more programs into those plans so that.
That's working as expected on the plant side.
About and I referred to as well as some of the some of the headwinds that we've seen.
On the health system side, and Thats I think why those numbers were a little flatter.
Got it thank you.
Sure.
Your next question comes from the line of David Larsen with BT, Inc. Your line is open.
Hi, I think you mentioned that about 10% of visits.
Or what percentage of visits are on converged now or is it like 10% in <unk> and then how should that trend over the course of 2022 will you be at 100%.
<unk> 22, and that's what's going to enable you to have.
Have all the R&D savings in 2023.
Your lips to God's ears, but I don't think so.
It was it was 10% at the end of the at the end of the year So call. It in December .
We expect look we don't control all of that.
Some of that is dependent on.
Our customers.
Dedicating the resources and having the time.
Two.
To allow us to make those conversions and migrations.
We we expect that to rise meaningfully over the course of the year.
And I think as the year goes on we'll certainly be reporting.
What what that number is.
Does it take right now to give you a target for year end, we are starting with our health systems first and then we'll move to.
Work.
On migrating our health plans after that so we certainly won't have the 100% because we're not really working on a 100% immediately but but we do expect to have the lion's share of the visits for our health systems, taking place on converge.
By the end of the year.
Maybe you want to comment that.
Okay.
Yes, absolutely I mean in essence, everything we need to win our entire market share.
Sure in the way of R&D capability.
We'll be there this year.
Even towards the end of the year.
Sure.
In the first half and then.
Completing during the second half.
As I mentioned earlier demand for converge is very very high people, who really want to upgrade it to converge.
As a reminder is included in the license. So there's no financial barrier to do that however, there is an operational timing related the barrier in the sense that things will be prioritized in the deployed.
We feel that we're going to as Bob mentioned.
The lion's share of our customers on the platform, but it's not an exact science and we fully expect to linger towards the 23.
Although it's really difficult to predict exactly how it's going to fall out.
We're then going to sunset whenever these things.
And of course benefit not only from the efficiencies of converge, but much more importantly from the great expansion opportunities for so many models and programs.
The new platform brings.
And then just one more quick one with a 20% annual revenue growth.
What portion of that will be organic versus acquired in your view and it seems like theres plenty of assets that could add a lot of value to your customers any certain areas that you're focusing on thanks a lot.
Yes that would all be upside to the degree that we.
Our successful in.
Finding.
Assets as terrific as silver cloud and converse of that that would be incremental revenue in this model.
Okay, great. Thanks very much.
Your next question comes from the line of Julian dressing with credit Suisse. Your line is open.
Thank you and thanks for taking my questions I have.
Actually wanted to get your thoughts on virtual primary care opportunities.
We're seeing a lot of activity from health plans and other virtual care vendors in that area just trying to understand what traction have you guys been seeing how big of a component is that product in your 'twenty two guidance as well as long term revenue projections.
Hi, Julien that's a great question.
The primary care, we really part of a digital first.
Samsung that patients are going to interact with the health care system by growing online.
As always and certainly first.
That's part of the heart of converged multi product on converge that's the way converge is built.
We introduced virtual primary care last year as you remember.
We're selling very successfully now in the market as part of as part of the converged.
I don't think that we expect the almost any clients not to use that capability, we think that the.
Essential part of any type of digital care delivery in the future.
We see it as cord, we are not going to report one eighth of the cyclic quota.
Okay, and then my follow up around the telehealth reimbursement environment card providers.
Despite the bipartisan support on telehealth providers across the country are still waiting for clarity on the reimbursement.
<unk> pandemic and public housing emergency one guidance or just trying to understand what is reflected in your long term outlook of $500 million with respect to telehealth reimbursement environment and implications it might have on the next leg of growth in telehealth adoption not exploration among providers.
Yes so.
It is very difficult.
<unk> estimated.
Size of the change in the speed of the change.
As such we used a fairly conservative assumptions to drive already modern it's also difficult to really understand the change between free for radio in fee for service to fee for value when youre venue based organizations, all Dominion and Dominion modules and functions around rail.
All converge that drive efficiency are becoming very very relevant.
For any type of organization. Many cases in a way that is unrelated to a reimbursement. If you are able to process deeper than you already are in a better way to avoid the readmission to bring specialist so we'll be able to healthy therapies to two different data points of care. That's good even in <unk>.
<unk> reimbursement environments.
I would say that the main purpose of converged is really improve the efficiency of care improved financial in the clinic on the outcome of course, if there is.
Going to be more direct reimbursement not only for virtual visits but also for digital therapeutics, which we began to see that's going to put a lot of fuel fueling the fire, but as you rightfully mentioned, we certainly are not smart enough to guess exactly how this is going to play out although.
I would only suggest that because.
There are so many proof points that.
<unk>.
Financing is neutral interventions is so.
So let's say.
Savings so much that we believe that.
Likely.
The different payers and certainly the government.
We'll end up reimbursing almost going to be.
Great. Thanks, a lot.
Your next question comes from the line of Jessica <unk> with Piper Sandler Your line is open.
Hi, Thank you so much for squeezing me in and for all of the details. This afternoon. So I wanted to follow up a little bit on silver cloud and convert that can you guys, just maybe remind us how silver cloud and <unk> are build.
Whether they're 100% subscription revenue streams and are they kind of enterprise SaaS contracts are billed P. M. P. M are perfect.
Hi, Thank you.
Converse.
From a revenue and customer size average average revenue per <unk>.
<unk> I should say.
And and type of customer very similar.
And it is virtually all.
Subscription revenue silver cloud.
As a little bit different from a customer size perspective.
They still have.
Subscription revenue that we would characterize the subscription revenue.
And it would be primarily in the health system category.
So that's how I'd be thinking about categorizing them.
That's really helpful. And then just as a quick follow up when we think about <unk>, specifically can you help us understand how that.
Virtual III exploration is kind of competitively differentiated relative to some of the other offerings on the market.
What are kind of the key value propositions is it integrated within converge. Thank you.
That doesn't really constantly one question, but im treated as such.
B.
Converse is being implemented as part of converge, it's going to really become the core.
Overall offering as I mentioned in my prepared remarks, we have over 170 different programs that were tried and tested to automate certain workflows.
<unk> can be described as part of a virtual primary care experience or in other.
Scenarios.
Israel is some of the differentiation or Conversely to other programs is its open nature is not only used as a tool that provides the extra programs, but it's a very powerful offering.
So we can take programs that exist in amendment amendments to the needs of the organization and in some cases create programs new programs altogether. So there is a library that is ever expanding the teams really customized to the needs of every customers and that's very important.
For many of our clients, especially the bigger ones that has a very strong opinion about how workflow should be managed how triage should be managed and mitigation steerage and things of that nature.
Thank you.
There are no further questions at this time.
Thank you for joining this concludes today's conference call you may now disconnect.
Okay.
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