Q4 2022 American Well Corp Earnings Call
Good evening My name is Savannah, and I will be your conference operator for today at this time I would like to welcome everyone to the L. O Q4, 2022 earnings call. All lines have been placed on mute to prevent any background noise and after the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press.
Star followed by one on your telephone keypad, if you would like to withdraw your question. Please press star one again, yeah, but you. Please.
Self to one question. Thank you and I would now like to hand, the call over to Sue Dooley head of Investor Relations with <unk> you may begin.
Hello, everyone welcome to <unk> conference call to discuss our fourth fiscal quarter and year end of 2022.
This is sue Dooley of AMOLED Investor Relations and joining me today are <unk>, chairman and CEO , Dr. Ido, Schonberg, and Bob Shepardson, our CFO .
Earlier today, we distributed a press release detailing our announcing this release is posted on our website at investors got AMOLED Dot Com and is also available from normal news sources.
Conference call is being webcast live on the IR page of our website, where a replay will be archived.
Before we begin our prepared remarks I'd like to take this opportunity to remind you that during the course of this call. We will make forward looking statements regarding projected operating results and anticipated market opportunities.
Forward looking information is subject to risks and uncertainties described in our filings with the SEC and actual results or events may differ materially except as required by law, we undertake no obligation to update or revise these forward looking statements.
On this call, we'll refer to both GAAP and non-GAAP financial measures a reconciliation of our GAAP to non-GAAP financial measures is provided in our posted earnings release.
With that I would like to turn the call over to Ido.
Thank you Sue and Hello, everyone.
I'm pleased to report that in Q4, we successfully kicked off an important and strategic year for them will.
On many levels it was an incredible year.
We rallied as a company and executed well, making meaningful progress in the transition to converge our software platform that we believe will enable and empower the future of hybrid care and which has already been embraced and implemented by some of the most demanding and innovative.
Health care organizations.
I would like to begin by reviewing a few highlights of the quarter.
Then I'll take a moment to discuss the market for our solution can describe key priorities for 2023.
After that Bob will review, some key metrics, our financial results and our 2023 guidance.
Then we'll be pleased to take your questions.
To begin here are some highlights.
In Q4, we had another great quarter for client migrations.
Converge is scaling well.
Specifically visit some converge continue to rise.
Grew from 16% of total visits for the quarter in Q3 to 28% of total visits in Q4 in fact, all of our key operating metrics are trending favorably and when.
We'll review that in a moment.
Our solution is resonating across all segments of the market.
We continue to strengthen our relationships with strategic clients.
In one standout example of this from Q4.
Formally extended our long term strategic partnership with elephant itself.
We are proud to be an important part of their digital platform for hills.
Which aims to attract engage and retain more clients, while also achieving operational goals.
We believe this validates the benefits along the.
These strategic partner that can empower and enable the future of care and we look forward to the future of this important relationship to help advance innovation from a visionary strategic partner.
What endorsement for clients like elephants in the high end of the market lift the visibility of converge.
Position extends to clients of all sizes.
For example.
Olson might help.
In Maine is leveraging converge to drive some of their system wide goals around DOCSIS care provider experience and internal efficiencies by consolidating technologies and streamlining workflows.
No. The light is a brand new client, which is rapidly deployed converged integrated schedule visits experience across many practice areas with more to come.
Our physician champion reports and improve clinical delivery experience with quality and efficiency gains compared to previous telehealth alternatives.
And we continue to deliver powerful new solutions in partnership with our clients.
For example, with north well, we extended their existing roaster, a robust automated care programs to include an AI driven pregnancy program aimed at reducing mortality.
The chatbot called North will pregnancy, Chet identifies potential urgent concerns links to care teams for evaluation in Atlanta disease, and accelerates time to care for women jewelry and after a pregnancy.
North will deliver as 1% of babies in the United States.
So far the checkbook has been used by over 600 patients with satisfaction rate of over 95%.
In one powerful example of the benefits of this solution North will help escalate lifesaving care, who pre claims CR for pregnant women, who reported high blood pressure in the check.
This is a great example of our enabling partner model.
We collaborate Iran meaningful products that provide value deliver outcomes and empower our clients to set new standards for care.
We are pleased with the consistent positive feedback on converge that is flowing in from our clients.
We are executing well and we have put many of the platform transition related challenges behind us.
Building on our track record is D, enabling partner for hybrid care.
Turning the page to 2020 three it is increasingly clear to me that we made the right decision to re platform our solution.
Now I'd like to speak to the broader environment for a moment and how I see our own role in it.
We just completed our annual sales meeting, which was filled with the energy of a new year, the promise of our converged platform and the many strong client and partner endorsement of our approach.
A lot has changed in the past few years.
Our teams are motivated by the certainty the digital first care is rapidly becoming the main highway for a variety of care modalities.
Whereby all types of providers and services and our role in this evolution is a significant one.
Yes.
Sorry industry, we are facing uncertain times.
As we see it the Nam will economic uncertainty creates both headwinds and tailwind for us.
We know hospital budgets are constrained.
And yet the challenges facing providers and Payors drive an urgent need to leverage technology to achieve their operational goals.
And our sales approach with driving every conversation to convey to prospects and clients.
Our solutions are the must have engine to resolve their pinpoints today and deliver on their strategic aspirations for the long run.
We understand the ROI and outcomes materialize quickly are a must in today's environment and it's on wheel demonstrating R O y.
In our DNA.
This approach resonates with health systems, which are prioritizing digital care to achieve important goals around staff burnout retention, new sources of revenue and streamlining workflows.
We support and embrace patients with their automated programs.
Gauging them to improve outcomes.
We enable models of care that allow our clients to differentiate their own approach to care.
Everyday I speak with health care industry leaders.
Struggling to unify fragmented technologies and define emerging digital care models.
Require a partner to work closely with.
A partner or to simplify this path.
A partner, who can imply a clinical approach to the underlying software infrastructure and best practices to advanced vehicles.
Hey, Tom will our differentiation is clear.
We have the clinical experience to understand the challenges our clients face.
Our platform is purpose built and future ready.
101 years of investing and understanding the needs of our clients.
Our approach to the market sets us apart.
We are a trusted partner.
We enable and empower our clients and never compete with them to deliver new and exciting ways to provide the care, while achieving important operational goals.
As we deliver on converge and the market response, we are solidifying our role as a digital transformation partner supporting our clients in defining an accelerating this strategy and aspirations to differentiate their own offerings.
Regardless of the environment.
Views this highly dynamic period of history.
Undertake our own transformation.
One that we believe has earned us a leading role to deliver on the promise of our mission and our long term model.
I'd like to take a moment to share a couple of key priorities for the coming year.
As we begin 2023, we are laser focused on achieving progress toward our long term financial model with the following three top priorities.
First at.
<unk> top priority remains migrating the balance of our clients onto converge.
We will strive to ensure the successful migration of our remaining provider clients onto converge and deployments for payer clients have already begun.
And another important initiative for us in 2023 will be to ensure the success of our strategic clients.
As we continue with these large and complex deployments, we will provide a shining example for clients and prospects of all sizes, who look to us for partnership enablement and acceleration of their digital care delivery plans.
Finally, our sights set on pursuing the tremendous opportunity to win new clients across the payer and provider universe, while expanding our footprint within our existing client base.
Reflecting this we are arming our teams with powerful new selling tools to enable the sales dialogue.
And we are up skilling, our teams to master the enterprise level solution based selling environment we are in.
As we pursue these initiatives we are further empowered by knowing the hard work of 2022 is behind us and we have achieved a lot.
We have completed the core elements will converge.
We have retained the lion's share of our clients.
We have effectively migrated clients and grown our percent of visits on converge. Our client list includes our industry's most far reaching.
<unk> organizations.
And experienced industry leaders have joined our company and hit the ground running partnering effectively with our existing talented teams.
We look to 2023 aiming to fulfill the promise of our vision of enabling the transformation in health care to a true hybrid digital care.
With that I would like to turn the call over to Bob for a review of our financials, some key metrics and our guidance for the year.
Well.
Thank you Peter and Hello, everyone.
I will start with a review of our operating metrics and financial results for the fourth quarter and the year.
I'll discuss our outlook and guidance for 2023.
I am pleased to report that all of our key operating metrics are trending in a healthy direction active providers is an important metric of the sustained value our clients see in our platform.
We ended the fourth quarter with over 107000 active providers representing growth of over 11% compared to a year ago.
As a subset active providers employed by our clients grew 12% versus last year.
We anticipate that our number of active providers will continue to rise as we migrate and implement existing and new clients onto our converged platform.
Another important metric is our average annual contract value or <unk>, which is a good indicator of the value we are delivering to our clients and the success of our land and expand strategy.
Health plan ACB increased over 19% to $862000 in 2022 compared to 2021.
<unk> for health systems saw a 13% increase to $401000.
This is in line with our expectations. During this time of the converged transition as clients focused on migrating to converge.
We expect HD data continued to expand as we look to grow our footprint within existing clients and add new clients over time.
Total visits were approximately $1 7 million in the fourth quarter, an increase of 10% compared to last year.
<unk> care visits drove most of this increase and what was the first real flu season since the onset of the pandemic.
This surge in on demand urgent care visits resulted in scheduled visits being 63% of the total down from our prior range of 70% to 75% over the last couple of years, but still up significantly from approximately 30% pre COVID-19 for.
For the year scheduled visits comprised 70% of total visits.
We continued to make steady progress migrating our clients to the new platform and we are proceeding according to plan.
In Q4 successful migrations drove visits on converged for the quarter to 28% of total and that number has continued to increase during Q1.
And now onto our financial results in.
In a transition year with many moving elements. We are pleased to have been able to achieve our revenue guide and exceed our adjusted EBITDA Guide for 2022.
Total revenue was $79 $2 million for the quarter, which represents growth of 9% over Q4 of last year.
Total revenue for the year grew 10% compared to last year to $277 $2 million.
Subscription revenue was $30 7 million in Q4 relatively flat compared to the year ago quarter for the year subscription revenue grew 12% to $129 million during the year subscription revenue growth was positively impacted by the inclusion of a full year.
Revenue from our 2021 acquisitions of silver cloud and convert that and was challenged by the temporary impact on bookings, we had expected well be focused on completing the converged build out successfully migrating our existing client base plus strategic client deployments.
The diversity of our revenue stream proved to be a real asset in 2022, as AMG and client related implementation services delivered strong growth for the year supporting our overall growth rate during this time.
Moving to visits in Q4, AMG visit revenue was 12% higher than last year at $35 $1 million.
Visit revenue was strong this quarter and in fact was just shy of <unk> medical groups, all time high of $36 million in the second quarter of 2020 at the peak of the pandemic demonstrating the enduring value of this service to our clients.
For the year visit revenue grew 7% to $124 $3 million.
Now onto some detail on visits AMG visits grew 23% for the quarter and 11% for the year with average revenue per visit at $71 and $76 respectively.
As I mentioned the early onset of an unusually heavy flu season drove urgent care volumes higher and hence revenue per visit lower for the quarter. As we have said previously while our AMG business is an important differentiator in the market and critical to many of our clients. 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 automated care programs and services like AMG.
Our services and care points revenue grew 18% to $13 $5 million in the quarter and 14% for the year. This strength was driven substantially by professional services revenue. We earned as we implemented strategic clients onto converge as we have discussed on prior calls revenues of this.
Tight highlight the strategic long term nature of our client relationships and the ROI they see in deploying our platform.
Turning to profitability fourth quarter gross profit margin increased 250 basis points versus last year to 42, 4%.
For the year gross profit margin increased 80 basis points to 42, 1%.
Gross margins may continue to fluctuate a bit from quarter to quarter, depending on revenue mix contributing to the increase for the quarter were a higher proportion of urgent care visits at AMG and a higher margin mix of services and care points revenue.
Over the long run it's our goal to drive a steady revenue mixed shift toward high margin recurring software revenue in pursuit of our long term model.
Turning to operating expenses during the fourth quarter, our progress in developing converge across a meaningful threshold and our overall project plan.
As required by GAAP, we capitalized $10 $2 million of development related efforts in the quarter.
Adjusting for these capitalized software development costs R&D expense increased by $1 $6 million in the quarter to $37 $8 million as we have discussed we believe that for Q 'twenty two represented our peak R&D spend and given our progress in delivering converge we expect that.
R&D spend will decline sequentially on an absolute basis over the course of 2023.
Fourth quarter sales and marketing expense increased 9% compared to a year ago. This was driven by higher sales and marketing activity across the board as we prepared for our January commercial kickoff meeting and ramped our overall sales efforts, reflecting the completion of converge.
We made some changes in our sales teams to align our resources around solution selling which are aimed at driving pipeline development deal velocity and deal size.
G&A increased 9% sequentially, driven primarily by the recognition of deferred non cash compensation associated with the terms of our silver cloud acquisition.
Adjusted EBITDA for the quarter was negative $43 $4 million, bringing the metrics for the year to negative $175 $3 million as we discussed on our third quarter call Q4 completed a full year of careful expense management around head count and we achieved synergies from.
The early integration of our recent acquisitions as a result, we achieved better than anticipated adjusted EBITDA, both relative to our preliminary guide for the year as well as versus our updated guidance last quarter.
Transitioning to the balance sheet, we ended the quarter with $538 $5 million of cash and marketable securities. We are fortunate to have a substantial cash position as it provides the resources to fund this temporary period of investing and the flexibility to pursue strategic opportunities that are aligned with our <unk>.
<unk>.
Turning now to our 2023 outlook.
2022 ended with puts and takes for our business, which we carefully assess and arriving at our guidance range.
First we experienced both continued impact from Covid and an early and severe flu season, which may not recur. This year. As a result, we took a conservative approach and are assuming normalized AMG visit activity of $1 45 to $1 65 million visits.
We also looked carefully at the spending environment, taking into account conversations with our clients.
You don't mentioned earlier, a challenging macro environment presents us with headwinds and <unk>.
On the one hand, the heart of our value proposition and our partnering approach directly addresses the budgetary and operational challenges our clients and prospects are facing today.
This is driving demand on the other hand. These challenges may also impact expansion and deployment cycles for our solution that are difficult to predict at this time.
Finally, we anticipate steadiness in our services and care points revenue, which we believe will remain at approximately 10% of total revenue.
Considering these factors, we expect revenue to be in the range of $275 million to $285 million for the year.
Given the sales cycle timing, we anticipate the majority of the bookings we generate this year will come in the second half of the year.
So a portion of the bookings momentum we aim to generate this year will translate to revenue growth in 2024.
Next some color on subscription software revenue growth, which is a primary goal for us.
As we emerge from this time of transition and continued migrations, we are turning our attention to reaccelerate and client bookings via expanded use of new modules on converge.
With converged ready and reference clients building, we anticipate a return to strong software bookings momentum.
Therefore, we believe software revenue will grow faster than our overall business in 2023.
Now onto our guidance for our progress toward profitability.
For the full year 2023, we expect our adjusted EBITDA to be in the range of negative $150 million to $160 million.
Much of the expected improvement in adjusted EBITDA will come from the anticipated reduction in R&D spending layering in over the course of the year as we had planned.
Wrapping up our guidance, we are encouraged by our progress to date all of our key metrics are trending favorably and we have put much of the risk of our transition behind us our teams are executing and product and client migrations and we have earned the validation that our anchor clients subscribed to our approach to the market.
The clients, we have implemented onto converge report, a very high level of patient and provider satisfaction and technical success and they give us valuable reference ability with our prospects. Our ROI case studies are fueling robust conversations with our substantial pipeline of Upsells and new logos.
Before I conclude my remarks, I would like to comment on our long term model as we outlined a year ago.
As we enter the next chapter of our transition we remain confident in the components of our long term model, which describes our path to cash flow breakeven and remains our goal. We believe our differentiated approach to enabling digital care delivery positions us well to deliver a sustained revenue growth and expanding.
Profitability over the long term.
Thank you for listening with that I'd like to turn the call back to <unk> for some closing remarks.
Thank you Bob.
Before we conclude our prepared remarks and take your questions I want to take a moment to thank our teams.
They dedicate their talents to developing and deploying our solution.
Extending our market reach delivering thought leadership around our mission.
And finally contributing to our unique company culture.
In closing we are driven every day it on well to continue along this path to achieving our goals and pursuing our mission.
Our solution is in high demand because it solves important programs for innovative healthcare organizations.
To your goal to hybrid digital care.
We begin 2023 on strong footing.
While we remain in broader environmental uncertainties in our world today.
Early days for digital first health care.
Our role is unique and differentiated.
And the opportunity before us has never been brighter.
With that we're ready to conclude our formal remarks.
Thank you for listening today, operator, we are ready to open the line for questions. Thank you.
Thank you and at this time I would like to remind everyone in order to ask a question. Please press star and then the number one on your telephone keypad.
We do ask that you. Please limit to one question and a little pause for a moment to compile the Q&A roster.
And our first question will come from.
Markwest Morgan borrow.
Please go ahead.
Well Craig your line is open.
And we will move on to our next question.
Charles <unk> with Cowen. Please go ahead.
Hi, This is Lucas on for Charles wanted to dive into the 2023 revenue guide implies growth that's a bit lower than we had expected obviously, it's a well documented the difficulty that health systems are dealing with right now.
Kind of wanted to dive into conversations you guys are having with your customers as the you know is there something slowing with the migration to converge our customers delaying things on there and is it more of customers pulling back or are they just putting projects on hold for second half you could give.
More color around that that'd be great.
Thank you Luca so I appreciate the opportunity to talk about that.
As I mentioned in our prepared remarks, we are actually executing very much exactly or even better than our plan.
2022 was a year of transformation, where we re platform.
Our major AI offering.
This is a high risk time for any company.
And the risk include a potential churn and delivery of the new platform the ability to migrate clients to the new platform.
To name a few.
As I mentioned before.
We did that and we finished the year with.
A solution that is ready for prime time, and not only that we were able to convert 28%.
Our traction into the new platform that is dramatically more efficient more sticky and more expandable.
Very significant wallet share same store growth opportunity going forward.
Because of the initial and very importantly, maybe to add.
And we did that while retaining the lion's share of our customers and practically 100%.
All of our strategic customers, which is far for may, albeit.
In addition to that we're able to have some very sophisticated large.
Clients like CBS and events and other debt.
We did not disclose yet.
Make a long term decision on the new platform.
So looking back we couldnt have asked for a better outcome for the year at the beginning of the year, we were able to part ways with an army of contractors that.
That helped us create the core components of the platform that is already now.
Being deployed adding to.
Two the efficiency.
Because of these dynamics, we always knew that 'twenty three will be a muted year only because we are unable to sell a platform that is not yet finished and all the dynamics that I just shared.
Adding to that there were two trains headwinds that I'd like to point out that werent as apparent.
Last year, and maybe also related to your own expectations.
One is the macro.
The macro obviously is an unknown as it relates to 2023, but it has the potential to impact sales cycles deployment cycles as velocity of expansion and things of that nature. While our solution is a must have and our clients are telling us this potentially could.
You kind of a barrier for further growth. This year. In addition to that we noticed interesting dynamics as it relates to the new and the pandemic in.
In Q4 of this year.
Turned out to be very positive in the sense that there was a very strong flu season and associated.
Revenue with it but just as easily played out the way. This year. We felt it was responsible to take those two headwinds into account as we.
Present.
Guidance protecting our downside.
Also because of those headwinds we feel that it's not.
Not prudent to include a long list of a tail wind.
That we see.
We know our platform is scaling well, we know you've seen very much very high demand. It's validated by so many sophisticated the organization and its very timely in Wales market is.
Very well positioned to grow very aggressively.
Over the next few years.
So that's maybe a long answer to your short question, but Thats really how we ended up with a guidance that we just shared.
Okay, Yeah that's helpful.
And then in terms of.
Your profitability guide it seems like Opex is going to be in a similar range to our expectations and the street's expectations are one or two here. If we should still think about adjusted EBITDA breakeven by year 2025, and if that expectation has changed at all.
Lucas I'll take that Bob.
So.
Just taking the opportunity to.
To rewind the clock a little bit to about a year ago, when we when we put out that guidance.
There were.
There were three kind of core.
Assumptions underlying that path to profitability framework.
All of them at the time had had different degrees of risk the <unk>.
<unk> was a continued strong demand for digital care enablement.
And as we sit here today.
We believe that the market opportunity is only better than we thought a year ago and large strategics are voting.
With their feet on that.
The second one.
Second key assumption underlying that model was that we would deliver converge.
Migrate customers.
Begin to migrate customers over 2022 to get us on a path to where we could sunset the legacy platforms.
And and realize the efficiencies associated with that.
<unk>.
The proof in the putting there is from a standing start where you went to 28% of our visits this quarter or this past quarter.
On the new platform.
And Thats continued to trend higher.
So I think thats, a check there too and then on the <unk>.
The last key.
Function there was that.
Once we delivered.
Convert the core components of converge that R&D would normalize.
And thats happening.
Youll see that in the first quarter start to present, and we will continue to get better as as we are able as Vito said too.
<unk> set the.
The contractors.
That's really been the backbone of a lot of that incremental spend on converge. So so all of that kind of provides the foundation for bookings and revenue acceleration in our margin improvement.
And as we sit here today visibility on all of that is much better than it was a year ago.
But there are things, we don't control like the macro that just went through and that can influence the pace positively or negatively.
Two.
When we get to that.
Breakeven path if there is a delay we're certainly well equipped to handle that.
Got the balance sheet.
Whether that and also now that we've got a commercial platform in the market a lot of our spend you could consider discretionary.
And we have much.
Lot more levers to play with then than we have over the last couple of years. When so much of our spend it's been driven by delivering converge. So in summary, we can get there, but if were delayed we don't see any change in the fundamentals.
And our next question will come Ryan Macdonald with Needham and company. Please.
Please go ahead.
Hey, Thanks. This is Matt Shea on for Ryan Macdonald, Thanks for taking the question.
I wanted to follow up on the 'twenty three guidance, let's start with <unk>.
Start with the revenue so we were a little bit surprised to see platform revenue declined sequentially in the fourth quarter and then.
Just on some of the building blocks for 'twenty three.
It looks like it's going to come in lower than expectations in 'twenty three as well. So just curious what is there in the quarter that caused the sequential declines.
The outlook for 'twenty three or is this solely just.
Bookings timing consideration and then maybe you could remind us what the bookings conversion cycle looks like for <unk>.
Converged bookings to revenue.
Thanks, I'll take that too.
I think what you ended with was really the most important aspect of the answer to the question.
Again this is.
2022, very much a transition year.
And with it brings challenges beyond the macro.
We did see customer churn at the low end.
Especially at the low end, where the switching costs are a lot less.
And the market.
And beyond beyond that.
Limited amount of churn that we saw at the low end customer expansions are by their nature with the re platforming delayed and new prospects want to evaluate the new platform before they sign up for multiyear contracts.
And so.
That dynamic is very much evident and really we've been living with that for a lot of the last almost couple of years at this point.
We're now at a point, where we have.
A commercial platform in the market.
And that plus a lot of tools.
And the toolkit for our sales force, we think is going to allow us to really.
Start to inflect.
Bookings side, which is going to drive obviously revenue growth.
To give you a.
Our sense for the time from booking to revenue you know it really depends on how large the customer is and how complicated the.
The implementation.
A reasonable expectation there.
Taking into account scheduling on the customer side, our side and then the work is probably five to six months.
On average so so so you can imagine with bookings building over the course of the year.
And then revenue is starting to present from that more in the back half of the year.
And then driving really growth into 2024.
That's the dynamic going on with what's perceived to be I think muted.
Our guidance for the year on the top line.
Got it that is super helpful.
And then keeping in mind it sounds like same store growth is going to be a big focus and you guys have talked about some of the changes to the sales force to align with that.
So you've talked about maybe a cadence of 16 to 20 weeks for a customer it comes on the converge realizes the value and then you guys can upsell additional modules have you guys seen some clients complete this journey.
And if so what does it kind of looked like maybe what are they what module was of the highest demand for them to up sell to and how do you see that trending going forward.
Sure Matt so.
It's hard to compare converge to our legacy platforms converge is so much bigger can do so much more and has so many modules.
Really cater to a very wide spectrum.
And of course, not all our clients need everything at one <unk>.
Very common that they focus on the pain points that are important to them today, but they take great comfort.
They can really expand.
In a very material way.
Too many many directions.
That trend, it's very apparent to use our success with very very large customers.
Those customers usually.
From the get go many many use cases, although the deployment stage. They talk a lot it's not binary they don't do everything at one just because of operational reasons, but they do have announced the healthy appetite in the HCV and those clients is significantly.
Significantly higher than what we've seen before.
When we think about it we.
You really want to make sure that we maintain our very large footprint in the U S health care that we had before and that certainly seems to be the case and they all do better and better.
Every day and really establish a trusting a lifelong or at least very very long relationship with those clients.
We serve their needs as a partner.
They need the really worth saying.
Saying it another way to think about digital care delivery, it's really hard to overstate the propulsion and the importance of that transformation.
In the proportional business to <unk>.
<unk> customers so.
Net of it.
It really depends.
Different clients, we see examples all over the spectrum.
We believe it's a timing issue.
Some of the larger organization, especially payers they have the ability to deploy more and the need to differentiate cluster and accomplish more or there is a little bit more.
Therefore in this environment, but they all trend.
In the direction of good appetite I'm pleased to also share.
Even in our smallest clients with simpler use cases, some of which we lost towards transition, we see a trend of coming back as they discover the need to buy more modules that are more sophisticated.
To give you more color on that maybe to be more <unk>.
<unk>.
When we look at payers.
Enable remains on digital first and mitigation, we feel is very much in demand today, obviously it allows them to offer a phenomenal member experience and also very efficient way to route those members financially and clinically to the most appropriate physical virtual.
Or automated.
The intervention.
The benefit of that that all of those modalities work in harmony around a single patient experience and when we think about health systems.
As Bob mentioned earlier, we care very much about staff retention. These days patient experience improve efficiency and the opportunity to diversify our revenues by going beyond their catchment area and begin to trade information services with either segment.
Very often payers did.
They can serve so thats another a very important trend.
If that's something is very wide there are many many examples the power of the platform.
I think the single platform that serves the entire market.
And really our clients are coming with new and innovative ways to leverage that that trend is likely to greatly accelerate and expand.
Going forward to net it all.
We believe that we are in the very early innings in the very early days of realizing the potential of the same store growth with our existing customers.
Yes.
And the interest of allowing everyone. A question, we would like to remind everyone to please keep your question Glen and then our next question will come from Okay.
Back with Morgan Stanley .
Please go ahead.
Hi.
Hi can you hear me okay.
Yes, Hi, Craig that's correct yes.
Oh, great apologize for that.
Use before.
I wanted to follow up on the comments around ACD and the growth that you saw this year, particularly as you kind of play out this year and going slowly just how youre thinking about the momentum behind ACD in any particular.
<unk> debt that you would call out whether it's an update on the behavioral health side or things that you feel the most.
What are you seeing the best customer response.
Well just on the Craig I'll, just take a little bit on ACB and Ido can address maybe some of the specifics around modules and behavioral.
But we did see especially on the health plan side very nice growth in HCV.
Driven primarily actually both by.
Existing customers, taking more of the same store sales and new logos and so that.
That's very much in line with our plan.
And what we expect going forward.
On the on the health plan side I'm, sorry on the health system side.
A little bit more complicated of a story still nice pick up there, but there are a number of moving moving pieces.
On the health system side.
We had some benefit from consolidating.
A full year of <unk>.
Revenue from.
Silver cloud and converse.
For their customers on the on the health system side, we also.
Unfortunately did see some churn at the low end.
As we've said a number of times here.
And Ido did mentioned that we're starting to see some come back, but but that did impact.
Positively because we lost some small.
Inputs to the average.
The ACB there.
So puts and takes there and obviously some movement.
<unk> around.
Around upsells.
As well it was helpful, but it netted out to.
Reasonably attractive growth on the ATV side for systems and again, we expect with the.
With bookings.
And revenue growth on the health system side, the bookings more this year driving revenue growth in the second half and into next year that also tick up so we expect growth on both its a key driver.
For revenue growth.
For us along with with new logo signings.
And so I think thats really I think an explanatory around.
The movements. This year, if you want to provide some color around.
Where that growth is credit Craig is asking we expect that to come from from a module perspective.
Profitability.
So essentially there.
There are many areas of unmet need for the U S patient or really patient.
Round.
Around the globe, our unique approach is not to try to fix it with the serviced ourselves, but rather enabled the connectivity to the trusted source of oral care and empower them to focus their time significantly more efficient.
You raised a really important therapeutic area, which is to be able health and unfortunately, we see a full fledged crisis.
Now in the United States that drive different types of demands, including rising out of pocket DTC payments for different modalities of care with MX mix.
Results, we have a clear vision on how this should play out but essentially.
The message will be similar to any other therapeutic area that we enable which is to take the to leverage its trusted the providers that we know that are integrated in our normal main pathway of care and just allow them to be dramatic more effect. So a good example, casing point Silva Claude.
<unk> that we acquired last year, a silver clouds as you may remember.
Was able in the UK to dramatically increase the ratio between the number of therapies in the number of patients that they can.
Care for more than fourfold.
More than four times and as a result, a dramatic decline in the cost per.
Convention.
And we did that not by hiring an army of psychiatrists and psychologists, but rather empowering the existing therapies.
Can be much more effective.
With their time by automating a lot of cash that's the one way in many ways, we see very strong demand for behavioral health enablement and efficiency and we definitely believe as you rightfully guess this.
This is going to be a very high demand module has concurred is being deployed this year. There are many other examples beyond dependence we have right now.
And our next question will come from Jack Wallace with Guggenheim Securities. Please go ahead.
Thank you for taking my questions.
Just wanted to ask the ACD question as it relates to the guide just a little bit differently.
It sounds it sounds like.
Don't expect many new logos this year.
It's an expansion within the client base here within that expansion.
My sense is that this is mostly upsells versus say intensity of user.
Clients using our core platform across whether it's more facilities are more settings is that the case.
Notice of I'm not sure how you got this compression we were maybe we weren't clear enough.
We see extraordinary demand for converged by both existing clients.
And a new one.
The decision to migrate and there's not an obvious decision. It takes time and integration training and things of that nature of the fact that we're in.
These uncertain times, we see such strong adoption for the new platform.
Encouraging.
But Cvs will definitely was not alone as the new.
Organization that understood the value of the new omni platform and we definitely plan to see others.
The guidance is focused on revenues not on bookings, we definitely see that as the year of significant acceleration as it relates to booking the recognition of which is dependent on various factors, including the macro and the pace of our customers.
We need to be careful.
In predicting.
But.
I would love for all of you to be with us through here of a beta was to convert clients are saying these days and the level of enthusiasm and encourage us encouragement and thats true not only for existing customers. That's definitely true also for new ones.
And our next question will come from the line of Brian <unk> with Bank of America.
Please go ahead.
This is Hannah Lee I'm on for Alan Thanks, Vivek. Thanks for taking my question.
I was wondering if you can provide additional color on the composition of revenue growth for 2023 is it primarily coming from subscriptions or visit.
We.
Thanks.
We provided guidance.
Four visit for the number of visits that.
We expect for AMG <unk> Medical group.
So youll see that that is fairly conservative relative to what we posted this past year, primarily because we.
I don't want to aggressively assume that we again see.
Covid spikes as well as <unk>.
Early in severe flu.
In 2023, so I think we've been conservative there.
<unk>.
And then on the.
I guess, we would expect I would give a little bit of guidance that we would expect.
That are our software line item.
Subscription revenue.
Would grow faster than the overall.
Revenue growth.
That is assumed for the entire organization.
So I think that gives you a sense as to.
I guess, what's going to drive.
And what the components of it looked like.
And our next question will come from Joe Linda with tourists security.
Please go ahead.
Alright. This is <unk>. Thanks for taking my question I kind of want to touch upon Cvs there is clearly a huge implementation.
Can talk about what kind of contribution is assumed in your guidance and additionally, anything to share in terms of how does all of that has been so far and how do you think about the opportunity.
Okay.
Evs on additional areas. Thank you.
Okay.
Sure.
Any of the participants know we are very careful not to focus specifically about our customers. We are an enabler.
Implement platform that participate in realizing important business goals.
For our customers and they usually like to share it when they are ready.
We have Cvs already shared that we are the backdrop of their very large cross company initiatives for digital care enablement, and we couldnt be more grateful our relationship with this partner is very strong.
And we are very optimistic.
Future and its potential for expansion.
I would say more generally and not necessarily about them, but really true for many customers, especially the bigger ones.
Usually are.
<unk> business model is such that there is a startup a recurring fee for.
For the baseline and then as more traction and more use a larger addressable audiences. They participate and decline total total loss, we are increasing our value and revenue capture from there.
Really there is no exception.
This.
Business.
More than <unk>.
Potential for the likes of Cvs too.
Grow within their own very large.
Footprint already and even impact.
Tire ecosystem in various ways it could not be overstated.
However, we cannot automatically assume.
Anything in our guidance per design.
Really assuming things that we have extremely high visibility too.
Nothing unnatural.
Our guidance.
The visibility is only four things that we think are extremely likely to happen.
Although there is numerous amount of upside that we believe in we're just not sure exactly how it's going to play out in real timing and redbrick.
And our next question will come from Eric Percher with Nephron research. Please.
Please go ahead.
Hi, This is dolphin for Eric Thank you for taking our question.
All of my questions have been asked already but.
With respect to the services.
Revenue is expected to go to 10% of revenues this year.
I just wanted to gain an understanding of how.
Hudson portal in nature that is.
And.
How much continues would be expected to continue into next year. Thank you.
Okay.
I just wanted to make sure I'm understanding the question.
Are you asking a quarterly question or is it how much.
Are you asking me, how the quarters lay out I'm not sure I'm not sure.
Yes.
Sorry, I think I caught that services revenue are expected to be 10% of total revenue. This year is that did I hear that.
Is that.
So if we think about what's driving that revenue is that something that we would expect to continue to grow in future years or is there any kind of lumpiness to this year versus future years that we should be kind of considering.
Well it was more I guess in 2022, it was more than 10%.
<unk>.
And there was some lumpiness in that.
We and the Lumpiness really is mostly attributable to.
Large complex custom integrations.
That.
That.
That we take on and.
And so.
Pegging, when those are going to happen or how often theyre going to happen is difficult.
But thats just a component it kind of drives up.
<unk> are down.
The percentage of revenue the other components of it obviously our care points.
Which have kind of an attach rate.
Two to how we're doing on.
Sales to our bookings too to health systems and then there is also.
Some.
Marketing campaigns that we help out on for are for.
A number of our clients.
Those have been.
A very regular component of our revenue through the years as well so.
Marketing revenues and the care point revenues.
I expect those to continue much as they have in the past and then the.
The implementation type revenues lumpy.
Tougher to predict.
Very high value as Theyre really indicative of.
Good forward indicator of revenue to come.
But I can't really give you much beyond that.
And our final question will come from the line of David Larsen with BTG. Please.
Please go ahead.
Hi, it's my understanding that converge is a very comprehensive platform does a full digital first solution. That's one of the reasons why Cvs selected you to be one of our key vendors going forward.
Agree with that strategy can you maybe talk about how many sort of different kinds of modules beyond sort of pure telehealth are now part of converge. So like is there like diabetes cholesterol mental health are there, maybe like 10 or 20 additional sort of digital health modules.
Plugged into converge.
And then is there a higher price point, depending on how many different modules youre clients select and just any color around sort of the incremental revenue contribution for those who would be very helpful. Thank you.
Hi, David you're absolutely correct.
There are really two things here to bear in mind one is.
Convergence is indeed, the platform and it's a very open platform.
It's designed to really bring together.
Patients providers other participants around the entire spectrum and types of care.
At our physical virtual and automated but also across the entire care continuum in an integrated way. So it's quite a task. Obviously, we don't expect ourselves to offer all those services, nor do we think that the right way to go at all but rather we are enabling the connectivity the integrate.
<unk> the orchestration more than anything else in that way.
Amazon is much closer to two am will then epic for example in Wales.
And the way that we operate converge is very easily open to third party, whether it's medical devices or different type of programs and so on we don't count them anymore.
101 more of those packages if you will many.
Many of them are made not by email.
Made by the lack of sward and title care and the Cleveland clinic and really many many out there.
Entities that want to participate in the integrated experience <unk> experience is extremely important for our buyers cio's today struggle with enormous fragmentation and inevitably LC suffering including patients and providers by leading to low to multiple apps and serve.
This is these are all for not connected the source of errors and cost.
Customer acquisition and another rig in either way.
As we grow we currently plan to include some anchor applications from services like automated be able health, which we think are very very important or second opinion through our JV with Cleveland clinic is great examples and use cases for the ecosystem, but we fully expect.
Really limitless amount of overtime programs and services to be offered by others, we definitely plan to monetize the value of integration.
Both by the impact it has on risk bearers on the one hand, and that's the important part, but also by allowing access to different vendors and innovators.
Really a dramatically reduced their entry points into the covered services and the audiences with our clients.
Presents I hope that.
Clear.
And that will conclude today's question and answer session Schanberg I turn the call back over to you.
Thank you very much operator, thank you very much everyone. We really appreciate your support of <unk>.
And our journey to converge and we look forward to talking with you again soon.
Have a nice evening.
And this concludes today's conference you may now disconnect.
Yeah.
[music].
Yeah.
[music].