Q2 2023 American Well Corporation Earnings Call

Good afternoon.

My name is David and I'll be your conference operator today at.

At this time I'd like to welcome everyone to the M. L. Q2, 20 twenty-three earnings call all lines have been placed on me to prevent.

After the speaker's remarks, there'll be a question and answer session.

Like to ask a question during this time simply pressey Starkey followed by the number one on your Touchtone keypad.

To withdraw your question press Star one once again.

Can you please limit yourself to one question.

I would now like to hand, the call over to Sue Dooley.

Mr Relations at M. L. You may begin.

Hello, everyone welcome to animals conference call to discuss our second quarter of 2023.

Julie is animal Investor Relations joining me today are animals, chairman and CEO , Dr. <unk> and Shepardson R. C F L.

Earlier today, we distributed a press release detailing our announcements. This release is posted on our web site at investors got animal Dot Com and is also available from normal news sources. This conference call is being webcast live on the I R. A 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 will make forward looking statements regarding projected operating results and anticipated market opportunities.

This forward looking information is subject to the risks and uncertainties described in our failings with the S. A C and actual results or events may differ materially <unk>.

Except as required by law, we undertake no obligation to update or revise these statements.

On this call will refer to both gap and non-GAAP financial measures a reconciliation of captain non-GAAP financial measures is provided and are posted earnings release.

With that I would like to turn the call over to <unk>.

Thank you Sue and Hello, everyone.

The second quarter of 2023 was another solid quarter for our company.

With most of converge developing behind US we made progress as we continue to make reading health systems and pay your migrations are under way I'm also pleased to announce we ate it too or at least a strategic clients will converge further validate take our approach to the market.

We are also putting important pieces in place as we work to Reaccelerate a bookcase momentum.

I would like to go into some more details on the highlights of Q2 before discussing what you're seeing in the market then.

Will cover our financial results.

During Q2, we maintain a steady pace of clients migrations visit.

Visit some converge rose to 43% of total visits and Q2 up from 36% last quarter.

We also successfully executed on the migration of Intermountain health major driver of the symmetric during queue to a few other examples of these successful migrations and implementations include Northern Arizona Hills in <unk>, California.

I'm proud of our teams who continued to drive successful migrations and I'm pleased to report that converge continues to deliver superb levels of availability and value for our clients.

I'm also very happy to announce that the highlight of Q2 was the successful launch of a new and very large strategic pay your client on converge.

We are proud to be the engine powering their approach to hybrid care.

This fear respire to deliver a best in class technical success rates for their provider visits.

A phone go alive declines scale rapidly and they're a technical success metrics sort. This is especially available example for us because this client demonstrates the power and value will be connective infrastructure platform independent of the traditional urgent care products purchase of a peers in.

Faked converge is already delivered deficiencies, but fulfilling and meaningful reduction in the load on the client's own support call Center. In addition, meaningful savings are anticipated without connective platform across their organization, which allows for more accurate and efficient course sure I'll go rhythms better remember <unk>.

<unk> and Beck and process for the strategic client we are owner innovative leading pair has chosen us as their Parker.

Doped, a broad spectrum of our capabilities and look to solve important operational priorities in the evolution to true hybrid care delivery and set new standards for the industry.

Continuing with go lives, we had an exciting expansion deployment of our solution aimed at alleviating the nursing shortage. It sounds are not viewed from nursing is an emerging capability enabled there solution, which represents a meaningful opportunity for us with mutual nursing care teams leverage octave.

<unk> devices in our software to monitor multiple rooms efficiently hindered alerts escalate for for prevention and improved the overall patient and care team experience. Sandra Nods is currently live with spiritual nursing rooms across their organization with a plan to expand to additional hospital.

Facilities and incorporate additional variety capabilities, including via to rounding specialty services and pharmacy consults.

Now I'd like to speak for a moment about our bookings related activity as we pursue the hybrid care enablement opportunity in front of us.

Q2 was a very active quota for us as we continue to ramp or enterprise solutions selling methodology Dakota was busy with sales engagement across the Bering provider universe, while we also work to extend our footprint within our existing client base.

Our sales team is sowing the seeds to reap the benefits over a new platform. He are a few examples of our success this quarter we.

We had the collaborative and creative when with a new client would county hospital in Ohio.

Wood County will post QR codes across their facility and across nearby Bowling Green University campus. These will seamlessly connect staff patient and students to automated programs and care teams in times of need will be able to health services.

Demonstrating the potential that exists within our installed base of clients, we decisively expansion win over our behavioral health services, extending our partnership with one of the largest hospital systems in the southwest. This hospital system managers 16 hospitals in multiple health care facilities throughout the.

State of Oklahoma, setting a great example for others in the region.

Finally, we also two traction in our efforts to grow our customer footprint in automated virtual care programs.

State and Corinne and health are electing to extend the benefit of our automated care programs across their organization.

In the past we've spoken about the powerful benefits of R. E D discharged program and a life saving pregnancy checks.

It's exciting to see these programs applied to a growing number of use cases for example in queue to Penn State expanded to include six more instances of these valuable programs.

I'm pleased with how our relationships with these truly innovative organizations are growing beyond trust that they'd have to provider to key strategic hybrid care enablement Parker.

Before discussing the market for a solution I want to share a couple of successes for my internationally efforts or track record for delivery measurable results inspiring partnerships that extend our reach we leverage our track record across the <unk> chest in the U K two irelands H S C.

National Health service of Ireland V. H S. C will rule out of taxis store digital will be able to health programs nationwide.

We also establish a new partnership with discovery health in South Africa, and we had an important renewal in Australia with Honeysuckle health. The demonstrated success. So very digital will be able to health programs are a big component of these wins.

While our sales therefore, it's a focus in the U S. We are planting the seeds for international expansion with flagship partners starting in English speaking countries and leveraging our established presence in Europe and in Israel.

We think these wins extend our total addressable market and further validate the large opportunity we are addressing.

Now I'd like to take a moment to comment on the environment and a focus on driving growth.

Out in the field of my sales conversation interactions with health care leaders continue to underscore their priorities.

On budgets in healthcare Israel.

Improving margins solving staffing shortages, establishing new sources of revenue and improving patient experience and outcomes consistently rise to the top of their list. These.

These priorities require health care leaders to rigorously prioritize spending.

Increasingly a key to that involves leveraging technology by evolving to a digital first approach to Highbury care in this environment demonstrated outcomes are essential and this provides a longterm tailwind for us.

These conversations about converge leading to more involved more strategic investigations or how converge can enhance patient and provider experience and improve operational efficiency. We are finding this new elevated dialogue can also take additional time into sales process and in some instances.

<unk> influence the timing of bookings commitments.

Because of this our booking performance and each one was somewhat muted diverse as our expectations and will impact a full year results.

While this conversation can in some cases extend the sales process. They are at the core of our platform approach and you view them as opposed to you for a business over the long run as we quickly again experience selling converge and proof points and use cases accumulate we <unk>.

Cycles can shorten and become more streamlined the.

The shift to converge platform requires changes to selling approach from the pulling solution focused sale <unk> based solution driven missile dollar G, which we believe will result in long term partnerships and high customer value and retention.

As we entered the second half or go to market teams are developing experienced rapidly and I'm very focus on mastering this transformation.

The transformation to Ottawa based enterprise selling involves upscaling training and rapid ramp of marketing programs to position or solution and grow our pipeline. These airforce Ah well underway.

We are also accelerating selling initiatives for a high R O Y automated programs and virtual nursing. These.

These solutions are in high demand and help our clients efficiently scale in a labor constraints environment.

In this regard I'm pleased to say that a highlight of Q2 was the addition of the new leader of our growth organization Kathy wider.

We are excited to have kept his experience with files for organizational transformation is rely on our team around in Ottawa based selling mythology.

He brings with her important capabilities and insights from years that United Health Group, often Blue Cross Blue Shield of Massachusetts and fidelity.

To conclude this discussion of our go to market, we are making the necessary moves to ensure a place at the table transforming our Saturday approach in order to establish our solution is it must've in any environment. We are winning the most strategic players in health care.

We remained steady in our confidence in the business over the longterm bolster the virus strategic customers successful migrations in case examples.

Meanwhile, the industry is taking notice of our solution and I wanted to share a few examples.

Demonstrating I'm was robust offering in the digital be able health space in May I'm will rake highest in obvious marketplaces top digital <unk> health companies report the report speaks to how our automated programs help health systems alleviate strains on teams <unk>.

He describes our ability to empower cost effective proactive accessible care to under so populations and hesitant patients. It also praises AMOLED psychiatric care as comprehensive and evidence based digital mental health content in June our automated programs were recognized.

The journal of diabetes Science and technology published an article on the Ficus seal diabetes education Checkbook pilot.

All sorted by a client Mister health. The article highlights how program drove an increase in self care confidence for patients and a 13% reduction over a one C higher than the control group.

Continuing with success stories are popular webinar serious doing well featured the compelling example from El Camino Health.

<unk> innovative health system shows on bill for its own demand virtual care platform in 2019.

Launch automated programs shortly after that.

First client migrated to converge <unk>.

El Camino has big plans to be at the forefront of digital care and they are a great example, overland and expand story for us.

In a highlight of his webinar coming to reported that 92% of patients said their spirit or automated checks made them feel more confident managing their health.

Before wrapping up I want to comment briefly on the current dialogue around artificial intelligence any simplifications in health care and <unk>.

We believe this conversation is lifting awareness and acceptance for hybrid care overall and it will be a tailwind for our growth.

Ah related technologies are advancing quickly converge as bill to allow for integration of AI, We trust of providers, both in person and virtual.

We enable the future ready engine to connect and empower healthcare organizations and innovators is health care adapts to an artificial intelligence world.

We believe I'm will is uniquely position to accelerate a <unk> and value creation. This is because both native and third party applications a way I can be embedded in associated with converge, thus, enabling trusted existing health care connections and <unk>.

<unk>. This is a patient who has regular interactions with their doctor V. R platform and will begin to benefit from a I powered follow ups on behalf of their doctor between life visits.

<unk>, we believe a I N hybrid care will amplify our hybrid care platform, which is designed to extend and augment rather than replaced care teams and drive improvements in patient and stuff experience as well as operational efficiency and outcomes.

However, as we evolve to hybrid care and integrates with the automated programs. It is crucial that we ensure a patient and provider confidence in these tools.

Seeing that to ninth we've given some examples that demonstrates we are doing that today.

In closing hybrid carries is rapidly becoming the main highway for it but the journey complex clines looking to address technological fragmentation and move beyond they build it yourself approach are seeing the light we are adapting are selling missiles.

Allergy rapidly.

With our unique combination of technology services and client experience. We believe I'm will is ideally suited to be the one stop shop, where our clients can access the benefits over the digital care transformation revert as context, I would like to turn the quote over to bulb to a.

You are cute to financials, some key metrics and all guidance Bob.

Thank you me, though and Hello, everyone.

Overall, we are encouraged by progress in our business with important customer validation of our new platform. Many successful migrations and strong customer feedback I do Wanna take a moment to comment that many of our metrics and results are being impacted to a degree by charnock customers on our legacy platform that we previously anticipated.

With that context, I'll start with a review of our operating metrics then turned to financial results for the second quarter and a revised guidance for the year.

We ended the second quarter with 106000 active providers representing growth of 5% compared to a year ago.

This represents a 2% decline from last quarter as during Replatforming efforts temporary declines can occur we continue to view asking providers as an important indicator of the sustained value our clients stay on our platform and we anticipate that our number of active providers will continue to increase as we migrate existing and implement new.

Clients onto our converge platform.

Total visits where approximately $1.5 million in the second quarter down 4% over last year schedule. A visit represented 69 per cent of total visits in line with our experienced over the last few years. We believe total visits declined year over year due to a combination of factors first we saw some impact.

Of declines on the legacy platform and second we believe we are returning to a more typical seasonality and visit volume, which was less prominent during the pandemic we.

We continue to make steady progress successfully migrating our clients to the new platform and Q2 successful migrations drove visits on converge for the quarter to 43% up from 36% in the first quarter of 23.

As we look toward the remainder of this year, we intend to complete migration for the majority of our provide our customers and they should drive visit sound converge to over 50 per cent by year end and the Zito said payer migrations have begun given payer visits are tied to the enrollment cycle ear and we expect to see payer related visits transition to.

Converge next year.

And now onto our financial results.

Total revenue was $62 million for the quarter down slightly from a year ago and also from last quarter.

Subscription revenue was $28 million in the second quarter slightly down from the first quarter, reflecting churn associated with our legacy platforms.

Customer experience on converge is excellent and we expect this revenue headwind to lessen as we successfully migrate the balance of our customers onto converge in the quarters to come.

Moving the visits in the second quarter AMG visit revenue trend at six per cent lower than last year and it was $28 million.

A M G visits declined 3% versus the second quarter of 22 with average revenue per visit $3 lower at $77 due primarily to a higher urgent care visit Max based on our experience. So far this year. We believe 2023 visits are looking more in line with.

Historical seasonal patterns in the period between 2020 in 2022.

Our services and care points revenue was $6.3 million for the quarter, which represents an increase of $3.6 million from last quarter, driven primarily by professional services revenue. We earned as we implemented strategic clients onto converge. These.

These revenues are lumpy from quarter to quarter did a customer buying patterns for care points as well as the timing of professional services that precede deployments.

They are also a leading indicator of the longterm increase in activity, we expect to see on converge.

Turning to profitability, our second quarter gross profit margin declined to 38.8% from 39.5% last quarter and 43.4% last year.

Gross margin was negatively impact of this quarter by lower subscription revenue versus the prior periods and higher explanation onboarding costs in advance of new clients, reaching run rate volumes, and our and while psychiatric care business.

Turning to operating expenses R&D expense was flat versus last quarter at $25.8 million and was $32.9 million after adjusting for $7.1 million of capitalized software costs.

As we have discussed we believe that the fourth quarter of 2022 represented our peak R&D spend and given our progress in delivering converge, we expect that R&D spend will decline in the second half of this year ending the year down mid twenties per cent compared to Q forespeak.

We also expect the capitalization of software costs to be minimal in the second half of this year <unk>.

Sales and marketing spend declined 5% and G&A expense was flat this quarter compared to last four we expect SG&A to decline approximately 10% in the second half versus the first half of 2023, primarily due to lower stock based compensation expense.

Adjusted EBITDA for the quarter was negative $45.3 million flat to last quarter.

Also we recorded a non-cash goodwill impairment as a result of the decline in our market capitalization as compared to the carrying value of our equity as of June 30th 2023, we estimated the fair value of our equity based on our market cap and it related to control premium.

As a result of this interim quantitative impairment assessment, we recorded 27 million dollar non-cash goodwill impairment charge.

Transitioning to the balance sheet, we ended the quarter with $459 million of cash and marketable securities. We have a substantial cash position, which provides the resources to fund this temporary period of investing as well as flexibility to pursue strategic opportunities that are aligned with our financial and strategic goals.

Turning now to our outlook, we are updating our 2023 financial guidance based on some near term dynamics, we are facing relating to our ongoing replatforming.

And subscriptions, we are transitioning the structure of our growth organization and expanding our dialogue with partners and clients to fit our new and different opportunity set with converge the ramp up and optimization of this process has some temporary impact on the timing of new sales and existing client expand.

<unk> in the first half.

And visits we had some chern and implementation delays in the second quarter that will impact R. M. All psychiatric care business in the second half as we build our ATC business beyond our traditional geography's, we find that limitation durations that are slightly extended as we hire and work with our clients to occur.

Fire, the necessary licensing and Credentialing for apc's clinicians to deliver services in these states.

Given these changes we are revising our guidance for annual revenues to arrange a $257 million to $263 million to.

To provide additional color for the second half, we expect subscription revenue there'll be mid single digits per cent higher than in the first half for visit revenue. We are tightening are paid visits estimate for the year to arrange have one spot $525 million to one spot 575 million visits and <unk>.

<unk> revenue per visit will be approximately the same as it was in 2022.

We further expect our adjusted EBITDA for the year to be in the range of negative 165 to negative $160 million.

Oh, we are facing some near term headwinds associated with Replatforming, we remain confident in the elements of our longterm model and our path to cash flow breakeven bolstered by the following elements, we have clear visibility to steadily normalizing our R&D spend with much of converge development behind us our solution is providing best and.

Class reliability and performance and is resonating in the market with our clients. We are applying are learning to the market rapidly. We believe we are taking the steps to accelerate our deal velocity and drive our overall efficiency when bookings with existing and new customers and grow our high margin subscription software revenue.

With converge commercial on the market, our sales transformation well under under way in a more informed view of our longer term cost structure. We estimate we can reach profitability at a level of circa $400 million significantly lower than our early 2022 estimate of $500 million. Thank you for.

Listening with that I'd like to turn the call back to Edo for some closing remarks Peter.

Thank you both with Q2 behind US we are focused on execution in queue free and beyond.

Because we think about the next few quarters, what I growth may be temporarily moderated in the near term we are taking the right steps to secure long term success looking.

Looking ahead, we will continue to work to build our market momentum execute well in our sales transformation and drive expansions and new customer wins, while continuing with successful client migrations.

Still early days for our industry as we evolve towards hybrid care delivery were driven everyday to enable our clients to evolve their approach to hybrid care as we pursue our mission and achieve the potential of our long term more than.

With that we are ready to conclude the for my remarks. Thank.

Thank you for listening today.

<unk>, we're ready to open the line for questions. Thank you.

Thank you at this time I'd like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad will <unk> and ask that everyone. Please let me yourself to one question what passed for just a moment, we'll take our first question from a Craig heading back with Morgan Stanley . Your line is now open.

Okay.

Yes. Thank you at first question for Bob on your last Communist they're about bringing the breakeven revenue down to 400 million. In addition to things that you're gonna do on the R&D side that will Roelof can you just need to talk about some of the levers that you have <unk> to reach that breakeven mark.

Thanks, Craig happy too.

So with with about.

Approaching 50 per cent of visits on converge at this point, we've got real world experience versus or early 20th two assumptions.

Find the path to profitability framework that we that we put out at that time, we know more we are better data and the product is highly successful the buckets of savings relative to then Ah really around R&D as you highlighted but also you know product delivery and fails efficiency, we've got a <unk>.

Out of conviction around lower levels of around run run rate R&D and do see potential for absolute declines in SG&A between you know from from today's levels.

And that those those efficiencies are really driven by better sales efficiency.

Got it and then just a follow up only think about the replatforming and some of the push out and <unk> you talk about kind of a shift in a sales target focus in new sale here uhm any thoughts there in terms have proof points into the back half of this year or early next year, what you'll be looking to kind of underpin.

And acceleration that she has actually expect and bookings.

Sure you know I think a couple of things there correct one.

You'll hear S. I think talk a lot about it.

Probably in the Q&A today, but also and some of the prepared remarks, the the importance of migrations and and so as we are able to migrate our our existing clients onto the converge platform a lot of good things happened one you know the head.

Winds from churn significantly abate because <unk>.

<unk> is really all related to the legacy platforms and dissatisfaction historically with with with how those performed.

And and and and clients not wanting to wait around as we get those clients migrated and we've done I think a really good job on the health system side and and the Zito talked about health plans are now underway will be in a position to you know early next year, probably show some really nice numbers around.

That that allows us again to to have a lot.

Lower headwinds on insurance side, but also a much broader addressable market to upsell and so so so the second half I think one of the most important things. We can do is continue aggressively and migrating the balance of our health system customers and our larger.

Our largest health plan customers as well so those are the that that I think is probably the most important thing we can do the other the other things that can probably add to our you know along or go to market transformation and that's.

Well under way, we feel really good about the progress we've made their and and and so you know that we expect will have a a very positive impact in the second half versus the first half on on bringing in some of these these.

Shorter cycle bookings, but.

But I don't know if you you want to add to that.

Well I think we've covered the table, but I would just suggest that the.

Growth organization transformation is he's very very significant in the past a couple of years, we really focused on imagining the bed.

Platform, we could imagine and then went ahead and focus on disruptive innovation.

And as Bob mentioned, while we have the data that allows us to be very confidant about reducing including a very large already <unk>.

Now focused on touching <unk> the organization.

The growth organisation transformation includes a special going to every part of the org, including gay new positioning packaging pricing and messaging, we do day very big at fault in the past few months.

Killing a our client facing <unk> some great higher starting from the top new training a for everyone to move from point service solution to an outright driven solution a sale and.

The dialogue with our channel partners inclined to change dramatically.

Much broader more right.

And we milk to a new level of <unk> is rebuild reproducible inefficient engine to send an extended converge with a goal to improve the efficiency due to velocity and B O size the wall focusing on profitability, mostly by improving the mixing contribution <unk>.

<unk> subscription so a continuing with migration and a.

Including the growth organization transformation, coupled with a the accumulation or very powerful validations and proof points.

All going to be the hallmark of what you can expect between now and the end of the year.

And we fully see ourself say, starting <unk>, you're from a completely different day standpoint.

Got it thank you [laughter].

Next we'll go to Orion Mcdonald with Needham and company, you're lying is now open.

Hey, Thanks for taking the question this is Matt Cheyenne for Orion.

Wanted to start off with some of the churn commentary and trying to unpack that a little bit are you guys still seeing this churn contained to kind of the lower end of the market with some of your small business clients and or is that bubbled up to any of your larger clients and relative to kind of expectations as as churn in line with what you had been expecting her.

Has there been any changes that resulted in maybe some lower subscription expectations in the back half of the year.

So a few a few data points.

<unk> a one a all are still P. G. Sorry with that then we added a couple as as as you know from my recent pay a announcement.

In addition to the F D. A low any day turned that we saw was exclusive to a legacy and we may have seen also Sunday midday and never return as we approach in the last innings, a all of the migration.

To know that there is zero Sharon in a converge and in fact, there is renewed commitment a by so many of our customers a existing and new a to converge win.

This evening, we are looking to cover most of the covered lives I mean, a big part of the cover of lives in the United States is committed a two way to converge, but but don't you have anything to add.

Yeah, I would say the churn is coming in and around the levels that we that we expected.

In our in our guidance there really isn't a meaningful change there. The so so so it's not a a churn driven.

Re guide here as much as you know just delays around some some quicker twitch revenues that that we had anticipated coming in and those those are pushed out a bit. So so so well well churn is a word that you know.

Probably comes through a lot and are prepared remarks.

The the level of revenue impact from that is in and around the levels that that we had anticipated.

Okay. That's helpful. I appreciate that and then maybe digging it on some of the go to market changes picking up on Craig's question. I was interested to hear you guys mentioned pricing is something that's part of the part of the changes and the girl with organization. So understanding that existing clients are getting the new converge platform for free.

I'm curious with your new our clients and some of this new pricing initiatives that you have if you're able to raise the price relative to what the legacy platform was and whether you're seeing pricing power at that offering and that clients are kind of understanding that higher price relative to the greater value that can be just driving thanks.

Yeah. That's a good question that so in that sense converge. It is very very different.

<unk> legacy is solutions.

<unk> and its value and therefore, it deserves a different look as it relates to pricing. In addition to that to converge <unk>. So what you can do pretty much everything you've done with a legacy platform Mayweed converge. There are many many new things you can do and converge. It was not we're not possible a before.

In the market today people are very value, a focused and oriented and our new architecture allows us to allow people to buy what they need today, but still being <unk> excuse of proof as it relates to be.

Able to grow with us is there need needs evolve over time.

Fact that we have some stacks observations relate to the new platform.

<unk> customer feedback and other things, which I'm happy to elaborate on we actually believe that our pricing power a has grown significantly just to give you a few observations that could be interesting. The system availability is really the highest possible we can never aspire to very unusual.

<unk> perhaps.

The consumer ratings and even more important you need to provide your ratings are at record levels they're.

They're Super High also an absolute the numbers.

The support ticket spare interaction.

Extremely low much much lower then alright legacy a platform, but that's really reflects the robustness and <unk> <unk>.

The new wear platform and the M. P. S. C is skyrocketing, it's much much higher reset actually our highest ever in our opinion based on what we know it's much higher than where the competitions. There are lots of green shoots lots of <unk> coming from all directions converge <unk>.

The <unk> organization, so way in many ways.

All of that is adding to a our protection a to exist finger and new clients that also relate to your question is two way pricing power.

Just end by saying that when you see the size of ecosystem that is already.

Committed to converge that too is a very important a buying a fact or and strengths a sore say for us is the largest and most sophisticated organizations are choosing converge that means that if you are for example, the provider or an email <unk> and you want to interact slew them with.

Then you need to do that a swim way converge and that of course, it you strengthening our position.

Next we'll go to a Jack wallets with Guggenheim Securities. Your line is now open.

Hey, Thanks for taking my questions.

You want to drill in 11th more on that new business environment, and maybe ask the questions from a different angle. It with you about 50 per cent of <unk>, you know getting that'd be on the converge platform by the end of the year.

<unk> migration were taken place earlier in the year of being completed early on here for the early adopters are you seeing any changes in the lag time between migration to then considering incremental yeah use cases modules expansions, etc. Uhm.

Uhm.

In that time on that wouldn't necessarily be related to say market dynamics.

Dynamics are budget pressures, but more related to their experience with the platform and understanding of its incremental capabilities. Thank you.

Sure. So it's important to note that the rollout of converge was unequal a symmetrical right. We started by with a low and then we went to providers in the lower end of providers and so on and so forth and now we are reaching the point, where we are basically covering everyone including.

The bears.

Is influencing b same store a growth an experienced having said that I gave today in my prepared remarks quite a few examples of expansions we see a lot of those we we think that things that increase efficiency. In this climate are very very popular things that change the <unk>.

<unk> between providers and the number of patients that they can address so less humans and more automation limited to the amount of progress a <unk> a grilled some nursing E. Zed very popular <unk> example, do.

You have a house it seems to be very much evening in high demand. So all those things.

Top the list and way of expansion the a opportunity and we also begin to see changes in in <unk> to your side. So volume saw growing very nicely with the convergence will be related to the experience and the fact that <unk> more easily and deeply integrated it.

With existing <unk> workflow, we think it all these trends are going to increase it quite significantly over the next few quarters is more and larger clients are migrating in in in in in much higher scale.

Actually that's that's really helpful. Yeah. Thank you and then is there.

Is there any pushback on some of the price.

Increases and and what I mean by that is during the.

You know the elevated dialogue process. The you know the demonstration of value is there.

A pushback in price or is it really you know there's <unk> customers are looking at the incremental capabilities considering them.

It is price a secondary factor and it's it's really a and what what kind of all you can eat demonstrating.

You sure will consider paying a little bit more for it but you were really curious about the full extent of the platform.

So we are suddenly price conscience say environment, Utah, very carefully to expenditure and they and we want to make sure that they invest in things that have a clear or why that is not so a distance and he's very very likely they will do not reach you have converge allows us to.

Our clients to take measure risk.

Choose the components that they believe are most needed moving it from them get confidant prove the I R Y and then extend we we couldn't really do that a before we tried to price every component of converge realistically in a way that is fair and in line with <unk>.

<unk> reality.

Like others, we have lots of components to choose from so awhile, a we are a competitive realistic as it relates to every stand alone solution. We are unique in our ability to offer and Duan <unk>, one stop shop, a experience for a customer's zeta.

Integrated into one a code base and lots of I'll buy it buyers are now you see I <unk> charge with integration. The fact that you have a single a reproducible experience. It is designed to integrate with a lot of moving pieces use a hallmark and strength and that we bring to the table that <unk>.

Saving and creating a lot of efficiency for our customers and we think that's not a really a lost of them. So on the one hand, we have very robust very comprehensive offering full very large strategic customers.

The other hand, we have very <unk>.

Dedicated fairly priced options for people that want to keep their talking to Walter and they're very risk averse and we are getting them to adopt our technology quite a quickly and grow from there in a reliable fashion.

Got that that's helpful. Thank you. Okay. Thank you and next will go to <unk> Securities you're lying is now open.

Hi, This is Jenny I'm, so like your lender to any child.

Can you speak about more specifically the customer renewal transfer <unk>, the health systems side, and how fan site.

These contracts are coming up for you vanilla alright, those conversation with all the.

Some of your customer swelling to restructure the contract in some ways, but I just feel more or less status quo on the approach.

So thank you Jenny uhm.

We've seen quite a few renewals the the most prominent one we announced last the Ernie <unk> instead towards the giant vote of confidence and we are so proud that they committed to converge. There are many other examples a quite a few of them I mentioned in this call in any previous vehicles.

We <unk> as I mentioned earlier, when you upgrade where you migrate to converge.

Within your term you don't pay an additional extra but when you want more <unk> you do and when we renew the contract we are moving people to the new a contract a structure is the.

The pricing in the way of apples to apples is is very similar however, there is a very big opportunity to expand the choose either a components. There was much more flexibility in S. D City that gives all sore full customers today. It really also renee as it relates to the previous a previous call. So.

We believe that we are physicians are not in the market and assume that are placed into a position there before.

In in in the way of a headline a but we are able to offer much more flexibility and options for customers. It both on the downside orange outside depending on the level of appetite and risk.

Thank you.

Okay next we'll go to Sam Bernstein with Wells Fargo Securities. Your line is now open.

Hi, Thanks for taking my questions.

And I guess I'd like to ask if I recall correctly I think historically.

<unk> visit volumes for a component within subscription revenue is that still the case posted migration onto converge and to the extent that it is with visit volumes moderating has that been a headwind to subscription revenue growth. Thanks.

So that's very that's a very interesting question Simon and thank you for bringing it up so essentially a the general structure, where you have a component of <unk> visit to include it in your provider subscription is maintained it also into will converge when you fear suits.

<unk> <unk> you pay more <unk> patterned however has changed dramatically you asked me with your right to know today. It boasts coffee obviously the market have seen a decline in the <unk> in general However, converge is much broader than telehealth or <unk> healthy dose of automation and Mindy.

Types of interactions, but even more importantly, <unk>. So <unk> before was related to tell your health is an alternative to the main parts of the world care. So when you look at the patterns are best times of where the weekends and holidays.

The pet thing, we'd converge is entirely I'd been 80 degrees reverse our best times are are weekdays received pledges and weekends and the holidays, which demonstrates the <expletive> that converge <unk> part of the <unk> part of the main pathway of care.

Air Force provider a organization.

And in fact, when your current interaction, we'd see an overall bigger patch or patience, although it's not always done through traditional video visit start menu either modalities asynchronous communication automated care and many other examples that can be used with a full hybrid carry a neighbor.

That's why even physical care enablement, usually component of what we offer today I would suggest summary that our role is an enabling with digital first experience has become much more meaningful if it was a somewhat.

Somewhat of a side show before a convenient alternative to care.

It's becoming very quickly the main pathway. The main way that people can interact with the health care and of course. It covers the full spectrum not only urgent care about anything from prevention, all the way to put the source of care, including chronic illness management North only video visit but also a synchronous care automated.

Karen physical care data all enabled by our platform and the over all the.

Traffic is increasing any food expect it to continue to increase over the next few years.

Got it thank you.

Next we'll go to Glen Sand Tangela Jeffries. Your line is now open.

Yeah, Thanks, and good evening, Hey, I just wanted to ask you about the transition timeline I think in the past. He said that you would hope to have all.

All the health systems, you know transition to over by the end of the twenty-three and that the payers would mostly converge in 24 is that timeline still the right way to think about it and should we assume that you won't be able to sunset the legacy platform and realized those gross margin savings until the last person his transition.

Or last customer rather.

Yes, or no. So the first part the first five but no to the last part the first part is pretty accurate I mean, we fully expect the lion's share of provide our customers to be on converge.

By the end of the year of course, there could be some outliers, but there's a trend you you're you're right. We also I have a few pairs like the one that <unk> announced Tonight with no name and of course, the Cvs such as a favorite component to it.

<unk> production, we have we have some payers already a life, but we will have this fear recepticle pairs in the first half season over the next year. So we fully expect where the lion's share of our customers as planned on converge by the end of the 24, if we have some legers you know they can.

That could happen, but we try to minimize that <unk> the more a customer's going to converge. So binary the we have <unk> savings and efficiency gains is we deploy more of our customers of course, a day or the last customer will stop using converge would be a very happy day and they're very efficient.

A for us, but we are we are definitely incurring efficiency and velocity and upside <unk>.

Every client that we convert a boat, but only if you have anything to add.

Yeah, Glenn I would just say you're you're right I mean, we really until we either have everybody migrated or make a decision that we're gonna go ahead, and and and just sunset them with a small amount of revenue left we will not see the cost.

Benefits of the you know the those platforms coming off and and but but we can be in a proactive <unk>.

In a proactive way make a decision to do that based on you know whatever revenue level. There is relative to the cost savings that we'd see from doing it so I and and the timing that you articulated I think Vito said is is is is pretty close.

Okay. Thanks for the comments.

Okay next we'll go to Charles re with T. D. Cowan Your line is now open.

Yeah. Thanks.

Want to go back to you know you talk about some turn.

Nothing out of the ordinary but.

Tied to this idea of kind of retraining the sales force.

You know to to think of it hasn't Roy platform versus point solutions.

Some of the travelling on because you know, they're not necessarily recognizing the the value prop of moving onto converge and you know you know how long do you think this sort of retraining of the the sales force.

We'll take where you'll start to see.

No Sir that opportunity to sorta, correct itself and and do you think that might you know to an earlier question.

It improves or the retention.

Of your existing.

Declines.

Sure. So hi, Charles a few comments a first day, the <unk> and legacy happens you never even Replatforming I've done three we've got for me and my history and they all look very pretty similar we announce a few years ago that you're going through that phone some clients don't care to wait that long.

Long darn sure what the results would be and they don't necessarily like a new way of platforms. These are some reasons I'm sure that others are as well. So we saw some may turn a there a there's no question that as we are deployed converge and we have more proof points that changes.

Quite a significantly there's no.

No question that as we transition our sales force, which is very much under way, we're getting much better articulating good value working with a client to realize their own business goals in R. O Y and doing it with my sore throat cycle and much more efficiently so I want to.

Be very clear, we are well on our way, we'll be say closest a but we're not done we are getting better ray all the time, we definitely believe that within a quarter or two they they the sufficiency will plateau and there'll be a diminishing return. So we are certainly not expecting these too long.

Last day much much a longer but the fact that we have so many clients happy and deployed and in production.

Is enormously valuable for the learning and for the communication that our client facing team not only sales, but also account management.

Deployment experts and solution experts are able to communicate.

Got it that that's really helpful. One other question you know what I'll touch on I don't think.

You touched on this yeah. It was it was around like behavioral health and obviously, there's this great demand for access to be able to help them, particularly through virtual you know it's not in the sense. The way you guys are position in the market as a as a platform, but you know it's just the capability that you would think of as an added service to your health plan Cuss.

Rumors.

Sorry, health system customers or or both actually given the scarcity in some regions of you know a qualified therapist. You know how would you think of that you know how old are you sort of approaching this sort of opportunity that's kind of suddenly right now in high demand.

That's a very good question Charles So essentially we don't see the world anymore is segregated between providers and payers essentially providers payers are partnering to improve the the efficiency and quality <unk> <unk> does not only influenced <unk>.

<unk>, but of course influences and every other aspects of our health, including chronic illness management days for example, it so while it your right to note that a R.

Be able to have solutions are very popular with bears like the end of chest in the U K and we recently announced the government to violence is another a client that they're very large examples the need to improve access to be able to help ease is very relevant also for a menu provider.

<unk> a customers give you. An example, it when you have a very busy.

<unk> the ability to being a psychiatrist and released the bed is very very helpful for delivery systems out there are many other are there. Examples so essentially you slipped in strategically the big told me sort of converge is the single codebase with these uniting all the players.

Most importantly fairs and providers. So they can partner to focus on solving really complicated problems like nobody's do do not behavioral health, a manage management and the way that you use really loud and give <unk> between very expensive humans and an envelope over.

The automation.

Got it.

You know to that point you know can you talk about maybe silver cloud I don't think you've touched on that lately talk about sort of the uptake and you know how the well that's being received in the market now.

Since you've had it.

At this point.

Absolutely well, we don't talk about Tebow cloud anymore, when you're ready to talk about converge is <unk> an important component of converge is legacy silver cloud I I guess quite a few examples.

Even today as it relates to some really powerful and innovative ways. The legacy silver cloud component, which is now part of the converge operate offering his his behavior, maybe just one nice one that people may have missed his wood county. The fact that you have all around the campus QR codes and when you have you have the <unk>.

Nine four anything you just point your phone and you needed to your connected to a snood will be able to help a solutions makes access to be able to help so much more streamlined a so much easier.

Easier if there is a reason why large governmental organization choosing next to silver cloud and the data is very compelling I mean, the any chest came out a <unk>.

<unk> are are showing that they are able with legos silver cloud to change the ratio between he'd be able to have a specialist and consumers six times over and now we have this capability as part of the converge offering so imagine a patient on interest diabetes.

A T Z need or being able to all services, we can really look at the whole person and and share those resources very easily.

<unk>.

Okay.

Okay next we'll go to Ireland loot Swiss Bank of America. Your line is now open.

Thanks for taking the question Uhm Ito, so to fully use converge and get the R O y.

Clothes need to change you know you're talking about hybrid care you mentioned a single code base.

And providing longitudinal behavioral health or longitudinal pair uhm, that's a lot different than just the basic telemedicine offering you said you know we're being talked about 24 36 months ago are there are more people at these health systems more stakeholders, then you need to convince them.

You know as opposed to just putting in the debates product that we were talking about three years ago is that what is taking a longer time period, because you need more <unk> across the health system and I guess as we think about that specifically is there any way to frame what per cent if any.

Of your customer sort of have that full oroide base view at this current point in time, just trying to get a sense of where your customer base is versus where you are.

So and this is almost not the question. This is a very important pay observation and you are absolutely right. The market now is night and day difference than it was only two or three years ago. The stakeholders are different because this is a <unk> it sounds like that used for every day.

Service to serve your customers and your ecosystem. So <unk> lots of <unk> <unk> technology solutions. So the technology is very Volkow C. M. I O C. I O <unk> always involved in this but it's something that touches all the C suite or.

<unk> because it has savings element to 80 says differentiation kids grow send them into it to the staff retention elements, we <unk> cost saving and way of claims and things of that nature connected to eat. So we find that our customers are are very educated day today.

We find it <unk> very structured that can touch many people and that does the influence the process. It's not necessarily a negative. We think we are good to match it to the new asking <unk> that are mentioned as highly differentiated versus add the offers especially as we deploy.

Converge in a very large a scale, having said all that a lot of the airforce I discussing the transition overgrowth organization is R. S. Four two greatly simplified this journey for ourselves and for our customers and to really understand patterns or a R y and business.

Cause our customers. So we can check the books much more quickly build the model our approach six <unk>.

Reoccurring cohort with typical segments a that are are happening again and again. So we can make you could match simpler and shorter for customers to hit the ground running redecorated solution I smell phone technology. It's also best practices in other modalities that really create the white glove experience for.

Customers that don't really accelerated their time for our why we choose the best way to create an <unk>, an endorsement and in a velocity and momentum in the market for us we didn't pull it up.

That concludes today's question and answer session. Dr. Schoenberg I'll turn the call back over to you for any additional or closing remarks.

Well. Thank you everyone for joining we had a lot to share as you can tell we are very excited about our future and we really appreciate your support and confidence <unk> and converge as <unk> normal transformation and we knew K to be very excited about the future ahead.

You so much.

This concludes today's conference call you may now disconnect.

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