Q1 2025 American Well Corp Earnings Call
Good day and thank you for standby welcome to the Am well first quarter 2025 earnings conference call.
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Speaker Change: I'd now like to hand, the conference over to your Speaker day, Sue Dooley head of Investor Relations for EM well. Please go ahead.
Speaker Change: Hello, everyone welcome to animals conference call to discuss our first fiscal quarter of 2025.
Sue Dooley: This is sue Dooley of AMOLED Investor Relations. Joining me today are animals, chairman and CEO, Dr. Sean Burke, and Mark Hirschhorn, our CFO and Chief operating officer.
Sue Dooley: Earlier today, we distributed a press release detailing our announcements our earnings report is posted on our website at investors Dot <unk> Dot Com and is also available through normal news sources. This conference call is being webcast live on the IR page of our website, where a replay will be archived.
Sue Dooley: Before we begin our prepared remarks I'd like to take this opportunity to remind you that during the call. We will make forward looking statements regarding projected operating results and anticipated market opportunities.
Sue Dooley: Forward looking information is subject to the risks and uncertainties described in our filings with the SEC actual results or events may differ materially except as required by law, we undertake no obligation to update or revise these forward looking statements.
Sue Dooley: On the call, we'll refer to both GAAP and non-GAAP financial measures a reconciliation of GAAP to non-GAAP financial measures is provided in our posted earnings release.
Ido: With that I would like to turn the call over to Ido.
Ido: Thank you Sue and good evening everyone.
Ido: Pleased to report that Q1 was an impactful quarter for our company.
Ido: One that provided a strong start to an important year for us as a reminder, on our last quarter, we shared our guidance for a big mix shift in software revenue in 2025 that will help us achieve our positive cash flow from operations go in 2026, we execute one with a strong sense of purpose.
Ido: <unk>.
Ido: The ninth time for our industry our goals remain steady.
Ido: Our mission to transform health care remains as relevant as ever our.
Ido: Our solution is built to deliver on the goals that are universal and timeless.
Ido: Enabling our clients to leverage technology enabled care for efficiency.
Ido: To improve outcomes with better access to more affordable convenient and effective care.
To begin tonight's call I'd like to provide you with some more detail on our performance in Q1 before discussing what we're seeing in the markets then Mark will review, our financial results and our outlook for the second quarter of the year.
Ido: First together with our latest partners, we advance our progress in this stage launch over full solution.
Ido: Ross the military health system.
Ido: We are inspired by the alignment of our mission with that of the LPTA H as we collaborate to achieve important enduring goals for members of the military and their families.
Ido: With efficiency defining the urgent agenda over the present day, we see a natural fit for our value proposition. We are hopeful this partnership position us to be a major contributor in the federal market landscape for many years.
Ido: Second we made significant progress in our path to achieving positive cash flow from operations in 2026.
Ido: These initiatives are showing up in the study.
Ido: Better than expected quarterly improvements in our adjusted EBITDA and this is the case again.
Ido: In Q1.
Ido: We are driving for efficiency with ongoing focus cost reduction measures, while improving our quality of revenue and profit margins.
Ido: We have successfully increased our mix of subscription software revenues and aligned our costs were.
Ido: We are targeting meaningful margin expansion this year.
Ido: And with another strong EBITDA performance this quarter, we take a step closer to our goal to improve our adjusted EBITDA by over 60% this year as compared to <unk> 24.
Ido: In other news.
Speaker Change: ANZ Umansky joined Zalm, well this quarter as our chief product and Technology Officer <unk>.
Speaker Change: John comes to us from Amazon healthcare.
Speaker Change: His proven track record, leading global and cross functional teams responsible for platform services art.
Speaker Change: Sufficient intelligence and product management gives them the right mix of experience to drive synergies.
Speaker Change: Support our path to profitable growth.
Speaker Change: He is already an excellent addition to our leadership team as we continue to sharpen our operational focus on key priorities driving efficiencies optimizing cash flow and fueling growth.
Speaker Change: Continuing with the Q1 highlights here are some more details on our performance.
Speaker Change: Our teams are working well with our latest partners.
Speaker Change: As of early April.
<unk> Global military health system Enterprise is now using our platform for future visits.
Speaker Change: This milestone.
Speaker Change: Very strong strategic position as we continue to grow our programs.
Speaker Change: Patient and provider satisfaction on our platform is reported as a very high well over 90% because we continue this important work of implementation. Many of our programs are now fully deployed and extending their reach across the military health systems around the globe regarding this initiative.
Speaker Change: I would like to spend a moment updating you on deployment timing over automated and digital health programs with our solution now live across the entire military health system for scheduled visits are dedicated teams are completing the work that precedes the go lives in the remaining territories for these programs.
Speaker Change: We are on time and on budget with deliverables for these initiatives.
Speaker Change: However, as a result of the top leadership transition at the Doj, We and our latest partners were us to wait for the final confirmation from the new Doj director before completing these last mile deployments.
Speaker Change: Reflecting this we now expect that these remaining lives will happen in Q3, rather than Q2.
Speaker Change: In our conversation with the DHA and latest leadership, both remain confident in the Dha's unwavering commitment to providing the highest quality care associated with the digital first initiatives.
Speaker Change: Fortunately our expectations are unchanged regarding the renewal of our contract with latest DHA as indicated in the October 2024 intend to award that specifically named them well.
Speaker Change: Moving on to some highlights from our commercial growth organization.
Speaker Change: We had a healthy quarter of building pipeline and we drove important client renewals across payer and provider clients.
Speaker Change: These included Penn State Hershey, the University of Chicago and core wheelhouse.
Speaker Change: Crude oil continues to go commit the miserable success with our automated emergency room discharge program.
Speaker Change: On the heels of a big expansion in Q4, we also had a sizable renewal with HFC in Ireland, which continues to improve access to care foods growing use of digital be able health programs.
Speaker Change: On the heels of good progress in Q1, we continue into the year with momentum and focus with market dynamics working in a fever I would like to speak to these trends for a brief moment.
Speaker Change: Increasingly we believe that the fractional care that people get in their day to day lives is going to shift dramatically from brick and mortar into technology enabled care consumers.
Speaker Change: Consumers are showing greater appetite to secure online and the inventory of technology enabled care clinical programs is quickly expanding.
Speaker Change: While this change brings incredible opportunities. It also creates new complexities to solve for.
First payers and health systems struggle to make sure that consumer engagement is efficient.
Speaker Change: Her experience is streamlined and the demand is matched with the right services.
Speaker Change: Services need to be covered.
Speaker Change: Appropriate and have demonstrated improved clinical and financial outcomes.
Speaker Change: Second clinical program vendors are challenged with high customer acquisition cost and they need to integrate their offering with whole person and even whole population care.
Speaker Change: It's becoming harder and harder for them to independently show a viable business model offering a program around a single therapeutic area.
Speaker Change: That is exactly where annual platform comes in.
Speaker Change: With a single unified platform for technology enabled care. We believe we have cemented our role has been a bureau of this movement.
Speaker Change: Here's how.
Speaker Change: First we help payers and health systems offer a single unified member and patient experience.
Speaker Change: He is attributed to their own trusted brand and features oldest sponsored care programs.
Speaker Change: With a unified platform payers and providers can offer exceptional consumer experience, helping individuals receive the most appropriate care in the simplest and most reliable way.
Speaker Change: Leveraging our technology helps our clients optimize customer engagement costs, and improved clinical and financial outcomes, making quality care more affordable and accessible to all.
We also make it easier for clients to document analyze and report whole person outcomes across the full patient and member cohort and sub cohorts.
Speaker Change: On our platform payers and providers remain agile and flexible in offering the most effective programs at any given time.
Speaker Change: And our platform makes them future ready.
Speaker Change: So that is new innovative and AI driven solutions become available we make it simple to switch programs, while maintaining a consistent experience.
Speaker Change: Second we offer our own comprehensive array of out of the books native and integrated our clinical programs.
Speaker Change: These programs cover a big part of the care continuum.
Speaker Change: <unk> urgent care virtual primary care be able health and growing number of specialty care programs with appropriate safeguards, we embed artificial intelligence advanced automation and other technologies to power exceptional user experience and better outcomes.
Speaker Change: The ecosystem of high quality onward programs make us a simpler choice for our clients, especially in comparison to point solution players.
Speaker Change: And finally, we hope to third party clinical program innovators improve their market reach and stickiness by integrating their solution into our platform.
Speaker Change: Importantly, this provides a high quality revenue source for them will as we grow together.
Speaker Change: The value of our platform approach to technology enabled care is meaningful to our players and we believe our large customer footprint deep integrations and vast deployments from a long term bond with health organizations that make up a big part of the iOS ecosystem.
Speaker Change: In terms of market penetration our clients reach is significant.
Speaker Change: And we believe we are just getting started.
Speaker Change: Almost two decades, we have proudly serve some of the largest and most sophisticated health care organizations in the U S.
Yet according to Mckinsey and others only a handful of percentage points of care is done online today. We think this is beginning to change in a very significant way.
Speaker Change: And our unified platform sits at the heart of a growing theme that embraces technology to drive outcomes and efficiency.
Speaker Change: We believe we are exceptionally well positioned to take advantage of these market forces.
Speaker Change: We see this reflected in our conversations I don't think the market and a growing pipeline for new business and across our own clients, we were targeting an attractive opportunity for expansion growth.
Mark: With that I would like to turn the call over to Mark to review, our financials and our guidance Mark.
Mark: Thank you Ina and good afternoon to everyone on the call Tonight I will walk you through a few operating metrics and financial results from the first quarter and then review our guidance the financial highlights of our first quarter include progress toward our key strategic initiatives software revenue grew over 30%.
Mark: <unk> from Q1 of last year, as we drove strategic client deployments, including the enterprise go live of scheduled virtual visits across the global military health system. The most significant growth initiatives in our company's history.
Also we accelerated our adjusted EBITDA improvements for the fourth quarter in a row as we continue to focus on increasing our software mix and aligning our cost structure with our revenue base most.
Speaker Change: Most importantly, as <unk> highlighted we have demonstrated continued progress with our most strategic objectives, specifically the stage launch of our full solution across the military health system and the cost initiatives that reinforce our confidence in our path to generating positive cash flows from operations during 'twenty.
Mark: 26, we.
Mark: We have committed ourselves to executing these initiatives that will ultimately drive value to our company.
Mark: So now let me share some of our Q1 financial results total revenue was $66 $8 million for the quarter, which is 12% higher than Q1 of 2024 normalizing for the sale of Bam well psychiatric care first quarter revenue was 25% higher than Q1 2024.
Mark: Revenue mix here is more important metric as subscription software revenue.
Mark: Was 48% of total revenue at $32 $2 million in Q1 up 30% from a year ago and compared to $37 million in Q4.
Mark: You will remember that in Q4, our software revenue benefited from a material uplift in subscription software revenue related to deploying our solution across the military health system.
Mark: Turning to visit metrics, we completed approximately $1 3 million visits in the first quarter, which is approximately 23% lower than a year ago normalizing for APC. This was 21% lower than last year.
Mark: Visits in the first quarter were in line with our adjusted expectations for the quarter.
Mark: Amg's first quarter visit revenue trend in 2014, 3% lower than last year at $26 6 million.
Mark: Normalizing for APC, However visits were higher by six 6% than a year ago average revenue per visit was $71, which is 8% lower this quarter compared to last year's Q1, but revenue per visit was 8% higher than last year after normalizing.
Mark: For APC.
Mark: This increase was driven by a mix shift within AMG visits towards virtual primary care and specialty programs.
Mark: Our AMG business continues to be foundational to our overall business.
Mark: It is highly visible to us and is strategically important to enabling client expansions and new client wins and for the overall support of our efforts to grow recurring software revenues.
Mark: Our services and care point revenue was $8 million for the quarter versus $4 $9 million last quarter. The nature of our business drives variable revenues due to consumer buying patterns for marketing programs and for care points as well as the timing of professional service milestones that precede deployments.
Mark: Turning now to gross profit, which continues to improve our quarter. One gross margin was 52, 8% higher by four three percentage points compared to Q4, reflecting higher software mix and cost initiatives.
Mark: On to operating expenses, our consistent efforts in reducing and aligning our costs are showing results down. The line. We continue to make substantial progress towards normalizing R&D spending while maintaining our focus on deploying our solution for the DHA. Our R&D expenses in Q1 were $22 1 million.
Mark: This represents a decline of approximately 17% compared to the $26 $7 million will be spent in Q1 of 2024.
Mark: Sales and marketing expenses were $12 $6 million. This.
Mark: This is approximately 18% lower than last quarter, and nearly 51% lower than last year's comparable quarter and G&A expenses were $23 2 million approximately 33% lower than last quarter, and nearly 29% lower than last year's comparable quarter G&A remains of me.
Mark: <unk> focus of our ongoing cost initiatives.
Mark: So we have now completed in another consecutive quarter that underscores our key strategic initiatives, we are delivering on the promise of growing our subscription software revenue, while being well on our way to reshaping our foundational cost basis as a result, adjusted EBITDA for the quarter was negative $12 2 million.
Mark: Versus negative $45 $6 million in Q1, 2024, finally with respect to cash and liquidity. We ended the first quarter with $222 million in cash and marketable securities with zero debt.
Mark: And now I would like to turn to our guidance for 2025.
Mark: This year the high margin revenue growth, we're guiding for is underscored by our focus on expanding our mix of subscription software revenues, taking conservative view on visit volumes, while further reducing costs with this in mind, we are reiterating our annual revenue and adjusted EBITDA guidance for 2025.
Mark: We continue to expect revenue for the full year 2025 to be in the range of $250 million to $260 million. As a reminder, this revenue guidance excludes the more than $25 million that we would have expected from APC in 2025 importantly.
Mark: Importantly.
Mark: With the most strategic elements of our revenue base intact, we anticipate subscription revenue to meaningfully grow to represent nearly 60% of total 2025 revenues.
Mark: Our range for AMG visits is between $1 3 million and 135 million visits we expect our 2025 adjusted EBITDA to be in the range of negative 55 million to negative $45 million, which demonstrates a 60% improvement year over year.
Mark: Here's some additional context around our assumptions we are on track to further reduce our R&D expense by more than 10%. This year versus 2024, as we streamline and complete the bulk of our software configuration work for our existing commitments overall, we expect sales and marketing costs to decline or.
Mark: 25% year over year, we expect to reduce our G&A expense beyond 20% for the year as we continue to organize the company around a new lower cost structure.
Mark: And I would like to repeat <unk> comment that our expectations are unchanged regarding the renewal of our contract with lighthouse for the DHA as indicated in the October 2024 intend to award that specifically named <unk>.
Mark: Next our guidance for Q2.
Mark: We expect revenue for the second quarter of 2025 to be in the range of $62 million to $67 million as to adjusted EBITDA. We expect our Q2 adjusted EBITDA to be in the range of negative <unk> 12 to.
Mark: To negative $10 million there were some additional revenue timing related dynamics, we want to call to your attention.
Mark: <unk> previously mentioned that as a result of the top leadership transition at the DHA. We end our lightest partners were asked to wait for final confirmation from the new DHA director before completing these last deployments, reflecting this we now expect that the remaining enterprise go lives of our automated and <unk>.
Mark: Digital behavioral health programs will happen in Q3.
Mark: Rather than in Q2 so.
Mark: So in Q3, we anticipate a onetime step up in DHA software revenue normalizing slightly below the Q3 level into Q4 with total software revenue ending the year at approximately 60% of total revenue.
Mark: Wrapping up we are encouraged by the strides we have made in our business and in the first quarter, we made solid progress towards the goals, which support our confidence in our path to generating positive cash flows from operations during 2026.
Mark: We continue to anticipate that <unk> will end 2025 with approximately $190 million in cash.
Mark: And in excess of $150 million in cash at year end 2026.
Mark: There's great energetic team here at <unk> that is fully aligned with delivering the novel healthcare products services and efficiencies that we successfully deliver to our clients every single day.
Mark: Thank you for participating this afternoon and with that I'd like to turn the call back to Ido for some closing remarks Ido.
Ido: Thank you Mark.
Ido: Before we take your questions I'd like to briefly wrap up we.
Ido: We enter Q2 with a strong sense of purpose and unprecedented focus on our key operational initiatives for the year, which center on unlocking value in our company and pursuing our mission.
Ido: To summarize.
Ido: We are delivering with.
Ido: With our latest partners.
Ido: Promise of the military health system digital first initiatives.
Ido: Our model for modernizing healthcare and the value of technology enabled care.
Ido: We are focused on our strategy to fuel higher quality revenue mix and to achieve the promise of our vision.
Ido: As we bring our unique differentiated solution into a very large underpenetrated market opportunity. We are set to achieve our goal of positive cash flow from operations during 2026 as well as for long term.
Speaker Change: <unk> growth for many years to come.
Speaker Change: With that we'd like to open the call to questions. Operator. Please go ahead.
Speaker Change: <unk>.
Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Speaker Change: The interest of time, we ask that you. Please limit yourself to one question. Please standby, while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Craig heading back with Morgan Stanley. Your line is now open.
Speaker Change: Great. Thank you just outside of the DHA can you talk about just bookings trends for converge more broadly and then also just with the higher Dan from Amazon, perhaps some things he can leverage from his experience are key strategic priorities as he gets onboard there.
Speaker Change: Absolutely great. It's good to hear we already have voice and thank you for the question.
Speaker Change: In general we see very good receptivity to the online platform.
Speaker Change: The new format in the market well beyond the DHA.
Speaker Change: Overall, there is growing understanding and agreement that more and more people are going to grow in line and it would need a singular experience to match them with a growing number of clinical programs and the data infrastructure to report on those programs.
Speaker Change: <unk>.
Speaker Change: We deployed at very large scale.
Speaker Change: Some of the largest organizations, including DHA as I've said, others, but you also the closure to smaller scale opportunities generating very similar value autos to mid size and even the smaller customers all of that results with a product. It is much more focused and proven and scalable it is not lost.
Speaker Change: Some people think about creating a large enables carrier infrastructure for years to come a lot of the activity is happening as we speak and it will be more.
Eric: Sure Eric.
Speaker Change: As we move forward.
Eric: As to the.
Eric: Brody.
Eric: Dan joining.
Eric: Dan was very well known leader.
Eric: Amazon He founded health AI in AWS, and then led the platforms for Amazon.
Eric: Brings a very broad network of expertise.
Eric: Abilities.
Eric: In closing high proficiency in AI with him and other challenges in the company and seven new relationships inside and outside the company, we are transforming a offering with some new technologies.
Dan: The key focus areas for Dan and oil product in <unk>.
Dan: Streamlining their consumer experience improving the way we match people with a growing number of clinical.
Dan: Programs and the data the bidirectional data exchange in order to further optimize their results.
Dan: Finally.
Dan: Infrastructure to create.
Dan: Got it.
Dan: To help our sponsors understand debated that you've generated by those.
Dan: We've been knocking either new leaders in the company I know, we have what we need in order to various efficiency you realize the mission.
Dan: Download platform.
Dan: And grow it successfully going forward to the market.
Dan: Got it thanks for all that.
Speaker Change: Thank you. Our next question comes from the line of Charles <unk> with TD Cowen. Your line is now open.
Charles: Yes, thanks for taking my questions.
Charles: Just a couple of quick questions around sort of the results here.
Charles: Really as we think about the guidance obviously, great performance in the quarter, particularly in terms of margins and managing the EBITDA loss here.
Charles: Yes.
Speaker Change: Is this sort of the right gross margin right because I think you had guided sort of north of 50% and obviously you did more like 53 here in the quarter. Mark is this sort of the right run rate, we should think about for the rest of the year could.
Charles: Could we expect that to get a little bit better here.
Charles: Because it looks like a lot of the revenue was from care points in the quarter, which I would imagine is lower margin. So we kind of backed that out does it seem like a software gross margins are running closer to 90% or so is that the right way to think of it.
Charles: Yes.
Charles: Youre on the right track Charles.
Charles: It's going to be an improving number as the software revenues represent a greater percentage of total revenues and you're exactly right timing of care points would bring that overall number down we should see.
Charles: That impact from the let's call it.
Charles: 75% to 90% software revenue margins that we would profile.
Charles: Going out over the next several quarters as long as the timing hits appropriately, we should continue to see quarter over quarter increases in margin.
Charles: And if we would expect the loss to be improving than any reason not to adjust maybe the EBITDA guide given where we're starting off here and what you've got for the second quarter. Thanks.
Charles: Yes, we're not we're not changing the EBITDA guide principally because we still have a.
Charles: We still have that considerable amount of.
Charles: Revenue that we need to generate over the remaining quarters of this year coming coming in with regard to the expansion work, we're very confident that the contract extension is.
Charles: It is now.
Charles: Within a month or two of being finalized where we're far along in that contract negotiation.
Charles: High degree of confidence with respect to that it's the expansion that.
Charles: Noted and I also noted in the prepared remarks that.
Charles: From a conservative view to Q2 two three.
Charles: We wouldn't go ahead and change any of those EBITDA ranges today.
Speaker Change: Okay. That's helpful. Thanks.
Charles: Sure.
Speaker Change: Thank you. Our next question comes from the line of James <unk> with Truest. Your line is now open.
Speaker Change: Thank you and thanks for taking my questions.
Speaker Change: All the macro noise status economic uncertainty I was curious have you seen any impact on your sales timeline as health systems continue to evaluate the <unk> just curious how have your conversations at least in the last couple of months and related to that can you guys talk about your debt that if exposure.
Speaker Change: Okay I'll take it first and then I'll turn to Mark for his point of view essentially there is a palpable obtain in the market people are uncertain.
Mark: And people are worried in the way of when do you think about their financial viability going forward that that includes many of our customers.
Speaker Change: The encouraging part.
Speaker Change: <unk> is part of the solution to this issue.
Speaker Change: When it is all about efficiency sort about saving it's all about growing.
Speaker Change: Revenue.
Speaker Change: And our long list of examples also on our side to show you a forward. So the rois, we're implementing a malaria.
Speaker Change: It was very significant in.
Speaker Change: Well the efficiency savings grow things of this nature and.
Speaker Change: And therefore, we actually see.
Speaker Change: The trend coming accelerating rather than decelerating, despite the overall market sentiment and headwinds.
Speaker Change: Thank you thank.
Speaker Change: Thank you.
Speaker Change: Question comes from the line of Stan Bernstein with Wells Fargo Securities LLC. Your line is now open.
Stan Bernstein: Yes, hi, thanks for taking my questions.
Speaker Change: Maybe just a couple on the government side.
Stan Bernstein: Arms of the DHA contract.
Stan Bernstein: Assuming that signed is there any chance of the economics change at all or is the expectation that they're going to be somewhat similar to the current contract and then.
Stan Bernstein: Shelley you previously have spoken about six possible government related opportunities that youre pursuing.
Stan Bernstein: Just curious any updates there anything moving along.
Stan Bernstein: In that direction. Thank you.
Stan Bernstein: Sure Hi, Stan it's Mark.
Speaker Change: With respect to the.
Speaker Change: The contract extension, we don't really anticipate any material changes in the economics that we.
Speaker Change: Bided to light us over the past year.
Speaker Change: Need to call that that contact is relatively recent.
Speaker Change: Essentially its first year.
Speaker Change: <unk>.
Speaker Change: Working especially at the at the enterprise level, which is.
Speaker Change: Certainly in months, one or two quarters, one or two so.
Speaker Change: No indication there that there'd be anything significant.
Speaker Change: I think for the.
Speaker Change: The opportunities, perhaps I'll hand, it over to Ido.
Ido: Thank you Mark So I think that some people underestimate the enormity of what took place in the last couple of years implementing the DHA. It was a giant undertaking for us and we will.
Speaker Change: Went through it.
Speaker Change: As I mentioned earlier across the globe enterprises for the military health system.
Speaker Change: Required us to migrate our platform to the dark cloud and chick infinite number of boxes and requirements.
Speaker Change: Tax and compliance.
Speaker Change: <unk>.
Speaker Change: It works at scale.
Speaker Change: The impact that we had on the military health system should there be definitive either similar.
Speaker Change: The entity and our partner is very proficient in that environment lighter service either.
Speaker Change: Organizations, So we believe that with this.
Speaker Change: Good execution in the sense that.
Speaker Change: As far as we're concerned we're always on time and on budget and we generate the efficiency for our customers here.
Speaker Change: Correct. This is a very fragile.
Speaker Change: I have to be very helpful. As we compete for other opportunities.
Speaker Change: Got it thanks, so much.
Speaker Change: Thank you. Our next question comes from the line of Eric Percher with Nephron. Your line is now open.
Eric Percher: Thank you.
Speaker Change: And I heard this asked but I'm not sure I heard.
Speaker Change: The answer on the tariff question can you just speak to any exposure across the business and maybe specifically.
Speaker Change: The endpoints.
Speaker Change: Sure Eric So overall.
Speaker Change: <unk> exposure to tariffs is minimal to nonexistent.
Speaker Change: You May know, we no longer manufacture.
Speaker Change: Of our hardware products for third parties in the hardware business.
Speaker Change: It generally is a very small parts.
Speaker Change: Overall business so their business is softer.
Speaker Change: The manufacturing, mostly in the United States and very proudly.
Speaker Change: And therefore, we don't see a cost issue for us.
Speaker Change: But.
Speaker Change: Having said that direct.
Speaker Change: Obviously impact disintegrating the market overall and do create some programs with our customers as it relates to their relationship with other.
Speaker Change: Suppliers, however, as I mentioned earlier, we originally conceived as part of a solution editing efficiency growing revenue for our customers.
Speaker Change: So in that environment.
Speaker Change: There is a good rois for investing in <unk>.
Speaker Change: Maybe very briefly just to give you some very quick examples.
Speaker Change: And will.
Speaker Change: Reducing costs and driving revenues in well start we just.
Speaker Change: Studies show, a 35% increase in net revenue for virtually coincide Dave Colo The commission of the prepared remarks.
Speaker Change: Cost reduction just with one program.
Speaker Change: That created the Turkey fueled nurses coal per day for the Nols were going to reduce cost in offshore by 48%.
Speaker Change: Another area is that.
So two very significant improvement in outcomes again very quick example, in the NHS. We help change May times from 16 weeks, we expect the <unk> to one week, that's very dramatic and the value is very well recognized there.
Speaker Change: Even in the U S with horizon.
Speaker Change: They reported 40% reduction in phase III patient waiting time for a second Patrick to occur and we.
Speaker Change: We have very high sentiment with providers.
Speaker Change: Burnout of clinical staff productivity over network is a giant topic for our customers.
Speaker Change: But to your fully embedded in the HR. The fact that we help prepare and match patients with the right doctors.
Speaker Change: And much better prepared in an automated fashion and providing additional access to different especially as these are just examples of why we believe that our production continues to be very relevant and in demand and resonating even in those times of great uncertainty and rising tariffs is a good example of that.
Thanks for the detail.
Kevin Caliendo: Thank you. Our next question comes from the line of Kevin Caliendo with UBS. Your line is now open.
Speaker Change: Yeah, Hey, guys. This is Jackson Don for Kevin Caliendo. Thanks for taking my questions I know youre talking more about the contract extension through like more of a conservative lens, but maybe if that renewal does not come to fruition and are you confident that you will sell breakeven on a free cash flow basis next year without it or is that contract kind of needed for it and then maybe just as a quick follow.
Speaker Change: Might be a little too early but given you updates on how the selling season.
Speaker Change: Progress thus far.
Jack: Jack we are quite certain that.
Jack: Contract will be extended we have no reason to believe based on where we stand in the many reasons I gave earlier in the call that it will not just sand and so it's a bit of.
Jack: Theoretical situation there was always the theoretical chance, but we believe it's a very very small.
Jack: All in our <unk>.
Jack: Working in the market.
Product that is extremely well defined we divested APC as you know we did some other measures. So our core offering today is high value high margin high quality.
Jack: We had very strong right to win in the different market segments that we serve.
Jack: Not lost in the market, we see it and how people react to our fees, we see it in sales meeting with safety and some of the results that you saw today and hopefully we'll continue to see.
Jack: <unk>.
Jack: The foreseeable future.
Jack: So that's how we feel about the market only if you have anything to add.
Jack: Jack both of you actually I would add that we clearly are.
Jack: In a position today to rely on that contract extension again, we have every reason to believe that we are going to see that extended based on where we stand today with our partners.
Jack: And of course, if that did not come to fruition.
Jack: You would have to pivot in order to reach.
Jack: Cash flow from breakeven operations number in 2026 again that would be a worst case scenario.
Jack: Not something that we actively planned for but.
Jack: It is it could be viewed as an existential threat.
Jack: Thank you.
Speaker Change: Minor to ask a question at this time, please press star one one touch tone telephone.
Speaker Change: Our next question comes from the line of David Larsen with <unk>. Your line is now open.
Speaker Change: Hi, congratulations on the good quarter can you just remind us how much revenue in the quarter came from the defense Defense Health agency contract and.
Speaker Change: Then what will that figure be like on an annualized basis by say for Q of 25. Thank you.
Speaker Change: Hi, Thanks for those.
Speaker Change: Nice remarks, we we don't break out the exact contribution as that.
Speaker Change: <unk> guided in the past that that contract is expected to represent our largest revenue component on an annualized basis when it's full enterprise.
Speaker Change: So we were not yet at full enterprise for all three products. As we noted we were there for scheduled visits and we're waiting for.
Speaker Change: The extension of the.
Speaker Change: The automated care and behavioral health, but.
Speaker Change: But we did have we did have a quarter.
Speaker Change: A full quarter of the portion of revenue that comes about from our enterprise wide.
Speaker Change: Revenue for scheduled visits.
Speaker Change: Great and then can you maybe just talk a little bit more about like the usage from the defense Health agency like how many lives actually use the platform in <unk> across how many countries or regions. What was the nature of the services is it all behavior health or are there other things in there as well.
Speaker Change: Is it does it include military families as well depending on some what I'm kind of getting at is like it seems to me like you.
Speaker Change: They can't cancel the contract right I mean, if the military is dependent on this for large amounts of their care. If they were to cancel that I mean that would be.
Speaker Change: Optically and medically a very difficult thing to do just any color around the usage of the platform would be great. Thank you.
Speaker Change: Hi, David obviously, we cannot speak on behalf of the military health system in north even on behalf of <unk> and what we can say very restricted but youre right to suggest and I think it was public information the audience for our project is huge its $9 6 million people in them.
Speaker Change: Military, including the men and women in uniform and their families.
Speaker Change: So the the visits the telehealth visit is scheduled visits that are now live enterprises, serving all of them.
Speaker Change: And we are connecting all of them.
Speaker Change: The providers at large over the military military a providers.
Speaker Change: Different use cases are very diversified and include the different teams.
Speaker Change: As it relates to coordinate care programs do you ever health, which is such a big area of focus of the military we are alive in the five regions. So we already followed was we need to reschedule visit before that's the initial launching pad. If you will of the military and then following that we fully expect to go away enterprise, especially as the new.
Speaker Change: Hey ahead of the DHA It takes place so.
<unk> earlier that we see very high satisfaction scores, we see efficiency.
Speaker Change: We have reasons to believe that the clients and our partner are very pleased with.
Speaker Change: With what they see we obviously don't speak on their behalf and that's why I said earlier that we believe that the likelihood of renewal is very very high as it is.
100% in CRE, but we believe that there was a giant race to get here is performing as planned it's generating very important results.
Speaker Change: Just to give you. An example, the new administration talks about their goals for the military health system and I mentioned four pillars, and we believe we check all those boxes. So the first pillar was readiness first ensuring that service members have access to world class Health care, obviously, we check that.
Speaker Change: <unk>.
Speaker Change: The second initiative is the medical modernization.
Speaker Change: <unk> digital health, which of course, we do.
Speaker Change: The third one is force optimization.
Speaker Change: And strengthening the medical workflow for so now we are embedded inside their EHR, the Oracle HR it connecting them to all their patients improving their lifestyles improving their efficiency and so overall, we're very relevant there and the last one is really encouraging the military to forge more meaningful strategic.
Speaker Change: Partnerships.
Speaker Change: Enhancing collaboration across the Dod DVA and of course, MHS with the private sector and we also relevant in that box. So with this track record we deferred if we are very well positioned to really focus on efficiency, which is such a key element in the new administration, we believe.
Speaker Change: We have a long future ahead of US together, serving this client, which we cannot be more proud of.
Speaker Change: Thanks, very much I'll hop back in the queue.
Speaker Change: Thank you.
Speaker Change: Our last question comes from the line of Ryan Macdonald with Needham. Your line is now open.
Speaker Change: Hey, guys. This is Matt Shea on for Brian Thanks for taking the questions and congrats on the strong quarter here.
Speaker Change: Im curious if theres anything on the insurance side to call out in the quarter and as we think about the remainder of the year. How are you thinking about intentional churn from here do you feel good about the core client base at this point or still some less profitable contracts that clean up and then just circling back to the selling season question any color on the selling season would be.
Speaker Change: Great and then any differences you're seeing in terms of demand from say health systems versus payers. Thanks, guys.
Speaker Change: Sure Hi, Matt its mark.
Speaker Change: With regard to your first question on churn.
Speaker Change: <unk> budgeted for a very conservative churn number and clearly we were very pleased with the fact that term came in much lower than we anticipated that actually helped to contribute to the.
Speaker Change: The increase in the bottom line.
Speaker Change: We had some challenging years prior to this year and Fortunately I think most of those heavy turn periods are behind us.
Speaker Change: We continue to budget conservatively.
Speaker Change: There's been nothing that we've seen them now that we're five months in nothing that we've seen indicate that.
Speaker Change: There's going to be any change in that.
Speaker Change: And that assumption.
Speaker Change: On the on.
Speaker Change: On the pipeline growth on the attractiveness of what we're bringing to the market we have.
Speaker Change: <unk> also seen.
Speaker Change: Significant activity far greater than than last year.
Speaker Change: Both the payer side and on the health system side.
Speaker Change: We're currently involved in a number of Rfps RFID.
Speaker Change: The amount of.
Speaker Change: The amount of interest in the product in these different sectors is fortunately.
Speaker Change: Been intensified over the last few months contrary to I think what a lot of people are talking about with respect to constraint.
Speaker Change: As the as.
Speaker Change: Tariffs and other indicators.
Speaker Change: Indicators put some apprehension in People's minds.
Speaker Change: Seem to be in a good place with the prospects that are interested in pursuing our products.
Speaker Change: That's great. Thanks Mark.
Speaker Change: Youre welcome.
Speaker Change: Thank you. This concludes the question and answer session I would now like to turn the call back over to Ido Schellenberg for closing remarks.
Ido Schellenberg: I want to thank everyone for their time. Thank you very much for your continued interest in <unk> and look forward to talking with you offline.
Ido Schellenberg: This concludes today's conference call. Thank you for your participation you may now disconnect.
Ido Schellenberg: Okay.
Ido Schellenberg: [music].
Ido Schellenberg: Yes.
Ido Schellenberg: [music].
Ido Schellenberg: Yes.
Ido Schellenberg: Yes.