Thanks, everyone. Sorry for the little delay. As everyone knows, the elevators at the Marriott are quite fickle, so... maybe you all can appreciate that. For our next session, we're great to have Amwell here. And we have Dr. Ido Schoenberg, Chairman and CEO, and Bob Shepardson, our Chief Financial Officer. Gentlemen, thanks for being here.
Thank you for having us.
Yeah, look, I... I think... I'm guessing a lot of folks here are familiar with Amwell, and I thought maybe we'll just jump into it. And, you know, maybe what I want to talk about a little bit is, you know, I feel like it's a bit... a bit under the radar, but really Amwell, if you look at it, has really become, I think, the platform of choice, particularly for managed care, as they pursue a virtual strategy. And... and maybe you can talk a little bit about that. What is it about Converge, in particular, you think makes it attractive? You know, both the payers, but, you know... and I'm sure to providers as well. But, you know, maybe you want to touch on the payer angle first, since, you know, you have Elevance now converting over, Aetna, another major one as well. So maybe let's...
Let's start there, and we can dive right in.
Sure. So, to understand Amwell, I think it's important to try to understand what happened in the market in the last few years. We all remember that telehealth was this convenient care, urgent care kind of thing. And came COVID, and the sponsors, health payers and health systems, understood that they need to realize a new role as it relates to digital care. You asked about payers. Payers now are trying to create an effective digital door that allows members to go online and really interact with the healthcare system through this gate. It's not only about getting Z-Pak for your sore throat.
It's really thinking in a multimodal way that allows you to broker your physical needs, your virtual needs, and your automated needs, interacting not only with people that are sponsored by or sponsored specifically for online care, but rather the people that you know and trust in your... in your community. We are no longer talking about urgent care. We are talking about the full care continuum. We're not only talking about one modality like virtual care. We're talking about multimodal. And we're not talking about external people. We're talking about the entire... the entire ecosystem. And that's why we developed Converge. We developed Converge realizing that there is a need for payers to allow for a single member experience that will broker connectivity with everything I just said.
Our ability to deploy that in very large scale depends on our ability to embrace and understand the complexity that is required by those customers, understand the positive use cases alongside with the enormous risks of providing this access, things like cybersecurity, regulation, payment collection, things of that nature that were also important in order to create those solutions. And very importantly, the fact that we have a big part of the ecosystem using us, making us a safe choice. When you have such a large deployment, you want to know that what you are building will work and scale in a large way. And that's what we began to see. Health systems are taking it from a different angle. They are focused today on things like staff retention, on improving efficiency, and on finding new diversified ways to grow, which Converge allows you to do.
One of the unique capabilities of Converge is that the codebase that is serving providers is the same codebase that is serving payers, so we can create this streamlined connectivity between the members and the doctors that they trust in their community through the same technology infrastructure.
You, Bob, initiated a point earlier saying it's no longer about just virtual. It's really about the entire continuum of care. And, you know, that's something that came up in one of our panels yesterday. It's this idea that, right? I mean, we can't think of digital as separate from physical. It's really care is both, you know, successful companies in the future, right, has to be able to connect both the physical to the digital. And it's right to think that here what you've transitioned to is having Converge be that infrastructure to enable that. Is that the right way to think of it?
Absolutely. But I would say a little more, in the sense that the healthcare system assumed that the patient is in the room. And the entire thing was built in a sense that there is a fragmented destination for healthcare. We go to the destination, and there is an EHR and a whole technology infrastructure to manage your presence in this fragmented location. The reality is that healthcare is happening when the patient is not in the room, when the patient is at home. It doesn't happen in transactions, but it happens continuously. And there is a need to develop technology that will connect people to the healthcare platform that, through this connectivity of... of...
Of technology is able to offer you something that offers you much greater choice, much better access, but still does not dilute the important trust that exists between you and the people that you normally see in person. We don't think technology replaces doctors and nurses that we trust. We think technology envelops them so they can focus on what they do best in automating and making other options available that were not possible before.
Got it. So then let's go back to the payers then. Maybe can you talk about sort of what your largest payers have kind of the feedback that you've gotten from them? Like, what is it about Converge that they particularly liked? And what have you know, sort of the feedback in terms of the experience you've seen so far in terms of traction? I know Aetna sort of is more up and running. Elevance is still in process. But anything that you kind of can share in terms of experience that's been gained so far?
So, just for the record, CVS is totally in production and live, and so is Elevance.
Okay.
That's new.
That's okay. Very good.
And we are very proud of that deployment that is going well. Those very large customers are big in the sense that they are comprehensive. The list of what they need to do in the way of integration is very long. And Converge is able to adapt and comply with this enormous list of needs in a way of diversity and comprehensiveness. So, integration into multiple EHRs, multiple payment systems, very sophisticated workflow, diversified types of users, diversified experiences, multiple parts of the care continuum that you want to touch from prevention all the way to acute care and things of that nature. I think the fact that we are able to offer one-stop shop that caters to this diversity and complexity is one element.
The second element is these are very large pockets with very large risks, and they are very worried about things like cybersecurity and privacy and regulatory compliance and things of that nature. The fact that we did it for very, very large organizations, including recently the DHA that is already live on part of our solution, I think gives comfort to those decision-makers that their investment is going to be relatively safe. Lastly, I would add that the ability for us to be as successful on the member/payer side and the provider side is very important to many of our customers. Because when you think about value-based care, if you want to improve financial and clinical outcomes, you need to influence and engage providers. There is no way to do it without that.
And we are very proficient as it relates to the vantage point of providers, and that allows payers to be better sponsors and fiduciaries for the risk bearers so they can make sure that those providers are helpful in improving financial and clinical outcomes. So, these are some of the things that I think some of our clients mentioned as really important for them. I would maybe add just one more... the future readiness. We, as you know, in 2021 took a very big bet on Amwell building a very, very expensive platform that took us almost four years to develop, and it is really designed to do a lot.
While many of those customers were not ready to deploy everything at once, the fact that their investment is future-proof, the fact that they can start with scheduled visits and on-demand visits and some longitudinal programs, but knowing that we have the full gamut, the full list of options for them in a way that will be very easily and immediately integrated with their existing infrastructure, I think was an important big consideration for them.
For someone like Elevance too, because they... you know, they've made a lot of other investments in digital as well here and there. My understanding is, right, that you can... they can incorporate that into the Converge platform. Is that the right way to think of it? They can take advantage of their earlier investments as well.
Charles, you're very helpful in helping me remember things that are important and I forgot to mention earlier. But... and that's a really, really important point. So, thank you for bringing it up. We realize that there is no way for us to build what everybody wants. It's just too much. And even if we build it, the likelihood of people buying everything we have just from us is very unlikely. So, the way Converge is built, it's built not to be the front layer, but it builds... it's built as an embedded layer, and it's designed in an open way to accept the digital and non-digital assets that already exist with our... with our customers. So, Elevance is a good example, but it's true for all our customers. They have different relationships with musculoskeletal companies and diabetes management companies and many other types of offerings.
Our ability to use our platform to create a singular experience that binds them all together while retaining the flexibility of our customers to mix and match what they need is also a really important asset for them because they know that what they have today is likely need to change as new offerings become available in the market as... and they want to de-emphasize or emphasize different types of products.
Great. So, maybe switching over to the provider side, right? It seems from the outside, you know, providers have, to a certain extent, pulled back from investing in digital or virtual. At least I think from an investor standpoint, it feels a little bit that way, particularly when you look at utilization rates for telehealth as an example. Maybe kind of give a sense of what's going on in the provider market. You know, maybe let's start there.
Sure. So, I think it's not a secret to anyone that they are under some significant financial pressure right now and are very discerning in the investment they need to make, both in way of cost, but also in way of indirect cost of implementation and mindshare and things. They have a lot of on their plate. So, if the dialogue was a few years ago with bright eyes about, "We are going to be available for our patients 24 hours a day and connect to them and do digital health," right now the focus is on really three things. One is efficiency. They want to make sure that they save costs.
So, if there is a way to do better triage, if there is a way to avoid readmission, if there is a way to do better load balancing of resources, releasing a bed by bringing in a behavioral health specialist, a psychiatrist, and moving the traffic on, these are things that are near and dear to their mind. Another example would be outpatient services. If I have a good automated way to make sure that patients show up more often to a colonoscopy and capture this revenue, that's really important for many of our customers. So, one bucket is using our technology to interact with patients with great focus on automation to really improve efficiency. The second element is staff retention. There is a giant shortage of staff, especially nurses.
Things like e-nursing and things of that nature are really important for them, and our technology can check the box on those things. The last element is retention and growth of revenue. So, the ability to offer a phenomenal patient experience for a hospital, the ability to serve employers that are beyond their normal catchment areas are also an important consideration for some of our 2,000 hospitals that are using Converge today. But it's, I would agree with you that the amount of revenue we can generate from providers, on average, is smaller than the value that we generate for payers. But our footprint and prevalence in providers is very important to many of our payer customers because they are able to close the loop and create a conduit for their members to interact with those trusted providers that also use our technology.
That makes sense.
I think, Charles, if you look at our numbers, I think you really haven't seen the drop-off in visits across the entire platform. You know, we do what? About 1.5 million visits a year in our AMG network. The rest of the 6 million are, you know, on... are basically health system visits. And that number has remained pretty stable from COVID on.
Okay. Yeah. No, that's fair. And I guess, though, right, it's a little bit muddied, right, because we're in the middle of this Converge transition. So, it's kind of hard to see sort of what, maybe the underlying demand looks like. And I think maybe to that point, you know, Bob, you talked about expectations to re-accelerate bookings growth, you know, as we move through more, I guess, into next year, this year to next year. Maybe give us some signs of, like, what signs can we be looking for that we can start to see that kind of picking back up?
Yeah. I gave Charles some very specific guidance for longer-term financials on the company. And this year kind of being really the last of the re-platforming years and where we still have those headwinds and then really nicely coming out of that. And, you know, what we put out there was an expectation for circa 30% top-line growth between 2024 and 2025 and more like 70% EBITDA growth. And getting to those types of numbers, you know, we talked about, you know, over 90% of that growth being associated with, you know, underwritten contractual customers. So, feel very good about being able to hit those types of numbers. And the requirement to see the recovery in bookings isn't really evident in the numbers that we put out, but we have very high...
A very high belief set that we are going to start to see a return to what we were putting up prior to the Converge transition.
Is it fair to think that if 90% of our revenue is already contracted to get to sort of your target, any meaningful acceleration in bookings growth would represent upside to those numbers?
Yeah. You know, I think that is fair. You know, we put a range out there.
Yeah.
We're not reliant on that. The other thing is, depending on the types of customers you're talking about, there's an implementation timeframe associated with those, where, you know, you've probably got, on average, I don't know, around a six-month lag to revenues from booking. For something like the DHA, you know, it's obviously a lot higher than that, given the size of the implementation.
Would love to talk on the DHA because, obviously, huge validation for Amwell and Converge. You've partnered with Leidos here. Maybe talk a little bit about the deployment process expectations for this year and next year. And I guess, you know, just because you talked about being able to turn on this full enterprise rollout, it seems like once you get to that point, it's almost... it sounds like you're saying, "We flipped the switch and the whole thing turns on." Maybe just give us a little bit more color on, like, what are the key things on these initial rollouts that the DHA needs to see to say, "We're ready?" And then, you know, what is sort of the... the go signal to say, "Hey, let's turn the rest of it on at the end of the year?
So, we hope this is going to be a really long relationship. We are building something very comprehensive for the DHA, and it has two parts. The first part is happening as we speak, which is we are deploying in five demonstrative sites of the DHA, most of our portfolio. We're doing behavioral health, we're doing Converge, and we are doing full automation. So, they bought most of the stuff that we have. The behavioral health part, which was most urgent for them, is live and in record time. They say they don't remember something deployed so quickly. It's already generating some really good results in the GovCloud environment. This year, investment is moving a lot of what we have into the GovCloud, highly regulated environment, and that's happening and happening well.
Once those sites are operating, it's a proof point that we are operating well in all the different types of use cases they may have. You're absolutely right that we flipped the switch to 9.6 million people around the world globally. We can do that because of the unique nature of the DHA. The Military Health System has one EHR. It's Cerner. It's very well deployed, unlike maybe other projects. There is no payment. There are no state lines. There are no other regulations. It's very simple use cases of one population of demand served by one population of supply. The only thing we sell is software. It's a very high margin, very scalable transaction for us. We don't sell any other type of clinical services. We fully... the entire thing, both the this year deployment and the rollout into enterprise, is contracted and budgeted.
Of course, if we fail to execute, there is risk in that, but we feel we have our arms around what's needed. We know exactly what we need to do together with Leidos, our partner. So, we think that risk is relatively low, and we are going to have a very nice proof point in this new TAM for Amwell, which is the government sector. And Leidos and other relationships that we have are showing some interesting opportunities for us for future growth once we have this good proof point live and in production.
Charles, let me just add one thing. The five sites that were selected were representative of the entire system that they have. And the rationale here was they wanted, when they do go to enterprise, they wanted all of the learnings from these representative sites to be in-house and ready to go when they flip up to enterprise. So, this is not a pilot-type situation. It's, let's make sure we get all of the learnings from all of these representative sites and be ready to hit the ground running when we flip up.
No, that makes sense. I guess my thought or concern would be, you know, how much visibility do you have in terms of the government's timing, right? Because, like, you know, obviously, you know, bureaucracy and could something happen internally right there and they hold off or things like that. How is that factored into your thoughts on timing?
So, General Crosland is working with us directly, and the TCAP, Taking Care of People initiatives, goes all the way up to the Secretary of Defense. The improving access to services, first and foremost, behavioral health, but many others, is a very big initiative in the Department of Defense right now and a very big unmet need, which we can serve. So far, they've been exceptional, supporting us and actually urging us to go faster and not slower. So, I believe that the likelihood of us, you know, doing this on time and maybe sooner is quite high.
Okay. That's really helpful. Obviously, DHA, once that goes at full enterprise, great proof point, great validation. You know, I think that makes us think about other big government systems like the VA, which is still on VistA, or did they move to Cerner as well?
They are moving to Cerner, not fully, but in multiple places.
In multiple places. Coast Guard still is out there, right? Like, what... I mean, and what is it... like, how do... what about the municipalities, like, you know, you know, state systems and things like that? Is that a... does that open the opportunity for that as well, or is that a little bit different?
Well, they're all on GovCloud. A lot of the heavy lift efforts that we had to make are very relevant to the entire government sector. So, getting our next client, regardless of what part of the government system they come from, is going to be dramatically more easy. Our relationship with the different primary contractors of the government is excellent, and we would be a good partner to them in implementing it. So, I think the bottom line is that the system that we are modernizing for the Military Health System was created in the VA. We're actually modernizing the VA system in the DHA. So, our ability to replicate that in the VA in the future is straightforward, although the VA is a little different than the Military Health System in a number of ways. So, we...
We are optimistic about the pipeline of the government system, and we believe we are going to take. We are ready to be a good participant in the future modernization that is required in this sector.
Great. That's helpful. Bob, you know, you just earlier just mentioned, right, you feel really good about your targets: 30%, you know, top-line growth through 2025, and 90% coming from contracted backlog. Can you give us a sense for how much of that contracted backlog is really more DHA versus, you know, existing clients that have already built up maybe a backlog of business?
Well, clearly, a very significant chunk of it is. I'm walking a fine line here in not giving too much detail about the contract because we're not supposed to. So, we've tried to position it in a way that the investment community could get their arms around the risk in giving it in the way we did.
I guess because what I'm trying to understand a little bit more is because I remember, you know, like a year or so ago, because a lot of your provider clients in particular were making the transition, but they were still kind of saying, "Hey, look, we want other modules, but we want to get Converge done first," and just trying to understand sort of what that kind of, you know, how much of your backlog has been building of sort of pent up... let's call it pent up demand, you know, for once they're on Converge, and then they're able to start deploying more solutions. And I guess that's sort of where I was going at. Any sense on that you can share there?
Well, we know that we have very high NPS, super high provider and patient satisfaction rates in the high 90s, the best we ever had in our history, and in absolute terms, they're very, very good. That level of feedback and proof points in way of efficiency improvement and long list of other things that are available on our website and in other publications are fueling confidence of our customers on Converge to increase first traction. They just do more to give it to a bigger audience. And very importantly, to begin to buy more and more solutions on Converge. We are beginning to see it and optimistic that same-store growth continues to be an important growth opportunity for Amwell. We also change our SG&A, our sales organization, to incentivize everybody to...
A, be trained on our entire portfolio; B, to be incentivized to sell more subscription software and really be able to be a better consultant or partner to our customers to introduce new options for them to be more effective with the tools that we have in place. All this goodness is not lost on new logos. So, new logos are talking growingly to the people that are using Converge and are seeing the opportunity, but also the getting confidence that the risk is relatively... relatively lower. So, big picture, if we zoom out, we see a reality where our cost structure is transforming dramatically. Our investment in Converge is finished. We still have the Gov investment this year, but that will also be a one-time investment. So, our R&D costs are dramatically lower.
Our deployment costs that were heavily loaded with free conversions, migrations from legacy into Converge are very much in the rearview mirror. The cost of deploying, supporting, and expanding Converge is dramatically lower than legacy. Our sales organization does not need to grow and, in fact, is a little smaller than it used to be as a conduit to create growth with much broader ACV. So, bottom line, a very efficient cost base with a product that is significantly more attractive and differentiated than... than before, generating a better mix of software versus services that directly impacts our margin that accelerates our path to profitable growth in the next few years, starting with very good visibility into moving from loss into cash flow positive already in 2026 in the model that Bob already shared in our last earnings call.
Yeah. And I guess in the last minute then, like, you paint a picture where we can clearly see the blocks are all moving in the right direction, and, you know, we can kind of see where this is going to really flip to a really interesting growth story. What do you think investors are missing a little bit at this point? Because, you know, over time, right, we've seen. We're finally seeing those things that you talked about like a year or two ago. We're finally starting to see that. You know, I think shares reacted positively on the guide, kind of pulled back a little bit. Maybe sort of in your recent discussions, anything that you feel want to get across here that you think investors might not be fully appreciating at this point?
Well, clearly, when we were at $40, the market was very enthusiastic about potential future that was hard to realize. Where we are right now, I think, is also related to the disappointment that many people had about the disillusion that the digital care will transform the world and will grow in a way that it was just not realistic. What we shared in the last earnings call, in my opinion, is enormously exciting and very, very important. It's not based on hopes and dreams. It's based on facts. It's based on contracted agreements and actual progress. Add to that the fact that we have a healthy balance sheet that gives us more room than we need in way of buffer to reach this profitable state, a reason that makes us very, very excited. When will people fully recognize and realize it is much more your area than ours?
We will patiently wait and just continue to do what we do and execute.
I think that's... that's all we can hope for, right? Okay.