Earnings Recap | AMWL | Telehealth As A Service is a "Business of the Past"

As expected, American Well missed on the top- line (reported: $57.6MM v consensus: $58.8MM) and reiterated guidance ($260MM-$270MM) citing four net plan/system losses and a third straight quarter of sequentially declining AMG visits. Despite calling out a big win of a large Mid-Atlantic Blue (which we believe to be Highmark Health Options, BCBS, based in Delaware), our provider tracker signaled a number of potential big name losses as well. Although the company did not give an indication of which logos moved, we believe that Cigna was the largest loss on the health plan side and that Guthrie and Northern Arizona Healthcare were the two losses on the health system side of the business. We believe this result validates the questions that we've been raising about the client base and churn.

Aside from the client churn which AMWL noted on the call, they also highlighted the expectation that the number of active providers on the platform will decline due to the method for which the company classifies them. To remain an active provider, the physician must have delivered care in the last 12 months. The read-through from this comment is that there are a large number of physicians who adopted AmWell at the beginning of COVID to fill a need and have not renewed/continued using as the pandemic subsided.

Put best by one of our contacts, telehealth in a post COVID world is a "rip-and-replace environment." Now that every hospital has found some solution whether it be complex or not, telehealth companies seem to be right back where they started, trying to prove their value to hospital administrators through better EMR integration, cutting costs, and return on investment/patient satisfaction. While AMWL's CEO, Ido Schoenberg, didn't put it this way, he did describe the telehealth business in two parts. One being a business of the past which is facing decline, and the other the business of the future which is emerging "fast and furious."

Just like that, telehealth as a service which many of us had never considered a year ago has been dubbed a thing of the past. The point Schoenberg was making was that telehealth is now about its future as a platform. Much of the call was centered on just that, the development of the previously- announced, new age platform, Converge. The need for a re- imagined platform is something we expected given our field checks that categorized Amwell's software as "nothing special" or "not worth the additional cost" compared to lower cost options like Doximity or Zoom.

Converge is likely the solution to the complaints they have heard from their "more evolved" customers who are willing to stick with the platform to meet their telehealth needs going forward. Despite over 1,000 members at their Converge forum, we don't know how many of those excited faces will turn into paying clients. Even with Google's help, the process of creating and driving interest for a telehealth- focused app marketplace sounds slow and difficult. Moreover, the development will be further complicated by uncertainty around free options and the future of telehealth within the re-opening.

As we mentioned on a call earlier this year, AMWL "should fall to the low teens, and could even end up in the high single digits if the wheels fall off." Following the move post earnings to a current EV/Sales multiple of 7.5x 2022 estimates, the wheels look to have fallen off. We expect AMWL will continue to drive module adoption with their customers who have "bought in," but will continue to struggle attracting new customers in the near- term. Moreover, the successful roll- out of the vaccine will make it hard to retain those systems that only needed a quick fix during the pandemic.