American Well Corporation ((AMWL)) has held its Q2 earnings call. Read on for the main highlights of the call.
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American Well Corporation’s recent earnings call presented a balanced sentiment, highlighting both strategic wins and challenges. The company reported significant improvements in software revenue and EBITDA, but also faced hurdles such as the exclusion of certain programs from the Military Health System contract extension and a decline in visit metrics, leading to revised revenue guidance. Despite these challenges, cost reduction initiatives and strategic wins suggest a cautiously optimistic outlook.
Strategic Win with Florida Blue
American Well Corporation secured a significant contract with Blue Cross Blue Shield of Florida, known as Florida Blue. This partnership will allow the company to white label Florida Blue’s brand and provide unified access to integrated clinical programs. This strategic win underscores the company’s commitment to innovation and expanding its reach in the healthcare sector.
Military Health System Contract Extension
The company successfully extended its engagement with the Military Health System for another year, focusing on delivering a SaaS software platform for digital-first initiatives. This extension has tripled virtual visits and achieved high satisfaction among providers and patients, marking a significant milestone in the company’s government business.
Significant Software Revenue Growth
American Well Corporation reported a remarkable 47% year-over-year growth in software revenue. This growth was driven by strategic client deployments and milestones, highlighting the company’s successful efforts in expanding its software offerings and client base.
Improved Adjusted EBITDA
The company achieved a significant improvement in adjusted EBITDA, moving from a negative $35 million in Q2 of last year to a negative $4.7 million. This marks the fifth consecutive quarter of improvement, showcasing the company’s effective cost management and operational efficiency.
Cost Reduction Initiatives
American Well Corporation made substantial progress towards a leaner cost structure by reducing R&D expenses by approximately 12.2% and sales and marketing expenses by 32% compared to last year’s second quarter. These initiatives reflect the company’s focus on optimizing its operations and improving financial performance.
Reduction in Behavioral Health and Automated Care Programs
The 2026 contract extension for the Military Health System excluded behavioral health and automated care programs due to budget restrictions. This exclusion has impacted the company’s revised guidance, highlighting the challenges faced in aligning with budgetary constraints.
Decrease in Visit Metrics
The company completed approximately 1.2 million visits in Q2, which is about 22.3% lower than a year ago. Additionally, AMG visit revenue was 20.8% lower than last year, indicating a decline in visit metrics that the company needs to address moving forward.
Revised Revenue Guidance
American Well Corporation revised its 2025 revenue guidance to a range of $245 million to $250 million, down from the prior range of $250 million to $260 million. This revision reflects new expectations around contributions from the government business, particularly the extension of the Military Health System contract.
Forward-Looking Guidance
During the earnings call, American Well Corporation provided updated guidance with a focus on achieving positive cash flow from operations by 2026. The company reported a total revenue of $70.9 million for Q2, a 13% increase year-over-year. Subscription software revenue grew by 47%, reaching $40.4 million and comprising 57% of total revenue. The company anticipates full-year revenue for 2025 to be between $245 million and $250 million, with subscription software revenue expected to represent 53% of total revenues. They project adjusted EBITDA to range from negative $50 million to negative $45 million, demonstrating a 65% improvement year-over-year.
In summary, American Well Corporation’s earnings call reflected a balanced sentiment with both achievements and challenges. The company’s strategic wins, particularly with Florida Blue and the Military Health System, highlight its growth potential. However, challenges such as reduced visit metrics and revised revenue guidance underscore the need for continued focus on cost management and strategic partnerships. Overall, the company’s efforts in improving software revenue and EBITDA suggest a cautiously optimistic outlook for the future.