Amwell touts military contract deployment wins in Q4

Dive Brief:

• Amwell failed to grow its revenue in the fourth quarter compared to the prior year, though the troubled telehealth vendor showed progress in its drive toward profitability in financial results posted Wednesday.
• Amwell narrowed its net loss in 2024, recording a $212.6 million loss last year compared to $679.2 million loss in 2023 when the company recorded a hefty non-cash goodwill impairment charge. The company aims to achieve positive cash flow by 2026. 
• Meanwhile, subscription revenue was up 36% in the fourth quarter compared to the same period in 2023, driven in large part by deployments of a lucrative defense contract, according to CFO Mark Hirschhorn.

Dive Insight:

Amwell is chasing between $250 million to $260 million in revenue in 2025.

Getting there will require a full rollout of Amwell’s joint contract with technology firm Leidos to digitize the military healthcare system, continuing to reduce overall costs and securing a “higher mix of of highly predictable recurring revenue,” CEO Ido Schoenberg told investors during a call on Wednesday.

Deployments will continue during the first half of 2025, with the final on-demand visit and international deployments expected early in the third quarter, according to Schoenberg.

Amwell’s initial contract with the Department of Defense’s Health Agency is set to expire after July. Analysts questioned whether the contract’s renewal could be at risk as Elon Musk’s Department of Government Efficiency looks to cut federal spending in Washington.

Schoenberg said this was unlikely. Leidos is in contract talks with the Defense Department now, seeking a three year extension. Schoenberg predicted that, if anything, the contract might expand to include an Oracle partnership. Oracle replaced the Department of Defense’s medical record, and is currently working to roll out its product at the Department of Veterans Affairs.

Still, even if the contract renewal goes as planned, Amwell is fighting to dig itself out of a financial hole.

In April, the company received a warning from the New York Stock Exchange that it could be delisted for failing to meet minimum share price standards. In response, the telehealth vendor implemented a reverse stock split in June. The company also shook up its executive team in October, adding Hirschhorn as CFO.

Amwell has also reevaluated its core offerings, divesting from service lines with sluggish growth to chase business in high-demand areas. In January, Amwell sold off Amwell Pyschiatric Care, its legacy psychiatric staffing business, and signed an agreement to work with Vida Health, which offers obesity and diabetes care, including GLP-1s.

The APC sale netted Amwell $30 million, Schoenberg said.

The company’s fourth quarter earnings also showed progress toward reducing expenses.

Amwell reduced its research and development costs by 29% year over year in the quarter and is on track to further trim the expenses by more than 10% in 2025, according to executives.

However, the telehealth vendor did record higher general and administrative expenses as it continues to experience fallout from the Change Healthcare cyberattack last year.

Still, Schoenberg said the company’s combined cost cutting initiatives and revenue growth strategies have led to “steady, better-than-expected quarterly improvements” in adjusted earnings.

The CEO sees opportunity for future financial improvement in quarters to come, though he isn’t expecting Amwell to become profitable overnight.

“As more people go online to those digital assets to seek care and receive it through us, we see a very significant opportunity for higher-margin growth over the next few years,” Scoenberg said. “But we would like to be very cautious in how we guide and that’s the guidance that we put in front of you today.”