AMWL - NYSE

Good afternoon. My name is David and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Amwell Q2 to 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there'll be a question-and-answer session. [Operator Instructions]. I would now like to hand the call over to Sue Dooley, Head of Investor Relations at Amwell, you may begin.

Hello, everyone, welcome to Amwell’s conference call to discuss our second quarter of 2023. This is Sue Dooley of Amwell Investor Relations. Joining me today are Amwell’s Chairman and CEO, Ido Schoenberg and Bob Shepardson, our CFO. Earlier today we distributed a press release detailing our announcement. This release is posted on our investors.amwell.com and is also available from normal news sources. This conference call is being webcast live on the IR page of our website where a replay will be archived. Before we begin our prepared remarks, I would like to take this opportunity to remind you that, during the course of this call, we will make forward-looking statements regarding projected operating results and anticipated market opportunities. This forward-looking information is subject to the risks and uncertainties described in our filings with the SEC and actual results or events may differ materially. Except as required by law, we undertake no obligation to update or revise these statements. On this call, we will refer to both GAAP and non-GAAP financial measures. A reconciliation of our GAAP to non-GAAP financial measures is provided in our posted earnings release. With that, I would like to turn the call over to Ido.

Thank you, Sue. And hello, everyone. The second quarter of 2023 was another solid quarter for our company. With most of Converge development behind us we made progress as we continue migrating health systems and payer migrations are underway. I'm also pleased to announce we added to our list of strategic clients of Converge further validated our approach to the market. We are also putting important pieces in place is we work to reaccelerate our bookings momentum. I would like to go into some more details on the highlights of Q2 before discussing what you're seeing in the market. Then, we'll cover our financial results. During Q2, we maintain a steady pace of client migrations, visits on Converge rules to 43% of total visits in Q2, up from 36% last quarter. We also successfully executed on the migration of Intermountain Health, a major driver of this metric during Q2. A few other examples of these successful migrations and implementations include Northern Arizona Health and [indiscernible] Health in California. I'm proud of our teams who continue to drive successful migrations, and I'm pleased to report that Converge continues to deliver superb levels of availability and value for our clients. I'm also very happy to announce that key highlight of Q2 was the successful launch of a new and very large strategic payer client on Converge. We are proud to be the engine powering their approach to hybrid care. This pair respire to deliver best in class technical success rates for their provider visits. Upon go live, the client scaled rapidly in their technical success metrics soared. This is especially valuable example for us because this client demonstrates the power and value of a connective infrastructure platform independent of the traditional urgent care products purchased by payers. In fact Converge has already delivered efficiencies by propelling a meaningful reduction in the load on the clients own support call center. In addition, meaningful savings are anticipated with our connected platform across their organization, which allows for more accurate and efficient cost share algorithms, better member experience and backend process for this strategic client. We are honored, this innovative and leading pair has chosen us as their partner as they adopt a broad spectrum of our capabilities and look to solve important operational priorities in the evolution to true hybrid care delivery and set new standards for the industry. Continuing with go live we had an exciting expansion deployment of our solution aimed at alleviating the nursing shortage at Saint Bernard. Virtual nursing is an emerging capability enabled by our solution which represents a meaningful opportunity for us. With virtual nursing care teams leverage activities, devices in our software to monitor multiple rooms, efficiently handle alerts, escalate for fall prevention, and improve the overall patient and care team experience. Saint Bernard is currently live with virtual nursing rooms across the organization with a plan to expand to additional hospital facilities and incorporate additional variety of capabilities, including virtual rounding, specialty services, and pharmacy consults. Now, I'd like to speak for a moment about our bookings related activity as we pursue the hybrid care enablement opportunity in front of us. Q2 was a very active quarter for us. As we continue to ramp our enterprise solution selling methodology. The quarter was busy with sales engagement across the payer and provider universe. While we also work to expand our footprint within our existing client base. Our sales team is sowing the seeds to reap the benefits of our new platform. Here are a few examples of our success this quarter, we had a collaborative and creative win with a new client Wood County Hospital in Ohio. Wood County will post QR codes across their facility and across nearby Bowling Green University campus. These will seamlessly connect staff, patients and students to automated programs and care teams in times of need for behavioral health services. Demonstrating the potential that exists within our installed base of clients with the sizable expansion wing of our behavioral health services, extending our partnership with one of the largest hospital systems in the southwest. This hospital system manages 16 hospitals and multiple healthcare facilities throughout the state of Oklahoma, setting a great example for others in the region. Finally, we also do traction in our efforts to grow our customer footprint in automated virtual care programs. Penn State and Carilion Health are electing to extend the benefit of our automated care programs across their organization. In the past, we've spoken about the powerful benefits of our ED discharge program in our life saving pregnancy checks. It's exciting to see these programs applied to a growing number of used cases, for example, Q2 Penn State expanding to include six more instances of these valuable programs. I'm pleased with how our relationships with these truly innovative organizations are growing beyond trusted telehealth provider to key strategic hybrid care enablement partner. Before discussing the market for our solution, I want to share a couple of successes from our international efforts. Our track record for delivering measurable results is powering partnerships that extend our reach. We leverage a track record across the NHS in the UK to Ireland's HSE, the National Health Service of Ireland, the HSE will roll out access to our digital behavioral health programs nationwide. We also established a new partnership with Discovery Health in South Africa, and we had an important renewal in Australia with Honeysuckle Health. The demonstrated success of our digital behavioral health programs are a big component of these wins. While our sales efforts are focused in the U.S., we are planting the seed for international expansion with flagship partners starting in English speaking countries, and leveraging our established presence in Europe and in Israel. We think these winds extend our total addressable market, and further validate the larger opportunity we are addressing. Now I'd like to take a moment to comment on the environment in our focus on driving growth. Out in the field, my sales, conversation and interactions with healthcare leaders continue to underscore their priorities. The strain on budgets in healthcare is real. Improving margins, solving staffing shortages, establishing new sources of revenue and improving patient experience and outcomes consistently rise to the top of their lists. These priorities require healthcare leaders to rigorously prioritize spending. Increasingly a key to that involves leveraging technology by evolving to a digital first approach to hybrid care. In this environment demonstrated outcomes are essential. And this provides a long-term tailwind for us. These conversations about Converge are leading to more involved, more strategic investigations of how Converge can enhance patient and provider experience and improve operational efficiency. We are finding this new elevated dialogue can also take additional time in the sales process, and in some instances influence the timing of bookings commitments. Because of this, our booking performance in H1 was somewhat muted versus our expectations and will impact a full year results. While this conversation can, in some cases extend the sales process, they are at the core of our platform approach, and we view them as positive for our business over the long run as we quickly gain experience in selling Converge, and proof points and used cases accumulate, we expect our sales cycles can shorten and become more streamlined. The shift to Converge platform requires changes to a selling approach from a proven solution for sale to an ROI based solution driven methodology, which we believe will result in long term partnerships and high customer value and retention. As we enter the second half, our go-to-market teams are developing experience rapidly in a very focused on mastering this transformation. The transformation to ROI based enterprise selling involves upskilling, training and rapid ramp of marketing programs to position our solution and grow our pipeline. These efforts are well underway. We are also accelerating selling initiatives for our high ROI automated programs in virtual nursing. These solutions are in high demand and help our clients efficiently scale in a labor constrained environment. In this regard, I'm pleased to say that a highlight of Q2 was the addition of the new leader of our growth organization, Kathy Weiler. We are excited to have Kathy's experience with powerful organizational transformation is we align our team around an ROI based selling methodology. Kathy brings with her important capabilities and insights from years at United Health Group, Optim, Blue Cross Blue Shield of Massachusetts and Fidelity. To conclude this discussion over go-to-market, we are making the necessary moves to ensure a place at the table. Transforming our selling approach in order to establish our solution is a massive in any environment. We are winning the most strategic players in healthcare. We remain steady in our confidence in the business over the long term, bolstered by our strategic customers' successful migrations and case examples. Meanwhile, the industry is taking notice of our solution. And I want to share a few examples demonstrating our most robust offering in the digital behavioral health space. In May, Amwell ranked highest in AVIA’s Marketplace as top digital behavioral health companies report. The report speaks to how our automated programs help health systems alleviate strains on teams. It describes our ability to empower cost effective proactive accessible care to underserved populations and hesitant patients. It also praises Amwell’s psychiatric care is comprehensive and evidence based digital mental health content. In June, our automated programs were recognized. The Journal of Diabetes Science and Technology published an article on the efficacy of diabetes education chatbot pilot authored by a client medical health, the article highlights how our program drove an increase in selfcare confidence for patients. And it's 13% reduction of A1c higher than the control group. Continuing with success stories are popular webinar series doing well featured the compelling example from El Camino Health. This innovative health system chose Amwell for its on-demand virtual care platform in 2019. They launched automated programs shortly after that, and they were our first client migrated to Converge. El Camino has big plans to be at the forefront of digital care, and they are a great example of a land and expense story for us. In a highlight of his webinar, El Camino reported that 92% of patients said respiratory automated chats made them feel more confident managing their health. Before wrapping up, I want to comment briefly on the current dialogue around artificial intelligence and its implications in healthcare into Amwell. We believe this conversation is lifting awareness and acceptance or hybrid care overall, and will be a tailwind for our growth. AI related technologies are advancing quickly. Converge is built to allow for integration of AI with trusted providers, both in person and virtual. We enabled the future ready engine to connect and empower healthcare organizations and innovators. As healthcare adapts to an artificial intelligence world. We believe Amwell is uniquely positioned to accelerate AI adoption and value creation. This is because both native and third-party applications of AI can be embedded in and associated with Converge, thus enabling trusted existing healthcare connections. An example of this is a patient who has regular interactions with their doctor VR platform and will begin to benefit from AI powered follow-ups on behalf of their doctor between live visits. At Amwell we believe AI in hybrid care will amplify our hybrid care platform, which is designed to extend an Augment rather than replace care teams, and drive improvements in patient and staff experience as well as operational efficiency in outcomes. However, as we evolve to hybrid care and integrate with automated programs, it is crucial that we ensure patient and provider confidence in these tools. I think that tonight we've given some examples that demonstrate we are doing that today. In closing, hybrid care is rapidly becoming the main highway forward. But the journey is complex. Clients looking to address technological fragmentation and move beyond that build it yourself approach are seeing the light, we are adapting our selling methodology rapidly. With our unique combination of technologies, services and client experience. We believe Amwell is ideally suited to be the one stop shop where our clients can access the benefits of the digital care transformation. With that as context, I would like to turn the call over to Bob to review our Q2 financials, some key metrics and our guidance, Bob?

Thank you, Ido, and hello, everyone. Overall, we are encouraged by progress in our business with important customer validation of our new platform, many successful migrations and strong customer feedback. I do want to take a moment to comment that many of our metrics and results are being impacted to a degree by churn of customers on our legacy platform that we previously anticipated. With that as context, I'll start with a review of our operating metrics, then turn to financial results for the second quarter, and our revised guidance for the year. We ended the second quarter with 106,000 active providers representing growth of 5% compared to a year ago. This represents a 2% decline from last quarter as during replatforming efforts temporary declines can occur. We continue to view active providers as an important indicator of the sustained value our clients see in our platform. And we anticipate that our number of active providers will continue to increase as we migrate existing and implement new clients onto our Converge platform. Total visits were approximately 1.5 million in the second quarter down 4% over last year. Scheduled visits represented 69% of total visits in line with our experience over the last few years. We believe total visits declined year-over-year due to a combination of factors. First, we saw some impact of declines on the legacy platform. And second, we believe we are returning to a more typical seasonality and visit volume, which was less prominent during the pandemic. We continue to make steady progress successfully migrating our clients to the new platform and two successful migrations drove visits on Converge for the quarter to 43%, up from 36% in the first quarter of 23. As we look toward the remainder of this year, we intend to complete migrations for the majority of our provider customers, and this should drive visits on Converge to over 50% by year-end. And as Ido said payer migrations have begun. Given payer visits are tied to the enrollment cycle at year-end, we expect to see payer related visits transitioned to Converge next year. And now on to our financial results. Total Revenue was $62 million for the quarter down slightly from a year ago and also from last quarter, subscription revenue was $28 million in the second quarter, slightly down from the first quarter reflecting churn associated with our legacy platforms. Customer experience on Converge is excellent and we expect this revenue headwind to lessen as we successfully migrate the balance of our customers on to Converge in the quarters to come. Moving to visits, and the second quarter AMG visit revenue trended 6% lower than last year and was $28 million. AMG visits declined 3% versus the second quarter of ‘22 with average revenue per visit $3 lower at $77, due primarily to a higher urgent care visit mix. Based on our experience so far this year, we believe 2023 visits are looking more in line with historical seasonal patterns than the period between 2020 and 2022. Our services and care points revenue was $6.3 million for the quarter, which represents an increase of $3.6 million from last quarter, driven primarily by professional services revenue we earned as we implemented strategic clients on to Converge. These revenues are lumpy from quarter-to-quarter did a customer buying patterns for care points as well as the timing of professional services that precede deployments. As we have discussed on prior calls, professional services revenue highlight the strategic long term nature of our client relationships, and the ROI they see in deploying our platform. They are also a leading indicator of the long-term increase in activity we expect to see on Converge. Turning to profitability, our second quarter gross profit margin declined to 38.8% from 39.5% last quarter, and 43.4% last year. Gross margin was negatively impacted this quarter by lower subscription revenue versus the prior periods and higher clinician onboarding costs in advance of new clients reaching run rate volumes in our Amwell Psychiatric Care business. Turning to operating expenses, R&D expense was flat versus last quarter at $25.8 million and was $32.9 million after adjusting for $7.1 million of capitalized software costs. As we have discussed, we believe that the fourth quarter of 2022 represented our peak R&D spend. And given our progress in delivering Converge we expect that R&D spend will decline in the second half of this year, ending the year down mid-20s percent compared to Q4’s peak. We also expect the capitalization of software costs to be minimal in the second half of this year. Sales and marketing spend declined 5% and G&A expense was flat this quarter compared to last quarter, we expect SG&A to decline approximately 10% in the second half versus the first half of 2023, primarily due to lower stock-based compensation expense. Adjusted EBITDA for the quarter was negative $45.3 million flat to last quarter. Also, we recorded a non cash goodwill impairment as a result of the decline in our market capitalization. As compared to the carrying value of our equity as of June 30th, 2023. We estimated the fair value of our equity based on our market cap and a related control premium. As a result of this interim quantitative impairment assessment, we recorded the $27 million non-cash goodwill impairment charge. Transitioning to the balance sheet we ended the quarter with $459 million of cash and marketable securities, we have a substantial cash position which provides the resources to fund this temporary period of investing, as well as flexibility to pursue strategic opportunities that are aligned with our financial and strategic goals. Turning now to our outlook, we are updating our 2023 financial guidance based on some near-term dynamics we are facing relating to our ongoing replatforming. In subscriptions, we are transitioning the structure of our growth organization and expanding our dialogue with partners and clients to fit our new and different opportunity set with Converge. The ramp up and optimization of this process has some temporary impact on the timing of new sales and existing client expansion in the first half. And visits we had some churn and implementation delays in the second quarter that will impact our Amwell Psychiatric Care business in the second half. As we build our APC business beyond our traditional geographies, we find implementation durations that are slightly extended as we hire and work with our clients to acquire the necessary licensing and credentialing for APCs clinicians to deliver services in these states. Given these changes, we are revising our guidance for annual revenues to a range of $257 to $263 million. To provide additional color for the second half, we expect subscription revenue will be mid-single digits percent higher than in the first half. For visit revenue, we are tightening our paid visits estimate for the year to a range of one spot five to 5 million to one spot 575 million visits, and expect revenue per visit will be approximately the same as it was in 2022. We further expect our adjusted EBITDA for the year to be in the range of negative $165 to negative $160 million. Although we are facing some near-term headwinds associated with replatforming, we remain confident in the elements of our long term model and our path to cash flow breakeven bolstered by the following elements. We have clear visibility to steadily normalizing our R&D spend with much of Converge development behind us. Our solution is providing best in class reliability and performance and is resonating in the market with our clients. We are applying our learnings in the market rapidly. We believe we are taking the steps to accelerate our deal velocity and drive our overall efficiency, win bookings with existing and new customers and grow our high margin subscription software revenue. With Converge commercial in the market, our sales transformation well underway, and a more informed view of our longer term cost structure. We estimate we can reach profitability at a level of circa $400 million, significantly lower than our early 2022 estimate of $500 million. Thank you for listening. With that I'd like to turn the call back to Ido for some closing remarks, Ido?

Thank you, Bob. With Q2 behind us, we are focused on execution in Q3 and beyond. As we think about the next few quarters, well our growth may be temporarily moderated in the near term, we're taking the right steps to secure long term success. Looking ahead, we will continue to work to build our market momentum, execute well in our sales, transformation, and drive expansions and new customer wins. While continuing with successful client migrations. It's still early days for our industry as we evolve towards hybrid care delivery. We are driven every day to enable our clients to evolve their approach to hybrid care as we pursue our mission and achieve the potential of our long-term model. With that, we're ready to conclude our formal remarks. Thank you, for listening today. Operator, we're ready to open the line for questions. Thank you.

Thank you. [Operator Instructions]. We'll pick our first question from Craig Hettenbach with Morgan Stanley. Your line is now open.

Yes, thank you first question for Bob, on your last comments there about bringing the breakeven revenue down to 400 million, in addition to things that you're going to do on the R&D side that will roll off. Can you just maybe talk about some of the levers that you have to reach that breakeven mark?

Thanks, Craig, happy to - So, about approaching 50% of visits on Converge at this point. We've got real world experience versus our early ‘22 assumptions behind the path to profitability framework that we put out at that time. We know more, we have better data and the product is highly successful. The buckets of savings relative to them are really around R&D, as you highlighted, but also product delivery and sales efficiency. We've got a lot of conviction around lower levels of around run rate R&D, and do see potential for absolute declines in SG&A between, from today's levels. And those efficiencies are really driven by better sales efficiency.

Got it. And then just a follow-up when we think about the replatforming in some of the push out and bookings this year, you talked about kind of a shift in the sales market. Focus the new sale here. Any thoughts there in terms of proof points into the back half of this year or early next year what you'll be looking to kind of underpin an acceleration that you eventually expect in bookings.

Sure. I think a couple of things there Craig. One, you'll hear us I think talk a lot about probably in the Q&A today but also in some of the prepared remarks, the importance of migrations. And so as we are able to migrate our existing clients on to the Converge platform, a lot of good things happen. One, the headwinds from churn, significantly abate because churn is really all related to the legacy platforms. And dissatisfaction historically with how those performed. And clients not wanting to wait around, as we get those clients migrated. And we've done I think, a really good job on the health system side and, and as Ido talked about health plans are now underway. We'll be in a position to early next year probably show some really nice numbers around that, that allows us again to have a lot lower headwinds on the churn side, but also a much broader addressable market to upsell. And so, the second half, I think one of the most important things we can do is continue aggressively in migrating the balance of our health system customers and our larger, our largest health plan customers as well. So, those are -- that I think, is probably the most important thing we can do. The other thing that, Ido can probably add to our, along our go-to-market transformation. And that's well underway, we feel really good about the progress we've made there. And so, that we expect we'll have a very positive impact in the second half versus the first half on bringing in some of these shorter cycle bookings. But Ido, I don't know, if you want to add to that?

Well, I think you covered it, Bob, I would just suggest that the growth organization transformation is very, very significant. In the past couple of years, we really focused on imagining the best private care enablement platform we could imagine. And then went ahead and focus on disruptive innovation. As we look into now in the next couple of years. It's all about a profitable delivery. And as Bob mentioned, while we have data that allows us to be very confident about reducing and concluding a very large R&D expense, we are now focused on touching other parts of the organization. The growth organization transformation includes a touch of really every part of the org, including new positioning, packaging, pricing and messaging. We did a very big effort in the past few months of upskilling. Our client facing teams, we did some great hires, starting from the top new training for everyone to move from point service solution to an ROI driven solution sales. The dialogue with our channel partners, the client has changed dramatically. It's not much broader, more proprietary. And we look to a new level of rigor as we build reproducible, in efficient engine to send an extend Converge with a goal to improve service efficiency did velocity and besides we're focusing on profitability, mostly by improving the mix and contribution of all the subscription. So, continuing the migration, and concluding the growth organization transformation, coupled with the accumulation of very powerful validations and proof points are all going to be the hallmark of what you can expect between now and the end of the year. And we fully see ourselves say, starting the New Year from a completely different standpoint.

Got it. Thank you.

Next, we'll go to Ryan MacDonald with Needham & Company. Your line is now open.

Hey, thanks for taking the question. This is Matt Shea on for Ryan. Wanted to start off with some of the churn commentary and trying to unpack that a little bit. Are you guys still seeing this churn contained to kind of the lower end of the market with some of your small business clients and or is that bubbled up to any of your larger clients and relative to kind of expectations is churn in line with what you had been expecting? Or has there been any changes that resulted in maybe some lower subscription expectations in the back half of the year?

So, a few data points. Matt one, all our strategics are with us and we added a couple as you know from our recent announcement. In addition to that, the low-end churn that we saw was exclusive to a legacy. And we may have seen also some a mid-level churn, as we approach the last innings of the migration. It's important to know that there is zero churn in Converge, in fact, there is renewed commitment by so many of our customers, existing and new to Converge. With our announcement this evening, we are looking to cover most of the covered lives, I mean, a big part of the go live in United States is committed to Converge. Bob if you have anything to add.

Yeah, Matt I would say the churn is coming in and around the levels that we expected in our in our guidance, there really isn't a meaningful change there. So, it's not a churn driven re-guide here, as much as just delays around some quicker twitch revenues that we anticipated coming in. And those are pushed out a bit. So, well, churn is a word that probably comes through a lot in our prepared remarks. The level of revenue impact from that is in and around the levels that we had anticipated.

Okay, that's helpful. Appreciate that. And then maybe digging in on some of the go-to-market changes picking up on Craig's question, I was interested to hear you guys mentioned pricing as something that's part of the changes in the growth organization. So, understanding that existing clients are getting the new Converge platform for free. Curious with your newer clients and some of this new pricing initiative that you have if you're able to raise the price relative to what the legacy platform was, and whether you're seeing pricing power at that offering, and that clients are understanding that higher price relative to the greater value that Converge is driving? Thanks.

It's a good question Matt. And so in essence, Converge is very, very different from our legacy solutions. It's different in its impact and its value, and therefore it deserves a different look as it relates to pricing. In addition to that Converge is modular. So, when you can do pretty much everything you've done with a legacy platform made with Converge, there are many, many new things you can do in Converge. That was not were not possible before. In the market today, people are very value focused and oriented. And our new architecture allows us to -- allow people to buy what they need today. But still being future proof as it relates to the, enable to grow that as their needs evolve over time. The fact that we have some stats or observations that relate to the new platform, in way of customer feedback, and other things, which I'm happy to elaborate on. We actually believe that our pricing power has grown significantly. Just to give you a few observations that could be interesting. The system availability is really the highest possible we can ever aspire to. Very unusual [technical difficulty]. The consumer ratings and even more importantly, the provider ratings are at record levels. They're super high also in absolute numbers. The support, it gets fair interaction, are extremely low, much, much lower than our legacy a platform that really reflects the robustness and simplicity of the new platform. And the NPS is skyrocketing, it's much, much higher, it's actually our highest ever. In our opinion, based on what we know, it's much higher than where the competition is. There are lots of green shoots, there are lots of proof points coming from all directions. Converge is a platform that can impact organizations in so many ways. And all that is adding to our perception, to existing a new client that also relate to your question as to pricing a power. I will just end by saying that when you see the size of ecosystem that is already committed to Converge, that too is a very important buying a factor and strength source for us. The largest, most sophisticated organizations are choosing Converge. That means that if you are, for example, the provider or innovator, and you want to interact through them or with them, you need to do that in some way Converge. And that, of course, is strengthening our position.

Next, we'll go to Jack Wallace with Guggenheim Securities. Your line is now open.

Thanks for taking my questions, just want to drill in a little bit more on the new business environment and maybe ask the questions from a different angle. It was about 50% of volumes be, getting beyond the Converge platform, by the end of the year. Migrations were taking place earlier in the year of being completed early in the year for the early adopters. Are you seeing any changes in the lag time between migration to then considering incremental use cases, modules, expansions, et cetera? In that timeline that wouldn't necessarily be related to say market dynamics or budget pressures, but more related to their experience with the platform and understanding of its incremental capabilities. Thank you.

Sure. So, it's important to note that the rollout of Converge was unequal, asymmetrical, right? We started by with the low end, then we went to providers, in the lower end of providers, and so on and so forth. And now we are reaching the point where we are basically covering everyone, including the payers, and that is influencing the same story growth and experience. Having said that, I gave today in my prepared remarks, quite a few examples of expansions, we see a lot of those with. We think that things that increase efficiency in this climate are very, very popular things that change the ratio between providers and the number of patients that they can address. So, less humans and more automation, longitudinal program, virtual nursing is very popular in way of examples. Behavioral health seems to be very much in high demand. So, all those things topped the list in way of expansion, the opportunity. And we also begin to see changes in sphere size. So, volumes are growing very nicely with the Converge will be related to the experience and the fact that it's more easily and deeply integrated with existing workflow. We think all these trends are going to increase quite significantly over the next few quarters is more and larger clients are migrating in much higher scale.

So that's really helpful. Thank you. And then, Ido is there is there any pushback on some of the price increases? And what I mean by that is, during the, the elevated dialogue process, the demonstration of value, is there a push back on price? Or is it really, there's, as customers are looking at the incremental capabilities and considering them? Is price a secondary factor? And it's really, what kind of value can you demonstrate, and you're sure we'll consider paying a little bit more for it. But we're really curious about the full extent of the platform.

So, we are suddenly in the price conscious environment, people are very careful as it relates to expenditure. And they really want to make sure that they invest in things that have a clear ROI that is not so distance and it's very, very likely. The modularity of Converge allows us to allow our clients to take measure risk, as they choose the components that they believe are most needed, moving away from them, get confident, prove the ROI, and then expand we couldn't really do that a before. We try to price every component of Converge realistically, in a way that is fair and in line with general market reality. Unlike others, we have lots of components to choose from. So, while we are competitive and realistic as it relates to every standalone solution, we are unique in our ability to offer end-to-end one stop shop experience for customers that are all integrated into one code base. A lot of our buyers are now CIOs and that are charged with integration. The fact that you have a singular reproducible experience designed to integrate with a lot of moving pieces is a hallmark and strength that we bring to the table that is saving and creating lots of efficiency for our customers. And we think that's not a really a loss of them. So, on the one hand, we have very robust, very comprehensive offering for very large strategic customers. On the other hand, we have very focused, dedicated, fairly priced options for people that want to dip their toe into water and are very risk averse. And we are getting them to adopt our technology quite quickly and grow from there in a reliable fashion.

That's helpful. Thank you.

Thank you. Next, we'll go to Jailendra Singh with Truist Securities. Your line is now open.

Hi, this is Jenny on for Jailendra. Can you speak about more specifically the customer, the new trends you have been seeing from both the health systems side and healthcare side? As these contracts are coming up renewal, how are those conversations evolving? Are you seeing some of your customers willing to restructure the contract in some ways, or is it still more or less status quo on the approach?

So, thank you, Jenny. We've seen quite a few renewals. The most prominent one we announced in our last earnings call as it relates to [indiscernible], that was a giant vote of confidence. And we're so proud that they committed to Converge. There are many other examples, a quite a few of them. I mentioned in this call, in previous calls. As I mentioned earlier, when you upgrade, when you migrate to Converge within your term, you don't pay an additional extra, but when you want more flexibility you do. And when we renew the contract, we are moving people to the new contract the structure, the pricing in way of apples-to-apples is very similar. However, there is a very big opportunity to expand and choose other components. There is much more flexibility and elasticity that is offered for customers today, it also relates to the previous call. So we believe that we are positioned generally in the market in a similar place that we're positioned before in wherever headline, but we're able to offer much more flexibility and options for customers, both on the downside or on the upside depending on the level of appetite and risk.

Thank you.

Next, we'll go to Stan Bernstein with Wells Fargo Securities. Your line is now open.

Hi, thanks for taking my questions. And I guess I'd like to ask if I recall correctly. I think historically, non-AMG visit volumes were a component within subscription revenue. Is that still the case post migration on to Converge? And to the extent that it is with visit volumes moderating has that been a headwind to subscription revenue growth? Thanks.

That's a very interesting question. Stan thank you for bringing it up. So, essentially, the general structure where you have a component of fixed a non-AMG visit included in your provider subscription is maintained. Also into Converge when you pierce it obviously, you pay more. The innovation pattern, however, has changed dramatically. You are absolutely right to know that post COVID obviously, the market has seen a decline in telehealth in general. However, Converge is much broader than telehealth there is a healthy dose of automation and many other types of interactions. But even more importantly, the pattern of utilization that we saw during COVID and even before was related to telehealth is an alternative to the main pathway of care. So, when you look at the patterns of best times of where the weekends and holidays. The pattern with Converge is entirely under negative degrees reverse. Our best times are weekdays, we see plunges in weekends and holidays, which demonstrates the fact that Converge has become part of the day job, part of the main pathway of care for our provider organization. In fact, when you count interaction, we'd see an overall bigger patch of patients, although it's not always done through traditional video visits. There are many other modalities, asynchronous communication automated care and many other examples that can be used with a full hybrid care enablement platform, even physical care enablement is a component of what we offer today. I would suggest in summary, that our role is an enabling of a digital first experience has become much more meaningful, if it was a somewhat of a sideshow before a convenient alternative to care. It's becoming very quickly the main pathway, the main way that people interact with their health care. And of course, it covers the full spectrum, not only urgent care about anything from prevention all the way to catastrophic care, including chronic illness management, not only video visit, but also asynchronous care, automated care and physical care that are all enabled by our platform in the overall magnitude of the traffic is increasing, and we fully expect it to continue to increase over the next few years.

Got it. Thank you.

Next we'll go to Glen Santangelo with Jefferies. Your line is now open.

Yes, thanks. And good evening. Hey, I just wanted to ask about the transition timeline. I think in the past, you said that you hope to have all the health systems transitioned over by the end of ’23 and that the payers would mostly convert in ‘24. Is that timeline still the right way to think about it? And should we assume that you won't be able to sunset the legacy platform and realize those gross margin savings until the last person is transitioned? Or last customer rather?

Yes, and no. So to the first part, yes to the first part, and no to the last part. The first part is pretty accurate. I mean, we fully expect the lion's share of our provider customers to be on converge by the end of the year. Of course, there could be some outliers. But as a trend, you're right. We also have a few payers like the one that we announced tonight, with no name. And of course there is CVS that as a payer component to it, it is already live in production, we have some payers already live, but we will have a serious optical payers in the first half, even over the next year. So we fully expect to have the lion's share of our customers, as planned on converge by the end of ‘24. If we have some leggers, that that could happen. But we try to minimize that, the more a customer's on converge, it's not binary, we have enormous savings and efficiency gains, as we deploy more of our customers, of course, a day where the last customer will stop using converge would be a very happy day in a very efficient day for us. But we are definitely incurring efficiency and velocity and upside with every client that we convert. Robert, don't know, if you have anything to add.

Yes, Glen, I would just say you're right. I mean, we really, until we either have everybody migrated, or make a decision that we're going to go ahead and just sunset them with a small amount of revenue left, we will not see the cost benefits of those platforms coming off. And -- but we can be in a proactive way make a decision to do that based on whatever revenue level there is, relative to the cost savings that we see from doing it. So, I -- and the timing that you articulated, I think as Ido said, is pretty close.

Okay, thanks for the comments.

Next, we'll go to Charles Rhyee with TD Cowen. Your line is now open.

Thanks. I want to go back to you talked about some churn, nothing out of the ordinary, but -- and tied to this idea of kind of retraining the salesforce, to think of it as an ROI platform versus point solutions, is some of the churn going on, because they're not necessarily recognizing the value prop of, of moving on to converge and how long do you think this sort of retraining of the salesforce will take where you'll start to see sort of that opportunity to sort of correct itself, and do you think that might to an earlier question, it improve sort of the retention of your existing clients?

So, hi, Charles. A few comments. First, the churn in legacy happens in every replatforming, I've done three replatformings in my history, and they all do pretty similar. We announced a few years ago that we are going to platform some clients don't care to wait that long, they are unsure what the result would be. And they don't necessarily like new platforms. These are some reasons I'm sure there are others as well. So we saw some may churn. There is no question that as we deploy converge, and we have more proof points, that changes quite a significantly, there is no question that as we transition our salesforce, which is very much underway, and we're getting much better articulating the value, working with a client to realize their own business goals and ROI, and doing it with much shorter cycle, and much more efficiently. So I want to be very clear, we are well on our way we say process, but we are not done, we are getting better re all the time. We definitely believe that within a quarter or two, this efficiency will plateau, there will be a diminishing return. So we are certainly not expecting this to last much longer. But the fact that we have so many clients happy and deployed and in production is enormously valuable for the learning and for the communication that our client facing team not only sales, but also cost management and even deployment experts in solution experts are able to communicate.

Got it. That's really helpful. One other question, want to touch on I don't think you touched on this yet was around like behavioral health. And obviously, this is great demand for access to be able to help them particularly through virtual, it's not in the sense the way you guys are positioned in the market as a platform. But, it's just a capability that you would think of as an added service to your health plan customers -- sorry, health system customers, or both actually, given the scarcity in some regions of a qualified therapists. How would you think -- how are you sort of approaching this, sort of opportunity that's kind of, certainly right now in high demand?

That's a very good question, Charles. So essentially, we don't see the world anymore as segregated between providers and payers, essentially providers and payers are partnering to improve the efficiency and quality of care. Behavioral health does not only influence behavioral health, but of course, influences in every other aspect of our health, including chronic illness management for example, it so while it you're right to note that our behavioral health solutions are very popular with payers, like the NHS in the UK, in recently announced, the government of Ireland is another a client that had a very large examples. The need to improve access to behavioral health is very relevant, also for a many provider customers. To give you an example, when you have a very busy hours and you don’t have a psychiatrist, is the ability to be in a psychiatrist and release a bed is very, very helpful, for delivery systems, there are many other examples. So essentially, and strategically, the big focus of converge is the single codebase that is uniting all the players, most importantly, payers been providers, so they can partner to focus on solving really complicated problems, like a longitudinal behavioral health, they manage management in a way that is really allowing a much better distribution between very expensive humans and an envelope of automation.

Got it. And I guess to that point, can you talk about maybe SilverCloud? I don't think you've touched on that lately. Talk about sort of the uptake, and how well that's being received in the market now, since you've had [indiscernible] at this point?

Well, absolutely well, we don't talk about SilverCloud anymore, we really talked about converge as one platform an important component of converges legacy SilverCloud, I guess quite a few examples, even today, as it relates to some really powerful and innovative ways that the legacy SilverCloud component, which is now part of the convergence offering is behaving maybe just one nice one that people may have missed is Wood County, the fact that you have around the campus QR codes and whenever you have a demand for anything, you just point your phone, and immediately you're connected to a slew of behavioral health solutions, makes x to behavioral health so much more streamlined is so much easier. There is a reasons why large governmental organizations are choosing legacy SilverClouds. And the data is very compelling. I mean, the NHS came out with tests that are showing that they're able with legacy SilverCloud to change the ratio between behavioral health specialist and consumers six times over. And now we have this capability as part of the convergence offering. So imagine the patient on a juvenile diabetes poll, but is in need of services, we can really look at the whole person and share those resources very easily in an integrated test.

Okay, next, we'll go to Alan Lutz with Bank of America, your line is now open.

Thanks for taking the questions. Ido, so to fully use converge and get the ROI workflows need to change, you're talking about hybrid care, you mentioned single codebase and providing longitudinal behavioral health or longitudinal care. That's a lot different than just the basic telemedicine offerings tha were being talked about 24, 36 months ago. Are there more people at these health systems, more stakeholders that you need to convince, as opposed to just putting in the base product that we were talking about three years ago? Is that what is taking a longer time period? Because you need more buy in across the health system? And I guess as we think about that, specifically, is there any way to frame what percent if any of your customer’s sort of have that full ROI base view at this current point in time, just trying to get a sense of where your customer base is versus where you are? Thanks.

So Alan, this is almost not a question. This is a very important observation. And you're absolutely right, the market now is night and day different than it was only two or three years ago. The stakeholders are different, because this is a production platform. It's something that used for everyday service to serve your customers and your ecosystem. So pretty much a lot of the leadership is involved. It is a technology solution. So the technology is very local, the CMIO, the CIO of the organization is always involved in this, but it's something that touches all the C-suite or the organization, because it has savings element to it, it has differentiation, it has growth element to it, it has the staff retention element to it, it has a cost saving and way of claims and things of that nature connected to it. So we find that our customers are very educated today, we find that their RFP processes that are very structured that in touch many people, and that does influence the process. It's not necessarily a negative, we think we have a good net to the new ask. And we think that they are mentioned highly differentiated, versus other offers, especially as we deploy converge in a very large scale. Having said all that, a lot of the effort I discussed in the transition over growth organization is our effort to greatly simplify this journey for ourselves and for our customers. And to really understand patterns of ROI in business task of our customers, so we can check the books much more quickly build a modular approach that fits a reoccurring cohort with typical segments that are happening again and again. So we can make it much simpler and shorter for customers to hit the ground running with our solution. It's not only technology, it's also best practices and other modalities that really create the white glove experience for customers that really accelerate their time for ROI, which is the best way to create ambassadorship endorsement and deal velocity and momentum in the market for us with this new product.

That concludes today's question and answer session. Dr. Schoenberg, I'll turn the call back over to you for any additional or closing remarks.

Well, thank you, everyone, for joining. We have a lot to share. As you can tell, we're very excited about our future. And we really appreciate your support and confidence in AMWL and Converge as we went through this enormous transformation, and we look to be very excited about the future ahead. Thank you so much.