American Well Sees 60% Boost in Adjusted EBITDA by 2025 on Soaring Software Revenue

By Unknown May 07, 2025 Post a Comment

Insights from the Earnings Call: American Well Corporation (AMWL) First Quarter 2025

Management View

CEO Ido Schoenberg underscored a robust beginning to the year, pointing out significant strides in the Military Health System rollout along with advances aimed at attaining positive operational cash flow by 2026. Notable achievements encompassed boosting the proportion of subscription-based software revenue and implementing cost-cutting measures to improve profitability margins.
The firm announced advancements in its collaboration with Leidos concerning the Military Health System, having completed global dissemination of their virtual visit platform. Both patients and providers expressed high approval ratings above 90%.
Mark Hirschhorn, the CFO, outlined the firm's enhanced adjusted EBITDA for Q1, which was due to an increased proportion of income from software and better expense management. He highlighted significant reductions in costs related to research and development, sales, as well as general and administrative functions.
The company announced the appointment of Dan Zamansky from Amazon Healthcare as Chief Product and Technology Officer, expected to drive synergies and further focus on profitable growth.

Outlook

The management team has reiterated their financial projections for the end of 2025, forecasting revenues between $250 million and $260 million along with an adjusted EBITDA ranging from a negative $55 million to a negative $45 million. This outlook indicates a significant enhancement of around 60% compared to the previous year’s figures.
In the second quarter, the firm anticipates revenues ranging from $62 million to $67 million and adjusted EBITDA within the range of negative $12 million to negative $10 million.
Projected for 2025, subscription software revenue is expected to make up almost 60% of the total revenues.
The firm revised the rollout schedule for its automated and digital behavioral health initiatives within the Military Health System. These programs are now anticipated to conclude in Q3 instead of Q2 because of a leadership change at the DHA.

Financial Results

The total revenue amounted to $66.8 million, representing a 12% growth compared to the first quarter of 2024. After adjusting for the impact of selling Amwell Psychiatric Care, the revenue saw a rise of 25% when measured against the same period last year.
The revenue generated from subscription software amounted to $32.2 million, accounting for 48% of the overall income and representing a 30% growth since the first quarter of 2024.
The gross margin increased to 52.8% in this quarter, marking an improvement of 4.3 percentage points compared to Q4 2024, primarily due to a greater contribution from software sales.
The Adjusted EBITDA wasNegative $12.2M, representing a substantial improvement over Negative $45.6M in the first quarter of 2024.
Research and development costs dropped 17%, sales and marketing expenditures fell by 18%, and general and administrative expenses decreased by 33% relative to the prior quarter.

Q&A

Craig Hettenbach from Morgan Stanley queried about the overall booking trends at Converge. The CEO, Schoenberg, affirmed strong market acceptance and emphasized how Amwell's integrated platform effectively addresses the rising demand for tech-assisted healthcare services.
Charles Rhyee from TD Cowen asked about the sustainability of the gross margins. The Chief Financial Officer, Hirschhorn, mentioned that the margins are anticipated to enhance as software revenue constitutes a bigger portion of overall earnings, with forecasts suggesting that software gross margins could fall between 75% and 90%.
Stan Berenshteyn from Wells Fargo Securities inquired about the renewal of the DHA contract and possible government prospects. The management showed strong confidence regarding the contract’s extension and mentioned their active pursuit of six significant government-associated initiatives.
David Larsen from BTIG asked about the extent of DHA’s implementation and its user community. The CEO, Schoenberg, explained that the platform currently caters to 9.6 million military personnel and their families worldwide for virtual consultations, noting strong approval ratings.

Sentiment Analysis

Analysts showed guarded enthusiasm, concentrating on DHA’s rejuvenation and the firm's capability to maintain enhanced financial figures. Queries regarding income distribution and governmental contracts indicated an interest in the potential for sustained future expansion.
The management kept an assured tone, especially during their scripted comments, emphasizing robust operational performance and solid strategic placement. During the question-and-answer session, their answers reflected confidence in meeting both fiscal targets and rollout objectives.
In comparison to the prior quarter, the managers adopted a more confident stance, indicating advancements in critical projects and improved financial outcomes.

Quarter-over-Quarter Comparison

The subscription software revenue saw an uptick in Q1 2025 as opposed to Q4 2024; however, total earnings were marginally reduced because of the usual drop in care point revenues during this period.
The Adjusted EBITDA saw considerable improvement from one quarter to the next, aided by reduced costs and enhanced gross margins.
The management's attitude remained as optimistic as before but showed increased assurance in meeting both operational and financial goals.

Risks and Concerns

Renewing the DHA contract continues to be crucial for the company’s fiscal path. Although management expressed strong confidence, they also recognized possible hazards stemming from external leadership changes.
While analysts expressed worries over possible broad economic effects on sales timelines, management emphasized the platform’s advantage of being cost-efficient as a way to offset these issues.
It was determined that churn normalization should be prioritized, with management showing faith in decreasing customer turnover.

Final Takeaway

In the first quarter of 2025, American Well Corporation showcased strong financials, bolstered by advancements within their Military Health System project and notable enhancements in adjusted EBITDA. Despite ongoing concerns related to the DHA contract renewal and general market volatility, company leadership continues to prioritize increasing subscription-based software income with an aim for attaining positive cash flow by 2026.

Review the complete earnings call transcript here.

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