Earnings call transcript: Amwell’s Q2 2025 revenue rises, stock surges

Amwell (AMWL) reported a notable increase in total revenue for Q2 2025, reaching $70.9 million, up 13% year-over-year. The company’s stock price saw a significant rise, climbing 20.45% to $7.82 in aftermarket trading, continuing its strong momentum that has led to a 16.97% year-to-date return. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculation. This surge follows the company’s financial performance improvements and strategic initiatives in AI and digital healthcare solutions.

Key Takeaways

• Amwell’s total revenue increased by 13% YoY to $70.9 million.
• Subscription software revenue grew by 47% YoY.
• The stock price rose by 20.45% in aftermarket trading.
• Adjusted EBITDA improved significantly compared to the previous year.

Company Performance

Amwell demonstrated strong performance in Q2 2025, with total revenue increasing by 13% year-over-year. The company has focused on expanding its digital healthcare solutions, particularly through its subscription software, which saw a substantial 47% increase. With a market capitalization of $134.14 million and a healthy current ratio of 2.92, the company maintains strong liquidity. This growth positions Amwell favorably in the competitive digital health market, where technology-enabled care is becoming increasingly vital. InvestingPro subscribers have access to 8 additional key insights about Amwell’s financial health and growth prospects.

Financial Highlights

• Total revenue: $70.9 million (+13% YoY)
• Subscription software revenue: $40.4 million (+47% YoY)
• Gross margin: 56.1% (up 3.3 percentage points from Q1)
• Adjusted EBITDA: -$4.7 million (improved from -$35 million in Q2 2024)
• Cash and marketable securities: $219 million, with zero debt

Outlook & Guidance

Amwell has revised its 2025 revenue guidance to $245-$250 million, down from previous estimates. Despite the downward revision, the company remains optimistic about future growth, with subscription software expected to contribute 53% of total revenues. InvestingPro data reveals that while the company holds more cash than debt on its balance sheet, it’s currently burning through cash rapidly. Amwell is targeting positive cash flow from operations by 2026, supported by ongoing cost reduction initiatives. For detailed analysis of Amwell’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Executive Commentary

CEO Ito Schoenberg highlighted the role of artificial intelligence as a key catalyst for the evolution of enabled care, stating, "We believe artificial intelligence represents the most significant and rising catalyst to prepare the evolution of enabled care." He also emphasized the company’s unique platform approach, which allows for easy integration and replacement of clinical programs, enhancing the experience for all stakeholders.

Risks and Challenges

• Continued market volatility could impact stock performance.
• Budget constraints may limit the expansion of behavioral and automated care programs.
• The healthcare sector’s rapid technological advancements present both opportunities and challenges for maintaining competitive advantage.
• Economic pressures could affect healthcare spending and investment in digital solutions.

Q&A

During the earnings call, analysts inquired about the extension of the DHA contract and its focus on core platform capabilities. The company acknowledged budget constraints affecting certain programs but expressed confidence in the market’s interest in cost-saving, AI-enabled solutions. The management reiterated its commitment to adding new programs to its existing platform, reflecting strong market demand.

Full transcript - American Well Corp (AMWL) Q2 2025:

Conference Operator: Good day, and thank you for standing by. Welcome to the AmWell Second Quarter twenty twenty five Earnings Conference Call. At this time, participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session. Please be advised that today’s conference is being recorded.

I would now like to hand the conference over to your speaker today, Sue Dooley, Head of Investor Relations. Please go ahead.

Sue Dooley, Head of Investor Relations, Amwell: Hello, everyone. Welcome to Amol’s conference call to discuss our 2025. This is Sue Dooley of Aml Investor Relations. Joining me today are Aml’s Chairman and CEO, Doctor. Ito Schoenberg and Mark Hirshorn, our CFO and Chief Operating Officer.

Earlier today, we distributed a press release detailing our announcement. Our earnings report is posted on our website at investors.aml.com and is also available through 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’d like to take this opportunity to remind you that during the 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 forward looking statements. On this call, we’ll refer to both GAAP and non GAAP financial measures. A reconciliation of GAAP to non GAAP financial measures is provided in our posted earnings release. With that, I’d like to turn the call over to Ito.

Ito Schoenberg, Chairman and CEO, Amwell: Thank you, Sue, and good evening everyone. Q2 was a productive quarter for our company. It was marked by progress on many fronts. Our focus and execution are strong, as we deliver on key strategies and financial initiatives. They support our guidance and path to accomplishing our goal of positive cash flow from operations in 2026.

In a dynamic time for our industry, we believe that the drive to reduce the cost of care while making it better and more easily accessible is going to broadly inspire and inform the spending priorities of healthcare organizations. Our goals at Amwell remain closely aligned with these priorities, and our mission to transform healthcare with technology has never been more relevant. In addition, we believe artificial intelligence represents the most significant and rising catalyst to prepare the evolution of enabled care. Our approach is to partner across healthcare to tech enable our clients in order to help them evolve and deliver the efficiencies and better clinical outcomes they require. To begin tonight’s call, I’d like to provide you with some more detail on our recent performance and I will discuss what we are seeing in the market.

From there, Marc will review our financial results and our guidance. Q2 was characterized by client success, new client wins, and progress in our efforts on our path to positive cash flow. Here are some highlights of tonight’s news: First, together with our latest partners, we received the anticipated extension of our engagement to deliver our SaaS software platform powering the military health systems’ Digital First initiatives for one year. We are proud of our track record with this important client, and our on time and on budget deployment. I would like to expand a bit more on our joint success to date.

The MHS’s legacy Video Connect system is now decommissioned and we are the fundamental infrastructure powering MHS provider video visits. Since going live on our platform, virtual visits have nearly tripled and provider and patient satisfaction is very high. Recently, we completed a successful expansion beyond DHA sites to include MHS beneficiaries in the U. S. Coast Guard and MabCom, the Military Entry Processing Command.

In a DHA first, MHS providers begin successfully conducting virtual visits from deployed units in combat zones connected to a military hospital in The United States. At Amwell, we are inspired by the alignment of our mission with that of the DHA, as we collaborate to achieve important and enduring goals for members of the military and their families. A development I want to share with you tonight is that the 2026 contract extension excluded our behavioral health and automated care programs due to budget restrictions being broadly enforced by the Department of Defense. This is reflected in our revised guidance tonight. We hold strong conviction around the clinical, cost, and operational benefits of these solutions.

During the performance period, we validated their effectiveness across all aspects of measurement, and we believe the efficacy strongly supports enterprise wide adoption. In our conversations, the DHA maintains an unwavering commitment to providing the high quality tech enabled care that is the foundation of its digital first initiative. We therefore believe that in a more normalized budgeting environment, our programs represent additional software revenue expansion opportunity beyond the current extension contract value. Overall, a major strategic focus of ours continues to be expanding our role as a significant contributor to healthcare modernization and efficiency across the broader federal market landscape for years to come. Second, and moving to highlights from our growth organization, I am delighted to share the news of a highly strategic win with Florida Blue, a regional blue that is known for innovation.

Blue Cross Blue Shield of Florida selected Amwell because of our ability to white label their brand to provide easy, unified access and navigation to integrated clinical programs through our platform. We had another healthy quarter of continuing to build pipeline, and we also drove client renewals, including Children’s Hospital of Pennsylvania for our automated care programs and OSF HealthCare for digital behavioral health. Our teams are seeing pipeline traction with clear indication that our solution is resonating across payers and health systems. And finally, we continue to make progress in the cost initiatives we have outlined as part of our path to positive cash flow from operations in 2026. These initiatives resulted in another steady, better than expected quarterly improvements in our adjusted EBITDA.

We are streamlining our teams, while challenging them to harness the power of artificial intelligence to reshape how they work. As an example of quick and effective solutioning, we just rolled out Amwell Navigate, our new digital first customer experience designed to empower our clients and enable our teams to cost effectively deliver quality support at scale. We are also successfully transforming our revenue mix and our profitability profile. Contributing to our EBITDA strength this quarter was a sizable jump in our mix of subscription software revenues associated with our DHA execution, which Marc will go into shortly. We are targeting meaningful margin expansion this year, and with another strong EBITDA performance under our belts in Q2, we take a step closer to our goal to improve our adjusted EBITDA by over 60% this year as compared to 2024.

On the heels of this progress in Q2, we enter Q3 with momentum and focus and market dynamics working in our favor. I would like to speak to these for a brief moment. We continue to believe that people are going to experience a dramatic shift from brick and mortar into technology enabled care. Consumers are seeking care online, and the inventory of technology enabled clinical programs, especially AI powered, is quickly expanding. Adoption of technology enabled care is growing, and it is increasingly accepted as the main catalyst needed to achieve better, more efficient care.

While this transformation presents major opportunities, it also creates challenges to healthcare organizations. Such challenges include the need to drive better consumer engagement, addressing service and data fragmentation, achieving regulatory compliance and care coverage, all while accomplishing and documenting goals around clinical and financial outcomes. Meanwhile, clinical program vendors struggle with high customer acquisition costs and a rising pressure to integrate their point solutions into broader, whole person care models. We believe Amul plays the central role in solving these challenges and delivering on the promise of technology enabled healthcare as our clients imagine it through our unified platform. And a rising dynamic, in our view, is that artificial intelligence is a new, dramatic catalyst that will advance the movement to tech enabled healthcare.

At Amwell, we envision enabling our clients to leverage AI to deliver improvements across multiple fronts, including experience, efficiency, clinical decision making, and data analytics. This means empowering our clients with the potential of going beyond replacing the mundane and the repetitive towards gathering and presenting full set of patient data and context, while optimizing provider time and informing clinical decision making. The value of our platform approach to technology enabled care is meaningful to all players. We believe that our large customer footprint, deep integrations, and vast deployments form long term bonds with healthcare organizations across the commercial and government sectors that make up a big part of The US ecosystem. We believe we are exceptionally well positioned to take advantage of these market forces.

We see this reflected in our conversations out in the market, in our growing pipeline for new business, and across our own clients, where we are targeting an attractive opportunity for expansion growth, with a new level of operational focus and efficiency. With that, I would like to turn the call over to Mark for a review of our financials and our guidance. Mark?

Mark Hirshorn, CFO and Chief Operating Officer, Amwell: Thank you, Ito, and good afternoon to everyone on the call. I will begin this section by walking you through a few operating metrics and financial results from the second quarter and then review our guidance. The financial highlights for our second quarter include progress toward our key strategic initiatives. Our software revenue grew over 47% from Q2 of last year as we continue to drive strategic client deployments and meet important milestones. Also, we accelerated our adjusted EBITDA improvements for the fifth quarter in a row as we pursue our goal of cash flow positive during 2026.

Most importantly, as Ito highlighted, we have demonstrated continued progress with our most strategic objectives. Specifically, we received the anticipated extension of our engagement to deliver our SaaS software platform, powering the military health systems digital first initiative. We also built on the cost initiatives that put us further down the path to generating positive cash flows from operations during 2026. We have committed ourselves to executing these initiatives that will ultimately drive value to our company. So now let me share some of our second quarter financial results.

Total revenue was $70,900,000 for the quarter, which is 13% higher than 2024. Normalizing for the sale of Amwell Psychiatric Care or APC, Q2 revenue was 25% higher than a year ago. Revenue mix here is the more important metric. Subscription software revenue was 57% of total revenue at $40,400,000 up 47% from a year ago and compared to $32,200,000 from Q1. Similar to Q1 of this year, our Q2 software revenue benefited from a material uplift in subscription software revenue related to deploying our solution across the military health system.

A significant portion of this was non recurring and related to the timing of certain go lives and the initial expectation that the contract expansion would have occurred. Turning to visit metrics, we completed approximately 1,200,000 visits in the second quarter, which is approximately 22.3% lower than a year ago. Visits in the second quarter were in line with our expectations for the quarter. Amwell Medical Group or AMG visit revenue was 20.8% lower than last year at $22,800,000 Normalizing for the sale of APC, however, visits were flat to a year ago. Average revenue per visit was $73 which is 9% lower this quarter compared to last year’s Q2.

However, average revenue per visit was 8.3% higher than last year after normalizing for the APC sale. This increase was driven by a mix shift within AMG visits towards virtual primary care and specialty programs. This is something we view as favorable to overall ongoing adoption and supports our growth thesis and acceptance of tech enabled care. Every quarter, I reinforce one main point to keep in mind about AMG. Our AMG business is foundational to our overall business.

It is highly visible to us, and it is strategically important to enabling client expansions and new client wins and for the overall support of our efforts to attract and grow recurring software revenues. Our services and CarePoint revenue was $7,700,000 for the quarter versus $8,000,000 last quarter. The nature of our business drives variable revenues due to customer buying patterns for marketing programs and for care points as well as the timing of professional service milestones that precede deployments. Turning now to gross profit, which was a real bright spot in Q2. Our second quarter gross margin was 56.1%, higher by 3.3 percentage points compared to Q1, reflecting higher software mix and also the benefits of our ongoing cost initiatives.

On to operating expenses. Our consistent efforts in reducing and aligning our costs are positively impacting our bottom line. We continue to make substantial progress towards normalizing R and D spending. Our R and D expenses in the second quarter were $18,300,000 This represents a decline of approximately 12.2% compared to the $20,800,000 we spent in 2024 and a decline of 17.2% compared to $22,100,000 last quarter. Sales and marketing expenses were $12,500,000 This is approximately 32% lower than last year’s second quarter.

And G and A expenses were $21,200,000 approximately 8.8% lower than last quarter and nearly 25.7% lower than last year’s second quarter. G and A costs continue to be a meaningful component of our cost initiatives. So we have now completed another consecutive quarter that underscores our key strategic initiatives. We are delivering on the promise of growing our subscription revenue while being well on our way to reshaping our foundational cost basis. As a result, adjusted EBITDA for the quarter was a negative $4,700,000 versus a negative $35,000,000 in Q2 of last year.

Finally, with respect to cash and liquidity, our cash burn was reduced to $3,000,000 in Q2, and we ended the quarter with $219,000,000 in cash and marketable securities with zero debt.

: And now I would like

Mark Hirshorn, CFO and Chief Operating Officer, Amwell: to turn to our revised guidance for 2025. This year, the high margin revenue growth we are guiding for is underscored by our focus on expanding our mix of subscription software revenues, while also taking a conservative view on visit volumes and of course reducing costs. With this in mind, and reflecting new expectations around contributions from our government business, we are revising our guidance for 2025 as follows. We expect revenue for the full year to be in the range of $245,000,000 to $250,000,000 compared to our prior range of $250,000,000 to $260,000,000 We anticipate subscription software revenue to represent 53% of total 2025 revenues compared to slightly over 45% of total revenues in 2024. Our range for AMG visits remains unchanged between one point three million and one point three five million visits.

Our guidance for adjusted EBITDA is also informed by our new expectations around our government business. We are narrowing our previous adjusted EBITDA guidance to a range of negative $50,000,000 to negative $45,000,000 from our previous range of negative $55,000,000 to negative $45,000,000 which demonstrates a 65% improvement in our EBITDA performance year over year. As a reminder, here’s some additional context around our assumptions. We are on track to further reduce our R and D expense by more than 10% this year versus 2024, as we streamline and complete the bulk of our software configuration work for our existing commitments. Overall, we expect sales and marketing costs to decline over 25% year over year.

We expect to reduce our G and A expense beyond 20% for the year as we continue to organize the company around a new lower cost structure. Now our guidance for Q3 of this year. We expect revenue for the 2025 to be in the range of $53,000,000 to $56,000,000 As to adjusted EBITDA, we expect our Q3 adjusted EBITDA to be in the range of negative $15,000,000 to negative $13,000,000 As I look to wrap up my commentary, we are encouraged by the strides we have taken to strengthen our business. And in the second quarter, we made solid progress towards the goals which support our confidence in our path to generating positive cash flows from operations during 2026. We continue to anticipate that Amo will end 2025 with approximately $190,000,000 in cash.

On behalf of myself and Ito, I would like to thank the great passionate team here at AmWell for their continued execution and commitment to delivering the novel healthcare products, services and efficiencies that we successfully provide to our clients every single day. Thank you for your time this afternoon. And with that, I’d like to turn the call back to Ito for some closing remarks. Ito? Thank you, Mark.

Ito Schoenberg, Chairman and CEO, Amwell: Before we take your questions, I’d like to briefly wrap up. We entered Q3 with a strong sense of purpose and unprecedented focus on unlocking value in our company and pursuing our mission. To summarize, our solution is operational across the global military health system and the contract extension is in place. We believe this represents a model for our industry on the value of modernizing healthcare and the power of technology enabled care. The extension is the foundation for important improvements in our revenue mix as we pursue opportunities to advance our market presence within both the commercial and government sectors.

We have taken important steps to make our company leaner and more focused. These are showing up in quarterly EBITDA improvements. Our teams are focused and inspired by the promise of how artificial intelligence would transform and magnify their contributions to our company. As we bring our differentiated solution into a very large yet underpenetrated market opportunity, we are set to achieve our goal of positive cash flow from operations during 2026 as well as for long term profitable growth for many years to come. With that, I would like to open the call to questions.

Operator, please go ahead. Thank you.

Conference Operator: Thank you. Our first question comes from the line of Stan Berenstin with Wells Fargo Securities. Your line is now open.

Stan Berenstin, Analyst, Wells Fargo Securities: Hi, good evening and thanks for taking my questions. I’ll maybe try to turn this into a two parter. But on the DHA contract extension, can you just share with us how does the revenue run rate of extended contract compared to the pilot contract? Then related to this, are there any APIs that you’ll be measured against over the coming year that the government will rely upon to decide whether to renew the contract into 2027? Thank you.

Ito Schoenberg, Chairman and CEO, Amwell: Hi, Stan. Well, just as a reminder, the DHA pilot, if you will, was a long time ago for our platform and it covered the first five regions. This initial deployment was very successful and resulted in a decision to expand globally to serve 9,600,000 people. Both during the initial deployment and the global deployment, obviously the client was clearly satisfied with the scale and results of how our platform is operating, which I’m sure was an important factor in the decision to further expand the contract today. I believe that our performance, as I mentioned, going to continue to be at least as good as the performance has resulted in those important decisions.

And we shared one factor, for example, where our platform was able to almost triple the traction of the system that was decommissioned before we installed ours. So we don’t expect any major changes going forward. We expect to continue to deliver at least as well as we did until now.

Mark Hirshorn, CFO and Chief Operating Officer, Amwell: Is there a dollar

Stan Berenstin, Analyst, Wells Fargo Securities: amount that you can share with us in terms of what the run rate is with this extended contract versus the outgoing pilot contract? Thank you.

Mark Hirshorn, CFO and Chief Operating Officer, Amwell: Hey, Stan, it’s Mark. What I can tell you is that the annualized value of the contract today for the subscription revenue is slightly greater than what it had been based on prior billings. So there’s a small increase that the government provided for, and that’s what we’ll be looking at for the next twelve months.

Stan Berenstin, Analyst, Wells Fargo Securities: Great, thanks so much.

Mark Hirshorn, CFO and Chief Operating Officer, Amwell: You’re welcome.

Conference Operator: Our next question comes from the line of Charles Rhyee with TD Cowen. Your line is now open.

: Hi, this is Lucas on for Charles. Thanks for taking the question. I want to make sure, one, I guess I’m backing into the expected subs revenue for 2025. One, does that indicate a decline of roughly 22,000,000 to $30,000,000 in expected subs revenue for 2025? And I guess what is driving that decrease?

Is it the change scope on the DHA contract? If you can give us any color there, that would be really helpful. Thanks.

Mark Hirshorn, CFO and Chief Operating Officer, Amwell: Yes, I think you need to check your math on the subscription revenue. We reflected the expected decrease from the extension of the go live times for automated care and behavioral health, which had been included in our projections for five months of 2025, that results in the narrowing of the range that we provided in the prepared remarks a few minutes ago. That would be the only item that was taken into consideration for the revised guidance.

Ito Schoenberg, Chairman and CEO, Amwell: Gotcha, I’ll double check my math

: on that. And then I guess in terms of thinking about your cash flow from operations, breakeven target for 2026, how should we think about your ability to realize that target? Would it be through incremental revenue contracts and health plans and health systems for their OpEx? I guess if you could bridge the gap from where we are now till then, that would be helpful.

Ito Schoenberg, Chairman and CEO, Amwell: So, Lucas, achieving this very important milestone that we remain very committed to includes multiple parts. They all revolve around focus. The first focus is product focus. You notice that we divested APC, we are continuing to focus on our modern platforms and trying to deemphasize, divest older solutions that are harder to deploy and support and don’t generate the same high quality, high revenue results. Number two, we match those modern solutions and modern platforms centered around the AMOLED platform with the right market segments.

So there is renewed focus on areas where our right to win is maximized to create maximal value for our customers and as a result, also much higher margins for us. Number three, and very importantly, is the focus around our team and our method. We talked earlier about some reductions in force that’s related to flattening our company, spending layers, things of that nature, that also connects to different ways that we operate, that include a liberal embracement of AI and other technologies and new methods like self-service for our customers that we discussed in the prepared remarks and a migration from very expensive one time customization efforts into much more centralized configured platform. The end result is a poststructure that is much smaller with a revenue mix that is much favorable with a value proposition that is much stronger and in aggregate give us visibility and confidence in achieving our goal as advertised.

: Got it. Thanks for the questions.

Conference Operator: Our next question comes from the line of Eric Percher with Nephron Research. Your line is now open.

Eric Percher, Analyst, Nephron Research: Thank you. Congrats on the extension. Ito, I’d be curious for your take on the decision on behavioral and automated care. Do you view that as easily severable or do you think that they have to come back to it in order to achieve the goals here? And then Mark, I’ll have a financial follow-up.

Ito Schoenberg, Chairman and CEO, Amwell: Hi, Eric. I will never say anything is easy in our business or certainly if it relates to government agreements. Everything is taking the time it is due. But what we know for sure is that those programs were very well received and resulted in very good impact for the DHA. We have every reason to believe that the lack of inclusion of those programs at this stage for the next iteration is related to broad budget reason much more than anything else.

Our platform is there and adding progress to our platform is how the platform operates. So we certainly have great expectations for those programs and other programs to be added later on because we know they generate important savings and important improvement in access and care for this incredibly important cohort.

Eric Percher, Analyst, Nephron Research: Okay. And Mark, I wanted to make sure I caught you right on the comment that the guidance change, if I heard it correctly, at the EBITDA line reflects only the MHS scale change. And my follow-up question is there, was there any pull forward to the first half that you expected in the second half?

Mark Hirshorn, CFO and Chief Operating Officer, Amwell: So Eric, for your first question, the impact from the government contract is what had moved the top line revenue guidance. The flow through to the bottom line is the net effect of that revenue being delayed and the positive impact of making reductions to our cost base earlier in June.

Eric Percher, Analyst, Nephron Research: Okay. And then is there any element from the divestiture that was reflected in prior not reflected in prior guidance reflected now at the revenue or EBITDA line?

Mark Hirshorn, CFO and Chief Operating Officer, Amwell: No, none at

Ito Schoenberg, Chairman and CEO, Amwell: all. Thank you.

Mark Hirshorn, CFO and Chief Operating Officer, Amwell: You’re welcome.

Conference Operator: Our next question comes from the line of Jeevinder Singh with Truist. Your line is now open.

Jeevinder Singh, Analyst, Truist: Thank you and congrats on the extension of DHA contract. So last quarter you guys highlighted lower than expected churn and that the selling season was showing strong demand across both payer and provider markets. Any update to share on the trends there? I’m just wondering if any of the recent macro developments, uncertainty and various regulations impacting providers are having any impact on your sales pipeline?

Ito Schoenberg, Chairman and CEO, Amwell: Hi, Jalendra. Well, we announced some nice examples of our market traction this evening. In addition to the DHA, we did win Blue Cross, Crusader Florida, which is a major, major blue plan with our new platform that has significant upside as it’s now going to serve this large audience and hopefully with more and more clinical programs. The market today is very focused on costs, there’s no question about it, and the need for a platform that is very efficient in the way that it engages with consumers and retain them and matches them with the most optimal clinical programs with ability to track the savings and make amendments and optimization is certainly something that people pay attention to. Our clients are also very aware of the enormous potential of using AI to achieve those goals and our ability to embed it liberally pretty much in everything we do in an iterative process is something that we believe is a factor that really is helpful in our conversations in the market today.

So overall, we are really encouraged by our dialogue. We’re encouraged by what we see. I think the market is seeing the traction that we have and the size and scale of what we are winning and that’s a serious consideration. People look at Amol as a trusted partner and people look at our solution as future ready and able to deliver on important savings in time where savings are really celebrated.

Jeevinder Singh, Analyst, Truist: Great and then quick follow-up for Mark and apologies if you covered this already. How should we think about R and D expenses into next year and does the extension of the DHA contract change your existing plans for R and D point of view?

Mark Hirshorn, CFO and Chief Operating Officer, Amwell: Hi, Jalinda. We noted in the prepared remarks that we would see at least a 10% decrease year over year 2025 compared to 2024. That focus of decreasing our cost base and making it as efficient as possible will continue through 2026 as there is a required contribution from cost savings in addition to top line new revenue in order to achieve that cash flow breakeven from operations in 2026.

Jeevinder Singh, Analyst, Truist: Great. Thanks guys.

Mark Hirshorn, CFO and Chief Operating Officer, Amwell: You’re welcome.

Conference Operator: Our next question comes from the line of Ryan MacDonald with Needham. Your line is now open.

Ryan MacDonald, Analyst, Needham: Hey, this is Matt Shay on for Ryan. Thanks for taking the question and congrats on the DHA extension. If the DHA wanted to re include automated care and or behavioral health in a future extension, would that be relatively turnkey given the prior implementation work or what would that look like? And then maybe beyond behavioral health and automated care, how do you think about incremental programs you could sell to the DHA in future extensions? And would that implementation work be similar to how you launched programs in the past where it would start with a few sites before scaling or could it be quicker now given your existing footprint within the DHA?

Ito Schoenberg, Chairman and CEO, Amwell: Hi, Matt. Thank you for this question. And based on the question, I know you know the answer, but I’ll reconfirm it anyway. You’re absolutely correct. Adding those programs, we are ready.

Those programs are deployed in GovCloud, they’re certified, they generate good results. It’s almost a flip of a switch once the DHA or other government entities are interested in including them. The whole point of the AMOLED platform is making it easy to add clinical programs, whether it’s AMOLED clinical programs or third party clinical programs. And if you do that, you don’t forego the elegance and effectiveness of having one type, one consumer experience that navigate to all those different clinical programs with ability to have common data set to report and optimize the outcomes. So we certainly expect all our clients and the DHA is no exception to use our platform to add more and more technology enabled care programs to really benefit from the savings and improve the clinical outcomes that they bring.

Ryan MacDonald, Analyst, Needham: Got it. That’s helpful. And then maybe based on the past couple of calls, you’ve talked about just broader optimism about the government pipeline in general. Would love to just get an update on that and kind of how this DHA extension maybe serves as a beachhead to keep penetrating that end market? Thanks, guys.

Ito Schoenberg, Chairman and CEO, Amwell: So, Matt, I would say only this. We definitely have very strong validation now in the government sector. We have good results and ability to scale on time and on budget. We have amazing partner in Leidos and other people that are part of it. And this configuration of the relationship between Oracle, Leidos, Us and others works really well and could be very relevant to adjacent organizations.

So we think we have a very nice opportunity both within the DHA and outside the DHA in similar environments, to reproduce the value that we created. And I will stop here. I think that time will tell the extent and the timeline of those additions, but we are certainly optimistic.

Conference Operator: Thank you. Our next question comes from the line of John Park with UBS. Your line is now open. I’m sorry, Park with Morgan Stanley. Your line is open.

Sue Dooley, Head of Investor Relations, Amwell0: Hey guys, thank you for taking my question. For Craig. I wanted to ask about the third party clinical solutions that you guys offer. Did this did the offerings in the third party solutions contribute any material effect to gross margins? And could you also remind us what the value prop is to go through Amwell while accessing these partners versus going directly to partners?

Ito Schoenberg, Chairman and CEO, Amwell: Thank you, John. This is a great question, which I’m happy to answer, of course. As you know, many of those clinical programs operate today as a standalone, which means that the sponsors need to integrate them and engage patients separately. So if you have an MSK program, for example, you need to hear from the MSK vendor independently, they need to acquire the consumer, then they need to report on the result and this result is not integrated with the whole person, with integrated care. And in some cases, the back problem may have some relation to your compliance as a diabetic patient and so on and so forth.

So our ability to basically create one type of engagement that is extremely personalized, delightful and easy, and then connect that in a very simple way to the entire set of ailments, the entire care continuum through various programs is extremely helpful first and foremost for patients and members, but also very efficient in the way of customer acquisition cost. In addition to that, many of the sponsors are struggling to stitch together the outcomes. Things as basic as identity of members between the different programs is a real struggle. We solve for that. So we add, we bring the report, it brings together all the programs so you can see your entire individual and of course the entire court as well.

From the vantage point of the clinical program vendor, when they are integrated on our platform, they get a steady stream of members that they didn’t spend to acquire, if you will. And in addition to that, they can refer the patient and also get referred patients or members to them in order to basically treat the patient holistically, and that creates a stickiness. So I would say that, in essence, the ability to create this ecosystem and allowing the sponsor to take out vendors that don’t perform and replace them very easily without changing the experience and the infrastructure for the members is really helpful for all players. As it relates to the business model, because we are saving so much for each clinical vendor, they’re happy to share with us the enablement revenue of bringing these patients to them and that translate into high margin, very sticky revenue for Amwell without taking anything away from the cost of the sponsor. This cost of the sponsor remains the same.

So it’s really a win win win for all parties.

Sue Dooley, Head of Investor Relations, Amwell0: Great. Thank you. I just had a follow-up to the earlier question that was asked about macro. It seems like there’s a lot of factors going on both in the provider of care level. Have you seen this translate into any type of like sales cycle elongation or perhaps pricing changes just to capture their attention?

Ito Schoenberg, Chairman and CEO, Amwell: I would suggest that each main change is the focus on the different unmet needs. If at times in the past, the member experience clinical outcomes were the discussion starter, In the market today, it’s all about savings. If we’re able to create a much more efficient experience that results in better, not only clinical but also financial outcomes, that wins the day. And we can do that and we’ve done it for many years and with recent enhancements and technology, we can do it better than ever and we’re going to get make it better and better every quarter and every year to come. And our ability to do it in a dependable way, I think is a key factor in decision making that makes the sales cycle be relatively at least as good as it was before, if not accelerated.

Our ability to make it very easy for our customers with modern platform to deploy and to configure their solution through self-service, I think is another factor. It’s easier to work with Amwell, It’s easier to deploy with Amwell and it’s easier to get support very quickly to what you need. And these are some things that are coming up again and again in conversation in the market today.

Sue Dooley, Head of Investor Relations, Amwell0: Great, thank you.

Conference Operator: Thank you. Our next question comes from the line of Kevin Caliendo with UBS. Your line is now open.

Sue Dooley, Head of Investor Relations, Amwell1: Yeah. Hey, guys. This is Jack Zemp on for Kevin. Thanks for taking the questions. Similar to Eric’s first question, on the DHA contract, you mentioned the renewals only for one year.

I’m just kinda curious. Do these renewals typically happen in one year increments, or was this kind of more of like stop gap funding type of renewal to keep care continuous? Just, you know, given the initial leadership change. Just curious if anything surprised you here. Thanks.

Ito Schoenberg, Chairman and CEO, Amwell: Well, Jack, as you can imagine, this is a much larger vehicle that includes much bigger participants than Amulet, including the EHR deployment for the DHA. So this negotiation, we were not part of between Leidos and others and the DHA that included even higher ups like the Pentagon is something that had many budget considerations, very broad budget considerations that we were not part of. We know our solution is very helpful, we know it’s sticky, we know it’s needed going forward. And we believe for where we see it, that we’re going to continue and serve this and other similar clients for many years to come. You’re right to suggest that typically those agreements are multi year.

We’re seeing this year with the new administration in place and the new flavor of negotiation, they wanted to create this vehicle and to continue to negotiate going forward and that resulted in where we landed. We don’t think that reflects in any way their perception on the value or the readiness to work with Amur as a partner for many more years.

Sue Dooley, Head of Investor Relations, Amwell1: Okay, understood. Thank you. Just a quick financial follow-up then. Gross margins expanded from last quarter. As we look into second half, what are your expectations on gross margin from here?

I think you mentioned maybe last call that you expect them to expand going forward. But adjusted EBITDA still looks a little flattish just given everything you guys talked about. Can you just kind of walk us through how we should think about gross margins going forward? And then maybe if this should continue into next year?

Mark Hirshorn, CFO and Chief Operating Officer, Amwell: Yes, the margin range will likely remain consistent with the guidance that we gave at the beginning of the year. The second quarter’s margins were positively impacted by a significant amount of implementation work and software revenue that we were able to recognize. So we will in fact be somewhat flattish for the remainder of the year and when we come into the beginning of 2026, we’ll give guidance for margin direction at that point.

Conference Operator: Thank you. And I’m currently showing no further questions at this time. I’d like to hand the call back over to Ito Schoenberg for closing remarks.

Ito Schoenberg, Chairman and CEO, Amwell: Thank you, operator, and thank you everyone for joining us this evening. We really appreciate your support and your attention. Have a good evening.

Conference Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.