American Well Aktie

Hello, everyone, and welcome to Amwell's conference call to discuss their first fiscal quarter of 2026. [Operator Instructions] Joining us on the call today are Amwell's Chairman and CEO, Dr. Ido Schoenberg; and Mark Hirschhorn, Amwell's CFO and Chief Operating Officer.

Earlier today, a press release was distributed detailing their announcement. The earnings report is posted on the Amwell website at investors.amwell.com and is also available through the normal news sources. This conference call is being webcast live on the IR page of the website, where a replay will be archived.

Before we begin 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 the filings with the SEC. Actual results or events may differ materially. Except as required by law, we undertake no obligation to update or revise those 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 the earnings release.

With that, I would like to turn the call over to Ido.

Thank you, operator. Good evening, everyone. Over the past 12 months, we focus on what matters most, solving clear urgent customer needs. We deliver dependable, unified platform, and the market is responding. Elevance renewed for 3 years. DHA deployed globally. Our pipeline is growing. CMS is increasingly making telehealth flexibilities permanent.

And in 2025, we reduced losses by $100 million. We also significantly grew our subscription revenue mix. We have ample cash, no debt and a clear path to cash flow breakeven in Q4 with real confidence in multiyear growth beyond it. Amwell entered 2026 with one focus, consolidate our platform and deliver what payer and provider customers need most today and in the future.

The market opportunity is real and urgent. Payers are under serious margin pressure. Premiums are not keeping pace with the total cost of care. Technology-enabled care and AI-powered clinical programs, in particular, are now one of the most critical levers payers have. They help control costs. They help improve outcomes. They help payers compete for members and sponsors. This is no longer speculative. It is a survival imperative, but adoption remains hard.

Despite strong demand, customers are struggling. Vendor sprawl is a real burden. Legacy tech stacks and internal silos make it expensive to integrate point solutions. The result, fragmented member experiences and very limited visibility into what actually works. Customers cannot easily measure performance across their programs. Switching between them or optimizing member attribution is slow, expensive and painful. That is exactly where we step in.

Amwell solves this. We offer a trusted, proven technology-enabled care infrastructure, a unified digital stack that lets health care sponsors act as their own system integrators. Customers white label and embed the clinical programs their members need directly within their own digital front door. They control navigation, they monitor results. And those results go to the heart of their business, lower costs, better outcomes and stronger market share.

With Amwell, customers get one unified engagement and navigation platform. It reduces acquisition and retention costs. It matches each patient with the most effective program based on client-defined rules. And it aims to deliver unified analytics across every program, so clients can see what works, document outcomes and adjust quickly. Clients can adjust service attribution by member, group or cohort.

They can add Amwell native clinical programs, third-party programs or their own preferred programs. That level of control and agility is highly valued and desired. The Amwell platform is built for where AI is going next. The industry is moving fast from generative AI to agentic AI. These are systems that don't just create content. They execute tasks autonomously across complex workflows. Our customers are preparing for this shift.

The Amwell platform is positioned to be the governed environment where these agents operate safely, effectively and at scale. We are not positioning Amwell as an AI feature. We are the infrastructure layer where AI-powered care becomes operational and measurable. A critical enabler of effective AI is data. Because our platform serves as a common infrastructure across all programs, we aim to maintain a unified data structure that is unique in our industry.

Before care begins, we look to share relevant member information with clinical programs, which the patient has selected so they can engage effectively from the first interaction. After care is delivered, we aim to collect and consolidate outcomes data across all programs. That data improves attribution, drives personalization and makes every AI-driven program more effective over time. This unified data foundation may create a significant and durable competitive advantage for us. We also have powerful validation at scale.

Elevance Health, one of the largest payers in the country, has renewed with Amwell for 3 more years. That is a strong vote of confidence in our platform and the value we deliver in one of the most sophisticated operating environments in the market. We also have powerful validation on the government side. The military health system contract extension in August 2025 put our platform in front of 9.6 million military beneficiaries across the globe, connecting deployed units in and outside combat zones with military hospitals.

That level of security, scale and mission-critical reliability is exactly what other government entities, payer and health system clients are looking for. The regulatory environment is now working in our favor. CMS has made telehealth permanently accessible. Rural geographic restrictions are gone. Home-based telehealth is extended through at least 2027. Virtual behavioral health is now a permanent part of Medicare.

New reimbursement code for advanced primary care management and behavioral health integration are creating further incentives to shift care into virtual and community-based settings. This is a direct tailwind for our platform. We have also transformed how we operate. Alongside strengthening our platform, we made meaningful operational improvements, sharper focus, significant organizational changes and more efficient ways of working.

In 2025, we reduced net loss and adjusted EBITDA losses by approximately $100 million. Subscription revenue grew to 53% of total revenue, a recurring stable income stream. And the market is responding. Renewals are strong, pipeline growth is significant. Our offering is resonating with existing customers and new ones alike. We enter this next phase with $182 million in cash, no debt, a clear path to cash flow breakeven in Q4 of this year and a view towards multiyear growth beyond that milestone.

We have a clear strategy, a mature and highly relevant platform, an efficient operation and financial stability that gives us the runway to execute. We are excited about what is ahead.

And now I would like to turn to Mark for a closer review of our performance. Mark?

Thanks, Ido, and good afternoon, everyone. On today's call, I'll start with a few highlights from the first quarter, walk through our financial results in detail and close with an update on our second quarter and full year 2026 outlook. In the first quarter, we delivered strong results across revenue, gross margin and adjusted EBITDA. The outperformance was driven by strong visit volumes in urgent care and clinical programs with continued cost discipline.

These results demonstrate continued progress on our path toward profitability and reinforce our confidence in the trajectory of our business. Total revenue for the first quarter was $54.9 million, down approximately 18% year-over-year. Subscription revenue was $24.9 million, down approximately 23% year-over-year, driven primarily by previously disclosed churn. Encouragingly, renewals and retention were higher than budgeted in the first quarter, providing greater confidence in the stability of our subscription base going forward.

Amwell Medical Group, or AMG visit revenue was $28.9 million, up approximately 9% year-over-year. AMG paid visits totaled approximately 382,000 visits, up slightly year-over-year with revenue per visit of approximately $76 up approximately $5 per visit year-over-year, reflecting the growing contribution of our clinical programs and the broader shift in our visit mix toward higher acuity, higher-value care.

Virtual primary care continued its strong growth trajectory with visits up approximately 57% year-over-year, underscoring the increasing adoption of our VPC offering across our client base. Total platform visits were 1 million visits, down approximately 19% year-over-year, which is in line with the portfolio changes we have previously discussed. Gross profit was $28 million with a gross margin of 51%, down approximately 180 basis points year-over-year from 52.8% in the first quarter of 2025.

Near term, our existing revenue mix will likely generate a margin profile similar to what we just generated. We continue to see our projected revenue mix shifting toward higher-margin SaaS offerings, which we believe will support margin expansion over the next several years as our scale improves. Total operating expenses were $45.4 million, down approximately 31% year-over-year. As a percentage of revenue, operating expenses improved to 82.6% from 98.3% in Q1 of 2025, reflecting the benefits of our transformation actions and continued cost discipline.

Adjusted EBITDA for the first quarter was a loss of $3.1 million compared to a loss of $12.2 million in Q1 of 2025, representing a $9.1 million improvement. Operating loss was $17.4 million compared to $30.4 million in Q1 of 2025, an improvement of approximately 43% year-over-year. Now turning to the balance sheet. We reported cash burn of approximately $3.1 million, down from $19 million last quarter. We ended the quarter with $179 million in cash and investments with 0 debt.

Now turning to guidance. For the second quarter of 2026, we expect revenue in the range of $48 million to $52 million and an adjusted EBITDA loss in the range of negative $4 million to negative $2 million. This Q2 outlook reflects normal seasonality in visit volumes and the continued step down in subscription revenue impacted by previously discussed churn. Additionally, for the full year, we are reiterating our revenue outlook and updating our expectations for adjusted EBITDA. The revised adjusted EBITDA range reflects the progress we've made in the first quarter and that which we expect to continue throughout 2026.

We now expect full year 2026 to generate revenue in the range of $195 million to $205 million and adjusted EBITDA loss of $16 million to $12 million compared to our previous range of a loss of $24 million to $18 million. The strength of Q1 gives us increased confidence in our goal of achieving positive cash flow from operations in the fourth quarter of this year.

In summary, Q1 was a promising start to the year. Visit volume momentum, stable subscription revenue and a leaner cost structure give us confidence that we are on the right path. I want to thank the entire Amwell team for their hard work and dedication. These results reflect their efforts.

With that, I'll turn it back to Ido.

Thank you, Mark. We are encouraged by our progress. It was made possible by the amazing team at Amwell. We feel privileged to help improve care for millions of patients and especially for the men and women in our military and their families around the globe. Amwell is playing an important role in transforming health care. What we do matters, and we believe it will only become more valuable going forward. We are proud of what we've accomplished, and we are truly excited about the road ahead.

With that, I'd like to open the call for questions. Operator, please go ahead.

[Operator Instructions] Our first question comes from the line of John Park of Morgan Stanley.

On the DHA relationships, could you remind us or help us understand if there's any dependencies on the broader DHA's GENESIS or partners like Leidos and if that ecosystem dynamic would influence any renewal decision in the near future?

I believe, Ido, may be having some tech problems.

I'm sorry, I'm back, I apologize for this. Can you hear me now?

Loud and clear.

Okay. So essentially, when we take this incredibly important customer, the DHA, we really focused on delivering on their very specific and high expectations. We are privileged to have many other players involved, but our focus remains on making sure that first and fore, we put the customer first. There are many changes happening in different areas, but the service that we are providing and the integration into the backbone of the DHA remains constant.

From where we sit and we strongly believe that based on our performance and relationship, we would likely hope and believe we are going to renew and continue to serve this customer for many years, recognizing that not all the players -- other players may or may not continue in the same format, but we are fairly confident and hopeful that we will, although we can never take it for granted and we work every day to continue and justify their trust.

Got it. My just follow-up would be, you talked about perhaps the broader pipeline. I remember perhaps the broader government pipeline you talked in the past. When you think about the rural health transformation initiative, I was wondering if you see any opportunities that this program could serve as a diversification lever relative to the broader government portfolio?

You're absolutely correct, John. In general, as we focus our efforts on our single platform and related products, I mentioned in my prepared remarks that people have great clarity. about the value that we bring and see the urgency in fulfilling that value that we believe we provide fairly uniquely. That's true for health system. It's certainly very true for commercial payers. And now that we have demonstrated in very large scale in a very unique and challenging environment of the GovCloud, our ability to operate there, that's not lost on government entities.

From where we see it, we certainly believe that we are going to continue to grow in the commercial space, but also in the government space going forward. We are trying to submit RFPs to many of the opportunities that you mentioned in rural health. This is a long process. We believe we are well positioned, but the jury is still out as to the results, and we'll just have to wait patiently with everybody else. That's not the only opportunity in government that we are pursuing. We're pursuing other opportunities as well. And that's certainly part of the pipeline I talked about and Mark mentioned as well.

Our next question comes from the line of Corey DeVito of Wells Fargo.

This is Corey on for Stan Berenshteyn. Two questions on my end. One, any update on upselling the scope of the current DHA contract? And then the second one, what's the driver of the sequential increase in deferred revenue? I believe it's up $7 million quarter-over-quarter.

I'll take the first, and Mark will answer the second part of your question, Corey. Thank you. As it relates to the DHA, we are laser focused, as I mentioned earlier, on renewing our agreement for the current scope, and we are hopeful that, that's going to be the case. As it relates to further expansion, especially behavioral health, what we know is that we did deploy that successfully in the past, quite significantly in different demonstrative regions.

And we know that it delivered on the value. The decision, of course, lies with the customer, and we hope they will expand at some point, but we don't have any specific information as to if and when at this point. And with that, I'll turn to Mark for the second part of your question.

Yes. The deferred revenue is purely a result of timing based on the renewals of some of our largest clients, those which took place in the first quarter as compared to prior year, which took place at the end of the calendar year.

Our next question comes from the line of Charles Rhyee of TD Cowen.

Congrats on all the progress that you've made so far. Ido, you made the comment earlier that the pipeline is growing and obviously, where subs and renewal and retention better than expected. So kind of giving you confidence in sort of the model as it goes forward. But maybe to dive into the pipeline a little bit more. Can you give us a sense on the mix of what that pipeline is maybe from a -- maybe a dollar standpoint to think through how much is health plans, health systems, government?

Because when we look at 2025 revenues, Elevance obviously, is your largest customer, a fairly significant mix. DHA is not too far behind. And then there's a decent concentration in the top 10 as well. So just trying to understand, as we think forward, as we get through this period and we think about where growth is coming from, if you could help us understand where the opportunities you think are sort of the easiest to go after and sort of what that -- and how does that pipeline kind of reflect that?

Absolutely, Charles, and thank you for joining. Good to hear your voice. As it relates to the pipeline, as we mentioned earlier, it is significant and very different from the past years. I'll talk about it a little bit qualitatively. Essentially, the exciting news is that our new platform, the Amwell platform resonates really, really well across the market. And that's a tool that allows us not only to have subscription revenues, but also to grow the related clinical services, Amwell and non-Amwell services that we also generate revenue from when we do that.

I mentioned earlier that while this technology and these services are relevant to health systems, to payers and to government entities across the board, we really believe that the most pressing need, obviously, is with large payers. They clearly need an infrastructure like that. And when that happens, 2 things happen. One, we have some new logos, but much more importantly, as they deploy our platform, it contributes to same-store growth, as it becomes more and more efficient in creating engagement with more members, and it is built to increase same user utilization of the clinical programs I discussed, encouraging the sponsors to continue and finance both engagement and coverage as we are able to demonstrate and prove outcomes, financial and clinical outcomes that also drive success in open enrollment and market expansion.

So I believe that it's very refreshing for us to see a product mix that used to be many, many products across vast markets narrowed down to essentially one platform and related services and still generates a very healthy growth in pipeline and a healthy level of enthusiasm by existing in a new potential customers.

Is there any way -- can you share maybe sort of what that kind of growth looks like? Are we talking double-digit growth in the pipeline maybe since last year? Or anything you can share in terms of sort of the growth outlook?

Charles, I would just jump in and suggest that the pipeline is a multiple of what it had been last year. So it would be closer to triple digit as a result of those opportunities that Ido addressed. And again, primarily, it falls in line with what we believe will be principally components of government opportunities.

Okay. And maybe just one more, if I may. I think to a previous question, getting an update on DHA. Can you remind us the time lines of when you would expect to get a decision on, a, the renewal? And remind us in the off chance that there isn't a renewal, what is the fallback for the government? Because the DoD because my understanding is they don't really have one. And then lastly, can you kind of remind us what the opportunities are for expansion with this renewal? Would they come together? Or would those be 2 separate decisions?

Yes, Charles. So the renewal, we think, is going to be very straightforward. We believe that will be completed at the end of the quarter, start of the third quarter, perhaps July. We also believe that the opportunity to expand that will take place after the initial renewal. And as Ido alluded to earlier, whether that's a direct contract, whether we continue to work with our Leidos partners, irrespective of who ends up being the contracting party, we feel very confident that, that renewal is going to commence within that time frame I just spoke to.

Our next question comes from the line of Jailendra Singh of Truist Securities.

My first question is around the visit volume in the quarter, around 1.1 million. How did that track compared to your internal expectations? And what's driving the full year guidance of $1.3 million to $1.37 million? Some providers have talked about soft volume trend. They saw soft flu season, some weather disruption, which might have been a tailwind for you. Just curious like puts and takes you saw in Q1 and how we think about the trends for the rest of the year?

Hi, Jailendra, it's Mark. The trends were positive in both regards to premium-priced visits. So those that represented more higher-priced care specifically those clinical programs and virtual primary care as opposed to what had been the vast majority of our revenue-producing visits coming from urgent care in prior periods. We've also seen a nice high single-digit growth in volume.

So we did not experience what some others may have told you was soft. We actually saw a nice seasonal boost that brought us through to the end of the quarter. And now we're obviously seeing the expected seasonality set in. So it was a nice surprise. It was one that I think was supported by the fact that we've got some additional ASO clients participating in the offerings that we've introduced. So the trend is positive, and we expect it to continue throughout the year.

Great. And then my follow-up, your comments around a number of meaningful renewals and strong pipeline. How often do AI capabilities come up in your client discussions now? And is the behavior different when you're talking to a health plan versus health system? And related to that, when clients evaluate your AI capabilities, are they willing to pay explicitly for those? Or they're saying like they should be bundled in your current platform and pricing? Just how are those conversations evolving?

Hi, Jailendra, that's a great question. So essentially, the answer is a little bit complex in this -- when people buy the platform, some of the AI capabilities that we use directly relate to things like consumer experience, streamlining navigation, providing sophisticated analytics and things of -- such things. Interestingly enough, not all our customers are ready to accept those modules. Some of them actually are very cautious about those models and really focus on the reoccurring, stable, proven parts of our platform as their main interest.

However, all our customers, without exceptions, are eager and ready to test AI-driven clinical programs on our platform. And the reason is that we built the platform such that integration is very fast and the integration and replacement is even faster without changing many things like the consumer experience or the analytics. So there is a general recognition that AI clinical programs are necessary in order to achieve improved clinical and financial outcomes and they prove them.

But that does not necessarily need to be expressed in the risks related to the actual platform, but rather more to the different programs that people test. So while we have a healthy bit of AI in our own offering, which we deploy to customers who are ready to benefit from it, the most important value that we bring is the safe, reproducible, scalable way for our customers to test different options. Most of them are AI-driven, not necessarily for a full cohort, but rather to certain ASOs versus others and so on and so forth and then really manage risk while having access to all the opportunities that all those innovations bring to them.

Our next question comes from the line of David Larsen of BTIG.

Can you talk a little bit more about the Defense Health Agency contract? I think there was a component in there. I think it was mental health that didn't renew, that might renew in the future and expand. What is the annual dollar value amount of that, please?

David, we can't speak to the exact dollar value of that, but we would expect it to represent in excess of 15% to 20% of the total value of the platform today. That's based on the experience that we had at the beginning of 2025 when the DHA was actively using those services. We are fully engaged in the discussion around reintroducing those services. However, we believe that will likely take place after the effective renewal of the base services earlier this summer.

And can you please talk about the nature of those services? Is it mental health? Is that correct? And I would think there's no greater need that the military has the mental health services given sort of the nature of their roles and their jobs. And I would think that the federal government would be very sympathetic towards supplying whatever support they can to serve our men and women in uniform.

David, this is Ido. Obviously, I totally agree with you, and we are very hopeful that's going to happen. The sequence is as follows: we are very grateful to be in a position to be the backbone and the infrastructure for technology-enabled care for the U.S. military. That relates to the core connection between any member of this wonderful family and their doctors, wherever they are. So that's Amwell.

In addition to that, one of the clinical programs that fits, obviously, as a native solution, totally integrated in our solution is our behavioral -- automated behavioral health program that one of its main benefits is that it allows for a handful of therapies to reach dramatically more patients. So -- and that's a giant problem. There is a giant supply and demand in behavioral health in general, and that also includes an environment like this environment.

And this is not theoretical. I mean we've tried it in this environment. We integrated it and it works and it's needed. The customer decided because of their own reasons to defer that deployment after we've proven that it works well and fully integrated, and that's perfectly fine. Should the client decide to add that again, the speed is going to be very, very quick. We believe it's going to be very helpful, and it does make sense.

But these are totally the decisions of the customer, not our decisions. We know that it worked really well, not only in places like the DHA, but for example, in the National Health Service, the NHS in the U.K. where studies proven that we could dramatically change the ratio between therapists and patients. And that's obviously a wonderful thing, both in way of cost, but more importantly, in way of accelerating access that is such a pain point for everybody.

And then for 2027, would you expect revenue to grow on a year-over-year basis? And I understand there's been some churn. I guess, any more color around the churn that has already occurred? Why has it occurred? Is it maybe 1 or 2 clients? And then would you expect revenue to grow in '27 relative to '26?

Sure. 2026 churn has been immaterial. We would always expect low single-digit churn as we would in any business in a competitive market. We do have significant expectations for revenue growth. I had alluded to that even at the end of last year that even if a part of our pipeline converts this year, we expect to have meaningful revenue improvement in 2027 coming from these new government contracts.

And one more quick one. Mark, fantastic job getting a lot of these costs under control. Just are you sort of there? Or how much more in incremental annualized cost can you pull out of the business and nice work, by the way.

I appreciate that. Of course, I speak on behalf of all my colleagues as well because, as you know, it takes teams, essentially a village to get there. People have done much more with far less in this company over the past 18 months. We are all very pleased with where we are. However, everybody understands that the job is not finished yet. We have the next couple of quarters to ensure that we complete some of the initiatives that we've invested in over the past several quarters, but we do have a step down of costs, which means a lower operating cost basis coming out of the third quarter.

So we are well on our way. You could probably tell that we're very optimistic and excited about achieving that milestone, but we're also very excited about what we believe is going to be meaningful growth next year.

[Operator Instructions] I'm showing no further questions at this time. So I would like to return it to Ido for closing remarks.

Thank you, Ari, and thank you, everyone, for joining. We truly appreciate your many years of support in Amwell and look forward to talking with you all soon. Take care.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Hello, everyone, and welcome to Amwell's conference call to discuss their fourth fiscal quarter and full year 2025. Joining us on the call today are Amwell's Chairman and CEO, Dr. Ido Schoenberg; and Mark Hirschhorn, Amwell's CFO and Chief Operating Officer.

Earlier today, a press release was distributed detailing their announcement. The earnings report is posted on the Amwell website at investors.amwell.com and is also available through normal news sources. This conference call is being webcast live on the IR page of the website, where a replay will be archived.

Before they begin 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 risks and uncertainties described in the filings with the SEC. 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 the earnings release.

With that, I would like to turn the call over to Ido.

Thank you, Operator, and good afternoon, everyone. 2025 was a pivotal year for Amwell. We sharpened our focus, executed a major transformation and entered 2026 with clear visibility towards the goal of cash flow breakeven from operations in Q4.

Today, I'll cover three areas: the market trends driving our strategy; our 2025 execution highlights; and our plan for 2026. Mark will then walk you through our detailed financial and guidance. After that, we'll take your questions.

The health care landscape entering 2026 is defined by a clear shift towards operational efficiency. Payers and health systems are aggressively pursuing platform consolidation, guaranteed ROI and industrial strength automation. Managing countless point solutions, one for diabetes, one for MSK, one for mental health, another for wellness, et cetera, creates massive administrative overhead. It creates security vulnerabilities and it creates disjointed member experiences. It forces sponsors to act as system integrators, a role for which they are often ill-equipped.

The pressures are mounting. The Medicare population is aging rapidly. Pharmacy costs are surging. Overall, health care costs keep climbing, especially in behavioral health and GLP-1 usage. Clinician shortages are worsening, Subsidies are evaporating. Payer margins are compressing rapidly. Technology-enabled care is no longer optional. It's essential.

The promise of hybrid care is now clear. combine automation with smart use of clinician time to reduce costs and improve outcomes. AI is accelerating this shift. It's transforming engagement, intake, decision support, care delivery workflows, risk certification and outcomes measurement. It creates tremendous opportunity and real risk that must be managed.

Payers and health systems get this. They're adopting technology-enabled care not as an experiment, but as their primary lever for cost reduction, better outcomes and meeting patient expectations. And increasingly, they want to deliver through a unified platform.

A technology-enabled care or tech platform delivers clear advantages. Sponsors keep their brand front and center. They have full data access. They own the relationship and get credit for the value they enable. Patient engagement becomes more efficient and effective. Our tech platform enables API-first ecosystem. It allows sponsors to consolidate the digital stack on one infrastructure. Clinical programs can be added, swapped or retired quickly. We facilitate vendor rationalization, the process of auditing digital health partnerships and aggressively cutting underperforming programs. Vendor management gets simpler. Vendors sprawl with its fragmented IT strategies, data silos and day-to-day inefficiencies is reduced.

Outcomes tracking across whole person and cohorts becomes actionable. This platformization reduces integration costs. It unifies data lakes for better analytics. It enables risk stratification to identify and intervene with high-risk members early. And it drastically improves the member experience by providing a single, simple, personalized and familiar front door for all care needs. With AI and especially agentic AI-powered clinical programs multiplying rapidly, the ability to experiment and iterate is critical, so is ensuring that authorized clinicians govern the care process through smart integration.

In 2025, we made decisive choice, focused exclusively on offering the best tech platform in the market. The benefits flow to every stakeholder. For patients, personalized, simple access to a growing array of AI-powered care programs. For payers, employers and government sponsors, reduce costs, improve outcomes and exceptional experiences while staying agile to improve ROI as programs evolve.

Member experience becomes critical in 2026 as ACA subsidies expire and drive member disenrollment, adversely impacting payer risk mix. Sponsors also obtain robust ROI using Amwell's proven platform native clinical programs, urgent care, behavioral health and virtual primary care with the flexibility to integrate any third-party solution. It also allows payers to maintain network adequacy, especially in behavioral health services, where supply-demand gap is reaching new heights.

The effective integration of partners like Vida, a digital companion to combat GLP-1 inappropriate utilization or Sword to manage MSK costs are great examples. For health systems, they can extend remote access to their own providers. They can offer services through our platform beyond their catchment area, and they can augment their care with third-party programs. All sponsors can use their tech platform as required infrastructure to unlock federal funding, programs like ACCESS, BALANCE or the Rural Health Transformation.

Finally, resilience is now a key purchasing criterion. Payers are looking for partners with Zero Trust architecture and proven resilience. Amwell's contract with the Defense Health Agency serves as a powerful validation. It demonstrates that our platform meets the most stringent security standards in the world. With tech as our sole focus, we are building deeper, long-term relationships with the payers, government and health systems. We completed our transformation from a telehealth provider to dependable, trusted enterprise infrastructure.

The Amwell Platform has become an essential utility. It solves existential needs for our customers by effectively enabling consolidation, automation and clinical ROI. This aligns our success with our clients' success and creates a path to higher quality, higher-margin growth. We expect our high-quality growth will be fueled by the powerful secular trend of tech adoption. As AI reshapes health care, we offer our customers a consistent, safe and effective framework to adopt it while remaining flexible and agile.

Following our focused commitment in 2025, we moved quickly. We divested non-core activities. The sale of APC is one example. We restructured our company and dramatically reduced our cost base. We realigned our road map and go-to-market investments.

Clients and prospects responded. 2025 brought significant commercial momentum. In the payer segment alone, we executed over 15 payer contract renewals, representing the vast majority of our existing payer subscription revenue. Coupled with our new logo wins, we validated our platform strategy, strengthened our recurring high-quality revenue base and positioned us well for same-store expansion. Examples include the DHA renewals last summer, Blue Cross Blue Shield of Florida going live this January and most importantly, our 3-year renewal with Elevance.

As we enter 2026, we have responsibly reduced non-core, lower quality activities. Our 2026 top line is smaller, but now it's primarily high-quality, high upside, sticky revenue. This gives us clear visibility to reach our cash flow breakeven goal in Q4 of this year. In 2026, we'll deploy with strict fiscal discipline, innovations that widen our competitive advantage, AI-enhanced patient experience, faster third-party integration, better clinical data utilization and faster, easier deployments.

We've assembled a strong and fresh leadership team, experienced executives with proven track records from world-class companies, united and energized around our clear mission. We have a focused execution path and a market that clearly values what we offer. We start 2026 with healthy cash reserves, no debt, a strong and dependable recurring revenue base and a clear path to multiyear growth.

Our journey wasn't short or easy. My deep appreciation goes to our team members, clients and partners for standing with us through this journey. We carry this trust with us as we execute and deliver in 2026 and for years to come.

With that, I'll turn it over to Mark. Mark?

Thanks, Ido, and good afternoon, everyone. On today's call, I'll start with a few highlights from our full year 2025, then walk through our fourth quarter financial performance and finally, provide an update on our initial guidance for the first quarter and full year 2026.

Starting with the full year, 2025 marked an important period of refocus and financial progress for Amwell. Total revenue for the year was $249.3 million. Importantly, subscription revenue continued to become a larger and more durable component of our business, representing 53% of total revenue, up from 45% in 2024. This deliberate shift reflects our strategic emphasis on higher quality, more predictable SaaS-based revenue streams. From a profitability standpoint, we made meaningful progress. For the full year, we reduced both net loss and adjusted EBITDA losses by approximately $100 million each, driven by disciplined cost actions and a more focused operating model.

Turning to the fourth quarter. We delivered solid results across revenue and adjusted EBITDA, reflecting stronger subscription retention, increased visit volume in specialty care and virtual primary care and meaningful cost efficiencies driven by the successful execution of our transformation plan. We also began to see early benefits from AI integration across our operations. Overall, our fourth quarter performance reinforces that the actions we initiated at the start of 2025 are translating into durable financial improvement and accelerating operating leverage.

Starting with revenue. Total revenue in the quarter was $55.3 million, representing a 22.1% year-over-year decline. Subscription revenue was $28.8 million, down 22% year-over-year. The decline was driven primarily by the step down in our DHA contract this past summer, churn that occurred earlier in 2024 and to a lesser extent, our reprioritization of certain parts of the business to focus on our core payer and government markets.

Amwell Medical Group, or AMG visit revenue was $23.7 million, down 18.7% year-over-year, reflecting the sale of APC as well as some remaining churn from 2024. In terms of volumes, paid AMG visits were flat at approximately 340,000 visits in the quarter. Total platform visits were 1 million visits, down 28.4% year-over-year from the 1.4 million visits in the fourth quarter of 2024, which is consistent with the portfolio changes I just described.

Cost of goods sold in the quarter was $27 million, resulting in a gross profit of $28.3 million, which was down 17.6% year-over-year. Gross margin was 51.2%, representing a 280 basis point decline year-over-year. While we experienced some near-term margin pressure, we continue to see our revenue mix shifting toward higher-margin SaaS offerings, which we believe will support margin expansion over time as our scale improves.

Turning now to operating expenses. Total operating expenses, including depreciation and amortization, were $55.3 million. That's a 30.7% reduction year-over-year. Operating expenses as a percentage of revenue improved meaningfully to 96.7% compared to 108.7% in the fourth quarter of last year, reflecting the benefits of our transformation actions and continued cost discipline.

Adjusted EBITDA for the quarter was a loss of $10.3 million. That's an improvement from a loss of $12.7 million in the third quarter of 2025, and a 55% improvement from the $22.8 million in the fourth quarter of 2024. Net loss was $25.2 million compared to $30.7 million in the third quarter, representing a 43.5% improvement year-over-year.

Turning now to the balance sheet. We reported cash burn of approximately $19 million in the fourth quarter. We ended the year with approximately $182 million in cash and marketable securities and importantly, no debt.

Now I'd like to turn to guidance. For the full year 2026, we expect revenue in the range of $195 million to $205 million. We expect AMG visits between 1.32 million and 1.37 million visits. Adjusted EBITDA loss in the range of $24 million to $18 million. And this first quarter of 2026, we expect revenue in the range of $48 million to $53 million, and an adjusted EBITDA loss in the range of $7 million to $5 million.

Based on our current outlook and continued execution, we expect the company to achieve positive cash flow from operations in the fourth quarter of this year. This guidance reflects our expectations around continued subscription stability, visit volume trends in specialty care and virtual primary care, ongoing cost discipline and incremental benefits from automation and AI-driven efficiencies across the business.

In closing, 2025 was a year of refocus and progress. We concentrated on our core markets, payers and government entities while positioning the company to return to delivering durable growth. At the same time, we made meaningful progress reducing cash burn and losses by nearly $100 million, putting us on a clear path forward to achieving positive cash flow from operations by the fourth quarter of this year.

These results would not have been possible without the hard work and dedication of our entire team, and I want to sincerely thank them for their efforts. We look forward to keeping you updated on our progress this year.

With that, I'll turn it back to Ido for his closing remarks. Ido?

Thank you, Mark. We are encouraged by the process we made in 2025. We successfully sharpened our focus on our tech platform, validated strong market demand and meaningfully improved both our efficiency and cost structure. We enter 2026 with clear visibility into continued performance improvement, position us well to achieve our goal of cash flow breakeven from operations in Q4. Equally important, the changes we've made have strengthened our revenue quality.

We now work with clients to extract even more value from our partnership, leading to longer-lasting, stickier relationships that generate higher margins more reliably and offer significantly greater same-store growth potential. With AI-driven clinical programs growing exponentially and payers, government and health systems increasingly in need of infrastructure to deploy them safely and effectively, we believe Amwell has reached an exciting inflection point. We look forward to an important year ahead.

With that, I'd like to open the call to questions. Operator?

[Operator Instructions] Our first question comes from the line of Stan Berenshteyn with Wells Fargo Securities.

This is Corey on for Stan. It's encouraging to see progress towards free cash flow breakeven despite retention challenges. As we think about 2026, how should we think about when existing client contracts would be up for renewal? And do you have any additional color related to your government opportunities?

Corey, well, as I mentioned earlier in my prepared remarks, in 2025, we signed 50 contracts, most of which are renewals. And in that, we really secured our reoccurring revenue base to a great extent. Therefore, the amount of what we renewed in '26 are significantly lower with one important exception, which is the DHA renewal that we expect to have this summer. We're very pleased with the value that we generate with the DHA and the traction and are optimistic that our performance and our strong relationship position us well for multiple year renewal also in that important segment of the market.

Our next question comes from the line of Jailendra Singh with Truist.

Ido, you talked about 2026 being a year of operational efficiencies and you spent a lot of time on AI. Clearly, AI is going to be playing a big role here, and you guys have been one of the early adopters. But what are your thoughts on some of the new AI companies entrants, which are seeing opportunities here in terms of having an impact in health care. And clearly, they are all trying to make a big push given all the inefficiency in the system. How do you see the competitive landscape evolving considering these new entrants in the market?

So we are -- thank you, Jailendra. We are very bullish and optimistic about the impact of AI on health care with the obvious asterisks and exceptions of risk management and so on. But overall, the trend is very powerful. AI can do many things. And in Amwell, we implemented AI liberally across our entire workflow and operations and inside our own product.

Having said that, the ability of AI to impact the most for our customers is in clinical programs, and they typically focus on one therapeutic area at a time, whether it's MSK, GLP-1, things with diabetes, blood pressure and so on and so forth.

The integration of those AI programs and the ability to integrate, switch and maintain multiple AI programs turned out to be a very big challenge for our customers and you need to connect them into a consistent, highly regulated infrastructure.

So for example, as you develop an entry point, a digital door for your digital assets and a workflow for your own members, you want to make it consistent and you want to not rebuild it each time whenever you change an AI program versus another. And that's really our role. Our role is to match the regulated baseline infrastructure with the tsunami of AI programs reliably. There are -- we are not aware of many or even any company that does exactly that right now. And very importantly, we are now already implemented with our new platform with a very big market share footprint right now that is proving to work very effectively. And the opportunity is really to use AI and to add AI to this infrastructure rather than replace it.

So saying it in summary, we believe that AI will be endorsed and adopted quite a bit across our client base. And we believe that our platform would be an important utility as our clients do that.

Our next question comes from the line of Dave Larsen with BTIG.

As we look towards 2026, can you talk about some of the headwinds and tailwinds that could cause either an increase or risk to the guide?

This is Mark. I think the most likely tailwind would be an earlier adoption of our technology-enabled platform [indiscernible] options. We are participating in all 50 states RFIs, RFPs right now. We've got a significant opportunity in a few other government segments as well. We expect to hear in second quarter, so only a few months from now as to how deep our participation will be and when those revenues will commence. While we have not built any of that revenue into our current 2026 plan, we certainly believe that as a result of the pipeline being larger today than it has been in the history -- in all the past history of Amwell, much of that will convert into some backlog that we'll see come to fruition in 2027.

As far as any of the headwinds, we do, of course, have a renewal with the DHA this summer. We're extremely confident that, that will be renewed again and hopefully for a longer term. But beyond that, our other material contracts are not up for renewal in 2026.

And can you remind me for the DHA renewal, what -- you mentioned like a step down in the DHA revenue. What was that related to? And then could you win that back in the summer? And if you did, how much of a step-up in incremental revenue would there be related to the DHA on the same annual run rate basis?

Yes. So the -- you're correct. We experienced, unfortunately, as a result of the DOGE, an elimination of our digital behavioral health and automated care programs in the summer of 2025. We had initially rolled that out to a select number of locations. It was doing extremely well. The uptake on those programs was very strong. But as a result of an overall cost efficiency mandate, they were not renewed as the contract and the base contract was renewed. We certainly feel very, very positive about the status of that contract and the opportunity to revisit adding those two programs to the base platform renewal coming up this summer.

As far as materiality, it's significant. It's material. While we don't disclose the total value of the contract, I think we did suggest in the past and we would going forward that adding those two components would certainly be material.

Our next question comes from the line of Craig Hettenbach with Morgan Stanley.

Ido, just keying off with your comment around kind of smaller top line but higher quality and stickier. How do you think about 2026 as a baseline in terms of the ability to kind of resume growth? And then with the business as it stands in 2026, what does the long-term growth look like? What type of growth profile can you generate with this business?

Craig, well, you're absolutely correct. In fact, 2 years ago, we sold so many products to so many market segments. The market product fit was different between one versus another. As a reminder, we had APC and we play psychiatry, sometimes in person hospitals with a very big hardware business inpatient solution, competing directly with EHRs and things of that nature. While we have some of it left and we are going to always serve our clients really well, we really essentially have now reduced all those many products into one beautiful platform, but one platform, the technology-enabled care Amwell Platform and connected to our own native services and a growing array of third-party services, out of which you can add even more.

When you look at the market right now, and I mentioned in my prepared remarks, the incredible importance and value of diverting clinical demand from brick-and-mortar into technology-enabled care, everybody is convinced you need to really have this infrastructure. So we fully expect our sponsors, our clients to invest in encouraging their members to use it more and more often in marketing and in cost attractiveness and things of that nature.

So there is a strong secular trend that is not going anywhere in the next few years to have people use our platform, not only for urgent care like in the early days, but really across the entire care continuum.

The infrastructure that we built is big and deep. You don't change it every day. Our sales cycles take for a reason 9 to 12, sometimes more months. But once implemented, they're really connected to the financial and clinical backbone of the sponsors, both in way of incoming traffic and in way of outgoing analytics and reporting. However, the middle ground, the area where you have all those AI-driven clinical programs is growing extremely rapidly. And there is real motivation to add more. And as that happens, we are going to benefit from higher-margin revenue for us.

I'll give you just one example. I don't recall any CFO leadership with any payer customer that we have that is not incredibly concerned about GLP-1 spending. The ability to very easily add Vida or other programs to the existing integrated infrastructure is extremely attractive for our customers to do, and we make it incredibly simple and easy for them to do that.

To summarize, we believe that the same-store growth presents a very meaningful revenue opportunity for us. In addition to that, as you know, we invested very heavily in penetrating the very hard-to-penetrate governance market. I'm very pleased with our performance there. And there are many other large opportunities that are very similar to the one that we presented with the DHA. So we do believe that the government sector represents an incredible growth opportunity as well, both in way of net new logos and even in same-store growth, like the example that Mark gave recently to really reinstate our behavioral health and maybe other alternatives.

The success that we have with our existing clients is not lost on others. And many of them are really under pressure to add those programs, but they do that today with an infrastructure that is much smaller. A lot of the IT departments in payers are much smaller today because of cost pressures. So their ability to serve as an integrator for all those programs and then to match them with a different ASO is becoming much more difficult. Amwell and the Amwell Platform presents itself as a very good solution, both for them and obviously, also for those vendors that can accelerate their penetration and offering into those conservative, highly regulated clients through our infrastructure.

Our next question comes from the line of Eric Percher with Nephron Research.

I'd also like to dig in a little bit more on the -- I think what comes from the improvement in revenue quality. When we look at what the guidance for this coming year holds, it sounds like some deemphasis. I know there were also divestitures that you had considered. Can you give us a little bit more on what you're deemphasizing and where those -- maybe a little bit of why the revenue is running lower than we might have expected? And does that not include any of the divestitures that you've looked at? Would those be ultimately incrementally beneficial to bottom line while perhaps taking down top line from here at least in '26?

Sure. So Eric, what we've done really is to centralize our offering around one offering, which is the Amwell Platform. And it does what we described earlier and does it really, really well. As you know, we had other offerings in market segments where the product market fit was not great. We divested APC, and we deemphasized other areas that are non-core. Essentially, our one product right now is still a very good match to all the market segments that we operated before, but there is one product across the segment versus many products across many segments.

The value proposition to payers and government is very strong and very sizable. A very big part of our revenue is derived from there. And since it connects millions and tens of millions of individuals that are motivated to use the platform more and more across the ecosystem, that also presents the most important growth opportunity for us.

Having said that, many health systems are now bearing risk. Many of them want to participate in different government programs like ACCESS. And in order to do that, they really benefit from a platform like Amwell, because you can add all those very efficient clinical programs to their current offering in a way that is integrated out of the box and is doing that very efficiently.

So that allows us to really be very efficient in focusing on one highly attractive and differentiating product, benefit from secular demand that is growing without a lot of cost to grow it once we are implemented, adding programs and seeing more traction is much less expensive than creating the platform that we've done over the past few years. And of course, there are not too many of those in the market. So we fully expect that the example we gave recently with Blue Cross Blue Shield of Florida is not going to be a singular one.

Mark, I don't know if you have anything to add.

I should have been more precise. Does the '26 revenue and EBITDA reflect full exit of the businesses we discussed could be exited?

I don't think so. There is some residual activity, but it's diminishing in percentage points and in proportion until a point where it's going to be negligible over the next 2 years.

[Operator Instructions] our next question comes from the line of Ryan MacDonald with Needham & Company.

Ido, great to hear that you got the 15 renewals done, obviously, and sort of the -- obviously, the large 3-year renewal with Elevance. I'm curious if you could talk about sort of how those renewals or those discussions in those renewals are informing your go-to-market approach for net new opportunities. And as you think about 2026, if you kind of look at sort of across government, payer, provider, where are you sort of skating to the fastest? Or where are you really focusing those go-to-market efforts in terms of bringing in net new logos to the business?

Absolutely, Ryan. So I'm pleased to share that all of our renewals, it relates to the payers that we mentioned and others were related to the same offering to the new Amwell Platform. And in many ways, while they are technically renewals, since the offering is so different than what they had in the past and our role is so different, you can consider them in many ways, a new sale or almost a net new sale. You need to remember also that when people renew and migrate their platform into the new platform, that comes with deep integration into financial and clinical backbone. So you don't to do it very quickly, you do it as a long-term investment.

The value of our existing customers is now demonstrated really well. And when we implement the new customers, it's really a very similar workflow. So reproducing it becomes much easier and simpler and much more efficient going forward. So as I mentioned earlier, when we look at multiyear growth, the most obvious and impactful area is same-store growth, benefiting from more programs to more people that we lose it more often and more efficiently and really benefiting from those secular tailwinds.

In addition to that, as Mark mentioned earlier, we have the largest pipeline we had in our history, I think, that I remember at least for now. And it's all about this. There's nothing else. It's about our one beautiful platform and its clinical services and the value it should generate as an infrastructure to adopt more and more AI-powered clinical programs. So we have a lot of proof points, a lot of success points in a very large scale.

When I look at the segments, commercial payers, obviously, is our sweet spot, Blues and others, but there's no question that our advantage in the government is even bigger. And the reason is that, that's a really high barrier of entry segment when you think about cybersecurity, regulations, things of that nature, and we have that right now. We spend enormous amounts and time and effort and resources getting there, and it performs really, really well. So we fully expect this to grow meaningfully over the next few years.

And lastly, we believe that health system will participate, but in proportion, probably their contribution is going to be smaller than the first two segments I just mentioned.

And I'm currently showing no further questions at this time. I'd now like to hand the call back over to Ido Schoenberg for closing remarks.

Thank you, operator, and thank you, everyone, for joining. We really appreciate your support of Amwell, and we look forward to talking to you very soon. Have a good evening.

This concludes today's conference. Thank you for your participation. You may now disconnect.

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" Wells Fargo Securities, LLC, Research Division

" TD Cowen, Research Division

" Truist Securities, Inc., Research Division

" UBS Investment Bank, Research Division

" Morgan Stanley, Research Division

Hello, everyone, and welcome to Amwell's conference call to discuss their third fiscal quarter of 2025. Joining us on the call today are Amwell's Chairman and CEO, Dr. Ido Schoenberg; and Mark Hirschhorn, Amwell's CFO and Chief Operating Officer.

Earlier today, a press release was distributed detailing their announcement. The earnings report is posted on the Amwell website at investors.amwell.com and is also available through normal news sources. This conference call is being webcast live on the IR page of the website, where a replay will be archived.

Before they begin 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 the filings with the SEC. 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 the earnings release.

With that, I would like to turn the call over to Ido.

Thank you, Operator, and good afternoon, everyone. For the third quarter, our results compared favorably to the guidance we provided. We showed steady progress in executing our plan, which is designed to achieve cash flow breakeven by the end of 2026 and to ultimately resume profitable growth. Our plan is based on 2 main work streams. First, focusing on our enterprise-grade, mature, and well-differentiated new platform to generate considerable value in our select market segments. Second, ensuring that all our operations are extremely efficient and effective. Both efforts rely heavily on the integration and adoption of rapidly evolving technologies, primarily enterprise-grade AI infrastructure.

In recent years, we have invested significantly in recruiting exceptional talent and establishing strong governance, compliance, and operational frameworks. We have also committed substantial resources and continue to do so towards building ecosystem interoperability that enables seamless data exchange and deep integration with existing EHRs and clinical systems. These investments help position Amwell as a highly dependable, secure, and scalable technology-enabled care platform for our customers.

We enable our customers to align our technology with measurable economic value while helping them address critical challenges such as clinician burnout, staffing shortages, and operational inefficiencies. Additionally, we position them to capitalize on emerging opportunities, including the integration of algorithm-based health care services, comprehensive care coordination, and new digital therapeutic solutions. These integrations may help our customers leverage predictive AI to reduce costly interventions and hospitalizations.

Our efforts are beginning to pay off as reflected in our results, and we believe the impact will only accelerate going forward. For our first work stream in Q3, we began socializing our product focus areas through 2026 with our clients and prospects. We are committed to making the new Amwell platform the most effective and valuable hybrid care backbone we have ever offered them. Our mission is to help our customers reduce care costs, improve clinical outcomes, and offer the highest member engagement and satisfaction through exceptional user experience. We strive to achieve this through the following focus areas:

First, we are moving AI into the core workflow layer. We're responsibly implementing enterprise-grade AI and other technologies to transform patient intake, personalized dialogue, and navigation, as well as clinical program matching and onboarding. Our efforts benefit from almost 2 decades of telehealth experience and access to an incredible data and knowledge repository driven by many millions of digital-first care encounters.

Second, we are enhancing and simplifying the way we work with our own and third-party partner clinical programs. This enhanced program integration is expected to help offer our customers even more options across the care continuum while adding more value to our clinical program partners. Also, clients will be able to seamlessly integrate clinical programs they've already committed to into their Amwell platform with unprecedented ease. As noted on our earlier calls, these third-party partners represent an important high-margin flywheel growth opportunity for Amwell. Our own clinical programs are likely to be the first to benefit from these changes and further improve our offering across urgent care, virtual primary care, comprehensive behavioral health, nutrition, lactation, and more.

Third, we are investing in and will remain heavily committed to our data and analytics infrastructure. We plan to offer our customers even better ways to measure and improve financial and clinical outcomes across all programs while offering patients an even more personalized, simple, and relevant journey. As payers, employers, and health systems look to consolidate their technology-enabled care strategy, we offer a unique and reliable solution. It allows them to realize their financial, clinical, and member engagement goals while maintaining full flexibility to dynamically choose and replace the clinical programs that work best for them in the simplest, most scalable, and reproducible way.

Our second work stream is centered around relentless focus and commitment to efficiency and quality. We are further improving our platform to make it even easier to deploy, maintain, and support. Self-management and automation tools for our customers are a good example of this commitment. These tools empower clients to do more faster while simultaneously reducing our own cost of deployment.

As we carefully define what we focus on, we are decisively divesting noncore assets. Earlier this year, we announced the sale of Amwell Psychiatric Care, or APC, and are currently pursuing other actions to divert access resources away from non-core assets. It is important to note that we plan to continue to fully support and maintain legacy assets that still provide value to our customers. These customers have expressed comfort from the stability and reliability of our trusted legacy solutions. We hope to see them gradually migrate to our core offering over time when they are ready.

In parallel, we systematically analyzed our own efficiency across all our operations. We were able to find opportunities to improve efficiency, including with widespread AI adoption, while rightsizing headcount across the board. These reductions in force were made possible through various interventions, including careful reallocation of talent across the company.

Now I'll take a step back to look broadly at the macro environment. In 2025, we continue to see clear signs that the market is shifting in our favor. Consumer demand for digital health is accelerating. Mental health telehealth utilization reached 27.8% in July, according to the Epic Research data tracker. And 79% of Gen Z now use health technology monthly, according to PwC 2025 Healthcare Consumer Insight survey. At the same time, digital clinical programs are demonstrating real results.

Research shows digital disease management can reduce 30-day readmission rates by 50%. This effectiveness is driving significant investment. AI start-ups, many of which could be considered clinical program themselves, capture 60% of all digital health funding in Q1, according to the AHA Center for Health Innovation. However, payers, employers, and health systems are struggling with fragmentation. Employers now manage an average of 4 to 9 point solutions, yet only 22% trust these vendors to act in their best interest, according to Evernorth Insights. This fragmentation carries real cost. For example, inefficient data exchange costs healthcare organizations up to $20 million annually. As a result, integration has become a strategic imperative. 62% of health plan leaders identify integrated solutions as a top 2025 priority according to HealthEdge's annual survey.

Organizations need help managing technology, engagement, reporting, and the commercial burden of multiple vendors, and that's exactly the gap we are positioned to fill. In that setting, the Amwell platform promises much-needed relief by maintaining future-ready flexibility with the efficiency, effectiveness, and peace of mind of offering one relationship, one user experience, and one data and reporting infrastructure across a dynamic and open-ended array of clinical programs and vendors.

Our unique business model never forces our clients to only use Amwell clinical programs. This aligns our interests and positions us well as their long-term partner. While many of our competitors feature their brands to members, we enable our customers to use their own white-labeled experience. Their Amwell platform inside allows them to offer a unified customer-branded gateway to all their covered programs.

Finally, and importantly, our ability to supplement automated programs with trusted in-network certified providers at scale enables and accelerates the safe and effective adoption of these new AI-driven solutions. Our special architecture is helpful in making customer acquisition costs more effective and in improving the customers' overall brand value and stickiness by associating it with a wide array of helpful services and exceptional platform experience.

Our ability to help customers obtain a clear view of whole-person and cohort outcomes and offer them tools to continuously improve results by switching programs and matching them with the right cohorts is highly desirable and appreciated. In our conversations in the market, our strategy resonates. As we look forward, we fully expect our competitive advantages to become increasingly visible and compelling as we continue to roll out our new Amwell platform. We believe that our long journey is in many ways only beginning, and we are excited about what the future brings to our loyal and sophisticated supporters, our customers, and our company.

With that, I would like to turn the call over to Mark for a review of our financials and our guidance. Mark?

Thanks, Ido, and good afternoon to everyone on the call. On today's call, I will walk through a few key operating metrics and financial results from the third quarter and then provide an update to our guidance for the remainder of this year. In the third quarter, we delivered results ahead of expectations for both revenue and adjusted EBITDA, reflecting stronger subscription retention, increased visit volume in specialty care and virtual primary care, and meaningful cost efficiencies driven by the successful execution of our restructuring. Our progress this quarter reinforces that the actions we began earlier this year are translating into durable financial improvement and accelerating operating leverage.

Today, I will walk you through our quarterly performance, highlight the financial impact of these strategic actions and provide an updated view on our guidance for the balance of 2025. Total revenue was $56.3 million, which represents an 8% decrease year-over-year and includes the step-down in contribution from Leidos and the divestiture of APC. Normalizing for the sale of APC, Q3 revenue would have increased 1.3%.

Subscription revenue of $30.9 million increased 18% year-over-year and represented 55% of total revenue compared to 43% of total revenue a year ago. Total visit volume of approximately 1.1 million visits in the third quarter was down 21% from a year ago, although in line with our expectations. Amwell Medical Group, or AMG visit revenue was 23% lower than last year at $21.2 million. Normalizing for the sale of APC, however, visits were down 3.5% from a year ago. Average revenue per visit was $71, which is 14% lower this quarter compared to last year's Q3. But when normalizing for the sale of APC, average revenue per visit was 3.5% higher, driven by a continued mix shift to higher-priced virtual primary care and specialty care visits.

GAAP gross margin expanded to 52% compared to 37% a year ago as a result of greater software and services revenue generating stronger margin contribution than last year's comparable quarter revenue mix and divestiture of APC. Our operating expenses totaled $58.9 million in the quarter, a decrease of 16% compared to last year, comprised of a 6% reduction in R&D, a 46% decrease in sales and marketing and a 14% decrease in G&A expenses. We remain focused on optimizing our resources, and we are clearly moving in the right direction and getting closer to our foundational cost basis.

Adjusted EBITDA was a loss of $12.7 million for the quarter, which compared favorably to a loss of $31 million a year ago, evidence of our acute focus and execution of our cost containment initiatives. In terms of cash and liquidity, we reported a cash burn of approximately $18 million in Q3 and ended the quarter with approximately $201 million in cash and marketable securities with 0 debt.

Finally, to wrap up my comments today, I'll share our revised guidance outlook. With just 2 months remaining in the year, we now expect our full year revenue to be between $245 million and $248 million versus the prior range of $245 million to $250 million. Adjusted EBITDA in the range of a negative $45 million to negative $42 million versus the prior range of negative $50 million to negative $45 million. Our range for AMG visits remained steady between 1.3 million and 1.35 million visits. Our full year guidance assumes the reduction of R&D expenses by more than 10% this year versus 2024 as we streamlined and completed the bulk of our software configuration to our existing build and integration commitments.

At the same time, we continue to expect sales and marketing costs to decline more than 25% year-over-year and G&A expense to decline at least 20% for the year as we continue to organize the company around a new lower cost structure. We now project Q4 revenue in the range of $51 million to $54 million and adjusted EBITDA between negative $15 million to negative $12 million. We have made meaningful progress rightsizing the cost structure while diligently working to position Amwell for longer-term success. We have quite a bit of work left to do, but we remain committed to our goal of generating positive cash flow from operations during 2026. I want to thank our entire team for their commitment and passion to our overarching mission of increasing access to affordable, high-quality health care. Thank you all for your time and attention.

I'd now like to turn the call back to Ido for his closing remarks. Ido?

Thank you, Mark. We're seeing a remarkable transformation in our market. As AI health care solutions proliferate both within and beyond Amwell, they're delivering significantly better patient outcomes with greater accessibility and affordability. In this evolving landscape, Amwell's role as an integrated backbone has never been more vital. Our unique ability to seamlessly blend intelligent automation with certified trusted clinicians provide a safe, effective pathway to superior care outcomes today and tomorrow.

Our clients value our proven track record of delivering measurable economic value while ensuring compliance and providing essential support to overburdened health care providers. Through enterprise-grade workflow automation, we're enhancing both access and operational efficiency. We are proud of our mission and firmly believe it's more relevant now than ever before.

With that, I'll open the call for questions. Operator?

[Operator Instructions] Our first question comes from the line of Stan Berenshteyn of Wells Fargo Securities.

A couple for me. First, I actually wanted to go back to the prior quarter where you had announced a Florida Blues plan win. I was curious if you can give us some color regarding how you won that? Was that a competitive takeaway? And are you seeing any similar opportunities for you going forward?

Stan, yes, we are very pleased with this important win. It was a competitive situation, and we are deinstalling a major competitor in this setting. The drivers for this really demonstrate everything I spoke about in the prepared remarks. I believe that Florida Blue, like many other payers understood that there is enormous fragmentation, enormous opportunity in AI programs, but they need to create one infrastructure under their brand that will allow for one efficient consumer engagement solution that will be able to drive care with their own choices of clinical program, including maybe different choices for different ASOs or different cohorts and one report and one infrastructure.

They, like many other people, existing customers and people that we talk with during our dialogue with the pipeline, really talk about vendor fatigue and complexity. There is a tami of amazing programs, some are better than the others. Many of them have enormous opportunity, but many of them are risky, and there is real need for one technology-enabled care infrastructure, which is an integrator and a distributor, if you will, for members. So all those important value points based on our dialogue with this very important customer, in my opinion, we're leading to this win and are indicative of a future demand that is likely to grow as more AI-driven program proliferate.

And then a follow-up for me here.

Regarding the comments you made in the prepared remarks around potential further divestiture of noncore assets. Can you give us any insight as to what those assets might be? And are you in any active discussions here? Or is this more of a theoretical process?

So this is very practical. Let's start there. The key conclusion is that the opportunity we spoke about with Florida Blue and many others is very, very exciting. And because of that, we decided to focus all our efforts around it because we believe that's the best ROI for Amwell and the best way we can create value for our customers. We do have a long list of legacy products that do the job but do the job well. Examples are automated programs for hospitals or inpatient solutions and so on and so forth. These are good products that are secure and reliable and dependable, and we plan to continue and use them, but we are going to spend less, significantly less in growing these market segments in comparison to this very clear enormous opportunity that I shared earlier. And that's really part of our strategy that we are implementing as we speak.

Our next question comes from the line of Charles Rhyee of TD Cowen.

You talked about AI and implementing that across the enterprise and other technology to sort of inform patient intake, navigation, et cetera. Can you talk a little bit about how that can be monetized? Is that something that you are charging extra for? What is sort of the model as we think about that? And maybe, Mark, I know it's still probably a little early. How should we think about maybe any kind of guardrails to think about when looking out to '26 at all, at least from a top line perspective?

Absolutely, Charles. So suffice to say that AI is influencing everything we do and everything that happens in our ecosystem. It's very, very dramatic. Let's start with the product, and let's start with third-party partners. When you think about someone like Sword, for example, their ability to predict with AI likelihood of someone getting surgery very soon is incredibly important. Our ability to route this patient to Sword and then document these savings and report it back to the likes of Elevance and others is incredibly, incredibly valuable. The same is true for other partners like HelloHeart that is able to use predictive modeling to manage medication adherence better, and there are many other such examples.

So first and foremost, AI is influencing both Amwell and non-Amwell clinical programs themselves. In addition to that, AI is allowing us to create a dramatically different experience for consumers. It can be highly personalized. You can get immediate attention as a person and have a very simple, easy, attentive, personalized navigation to programs that are likely to be helpful for you. So that's another area where AI has enormous value. The monetization of such value, both things actually really increase ROI for our customers and increase traction. So when a great experience is leading to a virtual primary care experience at over 30 days saving $500 for our customers, that's very good for Amwell. That's very good for our customers as well.

In addition to that, using of AI for data analytics so you can push information about outcomes in a very coherent way across different programs for a whole person and whole cohort is allowing our customers to choose the right programs and refine them over time. It also allows us to further personalize the experience for consumers and getting more use -- even more use and more higher NPS over the next. So all those examples in program essentially increase the value and the traction of our platform. We don't necessarily charge more for our platform directly in order to do that, although we may be able to do that in the future. But much more importantly, as we share the value of this traction in this traffic, each time we refer someone to Sword, for example, we get some rev share from this company, which is good for us and much better than the alternative customer acquisition cost.

So overall, all those investments are really creating more value for our own platform. In addition to that, like any other company, we brought some wonderful talent from big tech, people like Amazon and others. And we are looking at every part of our operation, whether it's core generation, QA, product management, sales, deployment, support and so on and so forth. And like many others, we are investing much in order to implement those solutions in order to be better, more effective, more efficient. And that work is ongoing and has more and more impact. I would just suggest that if you need to quantify the most important financial impact, and our relevance going forward, I would suggest that our ability to tie together hybrid solution between certified humans like our national network and other solutions together with AI-driven programs that as a result, create much better financial and clinical outcomes with much lower cost and much higher engagement is the heart of the influence of AI on our financial performance.

But I guess it sounds like then maybe, Mark, in terms of how should we think about next year? And also if we're not necessarily charging more for these innovations and obviously demonstrating more ROI for customers, how should we think about margins at least? Is the current rate, I think it was 52% here in the quarter. Is that sort of the right level we should be thinking about next year? Or maybe any kind of thoughts there would be helpful.

Yes. Charles, I don't believe the introduction of the AI features and the attributes that we're looking to implement throughout the year are going to have any meaningful impact on our margins. What's going to lead to the margin probably variation from '25 to '26 will be exactly what we saw in '25, which was the greater ability to bring more software revenues into the top line. Clearly, we had significant to the tune of tens of millions of dollars of implementation revenues generating very high margins. They impacted the margin profile tremendously. And that's why we're exiting at these stronger margins compared to '24. '26, I believe, will be consistent with the '25 margin profile.

And maybe one last one, if I could. You talked about sort of divesting sort of noncore assets. Obviously, APC was an example. Is there a lot of other assets still that you would consider in that noncore bucket? And is there a sense for timing? Is this something that we'd like to do very soon? Or is this when you can get something a good value for it?

It's more the latter, Charles. We're not in the market with either of these, what I would suggest are a couple of defined assets that can be bifurcated from the rest of the business without losing any focus, without challenging any of the clients right now with removing some of these. These are distinct assets that have a certain profile of clients that we could, in fact, cordon off, we could run them separately. But I think throughout '26, we will try to, again, narrow our focus in those areas that Ido shared in his prepared remarks.

Our next question comes from the line of Jailendra Singh of Truist Securities.

This is Jenny on for Jailendra. Just had a question around macro with all the macro noise, tariffs and economic uncertainty. Have you seen any impact on your sales pipeline as health systems continue to evaluate their IT budgets? Just curious how that conversation has been going in terms of the last couple of months? And related to that, can you talk about your direct tariff exposure?

Jenny, well, essentially, what we see in the market is that our solution is serving very important pain points that many of the customers using the new ones see as obligatory in the sense that if you think about it for a payer, the ability to have reliable, effective solution around hybrid care and technology-enabled care is a tool that is demanded by the sponsors, by employers and others and generate enormous savings. Implementing effective AI-driven care programs is not a question of if, it's really a question of how. You must do it, and that's very clear for our customers.

That's very dangerous. It's very confusing. It's error-prone. We offer our customers an ability to create less noise by having one platform that is embedded in their infrastructure and much less vendor fatigue by allowing us to do the heavy lifting of connecting to more and more solutions and making it still part of one experience and one report. So when we talk to them, that's not a line item they are likely to pass upon even if pressed. As it relates to health systems, we definitely believe that when we look at things like workflow automation, inpatient solutions, hardware solutions, things of that nature, there's definitely some resistance right now and some caution because of the economical impact. And that's one of the reasons why we are moving away resources from promoting such solutions into our core offering.

At the same time, when you look at delivery network that are implementing value-based care, when you look at their competition for patients, their need to add, for example, behavioral health to their core offering, things of that nature, their ability to expand their reach beyond catchment areas, all these things directly influence revenues, directly influence their livelihood and are considered as essential. And therefore, we see that we still have an offering that resonates and is relevant right now.

As it relates to tariffs, very minimal impact. We have a tiny business line that still has some hardware outside the United States. And that, of course, is impacted, but it has a negligible impact on our performance. We are proudly creating our software as a U.S. firm and therefore -- and our businesses in the U.S. as well. So we don't see any meaningful impact -- direct impact as it relates to tariffs. Of course, it may influence the market and the macro like everyone else, but it's not Amwell specific.

Our next question comes from the line of Kevin Caliendo of UBS.

This is Jack Senft on for Kevin. I wanted to go back to the comments on diverting resources away from the noncore assets. So just to clarify, this is something that's not embedded in guidance this year, correct? And then maybe as a second part to that, is this -- if it's not, is this something that could move up your time line on being cash flow breakeven next year? Or is this something that could even meaningfully move up cash flow expectations? If you can just comment on kind of what your expectations are there, that would be great.

Yes. This is not included in any of the guidance that you've seen throughout 2025 or the new guidance we provided for the final quarter this year. The impact that it would likely have would not be substantial to the degree that it would change our perspective on cash flow breakeven from operations in the end of 2026.

And then maybe just a quick follow-up. I know your sales and marketing expense, it took a nice step down sequentially this quarter. I know you're still targeting the declines of at least 25% plus this year. But maybe as we look at each like kind of line item in the operating expenses here, are these kind of good run rates to think about going forward? Or is there still additional leverage that you can pull next year? I think you touched on it a little bit briefly, but if you can just talk a little bit more about it, that would be great.

Yes, sure. As you pointed out, right, we had we really optimized the spend and reduced significantly the sales and marketing costs quarter-over-quarter, but obviously, compared to last year, that's material. I think there's still some meaningful opportunity to take out some costs in 2 other areas, probably G&A. We -- another significant area, probably the most from an absolute dollar perspective was in our costs and the delivery functioning. That's where we're likely going to be benefiting from the implementation of AI tools, both clinical operations, clinical delivery. We'll be able to scale the growth at a lower cost. And I think that will be visible throughout 2026 and beyond.

Our next question comes from the line of John Park of Morgan Stanley.

I know you guys talked about the cash flow breakeven target in '26. And also given the noncore divestitures that are conversations that are going on, if you had to prioritize or rank the factors going into this -- going into that target, factors such as customer renewals, perhaps price increases, service mix, maybe some other factors that I'm not considering right now, how would you rank those?

Are you asking how we would rank those in consideration of our target for cash flow breakeven next year? Or how do we rank them purely from a top to bottom priority?

Yes. Like how would you prioritize those things? Obviously, the divesting noncore assets is probably going to get you a decent chunk there, but just wondering how -- any other factors to consider to reach that target?

Yes. The divestiture of those noncore assets will certainly help to focus the company on our core initiatives and would obviously provide some additional dry powder for the balance sheet on top of our $200 million that we just ended the quarter with. And again, we have no debt. So that gives us a little bit more leverage. But I think we primarily have to focus on client retention, ensuring that our platform is delivering and our teams are handling the requests, the growth, the other opportunities for ROI that our clients are demanding. So I'd probably tell you retention is #1. And then, of course, some of the growth initiatives on the product side would then likely be ranked as the #2 priority

I know you mentioned Sword as kind of a way to implement more partners. Is there any areas or topics that you would not want to partner where you would want to just own outright versus integrate with third party?

So our service to our customers is the ability to help them under the brand, create one customer acquisition cost gateway connected to programs of their choosing. The fact that we come out of the box with a very long list of solutions across the full continuum doesn't hurt. But even more exciting is the fact that we can very easily add anything they want to or their clients want to implement. So as long as our customers believe that the solution is logistic, it's secure, it's compliant with different regulations, things of that nature, we will gladly implement it as part of their solution so they can benefit and monitor the value of such implementation.

I'm showing no further questions at this time. I would now like to turn it back to Ido for closing remarks.

Thank you, everyone, for joining. We really appreciate your time. It's interesting to see how relevant Amwell is in a time of great change, and it's exciting to see how this will grow even more as we go forward. Thank you again, and have a good evening.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Thank you.

Good afternoon, everyone. I'm Craig Hettenbach. I cover the health tech provider space for Morgan Stanley. Very pleased to have Amwell with us so CEO and CFO here. Just before we get started, some important disclosures, you can find them at the Morgan Stanley website, www.morganstanley.com/researchdisclosures.

So Ido, I thought I'd kick it off with you. And if I think just how the company has evolved the last few years kind of growth through COVID coming out of it and how the business model is evolving, I thought it would be a good chance to kind of just a refresher in terms of the business, what are some of the core value and driver propositions for Amwell services that you provide?

Absolutely Craig. So in essence, our mission has not changed much. We are in the basis of enabling access to quality care that is technology driven. In other words, technology care enablement. Our core focus is something we continue to invest in, which is this experience of more and more people that are going online. We try to get them a reproducible experience that is phenomenal to help understand what their issue is and match them with the right clinical program.

We have our own clinical programs in long list of areas, including urgent care, virtual primary care, behavioral health, like patient nutrition and many other things. And growing list of partners, third parties with other clinical programs. Essentially, by having one experience, we are creating a very efficient customer acquisition cost to the sponsors and customer experience that is a whole person based. And we are able to go back to sponsors and have one set of reporting as it relates to creating and documenting clinical and financial outcomes. And that's really the heart of what we do. We do have a [indiscernible] business anything, but I think that they all pale in comparison to that important focus.

Great. And if we touch on just kind of the core, the strategy shifting more towards software and subscription business kind of what that means to the overall kind of health of the business, margin profile, growth opportunity? I know it's a very big undertaking in terms of what you've done and kind of what you're looking to leverage from that as you go forward.

By creating strategic focus, we are also able to significantly improve our cost structure. And essentially, available position is technology-enabled care that is proving better financial and clinical outcomes. The software that we use, the platform that we developed is really the main differentiator that creates those outcomes assuming the care, good care is available through many modalities. So for customers that have access to care services, they only buy the software, a good example is the DHA, the U.S. military, their own physicians, and they only need the technology that we offer in order to get a better access and better financial and clinical outcomes, while, others like large payers, large employers really need a combination of the software and the clinical services to reach their goals.

But our gross margin growingly represents the value of the technology innovation in technology-enabled care where the proportion of ratio between care providers and patients is growingly increasing by allowing a hybrid mix between more technology and less very precious and limited provided time.

Got it. And maybe if we can take that and just kind of get into just the competitive backdrop, telehealth more broadly, kind of as your business is involved, are you competing against some similar competitors in the past? Are there other companies. How do you view as you plan for kind of RFPs?

Sure. So telehealth evolved much in the past few years. It used to be a service that is an add-on to the main pathway of care. People continue to see the doctors. And from time to time, went online to get a prescription or other convenient care options. Growingly what we see is the technology-enabled care, which I think is a better name maybe for it, is the main pathway for care. People go online before they do anything else.

And while there are a lot of vendors that offer specific programs in well-defined different therapeutic areas, there is an unmet need to create a whole person launching place where I get the phenomenal experience. It's highly personalized. It's all about me understanding my conditions and benefits, the financial reality and matches the app with the right clinical program with an ability to refer from 1 program to another and an ability to arm the different programs, the information that they need in order to avoid replicating it in the clinical intake that is fairly repetitive and error prone.

We built an infrastructure that ties together those different clinical programs into really 1 cohesive platform. And as a result, the overall experience is much better and the outcomes that we're able to achieve are significantly improved versus stand-alone array of different programs. Not many people spend the last 5 years, spending many hundreds of millions of dollars building such infrastructure. We are likely to benefit from the COVID-related environment that allowed for raising a significant amount of capital and investing it in creating this holistic infrastructure that now can pull in a lot of vendors together to create a cohesive whole person experience.

This offering resonates really well with very large customers, people like Elevance, the U.S. military, many of the Blue plans and many others that are growingly understand the value that we provide and in many ways, are trying to shy away from offering a high fragmented array of a program, but rather want to own a white label consistent singular experience. And that's why we believe Amwell is fairly unique.

When you look at AI, and I'm sure you're going to ask about that, AI has an opportunity to greatly improve patient experience, to improve the quality and scalability of the different matches between different programs and very importantly the analytics that proves the outcomes that were generated by the different vendors. We believe there is enormous upside in the significant market share that we have for same-store growth in the next few years as it relates to such an offering.

Great. Can we touch on just the importance of partnerships, third-party ecosystem like you said, you have a number of different applications that kind of plug in to your system. How is that resonating with your partners and your end customers?

Healthcare is very much around diversity. People want different programs for different needs for different cohorts. And we embrace this diversity so instead of trying to go and offer a set of fixed programs that are trying to do better in all areas for all the people all the time, we created this unique open infrastructure that allows each payer, for example, to choose the programs that are right for them or to continue to use the programs that are right for them, but envelope them into 1 experience, 1 cohesive data structure and very efficient handover of data and services in this singular experience. And that worked quite well for us.

Great. I want to shift gears to kind of the DHA, which was a very important contract. And really also get behind the point to win things with the government and how rigorous that process is. So can you just discuss kind of how you are positioned to that in terms of what helped that and probably more importantly, what that means more broadly for the platform and opportunities beyond the DHA.

The government space is very unique. We are talking about a very large scale and a very long list of very clear requirements. It takes a lot of effort, a lot of time and a lot of investment to comply with the many requirements of the government and really understand that you need cohort, which is really different than many commercial cohorts. We are lucky enough to get chosen early on to go through this process and we learned a ton. Right now, our platform luckily is deployed around the globe for all the men and women in uniform in the U.S. military and their families. It's a great privilege. We are very grateful for that. And we went through this learning process.

Our technology is implemented in the GovCloud and checks all different boxes that are required. And luckily enough, is already generating very good outcomes for this client. This kind of environment is very typical to many other government entities that could easily follow up following this initial investment that we made. So the next client in this environment is going to be much easier, we believe, a much faster to deploy than the original one. Although I'm proud to say that if it relates to the DHA, we are one of the few vendors to deliver on time and on budget quite quickly for this very, very large cohort.

Got it. And you did get a 1-year extension for this contract, although there were a couple of modules that are not included in that. Can you just maybe just give some background there in terms of where things stand and what that might look like going forward?

So after we delivered everything on time and in budget, and you know that many of the KPIs, if not all of them, were met or exceeded for this client, we were part of a much larger group, together with Leidos, Oracle and many others that had to extend the vehicle that was used in order to continue our agreement. All partners in this vehicle received an extension of 1 year and we are the same. I don't think it necessarily means anything good or bad about any participant. It's just a government's general decision that relates to negotiation dynamics. The programs that we implemented in addition to our platform that relates to certain services in behavioral health and automated programs were deployed successfully in 5 demonstrative sides, but did not expand into enterprise.

And this year, although we're very proud of the results that we generated, the government chose not to expand those services to enterprise, I believe, driven by financial consideration, we believe that the fact that it was delayed once is not indicative of this to not be available long term. And we believe there is still a good chance that when budget will defined in a different climate, those very valuable services could be incorporated for these government customers and certainly for others as well.

Got it. And you mentioned it's a very different kind of go-to-market in process with the government versus commercial. How do you think about just kind of security, compliance, like what were some of the unique things that you maybe had to do for this business?

Well, we're talking about national security. We're talking about men and women in uniform, and combat and things of the nature. So anything you can imagine is still valid, information, privacy, cyber security, readiness, availability, performance, demand are extremely demanding that you can imagine. I can't even imagine more demanding customer. But we are pleased that we worked really hard and we're very proud of our team that we're able to meet those demands, not only once that we deploy, we are tested on this every day, all the time.

And it's been quite a while, and the system Thank God is working well in production, very, very large scale. And I'm sure that if we need to expand and deploy additional similar environments, we'll be up to the task.

Got it. And as this business continues to ramp, what are some maybe KPIs and metrics that investors can kind of look at and say, you're getting the traction that you want to see...

So this specific customer is very careful about sharing information. Of course, we will never change that. But in general, I would suggest that government clients are really no different than commercial clients in the sense that they understand the value of technology-enabled care. They do that because it's a very efficient tool to improve access dramatically to create traction that at the end of day is improving clinical outcomes, it also creates significant savings.

I can share that all our customers and the DHA is no exceptions are seeing very good results and KPIs as it relates to those metrics.

Got it. And then just beyond the DHA within the government more broadly, are there opportunities or things that you say that you've done this that you can maybe capitalize on? How do you think about that?

Absolutely. There are many organizations that are structured very similarly to the DHA that are -- have shared set of requirements that have very similar needs. Their technology environment is very similar, we believe that the barrier for entry into the government is enormously high. But once you're there and you're performing expanding it are real opportunities that we are definitely going to benefit from in the not-so-distant future.

Great. We can bring Mark into the discussion. I do want to talk about kind of the path to profitability because I know you guys have done a lot of work in terms of reducing cost. Can you just talk about -- give some background on that and just what's your visibility like? What are some milestones that you kind of hit to get the possibility?

Certainly. Craig, back in Q1 of 2024, the company stated that they would achieve breakeven at some point in 2026, and we're wedded to that mandate. The focus for the company has been to concentrate on that core area that Ido referenced, the payer, positioning both private and of course, government. When you think about the concentration of our clients today, over half of our business, is with 2 significant payers. And the remaining part of the business is where we think the greatest growth opportunity is. We need to resource for that.

We're investing significantly in AI on the part of providing both front-end and back-end services to replace what we have or the cost structure for many years now. We have been an innovation shop for many years, but that innovation was at the cost of several hundreds of individuals who were with us for certainly half a decade or more. And when we started this year, we had over 1,000 employers, we're currently at about 650. We continue to see areas of opportunity in limiting that cost structure. And most importantly, growing the book of business at a far lower cost than having a far stronger ROI.

Got it. It sounds pretty clear in terms of the opportunity set where the growth is. How do you think more broadly about just the trade-offs in terms of the investments that you're making, the return you want to get? How does that all factor in.

I think technology and the -- now the opportunity to bring AI in the front end of the administrative side of not just onboarding and then engagement with particular members. It completely changes the calculus and gives us opportunities for ROI expansion that we had not previously seen. That resonates well with both prospects and existing clients. And we know certainly, moving forward, we don't have that same cost ratio for each variable dollar of revenue that comes on. So it's much more promising as a result of the opportunities that we have in bringing on this innovation and had we had to continue to go through cost-cutting measures that were necessary to reduce this cost base to where we needed to be at the end of next year.

Great. You touched on some of the third-party solutions. How important is that just from a margin mix or contribution margin? And how should we think about that as some of those potentially ramp.

Yes, it's one of the more significant contributors to our goal of breakeven. Those third-party programs are extremely important in both amplifying the need to bring on our platform into a new client. It makes us far more appealing to those clients when they can actively pursue a number of solutions through 1 vendor. And of course, our margin on that is a revenue share and a component of which generates margin profile that's very similar to SaaS software. So you're looking at 90-plus percent margins, and that helps us generally move towards that far greater contribution of software type revenues as compared to the pure AMG services.

Got it. And Ido, maybe if we take a step back, a lot of change in the industry for Amwell in terms of positioning this company getting -- for growth. How has the organization responded? How do you feel today in terms of the teams that you have in place? And how is the organization responding to all this change?

It's really interesting. Look, we went through so much all of us in digital health in the past few years. There was a time where people took a lot of risk and placed many bets. And that's good. And some of those bets paid out quickly and others would have taken much longer to pan out. The current environment is such that there is no ability to place many long-term debts. You need to choose. And that discipline actually is a blessing in many ways because when you get to make some hard decisions and focus on a very, very clear, well-defined mission, we also get a lot of clarity and enthusiasm by the team members.

So we have a very clear role. We want to create the most phenomenal experience for consumers that we possibly can that are also patients. We want to match them with the best set of comprehensive clinical programs and help generate very significant savings, clinical and improved clinical outcomes and financial savings, improve it and documented for the different sponsors. That's it. That's all you want to do. That's much narrower than the conversation you and I had on a while ago where we had many more ancillary business that we deemphasized over time.

I think that the entry of AI will present a super exciting opportunity for our companies, like many other AI companies in really realizing a mission in a very different way. Suffice to say that our smaller team is more excited than ever member, we see a little bright eyes. People get really, really excited around our road map. We have a very sophisticated and a meaningful client base. We bring to them very important KPIs in a large scale in a producible way every day. And we get to do that with a very modern platform that we invested a ton of money in time building. So overall, in many ways, I think that morale in the company and the excitement is as high as I can ever remember.

Great. Just building on AI, I know you have a new CTO from Amazon. When I think about just convergence happening between health care and technology and a lot of big tech companies getting into the field, what are some maybe insights he is bringing to Amwell? And what do you see in kind of his role in terms of what he's going to be kind of a performance-based.

Yes. Dan Zamansky is a wonderful placement in Amwell. He is EVP for product and technology. We also brought another very talented guy from Amazon to be our CTO, Rory. And there are quite a few others. We have people that are joining Amwell today from the best of AI health care in America. I know that sounds like somewhat of a strong statement, but it's still true. People really get excited about what AI can do in clinical field, which is a field that is very, very complicated, fairly risky in some ways, but we've been around for a long time, and we think we found a way to do it in a responsible way.

Overall, those people are able to match well with a deep institutional knowledge around clinical in Amwell, but they bring innovative abilities related to AI to create a perfect hybrid between what technology can offer and safe care can offer to try to solve things that were not possible to solve only a while ago, like finding the way to really change cost in health care, changing cost of visits, changing the cost of the clinical programs. Those innovations will be apparent to everybody in the road map that you're going to see in the next 12 to 18 months. These are things that are coming down the pipe that all our clients and the general public will be able to see and witness and I don't think we were able to do it without the newcomers. And now with the newcomers, we're able to do it without the veterans of Amwell that are so familiar with all the challenges and risks associated with providing reliable, trustworthy care. The combo is fairly unique.

Got it. So there's a lot of excitement in terms of the efficiencies, and you can kind of run leaner. You mentioned from a clinical perspective, how about just roadblocks, right? Because when we think about health care and AI, are there still things that have to be kind of solved that kind of get this off the ground more broadly?

Absolutely. I don't want to make it sound easy or obvious or trivial. There are really serious challenges related to AI. AI has hallucinations. AI is not accurate. It's not always dependable many things that people think AI can do, AI cannot do. In health care is an era where there is 0 tolerance for any type of mistakes. So trying to understand the benefits of the tool, the places that they can reliably generate an outcome in the place that they cannot has been the focus of Amwell in the last few years. We believe we figured it out a safe and reliable way to do it very carefully, very responsibly, but still in a way that will create a very significant outcome in a place that we believe is the most important.

I mean making care much more easy to access, making care much cheaper and much more effective is something that requires some transformative innovation that AI can deliver on.

Great. I want to turn the focus just to kind of some recent results on the back of your earnings, you talked about kind of Florida Blue plan, just some wins. What's really resonating with your -- the recent wins as well as prospective customers out there.

Absolutely. Sponsors understand the value of technology enabled care. It's very apparent to everybody that the right way for patients to go is to go online to a place that knows everything about them, to match them with what they need and make sure that we improve this offering again and again and again in order to provide the best return. So in many ways, we see that many payers today are really embarrassed by the number of -- sheer number of different clinical programs and what it takes to manage them. And when you think about it, each clinical program needs to acquire the consumer again and they need to prove the outcome in their therapeutic areas and someone sponsoring in the payer space, need to stitch all this information together and go back to the sponsor to prove an ROI. That's a very, very complicated task.

We have a platform today that allows you to have 1 consistent experience that is very, very simple to all your different clinical programs and 1 set of the reporting, and that's really resonates. And that's fairly unique. And very few companies in our world are doing that today. We're not only doing it. We are going to -- as I mentioned earlier, we're going to do it in a highly improved way with some new technologies that I think will further distance our differentiation from the other actors in the market today.

Got it. And payers and health systems have their own set of kind of challenges that they're navigating to, how is that influencing kind of your go-to-market sales cycles, things like that? Like how is the macro backdrop today?

I think that people are incredibly sensitive today to ROI. If in the past, you could offer some bold ideas of visionary investments. I don't think the environment can tolerate that today. You need to come with a plan that has very well-defined time line to KPIs, delivery and ROI, return on investment. The fact that we are very trusted in improving asset in the market is extremely helpful. When there is a new blue plan that wants to buy Amwell today, they know that there are tens of other plans that have tried that before and it's delivering for them. So there's very little question marks about the way that we are going to perform.

So the fact that we are offering new technology, but from someone that has been in the market for many years and deliver again and again and again, I think is a source of great differentiation and comfort to existing and new customers for Amwell. And I think that's important. I think that the fact that we are no longer emphasizing other bets that are less clear is also very, very helpful. It's easier to explain today the value proposition of Amwell to our customers, and it's even easier to grow and realize their expectations in a fairly expedited fashion.

Got it. If we think longer term, so we talked about kind of the path to breakeven, which is very important, and you guys are progressing to that. How should investors think about the opportunity set, whether it's size of the market or potential growth, margins on a longer-term basis?

So we are now experiencing a revolution in many ways where technology-enabled care is becoming more and more available to everyone. More and more people are going to go online to seek health care before they do anything else. So the original method of health care is really being replaced by technology-enabled care for a lot of good reasons. When we look at the size of the population that has access to Amwell, we're talking about 80 million to 90 million people. That's a lot of Americans. And only a fraction of them are benefiting from the many benefits of going online and getting technology-enabled care.

The growth of Amwell is first and foremost, going to be through same-store growth. More and more people in our payer customers are going to go online to seek care and our ability to offer them more and more services is going to grow exponentially over the next few years. Their experience is going to be dramatically improved. And the data that we can provide the sponsors for the entire orchestration is going to be better and better. So they are going to develop a healthier appetite to invest in more and more engagement and enablement and coverage of our services.

The fact that this is a fairly close to you, it means that the success we're having with existing customers is not going to be a surprise to newcomers and you're going to see more logos, both in government and in commercial space. I don't think we need to do anything else than our core focus, which is a phenomenal experience, very good matching to long list and growing list of clinical programs with very clear ROI that is demonstrable and documented. And there is plenty of growth if you do that and do that well over the next few decades in my opinion.

Got it. And not to get ahead of ourselves, but getting back again to kind of breakeven and how important that milestone is. It sounds like the message is very clear in terms of your strategy, what you're looking to execute on an environment where you become profitable, how do you think about capital allocation? Or is there organic inorganic investments that could further your position in the marketplace?

We landed in a very, very clear place. We know exactly who we are, we're on exactly what we want to do. And we -- as I mentioned earlier, we could see a very clear path for growth doing what we're doing. So when we get more resources as we become more and more profitable, we're going to reinvest those resources in exactly the same thing. If we have today a very simple way that allows our parents to go online and navigate and get what they need, if there is a way to really help our clients generate better savings and better clinical outcomes, we're going to invest again and again in doing exactly the same thing organically.

Of course, if we stumble across people that can help us do that, but the same goal and the same mission, we may acquire them, but we are not going to do anything else, but what I just said.

Understood. And just going back to the organization permit and bringing executives in from companies like Amazon, what are some of the things? It sounds like maybe it's a mission, but what are the other things attracting them to Amwell in terms of where you are at this stage in the company what the opportunity looks like.

We may be small, but we want to change the world. We really have an appetite to the democratize health care. The mission of Amwell is the reason why people leave jobs that are far bigger and in an area that is so hot, like AI and others and join Amwell because they understand that with their work they can help millions of Americans and maybe people even outside America, get the care they need in a fraction of the time, the fraction of the cost and get better. And that is truly difficult to match. And we can really do that. And those very serious people, they join us -- and the wonderful people that have been with us for 2 decades are united by that vision and ready to do whatever it takes to help realize it.

Great. Well, as you kind of wrap down here coming up in the last minute, what are some things maybe investors should watch for the next 6 to 12 months, whether it's milestones or things to kind of keep an eye on to see the progress of how the strategy is working out?

Well, we are laser focused. It's not hard to follow what we do. You can see that we are making some serious step in focusing the company and dealing with our cost structure. You are going to see some serious innovation that will result in further more and better, better delivery and outcomes for our customers, existing and new ones. And you don't need to wait long to do that. We have in the next 12 to 18 months, a lot of change that people are already seeing in our world is only going to get clearer and clearer is we seek our goals that we outlined earlier.

Great. I think we'll wrap it there. So Ido, Mark thank you so much of your time and sharing your insights with us.

Thank you, Craig. Thank you for having us.

Appreciate it.

Good day, and thank you for standing by. Welcome to the Amwell Second Quarter 2025 Earnings Conference Call. [Operator Instructions] 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.

Hello, everyone. Welcome to Amwell's conference call to discuss our second fiscal quarter of 2025. This is Sue Dooley of Amwell Investor Relations. Joining me today are Amwell's Chairman and CEO, Dr. Ido Schoenberg; and Mark Hirschhorn, 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.amwell.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 Ido.

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 tech-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're seeing in the market. From there, Mark 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 System's digital first initiatives for 1 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' 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 MEPCOM, the Military Entry Processing Command. In the DHA first, MHS providers began successfully conducting virtual visits from deployed units in combat zone 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've 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'm 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 Mark 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 entered 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 Amwell 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.

In 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 U.S. 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?

Thank you, Ido, 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 5th quarter in a row as we pursue our goal of cash flow positive during 2026.

Most importantly, as Ido 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 $70.9 million for the quarter, which is 13% higher than Q2 of 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 $40.4 million, up 47% from a year ago and compared to $32.2 million 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 1.2 million 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 $22.8 million. 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 $7.7 million for the quarter versus $8 million last quarter. The nature of our business drives variable revenues due to customer buying patterns for marketing programs and for Carepoints 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&D spending. Our R&D expenses in the second quarter were $18.3 million. This represents a decline of approximately 12.2% compared to the $20.8 million we spent in Q2 of 2024 and a decline of 17.2% compared to $22.1 million last quarter.

Sales and marketing expenses were $12.5 million. This is approximately 32% lower than last year's second quarter. And G&A expenses were $21.2 million, approximately 8.8% lower than last quarter and nearly 25.7% lower than last year's second quarter. G&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 $4.7 million versus a negative $35 million in Q2 of last year. Finally, with respect to cash and liquidity, our cash burn was reduced to $3 million in Q2 and we ended the quarter with $219 million in cash and marketable securities, with 0 debt.

And now I would like 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 million to $250 million compared to our prior range of $250 million to $260 million. 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 1.3 million and 1.35 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 million to negative $45 million from our previous range of negative $55 million to negative $45 million, 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&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&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 third quarter of 2025 to be in the range of $53 million to $56 million. As to adjusted EBITDA, we expect our Q3 adjusted EBITDA to be in the range of negative $15 million to negative $13 million.

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 Amwell will end 2025 with approximately $190 million in cash. On behalf of myself and Ido, 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 Ido for some closing remarks. Ido?

Thank you, Mark. 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 will 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.

[Operator Instructions] Our first question comes from the line of Stan Berenshteyn with Wells Fargo Securities.

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 the extended contract compared to the pilot contract? And then related to this, are there any KPIs 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?

Well, just as a reminder, the DHA pilot, if you will, was a long time ago for our platform and it covered the first 5 regions. This initial deployment was very successful and resulted in a decision to expand globally to serve 9.6 million people. Both during the initial deployment and the global deployment, obviously, the client was extremely 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, are going to continue to be at least as good as the performance that 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.

Is there a dollar amount that you can share with us in terms of what the run rate is with this extended contract versus the outgoing pilot contract?

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 the 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 12 months.

Our next question comes from the line of Charles Rhyee with TD Cowen.

This is Lucas on for Charles. 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 million to $30 million in expected subs revenue for 2025? And I guess what is driving that decrease? Is it the changed scope on the DHA contract? If you can give us any color there, that would be really helpful.

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 5 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.

Got you. 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 in health plans and health systems, further OpEx? I guess if you could bridge the gap from where we are now until then, that would be helpful.

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 noticed 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.

#2, we match those modern solutions and modern platforms centered around the Amwell platform with the right market segments. So there is renewed focus on areas where our right to win is maximized to create maximum value for our customers, and as a result, also much higher margins for us.

#3 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 spends and layers, things of that nature that also connect to different ways that we operate that include 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 a much more centralized configured platform.

The end result is a cost structure 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.

Our next question comes from the line of Eric Percher with Nephron Research.

Congrats on the extension. Ido, 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.

Eric, I will never say anything is easy in our business or certainly as 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 programs 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.

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 there, was there any pull forward to the first half that you expected in the second half?

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.

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?

No, none at all.

Our next question comes from the line of Jailendra Singh with Truist.

Congrats on the extension of DHA contract. So last quarter, you guys highlighted a lower than expected churn and then the selling season was showing strong demand across both payer and provider markets. Any update to share on the trends there? Just wondering if any of the recent macro developments, uncertainty and various regulations impacting providers are having any impact on your sales pipeline?

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 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 cost. There's no question about it. And the need for a platform that is very efficient in the way that it engages with the consumers and retain them and matches them with the most optimal clinical programs with the 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 Amwell 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.

Great. And then a quick follow-up for Mark. And apologies if you covered this already. How should we think about R&D expenses into next year? And does the extension of the DHA contract change your existing plans for R&D point of view?

Jailendra, 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.

Our next question comes from the line of Ryan MacDonald with Needham.

This is Matt Shea on for Ryan. Congrats on the DHA extension. If the DHA wanted to reinclude 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 launch 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?

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 Amwell platform is making it easy to add clinical programs, whether it's Amwell clinical programs or third-party clinical programs. And as you do that, you don't forgo the elegance and effectiveness of having one pipe, 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.

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?

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 time line of those additions, but we are certainly optimistic.

Our next question comes from the line of John Park with UBS. I'm sorry, John Park with Morgan Stanley.

I'm stepping on for Craig. I wanted to ask about the third-party clinical solutions that you guys offer. Did this -- did the offerings and 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?

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 stand-alone, 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 results 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 elements, the entire care continuum through various program is extremely helpful, first and foremost, for patients and members, but also very efficient in 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 a report that brings together all the programs so you can see your entire individual, and of course, the entire cohort 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 stickiness.

So I would say that in essence, the -- our 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 are happy to share with us the enablement revenue of bringing these patients to them and that translates into high margin, very sticky revenue for Amwell without taking anything away from the cost to the sponsor. The cost of the sponsor remains the same. So it's really a win-win-win for all parties.

Great. I 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 and payer level. Have you seen this translate into any type of like sales cycle elongation or perhaps pricing changes just to capture their attention?

I would suggest that the main change is the focus on the different unmet needs. If at times in the past, member experience, clinical outcomes were the discussion starter. In the market today, it's all about cost 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 accelerating.

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.

[Operator Instructions] Our next question comes from the line of Kevin Caliendo with UBS.

This is Jack Senft on for Kevin. Similar to Eric's first question, on the DHA contract, you mentioned the renewals only for 1 year. I'm just kind of curious, do these renewals typically happen in 1-year increment or was this kind of more like a stopgap funding type of renewal to keep care continuous just given the initial leadership change? Just curious if anything surprised you here.

Well, Jack, as you can imagine, this is a much larger vehicle that includes much bigger participants than Amwell, including the EHR deployment for the DHA. So this negotiation, which we were not part of between Leidos and others and the DHA that included even higher up like the Pentagon is something that had many budget consideration, 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 from where we sit 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 multiyear.

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 Amwell as a partner for many more years.

Okay, understood. 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 -- I think maybe last call that you expect them to expand going forward. But I mean 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?

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.

And I'm currently showing no further questions at this time. I'd like to hand the call back over to Ido Schoenberg for closing remarks.

Thank you, operator, and thank you, everyone for joining us this evening. We really appreciate your support and your attention. Have a good evening.

This concludes today's conference call. Thank you for your participation. You may now disconnect.