Amwell, the Boston-based telehealth company, saw its stock price go down 5.8% per share at market open on Friday, after releasing its first earnings report since its September IPO the night before. The company beat analyst expectations on revenue, but missed on earnings per share.
In announcing its third quarter earnings, Amwell focused on technology investments and the launch of several new products, which co-CEO and chairman Ido Schoenberg says were “artificially accelerated” by the Covid-19 pandemic. He likened one new product, Amwell Now, to an easy yet HIPAA-compliant Zoom-like video experience—a safer, better alternative to the stop-gap solutions many doctors implemented during the pandemic, such as treating patients over platforms like FaceTime.
“We don’t always need to only build very complicated platforms, sometimes we need to create innovation on the simple end of the spectrum,” says Schoenberg, who cofounded the company with his brother Roy in 2006.
Amwell posted $62.6 million in revenue in the third quarter, an 80% increase over the same period last year, and nearly $7 million above analyst consensus estimates. The company recorded a net loss of $64.6 million in the third quarter. This came out to a net loss of $0.92 on a per share basis, while analyst expectations were a $0.37 loss per share, according to Bloomberg data. Visits totaled more than 4 million in the first nine months of the year.
Amwell says the key performance indicator is the number of providers who are using the platform, which has grown to 62,000 from 6,000 the same time last year. That includes a mix of providers employed by health plan and health system customers, which accounted for more than 70% of visits on the platform, as well as those affiliated with Amwell Medical Group.
Amwell’s gross margin was down to 32.7% from 45.1% last year, driven by a higher volume of Amwell Medical Group visits, but Schoenberg sees this as a temporary problem. “As more and more people buy our technology, and not necessarily our technology with clinical services, which are much lower margin, you’re going to see the margin creep back up,” he says. The company expects its 2020 revenue to come in between $235 and $239 million.
The shift from on-demand urgent care to a platform where doctors of all specialties can see patients virtually is a growing trend in telehealth, as the one-off model shifts to services like primary care and behavioral healthcare. “We are moving from the transactional into the recurring,” says Schoenberg. “We think that connectivity should not be one and done, but rather is a way to help the patient continuously.”
On Thursday, Amwell also announced an update to its remote patient monitoring services, including new tablet software that helps connect remote providers to on-site patients, as well as a new telemedicine cart that helps with remote exams. Details were sparse on the company’s strategic partnership with Google, which invested $100 million as part of the IPO.
Schoenberg did mention new artificial intelligence tools recently rolled out by Google Cloud using natural language processing to help with medical documentation. “Once you have automated understanding of the [clinical] script, you can do better decision support and many other benefits,” says Schoenberg.
He also says Amwell would like to get the benefit of Google’s national and global reach through the partnership. “Tech companies don’t always fully realize the potential of what they create in healthcare, and healthcare companies don’t fully understand the value of the technology,” he says. “Since we are in the middle, we do both things.”