Good evening. My name is Rex, and I will be your conference operator today. At this time, I would like to welcome everyone to the Amwell 2Q 2022 Earnings Conference Call. All lines have been placed on you to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Sue, you may begin your conference.

Hello, everyone. Welcome to AML's conference call to discuss our second fiscal quarter of 2022. This is Sue Dooley of Amwell Investor Relations. Joining me today are Amira's Chairman and CEO, Dr. Ito Schoenberg; and Bob Shepherdson, our CFO. Earlier today, we distributed a press release detailing our announcement. The release is posted on our website at investors.ame.com and is also available from normal new sources. The conference call is being webcast live on the Investor Relations 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 course of this call, we will make forward-looking statements regarding projected operating results and anticipated market opportunities. This forward-looking information is subject to the risks and uncertainties described in animal's 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 for his opening remarks. Pete?

Thank you, Sue. Q2 was another important quarter for our company as we make progress on the launch of CONVERGE, our technology platform, powering the innovative healthcare organizations leading the way to our hybrid care future. We are proceeding according to our plan for the year, and our team is engaged and inspired by our clarity of purpose and well-defined role in a digital-first future. I'll start by reviewing some highlights of the quarter, then I'll take a moment to discuss the market for our solution and some customer examples. Bob will then review some key metrics, our financial results and our guidance. Then we'll open the discussion with your questions. To begin, here are a few highlights from Q2. A key workflow in Q2 has been supporting CVS Health on the launch of the virtual care delivery platform they announced in May. This is a new consumer-centric offering designed to bring together the many elements of CVS Health ecosystem services into a single integrated experience with unified digital front door. The CVS Virtual Care digital front door is an exciting new initiative, and we are honored to be selected as the backdrop for this vision. I want to take this opportunity to thank the Amwell team members on the front lines of these extraordinary efforts. Turning to development of CONVERGE. We are making good progress delivering our industry-leading digital care delivery enablement platform. with CVS well underway and a substantial part of our platform in live deployments, our R&D efforts are focused on bringing CONVERGE over the finish line. We continue to prioritize existing customer migrations. Demand for our solution continues to grow and sales conversations are proceeding according to our plan. Active providers on the AML platform reached an all-time high this quarter and a 45% higher than…

Thank you, Ido, and thank you all for joining the call this evening. Tonight, I will highlight some of our key operating metrics, then take you through our 2Q '22 financial results. The number of active providers on our platform is one measure we use to demonstrate the value we deliver to our provider and payer customers. We ended the second quarter with approximately 103,500 total active providers, representing 45% growth compared to a year ago. Providers employed by customers active on our network grew 48% versus last year. Virtual visits have continued to grow nicely despite much improved access to in-person care, demonstrating the continued acceptance of virtual business as a standard of care. Total visits were over $1.5 million in the second quarter, representing 19% growth versus last year. Scheduled visits grew 20% year-over-year and represented 73% of visit volume, about even with the first quarter and up from approximately 30% precoded -- we are making steady progress on CONVERGE development and the migration of our customers to our new platform is proceeding according to our plan. In Q2, total visits on CONVERGE comprised approximately 9% of total visits, which is in line with our average over the last 2 quarters. As we have discussed with our less complicated migrations largely behind us, we are now in process on several more complex migrations with our larger clients. These customers account for a much larger percentage of our visit volume. And as such, we expect our CONVERGE visit percentage to rise over the coming months as those migrations are completed. And now on to our financial results. Total revenue was $64.5 million, reflecting growth of 7% versus the second quarter of '21. The components of revenue are as follows: Subscription revenue grew 10% over a year ago and was…

Thank you, Bob. We are proud of our team, and we are encouraged by the progress that Q2 represents. -- in pursuing the strategy to deliver the leading digital care delivery infrastructure, our future is about increasing our mix of high-margin subscription software as we pursue our long-term path to profitability and beyond. Our role in the digital care delivery landscape is clear. The opportunity in front of us is large and expanding, and we believe we are just getting started. Before we move to Q&A, I wanted to share that soon we will be publishing our inaugural ESG framework. We are excited for the world to see how we view our company through an ESG lens. With that, operator, would you please open the call for Q&A.

[Operator Instructions] Your first question comes from the line of Charles Rhyee.

Congrats on the quarter. Either wanted to just touch on CBS here. Obviously, they made their announced in a release at the end of May. Obviously, Anil get rolled out starting next year. My understanding is that, that's been an ongoing discussion between you and the company. Maybe you can give us a little bit more background on how that kind of conversation started. And sort of what were the things that they were looking for as they are thinking about a virtual care platform? And then lastly, when you guys gave the long-term kind of path to profitability, was that factored already into sort of your thinking at the time?

Charles, thank you. As you know, we are very careful to never talk about any of our specific customers, big or small, and CVS is no doubt, a very important relationship for the company. CBS is a fascinating organization that blend, insurance capabilities, retail capabilities, care delivery networks, PBM, population management services and so much more. We could be more proud and excited about the fact that they chose us as their backpack for their effort, and that effort is very significant, and they alluded to that effort already as late as their recent earnings call. I'm afraid I cannot provide much information beyond what we already shared and was approved by our clients. But it is a very, very important undertaking that will be a wonderful demonstration of our new platform and capabilities. As far as the path to profitability, this was a generic model. I did not necessarily count specific clients in or out. I'm not sure, Bob, if you have anything else to add to this.

I think you covered it. The guidance that we gave in February contemplated everything we knew at the time. And we had referenced a large booking in the fourth quarter. So yes, it – you shouldn’t read into the announcement by CVS as something incremental to what our -- what the guidance we gave in February is…

Great. And if I just follow up, Bob, the guidance you reiterated on the EBITDA guide here. Obviously, you came in better, I think, than expected on the second quarter. Can you give us a little sense on the cadence? And if I recall correctly, you had talked about as you're ramping up CONVERGE, you're going to be running duplicate platforms, you outperforming the gross margins. Should we still expect a downtick in the gross margins then in the back half of the year?

Yes, Charles, I would say that – we do note that the quarter came in better than the consensus for adjusted EBITDA. It is, however, in line with how we thought the year would evolve. The back half, there’s a lot going on in terms of getting customers up and running, finishing off the CONVERGE development R&D and kind of across the board in terms of the income statement. So I would stick by the guidance we provided on the – at least for now, for the adjusted EBITDA and not really think about that different in the context just because of the quarter.

Appreciate it.

Thank you, Charles.

Your next question comes from the line of Jack Wallace [ph].

Can you hear me?

No, we can.

Sorry about that. It sounds like it was a great quarter, particularly on the expense management side. And I wanted to piggyback on the following question and thinking about the cadence of the year. I think when we were discussing the long-term growth and margin trajectory, the second quarter was called out for being the highest burn, particularly around the R&D line, and that looked like it was flat quarter-over-quarter. Granted the commentary with some of the large migrations happening in the back half of this year makes sense, but there was also paired with R&D going down over the course of the year. Can you just help us rebucket where the back half of the year expenses look to go and just within the context of about $90 million of EBITDA burn in the first half of the year, just annualizing that gets you to the high end of your EBITDA guidance. Just trying to figure out where all the moving pieces end up landing...

Yes. I'm not going to go line item by line item and give you the quarterly progression. But I would say that we talked about R&D specifically coming down over the back half of the year. That -- I wouldn't expect that the second quarter represents the high in terms of quarterly spend on R&D. So -- but we do still stand by the thought that relative to -- on a quarterly basis, we do expect to see some decline in the back half of the year. So whether that comes to pass second half over first half or just fourth quarter over third quarter, I don't want to be too specific around that. But I would tell you that I don't expect that the second quarter is the high quarter for the year on the R&D front, looking at where we are right now. And then gross margins are right now and in the first quarter, a bit higher than we had talked about in February. I think we talked about gross margins coming in flattish for the year, given all the puts and takes, and we still stand by that. So, I think you’ll see some – as visits ramp up over the back half of the year, that has an impact on gross margin as services ramp up over the back half of the year, that has an impact on margins. So we will see gross profit margins come in relative to this quarter, which is probably the high for the year. I think that probably covers the largest moving pieces, it’s really going to be around R&D gross margins. And as we get into the fourth quarter with services and care points ramping up, those are some of the lower-margin products that we offer. And so we’ll see that impact as well. Q – Unidentified Analyst: Got you. That’s super helpful. I appreciate it. Switching gears here on the CONVERGE front. You mentioned that Conversa and Silver Cloud recently integrated onto the platform. And on the prior call – or the first quarter call, there was a mention of other key modules that were being converted over – or being integrated to CONVERGE. What is the status of those other module integrations? And is that happening concurrently with the large customer migrations?

So Jack, CONVERGE is very much like an operating system. It's a very, very large infrastructure that is designed to host really indefinite number of modules and programs. If you only account Conversa programs, we're looking at more than 150 programs, SivoCloud has their own slew of program. We recently announced store help with MSK. We talked about dermatology, our nephrology [ph], telepsychiatry initiatives and many others that really are hard to count and mention over the call. The high-level answer to your question is that we fully expect to add modules that are made in Amwell and growing number of modules that are made by third parties and even our clients to really tie them into this unified infrastructure is so helpful to our clients. Down the road, I would not be surprised if the majority of our models and program will not be manufactured by AML, but we will just serve as a very large integration layer for all parties, for patients, providers and of course, payers and employers. We don’t tend to announce things before they’re ready, but you should fully expect more and more diversity, more and more comprehensiveness across the full care continuum on CONVERGE this year and in years to come.

Your next question comes from the line of Ricky Goldwasser [ph].

So a couple of questions, but let me start with the first one. So when you think about enterprise clients facing just more challenges now, how is this or is it impacting just the time line of the enterprise sales cycle? And as we think about sort of kind of like selling more, where are you seeing more traction or urgencies at health systems versus health plans who might have stronger balance sheets at the moment?

So Ricky, that's a great question. We really see 2 contradictory trends here. On the one hand, there is no doubt the macro wins are very clear. People have some serious concerns about the economy. People are much more careful when they buy the focus on ROI, and we prepare to have this discussion with existing and new customers. At the same time, it's also very evident. The digital care delivery is proven now more than ever. It's an extremely effective way to improve financial and clinical outcomes and reduce cost. And in many ways, hard press to find a client or even a potential client that doesn't see digital care delivery enablement is the necessary infrastructure they would need in order to survive and compete in this market. At the same time, we are -- we understand that the ability of people to commit to very large projects upfront really translate into risk that some people are hesitant to make at this time. And this is why we build the platform, not only converge, but the combination of converged, different type of clinical services, strategic services and even hardware in a modular way. So, you can buy what you need today and have the peace of mind that you can grow into the future. And that seems to resonate really well in the marketplace. So people can make the necessary investment that they can make with very clear ROI that is super specific to their budget and needs right now this year. and look at us as a multiyear, reliable partner as they continue and expand. It's hard to guess which one of those trends is going to win. But overall, I think the net is net positive. We seem to feel based on customer feedback that we have the right offering at the right time that is somewhat more resilient to market trends than other types of products.

And then another question, and this one is more sort of if we step back. We talked about CONVERGE digital care delivery infrastructure. But as we think about the CVS relationship, is the Sibos relationship could become more of a blueprint for CONVERGE being, let’s say, the digital outright care delivery infrastructure. When I hear kind of like what you talked about, right, you connect the PBM, connected pharmacy. So you are connecting services that are provided in person with services they are providing digitally. Is that a fair way to look at it?

Absolutely. Without getting into specifics on CVS, you're absolutely correct that we really see ourselves as an integrator. We make the point not to compete with the different players, especially not with the providers and really bring them together to create a singular experience, organizations that really have many of the moving parts would be a terrific example to the capability of the platform. But even if you have less of the parts and you want to engage sharing and exchanging information and services with other organizations, we don't necessarily compete with you, but really complement your offering and make it better and more sticky and more valuable to your own customers, we really created this tool in order to do that, which is a stark differentiator. -- of AML and the Amer platform versus other players in the market today. This may be your last question, I'm not really sure, but I want to just make the point that I was told recently that this may be one of your last calls, Ricky. So, I wanted to express the gratitude of myself and our entire team for many, many years of terrific reviews and analytics and wonderful guidance and wish you a very best on the next chapter in Korea. Q – Unidentified Analyst: Appreciated. Thank you.

Your next question comes from the line of Eric Percher.

Thank you. Description as an integrator make an interesting partner for technology companies looking at healthcare, I love to have there any updates on the Google relationship and also your views on Amazon expansion in healthcare, both digital and care delivery.

Eric, yes, with Google, I can reiterate what we said recently. They have a cloud service that we trust, and we hold some of our activity on. They have some technologies, especially around natural language processing and AI that we are using. We made a very important decision to use our clinical data repository on Google, which opens the way for us to give much better reporting and analytics which is so important for CIOs as they look at multiple vendors that we bring together and they really want not only on digital door, but there's really one set of oversight into the many ways they touch and engage with the patients. So we are very pleased with our relationship with Google. But of course, we have other relationships. Cerner is a long-term relationship with Amwell and now it's part of the Oracle, the other examples. As it relates to Amazon, this is a pretty interesting potential transaction. In some ways, it's another validation of what we said all along. The technology will transform healthcare. The Oracle example, the wool example or other data points or reference points. What's really interesting is that Amazon seems to think like us that the right answer is a hybrid model. It brings in person with technology, automated, virtual and in-person solutions is the right answer. They also said that they would like to bring care more close to the home. And Amazon is known for many things, but they are especially known for the logistics and their obsession about the consumer experience, which finally is arriving into healthcare. Eric, you've been on many calls with us, you know that we are equally religious about that, a lot of effort was put in CONVERGE to truly create the phenomenal provider and consumer and really any other type of user experience. But perhaps most importantly, we see this movement by Amazon as the very strong accelerant to many of our customers who can use our platform in order to survive and flourish in a marketplace that is becoming incredibly more sophisticated and more competitive to them. Aron is an enabler, a role as an integrator does not hurt anyone, but it could be very, very helpful when they look at their plans to really create an edge for themselves into the future.

That’s interesting. And just relative to Oracle and Cerner, is there anything – any change to the Cerner relationship or any way that your role now is in conflict with what Oracle and Center has become with Oracle?

I really don't think so. Apart from many wonderful relationships really across all levels of both Oracle and Cerner that we maintain our recent conversations with both organizations have been very, very positive and really indicate that we are likely to continue and see them as a very good partner of AMR for many years to come.

Your next question comes from the line of David Larson.

Hello. This is Aaron on for Dave. I just had a quick housekeeping question and then a more general question. First is just with regard to AMG visits in 2Q. I saw the revenue, but I didn't see the visit volume. And then I just want to know how the acquisitions of SilverCloud and Conversa are doing relative to your expectations? I know you didn't break them out, but just curious how they're trending and how you see it going forward.

On the AMG business side, I don’t think this is something that we have typically broken out quarter-to-quarter specifically I would say it was down a bit seasonally as we talked about kind of in line with revenue. There really wasn’t much of a change in revenue per visit quarter-over-quarter. So you could get to the number pretty easily by just looking at the change in revenues. It would be around the same level…

I hope that's helpful.

Yes.

And as far as -- thank you for the question about the Converse and Silver Cloud. I would say that those acquisitions were almost expansion. They were critical for AML. I keep talking about the hybrid of physical virtual, but we really need a very good technology and capability around the automation, which this strategic acquisitions are more than delivering. So they've been great as a stand-alone offering, they are even much more powerful under our integrated umbrella. So they really changed the paradigm in many ways. If you think about automation, it allows the patients to experience healthcare as the companion is always on something that you can be in touch with the different participants, the fraction of the cost and has many, many ROI benefit, some of which I shared in my prepared remarks, other are available on our website and even with the third parties. So, regardless of the exact impact on revenue of specific programs, these capabilities, which are now part of the anal platform really allow us to complete everything we have to have in order to end 2022 with a very competitive offering across our entire market. I don’t see any other similar needs that we are missing for M&A in years to come. So that’s pretty much covered what we had to acquire, but it was very necessary. Q – Unidentified Analyst: And just as a follow-up, I think you projected last year that you’re going to have about $30 million in revenue for that acquisition. I guess, how is it trending relative to that benchmark for Silverline conversion?

The 30% we talked about in the context of really giving some guidance around where those business would be on a stand-alone basis and in the context of an earnout that would run over the course of the year. We -- as do talked about, opted to accelerate the earn-outs and speed the integration of those assets as we saw the value that, that could bring us in marketing and integrated offering. And so with that, we're not really looking at these as stand-alone businesses at this point. We're marketing them in packages. Conversa is offered to customers on the health plan side as you can buy 1, 2, 3, 4 different Conversa packages along with an amount of visits and that will determine up and down kind of where you are on your subscription. So, it's really -- we're not really thinking about these as stand-alone line items from a revenue perspective anymore because you really just can't break them out in a package sale context. So I would tell you the businesses are performing as expected and -- but more importantly, the strategic value that they bring us and that they have brought us is better than we could have hoped.

Your next question comes from the line of Stan Bernstein [ph]. Q – Unidentified Analyst: I apologize I hope on with so if you addressed this, I’m sorry. But we’ve been hearing just more and more news how R&D has been a particularly sensitive area in terms of wage inflation pressures. And just as we think about your easing off the gas on R&D spend going into the back half of the year, should we be thinking about any offset or any incremental wage inflation pressure that you’re seeing? Any color there would be helpful.

Look, I would say that -- we're seeing pressures on the cost side, no different than anybody else. We've really tried to optimize from a staffing perspective by using -- given the nature of the development of CONVERGE, we have used a lot of outside contractors because as we complete the development of CONVERGE and those discrete projects roll off, we're not -- we haven't ramped up headcount and then have to ramp that down. So we've done a lot of contracting externally to get to where we need to be. We -- there has been some pressure from that perspective. And look, as we are in the market from an FTE perspective as well, we see the wage pressure. That being said, it hasn't put us in a position where I feel like we should be guiding you any differently from an R&D line item perspective going into the second half year. We've, I think, done a good job in dealing on a net basis with our -- with FTEs and again, really leveraging up on the contractor side. So it's there. We see it, but not to the degree that we would guide any differently.

Your final question comes from the line of Jessica Tassan.

I guess, first off, I was hoping you could help us understand what the mix of AMG behavioral versus primary care docs on the platform is roughly? And do you guys feel like you have sufficient capacity within the AMG network at this point to service the virtual primary care contracts you've signed and also just seasonal demand in heading into the back half, like fourth quarter?

Yes, Jess, and thanks for the question. We have SLAs across our business and really need to staff AMG appropriately for those SLAs. We're meeting our SLA targets across the board. And so I feel like we definitely are well positioned to -- just from a capacity perspective. There's areas on the behavioral side that are probably a bit tighter areas in the country that are a bit tighter than others. But I still -- even with that, we're performing well under our SLAs. The virtual primary care is really an interesting question. A lot of the virtual primary care that will be enabling is -- will be AMG related. But what we're also doing, I think, rather uniquely is allowing a provider allowing our customers to use their own providers in addressing the virtual primary care needs. And so while that may necessitate us ramping up some, what I think it really will be doing is allowing our customers to utilize their assets a lot more efficiently as they roll out virtual primary care across their footprint. So the mix -- I don't really have a number at my fingertips in terms of number of providers as it relates to the various categories. I would tell you, the lion's share more than the lion's share is urgent care related. We certainly have -- but we have adequate capacity across the other specialties, again, to meet the SLAs that we've got.

Okay. That's helpful. And I think a really helpful distinction on just the primary -- or primary care being reliant on customer doctors as opposed to your own. My just last question is, as you guys are rolling out CONVERGE with payers, should we be looking for, for example, like with the LiveHealth Online JV, should we be looking for like a new platform or a new consumer-facing app to support that launch or those several launches.

Jessica, that's a great question. So a year ago, we -- our brand was very important to us, and we have different apps. And then when we partner with the like of Anton at the time we created lives is a brand. where all this is going is that our brand really is much less important. The trusted brand in healthcare are the providers and their partners. And we are offering technology and services to make them what they do best, even better. CONVERGE is replacing the technology it used to be an SDK embedded in dedicated apps in the technology that is called rigid. It basically allows our customers to build their whole branded environment to use digital assets that they already own and still benefit from all the logistics and capabilities of matchmaking services and information that we provide for them without losing an inch on the integrity of their user-facing assets. In general, everything we do is web responsive -- so whether it's an app or a website, whether it's a computer or a tablet, it all works exactly on the same way, and it has the faith that our customers want us to have. So, we gracefully took one step backwards, if you will, allowing our customers to take their natural place to the forefront. And in many ways, that's a very welcome change. If you think about your own family, would you rather get care from Cleveland Clinic or into Mountain or Amwell. Of course, we love unwell, but we think that your level of trust with the academic medical center or your trusted network in your community is rightfully much stronger and much more robust and our role is really to empower and enable them. And that is translated into the architecture and the experience that you can see or in many cases, not see on CONVERGE.

Got it. That’s so helpful.

There are no further questions at this time. I'll now turn the call back over to you for closing remarks. I think maybe got dropped. We're ready for any closing remarks you have.

Well, thank you, everyone, for joining us today. As you can see, this is a very exciting quarter in a super exciting year. We can't wait to gear up our sales CONVERGE into 2023, who is bound to be a very interesting selling year for us. So, thank you, again, for joining us and look forward to talking with you very soon.

This concludes today's conference call. You may now disconnect.