Amwell Narrows Losses in Q4, Touts Military Contract Wins

Telehealth vendor Amwell reported progress towards profitability in its fourth-quarter financial results, despite failing to grow revenue compared to the previous year. The company's strategic focus on its military contract and cost-cutting measures have contributed to narrowing losses and increasing subscription revenue.

Financial Performance and Strategic Initiatives

Amwell recorded a net loss of $212.6 million in 2024, a significant improvement from the $679.2 million loss in 2023, which included a substantial non-cash goodwill impairment charge. The company aims to achieve positive cash flow by 2026, with CEO Ido Schoenberg expressing cautious optimism about future growth prospects.

Subscription revenue saw a 36% increase in the fourth quarter compared to the same period in 2023, largely driven by deployments related to a lucrative defense contract. CFO Mark Hirschhorn highlighted this as a key factor in the company's financial performance.

To improve its financial position, Amwell has implemented several strategic initiatives:

1. Divesting from slow-growth service lines, including the sale of Amwell Psychiatric Care for $30 million in January.
2. Reducing research and development costs by 29% year-over-year in Q4, with plans for further cuts in 2025.
3. Focusing on high-demand areas, such as partnering with Vida Health for obesity and diabetes care, including GLP-1 treatments.

Military Contract Developments and Future Outlook

A significant portion of Amwell's growth strategy revolves around its joint contract with Leidos to digitize the military healthcare system. CEO Schoenberg provided updates on the contract's progress:

1. Deployments will continue through the first half of 2025, with final on-demand visit and international deployments expected early in Q3.
2. The initial contract with the Department of Defense's Health Agency is set to expire after July, but Leidos is in talks for a three-year extension.
3. Schoenberg anticipates potential expansion of the contract to include an Oracle partnership, given Oracle's involvement in replacing the Department of Defense's medical record system.

Despite concerns about potential budget cuts from Elon Musk's Department of Government Efficiency, Schoenberg expressed confidence in the contract's renewal and possible expansion.

Amwell is targeting revenue between $250 million and $260 million for 2025, with a focus on fully deploying the military contract, reducing costs, and securing more predictable recurring revenue. While the company faces ongoing challenges, including higher general and administrative expenses due to the Change Healthcare cyberattack, management remains cautiously optimistic about future financial improvements.