Good afternoon. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Amwell Second Quarter 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. I would now like to hand the call over to Sue Dooley, Head of Investor Relations with Amwell. You may begin.

Hello, everyone. Welcome to Amwell's conference call to discuss our second fiscal quarter of 2024. This is Sue Dooley of Amwell Investor Relations. And joining me today are our Chairman and CEO, Dr. Ido Schoenberg; and Bob Shepardson, our CFO. Earlier today, we distributed a press release detailing our announcement. Our earnings release is posted on our website at investors.amwell.com and is also available through normal news sources. The 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 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 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 would like to turn the call over to Ido.

Thank you, Sue, and good evening, everyone. Q2 was a busy quarter for our company, marked by progress on all fronts. Our focus is strong as we deliver on key strategies that support our guidance, which calls for a step function in our growth in 2025, leading to our plan for adjusted EBITDA breakeven in 2026. We see three ways in which we advance our business during Q2. First, we continue the successful deployment of the Defense Health Agency's Digital First initiative. Second, we had a high degree of focus on cost-cutting initiatives in the first half of the year that drove the improved 2024 EBITDA guidance in tonight's release. And finally, our growth transformation is progressing well. Engagement with prospects is high, and our deal pipeline is expanding. Now, let me get into a little more detail. Our self-guided behavioral health solution for the DHA is live in production at all five designated sites. Converge and automated care implementations are progressing well as planned. We're targeting the next capability offering Go Live for Q3, and enterprise Go Live is still scheduled for Q4. We are honored to have the opportunity to positively impact the health and readiness of our men and women in uniform and their families. We remain fully committed to our partners to improve access to care and support the Military Health System's Digital First transformation. Turning to our cost structure, we continue to make good progress in rightsizing and optimizing our company to benefit from our new platform and go-to-market focus. Bo will provide you with details on Q2 cost-related results that led to our improved guidance for 2024 EBITDA. Across all aspects of our business, we continue to drive for efficiency. We are beginning to deliver the significant savings and efficiencies that are part of our path to profitability. Importantly, our strong balance sheet fuels us well beyond what we need to achieve profitability. We continue to deliver for our clients. Our patient satisfaction rating for Converge is above 90% and visits on Converge are 70% of total. One notable migration to Converge late in Q2 was Capital Blue Cross, where we saw one of our most efficient and streamlined migrations to date. Now, I would like to recap that we recently announced some important steps to evolve our company beyond this time of transformation. As we shared earlier, our co-CEO, Roy Schoenberg, stepped away from day-to-day operations. As our Executive Vice Chairman, Roy maintains an active role furthering Amwell's mission as a global provider of our world-class platform for digitally enabled care delivery. This change reflects the end of our replatforming era and is designed to streamline decision-making across the company to propel profitable growth. Second, we are fortunate to add a new member to our Board of Directors, Ricky Goldwasser. Ricky is a senior industry veteran many of you know. She has a strong financial and health technology leadership track record. We are confident she will bring new perspective and intense focus to her role. Ricky takes the seat of Governor Deval Patrick, who departs the board after nine years of early service. We thank Governor Patrick for his pivotal role in Amwell's history to date. Wrapping up, I would like to speak for a moment about the market for digital healthcare, and this time it is evident that the digital-first approach is resonating. Facing operational challenges, payers, and health systems are looking to unify, personalize, and simplify the healthcare consumer experience. They also aspire to mobilize longitudinal whole person data sets to improve care and outcomes, all to help consumers cost-effectively engage in a broad array of digitally enabled clinical programs across the care continuum. Related to this, in Q2, we signed a new partner agreement with Hello Heart, adding to our list of valuable clinical programs enabled by our ecosystem. Amwell is uniquely positioned to address the challenges our clients are facing, realize their aspirations and help them deliver on these goals. We offer an end-to-end, comprehensive solution. It is dependable, safe, secure with a proven track record at scale. It powers a large part of the U.S. ecosystem and can enable the exchange of data and services between entities across our client base to make care even more efficient and accessible. The partnering approach we are pursuing is unique. The value to patients, providers, and payers is significant. We believe our deep integrations and vast deployments form long-term bonds with healthcare organizations that make up a big part of the U.S. ecosystem. With that, I would like to turn to Bob to review our financials, some key metrics, and our positively revised guidance. Bob?

Thank you, Ido, and good evening to everybody on the call. The highlights of this quarter versus last are a total revenue increase of 5%, a gross profit margin increase of 660 basis points, and an adjusted EBITDA increase of 23%. As Ido mentioned, based on our first half performance and expectations for the second half, we are improving our guidance range for 2024 adjusted EBITDA by $10 million. To begin with a few operating metrics, total visits were approximately 1.5 million in the first quarter, approximately flat to last year. Scheduled visits represented 66% of total. Continuing to highlight the evolution of our company from providing virtual urgent care to a platform provider enabling hybrid care, volume on Converge held steady at approximately 70% of Q2 visits. Approximately $1.5 million of the increase is one-time in nature and relates to a change from our expected timing of the completion of certain contracts. With this context, we expect a small quarter-over-quarter decline in subscription revenue in Q3, followed by a substantial increase in Q4 to bring total subscription software revenue for the year to approximately flat. Last year, AMG revenue trended slightly higher than last year at $28.7 million in Q2. The number of AMG visits was slightly lower than a year ago. Average revenue per visit was 4% higher this quarter than last year at $80, driven by a mix shift within AMG away from urgent care visits. Our AMG business continues to be strategically important to successful client expansions and new client wins. Our Services and CarePoint's revenue were $6.6 million for the quarter, an increase of $3 million from last quarter, driven primarily by the timing of professional services and marketing. These revenues are uneven from quarter to quarter due to customer buying patterns for marketing services programs and for CarePoint, as well as the professional services milestones that precede deployments. We continue to anticipate that our services and CarePoint's revenue will represent approximately 10% of our total revenue for 2024, driven primarily by go-lives of contracted deployments. Turning to profitability, our second quarter gross profit margin was 37%, an increase of approximately 660 basis points from last quarter on higher subscription revenue and as we put some of the one-time cost impacts from Q1 behind us. As a reminder, these costs were related to the Change Healthcare breach and the very large client migrations that we successfully completed in Q1. For the year, we expect our gross margin to approximate the levels that we saw in 2023. We are tracking really well on our path to normalizing R&D spending. We are currently at peak spending for our government work, and yet our GAAP R&D expense for Q2 declined 22% compared to Q1. This is 12% lower after adjusting for $5 million of software development capitalization. Compared to a year ago, software cap-adjusted R&D spend is 21% lower. We continue to expect total R&D expense to decline mid-teens percent this year versus 2023, with most of the remaining decline to be in Q4 as we complete the bulk of our government work. Sales and marketing expenses were $7 million lower than last quarter, driven by cost initiatives as well as declines in one-time growth transformation costs compared to Q1. Overall, we expect GAAP sales and marketing costs to decline mid-single digits year-over-year, inclusive of one-time transformation costs. G&A expense was $4.3 million lower versus last quarter, driven primarily by lower stock-based compensation expense along with some benefit from lower headcount. We expect our quarterly run rate for stock-based compensation for the remainder of 2024 to be around our second quarter level. Adding it all together, we are now beginning to see the impact of our planned cost initiatives and we are putting some nonrecurring expenses behind us. As a result, adjusted EBITDA for the quarter was negative $35 million versus negative $45.6 million last quarter and negative $45.3 million last year. Transitioning to the balance sheet, we ended the second quarter with $277 million in cash and marketable securities. Turning to our outlook, we are pleased with our progress in the first half of the year, and tonight we are revising our 2024 adjusted EBITDA guidance. We continue to expect revenue for 2024 to be in the range of $259 to $269 million for the year. We expect subscription revenue to be roughly similar to that of 2023, with the balance of the growth for the year to occur in the fourth quarter, with the full impact of contracted go-lives. As to adjusted EBITDA on the strength of our first half and expectations for the second half, we are improving our guidance for 2024 adjusted EBITDA by $10 million to negative $150 million to negative $145 million from our prior range of negative $160 million to negative $155 million. In conclusion, we are encouraged by the strides we have made in our business and in Q2 we made good progress toward our goals, which support our confidence in our path to adjusted EBITDA breakeven in 2026. Thank you for listening. With that, I'd like to turn the call back to Ido for some closing remarks.

Thank you, Bob. We are executing well and energized by our results and the improved financial visibility that underscores our path to growth and profitability. At this time, I would like to thank our team for their hard work, passion, and perseverance. We will now open the call to questions. Operator, please go ahead. Thank you.

Your first question comes from the line of Craig Hettenbaugh from Morgan Stanley. Your line is open.

Thanks. And it's encouraging to see the improving trend in lowering EBITDA loss. Ido, can you just touch on just the change in go-to-market strategy with the sales force? Any proof points in terms of what's resonating with clients and what that might mean for the setup for 2025?

Sure. Hi, Craig. Absolutely. So, in essence, we are in a situation where Converge, that used to be a new, promising and exciting platform, is rapidly becoming a clear best of breed in the market with 70% of our volume on it, and practically all our strategics, including the contemplated DHA, is on this platform. We are pleased to see that people are using this platform really across the board for multiple programs. There is a long list of programs for payers that are interested in catering for Digital First members who want to use digital services across the care continuum. There are programs that are more popular than others, like Virtual Primary Care, but it's really across the board, it's a very wide variety, and every client is typically starting with the most important program with the most important pain points. The same is true for providers. Providers are looking for efficiency and growth and better services to their own patients, which we are able to provide as a package to address areas they typically miss out on, like specialty visits, telestroke, mental health, nursing, and the like. The demand for automated programs is another important high-demand area that we are definitely seeing in the provider space. So what we see right now is, and I mentioned a few examples this evening, is more and more clients that are expanding their initial investment with Amwell on Converge. And I think what's resonating the most is the peace of mind that you get by starting from really important ROI-driven choices and the ability to scale with the same level of integration quite quickly. We believe that that trend is going to become stronger as more and more people begin their interaction with digital health online.

Got it. Maybe just building on one of your comments in terms of how customers start and then they can scale over time, what do you see more broadly just in the demand environment, just from a sales cycle perspective across providers and health systems?

I think they're very, very different in their DNA and what they are looking for. Providers are really looking for a better way to offer more effective and efficient care with a digital-first experience. The cost of engaging a member is pretty high, and the fragmentation is pretty enormous. The opportunity to have one digital door that helps with orchestration of care for a whole person across a long list of programs is incredibly important to reduce the member acquisition cost and engagement. Also, realizing the promise of those digital programs and providing a level of transparency in reporting that is necessary for those payers to turn around and show to their clients, the employers. I believe that the main pain points of providers relate mostly to efficiency. We shared a few examples in the last earnings call that are resonating with health systems concerning automation. The ability to use text in a very personalized way to ensure that people show up to their outpatient clinics or avoid readmissions on a recurring basis or managing their ER interactions in a better way are just a few examples of that. So the system really benefits from those two strong value propositions that the two market segments offer, and we increasingly see more opportunities where connections between those market segments are becoming very relevant. Because at the end of the day, to achieve better, more effective care for payers, you do need to build on the brand trust of community providers, and providers that want to grow beyond their catchment areas need to be able to package their services digitally and make them available to a growing number of payers.

Got it. Thanks for that.

Your next question comes from the line of Jack Wallace from Guggenheim Securities. Your line is open.

Hey, thanks for taking my questions. It seems like there's an incremental commitment to getting a streamlined organization to get to profitability. Can you talk a little bit more about over the last month and a half or so, since you've been the sole CEO, what you've seen from your looking into the R&D department, from areas that maybe you weren't directly focused on, that Roy was, areas where either there's better lines of communication, elimination of some processes, potentially consolidation of divisions, whatever it is, where that part of the house got an opportunity to get leaner and more efficient? And then just kind of broadly elsewhere in the organization, if there's any other incremental places where you believe the organization can become more efficient? Thank you.

Absolutely, Jack. So the net of it is that for the past few years, as you know, we had an enormous undertaking in building Converge, and that was led by Roy and the organization. We're glad that we did it this way. Now it's very clear that this effort is very much behind us, as indicated also by the dramatic decline that Bob shared in the R&D cost, which will continue also through the rest of this year. In addition to that, the asset that we have today is very different from the asset that we had. We were able to revisit our go-to-market strategy to select sub-segments where the ACV potential is much greater and the mix of clients and the mix of products favors high-margin, recurring revenue and long-term, a very accretive relationship. We had to change our SG&A, mostly our sales organization, to realize what I just said and create something that is not only very efficient with smaller headcount, yet resulting in much more impactful results, but also really geared to grow. The new platform is much more efficient. So our delivery organization is operating much better. You see a change in the spends and layers in the company, in the old structure, in the headcount. You also see alignment in processes that are laser-focused on being as efficient and effective as we can, meaning addressing the key markets that we selected and accelerating growth. This operation is really all about execution and calls for a very streamlined, clear decision-making structure with new processes. The more orthodox structure of a single CEO fits that very well. Roy remains very active as our Executive Vice Chairman, continuing to offer very differentiated and important vision for the company. But the team is really all hands down, laser-focused on reaching our path to profitability as quickly as we can. Because as I talk to a lot of our shareholders—and we care deeply about our shareholders—that's what they're talking about; that's what they want to see in the company right now, and that's exactly what we are going to deliver.

I appreciate those comments. And then just a question about the kind of revenue of the billings this quarter, it sounds like we had a little bit of a one-time bump on the subscription line, but otherwise seemed to be pretty strong under the surface. Billings were up 45% year-over-year, about $10 million or so. Was there any pull forward? And billings associated with the NHS contract? Just associated with the staging of that, it sounded like there were some really good renewals and upsells in the quarter. Can you just talk a little bit about how much additional billing activity there was? Because it does seem like there was a nice change in direction there. Thank you.

Hey Jack, a good bit of it was related to the government contract, and so the growth there was the lion's share of the increase. Yes, the one-time bump; I just wanted to make sure everybody was aware and cognizant that growth is terrific and it looks really good. But we have talked about growth every quarter in subscription. We're going to get to the same place. We had to recognize a bit more of it in the second quarter than we expected. And so there'll be a little bit of a dip, a small dip for the third quarter and then a very large increase to get us to what we've been talking about for the year. Go ahead, Ido.

Zooming out a little bit. Jack, can you hear me?

Yes.

Zooming out a little bit. We are very satisfied to see our pipeline growing significantly, the conversion rate accelerating. We are also pleased to see next year with a very big jump in top line with a very big jump in margin and very brief progress in our path to profitability. So all that in the real big picture is very much there for us without any heroic efforts or any substantial unwelcome events at this point. So that's beyond the Q2; just a reconfirmation of the trajectory that we talked about before, and as we near the time of delivery, it's nice to see that we are getting closer.

Awesome. Thank you. I'll hop back in queue.

Our next question comes from the line of Ryan MacDonald from Needham & Company. Your line is open.

Hey guys, this is Matt Shea for Ryan. Thanks for taking the question, a nice quarter here, so good to hear about the pipeline development, wondering if there's any ability to parse out the contributions from net new versus client expansion. Sounds like maybe expansions are a bigger portion. And then with the go-to-market changes, are you seeing expansions happen faster or net new clients land larger or any changes of that nature to call out alongside those go-to-market changes?

So we see both. We see both very, very clearly. Obviously, we recognize the expansion and upsell; the same stores much faster. We also like this trend very much because it creates even stronger relationships that are stickier with our customers. We talked about more programs even tonight, and there are many more third parties that are joining our ecosystem. Therefore, there is a lot of nice runway with our existing customers to continue to grow and offer them more value that they can turn around and offer to their own clients and members. That offering is not lost on new logos, and we have a healthy dose of new logos that we are engaging. What we have today is resonating for sure, and I think both those opportunities are very much real for us at this time.

Got it. And then maybe just nitpicking a little bit. The percentage of visits on Converge slowed down a little bit this quarter from a quarter-over-quarter change, which makes sense after some sizable client migrations. But just thinking about the remaining migrations, should we expect that to be sort of a long tail and modest percentage gains in terms of visits on Converge each quarter from here? How do you expect the transition to progress as you migrate those remaining or lagging customers onto Converge? Thanks, guys.

Yes, you're right. So essentially, we were very focused on making sure that Converge becomes the real reliable asset in the market that is considered operationally sound and effective at scale. Where we are right now, we are checking that box in a very real way. In previous calls, we talked also about the type of customers left on a legacy system for various reasons, like international customers or customers with very unique integrations and workflows. I think we figured out a way to continue and manage them well. If for whatever reason they cannot migrate right now in a way that we can contain the cost and really separate those activities from the main event, which is Converge, we expect that to linger surely during 2025, but we don't expect it to be a major barrier for our growth and efficiency as a company governed today in all practical ways by the new Converge platform.

Your next question comes from the line of Jenny Cao from Truist Securities. Your line is open.

Hi, this is Jenny on for Jailendra Singh. So I just wanted to ask about weight management solutions. One of the major focuses for employers and payers these days has been cost around GLP-1 medications and weight management solutions. I know this might not be your core focus, but just curious if you see any opportunities in that area given your provider and payer partnerships, either in terms of working with PBMs or various third-party weight management vendors.

Absolutely. Weight management is part of health, and GLP is very promising for a lot of people, administered, of course, correctly. As a general rule, we would like to integrate the full gamut of whole person services across the care continuum for our customers. We have our own areas like psychiatry, psychology, urgent care, virtual primary care, and others that are operated mainly by Amwell today. However, there is a long list of other cardio-metabolic, weight management, dermatology, and many other programs that are offered by third-party services. We believe the sponsor, whether it be the payer or the employers, are the ones to choose the right programs for them based on their various considerations. Our role is really to create the best member experience and the best orchestration and access to these lines of services in a very reproducible, efficient way. GLP-1 and weight management are a good example of such services, but Amwell does not intend to offer them independently as their own product.

Your next question comes from a line of Jessica Tassan from Piper Sandler. Your line is open.

Hi guys, congrats on the good quarter and the guidance. Thanks for taking the question. I'm curious if you can just give us an update on the level of Converge integration with Epic and any other EHRs that are predominant throughout your install base. And then just on the health plan side, what are the kinds of key health plan software systems or platforms that you guys have integrations with? And I guess, how would those integrations insulate you from competition from some of these vertical agnostic telehealth players? Thanks.

Sure. Jessica, you're absolutely correct that integration is essential for what we do. When we talk about providers, each provider usually wants to operate from their EHR. To give you an idea, if we have about 100,000 providers on our platform, we don’t report this number, but as a general rule, only 3,000 to 4,000 of them are AMG providers, which means that the rest of them are operating in an integrated way across a variety of EHRs. Epic is very prevalent, so we check that box many times with many of our customers, but you also have Cerner and quite a few others. The opportunity in delivery networks is to add all the missing pieces that EHRs don't excel in or might not offer at all, like a very engaging scheduling process, on-demand visits, capabilities that are very consumer-friendly, different types of specialty care, tele-stroke, tele-digital health, automation, and so forth. I mentioned a few examples earlier tonight. As it relates to payers, of course, you need to integrate deep into their digital portals because they typically offer those services through those portals. A good example is the integration with United Health's MyUHC or Elevance's Sydney. But there are many other examples in our Blue Plans and other payer customers. When you operate in this environment, you need to make sure that you can collect the right copayment from a patient, that you can route the patient to a service that is licensed to treat that patient. The payment is passed through to the vendor operating the service along with acceptable wait times. There are many other elements to providing consistent, great service that is cost-effective and impactful for those payers, and that requires a deep integration with their financial, regulatory, and operational systems. We don't see Amwell as a standalone entity; it's almost always integrated into our clients' infrastructure, where their name appears on the door, and we are just enabling a technology that allows them to fulfill their business goals and resolve their pain points through what we created.

Got it. I'm curious if any kind of AI-powered clinical decision support tools or prescribing aids or transcription tools have been integrated into Converge. Thanks.

So AI is enormously important throughout our industry, and Amwell is no exception. There are many areas where AI will influence our roadmap in the coming years. I'm not prepared to begin to share that right now on this call, but I can assure you that the promise of AI will impact nearly every aspect of our activity, both as it relates to our products and our operations. We are thrilled about this opportunity and the way that we are implementing it.

Your next question comes from the line of David Larsen from BTIG. Your line is open.

Hi, congratulations on the quarter. Can you talk a little bit about your gross margin expectations and your expectations for 2025 in terms of revenue and EBITDA? I think that you had been talking about a high 30% gross margin range for fiscal 2024. It looks like you're actually, you're there for Q2 and then you're talking about a higher gross margin for 2025. Just any color there would be helpful. Thank you.

Yes, you got it, Dave. We're looking at a gross margin for the year 2024 in and around the same levels we had last year, which is high 30s. That changes dramatically in 2025, as we've talked about on prior calls, notably back in February, where we talked about expectations for gross margin in excess of 50%. And that's really the impact primarily of the DHA contract expanding to enterprise at the end of this year. So it has a pretty meaningful impact because it’s software revenue as opposed to software and visits, which is what we have with a lot of payer customers. The margin, the flow-through there is a lot different because we're not paying away, a lot of expenses or profitability to our 1099 doctors on the visit side.

Okay. And then revenue expectations, 335 to 350 for 2025 and EBITDA minus, I think it was 35 to 45.

Yes, we put that out in February for a specific reason. We really wanted to give longer-term guidance so that folks could be able to conceptualize what the impact is of this contract and other growth we have going live in that time period. We fully intend to update that as we go here in our normal cadence in February, but we're not going to take our beat here this quarter and our raise in our improved EBITDA guidance for the year and talk about what that might imply for next year. We're going to focus our updates on the period of time where we have really good visibility, which is 2024, and continue to give our perspective on that. On our fourth quarter call, we'll give certainly very comprehensive guidance on our expectations for 2025, but there's no change in any of that, Dave, or in the timing or path of our profitability.

Okay, so sounds like break-even in 2026. And then for the Military Health System contract, I think you're talking about a full enterprise deployment by the fourth quarter, the behavioral health…

At the end of the fourth quarter.

Okay. So in 2025, at the start of 2025, there'll be a full deployment for the military health system. Is that correct?

Correct.

Okay, thanks very much. Congrats on a good quarter.

Thank you.

Thanks, Dave.

Your next question comes from Charles Rhyee from TD Cowen. Your line is open.

Yes, thanks for taking the questions. Hey, just following up on the DHA, I don't suppose, is there any kind of color or look you can give us on how maybe utilization has looked for the behavioral health solution within the initial five sites so far, and maybe how that might compare with utilization with other clients using your solutions? Just trying to understand sort of the uptick there and how it's progressing.

Hi, Charles. The short answer is progressing very, very well. I can share what I'm allowed to share by the client, but overall we are very pleased with the progress, and it's definitely going ahead or aligned with our expectations in some cases. A few comments: one, the environment there is almost ideal. It's unlike other government environments. This one is very homogenized, with fewer moving parts, a very centralized command and control. So, it's a really ideal environment to work with. Our agreement is signed, there is no discussion about that. The budget is in place, and the client is extremely motivated. Obviously, providing access for care for the men and women in uniform, starting with behavioral health, which you asked about, is something that has enormous exposure and interest in the DHA. So that's very helpful. And obviously, our partner, Leidos, is also extremely supportive of what we're doing. So the relationship is really terrific and that's great. The behavioral health service is live since Q1, and we are very satisfied, and we've been informed that the client is also very satisfied. The progress on Converge and automated care is on track, as well as the very important go-live for the enterprise rollout, as Bob mentioned, at the end of Q4. All of that would not have happened if there were execution hiccups or lack of satisfaction, which reflects the way that this project is moving, and we are certainly very pleased with the way it goes so far.

Great. And then maybe, Bob, one question for you. I think we saw kind of a big step down in sales and marketing expense sequentially. How should we think about that, sales and marketing as we go through the year? And how are you thinking about balancing sales and marketing spend and investing to drive growth, reacceleration as we think about bookings growth in the future? Thanks.

Yes, Charles. We’ve kind of restructured the go-to-market for the sales organization in the fourth quarter and the first quarter. So the customer-facing side of that is baked at this point and has been in place and is seeing really good success in terms of many of the things that I mentioned in building pipeline, etc. A lot of what we're doing here from a cost perspective at this point is more around support—so sales support—and really streamlining that along with looking at G&A in the same vein. We are being very prudent about cost and are very focused on the cost side of things here. Our headcount is down across the enterprise, mid-teens from where it was at the end of the year. And that's really one of the big drivers for our improvement in guidance. But as far as the impact on the commercial side of things, that's something we're very careful about. As I said, we kind of put that in place in the fourth and first quarters and are not looking to do anything else on the customer-facing side.

Great. So would you say that this is a good sort of starting point as we think about sort of the rest of the year, going into next year in terms of both sales and marketing and G&A at these levels and kind of growing from here?

I think there's always room to do better, but we are going to see better second half performance, I think, on the SG&A side than we had in the first quarter, no doubt, especially when we're talking about GAAP. We did a decent amount of transformation in the first half of the year, which is behind us now. So that's going to come out of the GAAP numbers in the second half.

Okay, great. Thanks a lot. I appreciate the questions.

And there are no further questions at this time. Mr. Ido Schoenberg, I turn the call back over to you for some final closing remarks.

Thank you, Operator, and thank you, everyone. We really appreciate your time, and we look forward to talking with you soon. Take care. Good night.

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