Thank you for standing by and welcome to Amwell's Fourth Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the presentation, there will be a question-and-answer session. I would now like to hand the call over to Sue Dooley, Head of Investor Relations. Please go ahead.

Hello, everyone. Welcome to Amwell's conference call to discuss our fourth fiscal quarter of 2024. 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 the 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. Q4 marked the close of a transformative year for Amwell. In 2024, we refreshed and refined our strategy. We increased our focus on our core mission and matured our company to deliver efficiently. We also prepared to realize the potential of our unified technology-enabled care platform. I want to start by sharing some of our key accomplishments of the year. First, together with our latest partners, we are completing the stage launch of our full solution across the Military Health System, our most significant growth initiative in the company's history. Second, we made significant progress in our path to achieving cash flow positive results next year, while further strengthening our robust cash position. We drove efficiency with focused cost reduction measures. We also improved our quality of revenue and margins. These initiatives are showing up in steady, better-than-expected quarterly improvements in our adjusted EBITDA. Third, we established a leaner and more nimble leadership structure which we believe will sharpen the focus and efficiency of our company as we advance our efforts to propel profitable growth. The highlight of these changes is the expansion of Mark Hirschhorn's role beyond CFO to include Chief Operating Officer. This year, we're establishing the groundwork for positive cash flow in 2026. The drivers underscoring these initiatives are increasing subscription software revenues and aligning our costs. We are targeting meaningful margin expansion; and this year, we aim to improve our adjusted EBITDA by over 60%. I would now like to take a moment to briefly review a few other accomplishments from our Q4. As we continue to evaluate our portfolio of assets, we divested Amwell Psychiatric Care, our legacy psychiatric staffing business. We determined that APC did not meet our threshold of being an integral part of the Amwell core offering and was not advancing our profitable growth. This transaction helped us focus our resources on our core platform and bolsters our balance sheet significantly by adding up to $30 million in cash. Also during Q4, we signed an agreement to add Vida Health to our growing portfolio of clinical programs, expanding patient access to obesity and diabetes care, including GLP-1s. With this partnership, our clients can offer patients a broader set of valuable services through their Amwell platform. Our platform provides individuals with a delightful single entry point to a comprehensive array of clinical and behavioral programs, including obesity care and related illnesses. In Q4, we delivered considerable value for our clients, led by our DHA deployment. Since our last update, we can share that many of our programs are now fully deployed across the Military Health Systems and feedback is very positive. The remainder of our programs will be live across the AMHS enterprise in the first half of the year with the final expansion of on-demand visits and complete international deployment expected in early Q3. And we completed renewals across several Blue Cross Blue Shield plans as well as with a large national health plan in Nevada, The Clinic and Intermountain health care. Importantly, the HSC in Ireland continues expanding its use of our Digital Behavioral Health programs. Our Q4 performance demonstrates our existing client base is a fertile ground for future growth. In addition to the strong software growth we are guiding for this year, our sales insights are resulting in improved visibility as we look to expand further across the commercial and government space. We are expanding our deal pipeline. RFP traction with payers and health systems is significantly larger and of higher quality today than it was at this point last year. And based on our effective execution in the government space, we have in our sights expanding our market opportunity there. On the heels of this progress, we enter 2025 with momentum and unprecedented focus with market dynamics working in our favor. Outside Amwell, we observed two trends that could help accelerate our growth: growing consumer readiness to start their health care journey online and expansion in innovators offering new and improved technology-enabled clinical programs. With our success in strategic deployments like the Military Health System, we believe we have cemented our role as the technology-enabled care partner that health care organizations are turning to as they seek to modernize and achieve operational and clinical goals. Here’s how we are seeing this play out: As more patients go online to get care, our platform offers a single, delightful patient experience to help orchestrate access to a large and growing number of clinical programs. Payers and health systems value being able to offer one comprehensive technology-enabled care solution fully embedded in their own digital assets. They see the benefit of having a common patient care access pathway, making patient acquisition and retention more effective. Payers and health systems also like the flexibility of dynamically choosing their preferred set of clinical programs and offering different ones to varied patient cohorts. They desire the convenience and efficiency of having Amwell integrate relationships with multiple clinical program vendors. Finally, our investments in a common longitudinal patient-centric data structure resonate with them. Payers and health systems see it as a powerful instrument to improve navigation and patient experience with the promise of unified analytics and reporting. In addition, as more innovators leverage technologies like artificial intelligence and machine learning to offer more effective clinical programs, they too reach out to us. Integrating with the Amwell platform allows them to reduce customer acquisition costs, demonstrate better engagement, and drive results. We are encouraged by the clarity of our value proposition and the way it is resonating across the market. With our healthy balance sheet and improved financial visibility, we have high conviction in our path to profitability, supported by the following top priorities. First is growth. We will work to deliver excellence, showcase our value, and accelerate growth by working with our strategic partners and by expanding our presence within existing clients. Our key growth initiatives for 2025 include: full execution on our deliverable with the Military Health System; actively opening new government channels; pursuing new payer and health system contracts in competitive RFPs; and adding several more third-party clinical solutions to our platform, bolstering our high-margin revenue contribution over time. Second is realizing a higher mix of highly predictable recurring revenue. By aligning our existing and new product initiatives with our revenue quality goals, we will continue to improve our revenue mix of subscription-based software. Finally and critically important is efficiency. We will continue reducing our overall costs while focusing on our core Amwell portfolio of services, centering the energies of our company behind monetizing our platform. In summary, during 2025, we will pursue these key initiatives as we continue to enable the digital aspirations of health care organizations with long-term profitable growth well within our sights. With that, I would like to turn the call over to Mark to review our financials, our strategic priorities for the coming year, and our guidance.

Thank you, Ido, and good evening to everyone on the call. I've completed my first 100 days at Amwell, and I'm very pleased with what I have learned. I recently shared with our Board many of the initiatives that are underway. I'm very optimistic that we have the right people to lead this company back to a position of market strength. Our Board and our employees are excited for 2025. We have the greatest visibility into our revenues today as compared to any other time in this company's history. Tonight, I will walk you through a few operating metrics and financial results from Q4, and then review our guidance for 2025. The financial highlights of our Q4 include progress toward our key strategic initiatives. Software revenue grew well over 30% over Q3's results on the strength of strategic client deployments. We accelerated our adjusted EBITDA improvements for the third quarter in a row as we continue to focus on growing software and aligning our cost structure with our revenue base. With the previously announced divestiture of Amwell Psychiatric Care, we took action to focus our portfolio of assets and strengthen our balance sheet. Most importantly, as Ido said, we have demonstrated continued progress with our two most strategic objectives: specifically, the staged launch of our full solution across the Military Health System and the cost initiatives that reinforce our confidence in our 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 Q4 financial results. Total revenue was $71 million for the quarter, which is flat to Q4 2023. Revenue mix here is the more important metric as subscription revenue was $37 million in Q4, up 36% from a year ago. We had a material uplift in the Q4 subscription software revenue related to the staged launch of our solution across the Military Health System, which is the most significant growth initiative in the company's history. Turning to visit metrics; we completed approximately 1.4 million visits in the fourth quarter, which is approximately 18% lower than a year ago. We spoke on our Q3 call about some market-wide and client execution-related softness in visits and visits were, in fact, in line with our adjusted expectations for the quarter. Visits on Converge remained steady at close to 70% of our total visits. Visits on Converge is a helpful indicator of migration activity. With the bulk of migrations now behind us, we no longer believe this metric is important to our key strategic initiatives and we will sunset this metric going forward. However, an important metric in our business is our average Annual Contract Value, or ACV, which is a great indicator of the success of our land-and-expand strategy. Health plan ACV grew to $963,000 from $902,000 in 2024, and ACV for health systems expanded to $488,000 from $415,000 in 2024. We expect ACV for both groups to continue to expand as we grow our footprint within existing clients and add new clients over time. AMG's Q4 visit revenue trended 9% lower than last year at $29.2 million. Average revenue per visit was $77 which is 7% higher this quarter compared to last year. This increase was driven by a mix shift within AMG visits towards virtual primary care and specialty programs. Our AMG business continues to be strategically important to enabling client expansions and new client wins and for overall support of our efforts to grow recurring software revenues. Our Service and Carepoint's revenue was $4.9 million for the quarter versus $7.3 million last quarter. This decrease was driven primarily by the timing of marketing revenue. The nature of our business drives variable revenues due to customer buying patterns for marketing programs and for Carepoint's, as well as the timing of professional service milestones that precede deployments. Turning now to gross profit; our fourth quarter gross profit margin was 48%, higher by 11 points compared to Q3. For the full year, our gross margin was 39%, which was slightly higher than the 37% we finished with in 2023. On to operating expenses; we continue to make substantial progress towards normalizing R&D spending. While maintaining our focus on deploying our solution for the DHA, our R&D expenses in Q4 were $18.8 million, a decline of approximately 29% compared to the $26.3 million we spent in Q4 of 2023. Sales and marketing expenses were $15.4 million. That's approximately 8% lower than last quarter and nearly 29% lower than last year's comparable quarter, driven by our cost initiatives. G&A expenses were $34.8 million, which was approximately 38% higher than last quarter, primarily due to a one-time bad debt accrual related to losses caused by the Change Healthcare cyber event that occurred in the first quarter of 2024. G&A remains a meaningful focus of our ongoing cost initiatives. So we now have completed another consecutive quarter that highlights our key initiatives from 2024. We are delivering on the promise of growing our subscription software revenue while being well on our way to reshaping our foundational cost basis. As a result, adjusted EBITDA for the quarter was negative $22.8 million versus negative $36.9 million in Q4 2023. There is a great energetic team here at Amwell that is fully aligned with delivering the novel health care products, services and efficiencies that we successfully deliver to our clients every single day. Finally, with respect to cash and liquidity, we ended the fourth quarter with $228 million in cash and marketable securities with zero debt. And now, I would like to turn to our 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, taking a conservative view on visit volumes while further reducing costs. With this in mind, here are the details for our annual revenue and adjusted EBITDA guidance. We expect revenue for the full year 2025 to be in the range of $250 million to $260 million. This revenue guidance excludes the more than $25 million that we would have expected from APC in 2025. Importantly, with the most strategic elements of our revenue base intact, we anticipate subscription revenue to meaningfully grow to represent nearly 60% of total 2025 revenues. Our range for AMG visits is between 1.3 million and 1.35 million visits. We expect our 2025 adjusted EBITDA to be in the range of negative $55 million to negative $45 million, which demonstrates a 60% improvement year-over-year. Here are 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 around 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. As we complete the bulk of our government work and continue the staged go-lives of our solution across the Military Health System, there are some anticipated quarterly software revenue timing dynamics that we believe will be helpful to articulate here. And so at this time, we are providing some additional guidance, including for the first quarter of 2025. Here are the details: We expect revenue for the first quarter of 2025 to be in the range of $59 million to $61 million. As to adjusted EBITDA, we expect our first quarter adjusted EBITDA to be in the range of negative $18 million to negative $20 million. Also important to consider is that as we continue the go-live work in Q2, we anticipate a one-time step-up in DHA software-related revenues, normalizing slightly below the Q2 level into the remainder of 2025, with total software revenue ending the year at nearly 60% of total consolidated revenue. Wrapping up, we are encouraged by the strides we have made in our business. And in Q4, we made some solid progress toward the goals which support our confidence in our path to generating positive cash flows from operations during 2026. We anticipate that Amwell will end 2025 with approximately $190 million in cash and in excess of $150 million in cash at year-end 2026.

Thank you, Mark. As we turn the page to 2025, we begin the year with an unprecedented focus on our key operational initiatives for the year which center on unlocking the value in our company and pursuing our mission. We will now open the call to questions. Operator, please go ahead. Thank you.

Our first question comes from Craig Hettenbach of Morgan Stanley.

I have a question about DHA. Can you share how it's progressing compared to your initial expectations? Are there any key milestones for the rest of this year? Additionally, regarding the software subscription, could you discuss the growth expectations for the broader business in 2025?

I apologize. Can you hear me now? Yes. Hi Craig, thank you for this important question. The DHA deployment is progressing well, possibly even better than we anticipated. It's accurate to say that most, if not all, of the components and programs are customized and implemented for the partner and the client, as you are aware of the components involved. We have initiated enterprise deployment for the majority of those components and expect to complete the full enterprise deployment this year. We are experiencing strong traction, positive results, and receiving excellent feedback from our partner, Leidos, who has been incredibly supportive, and of course, our client there. Additionally, what we are doing is effectively implementing our Amwell platform and software infrastructure to connect all NHS providers with the larger community of 9.6 million military personnel and their families, which is similar to our work with numerous other payers and health systems. We are witnessing a notable increase in the demand for technology-driven care platforms among both payers and providers, which is reflected in the significant growth of our overall pipeline; more importantly, the quality of our pipeline shows a strong preference for higher-margin software components, along with good traction for renewals, expansions, and new customer bookings.

Our next question comes from the line of Stan Berenshteyn of Wells Fargo Securities.

Maybe a quick follow-up on the DHA contract. The original contract is set to run through July. Do you have any insight on when the sustainment contract will be signed?

So here's what we know, Stan. We know that in Q4, the DHA announced providing Leidos with a sole source grant for this project. And this project is talking about an extension of 3 more years, not only to our component that was named specifically in this grant but to a much larger deployment that includes the Oracle EHR and other components. We also know, as I mentioned earlier, that the deployment is going very well. It's vast. It's going enterprise globally as we speak with very good results. So where we don't have certainty for this to close, we believe that closing this extension is a very low risk to not happen at this point and we fully expect to be notified when our partner and clients are ready to share the news with the public.

Got it. And maybe just a quick one for Mark on the divested business. Is the revenue impact from the divestiture entirely in visit revenue? Or did it have a subscription component as well? And what was the mix, if that was the case?

Yes. That would be an annualized number of in excess of $25 million spend, and that would be also all visits.

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

I want to ask about ACV for health plans and health systems improved nicely in 2024. Based on trends you're seeing in your conversations, anything you can share in terms of what your expectations are this year? And just kind of related to that, at a high level, I mean, clearly, a very, very good job in terms of how you are progressing on EBITDA improvement and profitability or path to profitability. But the top line, I mean, clearly, not much growth for the last few years. I mean, the DHA contract is definitely helping in '25 to offset this sale. But any thoughts that you can share about the kind of underlying top line growth in the business longer term? How do you feel about it? Have your excitement about the industry and moving parts changed anyway? Just trying to understand how people should feel comfortable about the top line growth longer term for this business?

Thank you, Jailendra. So as Mark mentioned, we do show if you take out APC, we do guide for some significant growth already this year. And we are very, very optimistic this year and beyond. Our optimism is based on our much larger pipeline and much better quality of pipeline that favors subscription in a very material way. The successful deployment of the DHA is definitely a good indicator for the future, not only in the government market but its large deployment at scale overall. The dialogue with health plans and health systems shows clearly that they are very much aware of the importance of their own digital assets and want to enable technology-enabled care from those assets for reasons that I think are apparent to most of the audience on this call. They keep understanding and reiterating the value that we provide, and they see the value of a singular customer acquisition and retention pathway for enabling care, one layer of care orchestration, and a dynamic set of clinical programs that is covering the full care continuum and generating unified reporting for further personalization, further attraction, and further monetizing or monitoring the ROI. This is witnessed in good traction in retention and good traction in expansion. It's important to note that our business model now does not only include our own software and our own clinical programs but a way to monetize all those third-party clinical programs as well as the secular trends continue. So as the churn is normalizing, as demand is growing significantly, and as I mentioned earlier, as more people go online to those digital assets to seek care and receive it through us, we see a very significant opportunity for higher-margin growth over the next few years. But we would like to be very cautious in how we guide, and that's the guidance that we put in front of you today, which we believe is realistic. And the lion’s share of it is already contracted, and we see it as a very low risk.

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

I have two questions for Mark. The first is regarding visibility compared to the past. Can you explain the dependencies outside of DHA this year and any key variables you consider for the guidance? Secondly, in your new role, as you adapt the sales strategy for launching DHA for government and other businesses, do you anticipate significant changes over the year or adjustments for the rest of the market?

Sure. Thanks, Eric. As far as visibility is concerned, I feel extremely confident for two primary reasons. One is that visibility here at Amwell really consists of two components. That which is contractual, that's all of our subscription revenue which will likely exceed $150 million of the total, let's call it, midrange $255 million guide. So, that comes up right around 60%. And the remainder, the vast remainder is our transactional visit volume. And we've got years of expertise in delivering that. We've got a tremendous amount of data and analytics around determining exactly how we should fall within the range. And as Ido noted, we took a very conservative range in order for us to really have achievable and conservative baseline numbers this year. So, those two components give us in excess of 90% visibility into this 2025 guide. And that's something we're extremely comfortable with because of the go-get and the history of what we know that's in process off of the pipeline leads us to be, again, very comfortable with that, something that we have a good history of determining quarter-over-quarter. The other thing I'd add is just that we will be reporting quarterly now with guidance. So you'll have a very good idea as to how this trajectory is building up and how successful we are in our return to growth this year. On the expanded role on the COO and sales side, I've had now just a little over six weeks in this role, but I also remain very optimistic and energized by the complement of professionals that I work with. We've spent a lot of time now in building out the pipeline and understanding the depth of the opportunities, both inside the government line of business as well as, of course, on the payer and provider side. I think the changes that you'll see throughout the year is that we're extremely focused this year. We are not looking at exceptional work to be performed for innovators, those that we have defined in the past, requiring a different flavor of the technology that we've created. We're going to continue to sell what we have today, what we can implement today, and what we could activate today. On the government side, we're aware of at least six very material opportunities that we will be pursuing throughout the year. Obviously, some of these may impact our ability to launch in 2026. But the activity in the pipeline, both in the payer side, on the provider side, and then, of course, our new pipeline on the government side leaves us with an opportunity set that's multiples of the size that we had at this time in any prior year.

And sorry, you're saying that the success there could impact the ability to launch in '26 launch net new business or launch any of what you have planned for the year?

Oh no, net new business. These are opportunities that we believe will materialize for impact in 2026.

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

I wanted to follow up on DHA because when we examine the revenue guidance and exclude the $25 million from APC last year, along with the increase in Q4 subscription revenue and your projection of 60% subscription revenues for '25, it seems to indicate about a $40 million contribution from DHA this year. I'm trying to clarify because my understanding from last year was that when you discussed the enterprise-wide deployment by the end of the year, I thought it represented 100% of DHA. However, it now appears that complete deployment may not occur until later, possibly into Q3 of this year. I'm looking to understand what remains to be rolled out. Additionally, is that $40 million figure accurate? If so, adjusting for the '25 guidance suggests a reduction of roughly $15 million in revenues from other sources. Should we anticipate lower care points or visit revenues this year?

Charles, before Mark provides further details on the revenue recognition related to your question, I want to highlight that the DHA deployment is progressing as anticipated and even exceeding expectations; we are making significant strides. This is an enterprise deployment, so it is important not to confuse our preparations for going enterprise-wide with the stage deployment that our partner and customer are executing globally. The payment structure does not directly reflect where the deployment occurs; rather, it corresponds to the readiness of the components for enterprise-wide deployment. Mark will provide additional details on this. Overall, we expect everything the DHA is meant to contribute this year to proceed as planned without any delays.

Charles, I want to add my perspective. I believe your initial assumptions may be slightly inaccurate, possibly due to the implication that we haven't fully implemented yet. When we refer to being fully implemented, we are aiming for full achievement, but your estimate of $40 million might actually represent around half of what we anticipate for 2025. Therefore, you should feel very confident that a significant portion of that potential from this specific contract will be realized in 2025. Additionally, in the next 60 to 90 days, we will have clarity on the likelihood of contract renewal for the next 3.5 years. When you compare 2025 to 2024, you'll notice an approximate 10% increase in revenue, marking the first time in several years that our company has returned to growth.

If the remainder is from DHA and that's estimated to be half the value you're anticipating, let's say around $80 million, and then we consider what you have already accounted for, perhaps from last year’s numbers for one quarter, there appears to be a discrepancy even after we exclude APC. I'm trying to grasp where some of the decline in other revenue streams is occurring. There are key points that are unclear, but there's evidently less emphasis on them. I'm seeking to understand where the adjustments are to align with the guidance provided.

Yes. Certainly, there was a significant miss on the visit volume, which was consistent throughout the year. That's something that occurred as a result of two or three of our major clients who changed direction. I think we messaged that principally in Q3. But, obviously, we reiterated that in Q4. And net of any other churn that took place throughout the year, we have now come into this year, again with very, very strong visibility and knowing that the likelihood of churn as a result of either the transition away from the old platform to the existing platform as well as any other net losses as a result of other normal and recurring churn has already been processed.

Got it. That's really helpful. So is it fair to say, you're saying that going forward, you expect less churn than we've seen in the last couple of years?

Absolutely.

Our next question comes from the line of Matt Shea on behalf of Ryan.

I wanted to pressure test the 2026 free cash flow reiteration again. You guys commented in the past about needing somewhere like double-digit growth in 2025 and 2026 to reach those goals. So curious with that reiterated goal, are you pushing on cost savings harder than previously expected or expecting more growth in 2026 to make up for 2025? Ultimately, just trying to understand any changes to the calculus to get you to that 2026 cash flow profitability.

Sure, Matt. The two components, of course, stay constant. We've got an expectation that double-digit growth, which should sit between 11% and 20%, can materialize for the 2026 year. Clearly, if that level of growth doesn't come to fruition and benefit us in line with a margin profile that we believe we'll be exiting the 2025 year with, then cost containment strategies will have to once again be accelerated in order for us to achieve that cash flow breakeven from operations.

Our next question comes from Kevin Caliendo of UBS.

I guess, just one thing quickly with all the headlines around what's going on in the administration with DOGE and everything else. I just want to understand and how to think about this, because we've gotten some questions around the funding vehicle for digital first has to be approved again at some point during the calendar year. Can you take us through the process there? How it works? What the timing of that would be, first? And then I'll ask a follow-up.

As you know, Kevin, the DHA has already indicated their intent to offer a sole source to Leidos in Q4, and contract discussions are currently underway since the renewal period this summer. This vehicle funds essential elements for the Military Health System, including the Oracle EHR. We have no reason to believe that this funding will be absent. The current administration strongly supports our military, and our solutions are proven to significantly enhance efficiency, making care more accessible, affordable, and effective for those crucial participants. Therefore, we view the chances of the military or the DHA not financing this basic infrastructure as very low from our perspective.

Got it. Okay, that's helpful and good to know. And maybe outside of AMHS deployment, can you maybe share with us or talk broadly about what specific government RFPs are out there that you might be targeting? Like how should we think about these opportunities and any timing around them?

So of course, I'm unable to share specific names and processes. They are always under NDA and confidential. The sales cycle in the government is long. However, our relationship with a major supplier of the U.S. government, namely Leidos, which is terrific, is extremely helpful. Our track record and the long list of compliance items that we checked by implementing what we had is really hard to replace. So we believe that we are proven, we are compliant, and we are very well positioned to modernize systems that are very similar across the government sector to the one that we just successfully implemented; and also, we have a good distribution channel. What we do is saving money and democratizing health care and improving access to people. There are many similar organizations that could easily benefit from it. I'm hard-pressed to try to pinpoint the timeline for these things. They usually take time. And that's reflected in our very conservative guidance for the year that does not include any positive surprise in this area despite the fact that we are very bullish about our multi-year expansion there.

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

I joined the call a bit late, so I apologize if this has already been discussed, but I thought Converge was set to be implemented across the entire system, which would significantly boost revenue and EBITDA margin. Is that the case? Also, is the Converge revenue for the government systems meeting expectations?

David, short answer, yes. Everything you said is true.

Is there an incremental increase in the Converge revenue from the fourth quarter of '24 to the first quarter of '25? Is it related to the full platform 71? I noticed there was a $10 million sequential increase, which I assume is due to the Converge deployment across the system. Should we expect to see that additional $10 million each quarter through '25?

No, you shouldn't consider the full incremental revenue from that quarter solely as a recurring number. I mentioned to Charles earlier in the call that he had provided an estimate of $40 million expected to be realized in 2025. I suggested that this amount is likely around half of what we'll see in 2025 from that contract. We don't specifically identify the exact contributing factors to the subscription revenue, but there are some one-time implementation fees that we recognize. However, the vast majority of the DHA revenue is recurring.

And then, how much of the improvement in EBITDA is from cost reduction efforts?

I'm going to suggest that the vast majority of the increase in that EBITDA is coming from the shift from transactional visit revenue to subscription revenue. And then, of course, it's probably a one-third, two-thirds relationship with one-third of that savings coming from cost reductions.

Our final question comes from the line of Jessica Tassan of Piper Sandler.

So I was just hoping to come back to kind of the bridge between '24 reported revenue and the '25 guide. I guess based on the kind of comments or framework you all have given us around the DHA rollout or the incremental contribution in '25 and then the APC headwind. I guess, like we're coming up with something like at least $35 million of year-over-year dollar growth irrespective of the visit issues in 2024. And so I guess should we be thinking about that $35 million as being the attrition in the core in 2024? And would you expect a similar level of kind of core attrition in '25 that could then underline '26 growth despite the strong pipeline?

Jessica, the attrition in 2024 was significant and unprecedented for the company. However, some of it was managed attrition for clients that did not align with our future strategy. I mentioned earlier in the call that I believe this has been effectively addressed by the end of 2024. As we aim for growth in 2025, we anticipate a much lower impact from churn. This is why we are very confident in the conservative revenue range we shared today.

Got it. And then just quickly on the APC divestiture. Is that kind of capability, the psych capability noncore to being able to provide behavioral health programs that can be titrated up as patient acuity requires? Or does the Amwell Behavioral Health automated programs still have access to some level of psychiatric care just supported by a third party. Can you just help us understand how you guys are enabling the entire behavioral health kind of care delivery paradigm now that you've divested that asset?

Jess, the answer is that AMG is providing today quite successfully a whole spectrum of behavioral health services that are further amplified by automated programs with our automated program platform and with the legacy SilverCloud platform as well. We actually concluded that the legacy APC business had a very big component of physical staffing of psychiatrists in hospitals that had low margin and sometimes even negative margin contribution and was not truly helpful in staffing some of those services online for many of our customers. Therefore, we think behavioral health is enormously important. We are confident that AMG is able to supply the services required and the programs together with some other partners that we have, and continuing to hold APC was really not helpful, not financially but much more importantly, was not helpful strategically to provide technology-enabled care as it specifically relates to psychiatric care going forward.

Thank you. I would now like to turn the conference back to Ido for closing remarks. Sir?

Thank you, everyone. We really appreciate you joining, and we look forward to talking with you soon. Take care and have a great evening.

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