Earnings Call Transcript
American Well Corp (AMWL)
Earnings Call Transcript - AMWL Q4 2020
Operator, Operator
Good afternoon and welcome to Amwell's Fourth Quarter and Full Year 2020 Conference Call. At this time all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. Leading today's call are Dr. Ido Schoenberg, Chairman and Co-Chief Executive Officer; and Keith Anderson, Chief Financial Officer. Ido and Keith will offer their prepared remarks and then they will take your questions. The Amwell press release and webcast link are available on the Investor Relations section of Amwell's website. Please note that we will be discussing certain non-GAAP financial measures that we believe are important in evaluating Amwell's performance. Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliations thereof can be found in the press release that is posted on our website. Also please note that certain statements made during this call will be forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause the results for Amwell to differ materially from those expressed or implied in this call. And now I'll turn the call over to Dr. Ido Schoenberg, CEO of Amwell. Ido?
Ido Schoenberg, CEO
Good evening and welcome to our 2020 fourth quarter earnings call. 2020 was a significant year in many ways, especially in the world of healthcare. The pandemic stressed and challenged the entire healthcare ecosystem. Throughout the pandemic, Amwell empowered the providers of healthcare to continue to deliver care to their patients and also care for greater numbers of patients through virtual and remote care. The pandemic, while terrible, only accelerated our transformation impact timetable by about three to five years. Patients and members have now embraced receiving care virtually. Providers of care are comfortable, in some cases, encouraging delivering care virtually to their patients across the care continuum, well beyond rudimentary urgent care or pre-pandemic telehealth focused. The pandemic did not stop doctors and nurses, and Amwell took many of the new practice delivering care to their patients. For example, we powered cardiologists whose offices were abruptly closed to enable them to continue seeing their patients and monitoring them remotely. We helped obese sick pregnant mothers as they progressed through their pregnancy and enabled endocrinologists to follow up on their diabetic patients. In other words, the pandemic highlighted the power and differentiation of the Amwell platform. We're able to demonstrate how the Amwell platform could enable overall care delivery in the new hybrid world. In 2020, we delivered over $245 million in revenues and are forecasting between $260 million and $270 million for 2021, representing a growth of over 35% over the last two years. In 2020, our platform supported six million visits, which is about five times the volume we saw in 2019. Most importantly, we added over 65,000 active providers to our platform, bringing the total number of active providers to over 72,000 at the end of the year. It was incredible to see that 68,000 of them were not our AMG providers, but rather our clients' own providers. During this transformative year, we worked with admiration at the selfless work of our clients and partners, especially the healthcare providers in their heroic and courageous fight against COVID. Prior to the pandemic and even in January of 2020, many viewed telehealth as a complementary optional replacement service to simple urgent care. We have now proved that this utility is only a small part of telehealth. COVID helped solidify Amwell's role in enabling digital care delivery infrastructure across the entire healthcare continuum. It rapidly became apparent that telehealth does not replace in-person care. Instead, especially for Amwell, it complements it and can be instrumental in strengthening existing patient-provider relationships. For example, the Chartis Group estimated that over 50% of visits were done virtually at the height of the pandemic, up from less than 1% before COVID. And today the analysis is showing that the proportion of visits conducted virtually has stabilized around 15% to 20%. Also, according to McKinsey, health systems, independent practices, and other providers saw virtual visits increase by 50 to 175 times compared to pre-COVID, and more providers, 57%, view telehealth more favorably than before COVID, and 64% are more comfortable using it. Our conversations with payers and providers also changed substantially in 2020, shifting focus on affordable complementary services to empowering mission-critical technology. Digital connectivity enablement became a high priority for most of our clients and partners. Simplicity, reliability, modularity, extensibility, and efficiency took priority over other features and functions. The ability to integrate with existing digital assets, through easily supportable solutions, also became very important. We are very attentive to the new market needs and took significant measures to quickly address them. We saw visits in April 2020 as high as over 40,000 per day versus approximately 5,500 in January. Reacting to the tidal wave of demand, we grew capacity by about 10 times in 2020. We launched a series of platform modules and care points aimed to dramatically simplify connectivity and make it more accessible and affordable. We also streamlined integration with many other assets of our clients and partners. These innovations also included the super simple and popular Amwell Now that helps and is helping further accelerate provider adoption across delivery networks. They also include a deeply integrated Amwell Connect EHR module, the new affordable Amwell Touchpoint Tablet, the Amwell C500 Carepoint that is both home and hospital enabled, and the revolutionary Amwell Hospital TV Carepoint that we discussed on our Q3 call. We experienced significant growth across all segments of our business last year. Compared to 2019, in 2020, active client providers grew over 13 times from 5,000 to 68,000. We grew total visits 5 times from over 1 million to 6 million. Client provider visits accounted for over 70% of our total annual visits, up from 35% in 2019. And AMG provider visit volume more than doubled from 750,000 to 1.6 million. Maybe even more important within our visit results is the continued shift to specialty visits. Behavioral health visits grew by 1,000%, surgical care grew over 2,000%, and dentistry doubled. These trends created clear separation between Amwell and legacy telehealth players aiming to offer affordable and convenient alternatives to physical services. We’ve always focused on enabling and empowering trusted payers and providers and not on creating alternatives to their offerings. The transformation in the market's view of telehealth from a service to a platform is fast and profound. As the pandemic stabilized late in 2020, most of our clients began preparing to significantly expand the frequency and scope of use of our platform. In reaction to this tectonic market shift, we decided to accelerate our investment in innovative technology that powers our platform, as well as its models and programs. Looking ahead, we see a rapidly evolving landscape in which trusted healthcare players develop a hybrid model of care. They increasingly rely on Amwell to deliver an easy to use, yet comprehensive platform to enable the full spectrum of their telehealth needs. Importantly, this care will be longitudinal, enabling the relationship between providers and patients over time, as well as supporting interdisciplinary team-based care delivery models. We recognize that many of our clients and partners have their own preferences and investments in relation to telehealth-adjacent technologies like navigation or remote patient monitoring. We are therefore making sure that our platform does not overlap or compete with these assets, but rather makes it seamless for our clients and partners to integrate and embed their own choices. In 2021, we will continue our investment in our post-COVID technology platform buildout that we briefly discussed on our third-quarter call. We named the next release of the rapidly evolving all-new platform Converge. At our upcoming client forum, on April 28, we will present it and feature new functions and dynamics. In advance of the forum, and to help you frame our future and outlook for 2021, I will share that the key focus of Converge is the continued evolution of enabling care from episodic to longitudinal with the current relationship at its core. It also provides new possibilities for our clients', partners, and third parties to further expand and diversify use cases, enabled through our platform. The combination of our technology and its ubiquitous adoption across the ecosystem are likely to generate significant long-term competitive advantage for Amwell. Converge capabilities will also expand our total addressable market by both increasing our value to existing clients and opening new markets and opportunities for us. The release of Converge is an important multiyear milestone for Amwell. An early example of our new longitudinal capabilities is demonstrated in the virtual primary care module, which we recently deployed. We believe that our VPC module is demonstrative of how healthcare will be experienced in the future. It provides patients a simple and convenient choice of online and in-person options, including referrals, imaging, and lab services. It preserves the long-term and recurring relationships with the primary care providers and others while allowing payer sponsors to control utilization patterns without compromising our member experience, trust, quality, and value. We are excited about the technology innovations we will present to the market this year. I encourage our investor partners to attend our client forum in April. We believe that our innovative solutions uniquely address a strong and urgent need in the market. And now, I would like to turn the call over to Keith to review our financials.
Keith Anderson, CFO
Thank you, Ido, and good afternoon everyone, and thank you for joining us for our fourth quarter call. Before diving into our detailed results, I want to reiterate Ido's comments about how pleased we are with how we ended the year, and I'm happy to report that we have exceeded every forecast metric and are seeing continued momentum across all of our business lines. The conversations we are having with our current and prospective customers highlight their acknowledgment of the unique capabilities of our platform to deliver true longitudinal care, coordinated by your health plan or your doctor. This team has been the core of our strategic partnership conversations as we believe the new healthcare will require coordination of a full spectrum of care. Now, a couple of points on our full-year 2020 performance before we dig into the quarter. We ended the year generating over $245 million in revenue, which equates to 65% growth over the prior year. A large part of this growth was due to subscription average contract values expanding from $282,000 to $334,000 in 2019 to 2020 for our health system customers and from $546,000 to $612,000 for our health plan customers. The number of health system customers also grew from 140 to 158 in 2019 to 2020, and from 56 to 58 for our health plan customers. In terms of active providers, at the end of the year, there were over 72,000 active providers on the Amwell platform delivering care to their patients. While this is a 10x increase over the prior year and highlights the hard work of our team in many cases bringing full hospital system doctor groups on the platform in rapid fashion, the explosion of our customers' own providers plugging into the Amwell platform is the most important long-term metric as these non-Amwell doctors grew 13 times from 5,100 providers in 2019 to over 68,000 at the end of 2020. As referenced during the same period, the number of our own AMG providers grew from over 1,800 in 2019 to 4,500 at the end of 2020. As we first highlighted during the IPO and then on our Q3 call, this intended shift in care delivered by our customers' own providers is a critical dynamic that has been accelerated by the pandemic. To illustrate, 66% of all visits in 2019 were performed by Amwell providers. In 2020, this dramatically shifted to where almost 70% of all 5.9 million visits, or 4.3 million, were performed not by Amwell providers, but by our customers' own providers. Reminding you that one of the primary tenets of Amwell is not to compete against the providers of healthcare, but to enable and facilitate their ability to deliver care to their patients. It is a fundamental difference in our business model that will allow Amwell to capture the network effect of care delivered virtually and all its surrounding coordinates for longitudinal care. Now turning to our fourth quarter financial results. I'm happy to report total revenue of $60.4 million, which is a 34% increase compared to the same quarter last year. Our subscription revenue came in at $26.3 million. The 15% increase over the previous year can be attributed to new customers, expanded programs within the health plan populations, and an increase in the volume of platform visits performed by our health system and health plan customers' own providers. In terms of visits, our visit volume remains elevated in comparison to pre-COVID-19 levels, driving a steep increase in our visit revenue, which totaled $26.2 million this quarter, up 75% over the previous year. In this quarter alone, 1.6 million visits were performed on our platform, bringing our total visits in 2020 to over 5.9 million. This is up 11% sequentially versus the 1.4 million visits performed on the platform in Q3. As we forecasted, we saw AMG visits decline 5% sequentially from Q3. But within AMG visits, it's notable that we continue to experience significant growth in AMG specialty visits, which is on top of the dramatic increase in Q3 over and above Q2, which was the peak of the pandemic. This shift to more specialized visits versus simple urgent care has driven our average price per visit up to $73 per visit in 2020 versus $54 per visit in 2019. As I stated earlier, we continue to experience outsized usage of our platform by our customers' own providers. And 77% of all visits performed on the platform were conducted by our health plan and health system customers' own providers. Recall this percentage was 73% last quarter. So the dynamic in Q4 was similar to the peak of the pandemic in Q2, an overall trend that we see continuing throughout 2021 as healthcare delivery systems move to more hybrid care models combining physical and virtual care. Our services and care points revenue of $7.9 million was an increase of 10% year-over-year, but a decrease of 5% compared to last quarter where, if you recall from our third-quarter call, we discussed some pull-forward buying into Q3 due to the expiration of the CARES Act and the spending of these remaining funds in Q3. Gross margin for the quarter was 37.4% compared to 32.7% last quarter versus 44.7% last year. Versus last quarter, we continued to realize additional high-margin subscription revenue due to those contracts that contain volume components. The year-over-year margin decrease was a direct result of revenue mix shift to more visits versus 2019. G&A expense experienced a 36% decline versus last quarter, as our IPO occurred in Q3, and there were related one-time, non-cash stock-based compensation awards to our executives that were triggered by our successful IPO. With the IPO now behind us, Q4 G&A resembles a more normalized spend level in the mid-$20 million range. We are reporting an adjusted EBITDA loss of $35.4 million, compared to a $16.9 million loss last year. On a macro level, this was due to revenue mix shift to lower margin visits, continued investment in the platform, and expenses incurred typically as a public company versus last year when we were private. From a balance sheet perspective, we ended the year with cash and investments of approximately $1 billion, and Amwell continues to have no debt. Now turning to forward guidance for the full year 2021, we expect revenue to be in the range of $260 million to $270 million, representing a 35% compound growth over 2019. Similar to 2020, we are expecting visit revenue to account for approximately 50% of overall revenue, driven by forecast visit volumes between 1.5 million and 1.7 million AMG visits. We are forecasting an adjusted EBITDA loss between $157 million and $147 million. As we did during our IPO, in an effort to be transparent and give all the moving parts and uncertainty amidst the COVID-19 crisis, I want to provide a few high-level thoughts on framing 2021. Most notably, we are projecting in 2021 AMG visit volumes at levels similar to during the pandemic, with the midpoint of our range at 1.6 million visits, the same volume as we delivered in total in all of 2020. Now that is an important data point, as said differently, we see visit volumes coming out of the pandemic as foundational and not episodic. The underlying data supports that both our provider and health plan member customers have embraced delivering and receiving care virtually and are doing so on the Amwell platform. While we're projecting a more normalized flu season later in 2021, we continue to observe a mix shift towards specialty visits, whereas urgent care and thus are forecasting revenue per visit to continue to increase to around the $80 per visit range versus $73 in 2020 and $54 in 2019. Subscription revenue from our innovator customers and revenues from sales of our care points and services are projected to return to more normalized levels as discussed during our IPO. Regarding R&D spend, as I discussed earlier, and we highlighted on the third-quarter call, we expect R&D expense as a percentage of revenue to continue throughout 2021, at the same levels as the fourth quarter of 2020. This temporary increase is driven by foundational changes in customer sentiment to use digital connectivity as part of mainstream healthcare. And thus, we have decided to accelerate the Converge platform project in advance of these longitudinal care-type products. We'll talk more about this at our upcoming client forum in April. For the first quarter 2021, we are expecting revenue will be lower than in the fourth quarter of 2020, in part simply because of a fewer number of days, but more so the churn of two large contracts due to M&A that we identified and discussed during our IPO. Also, the run-up care points in Q3 and Q4 of last year pulling revenue forward into those quarters, and finally, specific educational marketing campaigns by the health plans that occurred in the fourth quarter of last year. Looking beyond 2021, the Converge platform will expand our total addressable market through expanded partnerships and functionality, and is the basis of some of our inorganic strategic discussions related to longitudinal care. I want to highlight though, that while we have accelerated this platform investment into 2021, our timeline to achieve EBITDA profitability remains unchanged. In closing, I'd like to reiterate how pleased we are to report another strong quarter, as this is only our second quarter since becoming a public company. I look forward to reporting progress towards our goals and forecast this year in 2021. We are well capitalized for growth and positioned to maintain a leadership position in the telehealth market, and I look forward to supplementing this foundational growth with our inorganic strategy. With that, I'll turn the call back to Ido for his closing remarks.
Ido Schoenberg, CEO
Thank you, Keith. I want to thank all our incredible team members for their hard work over the year supporting our customers and partners during their challenging times. It is clear to me that our platform enhances providers' abilities to deliver high-quality care to their patients today. The investments we are making will help us continue that well into the future. With that operator, we'll open the call to questions.
Operator, Operator
Your first question comes from Ricky Goldwasser with Morgan Stanley. Your line is open.
Ricky Goldwasser, Analyst
Yes. Hey, good evening and congrats on the quarter and guidance. Clearly there's a lot of demand for your services. You are putting forward the investments in new product development. When we think about your long-term guidance of 20% to 30% top line growth that you provided at IPO, is that the right way for us to think about jumping into '22? What do you think about 2022 and beyond, or are you now seeing sort of a step-up in demand that is shaping how you think about that long-term revenue opportunity? And then somewhat related, Keith, you talked about the revenue per visit assumption of $80. What are the underlying assumptions that you're making regarding reimbursement for telehealth visits and any potential changes in the parity versus in-person or rebasing it to a different level?
Keith Anderson, CFO
So Ricky, I believe there were several questions in that. I'll address the first couple and then I'll pass it over to Ido to discuss reimbursement and some of the broader answers to your last question. To answer your first two questions, we are indeed noticing an increase in demand. We will maintain our IPO revenue growth targets for now, and we look forward to providing updates throughout the year, particularly after the client forum in April, which I'm hopeful you'll attend. We are observing the total addressable market grow alongside our platform expansion. If we adjust for the two contracts, we are experiencing a mid-20% growth this year for subscriptions. So yes, we are committed to what we stated during the IPO regarding long-term growth, but we'll provide updates as the year progresses. Regarding the price per visit, we are sustaining around the $80 mark, but the shift we saw in Q4 is continuing into Q1, moving towards more specialty services. Our overall business mission and strategy focus on providing supplemental care and empowering care providers, such as doctors and health plans, to deliver that care. As a result, we're observing urgent care becoming more secondary while specialty care is becoming more primary as we support these providers. As Ido mentioned, we are experiencing significant growth on the specialty side, which now constitutes about half of our overall visit volume, which is exciting. This is what's contributing to the $80 revenue per visit. In the last quarter, we observed substantial growth among our platform providers, who are non-Amwell doctors delivering care through the platform. Sequentially, that was over 15% quarter-over-quarter, indicating the continued shift we noticed in Q4 is persisting into Q1 of this year. Ido?
Ido Schoenberg, CEO
Thank you, Keith. It's great to hear from you, Ricky. The events of 2020 were monumental, and it will take time to fully grasp their impact. The trend is clear, but the pace of change is unpredictable. We are confident in our growth assumptions moving forward, recognizing the significant potential that remains. In summary, telehealth has transitioned from an alternative acute care service to a fundamental part of everyday healthcare. Just a year ago, we discussed this as a vision, and now it has become a reality. With the launch of Converge, we believe our technology is a crucial enabler, and the growing number of providers adopting it is a strong indicator of future developments. We feel assured that there will be a shift towards technology-driven revenue, which is far more efficient and scalable. This year will provide us with valuable insights into the pace of change, and with more data, we can revisit our future guidance.
Ricky Goldwasser, Analyst
Thanks very much.
Operator, Operator
Our next question comes from the line of Robert Jones with Goldman Sachs. Your line is open.
Robert Jones, Analyst
Hi. Good evening. Thank you for taking my question. Keith, I appreciate all the data points you shared, especially those related to 2021. However, I would like to gain a clearer understanding of your expectations regarding the health systems and health plan projections for new additions and revenue. If I understood correctly, it seems you anticipate AMG will account for approximately 50% of revenue, and that innovator revenue may be a bit higher than what you've previously reported. Considering this, it appears there might be a slight deceleration in subscription projections if I'm interpreting that correctly. Could you provide any additional insights regarding the assumptions behind the health system and health plan subscription guidance?
Keith Anderson, CFO
For the health systems, it's adding new health systems as well as the expansion of the average contract values. So when you saw our average contract value expand nicely, as I said on the call, we see both of those dynamics continuing to happen into 2021. So the name of the game there is land and expand. So landing new hospital system logos, expanding the current customers that we have through both the rollout of additional modules as well as getting back to the cellphone plan we want their providers to deliver more care virtually. So those visit counts adding into the subscriptions that was part of the increase in Q4. So we're seeing that happen. On the health plan side, just to be complete, there is more expansion through the population expansion of new programs like virtual primary care and other programs out to the membership base. So it's land and expand on the system side and expansion through the population on the health plan side.
Robert Jones, Analyst
Okay. So, if I'm hearing you correctly, not a big deviation from what you had talked about before as far as new additions for health systems or health plans in 2021?
Keith Anderson, CFO
We find our conversations about the pipeline to be really exciting. The announcement of Converge shows the high level of discussions we're having with our partners, who are major players in the industry. This reflects a strong demand for delivering care on the platform. They are advancing their designs for providing longitudinal care and their virtual plans on the platform, which has prompted us to accelerate our expansion. We are very encouraged and excited about the depth of these conversations.
Robert Jones, Analyst
Okay, great. Sorry, Ido, go ahead.
Ido Schoenberg, CEO
Just to add detail. When you analyze what is subscription revenue, subscription is recognized revenue for an enterprise implementation of the hospital or a delivery network. It's safe to assume that in 2020, everybody was focused on their day job and the idea of implementing new infrastructure is really far and foreign for everybody. It's also safe to assume that everybody is up right now. Everybody realizes that you have to have digital connectivity infrastructure really in order to survive and in order to grow. And that's the conversation that Keith was alluding to. The discussion there is not about the price of AMG doctors or the capacity of doctors that we have. The whole discussion is about simplicity, integration, modularity, scalability, and other features or functions where we believe we have a significant advantage around. So overall when you think about subscription revenue we're actually fairly bullish when we look into the future.
Robert Jones, Analyst
Got it. That’s helpful. Thank you both.
Operator, Operator
Your next question comes from the line of Sean Wieland with Piper Sandler. Your line is open.
Sean Wieland, Analyst
Thank you. So what can you tell us about the virtual primary care launch with United that you announced? Can you size that for us with respect to the 2021 guidance and give us a little bit more detail on that launch?
Ido Schoenberg, CEO
So Sean, terrific to hear your voice and thank you for joining the call. You know that we cannot discuss any specific client details and numbers. That is something that we really care deeply about. However, I'm glad that you brought the topic of virtual primary care modules and programs, which we believe are very important. And as I said on the call earlier, really a way that most people in our opinion would experience healthcare going forward. So for those on the call that are less familiar, this is the technology and service infrastructure that allow people to start their interaction with the healthcare system, not only telehealth, but the entire healthcare system online. So you go online and then you have a highly personalized experience using artificial intelligence and very empathetic people that offer you a choice of the entire spectrum of services from online programs and people to labs, imaging, and physical referrals. This infrastructure is really designed from the get-go to encourage and support recurring longitudinal relationships. So for the consumer, it really is a wonderful way to experience healthcare. It's trusted, it's immediate, it's personal. It has an element of choice. For the payer sponsor, for the risk bearer, it's an opportunity to really renegotiate the network and the options that you see and to make it also very efficient financially. We are very glad that a very large client chose it as its backbone. And we will let this client and others tell the market when they're ready about their experience. But when you talk about the superiority of our technology, whether it's Converge and future primary telehealth, it's definitely part of that family, part of our platform, and when I said I was bullish about the future, this is definitely part of what I meant.
Keith Anderson, CFO
So Sean, if I could – yes. I mean to go a level deeper for your model. So there's two parts that I see of revenue coming out of – on virtual primary care. There's direct and indirect. On the direct side, there is an access fee that is either paid in per member per month or a blanket access fee depending on the plan that we are working with. There's a transaction fee. And this is the interaction with the member by the plan provider. And this is really where it's all going and what got those plans that we – have been announced as well as plans we're talking to get them really excited. And then there's the clinical fee because this is a new way. I mean, this is full longitudinal, full spectrum, fully coordinated care that is being delivered on our platform. And so that takes time to bring their doctors up to speed on how the coordination of care is going to impact them, where they need to plug in, where they need to have a primary node coordinator. So as backup, we have our AMG doctors at the ready, that, if someone has a bad experience using virtual primary care for the first time, they're not going to use it again. So our doctors – and I'll get to the visit impact in a second. Our doctors, we are assuming are going to be helping out in the beginning a lot and tapering off as more and more of their doctors become part of the care coordination plan. Then there's the indirect part. This is fully coordinated longitudinal care, at least that's the thesis of our partnership with the one customer that you referred to. So there's a lot more programs. This is a goal for us and a goal for them, bringing more programs, bringing more coordination, bringing more holistic care to the front to deal with these members. There's also maybe RPM. I mean, to be able to regardless of the age add some of the RPM functions that, I'll let Ido comment about in a second. But as it relates to the visits, this is an important point. We are projecting or forecasting the same number of visits in 2021 as 2020, but the components are really different. There was a significant number of visits that were performed in March, April, May that were just simple one-off urgent care demand, okay, I think I have COVID, dealing with different components. That has completely shifted in our 2021 forecast, where those components are being replaced by our specialists being replaced by their provider doctors, your doctor plugging in and delivering care to you. So a big part – not a big part, but a component of the visit forecast the same number ZIP code as 2020 includes those virtual primary care backup care, our AMG doctors. So, Ido do you want to talk about some of the other components that we see coming in as the indirect revenue that we've been talking about?
Ido Schoenberg, CEO
Yes, absolutely. Thank you, Keith. I mean, Sean, just – I wish we could talk more freely. But as I said earlier, we're limited about what we can say about some specific clients. But to help you understand the dynamics, implementing virtual primary care is a no-brainer for a payer for obvious reasons. It's so efficient, it's so member-friendly, and things of that nature. The way we monetize that infrastructure is, a, by technology subscriptions; b, by the volume that how often this technology is being used; and then by the scope of services, more modules, more programs; and then there are clinical fees. So all these are direct fees that relate to the scope of deployment. No one is deploying this overnight nationally. We deploy it over time, state-by-state. It's staged. You add more modules, you add more programs, but the direction is very steady. And we know this is going because it adds so much value for everyone. The indirect effect is even more profound because, as you remember, unlike others, we have one platform, and it's all connected. So imagine that the option that you see on the virtual primary care platform are excellent centers that are also Amwell clients. And because we allow them to change the business model in participating in very large payer programs, they become more sticky and we become more valuable to them as well. On the flip side, the ability to tie this service with additional services, scheduled visits, the urgent care visits, a million other things that we're doing with people on one platform is extremely valuable for others because it's not stand-alone. The fact that our platform is modular, the fact that we don't compete with our clients and partners is very important. We don't try to push our AMG providers and replace them with other providers on the contrary. We use them as a support mechanism to really foster existing patient-provider relationships, and therefore, the acceptance and the likelihood to offer a greater choice and greater capabilities on our platform is much greater versus other people that are trying to do this.
Sean Wieland, Analyst
Thank you for that. Very quick follow-up. Is all of the above material or immaterial to the 2021 revenue guidance?
Ido Schoenberg, CEO
Well, it's included in the guidance. And we have certain assumptions that have. We are very comfortable with our guidance. As I said, there is always a possibility to sometime do more, but we are not ready to go there yet. A lot of the progress of deployments like that depend on factors that we simply don't control. They are driven by the clients, by the market, by other factors. And we really want to make sure that our guidance is extremely robust and that's what we did.
Keith Anderson, CFO
I mean, they're rolling it out state-by-state. We're very comfortable with our guidance. I guess that's our response to the question, Sean.
Sean Wieland, Analyst
Okay. Thank you very much.
Operator, Operator
Your next question comes from the line of Kevin Caliendo with UBS. Your line is open.
Kevin Caliendo, Analyst
Great. Thanks for taking my call. I'd love to get your guys' take on the market consolidation we've seen in the last couple of months in the telehealth space. There's been a couple of higher-profile deals. In any way, shape, or form does that impact the landscape for your competitive positioning or how you think about the opportunity set? And also, M&A was always going to be a big part of the story we thought going forward and we still expect it to be. We'd love to hear your take on your M&A pipeline and the valuations in the marketplace currently to that end. Thank you.
Ido Schoenberg, CEO
Hi Kevin, while this isn't exactly a question, I'll treat it as one. We are clear about our identity and strategy. For instance, to be an effective connector, it's essential not to be owned by one of the targets, as that introduces bias and creates issues. When a telehealth operator is acquired by a health plan, it fosters a competitive environment since many target clients feel uneasy about engaging with that vendor. The ownership model may influence healthcare interactions unless seen purely as a utility or service plan, which is a positive aspect. Conversely, we observe M&A activity among those attempting to create a comprehensive solution, combining telehealth with navigation and transparency, for instance. While this may appear impressive in scale, we believe it is a misstep. Our customers have distinct preferences for the various components they want to integrate. A digital connectivity platform is certainly a strong option, and we hope they frequently choose us. However, they also have clear ideas about other features they wish to incorporate. The platform’s ability to integrate with those separate solutions is more crucial than sole ownership of the entire solution. There have been instances where a telehealth company has tried to offer comprehensive programs for chronic illnesses, and some clients found it overwhelming. We assert that true integration should promote diversity and inclusion, allowing others to excel while staying true to our core principles. Regarding M&A, we are actively exploring options to enhance the value and competitive edge of our platform and technology, which are our top priorities. We aim to assist our clients in improving patient outcomes both clinically and financially. It’s worth noting that valuations have decreased significantly over the past few months, which is a favorable trend. Some speculative activities differ from past patterns, which is also a positive shift. We will be cautious as we seek strategic opportunities for growth, both organically and through M&A, considering both valuation and financial perspectives. We are optimistic about the market's return to reality in some areas, making opportunities more appealing.
Keith Anderson, CFO
We are having many discussions in my role as Head of M&A. The strength of our platform lies in its ability to integrate new opportunities quickly. We are focused on expanding our total addressable market internationally and enhancing the platform's functionality for broader use. Our partnership with Google is creating new opportunities that exceed what we had when we went public last year. We are eager to continue executing our inorganic strategy and will make announcements at the appropriate time.
Kevin Caliendo, Analyst
That's really helpful. If I can ask a quick follow-up. Given the increased R&D spending for Converge, is it reasonable to expect that R&D might decline in 2022? Without specific guidance, can you share your thoughts on the anticipated spending trends and roadmap?
Ido Schoenberg, CEO
Yes, there has been a temporary increase driven by our customers, reflecting our discussions with them. We planned to systematically introduce various functionalities over a longer timeframe, spanning the next two to three years. For example, virtual primary care is one area where we are in talks with health plans, all of whom are requesting these features on the platform. Consequently, we have expedited the rollout of different aspects of the platform into 2021. This increase is temporary, and we expect it to return to more normalized levels in 2022.
Kevin Caliendo, Analyst
Thanks so much, guys.
Operator, Operator
Your next question comes from the line of Jailendra Singh with Credit Suisse. Your line is open.
Jailendra Singh, Analyst
Yes, thank you. I know, Keith, you just touched upon this Google partnership. I was just trying to ask that more broadly. You have these several interesting partnerships going on in terms of Google, Cleveland Clinic on expert opinion services. I was wondering if you could provide some color around how much if any revenue contribution or margin benefit is captured in your 2021 outlook, or even just more broadly maybe elaborate more on your Google partnership in terms of some more tangible benefits we should expect the company to start realizing in the coming quarters or years?
Ido Schoenberg, CEO
Hi, Jailendra, it’s great to hear from you. We didn’t incorporate any assumptions about our relationship with Google or Cleveland Clinic into our model because it’s too early and not specific enough. However, we do anticipate some excellent outcomes from those partnerships. As I mentioned earlier, you’re invited to our client forum in April to witness this firsthand. The long-term potential of Converge ties to some of the strategic partnerships you've mentioned. Converge, like all our platforms, uses a single code base, which is quite unique. There’s nothing else like it in the market; it supports payers, providers, integrates with devices, and consumer-facing structures. It’s designed for both transactional and longitudinal support to facilitate hybrid care, catering to those seen in-person and online. It’s highly integrated, which presents a challenge for larger companies managing numerous assets, including various electronic health records and other platforms. Importantly, it is open. Unlike most telehealth platforms that are closed, our platform allows third parties to contribute their innovations, which greatly enhances the use cases, diversity, and flexibility available to our clients and partners. Converge is modular, enabling you to invest in what you need today while being confident it will meet future demands. We expect considerable growth in terms of speed and the extent of change we will encounter. This platform is designed to deliver a wide array of capabilities, while also being incredibly user-friendly. It operates in a context-sensitive manner, displaying only what’s necessary at any given time, resulting in a truly unique user experience. It’s scalable, global-ready, and very cost-efficient in terms of hosting, which is crucial as we look toward the future and the numbers we anticipate.
Keith Anderson, CFO
I guess, to go more specifically into the model, Jailendra, we're cautious. This is only our second quarter as a public company. So until those relationships put points on the board beyond what they're currently doing, we're not going to put them in the model, the guidance or the forecast. So, our relationship with Cleveland Clinic is fantastic. We are generating revenue, both from Cleveland Clinic as well as from the JV. What they were doing in Q4, yes, we have that in the model. So we're waiting for points to be put on the board before we're comfortable putting them in the forward guidance, as well as some of the efficiencies that we're realizing from the partnership with Google. There was some of that dynamic and aspect in Q4; that is in the model. It is happening. I can touch it and so, then it made it into our guidance. We're just conservative in terms of, okay, there's a lot of opportunities. The Google partnership gets me, as the CFO, very excited in terms of the operational efficiencies, and then the whole executive team in terms of the opportunities globally. But we don't have those in the model yet because I need to see some points put on the board before they make it into our forecast.
Jailendra Singh, Analyst
All right. Great. Thanks guys.
Operator, Operator
Your next question comes from the line of Charles Rhyee with Cowen. Your line is open.
Charles Rhyee, Analyst
Thank you for answering my question. I would like to ask about the visits this year being a new base level for growth. You mentioned that more than 50% of visits in the last year shifted to specialist care. Does this impact your approach to recruiting providers for the AMG network? Additionally, regarding mergers and acquisitions, is this an area where you might invest to accelerate growth, or is that not a focus for your capital allocation? Thank you.
Keith Anderson, CFO
There's a lot of interest, and it's a great question. On the M&A side, there are many interesting models out there using providers more efficiently. This area is our largest cost, and through various technologies and processes, we can certainly become more efficient. This excites me a lot, among other things. Regarding the mix shift, around half of our visits in 2020 were specialists, and we expect this trend to continue into 2021 as more immediate urgent care shifts to health plans' own providers within the health systems, meaning your own doctor providing care. We've observed this trend continuing and saw it in Q4, which is driving revenue to the range of $80 per visit, up from $54 and $74 in 2020. As for recruiting, the pandemic has significantly impacted this space. Specialists like OBs and cardiologists have embraced delivering care to their specific patients, and it's natural for them to want to enhance their practices by connecting with our platform. One of the reasons we acquired Aligned in 2019 was to address the psychiatric shortage since the demand is increasing. We aimed to ensure our health system customers have the right team in place to meet their unmet needs. Overall, we are indeed witnessing a shift towards specialists on the AMG platform. Ido, if you'd like to elaborate on the broader aspects of AMG, please go ahead, but this is the trend we're seeing in Q4 and expect to continue into 2021.
Ido Schoenberg, CEO
Hi, Charles. Thank you for the great questions. So as you know, we see AMG as a buffer, as a service to our client and not as a replacement to their own services. We also try to enable not only acute care but the full spectrum. So if you think about the incredible growth of client active providers that we experienced in 2020, and we expect to continue and grow rapidly into the future, is mostly in 2000-plus medical centers, most of them are academic, most of them are specialists. Of course, in order to envelope a specialist, it is infinitely more complicated than to have an acute care visit with a video online and provide it for impact. We have different levels of integration. The rules are much more complicated with multidisciplinary care that is required and so on and so forth. So our role is to improve financial and clinical outcomes. When you think about financial clinical outcomes, you're mostly talking about the impact of chronic care and specialists that is enabled by our platform. As we try to get better supporting those specialists, sometimes, like in the case of the line, we grow AMG as a giant sandbox that also serves as a buffer for our clients. And as we figure out and streamline the workflow for AMG, we immediately make this information available in those technologies and services available to our ecosystem with the overarching goal to allow them to be as successful as they can with their own resources and not necessarily with AMG.
Ravi Misra, Analyst
Hi. Thanks for taking the question. I’d like to ask about the shift in visit mix in AMG specialty. How sustainable do you think this trend is? Are your institutional partners likely to continue shifting more visits to urgent care, or do you foresee them also transitioning to specialty care in light of the revenue change? Does this pose a risk to your AMG profile and mix? Additionally, regarding investments, Keith, it appears you're projecting sales above consensus next year while also increasing investments. Is this primarily R&D related to Converge that has been accelerated from future years, or should we consider this increase as the new standard for future spending? Thanks.
Ido Schoenberg, CEO
Keith, I think you're on mute. I know you're talking.
Keith Anderson, CFO
Thank you, Ido. The second question is straightforward. Yes, it pertains to R&D from 2021, which will return to more typical levels in 2022. General and administrative expenses will align with what is generally seen among us and our competitors as a percentage of revenue, and the same applies to sales and marketing. Now, regarding the second question about visit volumes, the specialist visits are particularly appealing to our health system and health plan customers. The goal, aligned with our business mission, is to ensure that your doctor provides care, or that your health plan coordinates that care, often involving the plan's doctor. Specialists will supplement care, and urgent care providers will be on standby to help when necessary. If all primary care doctors, such as cardiologists, obstetricians, and endocrinologists, are available, we need specialists ready to fill in gaps or prevent delays. We're observing this shift ongoing into 2021, with the revenue per visit increasing from $54.19 to $74 in 2020 and projected to reach around $80 in 2021. This dynamic is already apparent in Q4. While we do not report quarterly visit prices, this transition is intentional and strategic, reflecting Ido and Roy's vision of providing backup care without competing with care providers. As a technology company, we're seeing this revenue shift contributing to our subscription line, which is already in progress. Ido, would you like to discuss other aspects of the indirect revenue we've mentioned?
Ido Schoenberg, CEO
Yes, I think we made the point that we monitor everything closely. Ultimately, this is a technology company. I mean, if you can effectively do most of the care virtually, then most of these things will become hybrid. The notion that every single specialty needs to be delivered either in-person or virtually or back in a series of, it is inevitable that we would continue shifting into this hybrid model. And the more we engage providers digitally today, the more we can manage risk and reward. And so, ultimately we'll play it out. These things will become smoother in the industry.
Ravi Misra, Analyst
Great. Thank you. And then maybe just one more on Converge. Looking forward to, kind of, seeing more detail on that at the upcoming event. But just how do you think about that from your, kind of, land and expand or even this, kind of, ACV up-sell strategy? Is it something that enables you to just easily implement more modules per customer, or is there something else? Can you just provide a little bit more color on the business model around that? Thank you.
Keith Anderson, CFO
Yes, Ravi. Let's discuss that on April 28th. We have an entire day planned for it, and we will have customers involved. Let's start that conversation on the 28th.
Ido Schoenberg, CEO
But the short answer is yes.
Operator, Operator
Your next question comes from the line of David Larsen with BTIG. Your line is open.
David Larsen, Analyst
Hi. Congratulations on a good quarter. Can you talk a little bit about Amazon's announcement to push more services across the U.S. in their healthcare area especially with telehealth? And one of the plans we talked, you said that what's intriguing about this is that Amazon in some cases or in some cities may have a nurse that can show up at the patient's home the next morning at 9 a.m. if they had a telehealth visit at 2 a.m. that same night and that nurse could bring medications with them. And then at the home like there are different devices that could potentially be used like a stethoscope, things for measuring respiratory breathing habits and also like lab services that can be delivered at the home. Any thoughts around that? And do you have any potential plans to get into more of like this home health arena in a digitized way? Thanks.
Ido Schoenberg, CEO
So again this is in some ways David two questions. We're not going to opine about what Amazon is doing. I would just say welcome to the swamp. It's much more complicated than you think. And we encourage the additional availability of convenient primary care. You cannot have enough of this. Amazon brings enormous amounts of assets in way of drug delivery, in a way of consumer experience and things of that nature, and it relates to primary care in certain models that could be a fantastic thing, which is very, very different from the role of Amwell. We always talked about the fact that care is moving into the home and you need a very deep degree of integration with devices, better analytics, new care plans, better integration with multidisciplinary teams, deep understanding of the clinical flows and the financial flows and so on and so forth. It's very hard. We spent a decade and a half building it. It's not the DNA of big tech. And big tech did not have a track record of doing that in world technology. In addition to that, the relationships in the ecosystem are not as easy as they are for us. We really did that for many years. We are trusted by the parties. Amazon may be less so in some ways. So we think that what they bring to certain employers could be very helpful and yet does not compete directly with most of the value proposition that we offer at this time. When you come to see Converge, you'll realize the enormity of complexity that you need to truly serve complicated patients with multiple existing relationships and financial arrangements and regulations in their most convenient location, which is their home. We certainly totally agree with that notion. We just think it's really, really hard to create a solution. And very importantly, no one company can do that. That is, in our opinion, impossible. You need a very big coalition that is tightly integrated to reach that outcome.
Operator, Operator
Your next question comes from the line of Eric Percher with Nephron Research. Your line is open.
Eric Percher, Analyst
Thank you. A non-Converge health system question. You noted the delayed pandemic impact on subscription. And we're at a point where health systems must now move from temporary to industrialized solutions. So what is your view on the timeline? Has the health system sales cycle contracted? And maybe what is the competitive environment?
Ido Schoenberg, CEO
So it was really interesting to see the dynamics in 2020. People were caught completely by surprise by the pandemic in the sense that telehealth was 1% of the visits at the beginning of '20. We tend to forget that. 1% of the visits were done virtually in January of 2020. And then it went up to 50% and now it's 15% to 20%. So these are amazing numbers. And what happened at the beginning is that people used whatever they know. They used FaceTime, they used Zoom. There's lots of products and that was very, very helpful because it was very familiar both to the patient and the doctor, but there are an enormous list of shortcomings that became very apparent to people very, very quickly. So well into the year, the dialogue changed and people realized that the level of specification that is required for digital connectivity is much, much bigger than any of the tools that they had and that was very opportunistic and very helpful to us. I don't know any leader of any delivery network that is not thinking now about digital health connectivity infrastructure. Some are ready to do it sooner than others, but it's not an optional thing. It's just as important as your EMR in many ways, maybe even more important in order to survive into the future. So the urgency is there. The clarity of what they want to buy is there as well. The ability to implement the speed does vary. But we believe that in the next few years, I don't see any practice or any provider that is unable to effectively in a fully integrated way interact with their patients both online and in-person through a hybrid model. That probably spells bad news to anyone that has the model of docking the box in the cloud that is competing with that preferred option.
Keith Anderson, CFO
Eric, I mean from my perspective when I look at the individual business lines, product lines, they're being a lot more thoughtful. Coming out of the pandemic, their doctors are asking for this. And as we discussed on the Q3 call, we're seeing happen even more. They're using it as a patient recruiting tool. So if you go to the products that, Ido mentioned, on his prepared remarks, the C500 Carepoints can be used both in the hospital and in the home. The Amwell Hospital TV is the same thing. So I mean what they're trying to do or what their part of their plan is; A, patient recruiting. They want to bring more of their doctors on the peripheral into the mainstream, delivering care through the hospital system. That's the Amwell Now product. But they're also trying to expand their footprint into the community with the C500 cart with the hospital TV. So the conversations we're having with them, they're asking for this functionality. They're asking, "Do you have this capability?" and it's very, very differentiating. So, I would say versus COVID, when it was more emergency-based, okay, how quickly can we get your COVID module? And how many C500 carts or any carts can we get to man our satellite emergency rooms, now they're being very, very thoughtful. Do you have this functionality? How quickly can we bring these doctors on the peripheral into the mainstream? So, we're really excited about how differentiated our value proposition is for the hospital system customers and part of the Converge build-out.
Ido Schoenberg, CEO
I would just very quickly add one more thing. What's really interesting is that finally, after 1.5 decades, people realize the power of connectivity. For the first time in a really long time, many of our customers tell us so how can we providers connect with payers? And payers say to us and say, "How can we enable our provider network to be included in our best in care in our vision?" And that's very refreshing. And that's a zone where we are extremely comfortable in and have very strong advantages.
Operator, Operator
Your next question comes from the line of David Grossman with Stifel. Your line is open.
David Grossman, Analyst
Thank you. You've done an excellent job covering the key points. I have just two quick financial questions. Keith, can you provide the fully diluted share count once the company starts generating profit, based on the options and shares available? Additionally, I apologize if I missed this earlier, but could you clarify how much of the average revenue per health system increase is attributed to the number of modules versus utilization or any other contributing factors?
Keith Anderson, CFO
I'll follow up with you on the fully diluted share count, as I usually provide that using the treasury stock method. Regarding the mix from our systems, our strategy focuses on land and expand. You can see the average contract value has increased significantly, driven by both new logos and the growth of contract value. The main factor keeping contract value lower is the growing denominator. We're noticing our typical customers, and while we shared some examples of typical contracts, some larger health systems are achieving total contract values in the multimillion range.
David Grossman, Analyst
Right. So is there any stat you can share in terms of number of modules and how that's increasing on average or anything like that, per client, independent of the kind of growth in the denominator if you will?
Keith Anderson, CFO
We haven't disclosed that. During the IPO, we listed all of the modules we have. I would refer you to what we disclosed during the IPO and in the S-1.
David Grossman, Analyst
Great. Thanks very much.
Operator, Operator
There are no further questions at this time. I will turn the call back over to Dr. Ido Schoenberg.
Ido Schoenberg, CEO
Thank you so much. I want to thank everyone for joining. Many of you are dear friends and follow us for many, many years. I really appreciate the time and effort that you are making. Together, we are helping bring care to millions of people. And that's very important. So we look forward to continue the dialogue in person very soon.
Operator, Operator
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.