8-K: Amwell Sells Virtual Psychiatric Care Business to Avel eCare in All-Cash Deal

Amwell divests its Amwell Psychiatric Care (APC) business to Avel eCare for approximately $21 million in cash at closing plus a potential earn-out payment, focusing on key growth initiatives and streamlining its product portfolio.

Summary

• American Well Corporation (Amwell) has completed the sale of its Amwell Psychiatric Care (APC) business to Avel eCare in an all-cash transaction.
• The sale includes an upfront payment of approximately $21 million and an additional earn-out payment based on Avel eCare's revenue from the APC business over the following twelve months.
• The divestiture includes APC technology, personnel, and Asana, the psychiatric clinical network affiliated with Amwell.
• Amwell is focusing on its unified digital care platform and growing accretive software contribution.
• Amwell reiterates its 2024 guidance, projecting revenue between $247 million and $252 million and adjusted EBITDA between ($137) million and ($142) million.
• Amwell Medical Group (AMG) will continue to deliver behavioral health services, including AMG Therapy Services and SilverCloud by Amwell.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. Amwell is divesting a non-core asset to focus on its main platform and reiterated its guidance. However, the company is still projecting a significant adjusted EBITDA loss for 2024.

Positives

• The transaction strengthens Amwell's balance sheet.
• The divestiture allows Amwell to focus on its core digital care platform and key growth areas.
• Amwell expects to achieve positive cash flow in 2026.
• Amwell reiterates its 2024 guidance, projecting revenue between $247 million and $252 million and adjusted EBITDA between ($137) million and ($142) million.

Negatives

• Amwell is divesting a business it purchased in 2019, suggesting it did not meet expectations.
• The company is still projecting a significant adjusted EBITDA loss of ($137) million to ($142) million for 2024.

Risks

• The earn-out payment is contingent on Avel eCare's future revenue, which may not materialize as expected.
• Amwell's ability to achieve positive cash flow in 2026 depends on its success in growing its core digital care platform.
• The company's reiterated guidance for 2024 still reflects a substantial adjusted EBITDA loss.

Future Outlook

Amwell aims to increase focus on its unified, world-class digital care platform and achieve positive cash flow in 2026.

Management Comments

• Ido Schoenberg, M.D., Amwell chairman and CEO, stated that the divestment of APC will enable the company to increase focus on its unified digital care platform and strengthen its balance sheet.
• Ido Schoenberg expressed confidence that Avel eCare will be a wonderful home for the APC business and will continue to offer great value to clients.
• Ido Schoenberg stated that the transaction enables the company to place an even greater focus on its mission of connecting and empowering providers, insurers and innovators to deliver more accessible, affordable and high-quality care.
• Ido Schoenberg stated that the transaction fortifies the company's confidence in its stated goal to achieve positive cash flow in 2026.

Industry Context

The telehealth industry is experiencing rapid growth, and companies are increasingly focusing on core competencies and strategic partnerships to deliver comprehensive digital care solutions. Amwell's divestiture of APC reflects this trend, as it seeks to streamline its product portfolio and focus on its core platform.

Comparison to Industry Standards

• Teladoc Health, a major competitor in the telehealth space, has also been making strategic acquisitions and partnerships to expand its service offerings.
• Companies like Livongo (now part of Teladoc) have demonstrated the value of focusing on specific chronic conditions, which may have influenced Amwell's decision to divest APC and focus on its broader platform.
• The valuation of the APC business at approximately $21 million plus an earn-out is within the range of recent telehealth acquisitions, but the specific terms depend on the revenue performance of the business under Avel eCare's ownership.

Stakeholder Impact

• Shareholders: The divestiture is intended to improve Amwell's financial position and focus on growth areas, which could benefit shareholders.
• Employees: APC employees will transition to Avel eCare.
• Customers: APC customers will continue to receive virtual psychiatric care services from Avel eCare.
• Patients: Patients will continue to have access to behavioral health services through Amwell Medical Group (AMG).

Next Steps

• Avel eCare will integrate the APC business into its existing operations.
• Amwell will focus on growing its core digital care platform and achieving positive cash flow in 2026.
• Amwell and Avel eCare may explore collaborative ways to serve patients and communities together.

Key Dates