Thoughts on AMWL’s Acquisitions

Credit Suisse https://www.credit-suisse.com, caught up with American Well (AMWL)https://business.amwell.com, management on their SilverCloud https://www.silvercloudhealth.com,and Conversa Health https://conversahealth.com Acquisitions.

Management notes that SilverCloud (a digital mental health platform) and Conversa Health  (a leader in automated virtual healthcare) were targeted to supplement AMWL’s product offerings and increase their scope of solutions, including their recently launched Converge platform.

Conversa/SilverCloud enhances AMWL’s value proposition by advancing platform offerings with new digital care workflows and automation, and accelerating growth opportunities in new markets. Through these acquisitions, AMWL gains access to each of the company’s clients and can utilize these existing relationships to expand their overall product offerings and provider reach.

Management also sees several synergy opportunities across SilverCloud, Conversa, and AMWL’s core businesses. For example, escalating a consumer, who starts with asynchronous Cognitive Behavioral Therapy (CBT) on SilverCloud platform, to a coach, therapist, or psychiatrist on AMWL’s Aligned Telehealth business.   

The transactions also presents an opportunity for AMWL to become further embedded with overlapping customers, such as Northwell Health, UNC Health, UCSF Health etc. Initial priorities following the acquisitions will focus on virtual care automation and patient companionship to advance longitudinal care, behavioral care, and other specialty and chronic care segments.

Combined, the purchase price for both companies is ~$320 min and will be funded through a 50/50 mix of stock/cash. A local press report indicated that AMWL is paying +$250 million for SilverCloud.

Combined SilverCloud/Conversa represent ~$15 min of revenue for 2021 (on a PF basis excluding any deferred rev write-downs), with anticipated rev growth of 100% for 2022. With the subscription/SaaS revenue model and large balances of deferred rev haircut, implying actual growth coming in +100% Y/Y for 2022.

While there are some operational/performance milestones as part of the acquisitions, management indicated that for these to take effect (i.e., push the $320 min valuation), growth would have to be significantly accretive.

AMWL expects the transactions to close at the end of 3Q21. On a combined basis, the two companies operate with ~70% gross margin profile. Between both SilverCloud & Conversa, ~92% of revenue is recurring while achieving a 140% net revenue retention rate.

To ask questions, provide feedback and/or news, email Jailendra Singh at jailendra.singh@creditsuisse.com or call 212-325-8121.

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