Operator: Thank you for your question. Our next question is from the line of Jessica Tassan with Piper Sandler. Your line is live.
Jessica Tassan: Hi, guys. Thank you for squeeze me in. Congratulations on the DHA, so I think we just wanted to understand the kind of positioning into the payer replatforming for 2024. I know we had two large strategic payers plus the DHA commit so far in 2023. So I guess at this point, does Amwell have complete visibility or complete commitment from payer customers heading into 2024. And can we think of 3Q 2023 as kind of the low point for quarterly subscription revenue from here with new strategic hospital cross-sells and payer migrations kind of layering in from this point forward? Thanks.
Ido Schoenberg: Hi, Jess, good to hear it voice. We have four strategic, three are 3 are names, one is not, all of them are fully committed to converge at this point in various degrees. To our lives, one will be live early next year and the other one shortly thereafter. So that’s the headline. Bob, why don’t you take the second part of the question.
Bob Shepardson: Yeah. I don’t really — I don’t have an answer for you, Jess, on does 3Q represent the low point in subscription revenue, it could very well. I think that as we think about the rollout here going forward, the DHA, obviously, there’s nothing in this year for the DHA that we will start to see revenues from them at go live next year and that will build, because there are several go lives associated with that contract. I think the other important thing to note is once the government, the DHA makes the election to go to the full enterprise rollout, which we estimate for planning purposes to be towards the end of the year here, there’s a step function in our financials from 2024 to 2025. That’s really important to understand.
And I think I said earlier, that step function doesn’t bring within any incremental investment. So the initial deployment here, which is cash flow accretive over the — just on the initial deployment over the initial — the 22-month period of performance is all the spending that’s loaded in for that full enterprise deployment. So I’m sure we’re around the low point here of where subscription revenues should be, but the upside associated with the growth initiatives that Ido has talked about as well as just looking myopically at this DHA contract that brings with it the potential for a dramatic expansion in subscription revenue.
Operator: Thank you for your question. We just have time for one final question. That will be from the line of Diana Lee [ph] with Bank of America. Your line is live.
Unidentified Analyst: Hi. This Hannah Liam [ph] on for Allen Lutz. Thanks for taking my question. Just wanted to know if there’s been any updates on how you’re thinking about the $400 million profitability targets. And if you can frame what you’re thinking about in terms of gross margin expectations, or any OpEx assumptions related to those targets?
Bob Shepardson: Yeah, sure. No real new thinking on it. Other than I would say getting there has been meaningfully derisked over with what we’ve accomplished here over the last quarter. And that brings with it getting to that area of $400 million over 1,000 basis points of gross margin expansion as the lion’s share of that growth is really going to be driven by subscription software revenue. So you combine that over 1,000 basis points of improvement with probably about 25% declines in operating expenses, driven primarily by declines in R&D spending over that period of time, but also pretty meaningful operating leverage in SG&A. And that all comes together to deliver a breakeven in and around that 400 level.
Operator: Thank you for the question. We are just at time. So I’d like to turn it back over to Dr. Schoenberg for any final comments.
Ido Schoenberg: Thank you, Aaron, and thank you, everyone. Thank you. We really appreciate you joining us this evening and wish you a great night.
Operator: Thank you. And ladies and gentlemen, this does conclude today’s conference call. You may now disconnect. Have a great evening. Take care.
