UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 20222023
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-39515
American Well Corporation
(Exact name of registrant as specified in its charter)
Delaware | 20-5009396 |
(State of incorporation) | (I.R.S. Employer |
75 State Street, 26th Floor
Boston, MA 02109
(Address of registrant’s principal executive offices)
(617) 204-3500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Class A common stock, | AMWL | The New York Stock Exchange |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ | ||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of July 31, 2022,28, 2023, the number of shares of the registrant’s Class A common stock outstanding was 240,621,761251,727,585, the number of shares of the registrant’s Class B common stock outstanding was 27,390,397 and the number of shares of the registrant’s Class C common stock outstanding was 5,555,555.
American Well Corporation
QUARTERLY REPORT ON FORM 10-Q
For the period ended June 30, 20222023
TABLE OF CONTENTS
Page | ||
PART I | 3 | |
Item 1. | 3 | |
Condensed Consolidated Balance Sheet as of June 30, | 3 | |
4 | ||
5 | ||
7 | ||
Notes to the Unaudited Condensed Consolidated Financial Statements | 8 | |
Item 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
Item 3. |
| |
Item 4. |
| |
PART II |
| |
Item 1. |
| |
Item 1A. |
| |
Item 2. |
| |
Item 3. |
| |
Item 4. |
| |
Item 5. |
| |
Item 6. |
|
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN WELL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(unaudited)
|
| June 30, 2022 |
|
| December 31, 2021 |
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
| $ | 257,189 |
|
| $ | 746,416 |
|
| $ | 161,356 |
|
| $ | 538,546 |
|
Investments |
|
| 372,880 |
|
|
| — |
|
|
| 297,326 |
|
|
| — |
|
Accounts receivable ($82 and $2,054, from related parties and net of |
|
| 44,675 |
|
|
| 51,375 |
| ||||||||
Accounts receivable ($91 and $2,597, from related parties and net of |
|
| 48,399 |
|
|
| 58,372 |
| ||||||||
Inventories |
|
| 7,921 |
|
|
| 7,530 |
|
|
| 8,532 |
|
|
| 8,737 |
|
Deferred contract acquisition costs |
|
| 1,781 |
|
|
| 1,697 |
|
|
| 1,534 |
|
|
| 1,394 |
|
Prepaid expenses and other current assets |
|
| 22,148 |
|
|
| 20,278 |
|
|
| 18,294 |
|
|
| 19,567 |
|
Total current assets |
|
| 706,594 |
|
|
| 827,296 |
|
|
| 535,441 |
|
|
| 626,616 |
|
Restricted cash |
|
| 795 |
|
|
| 795 |
|
|
| 795 |
|
|
| 795 |
|
Property and equipment, net |
|
| 1,498 |
|
|
| 2,235 |
|
|
| 586 |
|
|
| 1,012 |
|
Goodwill |
|
| 433,840 |
|
|
| 442,761 |
|
|
| 79,421 |
|
|
| 435,279 |
|
Intangible assets, net |
|
| 136,434 |
|
|
| 152,409 |
|
|
| 134,953 |
|
|
| 134,980 |
|
Operating lease right-of-use asset |
|
| 14,511 |
|
|
| 16,422 |
|
|
| 11,770 |
|
|
| 13,509 |
|
Deferred contract acquisition costs, net of current portion |
|
| 2,202 |
|
|
| 2,028 |
|
|
| 4,520 |
|
|
| 3,394 |
|
Other assets |
|
| 1,233 |
|
|
| 1,722 |
|
|
| 2,197 |
|
|
| 1,972 |
|
Investment in minority owned joint venture |
|
| 1,366 |
|
|
| 168 |
| ||||||||
Investment in minority owned joint venture (Note 2) |
|
| 2,493 |
|
|
| — |
| ||||||||
Total assets |
| $ | 1,298,473 |
|
| $ | 1,445,836 |
|
| $ | 772,176 |
|
| $ | 1,217,557 |
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accounts payable |
| $ | 5,490 |
|
| $ | 12,156 |
|
| $ | 4,521 |
|
| $ | 7,236 |
|
Accrued expenses and other current liabilities |
|
| 43,649 |
|
|
| 58,711 |
|
|
| 42,581 |
|
|
| 54,258 |
|
Operating lease liability, current |
|
| 3,174 |
|
|
| 1,918 |
|
|
| 2,932 |
|
|
| 3,057 |
|
Deferred revenue ($867 and $1,860 from related parties, respectively) |
|
| 63,971 |
|
|
| 68,841 |
| ||||||||
Deferred revenue ($706 and $1,665 from related parties, respectively) |
|
| 60,214 |
|
|
| 49,505 |
| ||||||||
Total current liabilities |
|
| 116,284 |
|
|
| 141,626 |
|
|
| 110,248 |
|
|
| 114,056 |
|
Other long-term liabilities |
|
| 3,677 |
|
|
| 5,136 |
|
|
| 1,645 |
|
|
| 1,574 |
|
Contingent consideration liabilities, net of current portion |
|
| — |
|
|
| 16,450 |
| ||||||||
Operating lease liability, net of current portion |
|
| 12,842 |
|
|
| 14,694 |
|
|
| 9,995 |
|
|
| 11,787 |
|
Deferred revenue, net of current portion ($16 and $22 from related |
|
| 4,777 |
|
|
| 7,055 |
| ||||||||
Deferred revenue, net of current portion ($4 and $10 from related |
|
| 6,600 |
|
|
| 6,289 |
| ||||||||
Total liabilities |
|
| 137,580 |
|
|
| 184,961 |
|
|
| 128,488 |
|
|
| 133,706 |
|
Commitments and contingencies (Note 11) |
|
|
|
|
|
| ||||||||||
Commitments and contingencies (Note 10) |
|
|
|
|
|
| ||||||||||
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Preferred stock, $0.01 par value; 100,000,000 shares authorized, 0 shares |
|
| — |
|
|
| — |
| ||||||||
Common stock, $0.01 par value; 1,000,000,000 Class A shares authorized, 240,397,065 and |
|
| 2,734 |
|
|
| 2,620 |
| ||||||||
Preferred stock, $0.01 par value; 100,000,000 shares authorized, no shares |
|
| — |
|
|
| — |
| ||||||||
Common stock, $0.01 par value; 1,000,000,000 Class A shares authorized, 251,076,995 and |
|
| 2,834 |
|
|
| 2,766 |
| ||||||||
Additional paid-in capital |
|
| 2,108,576 |
|
|
| 2,054,275 |
|
|
| 2,204,387 |
|
|
| 2,160,108 |
|
Accumulated other comprehensive income |
|
| (20,845 | ) |
|
| (6,353 | ) |
|
| (8,869 | ) |
|
| (16,969 | ) |
Accumulated deficit |
|
| (950,466 | ) |
|
| (811,284 | ) |
|
| (1,572,777 | ) |
|
| (1,082,028 | ) |
Total American Well Corporation stockholders’ equity |
|
| 1,139,999 |
|
|
| 1,239,258 |
|
|
| 625,575 |
|
|
| 1,063,877 |
|
Non-controlling interest |
|
| 20,894 |
|
|
| 21,617 |
|
|
| 18,113 |
|
|
| 19,974 |
|
Total stockholders’ equity |
|
| 1,160,893 |
|
|
| 1,260,875 |
|
|
| 643,688 |
|
|
| 1,083,851 |
|
Total liabilities and stockholders’ equity |
| $ | 1,298,473 |
|
| $ | 1,445,836 |
|
| $ | 772,176 |
|
| $ | 1,217,557 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
AMERICAN WELL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except share and per share amounts)
(unaudited)
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
( $1,163, $1,462, $2,377 and $3,089 from related parties, respectively) |
| $ | 64,516 |
|
| $ | 60,217 |
|
| $ | 128,748 |
|
| $ | 117,816 |
| ||||||||||||||||
($983, $1,163, $1,971 and $2,377 from related parties, respectively) |
| $ | 62,447 |
|
| $ | 64,516 |
|
| $ | 126,448 |
|
| $ | 128,748 |
| ||||||||||||||||
Costs and operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Costs of revenue, excluding depreciation and amortization of intangible assets |
|
| 36,497 |
|
|
| 33,889 |
|
| $ | 73,262 |
|
| $ | 69,594 |
|
|
| 38,244 |
|
|
| 36,497 |
|
|
| 76,996 |
|
|
| 73,262 |
|
Research and development |
|
| 37,067 |
|
|
| 22,378 |
|
| $ | 74,548 |
|
| $ | 45,418 |
|
|
| 25,842 |
|
|
| 37,067 |
|
|
| 51,765 |
|
|
| 74,548 |
|
Sales and marketing |
|
| 18,721 |
|
|
| 14,789 |
|
| $ | 39,875 |
|
| $ | 28,521 |
|
|
| 21,554 |
|
|
| 18,721 |
|
|
| 44,280 |
|
|
| 39,875 |
|
General and administrative |
|
| 34,911 |
|
|
| 24,212 |
|
| $ | 67,627 |
|
| $ | 45,566 |
|
|
| 36,319 |
|
|
| 34,911 |
|
|
| 72,689 |
|
|
| 67,627 |
|
Depreciation and amortization expense |
|
| 6,724 |
|
|
| 2,484 |
|
| $ | 13,322 |
|
| $ | 4,990 |
|
|
| 7,718 |
|
|
| 6,724 |
|
|
| 14,961 |
|
|
| 13,322 |
|
Goodwill Impairment |
|
| 27,276 |
|
|
| — |
|
|
| 357,585 |
|
|
| — |
| ||||||||||||||||
Total costs and operating expenses |
|
| 133,920 |
|
|
| 97,752 |
|
|
| 268,634 |
|
|
| 194,089 |
|
|
| 156,953 |
|
|
| 133,920 |
|
|
| 618,276 |
|
|
| 268,634 |
|
Loss from operations |
|
| (69,404 | ) |
|
| (37,535 | ) |
|
| (139,886 | ) |
|
| (76,273 | ) |
|
| (94,506 | ) |
|
| (69,404 | ) |
|
| (491,828 | ) |
|
| (139,886 | ) |
Interest income and other (expense) income, net |
|
| 764 |
|
|
| 224 |
|
| $ | 872 |
|
| $ | 285 |
| ||||||||||||||||
Interest income and other income (expense), net |
|
| 2,332 |
|
|
| 764 |
|
|
| 3,272 |
|
|
| 872 |
| ||||||||||||||||
Loss before expense from income taxes and loss from |
|
| (68,640 | ) |
|
| (37,311 | ) |
|
| (139,014 | ) |
|
| (75,988 | ) |
|
| (92,174 | ) |
|
| (68,640 | ) |
|
| (488,556 | ) |
|
| (139,014 | ) |
Benefit (Expense) from income taxes |
|
| (461 | ) |
|
| (103 | ) |
| $ | (129 | ) |
| $ | (412 | ) | ||||||||||||||||
Expense from income taxes |
|
| (716 | ) |
|
| (461 | ) |
|
| (2,191 | ) |
|
| (129 | ) | ||||||||||||||||
Loss from equity method investment |
|
| (551 | ) |
|
| (722 | ) |
| $ | (762 | ) |
| $ | (1,541 | ) |
|
| (625 | ) |
|
| (551 | ) |
|
| (1,277 | ) |
|
| (762 | ) |
Net loss |
|
| (69,652 | ) |
|
| (38,136 | ) |
|
| (139,905 | ) |
|
| (77,941 | ) |
|
| (93,515 | ) |
|
| (69,652 | ) |
|
| (492,024 | ) |
|
| (139,905 | ) |
Net loss attributable to non-controlling interest |
|
| (507 | ) |
|
| (277 | ) |
| $ | (723 | ) |
| $ | (894 | ) |
|
| (1,040 | ) |
|
| (507 | ) |
|
| (1,861 | ) |
|
| (723 | ) |
Net loss attributable to American Well Corporation |
| $ | (69,145 | ) |
| $ | (37,859 | ) |
| $ | (139,182 | ) |
| $ | (77,047 | ) |
| $ | (92,475 | ) |
| $ | (69,145 | ) |
| $ | (490,163 | ) |
| $ | (139,182 | ) |
Net loss per share attributable to common stockholders, |
| $ | (0.25 | ) |
| $ | (0.15 | ) |
| $ | (0.51 | ) |
| $ | (0.31 | ) |
| $ | (0.33 | ) |
| $ | (0.25 | ) |
| $ | (1.74 | ) |
| $ | (0.51 | ) |
Weighted-average common shares outstanding, basic and diluted |
|
| 273,320,740 |
|
|
| 249,366,652 |
|
|
| 273,615,031 |
|
|
| 246,471,733 |
|
|
| 283,059,929 |
|
|
| 273,320,740 |
|
|
| 281,504,945 |
|
|
| 273,615,031 |
|
Net loss |
| $ | (69,652 | ) |
| $ | (38,136 | ) |
| $ | (139,905 | ) |
| $ | (77,941 | ) |
| $ | (93,515 | ) |
| $ | (69,652 | ) |
| $ | (492,024 | ) |
| $ | (139,905 | ) |
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Unrealized (loss) gain on available-for-sale investments |
|
| (111 | ) |
|
| (119 | ) |
|
| (1,362 | ) |
|
| (85 | ) | ||||||||||||||||
Unrealized gain (loss) on available-for-sale investments |
|
| 1,933 |
|
|
| (111 | ) |
|
| 6,252 |
|
|
| (1,362 | ) | ||||||||||||||||
Foreign currency translation |
|
| (10,179 | ) |
|
| (20 | ) |
|
| (13,130 | ) |
|
| (72 | ) |
|
| (214 | ) |
|
| (10,179 | ) |
|
| 1,848 |
|
|
| (13,130 | ) |
Comprehensive loss |
|
| (79,942 | ) |
|
| (38,275 | ) |
|
| (154,397 | ) |
|
| (78,098 | ) |
|
| (91,796 | ) |
|
| (79,942 | ) |
|
| (483,924 | ) |
|
| (154,397 | ) |
Less: Comprehensive loss attributable to |
|
| (507 | ) |
|
| (277 | ) |
|
| (723 | ) |
|
| (894 | ) |
|
| (1,040 | ) |
|
| (507 | ) |
|
| (1,861 | ) |
|
| (723 | ) |
Comprehensive loss attributable to American Well Corporation |
| $ | (79,435 | ) |
| $ | (37,998 | ) |
| $ | (153,674 | ) |
| $ | (77,204 | ) |
| $ | (90,756 | ) |
| $ | (79,435 | ) |
| $ | (482,063 | ) |
| $ | (153,674 | ) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
AMERICAN WELL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share amounts)
(unaudited)
|
| Common Stock |
|
| Additional |
|
| Accumulated |
|
| Accumulated |
|
| American Well |
|
| Noncontrolling |
|
| Total |
| |||||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Income (Loss) |
|
| Deficit |
|
| Equity |
|
| Interest |
|
| Equity |
| ||||||||
Balances as of January 1, 2022 |
|
| 261,871,587 |
|
| $ | 2,620 |
|
| $ | 2,054,275 |
|
| $ | (6,353 | ) |
| $ | (811,284 | ) |
| $ | 1,239,258 |
|
| $ | 21,617 |
|
| $ | 1,260,875 |
|
Exercise of common stock options |
|
| 976,644 |
|
|
| 10 |
|
|
| 2,455 |
|
|
| — |
|
|
| — |
|
|
| 2,465 |
|
|
| — |
|
|
| 2,465 |
|
Vesting of restricted stock units |
|
| 1,398,305 |
|
|
| 14 |
|
|
| (14 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Issuance of stock under employee stock purchase plan |
|
| 425,114 |
|
|
| 4 |
|
|
| 1,497 |
|
|
| — |
|
|
| — |
|
|
| 1,501 |
|
|
| — |
|
|
| 1,501 |
|
Issuance of common stock related to Conversa earn-out settlement |
|
| 1,020,964 |
|
|
| 10 |
|
|
| 4,288 |
|
|
| — |
|
|
| — |
|
|
| 4,298 |
|
|
| — |
|
|
| 4,298 |
|
Stock-based compensation expense |
|
| — |
|
|
| — |
|
|
| 12,085 |
|
|
| — |
|
|
| — |
|
|
| 12,085 |
|
|
| — |
|
|
| 12,085 |
|
Capital contributed by selling shareholders of acquired businesses |
|
| — |
|
|
| — |
|
|
| 2,019 |
|
|
| — |
|
|
| — |
|
|
| 2,019 |
|
|
| — |
|
|
| 2,019 |
|
Currency translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,951 | ) |
|
| — |
|
|
| (2,951 | ) |
|
| — |
|
|
| (2,951 | ) |
Unrealized losses on available-for-sale |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,251 | ) |
|
| — |
|
|
| (1,251 | ) |
|
| — |
|
|
| (1,251 | ) |
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (70,037 | ) |
|
| (70,037 | ) |
|
| (216 | ) |
|
| (70,253 | ) |
Balances as of March 31, 2022 |
|
| 265,692,614 |
|
|
| 2,658 |
|
|
| 2,076,605 |
|
|
| (10,555 | ) |
|
| (881,321 | ) |
|
| 1,187,387 |
|
|
| 21,401 |
|
|
| 1,208,788 |
|
Exercise of common stock options |
|
| 1,083,571 |
|
|
| 10 |
|
|
| 1,916 |
|
|
| — |
|
|
| — |
|
|
| 1,926 |
|
|
| — |
|
|
| 1,926 |
|
Vesting of restricted stock units |
|
| 1,606,976 |
|
|
| 16 |
|
|
| (16 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Issuance of common stock related to SilverCloud earn-out settlement |
|
| 4,959,856 |
|
|
| 50 |
|
|
| 12,895 |
|
|
| — |
|
|
| — |
|
|
| 12,945 |
|
|
| — |
|
|
| 12,945 |
|
Receipt of Section 16(b) disgorgement |
|
| — |
|
|
| — |
|
|
| 295 |
|
|
| — |
|
|
| — |
|
|
| 295 |
|
|
| — |
|
|
| 295 |
|
Stock-based compensation expense |
|
| — |
|
|
| — |
|
|
| 14,907 |
|
|
| — |
|
|
| — |
|
|
| 14,907 |
|
|
| — |
|
|
| 14,907 |
|
Capital contributed by selling shareholders of acquired businesses |
|
| — |
|
|
| — |
|
|
| 1,974 |
|
|
| — |
|
|
| — |
|
|
| 1,974 |
|
|
| — |
|
|
| 1,974 |
|
Currency translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (10,179 | ) |
|
| — |
|
|
| (10,179 | ) |
|
| — |
|
|
| (10,179 | ) |
Unrealized losses on available-for-sale |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (111 | ) |
|
| — |
|
|
| (111 | ) |
|
| — |
|
|
| (111 | ) |
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (69,145 | ) |
|
| (69,145 | ) |
|
| (507 | ) |
|
| (69,652 | ) |
Balances as of June 30, 2022 |
|
| 273,343,017 |
|
| $ | 2,734 |
|
| $ | 2,108,576 |
|
| $ | (20,845 | ) |
| $ | (950,466 | ) |
| $ | 1,139,999 |
|
| $ | 20,894 |
|
| $ | 1,160,893 |
|
|
| Common Stock |
|
| Additional |
|
| Accumulated |
|
| Accumulated |
|
| American Well |
|
| Noncontrolling |
|
| Total |
| |||||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Income (Loss) |
|
| Deficit |
|
| Equity |
|
| Interest |
|
| Equity |
| ||||||||
Balances as of January 1, 2023 |
|
| 277,139,679 |
|
| $ | 2,766 |
|
| $ | 2,160,108 |
|
| $ | (16,969 | ) |
| $ | (1,082,028 | ) |
| $ | 1,063,877 |
|
| $ | 19,974 |
|
| $ | 1,083,851 |
|
Exercise of common stock options |
|
| 128,572 |
|
|
| 1 |
|
|
| 288 |
|
|
| — |
|
|
| — |
|
|
| 289 |
|
|
| — |
|
|
| 289 |
|
Vesting of restricted stock units, including units with a market condition |
|
| 2,927,471 |
|
|
| 29 |
|
|
| (29 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Shares repurchased and retired |
|
| (316 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| (1 | ) |
|
| — |
|
|
| (1 | ) |
Issuance of stock under employee stock purchase plan |
|
| 513,339 |
|
|
| 5 |
|
|
| 1,263 |
|
|
| — |
|
|
| — |
|
|
| 1,268 |
|
|
| — |
|
|
| 1,268 |
|
Stock-based compensation expense |
|
| — |
|
|
| — |
|
|
| 20,997 |
|
|
| — |
|
|
| — |
|
|
| 20,997 |
|
|
| — |
|
|
| 20,997 |
|
Currency translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,062 |
|
|
| — |
|
|
| 2,062 |
|
|
| — |
|
|
| 2,062 |
|
Unrealized gains on available-for- |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,319 |
|
|
| — |
|
|
| 4,319 |
|
|
| — |
|
|
| 4,319 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (397,688 | ) |
|
| (397,688 | ) |
|
| (821 | ) |
|
| (398,509 | ) |
Balances as of March 31, 2023 |
|
| 280,708,745 |
|
|
| 2,801 |
|
|
| 2,182,627 |
|
|
| (10,588 | ) |
|
| (1,479,717 | ) |
|
| 695,123 |
|
|
| 19,153 |
|
|
| 714,276 |
|
Exercise of common stock options |
|
| 158,027 |
|
|
| 2 |
|
|
| 278 |
|
|
| — |
|
|
| — |
|
|
| 280 |
|
|
| — |
|
|
| 280 |
|
Vesting of restricted stock units, including units with a market condition |
|
| 3,420,846 |
|
|
| 34 |
|
|
| (34 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Shares repurchased and retired |
|
| (264,671 | ) |
|
| (3 | ) |
|
| 3 |
|
|
| — |
|
|
| (585 | ) |
|
| (585 | ) |
|
| — |
|
|
| (585 | ) |
Stock-based compensation expense |
|
| — |
|
|
| — |
|
|
| 21,513 |
|
|
| — |
|
|
| — |
|
|
| 21,513 |
|
|
| — |
|
|
| 21,513 |
|
Currency translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (214 | ) |
|
| — |
|
|
| (214 | ) |
|
| — |
|
|
| (214 | ) |
Unrealized gains on available-for- |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,933 |
|
|
| — |
|
|
| 1,933 |
|
|
| — |
|
|
| 1,933 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (92,475 | ) |
|
| (92,475 | ) |
|
| (1,040 | ) |
|
| (93,515 | ) |
Balances as of June 30, 2023 |
|
| 284,022,947 |
|
| $ | 2,834 |
|
| $ | 2,204,387 |
|
| $ | (8,869 | ) |
| $ | (1,572,777 | ) |
| $ | 625,575 |
|
| $ | 18,113 |
|
| $ | 643,688 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
AMERICAN WELL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share amounts)
(unaudited)
|
| Common Stock |
|
| Treasury |
|
| Additional |
|
| Accumulated |
|
| Accumulated |
|
| American Well |
|
| Noncontrolling |
|
| Total |
|
| Common Stock |
|
| Additional |
|
| Accumulated |
|
| Accumulated |
|
| American |
|
| Noncontrolling |
|
| Total |
| |||||||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Stock |
|
| Capital |
|
| Income (Loss) |
|
| Deficit |
|
| Equity |
|
| Interest |
|
| Equity |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Income (Loss) |
|
| Deficit |
|
| Equity |
|
| Interest |
|
| Equity |
| |||||||||||||||||
Balances as of January 1, 2021 |
|
| 235,604,105 |
|
|
| 2,357 |
|
| $ | (37,568 | ) |
|
| 1,841,405 |
|
| $ | 297 |
|
| $ | (582,359 | ) |
| $ | 1,224,132 |
|
| $ | 22,065 |
|
| $ | 1,246,197 |
| ||||||||||||||||||||||||||||||||
Balances as of January 1, 2022 |
|
| 261,871,587 |
|
| $ | 2,620 |
|
| $ | 2,054,275 |
|
| $ | (6,353 | ) |
| $ | (811,284 | ) |
| $ | 1,239,258 |
|
| $ | 21,617 |
|
| $ | 1,260,875 |
| ||||||||||||||||||||||||||||||||||||
Exercise of common stock options |
|
| 3,474,375 |
|
|
| 34 |
|
|
| — |
|
|
| 10,096 |
|
|
| — |
|
|
| — |
|
|
| 10,130 |
|
|
| — |
|
|
| 10,130 |
|
|
| 976,644 |
|
|
| 10 |
|
|
| 2,455 |
|
|
| — |
|
|
| — |
|
|
| 2,465 |
|
|
| — |
|
|
| 2,465 |
|
Vesting of restricted stock units |
|
| 853,842 |
|
|
| 9 |
|
|
| — |
|
|
| (9 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,398,305 |
|
|
| 14 |
|
|
| (14 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Retirement of treasury stock purchased in 2020 |
|
| — |
|
|
| — |
|
|
| 37,568 |
|
|
| (15 | ) |
|
| — |
|
|
| (37,553 | ) |
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||||||
Shares withheld related to net share settlement and retired treasury stock in 2021 |
|
| (402,060 | ) |
|
| (4 | ) |
|
| — |
|
|
| 4 |
|
|
| — |
|
|
| (9,771 | ) |
|
| (9,771 | ) |
|
| — |
|
|
| (9,771 | ) | ||||||||||||||||||||||||||||||||
Issuance of stock under employee stock purchase plan |
|
| 425,114 |
|
|
| 4 |
|
|
| 1,497 |
|
|
| — |
|
|
| — |
|
|
| 1,501 |
|
|
| — |
|
|
| 1,501 |
| ||||||||||||||||||||||||||||||||||||
Issuance of common stock related to Conversa earn-out settlement |
|
| 1,020,964 |
|
|
| 10 |
|
|
| 4,288 |
|
|
| — |
|
|
| — |
|
|
| 4,298 |
|
|
| — |
|
|
| 4,298 |
| ||||||||||||||||||||||||||||||||||||
Stock-based compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8,642 |
|
|
| — |
|
|
| — |
|
|
| 8,642 |
|
|
| — |
|
|
| 8,642 |
|
|
| — |
|
|
| — |
|
|
| 12,085 |
|
|
| — |
|
|
| — |
|
|
| 12,085 |
|
|
| — |
|
|
| 12,085 |
|
Capital contributed by selling shareholders of acquired businesses |
|
| — |
|
|
| — |
|
| 2,019 |
|
| — |
|
|
| — |
|
|
| 2,019 |
|
|
| — |
|
|
| 2,019 |
| ||||||||||||||||||||||||||||||||||||||
Currency translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (52 | ) |
|
| — |
|
|
| (52 | ) |
|
| — |
|
|
| (52 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,951 | ) |
|
| — |
|
|
| (2,951 | ) |
|
| — |
|
|
| (2,951 | ) |
Unrealized gains on available-for-sale |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 34 |
|
|
| — |
|
|
| 34 |
|
|
| — |
|
|
| 34 |
| ||||||||||||||||||||||||||||||||
Unrealized gains (losses) on available-for-sale |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,251 | ) |
|
| — |
|
|
| (1,251 | ) |
|
| — |
|
|
| (1,251 | ) | ||||||||||||||||||||||||||||||||||||
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (39,188 | ) |
|
| (39,188 | ) |
|
| (617 | ) |
|
| (39,805 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (70,037 | ) |
|
| (70,037 | ) |
|
| (216 | ) |
|
| (70,253 | ) |
Balances as of March 31, 2021 |
|
| 239,530,262 |
|
|
| 2,396 |
|
|
| — |
|
|
| 1,860,123 |
|
|
| 279 |
|
|
| (668,871 | ) |
|
| 1,193,927 |
|
|
| 21,448 |
|
|
| 1,215,375 |
| ||||||||||||||||||||||||||||||||
Balances as of March 31, 2022 |
|
| 265,692,614 |
|
|
| 2,658 |
|
|
| 2,076,605 |
|
|
| (10,555 | ) |
|
| (881,321 | ) |
|
| 1,187,387 |
|
|
| 21,401 |
|
|
| 1,208,788 |
| ||||||||||||||||||||||||||||||||||||
Exercise of common stock options |
|
| 1,812,491 |
|
|
| 18 |
|
|
| — |
|
|
| 6,656 |
|
|
| — |
|
|
| — |
|
|
| 6,674 |
|
|
| — |
|
|
| 6,674 |
|
|
| 1,083,571 |
|
|
| 10 |
|
|
| 1,916 |
|
|
| — |
|
|
| — |
|
|
| 1,926 |
|
|
| — |
|
|
| 1,926 |
|
Vesting of restricted stock units |
|
| 844,900 |
|
|
| 9 |
|
|
| — |
|
|
| (9 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,606,976 |
|
|
| 16 |
|
|
| (16 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Shares withheld related to net share settlement and retired treasury stock in 2021 |
|
| (68,750 | ) |
|
| (1 | ) |
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| (1,857 | ) |
|
| (1,857 | ) |
|
| — |
|
|
| (1,857 | ) | ||||||||||||||||||||||||||||||||
Issuance of common stock related to SilverCloud earn-out settlement |
|
| 4,959,856 |
|
|
| 50 |
|
|
| 12,895 |
|
|
| — |
|
|
| — |
|
|
| 12,945 |
|
|
| — |
|
|
| 12,945 |
| ||||||||||||||||||||||||||||||||||||
Receipt of Section 16(b) disgorgement |
|
| — |
|
|
| — |
|
|
| 295 |
|
|
| — |
|
|
| — |
|
|
| 295 |
|
|
| — |
|
|
| 295 |
| ||||||||||||||||||||||||||||||||||||
Stock-based compensation expense |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 10,726 |
|
|
| — |
|
|
| — |
|
|
| 10,726 |
|
|
| — |
|
|
| 10,726 |
|
|
| — |
|
|
| — |
|
|
| 14,907 |
|
|
| — |
|
|
| — |
|
|
| 14,907 |
|
|
| — |
|
|
| 14,907 |
|
Capital contributed by selling shareholders of acquired businesses |
|
| — |
|
|
| — |
|
| 1,974 |
|
| — |
|
|
| — |
|
|
| 1,974 |
|
|
| — |
|
|
| 1,974 |
| ||||||||||||||||||||||||||||||||||||||
Currency translation adjustment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (20 | ) |
|
| — |
|
|
| (20 | ) |
|
| — |
|
|
| (20 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (10,179 | ) |
|
| — |
|
|
| (10,179 | ) |
|
| — |
|
|
| (10,179 | ) |
Unrealized gains on available-for-sale |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (119 | ) |
|
| — |
|
|
| (119 | ) |
|
| — |
|
|
| (119 | ) | ||||||||||||||||||||||||||||||||
Unrealized losses on available-for-sale |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (111 | ) |
|
| — |
|
|
| (111 | ) |
|
| — |
|
|
| (111 | ) | ||||||||||||||||||||||||||||||||||||
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (37,859 | ) |
|
| (37,859 | ) |
|
| (277 | ) |
|
| (38,136 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (69,145 | ) |
|
| (69,145 | ) |
|
| (507 | ) |
|
| (69,652 | ) |
Balances as of June 30, 2021 |
|
| 242,118,903 |
|
| $ | 2,422 |
|
| $ | - |
|
| $ | 1,877,497 |
|
| $ | 140 |
|
| $ | (708,587 | ) |
| $ | 1,171,472 |
|
| $ | 21,171 |
|
| $ | 1,192,643 |
| ||||||||||||||||||||||||||||||||
Balances as of June 30, 2022 |
|
| 273,343,017 |
|
| $ | 2,734 |
|
| $ | 2,108,576 |
|
| $ | (20,845 | ) |
| $ | (950,466 | ) |
| $ | 1,139,999 |
|
| $ | 20,894 |
|
| $ | 1,160,893 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
AMERICAN WELL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except share and per share amounts)
(unaudited)
|
| Six Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss |
| $ | (139,905 | ) |
| $ | (77,941 | ) |
| $ | (492,024 | ) |
| $ | (139,905 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Goodwill impairment |
|
| 357,585 |
|
|
| — |
| ||||||||
Depreciation and amortization expense |
|
| 13,132 |
|
|
| 4,990 |
|
|
| 14,950 |
|
|
| 13,132 |
|
Provisions for credit losses |
|
| (308 | ) |
|
| (57 | ) |
|
| (21 | ) |
|
| (308 | ) |
Amortization of deferred contract acquisition costs |
|
| 847 |
|
|
| 731 |
|
|
| 1,093 |
|
|
| 847 |
|
Amortization of deferred contract fulfillment costs |
|
| 288 |
|
|
| 351 |
|
|
| 215 |
|
|
| 288 |
|
Noncash compensation costs incurred by selling shareholders |
|
| 3,993 |
|
|
| — |
|
|
| — |
|
|
| 3,993 |
|
Stock-based compensation expense |
|
| 27,598 |
|
|
| 19,368 |
|
|
| 42,685 |
|
|
| 27,598 |
|
Loss on equity method investment |
|
| 762 |
|
|
| 1,541 |
|
|
| 1,277 |
|
|
| 762 |
|
Deferred income taxes |
|
| (1,164 | ) |
|
| — |
|
|
| (23 | ) |
|
| (1,164 | ) |
Changes in operating assets and liabilities, net of acquisition: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accounts receivable |
|
| 5,763 |
|
|
| 9,809 |
|
|
| 10,161 |
|
|
| 5,763 |
|
Inventories |
|
| (391 | ) |
|
| 199 |
|
|
| 205 |
|
|
| (391 | ) |
Deferred contract acquisition costs |
|
| (1,135 | ) |
|
| (618 | ) |
|
| (2,338 | ) |
|
| (1,135 | ) |
Prepaid expenses and other current assets |
|
| (1,714 | ) |
|
| 284 |
|
|
| 1,091 |
|
|
| (1,714 | ) |
Other assets |
|
| 489 |
|
|
| 184 |
|
|
| (212 | ) |
|
| 489 |
|
Accounts payable |
|
| (6,525 | ) |
|
| (624 | ) |
|
| (2,753 | ) |
|
| (6,525 | ) |
Accrued expenses and other current liabilities |
|
| (490 | ) |
|
| (16,063 | ) |
|
| (11,591 | ) |
|
| (490 | ) |
Other long-term liabilities |
|
| (15 | ) |
|
| (38 | ) |
|
| — |
|
|
| (15 | ) |
Deferred revenue |
|
| (6,624 | ) |
|
| (9,506 | ) |
|
| 10,924 |
|
|
| (6,624 | ) |
Net cash used in operating activities |
|
| (105,399 | ) |
|
| (67,390 | ) |
|
| (68,776 | ) |
|
| (105,399 | ) |
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Purchases of property and equipment |
|
| (58 | ) |
|
| (283 | ) |
|
| (36 | ) |
|
| (58 | ) |
Capitalized software development costs |
|
| (13,836 | ) |
|
| — |
| ||||||||
Investment in less than majority owned joint venture |
|
| (1,960 | ) |
|
| (2,548 | ) |
|
| (3,920 | ) |
|
| (1,960 | ) |
Purchases of investments |
|
| (499,223 | ) |
|
| — |
|
|
| (389,990 | ) |
|
| (499,223 | ) |
Proceeds from sales and maturities of investments |
|
| 124,981 |
|
|
| 100,000 |
|
|
| 98,916 |
|
|
| 124,981 |
|
Net cash used in and provided by investing activities |
|
| (376,260 | ) |
|
| 97,169 |
| ||||||||
Net cash used in investing activities |
|
| (308,866 | ) |
|
| (376,260 | ) | ||||||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Proceeds from exercise of common stock options |
|
| 4,465 |
|
|
| 16,733 |
|
|
| 569 |
|
|
| 4,465 |
|
Proceeds from employee stock purchase plan |
|
| 1,501 |
|
|
| — |
|
|
| 1,268 |
|
|
| 1,501 |
|
Payments for the purchase of treasury stock |
|
| — |
|
|
| (11,628 | ) |
|
| (586 | ) |
|
| — |
|
Payment of deferred offering costs |
|
| — |
|
|
| (1,613 | ) | ||||||||
Proceeds from Section 16(b) disgorgement |
|
| 295 |
|
|
|
|
|
| — |
|
|
| 295 |
| |
Payment of contingent consideration |
|
| (11,790 | ) |
|
| — |
|
|
| — |
|
|
| (11,790 | ) |
Net cash used in and provided by financing activities |
|
| (5,529 | ) |
|
| 3,492 |
| ||||||||
Net cash provided by (used in) financing activities |
|
| 1,251 |
|
|
| (5,529 | ) | ||||||||
Effect of exchange rates changes on cash, cash equivalents, and restricted cash |
|
| (2,039 | ) |
|
| — |
|
|
| (799 | ) |
|
| (2,039 | ) |
Net decrease in cash, cash equivalents, and restricted cash |
|
| (489,227 | ) |
|
| 33,271 |
|
|
| (377,190 | ) |
|
| (489,227 | ) |
Cash, cash equivalents, and restricted cash at beginning of period |
|
| 747,211 |
|
|
| 942,711 |
|
|
| 539,341 |
|
|
| 747,211 |
|
Cash, cash equivalents, and restricted cash at end of period |
| $ | 257,984 |
|
| $ | 975,982 |
|
| $ | 162,151 |
|
| $ | 257,984 |
|
Cash, cash equivalents, and restricted cash at end of period: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
|
| 257,189 |
|
|
| 975,187 |
|
|
| 161,356 |
|
|
| 257,189 |
|
Restricted cash |
|
| 795 |
|
|
| 795 |
|
|
| 795 |
|
|
| 795 |
|
Total cash, cash equivalents, and restricted cash at end of period |
| $ | 257,984 |
|
| $ | 975,982 |
|
| $ | 162,151 |
|
| $ | 257,984 |
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash (refunded) paid for income taxes |
| $ | 13 |
|
| $ | 955 |
| ||||||||
Cash paid (refunded) for income taxes |
| $ | 1,018 |
|
| $ | 13 |
| ||||||||
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Issuance of common stock in settlement of earnout |
| $ | 17,243 |
|
| $ | — |
|
| $ | — |
|
| $ | 17,243 |
|
Receivable related to exercise of common stock options |
| $ | — |
|
| $ | 71 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
AMERICAN WELL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
1. Organization and Description of Business
Description of Business
American Well Corporation (the “Company”) was incorporated under the laws of the State of Delaware in June 2006. The Company is headquartered in Boston, Massachusetts. The Company is a leading enterprise software company enabling digital delivery of care for healthcare’s key stakeholders. The Company empowers our clients with the core technology and services necessary to successfully develop and distribute virtual care programs that meet their strategic, operational, financial and clinical objectives under their own brands.
Acquisitions
On August 9, 2021 and August 27, 2021, the Company completed the acquisitions of Conversa Health Inc. (“Conversa”) and SilverCloud Health Holdings, Inc. (“SilverCloud”), respectively (together, the “Acquisitions”). Conversa is a leader in automated virtual healthcare. SilverCloud is a leading digital mental health platform. See Note 7 “Business Combinations”.
Liquidity and Capital Resources
The Company expects that its cash, cash equivalents and investments balance as of June 30, 20222023 of $630,069458,682 will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next twelve months.
2. Summary of Significant Accounting Policies
There have been no material changes to the significant accounting policies described in the Company’s Form 10-K for the fiscal year ended December 31, 2021,2022, that have had a material impact on the consolidated financial statements and related notes.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring accruals and adjustments) necessary for the fair statement of the Company’s the financial position, results of operations and cash flows at the dates and for the periods indicated. The interim results for the three and six months ended June 30, 20222023 are not necessarily indicative of results for the full 20222023 calendar year or any other future interim periods. The information included in the interim financial statements should be read in conjunction with the annual consolidated financial statements and accompanying notes included in the Form 10-K.
The unaudited condensed consolidated financial statements include the accounts of American Well Corporation, its wholly-owned subsidiaries, those of professional corporations, which represent variable interest entities in which American Well has an interest and is the primary beneficiary (“PC”), and National Telehealth Network (“NTN”), an entity in which American Well controls fifty percent or more of the voting shares (see Note 4). Intercompany accounts and transactions have been eliminated in consolidation.
The Company’s reporting currency is the U.S. dollar. The Company determines the functional currency of each subsidiary based on the currency of the primary economic environment in which each subsidiary operates. Items included in the financial statements of such subsidiaries are measured using that functional currency. Foreign currency denominated monetary assets and liabilities are remeasured into U.S. dollars at current exchange rates and foreign currency denominated nonmonetary assets and liabilities are remeasured into U.S. dollars at historical exchange rates. Gains or losses from foreign currency remeasurement and settlements are included in interest income and other income (expense), net in the condensed consolidated statements of operations and comprehensive loss.
For consolidated entities where American Well owns or is exposed to less than 100% of the economics, the net loss attributable to noncontrolling interests is recorded in the condensed consolidated statements of operations and comprehensive loss equal to the percentage of the economic or ownership interest retained in each entity by the respective non-controlling party. The noncontrolling interests are presented as a separate component of stockholders’ deficit in the condensed consolidated balance sheets.
8
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reported periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, revenue recognition, the estimated customer relationship period that is used in the amortization of deferred contract acquisition costs, the valuation of assets and liabilities acquired in business combinations, goodwill, the useful lives of intangible assets and property and equipment and the valuation of common stock.stock awards. The Company bases its estimates on historical experience, known trends, and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates, as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ from those estimates or assumptions.
Due to the COVID-19 global pandemic, the global economy and financial markets have been disrupted and there is a significant amount of uncertainty about the length and severity of the consequences caused by the pandemic. The Company has considered information available to it as of the date of issuance of these financial statements and has not experienced any significant impact to its estimates and assumptions as a result of the COVID-19 pandemic. On an ongoing basis, the Company will continue to closely monitor the COVID-19 impact on its estimates and assumptions.
Segment Information
The Company’s chief operating decision makers (CODMs), its two Chief Executive Officers, review financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. The Company operates and manages its business as 1one reportable and operating segment. In addition, substantially all of the Company’s revenue and long-lived assets are attributable to operations in the United States for all periods presented.
Variable Interest Entities
The Company evaluates its ownership, contractual and other interests in entities to determine if it has any variable interest in a variable interest entity (“VIE”). These evaluations are complex and involve judgment. If the Company determines that an entity in which it holds a contractual or ownership interest is a VIE and that the Company is the primary beneficiary, the Company consolidates such entity in its condensed consolidated financial statements. The primary beneficiary of a VIE is the party that meets both of the following criteria: (i) has the power to make decisions that most significantly affect the economic performance of the VIE; and (ii) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Management performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change. Changes in consolidation status are applied prospectively.
The aggregate carrying value of total assets and total liabilities included on the condensed consolidated balance sheets for the PCs after elimination of intercompany transactions were $26,87933,442 and $1,5081,760, respectively, as of June 30, 20222023 and $29,77031,189 and $1,4851,648, respectively as of December 31, 2021.2022.
Total revenue included on the condensed consolidated statements of operations and comprehensive loss for the PCs after elimination of intercompany transactions was $17,40016,729 and $17,58517,400 for the three months ended June 30, 20222023 and 2021,2022, respectively. Net loss included on the condensed consolidated statements of operations and comprehensive loss was not material for the three months ended June 30, 20222023 and 2021.2022. Total revenue included on the condensed consolidated statements of operations and comprehensive loss for the PCs after elimination of intercompany transactions was $35,79236,475 and $35,15435,792 for the six months ended June 30, 20222023 and 2021,2022, respectively. Net loss included on the condensed consolidated statements of operations and comprehensive loss was not material for the six months ended June 30, 20222023 and 20212022.
Investment in Minority Owned Joint Venture
The Company and Cleveland Clinic partnered to form a joint venture, under the name CCAW, JV LLC, to provide broad access to comprehensive and high acuity care services via digital care delivery. The Company does not have a controlling financial interest in CCAW, JV LLC, but it does have the ability to exercise significant influence over the operating and financial policies of CCAW, JV LLC. Therefore, the Company accounts for its investment in CCAW, JV LLC using the equity method of accounting. The joint venture is considered a variable interest entity under ASC 810-10, but the Company is not the primary beneficiary as it does not have the power to direct the activities of the joint venture that most significantly impact its performance. The Company’s evaluation of ability to impact performance is based on Cleveland Clinic’s managing directors and Cleveland Clinic’s ability to appoint and remove the chairperson who has the ability to cast the tie breaking vote on the most significant activities.
9
In 2020 the Company contributed $2,940 as its initial investment for a 49% interest in CCAW, JV LLC. The agreement also requires aggregate total capital contributions by the Company up to an additional $11,800 in two phases, which is yet to be defined. During the three months ended March 31, 2021, the Company made a capital contribution of $2,548, related to a portion of the phase one capital commitment. In April 2022 the Company made a capital contribution of $1,960 related to a portion of the phase one capital commitment. During the six months ended June 30, 2023 the Company made capital contributions of $3,920 related to a portion of the phase one capital commitment, of which $2,940 was contributed in the three months ended June 30, 2023.
9
For the three months ended June 30, 20222023 and 2021,2022, the Company recognized a loss of $551625 and $722551 as its proportionate share of the joint venture’s results of operations, respectively. For the six months ended June 30, 20222023 and 2021,2022, the Company recognized a loss of $7621,277 and $1,541762, respectively. Accordingly, the carrying value of the equity method investment as of June 30, 20222023 and December 31, 20212022 was $1,3662,493 and $$(168150), respectively. As the share of losses exceeds the carrying amount of the investment, the carrying amount as of December 31, 2022 is included in the balance of accrued expenses and other current liabilities on the consolidated balance sheet.
Concentrations of Credit Risk and Significant CustomersClients
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, investments and accounts receivable. The Company invests its excess cash with large financial institutions that the Company believes are of high credit quality. Cash and cash equivalents are invested in highly rated money market funds. At times, the Company’s cash balances with individual banking institutions are in excess of federally insured limits. The Company’s investments are invested in U.S. government agency bonds. The Company has not experienced any losses on its deposits of cash, cash equivalents or investments. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
The Company performs ongoing assessments and credit evaluations of its customersclients to assess the collectability of the accounts based on a number of factors, including past transaction experience, age of the accounts receivable, review of the invoicing terms of the contracts, and recent communication with customers.clients. The Company has not experienced significant credit losses from its accounts receivable. As of June 30, 2022 and December 31, 2021,2023 one customerclient accounted for 15% of outstanding accounts receivable, and as of December 31, 2022, two clients each accounted for 1918% of outstanding accounts receivable, respectively.receivable.
During the three months ended June 30, 2023 and 2022, sales to one client represented 24% and 2021,24% of the Company’s total revenue, respectively. During the six months ended June 30, 2023 and 2022, sales to one customer represented 24% and 25% of the Company’s total revenue, respectively. During
Goodwill
We recognize the excess of the purchase price over the fair value of identifiable net assets acquired as goodwill. Goodwill is not amortized but is tested for impairment annually on November 30 or more frequently if events or changes in circumstances indicate that the carrying amount of the goodwill may not be recoverable. These events include: (i) severe adverse industry or economic trends; (ii) significant company-specific actions, including exiting an activity in conjunction with restructuring of operations; (iii) current, historical or projected deterioration of our financial performance; or (iv) a sustained decrease in our market capitalization, as indicated by the Company’s publicly quoted share price, below our net book value. Our goodwill impairment tests are performed at the enterprise level given our single reporting unit.
When testing goodwill for impairment, we have the option of first performing a qualitative assessment to determine whether it is more likely than not that the fair value of our reporting unit is less than its carrying amount. If we elect to bypass the qualitative assessment, or if a qualitative assessment indicates it is more likely than not that carrying value exceeds its fair value, we perform a quantitative goodwill impairment test. Under the quantitative goodwill impairment test, if our reporting unit’s carrying amount exceeds its fair value, we will record an impairment charge based on that difference. A charge is reported as impairment of goodwill in the consolidated statements of operations and comprehensive loss. In the three and six months ended June 30, 20222023 there was an impairment of goodwill of $27,276 and 2021, sales$357,585, respectively, as our carrying value exceeded the fair value of our reporting unit. For details associated with the Company's interim goodwill impairment, see Note 7 - Goodwill and Intangible Assets.
Fair value determination of our reporting unit requires considerable judgment and is sensitive to one customer (who waschanges in underlying assumptions and factors. As a related party duringresult, there can be no assurance that the 2021 period) represented 25%estimates and 25%assumptions made for purposes of the quantitative goodwill impairment tests will prove to be an accurate prediction of future results. Examples of events or circumstances that could reasonably be expected to negatively affect the underlying key assumptions and ultimately impact the estimated fair value of our reporting unit may include such items as: (i) severe adverse industry or economic trends; (ii) significant company-specific actions, including exiting an activity in conjunction with restructuring of operations; (iii) current, historical or projected deterioration of our financial performance; or (iv) a sustained decrease in our market capitalization, as indicated by the Company’s total revenue, respectively.
Recently Adopted Accounting Pronouncements
publicly quoted share price, below our net book value. In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes by removing certain exceptions and clarifying and amending existing guidance. The guidance was adopted effective January 1, 2021 and did not haveevent there is a material impact on the condensed consolidated financial statements and disclosures.
In October 2021, the FASB issued ASU 2021-08, Business Combinations(Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which requires thatfurther sustained decline in our stock price, future adverse changes in our projected cash flows, and/or changes in key assumptions, including but not limited to an entity (acquirer) recognize and measure contractincrease in our discount rate and/or lower market multiples, we may be required conduct additional impairment testing of our goodwill, other intangibles and/or long-lived assets and contract liabilities acquired insubsequently record a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. To achieve this, an acquirer may assess how the acquiree applied Topic 606 to determine what to record for the acquired revenue contracts. Generally, this should result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements. The guidance was adopted effective July 1, 2021 and impacted the accounting of acquired deferred revenue for the Conversa and SilverCloud acquisitions that occurred in August 2021.non-cash impairment charge.
10
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (‘‘ASU 2016-13’’), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes may result in earlier recognition of credit losses. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements toTopic 326, Financial Instruments—Credit Losses, which narrowed the scope and changed the effective date for non-public entities for ASU 2016-13. The FASB subsequently issued supplemental guidance within ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief (‘‘ASU 2019-05’’). ASU 2019-05 provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. The Company adopted ASU 2016-13 and the related clarifications in 2021. The adoption did not have a material effect on the Company’s consolidated financial statements.
3. Revenue
The following table presents the Company’s revenues disaggregated by revenue source:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Platform subscription |
| $ | 29,592 |
|
| $ | 26,780 |
|
| $ | 58,283 |
|
| $ | 51,376 |
|
| $ | 28,030 |
|
| $ | 29,592 |
|
| $ | 56,725 |
|
| $ | 58,283 |
|
Visits |
|
| 29,750 |
|
|
| 27,532 |
|
|
| 60,486 |
|
|
| 55,353 |
|
|
| 28,083 |
|
|
| 29,750 |
|
|
| 60,620 |
|
|
| 60,486 |
|
Other |
|
| 5,174 |
|
|
| 5,905 |
|
|
| 9,979 |
|
|
| 11,087 |
|
|
| 6,334 |
|
|
| 5,174 |
|
|
| 9,103 |
|
|
| 9,979 |
|
Total Revenue |
| $ | 64,516 |
|
| $ | 60,217 |
|
| $ | 128,748 |
|
| $ | 117,816 |
|
| $ | 62,447 |
|
| $ | 64,516 |
|
| $ | 126,448 |
|
| $ | 128,748 |
|
Accounts Receivable, Net
Accounts receivable primarily consist of amounts billed currently due from customers.clients. Accounts receivable are presented net of an allowance for credit losses, which is an estimate of amounts that may not be collectible. In determining the amount of the allowance at each reporting date, the Company makes judgments about general economic conditions, historical write-off experience and any specific risks identified in customerclient collection matters, including the aging of unpaid accounts receivable and changes in customerclient financial conditions. Account balances are written off after all means of collection are exhausted and the potential for non-recovery is determined to be probable. Adjustments to the allowance for credit losses are recorded as general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss.
Changes in the allowance for credit losses were as follows:
|
| Six Months Ended June 30, 2022 |
|
| Year Ended December 31, 2021 |
|
| Six Months Ended June 30, 2023 |
|
| Year Ended December 31, 2022 |
| ||||
Allowance for credit losses, beginning of the |
| $ | 1,809 |
|
| $ | 1,556 |
|
| $ | 1,884 |
|
| $ | 1,809 |
|
Provisions |
|
| (308 | ) |
|
| 714 |
|
|
| (21 | ) |
|
| 803 |
|
Write-offs |
|
| (49 | ) |
|
| (461 | ) |
|
| (25 | ) |
|
| (728 | ) |
Allowance for credit losses, end of the period |
| $ | 1,452 |
|
| $ | 1,809 |
|
| $ | 1,838 |
|
| $ | 1,884 |
|
The Company has rights to consideration for services completed but not billed at the reporting date. Unbilled receivables are classified as receivables when the Company has the right to invoice the customer.client. The amount of unbilled accounts receivable included within accounts receivable on the consolidated balance sheet was $4,3393,677 and $5,6973,566 as of June 30, 20222023 and December 31, 2021,2022, respectively. The amount of unbilled accounts receivable included within other assets on the consolidated balance sheet was 0 as of June 30, 2022 and $781as of December 31, 2021, respectively.
Deferred Revenue
Contract liabilities consist of deferred revenue and include billings in advance of performance under the contract. Such amounts are recognized as revenue over the contractual period. For the three months ended June 30, 20222023 and 2021,2022, the Company recognized revenue of $16,84511,099 and $21,23816,845, respectively, that was included in the corresponding contract liability balance at the beginning of the periods presented. For the six months ended June 30, 20222023 and 2021,2022, the Company recognized revenue of $39,99227,297 and $39,14639,992, respectively, that was included in the corresponding contract liability balance at the beginning of the periods presented.presented
11
Changes in the Company’s deferred revenue balance for the six months ended June 30, 20222023 and December 31, 20212022 were as follows:
|
| Six Months Ended June 30, 2022 |
|
| Year Ended December 31, 2021 |
|
| Six Months Ended June 30, 2023 |
|
| Year Ended December 31, 2022 |
| ||||
Total deferred revenue, beginning of the period |
| $ | 75,896 |
|
| $ | 74,800 |
|
| $ | 55,794 |
|
| $ | 75,896 |
|
Additions |
|
| 50,690 |
|
|
| 123,717 |
|
|
| 71,281 |
|
|
| 106,330 |
|
Recognized |
|
| (57,838 | ) |
|
| (122,621 | ) |
|
| (60,261 | ) |
|
| (126,432 | ) |
Total deferred revenue, end of the period |
| $ | 68,748 |
|
| $ | 75,896 |
|
| $ | 66,814 |
|
| $ | 55,794 |
|
Current deferred revenue |
|
| 63,971 |
|
|
| 68,841 |
|
|
| 60,214 |
|
|
| 49,505 |
|
Non-current deferred revenue |
|
| 4,777 |
|
|
| 7,055 |
|
|
| 6,600 |
|
|
| 6,289 |
|
Total |
| $ | 68,748 |
|
| $ | 75,896 |
|
| $ | 66,814 |
|
| $ | 55,794 |
|
11
Transaction Price Allocated to Remaining Performance Obligations
As of June 30, 20222023 and December 31, 2021,2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $192,836192,406 and $219,893166,855, respectively. The substantial majority of the unsatisfied performance obligations will be satisfied over the next three years.
As it pertains to the June 30, 20222023 amount, the Company expects to recognize 4547% of the transaction price in the 12 month period ended June 30, 2023,2024, in its condensed consolidated statement of operations and comprehensive loss with the remainder recognized thereafter.
4. National Telehealth Network
In 2012, the Company and an affiliate of Anthem,Elevance Health Inc. formed NTN to expand the availability and adoption of telemedicine. The Company did not have a controlling financial interest in NTN, but it had the ability to exercise significant influence over the operating and financial policies of NTN. Therefore, the Company accounted for its investment in NTN using the equity method of accounting through December 31, 2015.
On January 1, 2016, the Company made an additional investment in NTN, which increased its ownership percentage above 50%. The Company also obtained the right to elect the Chairman of NTN, who has the ability to cast the tie-breaking vote in all decisions. Therefore, on January 1, 2016, the Company obtained control over NTN and has the power to direct the activities that most significantly impact NTN’s economic performance. This step-acquisition was accounted for as a business combination and the results of the operations of NTN from January 1, 2016, have been included in the Company’s condensed consolidated financial statements. However, because the Company owns less than 100% of NTN, the Company recognizes net loss attributable to non-controlling interest in the condensed consolidated statements of operations and comprehensive loss equal to the percentage of the ownership interest retained in NTN by the respective non-controlling party.
The proportionate share of the loss attributed to the non-controlling interest amounted to $5071,040 and $277507 for the three months ended June 30, 20222023 and 2021,2022, respectively. The proportionate share of the loss attributed to the non-controlling interest amounted to $7231,861 and $894723 for the six months ended June 30, 20222023 and 2021,2022, respectively.
The carrying value of the non-controlling interest was $20,89418,113 and $21,61719,974 as of June 30, 20222023 and December 31, 2021,2022, respectively.
12
5. Fair Value Measurements
Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
The following tables presents the Company’s fair value hierarchy for its assets and liabilities that are measured at fair value on a recurring basis and indicate the level within the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value:
|
| June 30, 2022 |
|
| June 30, 2023 |
| ||||||||||||||||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
Money market funds |
| $ | 167,560 |
|
| $ | — |
|
| $ | — |
|
| $ | 167,560 |
|
| $ | 83,533 |
|
| $ | — |
|
| $ | — |
|
| $ | 83,533 |
|
U.S government securities |
|
| — |
|
|
| 372,880 |
|
|
| — |
|
| $ | 372,880 |
|
|
| — |
|
|
| 297,326 |
|
|
| — |
|
| $ | 297,326 |
|
Total financial assets: |
| $ | 167,560 |
|
| $ | 372,880 |
|
| $ | — |
|
| $ | 540,440 |
|
| $ | 83,533 |
|
| $ | 297,326 |
|
| $ | — |
|
| $ | 380,859 |
|
|
| December 31, 2021 |
|
| December 31, 2022 |
| ||||||||||||||||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
Money market funds |
| $ | 671,107 |
|
| $ | — |
|
| $ | — |
|
| $ | 671,107 |
|
| $ | 445,856 |
|
| $ | — |
|
| $ | — |
|
| $ | 445,856 |
|
Total financial assets: |
| $ | 671,107 |
|
| $ | — |
|
| $ | — |
|
| $ | 671,107 |
|
| $ | 445,856 |
|
| $ | — |
|
| $ | — |
|
| $ | 445,856 |
|
Contingent consideration |
| $ | — |
|
| $ | — |
|
| $ | 16,450 |
|
| $ | 16,450 |
| ||||||||||||||||
Total financial liabilities: |
| $ | — |
|
| $ | — |
|
| $ | 16,450 |
|
| $ | 16,450 |
|
The Company’s cash equivalents were invested in money market funds and were valued based on Level 1 inputs. The Company’s investments consisted of U.S. government agency bonds and were valued based on Level 2 inputs. In determining the fair value of its U.S. government agency bonds, the Company relied on quoted prices for similar securities in active markets or other inputs that are observable or can be corroborated by observable market data.
The Company has classified its net liability for contingent earnout considerations relating to the Acquisitions within Level 3 of the fair value hierarchy because the fair value is determined using significant unobservable inputs, which included the Monte Carlo method that uses key assumptions to model future revenue and costs of goods sold projections. A description of the Acquisitions is included within Note 7. The contingent earnout payments for each acquisition are based on the achievement of certain revenue thresholds. During the six months ended June 30, 2022 the fair value of the contingent earnout consideration decreased due to the Company signing an amendment to the agreement accelerating the determination of the Conversa revenue earn-out as of March 31, 2022 that resulted in the issuance of 1,020,964 shares of Class A Common Stock, and signing an amendment to the agreement accelerating the determination of the SilverCloud revenue earn-out as of May 11, 2022 that resulted in the issuance of 4,959,856 shares of Class A Common Stock, which resulted in a net accretion to the contingent considerations of $793.
|
| Six Months Ended June 30, 2022 |
| |
Beginning Balance as of January 1 |
| $ | 16,450 |
|
Accretion of contingent consideration |
|
| 793 |
|
Fair value adjustment |
|
| — |
|
Earned amount issued to shareholders in Class A Common Stock |
|
| (17,243 | ) |
Ending Balance |
| $ | — |
|
During the six months ended June 30, 2022,2023, there were 0no transfers between fair value measurement levels.
13
6. Investments
As of June 30, 20222023 and December 31, 2021,2022, the fair value of the Company’s investments by type of security was as follows:
|
| June 30, 2022 |
|
| June 30, 2023 |
| ||||||||||||||||||||||||||
|
| Amortized |
|
| Gross |
|
| Gross |
|
| Fair Value |
|
| Amortized |
|
| Gross |
|
| Gross |
|
| Fair Value |
| ||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
U.S government securities |
| $ | 374,242 |
|
|
| — |
|
| $ | (1,362 | ) |
| $ | 372,880 |
|
| $ | 291,074 |
|
|
| 6,252 |
|
| $ | — |
|
| $ | 297,326 |
|
|
| $ | 374,242 |
|
| $ | — |
|
| $ | (1,362 | ) |
| $ | 372,880 |
|
| $ | 291,074 |
|
| $ | 6,252 |
|
| $ | — |
|
| $ | 297,326 |
|
December 31, | ||||||||||||||||
Amortized | Gross | Gross | Fair Value | |||||||||||||
Assets: | ||||||||||||||||
U.S government securities | $ | — | $ | — | $ | — | $ | — | ||||||||
$ | — | $ | — | $ | — | $ | — |
13
7. Business Combinations
On August 27, 2021, the Company completed the acquisition of SilverCloud through a merger in which SilverCloud became a wholly-owned subsidiary of the Company. The cash consideration paid was $105,195 net of cash acquired of $12,239. The stock consideration was comprised of 8.1 million shares of the Company’s Class A common stock valued at $85,571, and escrow share consideration of $6,376. SilverCloud is a leading digital mental health platform. The Company is obligated to pay an earn-out of up to $40,000 contingent upon SilverCloud achieving certain revenue thresholds for the year ending December 31, 2022. The Company estimated the fair value of the contingent consideration as of the acquisition date to be $29,360. The contingent consideration is subject to remeasurement at each reporting date until December 31, 2022, with the remeasurement adjustment reported in the consolidated statement of operations and comprehensive loss. The Company signed an amendment to the agreement accelerating the determination of the SilverCloud revenue earn-out as of May 11, 2022, which resulted in the issuance of 4,959,856 shares of Class A Common Stock. The acquisition was considered a stock acquisition for tax purposes and accordingly, the goodwill resulting from this acquisition is not tax deductible. The total acquisition related costs were $4,854 which included transaction costs from financial and legal advisors and other transaction related fees and were recognized as incurred in the Company’s consolidated statement of operations and comprehensive loss in general and administrative expenses.
On August 9, 2021, the Company completed the acquisition of Conversa through a merger in which Conversa became a wholly-owned subsidiary of the Company. The cash consideration paid was $51,331 net of cash acquired of $9,735. The stock consideration was comprised of 4.7 million shares of the Company’s Class A common stock valued at $52,160. Conversa is a leader in automated virtual healthcare. The Company is obligated to pay an earn-out of up to $30,000 contingent upon Conversa achieving certain integration thresholds in the first quarter of 2022, and certain revenue thresholds for the year ending December 31, 2022. The Company estimated the fair value of the contingent consideration as of the acquisition date to be $15,230. The contingent consideration is subject to remeasurement at each reporting date until December 31, 2022, with the remeasurement adjustment reported in the consolidated statement of operations and comprehensive loss. The integration milestone was achieved in December 2021 and $15,000 was paid in January 2022. The Company signed an amendment to the agreement accelerating the determination of the Conversa revenue earn-out as of March 31, 2022, which resulted in the issuance of 1,020,964 shares of Class A Common Stock. The acquisition was considered a stock acquisition for tax purposes and accordingly, the goodwill resulting from this acquisition is not tax deductible. The total acquisition related costs were $2,435 which included transaction costs from financial and legal advisors and other transaction related fees and were recognized as incurred in the Company’s consolidated statement of operations and comprehensive loss in general and administrative expenses.
The Acquisitions were accounted for using the acquisition method of accounting, which requires, among other things, the assets acquired and the liabilities assumed be recognized at their fair values as of the acquisition date. The results of the Acquisitions were integrated within the consolidated financial statements commencing on the aforementioned acquisition dates. Actual revenue and losses of the Acquisitions since the acquisition date as well as pro forma combined results of operations for the Acquisitions have not been presented because the effect of the Acquisitions was not material to the Company’s consolidated financial results for the periods presented.
14
The following table summarizes the preliminary fair value estimates of the assets acquired and liabilities assumed for the SilverCloud and Conversa acquisitions at the respective acquisition dates. The Company, with the assistance of a third-party valuation expert, estimated the preliminary fair value of the acquired tangible and intangible assets with significant estimates such as revenue projections. The allocation of the consideration transferred to the assets acquired and the liabilities assumed for the Acquisitions remains preliminary, and therefore can be revised as a result of additional information obtained due to completing the assessment of the tax attributes of the business combination. Additional adjustments may be recorded within the measurement period, which will not exceed one year from the acquisition date.
Identifiable assets acquired and liabilities assumed:
|
| SilverCloud |
|
| Conversa Health |
| ||
Purchase consideration: |
|
|
|
|
|
| ||
Cash consideration, net of cash acquired |
| $ | 105,195 |
|
| $ | 51,331 |
|
Stock consideration |
|
| 85,571 |
|
|
| 52,160 |
|
Contingent consideration |
|
| 29,360 |
|
|
| 15,230 |
|
Escrow share consideration |
|
| 6,376 |
|
|
|
| |
Working capital adjustment |
|
| (300 | ) |
|
| (127 | ) |
Total consideration transferred |
| $ | 226,202 |
|
| $ | 118,594 |
|
|
|
|
|
|
|
| ||
Allocation of consideration transferred: |
|
|
|
|
|
| ||
Accounts receivable |
| $ | 2,630 |
|
| $ | 3,651 |
|
Identifiable intangible assets |
|
| 78,146 |
|
|
| 34,700 |
|
Other assets |
|
| 491 |
|
|
| 4,604 |
|
Total assets acquired |
|
| 81,267 |
|
|
| 42,955 |
|
Current liabilities |
|
| 2,155 |
|
|
| 8,463 |
|
Deferred revenue |
|
| 5,813 |
|
|
| 4,655 |
|
Other long-term liabilities |
|
| 11,557 |
|
|
| 115 |
|
Total liabilities assumed |
|
| 19,525 |
|
|
| 13,233 |
|
Goodwill |
| $ | 164,460 |
|
| $ | 88,872 |
|
|
| $ | 226,202 |
|
| $ | 118,594 |
|
The amount allocated to goodwill reflects the benefits the Company expects to realize from post-acquisition cross selling opportunities from integrating customer relationships and from the growth of the respective acquisitions’ operations.
The following are the identifiable intangible assets acquired in the Acquisitions and their respective weighted average useful lives, as determined based on initial valuations. The estimated fair value of the Technology and Tradename was determined using a relief from royalty method and the estimated fair value of the Customer relationships was determined using the excess earnings method:
|
| SilverCloud |
|
| Weighted |
|
| Conversa Health |
|
| Weighted |
| ||||
Technology |
| $ | 34,996 |
|
|
| 5.0 |
|
| $ | 20,400 |
|
|
| 5.0 |
|
Tradename |
|
| 10,800 |
|
|
| 7.0 |
|
|
| 4,200 |
|
|
| 5.0 |
|
Customer relationships |
|
| 32,350 |
|
|
| 10.0 |
|
|
| 10,100 |
|
|
| 10.0 |
|
Total |
| $ | 78,146 |
|
|
|
|
| $ | 34,700 |
|
|
|
|
8. Goodwill and Intangible Assets
Goodwill consisted of the following:
|
| Six Months Ended June 30, 2022 |
|
|
| Six Months Ended June 30, 2023 |
|
| ||
Beginning Balance as of January 1 |
| $ | 442,761 |
|
|
| $ | 435,279 |
|
|
Goodwill acquired |
|
| — |
|
| |||||
Goodwill impairment |
|
| (357,585 | ) |
| |||||
Currency translation adjustments |
|
| (8,921 | ) |
|
|
| 1,727 |
|
|
Ending Balance |
| $ | 433,840 |
|
|
| $ | 79,421 |
|
|
15As a result of sustained decreases in the Company's publicly quoted share price and market capitalization during 2023, the Company considered the potential impact on its goodwill, definite-lived intangibles, and other long-lived assets as of June 30, 2023. As a result of this review, the Company did not identify any triggering events that would result in impairment to its definite-lived intangible assets or other long-lived assets.
The Company identified indicators of goodwill impairment for the single reporting unit which required an interim goodwill impairment assessment. In performing the quantitative assessment of goodwill, our reporting unit’s carrying amount exceeded its fair value. The Company estimated the reporting unit's fair value based on the market capitalization and a related control premium of 30% (amount paid by a new controlling shareholder for the benefits resulting from synergies and other potential benefits derived from controlling the acquired company). The Company evaluates the implied control premium or discount by comparing it to control premiums or discounts of recent comparable market transactions, as applicable. As a result of the interim quantitative impairment assessment, the Company recorded a $27,276 and $357,585 non-deductible, non-cash goodwill impairment charge for three and six months ended June 30, 2023. When considering a hypothetical sensitivity analysis to our goodwill assessment in future periods, should a triggering event be identified, a further 10% decline in our stock price could result in an impairment charge of approximately $50,000.
Identified intangible assets consisted of the following:
|
| Gross |
|
| Accumulated |
|
| Carrying |
|
| Weighted |
|
| Gross |
|
| Accumulated |
|
| Carrying |
|
| Weighted |
| ||||||||
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Customer relationships |
| $ | 80,201 |
|
| $ | (20,852 | ) |
| $ | 59,349 |
|
|
| 7.9 |
|
| $ | 80,499 |
|
| $ | (29,015 | ) |
| $ | 51,484 |
|
|
| 7.0 |
|
Contractor relationships |
|
| 535 |
|
|
| (268 | ) |
|
| 267 |
|
|
| 6.5 |
|
|
| 535 |
|
|
| (309 | ) |
|
| 226 |
|
|
| 5.5 |
|
Tradename |
|
| 13,688 |
|
|
| (1,781 | ) |
|
| 11,907 |
|
|
| 5.5 |
|
|
| 14,127 |
|
|
| (4,192 | ) |
|
| 9,935 |
|
|
| 4.6 |
|
Technology |
|
| 88,575 |
|
|
| (23,664 | ) |
|
| 64,911 |
|
|
| 4.7 |
|
|
| 89,634 |
|
|
| (38,062 | ) |
|
| 51,572 |
|
|
| 3.8 |
|
Internally developed software |
|
| 23,991 |
|
|
| (2,255 | ) |
|
| 21,736 |
|
|
| 2.7 |
| ||||||||||||||||
|
| $ | 182,999 |
|
| $ | (46,565 | ) |
| $ | 136,434 |
|
|
|
|
| $ | 208,786 |
|
| $ | (73,833 | ) |
| $ | 134,953 |
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Gross |
|
| Accumulated |
|
| Carrying |
|
| Weighted |
|
| Gross |
|
| Accumulated |
|
| Carrying |
|
| Weighted |
| ||||||||
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Customer relationships |
| $ | 81,053 |
|
| $ | (16,842 | ) |
| $ | 64,211 |
|
|
| 8.2 |
|
| $ | 80,168 |
|
| $ | (24,919 | ) |
| $ | 55,249 |
|
|
| 7.4 |
|
Contractor relationships |
|
| 535 |
|
|
| (247 | ) |
|
| 288 |
|
|
| 7.0 |
|
|
| 535 |
|
|
| (288 | ) |
|
| 247 |
|
|
| 6.0 |
|
Trade name |
|
| 14,435 |
|
|
| (706 | ) |
|
| 13,729 |
|
|
| 5.8 |
|
|
| 14,012 |
|
|
| (3,050 | ) |
|
| 10,962 |
|
|
| 5.0 |
|
Technology |
|
| 90,464 |
|
|
| (16,283 | ) |
|
| 74,181 |
|
|
| 5.0 |
|
|
| 89,262 |
|
|
| (30,895 | ) |
|
| 58,367 |
|
|
| 4.2 |
|
Internally developed software |
|
| 10,155 |
|
|
| — |
|
|
| 10,155 |
|
|
| 3.0 |
| ||||||||||||||||
|
| $ | 186,487 |
|
| $ | (34,078 | ) |
| $ | 152,409 |
|
|
|
|
| $ | 194,132 |
|
| $ | (59,152 | ) |
| $ | 134,980 |
|
|
|
|
14
The Company capitalized $7,085 and $13,836 of costs during the three and six months ended June 30, 2023, related to internally developed software to be sold as a service incurred during the application development stage and is amortizing these costs over the expected lives of the related services. Amortization expense related to intangible assets for the three months ended June 30, 20222023 and 20212022 was $6,3287,565 and $1,9286,328, respectively. Amortization expense related to intangible assets for the six months ended June 30, 20222023 and 20212022 was $12,51414,497 and $3,85612,514, respectively.Estimated future amortization expense of the identified intangible assets as of June 30, 2022,2023, is as follows:
2022 |
| $ | 12,205 |
| ||||
2023 |
|
| 24,361 |
|
| $ | 16,346 |
|
2024 |
|
| 24,377 |
|
|
| 32,659 |
|
2025 |
|
| 24,361 |
|
|
| 32,643 |
|
2026 |
|
| 20,102 |
|
|
| 22,061 |
|
2027 |
|
| 11,331 |
| ||||
Thereafter |
|
| 31,028 |
|
|
| 19,913 |
|
|
| $ | 136,434 |
|
| $ | 134,953 |
|
9.8. Accrued Expenses and other current liabilities
Accrued expenses and other current liabilities consist of the following:
|
| June 30, 2022 |
|
| December 31, 2021 |
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||||
Employee compensation and benefits |
| $ | 15,876 |
|
| $ | 21,572 |
|
| $ | 18,861 |
|
| $ | 26,192 |
|
Professional services |
|
| 14,983 |
|
|
| 8,766 |
|
|
| 7,149 |
|
|
| 10,190 |
|
Earned contingent consideration |
|
| — |
|
|
| 15,000 |
| ||||||||
Provider services |
|
| 4,483 |
|
|
| 5,473 |
|
|
| 5,576 |
|
|
| 8,096 |
|
Other |
|
| 8,307 |
|
|
| 7,900 |
|
|
| 10,995 |
|
|
| 9,780 |
|
Total |
| $ | 43,649 |
|
| $ | 58,711 |
|
| $ | 42,581 |
|
| $ | 54,258 |
|
16
10.9. Stockholders’ Equity
Undesignated Preferred Stock
The Company’s Amended and Restated Certificate of Incorporation authorizes the issuance of 100,000,000 shares of undesignated preferred stock, par value of $0.01 per share, with rights and preferences, including voting rights, designated from time to time by the board of directors. NaNNo shares of preferred stock were issued or outstanding as of June 30, 20222023 and December 31, 2021.2022.
Common Stock
The Company’s Amended and Restated Certificate of Incorporation which authorizes capital stock of 1,000,000,000 shares of Class A common stock, par value $0.01 per share, 100,000,000 shares of Class B common stock, par value $0.01 per share, and 200,000,000 shares of Class C common stock, par value $0.01 per share. Except for the rights noted below, each share of Class A, Class B and Class C common stock have the same rights, are equal in all respects and are treated by us as one class of shares. Each share of Class A and Class C common stock is entitled to one vote per share on all matters presented for a vote, except that Class C common stock does not have the right to vote for elections of directors. Subject to certain conditions, Class B common stock is collectively entitled to a number of votes equal to the product of (x) 1.0408163 and (y) the total number of votes that would be cast at such time by the holders of the Class A and Class C common stock and any other preferred stock entitled to vote under the certificate of incorporation at such time (resulting in the Class B common stock collectively holding 51% of the total outstanding voting power), and each share of Class B common stock will be entitled to a number of votes equal to the total number of votes held by all Class B common stock divided by the total number of then outstanding shares of Class B common stock. Shares of Class B and Class C common stock will be converted into shares of Class A common stock on a one-for-one basis upon the occurrence of certain events. Shares of Class B common stock will automatically convert on the first business day (i) after the date on which the outstanding shares of Class B common stock constitutes less than 5% of the aggregate number of shares of common stock then outstanding, (ii) after the date on which neither founder is serving as an executive officer or (iii) following seven years after the date the amended and restated certificate of incorporation becomes effective, provided that, such period may, to the extent permitted by law and applicable stock exchange rules, be extended for three years upon the affirmative vote of the holders of a majority of the voting power of the then-outstanding shares of Class A common stock entitled to vote thereon, voting separately as a class. Shares of Class C common stock will be convertible at the option of the holder upon determination that a Hart-Scott-Rodino Antitrust Improvements Act (“HSR”) filing is not necessary prior to the holder’s conversion of such shares or, if required, upon expiration or termination of the HSR waiting period.
In the three and six months ended June 30, 2022,2023, 0no shares of Class B common stock were converted to Class A common stock. As of June 30, 2022,2023, the par value of the Class A, Class B and Class C shares was $2,4032,503, $275, and $56, respectively.
|
| Shares |
|
| Shares |
|
| Shares |
|
| Shares |
|
| Shares |
|
| Shares |
| ||||||
Class A |
|
| 1,000,000,000 |
|
|
| 240,397,065 |
|
|
| 240,397,065 |
|
|
| 1,000,000,000 |
|
|
| 251,076,995 |
|
|
| 251,076,995 |
|
Class B |
|
| 100,000,000 |
|
|
| 27,390,397 |
|
|
| 27,390,397 |
|
|
| 100,000,000 |
|
|
| 27,390,397 |
|
|
| 27,390,397 |
|
Class C |
|
| 200,000,000 |
|
|
| 5,555,555 |
|
|
| 5,555,555 |
|
|
| 200,000,000 |
|
|
| 5,555,555 |
|
|
| 5,555,555 |
|
|
|
| 1,300,000,000 |
|
|
| 273,343,017 |
|
|
| 273,343,017 |
|
|
| 1,300,000,000 |
|
|
| 284,022,947 |
|
|
| 284,022,947 |
|
As of June 30, 20222023 and December 31, 2021,2022, the Company had reserved 74,437,86178,971,649 and 61,989,74968,617,245 shares of common stock for the exercise of outstanding stock options, the vesting of restricted stock units, the vesting of performance-based market condition share awards, and the number of shares remaining available for future grant, respectively.
Stock Plans and Stock Options
The Company maintains the 2006 Employee, Director and Consultant Stock Plan as amended and restated (the “2006 Plan”) and 2020 Equity Incentive Plan (the “2020 Plan” together, the “Plans”) under which it has granted incentive stock options, non-qualified stock options, and restricted stock units to employees, officers, and directors of the Company. In connection with the adoption of the
15
2020 Plan, the then-remaining shares of common stock reserved for grant or issuance under the 2006 Plan became available for issuance under the 2020 Plan, and no further grants will be made under the 2006 Plan. The 2020 Plan is administered by the board of directors with respect to awards to non-employee directors and by the compensation committee, with respect to other participants, are collectively, referred to as the plan administrator. The exercise prices, vesting and other restrictions are determined at the discretion of the plan administrator.
17
Options issued under the Plans are exercisable for periods not to exceed ten years, and vest and contain such other terms and conditions as specified in the applicable award document. Options to buy common stock are issued under the Plans, with exercise prices equal to the closing price of shares of the Company’s common stock on the New York Stock Exchange on the date of award.
Activity under the Plans is as follows:
|
| Number of |
|
| Weighted |
|
| Weighted Average |
|
| Aggregate |
| ||||
Outstanding as of January 1, 2022 |
|
| 15,893,755 |
|
| $ | 4.81 |
|
|
| 5.9 |
|
| $ | 23,876 |
|
Granted |
|
| — |
|
| $ | — |
|
|
|
|
|
|
| ||
Forfeited |
|
| (953,627 | ) |
| $ | 6.64 |
|
|
|
|
|
|
| ||
Expired |
|
| (49,542 | ) |
| $ | 5.63 |
|
|
|
|
|
|
| ||
Exercised |
|
| (2,060,215 | ) |
| $ | 2.13 |
|
|
|
|
|
|
| ||
Outstanding as of June 30, 2022 |
|
| 12,830,371 |
|
|
| 4.81 |
|
|
| 5.8 |
|
| $ | 6,198 |
|
Vested and expected to vest as of December 31, 2021 |
|
| 15,395,398 |
|
| $ | 4.61 |
|
|
| 5.8 |
|
| $ | 23,752 |
|
Vested and expected to vest as of June 30, 2022 |
|
| 12,630,154 |
|
| $ | 4.91 |
|
|
| 5.7 |
|
| $ | 6,194 |
|
Options exercisable as of December 31, 2021 |
|
| 13,407,882 |
|
| $ | 4.38 |
|
|
| 5.5 |
|
| $ | 23,120 |
|
Options exercisable as of June 30, 2022 |
|
| 11,634,556 |
|
| $ | 4.82 |
|
|
| 5.6 |
|
| $ | 6,198 |
|
|
| Number of |
|
| Weighted |
|
| Weighted Average |
|
| Aggregate |
| ||||
Outstanding as of January 1, 2023 |
|
| 11,039,551 |
|
| $ | 5.23 |
|
|
| 5.5 |
|
| $ | 996 |
|
Granted |
|
| — |
|
| $ | — |
|
|
|
|
|
|
| ||
Forfeited |
|
| (509,005 | ) |
| $ | 5.42 |
|
|
|
|
|
|
| ||
Expired |
|
| — |
|
| $ | — |
|
|
|
|
|
|
| ||
Exercised |
|
| (286,599 | ) |
| $ | 1.99 |
|
|
|
|
|
|
| ||
Outstanding as of June 30, 2023 |
|
| 10,243,947 |
|
| $ | 5.25 |
|
|
| 5.1 |
|
| $ | 32 |
|
Vested and expected to vest as of December 31, 2022 |
|
| 10,951,967 |
|
| $ | 5.02 |
|
|
| 5.5 |
|
| $ | 996 |
|
Vested and expected to vest as of June 30, 2023 |
|
| 10,209,073 |
|
| $ | 5.09 |
|
|
| 5.1 |
|
| $ | 32 |
|
Options exercisable as of December 31, 2022 |
|
| 10,417,259 |
|
| $ | 4.97 |
|
|
| 5.4 |
|
| $ | 996 |
|
Options exercisable as of June 30, 2023 |
|
| 9,959,014 |
|
| $ | 5.07 |
|
|
| 5.1 |
|
| $ | 32 |
|
NaNNo options were granted in the six months ended June 30, 20222023 and 2021.2022.
Restricted Stock Units
Activity for the restricted stock units is as follows:
|
| Shares |
|
| Weighted Average |
|
| Shares |
|
| Weighted Average |
| ||||
Unvested as of January 1, 2022 |
|
| 11,718,813 |
|
| $ | 19.63 |
| ||||||||
Unvested as of January 1, 2023 |
|
| 19,316,459 |
|
| $ | 10.78 |
| ||||||||
Granted |
|
| 10,622,982 |
|
|
| 4.09 |
|
|
| 13,585,428 |
|
|
| 2.60 |
|
Vested |
|
| (3,005,281 | ) |
|
| 12.55 |
|
|
| (5,202,007 | ) |
|
| 7.03 |
|
Forfeited |
|
| (1,787,601 | ) |
|
| 9.04 |
|
|
| (1,484,678 | ) |
|
| 3.97 |
|
Unvested as of June 30, 2022 |
|
| 17,548,913 |
|
| $ | 7.75 |
| ||||||||
Unvested as of June 30, 2023 |
|
| 26,215,202 |
|
| $ | 7.67 |
|
The total grant date fair value of RSU’s granted for the six months ended June 30, 20222023 was $43,45635,338. Restricted stock units vest over the service period of one to four years. The aggregate intrinsic value of restricted stock units vested for the six months ended June 30, 20222023 and 20212022 was $13,18013,134 and $35,22313,180, respectively.
Restricted Stock Units with a Market Condition
In the six months ended June 30, 20222023, the Company granted performance-based market condition share awards to certain members of the Company’s management team (excluding the co-CEOs), which entitle these employees with the right to receive shares of common stock, upon achievement of certain market capitalizationstock price milestones measured over a rolling thirty day trading-period, subject to the satisfaction of the applicable service vesting conditions. TheThese performance-based market condition share awards for management (other than the co-CEOs) consist of 6three tranches with sixthree separate specified award values that become payable upon the achievement of certain market capitalizationstock price milestones, which can result in a vesting range of up to 10,423,6742,654,598 shares. Also in 2022 the Company granted performance-based market condition share awards to the co-CEOs, which entitle these employees with the right to receive shares of common stock, upon achievement of certain market capitalization milestones measured over a rolling thirty day trading-period, subject to the satisfaction of the applicable service vesting conditions. The performance-based market condition share awards for the co-CEOs consist of 8 tranches with eight separate specified award values that become payable upon achievement of certain market capitalization milestones (subject to specified vesting caps during each of the first two years of the performance period), which can result in a vesting range of up to 7,500,000 shares for each co-CEO. As of June 30, 2022, the performance-based market conditions for the awards to management and the co-CEOs have not been met. These performance-based market condition share awards have a performance period of three years.
1816
As of June 30, 2023, 1,146,310 of the performance-based market condition share awards granted in the prior year have satisfied both the applicable market capitalization milestones and the service vesting conditions.
|
| Shares |
|
| Weighted Average |
|
| Shares |
|
| Weighted Average |
| ||||
Unvested as of January 1, 2022 |
|
| — |
|
| $ | — |
| ||||||||
Unvested as of January 1, 2023 |
|
| 25,602,405 |
|
| $ | 2.30 |
| ||||||||
Granted |
|
| 25,423,674 |
|
|
| 2.21 |
|
|
| 2,654,598 |
|
|
| 2.19 |
|
Vested |
|
| — |
|
|
| — |
|
|
| (1,146,310 | ) |
|
| 2.12 |
|
Cancelled/Forfeited |
|
| (1,568,889 | ) |
|
| 2.62 |
|
|
| (77,168 | ) |
|
| 2.19 |
|
Unvested as of June 30, 2022 |
|
| 23,854,785 |
|
| $ | 2.18 |
| ||||||||
Unvested as of June 30, 2023 |
|
| 27,033,525 |
|
| $ | 2.29 |
|
The total grant-date fair value of performance-based market condition share awards granted during the six months ended June 30, 2023 and 2022 was $5,805 and $56,109 million and 0 performance-based market condition share awards were granted during the six months ended June 30, 2021., respectively.
The weighted average estimated fair value of the performance-based market condition share awards granted during the six months ended June 30, 20222023 was determined using a Monte-Carlo valuation simulation, with the following most significant weighted-average assumptions:
|
| Six Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||
|
| 2022 |
|
| 2023 |
| ||
Risk-free rate |
|
| 2.28 | % |
|
| 4.61 | % |
Term to end of performance period (yrs) |
| 3 years |
|
| 3 years |
| ||
Valuation date stock price |
| $ | 3.43 |
|
| $ | 2.76 |
|
Expected volatility |
|
| 75 | % |
|
| 70 | % |
Expected dividend yield |
|
| 0 | % |
|
| 0 | % |
2020 Employee Stock Purchase Plan
During the six months ended June 30, 2021, the Company had 0t issued any shares under the ESPP. During the six months ended June 30, 2022, the Company issued 425,114 shares under the ESPP. During the six months ended June 30, 2023, the Company issued 513,339 shares under the ESPP. As of June 30, 20222023 4,779,9947,634,642 shares remained available for issuance.
Stock-Based Compensation
Stock-based compensation expense was classified in the condensed consolidated statements of operations and comprehensive loss as follows:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Cost of revenues |
| $ | 426 |
|
| $ | 521 |
|
| $ | 761 |
|
| $ | 910 |
|
| $ | 435 |
|
| $ | 426 |
|
| $ | 833 |
|
| $ | 761 |
|
Research and development |
|
| 2,699 |
|
|
| 2,171 |
|
|
| 4,881 |
|
|
| 3,678 |
|
|
| 2,872 |
|
|
| 2,699 |
|
|
| 5,673 |
|
|
| 4,881 |
|
Selling and marketing |
|
| 1,304 |
|
|
| 2,100 |
|
|
| 3,099 |
|
|
| 3,989 |
|
|
| 2,337 |
|
|
| 1,304 |
|
|
| 4,323 |
|
|
| 3,099 |
|
General and administrative |
|
| 10,478 |
|
|
| 5,934 |
|
|
| 18,251 |
|
|
| 10,791 |
|
|
| 15,869 |
|
|
| 10,478 |
|
|
| 31,681 |
|
|
| 18,251 |
|
Total |
| $ | 14,907 |
|
| $ | 10,726 |
|
| $ | 26,992 |
|
| $ | 19,368 |
|
| $ | 21,513 |
|
| $ | 14,907 |
|
| $ | 42,510 |
|
| $ | 26,992 |
|
As of June 30, 2022,2023, the unrecognized stock-based compensation expense related to unvested common stock-based awards was $116,81894,720, which is expected to be recognized over a weighted-average period of 2.62.4 years.
17
11.10. Commitments and Contingencies
Indemnification
The Company’s arrangements generally include certain provisions for indemnifying customersclients against third-party claims asserting infringement of certain intellectual property rights in the ordinary course of business. The Company also regularly indemnifies customersclients against third-party claims that the company’s products or services breach applicable law or regulation or from claims resulting from a breach of the business associate agreement in place with the customer.client. In addition, the Company indemnifies its officers, directors and certain key employees while they are serving in good faith in their capacities. Through June 30, 20222023 and December 31, 2021,2022, there have been 0no claims under any indemnification provisions.
19
Litigation
From time to time, and in the ordinary course of business, the Company may be subject to various claims, charges, and litigation. On September 14, 2020, the Company received a letter from Teladoc Health, Inc. ("Teladoc") alleging that certain of the Company’s cart products and associated peripherals infringe upon their patents. On October 12, 2020, Teladoc filed a claim against the Company related to these allegations. On June 30, 2022, the claim was dismissed pursuant to a confidential settlement between the parties. As of June 30, 20222023 and December 31, 2021,2022, the Company did 0not have any pending claims, charges or litigation that it expects would have a material adverse effect on its consolidated financial position, results of operations or cash flows.
12.11. Income Taxes
As a result of the Company’s history of net operating losses (“NOL”), the Company continues to maintain a full valuation allowance against its domestic net deferred tax assets. For the three and six months ended June 30, 2022,2023, the Company recognized an income tax expense of $716 and $2,191, primarily due to federal, state and foreign income tax expense. During the three and six months ended June 30, 2022, the Company recorded income tax expense of $461 and $129, primarily due to state and foreign income tax. During the three and six months ended June 30, 2021, the Company recorded income tax expense of $103 and $412, primarily due to estimated state and foreign income taxes.
13.12. Related-Party Transactions
Philips Holding USA, Inc.
Philips Holding USA, Inc. (“Philips”) was determined to be a related party through June 2021, because a member of the Company’s board of directors was the Business Leader of Philips Population Health Management. In the three and six months ended June 30, 2021 the Company recognized revenue of $758 and 1,658, respectively from contracts with this customer.
Anthem Inc.
Anthem Inc. (“Anthem”) was determined to be a related party through February 2021, because a member of the Company’s board of directors served as the Vice President of Anthem. Prior to that director's departure from Anthem in February 2021 the Company recognized revenue of $7,218 from contracts with this customer.
Cleveland Clinic
Cleveland Clinic is a related party because a member of the Company’s board of directors is an executive advisor to Cleveland Clinic. As of June 30, 20222023 and December 31, 2021,2022, the Company held total deferred revenue of $261172 and $456355, respectively from contracts with this customer.client. As of June 30, 20222023 and December 31, 2021,2022, amounts due from Cleveland Clinic were $8291 and $441995, respectively.
During the three months ended June 30, 20222023 and 2021,2022, the Company recognized revenue of $694590 and $279694, respectively, from contracts with this customer.client. During the six months ended June 30, 20222023 and 2021,2022, the Company recognized revenue of $1,4541,189 and $5301,454, respectively, from contracts with this customer.
CCAW, JV LLC
CCAW, JV LLC is a related party because it is a joint venture formed between the Company and Cleveland Clinic for which the Company has a minority owned interest in. During the year ended December 31, 2020, the Company made an initial investment in CCAW, JV LLC of $2,940 for its less than 50% interest in the joint venture. During the threesix months ended June 30, 2021,2023 the Company made a capital contributioncontributions of $2,548, related to a portion of the phase one capital commitment. During the three months ended June 30, 2022 the Company made a capital contribution of $1,9603,920 related to a portion of the phase one capital commitment.
During the three months ended June 30, 20222023 and 20212022 the Company recognized revenue of $469393 and $412469 from contracts with this customer,client, respectively. During the six months ended June 30, 20222023 and 2021,2022, the Company recognized revenue of $923782 and $874923, respectively, from contracts with this customer, respectively.customer.
As of June 30, 20222023 and December 31, 2021,2022, the Company held total deferred revenue of $622538 and $1,4261,320, respectively, from contracts with this customer.client. As of June 30, 20222023 and December 31, 2021,2022, amounts due from CCAW, JV LLC were $0 and $1,6131,602.
2018
14.13. Net Loss per Share
Basic and diluted net loss per share attributable to common stockholders was calculated as follows:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net loss |
| $ | (69,652 | ) |
| $ | (38,136 | ) |
| $ | (139,905 | ) |
| $ | (77,941 | ) |
| $ | (93,515 | ) |
| $ | (69,652 | ) |
| $ | (492,024 | ) |
| $ | (139,905 | ) |
Net loss attributable to non-controlling interest |
|
| (507 | ) |
|
| (277 | ) |
|
| (723 | ) |
|
| (894 | ) |
|
| (1,040 | ) |
|
| (507 | ) |
|
| (1,861 | ) |
|
| (723 | ) |
Net loss attributable to American Well Corporation |
| $ | (69,145 | ) |
| $ | (37,859 | ) |
| $ | (139,182 | ) |
| $ | (77,047 | ) |
| $ | (92,475 | ) |
| $ | (69,145 | ) |
| $ | (490,163 | ) |
| $ | (139,182 | ) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Weighted-average common shares outstanding |
|
| 273,320,740 |
|
|
| 249,366,652 |
|
|
| 273,615,031 |
|
|
| 246,471,733 |
|
|
| 283,059,929 |
|
|
| 273,320,740 |
|
|
| 281,504,945 |
|
|
| 273,615,031 |
|
Net loss per share attributable to common |
| $ | (0.25 | ) |
| $ | (0.15 | ) |
| $ | (0.51 | ) |
| $ | (0.31 | ) |
| $ | (0.33 | ) |
| $ | (0.25 | ) |
| $ | (1.74 | ) |
| $ | (0.51 | ) |
The Company’s potential dilutive securities, which include stock options, convertible preferredunvested restricted stock units and unvested restrictedperformance market-based stock units, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential common shares equivalents presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Unvested restricted stock units |
|
| 14,856,621 |
|
|
| 7,724,006 |
|
|
| 14,856,621 |
|
|
| 7,724,006 |
|
|
| 25,676,742 |
|
|
| 14,856,621 |
|
|
| 25,676,742 |
|
|
| 14,856,621 |
|
Unvested performance market-based stock units |
|
| 23,854,785 |
|
|
| — |
|
|
| 23,854,785 |
|
|
| — |
|
|
| 27,033,525 |
|
|
| 23,854,785 |
|
|
| 27,033,525 |
|
|
| 23,854,785 |
|
Options to purchase shares of common stock |
|
| 12,830,371 |
|
|
| 17,562,754 |
|
|
| 12,830,371 |
|
|
| 17,562,754 |
|
|
| 10,243,947 |
|
|
| 12,830,371 |
|
|
| 10,243,947 |
|
|
| 12,830,371 |
|
|
|
| 51,541,777 |
|
|
| 25,286,760 |
|
|
| 51,541,777 |
|
|
| 25,286,760 |
|
|
| 62,954,214 |
|
|
| 51,541,777 |
|
|
| 62,954,214 |
|
|
| 51,541,777 |
|
2119
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future results of operations, including descriptions of our business plan and strategies, are forward-looking statements. These statements often include words such as “anticipate,” “expect,” “suggests,” “plan,” “believe,” “intend,” “estimates,” “targets,” “projects,” “should,” “could,” “would,” “may,” “will,” “forecast,” or the negative of these terms, and other similar expressions, although not all forward-looking statements contain these words.
The forward-looking statements and projections are subject to and involve risks, uncertainties and assumptions and you should not place undue reliance on these forward-looking statements or projections. Although we believe that these forward-looking statements and projections are based on reasonable assumptions at the time they are made, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements and projections.
Important factors that may materially affect such forward-looking statements and projections include the following:
The foregoing list of factors is not exhaustive and does not necessarily include all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. The information in this Quarterly Report should be read carefully in conjunction with other uncertainties and potential events described in our Form 10-K filed with the SEC on February 28, 202222, 2023 (the “Form 10-K”).
The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date of this Quarterly Report. Except as required by law or regulation, we do not undertake any obligation to update any forward-looking statements to reflect subsequent events or circumstances
2220
Overview
We areAmwell is a leading enterprise software company enabling digital delivery of care for healthcare’s key stakeholders. We empower health providers, payers and innovators to achieve their digital ambitions, enabling a hybrid model of in-person, virtual and automated care. We provide our clients with the core technology and services necessary to successfully develop and distribute virtualdigital care programs that meet their strategic, operational, financial and clinical objectives under their own brands. The Amwell Platform is a complete digitalOur enterprise software connects care delivery solutionacross in-person, virtual and automated modalities and provides an open, scalable infrastructure that equipscan grow alongside our health system, health plan, government,clients. We bring technology and innovator clients with the tools to enableservices that deliver new models of care, for their patientsstrategic partnerships, consistent execution, and members. Our scalable technology integrates with our clients’ existing offerings and clinical workflows, spanning the continuum of care and enabling care delivery across a wide variety of clinical, retail, school and home settings. Our client-focused approach drives our success as one of the largest global digital healthcare enterprise software companies.better outcomes. As of December 31, 2021,2022, we powered the digital care programs of overmore than 55 health plans, which collectively represent more than 8090 million covered lives, as well as approximately 150140 of the nation’s largest health systems, encompassingrepresenting more than 2,000 hospitals. Since inception, we have powered over 17.7approximately 24.1 million telehealthvirtual care visits for our clients, including more than 3.3approximately 3.2 million in the six months ended June 30, 2022.2023.
We believe Amwell makes this digital care transformation possible for the healthcare ecosystem. The Amwell telehealth platform ("Amwell Platform")Our enterprise software enables virtual and automated care deliverydigital innovation across the full healthcare continuum – fromincluding urgent and primary and urgent care, in the home tosecond opinion services, behavioral health, chronic condition management and high acuity specialty consults, such as telestroke and telepsychiatry, in the hospital. We support both on-demand and scheduled consultations for providers and offer pre-packaged care modules and programs that power overmore than 100 unique use cases today. The Amwell Platform
Our enterprise software can be fully integrated into our clients’ patient/health plan member and patient portals and provider and health plan workflows. Providers can launch telehealthvirtual visits directly from their native EHRs, with seamless integration to their payer eligibility and claims systems. Providers, patients and members can access this care through a full range of CarepointsAmwell Carepoint™,devices, including via mobile, web, phone and our proprietary Carepoint carts that support multi-way video, phone or secure messaging interactions. Through our recent2021 acquisitions of ConversaConversa® Health, Inc. (“Conversa”) and SilverCloudSilverCloud® Health Holdings, Inc (“SilverCloud”) (together, the “August 2021 Acquisitions”), we enable automated care touchpoints, support ongoing treatment and care through digital engagements, and escalate care when needed to a live clinician.
As of June 30, 2022,2023, approximately 100,000102,500 of our clients’ providers use the Amwell Platformour enterprise software to serve their patients and members. When needed, we augment and extend our clients’ clinical capabilities with Amwell Medical GroupGroup® (“AMG”), aour nationwide network of clinical entities with over 6,500approximately 3,500 multi-disciplinary providers covering 50 states and Washington, D.C., with 24/7/365 coverage.
The Converge™ platform is the latest version of the Amwell Platformour enterprise software and is designed to be future-ready, reliable, flexible, scalable, secure and fully integrated with other healthcare software systems. The Converge platform offers state-of-the-art data architecture and video capabilities, flexibility and scalability, andas well as a user experience focused ondesigned around the needs of patients, members and providers. ConvergeIt has been designed from the ground up with the holistic understanding that the future of care of any one patientperson will inevitably blend a mix of physical,in-person, digital and automated experiences. The virtual caretelehealth of todayyesterday has grown to encompass hybrid care models, asynchronous and automated care, remote patient monitoring, patient and provider engagement — and the flow of data that drives all of the above.
WithThe Converge platform delivers the digital care capabilities that health systems and health plans care about — for example, virtual primary care, post-discharge follow-up, chronic condition management, remote patient monitoring — are alignedand aligns them into a single digital care operating system that aggregates all of the data from these care experiences to provide real-time insight. By providing a single platform for the digital distribution of care, the Converge platform will accelerate innovation and interoperability for health system and health plan clients as well as other healthcare innovators who aim to offer a seamless experience for providers, patients and members.
The development of Converge represents a re-platforming by the Company to provide our customer base with an improved and more robust solution. This re-platforming has been an ongoing effort that resulted in increased research and development costs during the peak development period and we expect to see a return to normal levels of spend in the coming quarters. Re-platforming may impact timing of revenue as we manage on-boarding and customer churn. During the three months ended June 30, 2023, 43% of our visits were provided on the Converge platform, which was an increase from 28% in the fourth quarter of 2022. As of June 30, 2023, we have a thumbs-up rating by patients and providers of over 90%. A major strategic focus for us in 2023 is to continue the migration of our health system and health plan clients onto the Converge platform.
21
Our Business Model
The Amwell Platform is a complete digital care delivery solution that equips our health system, health plan and innovator partners with the tools to enable new models of care for their patients and members. We sell the Amwell Platformour enterprise software on a subscription basis, which, with our modular platform architecture, allows our clients to introduce innovative digital healthcare use cases over time, expanding our subscription revenue opportunity. To support the Amwell Platform,enterprise software, we offer professional services on a fee-for-service basis and a range of patient and provider access CarepointsCarepoint devices and software that support hospital and home use cases and access to AMG, our affiliated medical group that provides clinical services on a fee-for-service basis. The combination of the Platform,enterprise software, services and CarepointsCarepoint hardware allows our clients to deploy telehealthdigital care solutions across their full enterprise, deepening their relationships with existing and new patients and members through improved care access and coordination, cost and quality. Our contracts are typically three years in length but may be longer for our largest strategic customerclient partners.
Total subscription fees received were $29.6$28.0 million and $26.8$29.6 million for the three months ended June 30, 20222023 and 2021,2022, respectively, and $58.3$56.7 million and $51.4$58.3 million for the six months ended June 30, 2023, and 2022, and 2021, respectively.
23
Health Systems
For our health system customers, the Amwell Platform’sclients, our enterprise software’s primary function is to facilitate consultations between patients and providers affiliated with the health system. Our typical contracts with health systems are mainly the platform subscription, but also include services delivered by AMG to complement the health system provider resources, services for technology integration, marketing and Carepoints.Carepoint hardware. Subscription fees are recurring and are determined based on the initial forecasted number of overall consultations throughout the entire health system on the Amwell Platformour enterprise software and net patient revenue of the health system. Subscriptions include a maximum number of consultations that can be delivered on the platform and similar to a cellular phone plan, when consultations exceed the contractual maximum, overages result in higher subscription fees in the following annual period. As the health system expands its use of the Amwell Platformour enterprise software through additional modules, there is a corresponding increase in subscription fees.
To supplement a health system’s own network of healthcare providers, health systems often choose to purchase clinical services from AMG to deliver care for certain specialties such as telepsychiatry, behavioral health therapy and general urgent care, or to simply operate as backup providers on nights and weekends. AMG services are provided on a fee-for-service basis.
Health Plans
For our health plan clients, the Amwell Platform provides betterour enterprise software functions to expand member access to care, betterimprove health outcomes and the member experience, and reduce costs through care coordination of care and the ability to directcontain follow-up care referrals to providers owned or affiliated with the respectivea health plan. All of these functions lower the overall cost of care for health plan clients: improved population access to needed services reduces unneeded Emergency Department usage and better coordination of care can improve outcomes and lower the overall cost of care.plan’s own network. Currently, our typical health plan contract includes a recurring subscription fee based on the number of members who have access to the Amwell Platformour enterprise software plus additional subscription fees associated with the variousadd-on programs we offerthat extend from urgent care services to longitudinal care. As the health plan.plan expands its offerings on our enterprise software through additional programs or additional covered lives, there is a corresponding increase in subscription fees.
Our health plan clients mainly purchase clinical services for their members through AMG. They may also maintain relationships with other in network provider organizations to deliver care on the Amwell Platform on their behalf.that leverage our AMG network. These visit consultations are charged on a fee-for-service basis and range in price based on the type of consultation and the specialty of the provider. We also have digital programs like our SilverCloud by Amwell Behavioral Health and our automated care programs leveraging the technology from our acquisition of Conversa, as well as third-party partner programs, including SWORD Health, DermatologistOnCall and Dario Health, which we announced in March 2023. These programs are each priced differently, with some including recurring subscription fees and others including volume-based and visit fees.
Innovators
Amwell has a number of unique customersclients that use our Platform in various ways to support their products. For example, we support: (i) Philips’ sleep apnea products and programs, (ii) a joint-venture with Cleveland Clinic and Amwell, (iii) Meuhedet’s advanced, hybrid-virtual international health plan and (iv) in the future, we plan to deliver virtual care capabilities delivered through Converge toSolaborate and LG devices and peripheral technologies within the walls of hospitals.technologies.
Our contracts with our innovator customersclients vary from simple subscription fee-only contracts, where an innovator customerclient embeds our technology within their product, to broad subscription fee and services contracts that resemble a blend of our health system and health plan profile contracts.
22
Visits
Amwell’s clinical affiliate AMG has built a network of over 6,500 providers who are registered and credentialed to deliver care on the Amwell Platform.our enterprise software. This clinical network is designed and operated in a way that allows us to meet the aggregate visit demand requirements of our health plan and health system clients, spanning a broad mix of specialties including, for example, internal medicine, Family Medicine, Psychiatry, Gynecology, Anesthesiology, Nutritionist, Sleep Medicine, Pain Management, Psychology, Pulmonology, Urology, Health Coach, Orthopedic Surgery, Case Manager, Emergency Medicine, Gastroenterology, Nephrology, Pediatrician, Lactation Consultant, Social Worker and Vascular Surgery.
AMG earns fee-for-service revenue for each episode of care delivered on the Amwell Platformour enterprise software by its providers with fees varying by physician specialty or clinical program. These clinical fees vary significantly from $59 to more than $800 per consultation or case based on the specialty and may require an additional module subscription, as in the case of telepsychiatry.
Fees received from AMG-related visits were $29.7$28.1 million and $27.5$29.7 million for the three months ended June 30, 20222023 and 2021,2022, respectively, and $60.5$60.6 million and $55.4$60.5 million for the six months ended June 30, 2023, and 2022, and 2021, respectively.
24
Services & CarepointsCarepoint Hardware
We offer a full suite of paid, supporting services to our clients to enable their telehealthvirtual care offerings, including professional services to facilitate telehealthvirtual care implementation, workflow design, systems integration and service expansion. To help our clients promote adoption and utilization, we offer patient and provider engagement services through our internal digital engagement agency.
Our customersclients often deploy telemedicinevirtual care through a variety of our proprietary Carepoints,Carepoint hardware, which are medical carts and kiosks designed for various clinical and community settings. These CarepointsCarepoint devices enable providers to deliver digital care into clinical care locations, such as the ED and clinics, as well as into community settings such as retail stores, community centers, employer sites, skilled nursing facilities and schools. CarepointsCarepoint offerings consist of hardware integrated into our Platform but can also be deployed independent of our software solution. Our Carepoints areCarepoint hardware is designed by our product development teams and manufactured through partner and contract relationships.
Fees received from the provision of services and Carepoints were $5.2$6.3 million and $5.9$5.2 million for the three months ended June 30, 20222023 and 2021,2022, respectively, and $10.0$9.1 million and $11.1$10.0 million for the six months ended June 30, 20222023, and 2021,2022, respectively.
Acquisitions
We have expanded and intend to continue to expand our Platformenterprise software through research and development as well as the pursuit of selective acquisitions. We have completed multiple acquisitions since our inception, which we believe have expanded the channels that we serve and our distribution capabilities as well as broadening our service offering. Our acquisitions of SilverCloud and Conversa add proven longitudinal care and behavioral healthcare capabilities to our digital care enablement platform. SilverCloud is a leading digital mental health platform. Conversa is a leader in automated virtual healthcare. Acquisition costs and integration costs are an additional one timeone-time cost incurred as part of the acquisitions and investment in the future growth of the business.
Key Metrics and Factors Affecting Our Performance
We believemonitor the following key metrics to help us evaluate our future growth, successbusiness, identify trends affecting our business, formulate business plans and performance are dependent on many factors, including those set forth below.make strategic decisions. While these factorsmetrics present significant opportunities for us, they also represent the challenges that we must successfully address in order to grow our business and improve ourthe results of our operations.
TelehealthDigital Care Utilization
TelehealthDigital care utilization is a key driver of our business. A client’s overall utilization of its telehealthdigital care platform provides an important measure of the value they derive. TelehealthDigital care utilization drives our business in three important ways. First, to the extent a client succeeds with its telehealthdigital care program and sees good usage, they are more likely to renew and potentially expand their contract with us. Second, our health systems agreements typically include a certain number of visits conducted by their own providers annually and provide that as certain volume thresholds are exceeded, its annual license fees will rise to reflect this growing value. Third, to the extent that clients utilize provider services from AMG, Amwell derives revenue from clinical fees. We expect that our future revenues will be driven by the growing adoption of telehealthdigital care and our ability to maintain and grow market share within that market.
COVID-19 has dramatically accelerated telehealthdigital care adoption seen in both overall volumes and embracement of delivering higher acuity care in a
23
virtual medium. Peak COVID-19 pandemic visit growth reflected several factors. Many patients needed assessment for respiratory or other COVID-19-like symptoms and sought to be assessed for possible referral to hospital or testing facilities. In addition, many patients, especially those with health vulnerabilities, sought to avoid going into brick and mortar facilities – and indeed our health systems’ clients preferred wherever possible to treat patients remotely at home for non-COVID-19 related ongoing healthcare needs. Finally, we saw significantSignificant expansion of reimbursement for telehealthdigital care during the COVID-19 crisis which made telehealthdigital care more affordable for many people.
25
We continue to experience these levels of telehealthstrong digital care adoption and usage of our Platformenterprise software and products. In the six months ended June 30, 2022,2023, our clients completed a total of 3.33.2 million visits on the Amwell Platform,using our enterprise software, while in the six months ended June 30, 2021 2.92022 3.3 million visits were completed. AMG providers accounted for 24% and 23% of total visits performed on the Amwell Platformusing our enterprise software during the six months ended June 30, 20222023 and 2021,2022, respectively. We demonstrated that virtual care goes beyond urgent care pandemic needs through the increase ina significant number of scheduled visits. Scheduled visits increased to 2.4were 2.2 million from 2.1 million duringfor the six months ended June 30, 20222023 and 2021, respectively.2.4 million for the six months ended June 30, 2022.
Total Overall Quarterly Visits | Total Overall Quarterly Visits |
| Total Overall Quarterly Visits |
| ||||||||||||
Quarter Ended |
| Overall Visits |
|
| Performed by Customer Providers |
|
| Overall Visits |
|
| Performed by Client Providers |
| ||||
June 30, 2023 |
|
| 1,485,000 |
|
|
| 76 | % | ||||||||
March 31, 2023 |
|
| 1,710,000 |
|
|
| 75 | % | ||||||||
December 31, 2022 |
|
| 1,715,000 |
|
|
| 71 | % | ||||||||
September 30, 2022 |
|
| 1,450,000 |
|
|
| 74 | % | ||||||||
June 30, 2022 |
|
| 1,525,000 |
|
|
| 76 | % |
|
| 1,525,000 |
|
|
| 76 | % |
March 31, 2022 |
|
| 1,775,000 |
|
|
| 78 | % |
|
| 1,775,000 |
|
|
| 78 | % |
December 31, 2021 |
|
| 1,525,000 |
|
|
| 75 | % | ||||||||
September 30, 2021 |
|
| 1,425,000 |
|
|
| 75 | % | ||||||||
June 30, 2021 |
|
| 1,300,000 |
|
|
| 75 | % | ||||||||
March 31, 2021 |
|
| 1,575,000 |
|
|
| 80 | % |
Active Providers
An important indicator of the value of our Amwell Platformenterprise software to our clients is the number of non-AMG providers that are active on the Amwell Platform.enterprise software. We define “Active Providers” as providers that have delivered a visit on the Amwell Platformenterprise software at least once in the last 12 months. Active Providers demonstrate the prevalence of telehealthdigital care within our clients in both home and hospital environments. We believe Active Providers is a measure of our success in delivering on our mission of enabling access to care. We expect that the overall number of Active Providers will increase over time as a result of several factors:factors, however during re-platforming efforts temporary declines may could occur:
We continued to experience growth in core
Total Active Providers |
| |||||||||||
Quarter Ended |
| Total Active Providers |
|
| Client Providers |
|
| AMG |
| |||
June 30, 2023 |
|
| 106,000 |
|
|
| 102,500 |
|
|
| 3,500 |
|
March 31, 2023 |
|
| 108,000 |
|
|
| 104,500 |
|
|
| 3,500 |
|
December 31, 2022 |
|
| 107,000 |
|
|
| 103,500 |
|
|
| 3,500 |
|
September 30, 2022(1) |
|
| 104,000 |
|
|
| 100,500 |
|
|
| 3,500 |
|
June 30, 2022(1) |
|
| 101,000 |
|
|
| 97,500 |
|
|
| 3,500 |
|
March 31, 2022(1) |
|
| 100,000 |
|
|
| 96,500 |
|
|
| 3,500 |
|
24
Total Active Providers |
| |||||||||||
Quarter Ended |
| Total Active Providers |
|
| Customer Providers |
|
| AMG |
| |||
June 30, 2022 |
|
| 103,500 |
|
|
| 100,000 |
|
|
| 3,500 |
|
March 31, 2022 |
|
| 102,000 |
|
|
| 98,500 |
|
|
| 3,500 |
|
December 31, 2021 |
|
| 91,500 |
|
|
| 88,000 |
|
|
| 3,500 |
|
September 30, 2021 |
|
| 80,000 |
|
|
| 76,000 |
|
|
| 4,000 |
|
June 30, 2021 |
|
| 71,000 |
|
|
| 67,000 |
|
|
| 4,000 |
|
March 31, 2021 |
|
| 81,000 |
|
|
| 76,000 |
|
|
| 5,000 |
|
Regulatory Environment
Our operations are subject to comprehensive United States federal, state and local and international regulation in the jurisdictions in which we do business. Our ability to operate profitably will depend in part upon our ability, and that of our affiliated providers, to maintain all necessary licenses and to operate in compliance with applicable laws and rules. The COVID-19 pandemic has resulted in a reduction of regulatory and reimbursement barriers for telehealth, including removing the originating site restrictions for fee for service Medicare; the expansion of Medicare and commercial reimbursement for telehealth and an easing of state licensure policies for providers. However, it is uncertain how long the relaxed policies will remain in effect, and there can be no guarantee that onceIn response to the COVID-19 pandemic, is over that such restrictions willstate and federal regulatory authorities loosened or removed a number of regulatory requirements in order to increase the availability of digital care services. For example, many state governors issued executive orders permitting physicians and other health care professionals to practice in their state without any additional licensure or by using a temporary, expedited or abbreviated licensure process so long as they hold a valid license in another state. In addition, changes were made to the Medicare and Medicaid programs (through waivers and other regulatory authority) to increase access to digital care services by, among other things, increasing reimbursement, permitting the enrollment of out of state providers and eliminating prior authorization requirements. With the end of the public health emergency in the United States in May 2023, we expect many of these regulatory requirements to be re-instated. However, we do not be reinstated or changed inanticipate a way that adversely affectsmaterial impact on our business.business resulting from the foregoing.
26
Seasonality
Visit volumes typically follow the annual flu season, rising during quarter four and quarter one and falling in the summer months. COVID-19 has altered these historical trends as we saw spikes other times in the precautions being taken to prevent the spread of COVID-19 have essentially flattened the spike traditionally experienced related to the flu season.year with new variant outbreaks. The future impact of COVID-19 on seasonality is unknown as there could be additional surges and demand on telehealthvirtual care visits. While we sell to and implement our solutions to clients year-round, we experience some seasonality in terms of when we enter into agreements with our clients and when we launch our solutions to members.
Non-GAAP Financial Measures
In addition to our financial results determined in accordance with GAAP, we believe adjusted EBITDA, a non-GAAP measure, is useful in evaluating our operating performance. We use adjusted EBITDA to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that this non-GAAP financial measure, when taken together with the corresponding GAAP financial measures, provides meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of adjusted EBITDA is helpful to our investors as it is a metric used by management in assessing the health of our business and our operating performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measure as a tool for comparison. A reconciliation is provided below for our non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measure and the reconciliation of this non-GAAP financial measure to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
Adjusted EBITDA
Adjusted EBITDA is a key performance measure that our management uses to assess our operating performance. Because adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure for business planning purposes and in evaluating acquisition opportunities.
We calculate adjusted EBITDA as net loss adjusted to exclude (i) interest income and other income, net, (ii) tax benefit and expense, (iii) depreciation and amortization, (iv) goodwill impairment, (v) stock-based compensation expense, (v) public offering(vi) severance expenses, (vi) acquisition-related expenses, (vii) capitalized software costs, (viii) litigation expenses related to the defense of our patents in the patent infringement claim filed by Teladoc and (viii)(ix) other items affecting our results that we do not view as representative of our ongoing operations, including noncash compensation costs incurred by selling shareholders and adjustments made to the contingent consideration.
2725
The following table presents a reconciliation of adjusted EBITDA from the most comparable GAAP measure, net loss, for the three and six months ended June 30, 20222023 and 2021:2022:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
(in thousands) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Net loss |
| $ | (69,652 | ) |
| $ | (38,136 | ) |
| $ | (139,905 | ) |
| $ | (77,941 | ) |
| $ | (93,515 | ) |
| $ | (69,652 | ) |
| $ | (492,024 | ) |
| $ | (139,905 | ) |
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Depreciation and amortization |
|
| 6,724 |
|
|
| 2,484 |
|
|
| 13,322 |
|
|
| 4,990 |
|
|
| 7,718 |
|
|
| 6,724 |
|
|
| 14,961 |
|
|
| 13,322 |
|
Interest income and other (expense) income, net |
|
| (764 | ) |
|
| (224 | ) |
|
| (872 | ) |
|
| (285 | ) | ||||||||||||||||
Benefit (Expense) from income taxes |
|
| 461 |
|
|
| 103 |
|
|
| 129 |
|
|
| 412 |
| ||||||||||||||||
Interest income and other income (expense), net |
|
| (2,332 | ) |
|
| (764 | ) |
|
| (3,272 | ) |
|
| (872 | ) | ||||||||||||||||
Expense from income taxes |
|
| 716 |
|
|
| 461 |
|
|
| 2,191 |
|
|
| 129 |
| ||||||||||||||||
Goodwill Impairment |
|
| 27,276 |
|
|
| — |
|
|
| 357,585 |
|
|
| — |
| ||||||||||||||||
Stock-based compensation |
|
| 14,907 |
|
|
| 10,726 |
|
|
| 26,992 |
|
|
| 19,368 |
|
|
| 21,513 |
|
|
| 14,907 |
|
|
| 42,510 |
|
|
| 26,992 |
|
Public offering expenses(1) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,223 |
| ||||||||||||||||
Acquisition-related expenses |
|
| — |
|
|
| 587 |
|
|
| — |
|
|
| 587 |
| ||||||||||||||||
Severance(1) |
|
| 406 |
|
|
| — |
|
|
| 1,981 |
|
|
| — |
| ||||||||||||||||
Capitalized software costs |
|
| (7,085 | ) |
|
| — |
|
|
| (13,836 | ) |
|
| — |
| ||||||||||||||||
Noncash expenses and contingent consideration adjustments(2) |
|
| 1,259 |
|
|
| — |
|
|
| 4,996 |
|
|
| — |
|
|
| — |
|
|
| 1,259 |
|
|
| — |
|
|
| 4,996 |
|
Litigation expense |
|
| 4,261 |
|
|
| 808 |
|
|
| 5,399 |
|
|
| 1,547 |
| ||||||||||||||||
Litigation expense(3) |
|
| — |
|
|
| 4,261 |
|
|
| — |
|
|
| 5,399 |
| ||||||||||||||||
Adjusted EBITDA |
| $ | (42,804 | ) |
| $ | (23,652 | ) |
| $ | (89,939 | ) |
| $ | (50,099 | ) |
| $ | (45,303 | ) |
| $ | (42,804 | ) |
| $ | (89,904 | ) |
| $ | (89,939 | ) |
Some of the limitations of adjusted EBITDA include (i) adjusted EBITDA does not properly reflect capital commitments to be paid in the future, and (ii) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and adjusted EBITDA does not reflect these capital expenditures. Our public offering expenses, including legal, accounting and other professional expenses reflect cash expenditures and we expect such expenditures to recur from time to time. Our adjusted EBITDA may not be comparable to similarly titled measures of other companies because they may not calculate adjusted EBITDA in the same manner as we calculate the measure, limiting its usefulness as a comparative measure. In evaluating adjusted EBITDA, you should be aware that in the future we will incur expenses similar to the adjustments in this presentation. Our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by these expenses or any unusual or non-recurring items. Adjusted EBITDA should not be considered as an alternative to loss before benefit from income taxes, net loss, earnings per share, or any other performance measures derived in accordance with U.S. GAAP. When evaluating our performance, you should consider adjusted EBITDA alongside other financial performance measures, including our net loss and other GAAP results.
Components of Statement of Operations
Revenue
The Company has demonstrated continued revenue growth as a direct result of the increasing acceptance of telehealth,digital care, our penetration of the market, and the successful launch of new or expanded products that enable broadened applications of settings for care delivered virtually. Revenue performance is reflective of the strong foundation that has been built, focused around health plans, health systems, our provider network and a consistently increasing visit base.
We generate revenues from the use of the Amwell Platformour enterprise software in the form of recurring subscription fees for use of our Platform,enterprise software, and related services and Carepoint sales. We also generate revenue from the performance of AMG patient visits.
Cost of Revenues, Excluding Amortization of Intangible Assets
Cost of revenuerevenues primarily consistsconsist of hosting fees paid to our hosting providers, costs incurred in connection with our professional services, technical and hosting support, and costs for running our affiliated provider network operations team. These costs primarily include employee-related expenses (including salaries, bonuses, benefits, stock-based compensation and travel).
26
Cost of revenues are primarily driven by the size of our provider network and the hosting and technical support required to service our Platform customers.clients. Our business models are designed to be scalable and to leverage fixed costs to generate higher revenues. While we currently expect increased investments to support accelerated growth, we also expect increased efficiencies and economies of scale. Our quarterly cost of revenues as a percentage of revenues is expected to fluctuate from period to period depending on the interplay of these aforementioned factors.
28
Operating Expenses
Operating expenses consist of research and development, sales and marketing, and general and administrative expenses.
Research and Development Expenses
Research and development expenses include personnel and related expenses for software and hardware engineering, information technology infrastructure, security and compliance and product development (inclusive of stock-based compensation for our research and development employees). Research and development expenses also include the periodic outsourcing of similar functions to third party specialists. Due toIn the quarantine and isolation strategies employed by governmental authorities, health systems and health plans to deal with the COVID-19 pandemic, a significant portion of healthcare was forced to be delivered virtually. Our health plan and health system customers believe that overall utilization of telemedicine and care delivered virtually will continue to increase during and after the COVID-19 crisis. By partnering with our customers during the crisis,recent years, we understand the increased volume and additional types of care they intend to deliver virtually on the Amwell Platform. We originally expected this increase in volume, evolution and advancement of telemedicine usage to occur over the next few years but we have now adjusted our research and development strategies to match the views of our customer partners, thus acceleratingaccelerated the expansion of our Platformenterprise software volume capacity and the development of additional functionality through new programs and modules. We have also expanded the use of offshore resources to provide more efficient rates which are designed to offset the increased research and development spend. While we have recognized an increase in the research and development expense is expected inthroughout the near-term future periods,prior years, the corresponding future revenue growth is expected to result in lower expenses as a percentage of revenue. Further, while we expect to see an increase in research and development expense during the next several quarters, this expenseThis increased spend represents an investment in a more scalable and economically beneficial solution. We believe the temporary increasesolution that will properly position the Company to benefit in the long term. We believe the increase in spend in the prior years was temporary and we have seen and expect to continue to see a gradual decline during 2023 as we return to normal levels of spend in future periods.
Our research and development expenses may also fluctuate as a percentage of our total revenue from period to period due to the seasonality of our total revenue and the timing and extent of our research and development expenses. We are accelerating our multiyear technology investment to accommodate the anticipated significant growth in market demand for increasingly broad and sophisticated telehealthdigital care enablement infrastructure following COVID-19.
Sales and Marketing Expenses
Sales expenses consist primarily of employee-related expenses, including salaries, benefits, commissions, travel and stock-based compensation costs for our employees engaged in sales.commercial activities. We expect our sales expenses to increase as wewill continue to invest appropriately in sales expenses as we look to grow with new prospects and expand the expansionbusiness of our business.existing clients. We expectwill continue to hire additionalelevate the skills and impact of our sales personnel and related account management teams as we look to provide a differentiated and sales support personnelenhanced client experience to properly service our growing client base and to identify and capitalize onas well as identifying new strategic market opportunities.
Marketing expenses consist primarily of personnel and related expenses (inclusive of stock-based compensation) for our marketing staff including costs of communications materials that are produced to generate greater awarenessprimarily support the sales organization and utilization of the Amwell Platform among our clients and their users.client engagement. Marketing costs also include third-party independent research, digital marketing campaigns, participation in trade shows, brand messaging, and public relations costs.costs, and the costs of communication materials that are produced to generate awareness and utilization of our enterprise software among our clients and their users.
Our sales and marketing expenses will fluctuate as a percentage of our total revenue from period to period due to the seasonality of our total revenue and the timing and extent of our advertising and marketing expenses.
General and Administrative Expenses
General and administrative expenses include personnel and related expenses, and professional fees incurred by finance, legal, human resources, information technology, our executives, and executive administration staff. They also include stock-based compensation for employees in these departments and expenses related to auditing, consulting, legal, and corporate insurance.
27
We expect our general and administrative expenses to increase for the foreseeable future as we continue to grow our business. However, we expect our general and administrative expenses to decrease as a percentage of our total revenue over the next several years. Our general and administrative expenses may fluctuate as a percentage of our total revenue from period to period due to the seasonality of our total revenue and the timing and extent of our general and administrative expenses.
Depreciation and Amortization Expense
Depreciation and amortization expense includes the amortization of intangible assets and depreciation related to our fixed assets. Amortization of intangible assets consists of the amortization of acquisition-related intangible assets, which are customer relationships, contractor relationships, technology and trade names.
29Goodwill Impairment
Goodwill impairment is the result of the fair value of the Company's one reporting unit being less than its carrying value. The goodwill impairment resulted from sustained decreases in the Company's publicly quoted share price and market capitalization.
Interest Income and Other Income (Expense), Net
The balance of interest income and other income (expense), net, consists predominantly of interest income on our money-market and short-term investments. We did not incur material interest expenses in the period as there were no outstanding debts or notes payables.payable.
Provision for Income Taxes
The income tax provision and benefit wereis primarily due to state and foreign income tax expense, and benefit related to release of the valuation allowance as a result of our acquisitions.expense.
Deferred tax assets are reduced by a valuation allowance to the extent management believes it is not more likely than not to be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. Management makes estimates and judgments about future taxable income based on assumptions that are consistent with our plans and estimates.
28
Consolidated Results of Operations
The following table sets forth our summarized condensed consolidated statement of operations data for the three and six months ended June 30, 20222023 and 20212022 and the dollar and percentage change between the respective periods:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) |
| 2022 |
|
| 2021 |
|
| Change |
|
| % |
|
| 2022 |
|
| 2021 |
|
| Change |
|
| % |
|
| 2023 |
|
| 2022 |
|
| Change |
|
| % |
|
| 2023 |
|
| 2022 |
|
| Change |
|
| % |
| ||||||||||||||||
Revenue |
| $ | 64,516 |
|
| $ | 60,217 |
|
| $ | 4,299 |
|
|
| 7 | % |
| $ | 128,748 |
|
| $ | 117,816 |
|
| $ | 10,932 |
|
|
| 9 | % |
| $ | 62,447 |
|
| $ | 64,516 |
|
| $ | (2,069 | ) |
|
| -3 | % |
| $ | 126,448 |
|
| $ | 128,748 |
|
| $ | (2,300 | ) |
|
| -2 | % |
Costs and operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Costs of revenue, excluding depreciation and amortization of intangible assets |
|
| 36,497 |
|
|
| 33,889 |
|
|
| 2,608 |
|
|
| 8 | % |
|
| 73,262 |
|
|
| 69,594 |
|
|
| 3,668 |
|
|
| 5 | % |
|
| 38,244 |
|
|
| 36,497 |
|
|
| 1,747 |
|
|
| 5 | % |
|
| 76,996 |
|
|
| 73,262 |
|
|
| 3,734 |
|
|
| 5 | % |
Research and development |
|
| 37,067 |
|
|
| 22,378 |
|
|
| 14,689 |
|
|
| 66 | % |
|
| 74,548 |
|
|
| 45,418 |
|
|
| 29,130 |
|
|
| 64 | % |
|
| 25,842 |
|
|
| 37,067 |
|
|
| (11,225 | ) |
|
| (30 | )% |
|
| 51,765 |
|
|
| 74,548 |
|
|
| (22,783 | ) |
|
| (31 | )% |
Sales and marketing |
|
| 18,721 |
|
|
| 14,789 |
|
|
| 3,932 |
|
|
| 27 | % |
|
| 39,875 |
|
|
| 28,521 |
|
|
| 11,354 |
|
|
| 40 | % |
|
| 21,554 |
|
|
| 18,721 |
|
|
| 2,833 |
|
|
| 15 | % |
|
| 44,280 |
|
|
| 39,875 |
|
|
| 4,405 |
|
|
| 11 | % |
General and administrative |
|
| 34,911 |
|
|
| 24,212 |
|
|
| 10,699 |
|
|
| 44 | % |
|
| 67,627 |
|
|
| 45,566 |
|
|
| 22,061 |
|
|
| 48 | % |
|
| 36,319 |
|
|
| 34,911 |
|
|
| 1,408 |
|
|
| 4 | % |
|
| 72,689 |
|
|
| 67,627 |
|
|
| 5,062 |
|
|
| 7 | % |
Depreciation and amortization expense |
|
| 6,724 |
|
|
| 2,484 |
|
|
| 4,240 |
|
|
| 171 | % |
|
| 13,322 |
|
|
| 4,990 |
|
|
| 8,332 |
|
|
| 167 | % |
|
| 7,718 |
|
|
| 6,724 |
|
|
| 994 |
|
|
| 15 | % |
|
| 14,961 |
|
|
| 13,322 |
|
|
| 1,639 |
|
|
| 12 | % |
Goodwill Impairment |
|
| 27,276 |
|
|
| — |
|
|
| 27,276 |
|
| (N/A |
|
|
| 357,585 |
|
|
| — |
|
|
| 357,585 |
|
| (N/A |
| ||||||||||||||||||||||||||||||||||
Total costs and operating expenses |
|
| 133,920 |
|
|
| 97,752 |
|
|
| 36,168 |
|
|
| 37 | % |
|
| 268,634 |
|
|
| 194,089 |
|
|
| 74,545 |
|
|
| 38 | % |
|
| 156,953 |
|
|
| 133,920 |
|
|
| 23,033 |
|
|
| 17 | % |
|
| 618,276 |
|
|
| 268,634 |
|
|
| 349,642 |
|
|
| 130 | % |
Loss from operations |
|
| (69,404 | ) |
|
| (37,535 | ) |
|
| (31,869 | ) |
|
| 85 | % |
|
| (139,886 | ) |
|
| (76,273 | ) |
|
| (63,613 | ) |
|
| 83 | % |
|
| (94,506 | ) |
|
| (69,404 | ) |
|
| (25,102 | ) |
|
| 36 | % |
|
| (491,828 | ) |
|
| (139,886 | ) |
|
| (351,942 | ) |
|
| 252 | % |
Interest income and other (expense) income, net |
|
| 764 |
|
|
| 224 |
|
|
| 540 |
|
|
| 241 | % |
|
| 872 |
|
|
| 285 |
|
|
| 587 |
|
|
| 206 | % | ||||||||||||||||||||||||||||||||
Interest income and other income (expense), net |
|
| 2,332 |
|
|
| 764 |
|
|
| 1,568 |
|
|
| 205 | % |
|
| 3,272 |
|
|
| 872 |
|
|
| 2,400 |
|
|
| 275 | % | ||||||||||||||||||||||||||||||||
Loss before expense from income taxes and loss from |
|
| (68,640 | ) |
|
| (37,311 | ) |
|
| (31,329 | ) |
|
| 84 | % |
|
| (139,014 | ) |
|
| (75,988 | ) |
|
| (63,026 | ) |
|
| 83 | % |
|
| (92,174 | ) |
|
| (68,640 | ) |
|
| (23,534 | ) |
|
| 34 | % |
|
| (488,556 | ) |
|
| (139,014 | ) |
|
| (349,542 | ) |
|
| 251 | % |
Benefit (Expense) from income taxes |
|
| (461 | ) |
|
| (103 | ) |
|
| (358 | ) |
|
| 348 | % |
|
| (129 | ) |
|
| (412 | ) |
|
| 283 |
|
|
| (69 | )% | ||||||||||||||||||||||||||||||||
Expense from income taxes |
|
| (716 | ) |
|
| (461 | ) |
|
| (255 | ) |
|
| 55 | % |
|
| (2,191 | ) |
|
| (129 | ) |
|
| (2,062 | ) |
|
| 1,598 | % | ||||||||||||||||||||||||||||||||
Loss from equity method investment |
|
| (551 | ) |
|
| (722 | ) |
|
| 171 |
|
|
| (24 | )% |
|
| (762 | ) |
|
| (1,541 | ) |
|
| 779 |
|
|
| (51 | )% |
|
| (625 | ) |
|
| (551 | ) |
|
| (74 | ) |
|
| 13 | % |
|
| (1,277 | ) |
|
| (762 | ) |
|
| (515 | ) |
|
| 68 | % |
Net loss |
|
| (69,652 | ) |
|
| (38,136 | ) |
|
| (31,516 | ) |
|
| 83 | % |
|
| (139,905 | ) |
|
| (77,941 | ) |
|
| (61,964 | ) |
|
| 80 | % |
|
| (93,515 | ) |
|
| (69,652 | ) |
|
| (23,863 | ) |
|
| 34 | % |
|
| (492,024 | ) |
|
| (139,905 | ) |
|
| (352,119 | ) |
|
| 252 | % |
Net loss attributable to non-controlling interest |
|
| (507 | ) |
|
| (277 | ) |
|
| (230 | ) |
|
| 83 | % |
|
| (723 | ) |
|
| (894 | ) |
|
| 171 |
|
|
| (19 | )% |
|
| (1,040 | ) |
|
| (507 | ) |
|
| (533 | ) |
|
| 105 | % |
|
| (1,861 | ) |
|
| (723 | ) |
|
| (1,138 | ) |
|
| 157 | % |
Net loss attributable to American Well Corporation |
| $ | (69,145 | ) |
| $ | (37,859 | ) |
| $ | (31,286 | ) |
|
| 83 | % |
| $ | (139,182 | ) |
| $ | (77,047 | ) |
| $ | (62,135 | ) |
|
| 81 | % |
| $ | (92,475 | ) |
| $ | (69,145 | ) |
| $ | (23,330 | ) |
|
| 34 | % |
| $ | (490,163 | ) |
| $ | (139,182 | ) |
| $ | (350,981 | ) |
|
| 252 | % |
Revenue
For the three months ended June 30, 2022,2023, subscription revenue increased by $2.8 million. Subscription revenue increase was driven by the expanded use of the Amwell Platform by existing customers. In addition, visit revenue increased by $2.4declined $1.6 million due to increasedcustomer churn during re-platforming, partially offset by growth in our existing strategic clients. Visit revenue decreased $1.6 million due to a decline in visit volume and lower utilization in urgent care,specialty care. These decreases were partially offset by an increase in other revenue of $1.1 million primarily associated with the Omicron variant.related to an increase in professional services.
For the six months ended June 30, 2022,2023, subscription revenue increased by $6.9 million. This was a result of new customers subscribing to the Amwell Platform and existing customers expanding their use of the Amwell Platform. In addition, visit revenue increased by $5.1declined $1.6 million due to increased visit volumecustomer churn during re-platforming, partially offset by growth in urgent care,strategic clients. Visit revenue remained flat (visit mix largely offset the change in in volume). There was a slight decrease in other revenue of $0.9 million related primarily associated with the Omicron variant.to hardware and marketing revenue.
Costs of Revenue, Excluding Amortization of Acquired Intangible Assets
For the three months ended June 30, 2022,2023, the increase in cost of revenue was primarily due to an increase of $1.3$2.4 million related to employee-relatedemployee and consulting costs due to increased headcount. There was also an increaseassociated with clinician onboarding, partially offset by a decrease in hardware costs of $0.4 million.$1.2 million due to the decline in hardware revenue. The decrease in gross margin is a result of shift in revenue mix.
For the six months ended June 30, 2022,2023, the increase in cost of revenue was primarily due to an increase of $2.2$3.3 million related to employee-relatedemployee and consulting costs, due to increased headcount. There was also an increaseand $1.5 million in provider costs. This increase was offset by a decrease in hardware costs of $0.7$1.7 million due to increased visits.the decline in hardware revenue. The decrease in gross margin contribution is a result of a shift in revenue mix.
30
Research and Development Expenses
For the three months ended June 30, 2022,2023, the increasedecrease in research and development expense was primarily driven by an increasea decrease of $9.9$10.5 million in consulting services foras spend related to the development of the Converge and $4.0platform has declined (contributing to this decrease was $7.1 million capitalized as software development costs). There was also a decline in employee-related costs (inclusivethird party software spend of stock compensation expense) due to increased headcount.$1.4 million.
29
For the six months ended June 30, 2022,2023, the increasedecrease in research and development expense was primarily driven by an increasea decrease of $20.3$23.6 million in consulting services foras spend related to the development of the Converge and $7.1platform has declined (contributing to this decrease was $13.8 million capitalized as software development costs). There was no non-cash compensation in the current year related to the SilverCloud acquisition, while there was a charge of $1.2 million in the prior year due to the settlement of the SilverCloud bonus escrow award in 2022. These decreases were partially offset by an increase of $3.6 million in employee-related costs (inclusive of(mainly due to increase in stock compensation expense and bonus expense) due to increased headcount.
Sales and Marketing Expenses
For the three months ended June 30, 2022,2023, the increase in sales and marketing expense primarily consisted of $2.0$3.6 million in employee-related costs (inclusive of commissions and stock compensation expense) due to increased headcount. ThereThis increase was also an increasepartially offset by a decrease of $0.4 million in advertising spend and spend on conferences and tradeshows and $0.7 million related to company meetings that did not occur in the prior year and consulting expense of $0.8 million mainly related to marketing campaigns and services for system integration.meeting costs.
For the six months ended June 30, 2022,2023, the increase in sales and marketing expense primarily consisted of $5.2$6.5 million in employee-related costs (inclusive of commissions and stock compensation expense) due to increased headcount. ThereThis increase was also an increasepartially offset by a decrease of $1.7 million in marketing expenses of $2.1 million related toadvertising spend and spend on conferences and an increase oftradeshows and $1.1 million related to company meetings that did not occur in the prior year. In addition there was an increase in consulting expense of $1.9 million mainly related to marketing campaigns and services for system integration.meeting costs.
General and Administrative Expenses
For the three months ended June 30, 2022,2023, the increase in general and administrative expense was driven by an increase related to employee-related costs (inclusive of $4.5$5.4 million of stock compensation expense) of approximately $7.4million, due to additional equity awards granted in 2022 and headcount increase. ThereThe increase was alsopartially offset by a $3.8decrease of $4.6 million increase in legal costs mainly due to the fees paid forTeladoc litigation settlement in the Teladoc litigation.second quarter of 2022 as well as a decrease in insurance costs of $0.7 million.
For the six months ended June 30, 2022,2023, the increase in general and administrative expense was driven by an increase related to employee-related costs (inclusive of $7.5$13.4 million of stock compensation expense) of approximately $14.4$15.9 million, due to additional equity awards granted in March and May 2022 and headcount increase. ThereThe increase was alsopartially offset by a $3.5decrease of $5.8 million increase in legal costs mainly due to the fees paid forTeladoc litigation settlement in the Teladoc litigation.second quarter of 2022. There was an increaseno non-cash compensation or earnout adjustment in the current year, while there were total charges of $1.8$3.0 million in system costs to enhance administrative processing. In addition, there was an increase in contingent consideration adjustments recorded of $1.0 million relatedthe prior year, due to the Conversasettlement of the SilverCloud bonus escrow awards and the SilverCloud revenue earnouts.earnout in 2022. There was also a decrease in insurance costs of $1.5 million.
Depreciation and Amortization Expense
Depreciation expense remained consistent for the three months ended June 30, 2022.2023. Amortization expense increased by $4.4$1.2 million for the three months ended June 30, 2022.2023. The increase in amortization was related to the amortization of the internally developed software intangible assets acquired in 2021.assets.
Depreciation expense remained consistent for the six months ended June 30, 2022.2023. Amortization expense increased by $8.7$2.2 million for the six months ended June 30, 2022.2023. The increase in amortization was related to the amortization of the internally developed software intangible assets acquiredassets.
Goodwill Impairment
During the three months ended June 30, 2023, the goodwill was impaired by $27.3 million (or $0.10 per basic and diluted share) as a result of sustained decreases in 2021.the Company's publicly quoted share price and market capitalization.
During the six months ended June 30, 2023, the goodwill was impaired by $357.6 million (or $1.27 per basic and diluted share) as a result of sustained decreases in the Company's publicly quoted share price and market capitalization.
Interest Income and Other (Expense) Income, net
For the three and six months ended June 30, 20222023 and 2021,2022, interest income and other (expense) income, net consist entirely of interest income and gains from our cash equivalents and short-term investments.
Expense from Income Taxes
Income tax expense was $0.7 million and $2.2 million for the three and six months ended June 30, 2023, compared to income tax benefit of $0.5 million and $0.1 million for the three and six months ended June 30, 2022, compared to income tax expense of $0.1 million and $0.4 million for the three and six months ended June 30, 2021.2022.
3130
Loss from Equity Method Investment
The Company and Cleveland Clinic partnered to form a joint venture, under the name CCAW, JV LLC, to provide broad access to comprehensive and high acuity care services via telehealth.virtual care. The Company does not have a controlling financial interest in CCAW, JV LLC, but it does have the ability to exercise significant influence over the operating and financial policies of CCAW, JV LLC. Therefore, the Company accounts for its investments in CCAW, JV LLC using the equity method of accounting.
During the three months ended June 30, 20222023 and 2021,2022, the Company recognized a loss of $0.6 million and $0.7$0.6 million, respectively, as its proportionate share of the joint venture results of operations. During the six months ended June 30, 20222023 and 2021,2022, the Company recognized a loss of $0.8$1.3 million and $1.5$0.8 million, respectively, as its proportionate share of the joint venture results of operations.
Liquidity and Capital Resources
The following table presents a summary of our cash flow activity for the periods set forth below:
|
| Six Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Consolidated Statements of Cash Flows Data: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net cash used in operating activities |
| $ | (105,399 | ) |
| $ | (67,390 | ) |
| $ | (68,776 | ) |
| $ | (105,399 | ) |
Net cash used in and provided by investing activities |
|
| (376,260 | ) |
|
| 97,169 |
| ||||||||
Net cash used in and provided by financing activities |
|
| (5,529 | ) |
|
| 3,492 |
| ||||||||
Net cash used in investing activities |
|
| (308,866 | ) |
|
| (376,260 | ) | ||||||||
Net cash provided by (used in) financing activities |
|
| 1,251 |
|
|
| (5,529 | ) | ||||||||
Total |
| $ | (487,188 | ) |
| $ | 33,271 |
|
| $ | (376,391 | ) |
| $ | (487,188 | ) |
Sources of Financing
Our principal sources of liquidity were cash, cash equivalents and short-term investments totaling $630.1$458.7 million and $746.4$538.5 million as of June 30, 20222023 and December 31, 2021,2022, respectively, which were held for a variety of growth initiatives and investments as well as working capital purposes. Our cash, cash equivalents and short-term investments are comprised of money market funds and marketable securities including U.S. Treasury bills.
As shown in the accompanying condensed consolidated financial statements, the Company incurred a loss from operations of $139.9$491.8 million and a net loss of $139.9$492.0 million for the six months ended June 30, 20222023 and had an accumulated deficit of $950.5$1,572.8 million as of June 30, 2022.2023.
The Company has no debt as of June 30, 20222023 or December 31, 20212022 and expects to generate operating losses in future years.
We believe that our existing cash and cash equivalents will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months from the issuance date of the financial statements. Our future capital requirements will depend on many factors including our growth rate, contract renewal activity, number of consultations on our Platform,enterprise software, the timing and extent of spending to support product development efforts, our expansion of sales and marketing activities, the introduction of new and enhanced services offerings, and the continuing market acceptance of telehealthdigital care services. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies and intellectual property rights. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, financial condition and results of operations would be adversely affected.
Six months ended June 30, 2022,2023, vs. six months ended June 30, 20212022
Cash Used in Operating Activities
Cash used in operating activities was $68.8 million for the six months ended June 30, 2023. The primary driver of this use of cash was our net loss of $492.0 million. The net loss was reflective of the investments made back into the Company (from a technology and infrastructure perspective), partially offset by the overall growth of our business including expansion of business with existing clients. The net loss was partially offset by non-cash expenses of $417.8 million (primarily goodwill impairment of $357.6 million, stock-based compensation of $42.7 million and depreciation and amortization of $15.0 million).
31
For the six months ended June 30, 2022, cash used in operating activities was $105.4 million. The primary driver of this use of cash was our net loss of $139.9 million. The net loss was reflective of the investments made back into the Company (from a technology perspective), partially offset by the overall growth of our business including expansion of business with existing clients. The net loss was partially offset by non-cash expenses of $45.1 million (primarily stock-based compensation of $27.6 million and depreciation and amortization of $13.1 million).
32Cash Used in Investing Activities
ForCash used in investing activities was $308.9 million for the six months ended June 30, 2021, cash2023. Cash used in operatinginvesting activities was $67.4 million. The primary driverconsisted of this use$13.8 million in capitalized software development costs, $3.9 million investment in the less than majority owned joint venture and purchases of cash was our net lossshort-term investments of $77.9 million. The net loss for the year was reflective of the investments made back into the Company (from both a personnel and technology perspective),$390.0 million, partially offset by the overall growthsales and maturities of our business including an increase in new clients and expansioninvestments of business with existing clients. The net loss was partially offset by non-cash expenses of $26.9 million (primarily stock-based compensation of $19.4 million and depreciation and amortization of $5.0 million).
Cash Used in and Provided by Investing Activities$98.9 million.
Cash used in investing activities was $376.3 million for the six months ended June 30, 2022. Cash used in investing activities consisted of $2.0 million investment in the less than majority owned joint venture, $0.1 million in the purchases of property and equipment and purchases of short-term investments of $499.2 million, partially offset by sales and maturities of investments of $125.0 million.
Cash Provided by and Used in Financing Activities
Cash provided by investingfinancing activities was $97.2 million for the six months ended June 30, 2021.2023, was $1.3 million. Cash provided by investingfinancing activities consisted of $1.8 million of proceeds from maturitiesthe exercise of investments of $100.0 million, partiallyemployee stock options and employee stock purchase plan, offset by a $2.5 million investment$0.6 in the CCAW, JV LLC joint venture with Cleveland Clinic and $0.3 million in the purchasesrepurchase of property and equipment.
Cash Used in and Provided by Financing Activitiesstock to cover tax withholding obligations upon vesting of restricted stock units.
Cash used in financing activities for the six months ended June 30, 2022, was $5.5 million. Cash used in financing activities consisted of $11.8 million related to the payment of the Conversa integration earnout, partially offset by $6.0 million of proceeds from the exercise of employee stock options and employee stock purchase plan.
Cash provided by financing activities for the six months ended June 30, 2021, was $3.5 million. Cash provided by financing activities consisted of $16.7 million of proceeds from the exercise of employee stock options. These proceeds were offset by cash payments primarily for the purchase of treasury stock of $11.6 million.
Off-Balance Sheet Arrangements
During the periods presented, we did not have, nor do we currently have, any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We are therefore not exposed to the financing, liquidity, market or credit risk that could arise if we had engaged in those types of relationships.
Contractual Obligations and Commitments
As of June 30, 2022,2023, there have been no material changes from the contractual obligations and commitments previously disclosed in our Form 10-K.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements and the related notes thereto are prepared in accordance with GAAP. The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company bases its estimates on historical experience, current business factors, and various other assumptions that the Company believes are necessary to consider to form a basis for making judgments about the carrying values of assets and liabilities, the recorded amounts of revenue and expenses, and the disclosure of contingent assets and liabilities. The Company is subject to uncertainties such as the impact of future events, economic and political factors, and changes in the Company’s business environment; therefore, actual results could differ from these estimates. Accordingly, the accounting estimates used in the preparation of the Company’s condensed consolidated financial statements will change as new events occur, as more experience is acquired, as additional information is obtained, and as the Company’s operating environment evolves.
Our significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, to our condensed consolidated financial statements in our Form 10-K and Note 2, Summary of Significant Accounting Policies to our condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. There have been no significant changes to these policies during the six months ended June 30, 2022.2023.
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Recently Issued Accounting Pronouncements Adopted
For more information on recently issued accounting pronouncements, see Note 2 to our condensed consolidated financial statements covered under Part I, Item 1 of this Quarterly Report on Form 10-Q.
New Accounting Pronouncements Not Yet Adopted
For more information on new accounting pronouncements not yet adopted, see Note 2 to our condensed consolidated financial statements covered under Part I, Item 1 in this Quarterly Report on Form 10-Q.
Item 3. Qualitative and Quantitative Disclosure about Market Risk
Interest Rate Risk
We had cash and cash equivalents totaling $257.2$161.4 million, and $746.4$538.5 million as of June 30, 20222023 and December 31, 2021,2022, respectively. The Company also held investments totaling $372.9$297.3 million as of June 30, 2022 .2023. The Company held no investments as of December 31, 2021.2022. These amounts were primarily invested in money markets and U.S. Treasury bills. The cash and cash equivalents are held for a variety of growth and investments as well as working capital purposes. Our investments are made for capital preservation purposes. We do not enter into investments for trading or speculative purposes. All our investments are denominated in U.S. dollars.
We do not believe that an increase or decrease of 100 basis points in interest rates would have a material effect on our business, financial condition or results of operations. However, our cash equivalents are subject to market risk due to changes in interest rates. Fixed rate securities may have their market value adversely affected due to a rise in interest rates. Due in part to these factors, our future investment income may fall short of expectation due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates.
Fluctuations in the value of our money market funds caused by a change in interest rates (gains or losses on the carrying value) are recorded in other income and are realized only if we sell the underlying securities.
Foreign Currency Exchange Risk
To date, a substantial majority of our revenue from customerclient arrangements has been denominated in U.S. dollars. We have limited operations outside the United States. As of June 30, 20222023 and December 31, 2021, we had four foreign subsidiaries with functional currencies of the Euro, British pound, Australian dollars and New Israeli Shekel. As of June 30, 20212022, the Company hadhas one foreign subsidiary in Israel, the functional currency of that subsidiary is the U.S. dollar,dollar. In addition the Company has three foreign subsidiaries from the acquisition of SilverCloud, with functional currencies of the Euro, British pound and Australian dollars. The Company hadalso has a branch with a functional currency of the New Israeli Shekel. The transactional activity for these entities in the six months ended June 30, 20222023 and 20212022 was not considered significant. Accordingly, we believe we do not have a material exposure to foreign currency risk. We may choose to focus on international expansion, which may increase our exposure to foreign currency exchange risk in the future.
Inflation Risk
We do not believe that inflation had a material effect on our business, financial condition or results of operations in the last two years. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition or results of operations.
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Item 4. Controls and Procedures
Managements Report on Internal Control over Financial Reporting
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Our management, with the participation of our principal executive officers and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive officers and principal financial officer concluded that as of June 30, 2022,2023, our disclosure controls and procedures were effective. Disclosure controls and procedures are our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officers and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2022,2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, in the opinion of our management, would individually or taken together have a material adverse effect on our business, financial condition, results of operations or cash flows. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity, reputational harm and other factors.
On September 14, 2020, we received a letter from Teladoc Health, Inc. ("Teladoc") alleging that certain of our cart products and associated peripherals infringe upon their patents. On October 12, 2020, Teladoc filed a claim against the Company related to these allegations. On June 30, 2022, the claim was dismissed pursuant to a confidential settlement between the parties.
Item 1A. Risk Factors
There have been no material changes to the risk factors previously disclosed in our Form 10-K. For a discussion of potential risks and uncertainties related to our Company see the information in our Form 10-K in the section entitled “Risk Factors.”
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in the “Special Note Regarding Forward-Looking Statements” section in Part I, Item 2, of this Quarterly Report on Form 10-Q.
ITEMItem 2. Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Securities
There were no sales of unregistered equity securities during the quarter ended June 30, 2022.2023.
Issuer Purchases of Equity Securities
The following table provides information about the Company’s purchases of its common stock for each month during this quarterly period covered by this report:
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Period |
| (a) Total |
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| (b) Average |
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| (c) Total number |
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| (d) Maximum |
| ||||
April 1 to April 30 |
|
| — |
|
| $ | — |
|
|
| — |
|
|
| — |
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May 1 to May 31 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
June 1 to June 30 |
|
| 264,671 |
|
|
| 2.21 |
|
|
| — |
|
|
| — |
|
Total |
|
| 264,671 |
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| $ | 2.21 |
|
|
| — |
|
|
| — |
|
* Shares withheld to cover tax withholding obligations under the net settlement provision upon vesting of restricted stock units and exercising of options.
36
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
35
Item 5. Other Information
Not applicable.Insider Trading Arrangements and Policies
During the three months ended June 30, 2023, certain of our officers and directors adopted or terminated Rule 10b5-1 trading arrangements as follows:
Item 6. Exhibits
The documents listed below are incorporated by reference or are filed with this Quarterly Report on Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).
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31.1* | |||
31.2* | |||
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32.2* | |||
101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. | ||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | ||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | ||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* | Filed herewith |
# | Indicates a management contract or compensatory plan |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
AMERICAN WELL CORPORATION | ||||
Date: | August | By: | /s/ Ido Schoenberg, MD | |
Co-Chief Executive Officer | ||||
(Principal Executive Officer) | ||||
Date: | August | By: | /s/ Roy Schoenberg, MD, MPH | |
Co-Chief Executive Officer | ||||
(Principal Executive Officer) | ||||
Date: | August | By: | /s/ Robert Shepardson | |
Chief Financial Officer | ||||
(Principal Financial Officer) | ||||
Date: | August | By: | /s/ Paul McNeice | |
Vice President of Accounting | ||||
(Principal Accounting Officer) |
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