American Well Corporation (Amwell) — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; year-over-year comparisons are with Q1 2023. Amounts are in U.S. dollars; financial figures below are in millions unless stated otherwise. Amwell provides enterprise software and services for digital and hybrid healthcare delivery.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $59.5 | $64.0 |
| Cost of revenue, excluding depreciation and amortization | $41.2 | $38.8 |
| Gross profit and margin, derived | $18.4; 30.9% | $25.2; 39.5% |
| Operating loss | $(75.0) | $(397.3) |
| Net loss | $(73.4) | $(398.5) |
| Net loss attributable to Amwell | $(72.1) | $(397.7) |
| Net loss per share, basic and diluted | $(0.25) | $(1.42) |
| Adjusted EBITDA (non-GAAP) | $(45.7) | $(44.6) |
| Cash used in operating activities | $(59.8) | $(29.1) |
Revenue fell 7.0%. Subscription revenue was $24.9 million (down from $28.7 million), visit revenue was $31.1 million (down from $32.5 million), and other revenue was $3.6 million (up from $2.8 million). The company reported 1.665 million platform visits, versus 1.710 million a year earlier. Gross margin declined as subscription revenue weakened and cost of revenue increased.
Operating expenses were $134.6 million, versus $461.3 million in Q1 2023, when Amwell recorded a $330.3 million goodwill impairment. The year-over-year reduction in reported net loss therefore chiefly reflects the absence of that prior-year impairment; adjusted EBITDA loss worsened modestly. Q1 2024 included $8.7 million of severance and strategic-transformation costs, including accelerated sales and marketing strategy consulting costs.
Cash and cash equivalents were $308.6 million at March 31, down from $372.0 million at December 31, 2023; restricted cash was $0.8 million. Operating cash use increased year over year, including a $27.5 million cash outflow from accounts receivable. Investing cash use was $4.6 million, including $2.8 million of capitalized software development and $1.7 million contributed to the joint venture. Financing provided $1.0 million, mainly from the employee stock purchase plan. Amwell reported no debt and said existing cash should meet working-capital and capital-expenditure needs for at least 12 months from issuance of the financial statements. Current assets were $414.2 million and current liabilities $108.4 million.
Material changes and operating developments
- Management attributed the subscription decline primarily to customer churn during the Converge platform migration, partly offset by growth among existing strategic clients. Visit revenue fell with lower visit volume and specialty-care utilization.
- Converge accounted for 68% of visits in Q1, up from 52% in Q4 2023. Management said migration and onboarding can affect revenue timing and churn.
- Research and development expense increased 3% to $26.7 million, partly because less internal development cost was capitalized. Management expects government-product investment to continue through most of 2024, followed by another reduction in the ongoing R&D expense run rate.
- Sales and marketing expense increased 13% to $25.7 million, including $2.9 million of accelerated consulting costs for organizational strategy initiatives. General and administrative expense decreased 10% to $32.8 million, mainly on lower employee-related costs.
- Deferred revenue rose to $67.0 million from $52.5 million at year-end. Remaining performance obligations were $227.7 million; Amwell expects to recognize 52% of the March 31 amount in the 12 months ending March 31, 2025.
- Amwell made a $1.7 million capital contribution to its Cleveland Clinic joint venture and recognized a $0.9 million equity-method loss during the quarter.
Outlook, risks, and contingencies
No quantified revenue, earnings, or cash-flow guidance was provided. Management described 2024 as a transition period, emphasizing government-sector delivery, service to commercial clients, migration of remaining clients to Converge, and actions intended to reaccelerate growth. It expects operating losses in future years. The filing says Medicare reimbursement flexibilities were extended through December 31, 2024 and notes typical visit seasonality, with higher volume in Q4 and Q1.
Key stated risks include customer concentration and churn, slow digital-care adoption, competition, technology changes, healthcare regulation and privacy/cybersecurity compliance, provider-network capacity, and the Defense Health Agency relationship, including renewal beyond July 2025. One customer represented 29% of Q1 revenue; two customers represented 41% and 13% of quarter-end accounts receivable.
On April 2, 2024, Amwell received an NYSE notice for noncompliance with the minimum share-price requirement after its average closing price remained below $1.00 for 30 consecutive trading days. The company proposed a reverse stock split for stockholder approval; it cautioned that compliance is not assured and delisting could adversely affect trading liquidity and access to capital. Management reported no pending litigation expected to have a material adverse effect and no material changes to previously disclosed contractual obligations. Disclosure controls were deemed effective as of March 31, 2024.
Important facts for investors to verify
- Progress on the proposed reverse stock split and the deadline and requirements for regaining NYSE compliance.
- Whether Converge migrations reduce churn and stabilize subscription revenue, gross margin, and visit utilization.
- Cash burn and working-capital trends, especially receivables, against the stated 12-month liquidity assessment.
- Execution and economics of government-sector investments, including the Defense Health Agency relationship and its terms after July 2025.
- Customer concentration, collection of significant receivables, and potential dilution: Q1 included 23.7 million RSUs granted, and 65.5 million potential common-share equivalents were excluded from diluted EPS as anti-dilutive.
- Adjusted EBITDA is a non-GAAP measure; review its reconciliation and adjustments alongside GAAP losses and cash flows.