American Well Corporation (Amwell) — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing; it does not provide a separate Q4 income statement or complete Q4 financial results. Amounts below are in U.S. dollars unless noted.
Business context and reporting period
Amwell provides enterprise software and related services for virtual care, primarily through subscriptions to its Amwell Platform, professional services and hardware Carepoints, and fee-for-service clinical visits through Amwell Medical Group (AMG). At year-end, it served more than 55 health plans representing over 80 million covered lives and approximately 150 health systems encompassing more than 2,000 hospitals. The company reported 5.825 million platform visits in 2021.
Financial and operating metrics
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue | $252.8 million | $245.3 million | Up 3% |
| Platform subscription revenue | $108.3 million | $98.4 million | Up $9.9 million |
| Visit revenue | $116.6 million | $117.2 million | Down $0.6 million |
| Other revenue, including services and hardware | $27.9 million | $29.7 million | Down $1.8 million |
| Operating loss | $(179.1) million | $(227.4) million | Loss narrowed $48.3 million |
| Net loss | $(176.8) million | $(228.6) million | Loss narrowed $51.8 million |
| Net loss attributable to Amwell | $(176.3) million | $(224.4) million | |
| Basic and diluted loss per share | $(0.69) | $(2.27) | |
| Adjusted EBITDA, non-GAAP | $(122.7) million | $(92.7) million | Loss widened $30.0 million |
| Cash used in operating activities | $(141.5) million | $(112.5) million | Use increased $29.1 million |
Cost of revenue, excluding depreciation and amortization of intangible assets, was $148.5 million, or about 58.7% of revenue, versus $156.8 million in 2020. The filing does not present a single gross-margin figure in the supplied text. Revenue growth was modest as increased subscriptions were partly offset by lower visit revenue and lower services and Carepoints revenue.
At December 31, 2021, cash and cash equivalents were $746.4 million; the company reported no short-term investments on the balance sheet, compared with $100.0 million of investments at year-end 2020. Current assets were $827.3 million and current liabilities were $141.6 million. Total liabilities were $185.0 million. Amwell reported no debt; its prior $7.0 million line of credit expired during 2021.
Total visits were 5.825 million versus 5.875 million in 2020. Scheduled visits increased to 4.2 million from 3.3 million. AMG visits declined to 1.415 million from 1.595 million, while reported revenue per visit rose to $82 from $73. Active customer providers increased to approximately 88,000 from 68,000; total active providers, including AMG, were 91,500 versus 72,000.
Material changes versus the prior comparable period
- Revenue rose 3%, with subscription revenue increasing 10% as existing clients expanded coverage, programs, modules and use by their own providers. Visit revenue was slightly lower than the pandemic-driven 2020 level; services and Carepoints revenue also declined from elevated pandemic-related activity.
- Operating and net losses narrowed, but adjusted EBITDA loss widened and operating cash use increased. Research and development expense rose 26% to $106.6 million, and sales and marketing expense rose 20% to $66.2 million.
- General and administrative expense fell 43% to $94.6 million, substantially reflecting an $81.5 million decrease in stock-based compensation, predominantly related to IPO awards to the co-CEOs, and a $13.7 million favorable fair-value adjustment to contingent consideration. Acquisition, insurance and legal costs partly offset the decrease.
- Amwell acquired digital mental health platform SilverCloud and automated-care provider Conversa in August 2021. Total consideration was approximately $226.2 million for SilverCloud and $118.6 million for Conversa, including stock and contingent consideration. The acquisitions added $253.3 million of goodwill; purchase-price allocations remained preliminary.
- Year-end cash and cash equivalents decreased from $941.6 million in 2020, while the prior-year $100.0 million investment balance was no longer reported. Investing cash flow included $156.5 million of net cash used for acquisitions.
Outlook, management commentary, risks and unusual items
- Outlook: Management expected continued operating losses and increased near-term investment in technology, research and development, sales and marketing. It said these investments are intended to support long-term growth, but provided no specific revenue, earnings or cash-flow guidance. Management expected existing cash and cash equivalents to fund working capital and capital expenditures for at least 12 months from issuance of the financial statements.
- Platform rollout: 53 clients had deployed Converge by year-end. Amwell expected substantially all existing clients to be operating on Converge by the first half of 2023.
- Acquisition and accounting items: The company recorded a $13.7 million reduction in contingent consideration fair value due to changed revenue forecast timing. A $15.0 million Conversa integration milestone was achieved and payable at year-end. Acquired intangible assets increased amortization expense.
- Customer concentration: Anthem represented 25% of 2021 revenue, up from 22% in 2020; the top ten clients represented 44% of revenue. Loss or contraction of a major client could materially affect results.
- Key risks: Continued losses, significant operating cash use, uncertain telehealth adoption and reimbursement, intense competition, rapid technology change, customer concentration, provider recruitment, cybersecurity and privacy exposure, and evolving healthcare regulation. COVID-19-related reimbursement and licensing changes could be reversed, and pandemic-related demand makes forecasting and seasonality less predictable.
- Legal contingency: Teladoc filed a patent infringement claim concerning certain Amwell carts and peripherals. Amwell said it believes the claim lacks merit and intends to defend it. Carepoints represented 4% of 2021 revenue. Management did not identify pending litigation expected to have a material adverse effect.
- Governance: Founders’ Class B shares retain 51% of voting power while any Class B shares remain outstanding, limiting Class A holders’ influence. The company also disclosed that Anthem was its largest customer and a shareholder.
Important facts for investors to verify
- Whether subscription expansion and higher scheduled-visit activity can offset lower pandemic-related visit and hardware/service revenue.
- Whether cash burn and the planned technology and commercial investments remain within the company’s liquidity capacity; review cash-flow trends against the $746.4 million year-end cash balance.
- Actual performance and integration progress for SilverCloud and Conversa, including acquisition-related earnouts, preliminary purchase accounting and expected synergies.
- Revenue concentration, contract renewal terms and the status of the Anthem relationship, given its 25% share of 2021 revenue.
- Progress toward the Converge migration target and any related implementation costs, disruptions or delays.
- Developments in the Teladoc patent dispute, telehealth reimbursement and licensing rules, and cybersecurity or privacy incidents.
- Reconcile and assess non-GAAP adjusted EBITDA alongside GAAP results; adjusted EBITDA excludes items including stock compensation and acquisition-related expenses.