American Well Corporation (Amwell) — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparisons are with Q1 2020 unless otherwise stated. Financial amounts below are in millions of dollars except per-share data. Amwell provides enterprise telehealth technology, subscriptions, related services and clinical visits through its affiliated medical group.
Financial performance
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $57.6 | $53.7 | +7% |
| Operating loss | $(38.7) | $(25.8) | Loss widened |
| Net loss | $(39.8) | $(25.2) | Loss widened 58% |
| Net loss attributable to Amwell | $(39.2) | $(24.4) | Loss widened 61% |
| Adjusted EBITDA (non-GAAP) | $(26.4) | $(17.7) | Loss widened |
| Cash used in operating activities | $(41.1) | $(32.1) | Cash use increased |
Operating-loss margin was approximately negative 67% of revenue, compared with negative 48% in Q1 2020; net-loss margin was approximately negative 69%, compared with negative 47%. The filing does not present a gross-margin measure. Basic and diluted net loss per share was $(0.16), versus $(0.58); the share count increased substantially following the 2020 IPO and stock split, so per-share comparisons are affected by dilution and share-count changes.
- Revenue mix: Platform subscription revenue was $24.6 million (+13%); visit revenue was $27.8 million (+5%); services and Carepoints revenue was $5.2 million (down from $5.5 million).
- Expenses: Total costs and operating expenses rose 21% to $96.3 million. Research and development increased 54% to $23.0 million, primarily reflecting staff and consulting costs, including work on the Converge platform. General and administrative expense increased 39% to $21.4 million, including higher stock compensation, employee, insurance and legal costs. Cost of revenue rose 8% to $35.7 million; sales and marketing was $13.7 million, down 1%.
- Cash and liquidity: Cash and cash equivalents were $896.4 million and investments were $100.0 million at March 31, 2021, totaling $996.4 million, down from $1,041.6 million at year-end 2020. Cash, cash equivalents and restricted cash declined $45.5 million during the quarter.
- Debt and obligations: Amwell reported no debt or line-of-credit borrowings. Its $7.0 million credit line had $6.2 million available after $0.8 million of letters of credit. Total liabilities were $106.8 million; deferred revenue was $70.7 million.
Changes, business trends and management outlook
- Platform visits increased to 1.575 million from 725,000. Customer-affiliated providers performed 80% of visits, compared with 50% a year earlier; paid AMG visits therefore represented a smaller share despite higher visit revenue.
- Active providers rose to 81,000 from 24,000 a year earlier. The company reported serving over 55 health plans representing more than 80 million covered lives and over 150 health systems.
- Management attributed ongoing telehealth adoption partly to COVID-19 and said utilization levels continued. It cautioned that the duration of expanded reimbursement and relaxed licensing rules is uncertain; reinstatement or changes could adversely affect demand.
- Management expects operating losses to continue for the foreseeable future and identifies accelerated 2021 technology investment, including Converge development, as a priority. It expects higher near-term R&D spending and ongoing growth-related and public-company costs. No numerical revenue, earnings or margin guidance is provided.
- The company said its March 31 cash, cash equivalents and investments should fund operating expenses and capital needs for at least 12 months. Future capital needs depend on growth, product investment and other factors; additional financing may be needed and may not be available on acceptable terms.
- Remaining performance obligations were $194.5 million; the company expects to recognize 56% over the 12 months ending March 31, 2022, with the substantial majority of the balance to be fulfilled within three years.
Risks, contingencies and unusual items
- Disclosure controls and procedures were reported ineffective because material weaknesses in internal control over financial reporting remained. The weaknesses involved accounting resources, revenue transaction controls and period-end financial reporting. Remediation was underway but not yet complete.
- Teladoc Health sued over alleged patent infringement involving certain carts and peripherals. Amwell disputes the claims and intends to defend itself; the filing reports $0.7 million of related litigation expense in Q1 and says it does not expect pending matters to have a material financial effect.
- Revenue and customer concentration merit attention: one customer represented 25% of Q1 revenue and one customer accounted for 30% or more of accounts receivable at quarter-end. A significant customer relationship also generated related-party revenue.
- Amwell has a history of losses and an accumulated deficit of $668.9 million. Its risks include competition, customer concentration, privacy and cybersecurity, healthcare regulation, telehealth adoption, execution and acceptance of Converge, and maintaining provider capacity.
- The Cleveland Clinic joint venture generated an $0.8 million equity-method loss in Q1. Amwell made a $2.5 million contribution during the quarter and has a commitment for up to $11.8 million in additional contributions, with timing and phases not fully defined.
Investor verification points
- Track whether subscription growth and customer-provider utilization can offset slower growth in AMG visit revenue and continuing operating losses.
- Verify cash burn, liquidity runway, and the timing and amount of remaining joint-venture contributions.
- Monitor Converge launch costs, customer acceptance, and any quantified outlook in subsequent filings.
- Check progress in remediating material weaknesses and whether controls are later determined to operate effectively.
- Follow the Teladoc patent litigation and any material changes to regulatory reimbursement or telehealth licensing policies.
- Review customer concentration, receivable collection, and the sustainability of revenue tied to major customer relationships.