American Well Corporation (Amwell) — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022; filed August 5, 2022. Amwell provides enterprise software and services for virtual care, including platform subscriptions, clinical visits, and supporting services and hardware. Results include the 2021 acquisitions of Conversa Health and SilverCloud.
Financial performance
Amounts are in millions of dollars except per-share data. Comparisons are with the corresponding 2021 periods.
| Metric | Q2 2022 | Q2 2021 | First half 2022 | First half 2021 |
|---|---|---|---|---|
| Revenue | $64.5 | $60.2 | $128.7 | $117.8 |
| Operating loss | $(69.4) | $(37.5) | $(139.9) | $(76.3) |
| Net loss | $(69.7) | $(38.1) | $(139.9) | $(77.9) |
| Net loss per share, basic and diluted | $(0.25) | $(0.15) | $(0.51) | $(0.31) |
| Adjusted EBITDA (non-GAAP) | $(42.8) | $(23.7) | $(89.9) | $(50.1) |
- Q2 revenue rose 7%; first-half revenue rose 9%. Subscription revenue was $29.6 million in Q2 and $58.3 million for the first half, up from $26.8 million and $51.4 million. Visit revenue was $29.8 million and $60.5 million, respectively. Other revenue declined to $5.2 million in Q2 and $10.0 million in the first half.
- Q2 costs of revenue, excluding depreciation and amortization, were $36.5 million, implying a gross margin of approximately 43.4%, versus approximately 43.7% a year earlier. Operating expenses increased 37% in Q2 and 38% for the first half; R&D and depreciation and amortization rose particularly sharply.
- Operating cash use was $105.4 million in the first half, compared with $67.4 million in 2021. Investing activities used $376.3 million, primarily reflecting purchases of investments; financing activities used $5.5 million. Cash, cash equivalents and restricted cash ended at $258.0 million.
- At June 30, cash and cash equivalents were $257.2 million and investments were $372.9 million, totaling $630.1 million in cash, cash equivalents and investments. Current assets were $706.6 million and current liabilities $116.3 million. The company reported no debt.
- Accumulated deficit was $950.5 million. Total stockholders’ equity was $1.16 billion. The company reported a $10.2 million Q2 foreign-currency translation loss in other comprehensive income.
Material changes and operating developments
- Management attributed subscription growth to new and expanding customers, and visit-revenue growth chiefly to increased urgent-care volume associated with Omicron. First-half platform visits increased to 3.3 million from 2.9 million; scheduled visits rose to 2.4 million from 2.1 million.
- R&D expense rose 66% in Q2, largely due to $9.9 million of additional Converge consulting costs and higher employee costs. Management described accelerated technology investment to build platform capacity and functionality.
- Higher G&A reflected increased compensation and stock-based compensation, including equity awards, as well as higher legal costs. Depreciation and amortization increased with acquired intangible assets from Conversa and SilverCloud.
- Amwell issued 1.02 million shares for the Conversa revenue earn-out and 4.96 million shares for the SilverCloud earn-out; the contingent consideration balance was eliminated. It also paid $11.8 million related to the Conversa integration earn-out.
Outlook, risks and unusual items
- No numerical revenue or earnings guidance is provided in the filing. Management expects operating losses in future years but believes cash, cash equivalents and investments at June 30 will fund operating expenses and capital needs for at least the next 12 months.
- Management identifies telehealth-market growth and utilization, customer concentration, competition, Converge launch and customer adoption, regulation and reimbursement, privacy and cybersecurity, provider availability, acquisition integration, and COVID-19-related uncertainty as risks. Relaxed telehealth reimbursement and licensing policies may be changed or reinstated.
- One customer represented 24% of Q2 revenue and 25% of first-half revenue. Management also reported that one customer accounted for 15% of receivables at quarter-end.
- The Teladoc patent dispute was dismissed on June 30, 2022, pursuant to a confidential settlement. Q2 G&A included higher Teladoc-related legal costs; the company’s adjusted EBITDA reconciliation added back $4.3 million of litigation expense for Q2 and $5.4 million for the first half.
- Potential dilution is notable: 51.5 million potential common shares, including options and unvested restricted and performance-based units, were excluded from diluted loss per share as anti-dilutive. The filing reports 23.9 million unvested performance-based market-condition units granted in 2022; the specified market-capitalization conditions had not been met by June 30.
Important facts for investors to verify
- Whether subscription growth and elevated visit volumes are durable, particularly after the Omicron-related urgent-care increase.
- Converge development costs, launch progress, client adoption, and whether investment can translate into operating leverage.
- Cash-burn trajectory and the adequacy of liquidity against management’s stated 12-month outlook.
- Revenue and receivables exposure to the largest customer, and any changes in customer concentration or contract renewals.
- Potential dilution from equity compensation and acquisition-related share issuances, and the terms or outcomes of outstanding performance awards.
- Future telehealth reimbursement and regulatory policy, cybersecurity exposure, and any obligations or effects arising from the confidential Teladoc settlement.