American Well Corporation (Amwell) — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Amwell provides enterprise telehealth technology, subscriptions, services, Carepoints and clinical visits through its affiliated provider network. Financial amounts below are in millions unless otherwise stated.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $60.2 | $68.6 | $117.8 | $122.3 |
| Operating loss | $(37.5) | $(87.8) | $(76.3) | $(113.6) |
| Net loss | $(38.1) | $(88.2) | $(77.9) | $(113.4) |
| Adjusted EBITDA (non-GAAP) | $(23.7) | $(13.3) | $(50.1) | $(31.1) |
| Cash used in operating activities | — | $(67.4) | $(57.8) |
Q2 revenue declined 12% year over year, as visit revenue fell 24% to $27.5 million, largely reflecting lower volumes than during the pandemic-driven Q2 2020 peak. Platform subscription revenue increased 9% to $26.8 million, while services and Carepoints revenue decreased to $5.9 million from $8.1 million. For the first half, visits totaled 2.9 million in both years, but more visits were delivered by customers’ own providers in 2021.
Costs of revenue, excluding depreciation and amortization, were $33.9 million in Q2. On that basis, revenue less costs of revenue was $26.3 million, or approximately 43.7% of revenue, versus $24.7 million, or 36.1%, a year earlier. This is a calculated measure, not a company-reported gross margin. GAAP losses narrowed substantially, chiefly because Q2 2020 included much higher stock-based compensation; Q2 2021 stock-based compensation was $10.7 million versus $67.6 million. Adjusted EBITDA loss nevertheless widened.
Liquidity, debt and cash flow
- Cash and cash equivalents were $975.2 million at June 30, 2021; the company reported no investments at that date and no debt outstanding. It had $6.2 million of borrowing availability under its line of credit, after outstanding letters of credit.
- First-half operating cash use was $67.4 million. Investing activities provided $97.2 million, mainly from $100.0 million of investment maturities; financing activities provided $3.5 million.
- Management expects existing cash and cash equivalents to fund operating expenses and capital expenditure needs for at least 12 months, while also expecting operating losses for the foreseeable future. Accumulated deficit was $708.6 million.
Outlook, developments and risks
- No specific revenue or earnings guidance was provided. Management said it is accelerating 2021 technology investment, including development of the Converge platform, and expects near-term R&D spending to increase. Sales and marketing and public-company administrative costs are also expected to rise in absolute dollars.
- COVID-19 accelerated telehealth adoption, but management noted uncertainty around future demand and the duration of relaxed telehealth reimbursement, licensing and other rules. Active providers declined from 81,000 in Q1 2021 to 71,000 in Q2; management anticipated a reset as pandemic-era providers cycle out of the measure.
- After quarter-end, Amwell agreed to acquire Conversa Health for approximately $110 million and SilverCloud Health for approximately $210 million, in proposed cash-and-stock consideration, with potential performance-based additional consideration. Conversa closed August 10, 2021; SilverCloud was expected to close by the end of Q3. Consideration mix could change.
- A single customer represented 25% of revenue in both Q2 and the first half of 2021. Amwell cited customer concentration, competition, regulation, privacy and cybersecurity, technology execution, acquisition integration, and the possibility of reduced telehealth utilization among its risks.
- Teladoc sued over alleged patent infringement involving certain cart products and peripherals. Amwell disputes the claims and intends to defend itself; management said pending matters were not expected to have a material adverse effect.
- Disclosure controls were deemed ineffective due to continuing material weaknesses in the control environment, revenue transaction controls and period-end financial reporting. Remediation efforts were underway; the weaknesses were not yet considered remediated.
Most important facts for investors to verify
- Whether subscription growth can offset lower visit revenue as pandemic-era volumes normalize, and how visit mix affects revenue and margins.
- Cash burn and adjusted EBITDA trends, including the effects of investment spending and stock-based compensation.
- Customer concentration and renewal or expansion trends, particularly for the customer contributing 25% of revenue.
- Post-quarter acquisition closing terms, final cash-versus-stock consideration, earnouts, and integration costs.
- Progress in remediating internal-control material weaknesses and developments in the Teladoc litigation.