American Well Corporation (Amwell) — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing; the supplied filing text does not provide a clear standalone fourth-quarter income statement. Amounts below are in U.S. dollars.
Business context
Amwell sells enterprise digital-care software and subscriptions, related services and hardware, and fee-for-service clinical visits through its affiliated Amwell Medical Group. At year-end, it served more than 50 health plans representing over 100 million covered lives and approximately 115 health systems. Its Converge platform is central to its strategy of connecting in-person, virtual and automated care.
Financial and operating metrics
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Revenue | $259.0 million | $277.2 million | Down 7% |
| Platform subscription revenue | $112.4 million | $120.9 million | Down $8.6 million |
| Visit revenue | $119.5 million | $124.4 million | Down $4.9 million |
| Net loss | $679.2 million | $272.1 million | Loss widened $407.1 million |
| Adjusted EBITDA (non-GAAP) | $(165.4) million | $(175.3) million | Improved $9.9 million |
| Operating cash flow | $(148.3) million | $(192.3) million | Use of cash declined |
| Cash and cash equivalents | $372.0 million | $538.5 million | Down $166.5 million |
Cost of revenue, excluding depreciation and amortization of intangible assets, was $164.3 million, implying gross profit of approximately $94.8 million and a 36.6% gross margin on that basis. Operating loss was $692.1 million. The large GAAP loss included a $436.5 million non-cash goodwill impairment charge. The filing reports no debt at December 31, 2023. Current assets were $449.6 million and current liabilities $93.8 million.
- Visits totaled 6.29 million versus 6.47 million in 2022; scheduled visits fell to 4.1 million from 4.6 million. AMG providers accounted for 25% of visits in both years.
- Health-system subscription revenue declined to $53.5 million from $61.2 million, while health-plan subscription revenue increased to $49.2 million from $48.7 million.
- Converge handled 52% of visits in Q4 2023, up from 28% in Q4 2022.
- Elevance Health represented 24% of FY2023 revenue; the top ten clients represented 51%.
Material changes versus prior year
Revenue fell primarily because of subscription churn during the Converge re-platforming, lower visit volumes and specialty-care utilization, and reduced hardware and services revenue. Management said growth within strategic clients partly offset subscription churn. Research and development expense decreased 24% to $105.8 million as peak Converge development spending eased; $15.1 million of software development costs were capitalized. Sales and marketing expense rose 6% to $86.5 million, while general and administrative expense declined 13% to $126.6 million.
The net loss more than doubled, largely because of the goodwill impairment, which followed sustained declines in the company’s share price and market capitalization. Excluding that charge, adjusted EBITDA improved, though it remained substantially negative.
Outlook, commentary and risks
- Management expects operating losses to continue and says existing cash and cash equivalents are expected to fund working capital and capital expenditures for at least 12 months from the financial statements’ issuance date. Additional financing may be needed depending on business needs; availability and terms are uncertain.
- Management expects research and development spending to return toward normal levels after the peak development period in 2022 and the first half of 2023. A major 2024 priority is migrating remaining health-plan and health-system clients to Converge. No specific revenue or earnings guidance is stated in the supplied filing text.
- Key risks include re-platforming-related churn and implementation timing, persistent losses and cash use, reliance on a limited number of clients, competition and uncertain digital-care adoption, and extensive healthcare, privacy and cybersecurity regulation. Elevance accounted for 24% of revenue.
- Seasonality affects visit volumes, which generally rise in Q4 and Q1 and decline during summer. Medicare reimbursement flexibilities were extended through December 31, 2024, but their longer-term status is uncertain.
- The company reported no material cybersecurity threats identified in 2023 and no pending legal matters that management expected to have a material adverse effect. PwC issued an unqualified audit opinion and concluded internal control over financial reporting was effective.
- After year-end, certain named executive officers agreed to cancel specified 2022 performance stock units in exchange for expected 2024 restricted stock unit grants. The filing describes this as a retention measure and provides grant values for the affected executives.
Important facts for investors to verify
- Whether Converge migration progresses as planned and reduces client churn, particularly given the decline in health-system clients and subscription revenue.
- Whether revenue stabilizes and operating cash burn continues to moderate; reconcile reported net losses with non-GAAP adjusted EBITDA and non-cash charges.
- Cash runway assumptions, future financing needs and the effect of continued operating losses on liquidity.
- Client concentration and renewal exposure, especially Elevance’s 24% revenue share and the top ten clients’ 51% share.
- Revenue recognition, capitalized software spending and further impairment risk; goodwill was fully impaired, while $120.2 million of intangible assets remained.
- Potential dilution from equity compensation and the multiple-class share structure, under which founders retain 51% of voting power while Class B shares remain outstanding.