American Well Corporation — Q1 2022 10-Q
Reporting period: Three months ended March 31, 2022. Amounts below are in U.S. dollars; financial figures are in millions unless noted. American Well provides enterprise software and services for virtual care. Its platform subscriptions and services are complemented by patient visits delivered through its affiliated medical group. Results include the Conversa and SilverCloud businesses acquired in August 2021.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $64.2 | $57.6 | +12% |
| Platform subscription revenue | $28.7 | $24.6 | +17% |
| Visit revenue | $30.7 | $27.8 | +10% |
| Other revenue | $4.8 | $5.2 | -7% |
| Operating expenses | $134.7 | $96.3 | +40% |
| Operating loss | $(70.5) | $(38.7) | Loss increased |
| Net loss | $(70.3) | $(39.8) | Loss increased |
| Adjusted EBITDA (non-GAAP) | $(47.1) | $(26.4) | Loss increased |
| Operating cash used | $(62.2) | $(41.1) | Cash use increased |
Gross profit before depreciation and amortization was approximately $27.5 million, or 42.8% of revenue, compared with $21.9 million, or 38.0%, in Q1 2021. Net loss attributable to American Well was $70.0 million, or $0.26 per share, versus $39.2 million, or $0.16 per share. The filing reports no debt at March 31, 2022.
At quarter-end, cash and cash equivalents were $176.9 million and investments were $498.0 million, for combined cash, cash equivalents and investments of $674.9 million. Total liabilities were $153.0 million; current assets were $753.2 million and current liabilities were $128.8 million. Management said available cash, cash equivalents and investments should fund operating expenses and capital requirements for at least 12 months.
Cash used in investing activities was $499.3 million, principally reflecting $499.2 million of purchases of investments, rather than operating capital expenditure. Cash used in financing activities was $7.8 million, including an $11.8 million Conversa earnout payment, partly offset by employee equity-plan proceeds.
Material changes and operating trends
- Revenue grew $6.6 million. Management attributed the increase to new and expanding platform subscriptions and higher visit volume, including urgent care and behavioral health visits.
- Operating costs grew substantially faster than revenue. Research and development rose 63% to $37.5 million, sales and marketing rose 54% to $21.2 million, and general and administrative expense rose 53% to $32.7 million.
- Management cited Converge development consulting, increased headcount, marketing and conference costs, administrative systems, acquisition-related amortization, and earnout accretion among the drivers of higher costs.
- Clients completed approximately 1.775 million platform visits, up from 1.575 million in Q1 2021. Scheduled visits increased to 1.3 million from 1.1 million. Active providers totaled approximately 102,000, including 98,500 customer providers and 3,500 AMG providers.
- Cash and investments declined from $746.4 million at year-end to $674.9 million at quarter-end; the largest cash-flow driver was the purchase of short-term investments, which shifted funds from cash into investments.
Outlook, risks and unusual items
The filing provides no specific quarterly or full-year revenue or earnings guidance. Management expects continued operating losses in future years and described accelerated investment in the Converge platform, with higher near-term research and development spending. It expects growth and scale to support improved expense efficiency over time, but does not quantify timing or results.
Key risks include the company’s history of losses and uncertainty about achieving profitability; telehealth market growth and usage; reliance on a limited number of significant customers; competition; successful Converge rollout and customer acceptance; healthcare regulation and potentially changing telehealth reimbursement rules; privacy and cybersecurity; and integration and benefits of acquisitions. One customer represented 26% of Q1 2022 revenue. The company also noted uncertainty around COVID-19’s effect on demand and seasonality.
Teladoc Health has asserted that certain Amwell cart products and peripherals infringe its patents and filed a claim in October 2020. Amwell considers the claims without merit and intends to defend itself; management said it did not expect pending litigation to have a material adverse financial effect. The filing notes Carepoints products represented approximately 4% of 2021 revenue.
Acquisition-related items included $15.0 million paid in January for a Conversa integration milestone and 1,020,964 Class A shares issued following an amendment accelerating the determination of a Conversa revenue earnout. The company reported $13.9 million of contingent consideration liabilities at quarter-end. It also reported $12.1 million of stock-based compensation expense for the quarter.
Important facts for investors to verify
- Whether revenue and platform visit growth can persist as pandemic-era demand and reimbursement conditions change.
- Whether Converge development and other investment translate into customer adoption, revenue growth and improved margins, given the widening operating loss.
- How quickly operating cash use may moderate and whether the stated liquidity runway remains adequate under future spending and growth scenarios.
- The exposure to the customer representing 26% of quarterly revenue and the effect of any renewal, utilization or relationship changes.
- Developments in the Teladoc patent dispute, acquisition integration and remaining earnout obligations, including potential equity dilution.