Amwell(AMWL) - 2023 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements Presents unaudited condensed consolidated financial statements and notes for Q1 2023 and 2022, covering balance sheet, operations, equity, and cash flows Condensed Consolidated Balance Sheet Presents the unaudited condensed consolidated balance sheet as of March 31, 2023, and December 31, 2022 Condensed Consolidated Balance Sheet (in thousands): | Item | March 31, 2023 | December 31, 2022 | | :----------------------------------- | :------------- | :---------------- | | Assets | | | | Cash and cash equivalents | $112,887 | $538,546 | | Investments | $394,309 | — | | Total current assets | $588,252 | $626,616 | | Goodwill | $106,707 | $435,279 | | Total assets | $850,505 | $1,217,557 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $115,590 | $114,056 | | Total liabilities | $136,229 | $133,706 | | Total stockholders' equity | $714,276 | $1,083,851 | | Total liabilities and stockholders' equity | $850,505 | $1,217,557 | Condensed Consolidated Statement of Operations and Comprehensive Loss Details the unaudited condensed consolidated statement of operations and comprehensive loss for Q1 2023 and 2022 Condensed Consolidated Statement of Operations and Comprehensive Loss (in thousands, except per share amounts): | Item | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Revenue | $64,001 | $64,232 | | Total costs and operating expenses | $461,323 | $134,714 | | Loss from operations | $(397,322) | $(70,482) | | Net loss | $(398,509) | $(70,253) | | Net loss attributable to American Well Corporation | $(397,688) | $(70,037) | | Net loss per share, basic and diluted | $(1.42) | $(0.26) | | Comprehensive loss attributable to American Well Corporation | $(391,307) | $(74,239) | - The company recognized a significant goodwill impairment charge of $330,309 thousand in Q1 2023, which was not present in Q1 2022, contributing to a substantial increase in total costs and operating expenses[8] Condensed Consolidated Statement of Stockholders' Equity Outlines changes in stockholders' equity for the three months ended March 31, 2023 and 2022 Changes in Stockholders' Equity (in thousands): | Item | January 1, 2023 | March 31, 2023 | | :----------------------------------- | :-------------- | :------------- | | Common Stock | $2,766 | $2,801 | | Additional Paid-In Capital | $2,160,108 | $2,182,627 | | Accumulated Other Comprehensive Income (Loss) | $(16,969) | $(10,588) | | Accumulated Deficit | $(1,082,028) | $(1,479,717) | | Total American Well Corporation Stockholders' Equity | $1,063,877 | $695,123 | | Noncontrolling Interest | $19,974 | $19,153 | | Total Stockholders' Equity | $1,083,851 | $714,276 | - Net loss for the three months ended March 31, 2023, was $(397,688) thousand, significantly impacting accumulated deficit and total stockholders' equity[11] - Stock-based compensation expense contributed $20,997 thousand to additional paid-in capital during Q1 2023[11] Condensed Consolidated Statement of Cash Flows Provides the unaudited condensed consolidated statement of cash flows for Q1 2023 and 2022 Condensed Consolidated Statement of Cash Flows (in thousands): | Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(29,148) | $(62,191) | | Net cash used in investing activities | $(397,739) | $(499,291) | | Net cash provided by (used in) financing activities | $1,556 | $(7,753) | | Net decrease in cash, cash equivalents, and restricted cash | $(425,659) | $(569,482) | | Cash, cash equivalents, and restricted cash at end of period | $113,682 | $177,729 | - Cash used in operating activities decreased by $33.043 million (53.1%) from Q1 2022 to Q1 2023, primarily due to the impact of goodwill impairment and stock-based compensation offsetting the net loss[17] - Investing activities in Q1 2023 included significant purchases of investments ($389.99 million) and capitalized software development costs ($6.751 million)[17] Notes to the Unaudited Condensed Consolidated Financial Statements Provides detailed explanations of significant accounting policies and financial statement components 1. Organization and Description of Business Describes the company's business, operations, and financial outlook for the next twelve months - American Well Corporation (Amwell) is a leading enterprise software company enabling digital delivery of care for healthcare stakeholders, headquartered in Boston, Massachusetts[20] - The Company expects its cash, cash equivalents, and investments of $507,196 thousand as of March 31, 2023, to be sufficient to fund operations and capital expenditures for at least the next twelve months[21] 2. Summary of Significant Accounting Policies Details the accounting principles and policies used in preparing the financial statements - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP and SEC rules, including all necessary adjustments for fair statement[23] - The Company operates as one reportable and operating segment, with substantially all revenue and long-lived assets attributable to U.S. operations[30] - The aggregate carrying value of total assets for Variable Interest Entities (VIEs) was $31,042 thousand as of March 31, 2023, and total revenue from VIEs was $19,746 thousand for Q1 2023[31][32] - The Company accounts for its investment in CCAW, JV LLC (a joint venture with Cleveland Clinic) using the equity method, recognizing a loss of $652 thousand in Q1 2023[33][36] 3. Revenue Analyzes revenue disaggregated by source, credit losses, and deferred revenue Revenue Disaggregated by Source (in thousands): | Revenue Source | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------- | :-------------------------------- | :-------------------------------- | | Platform subscription | $28,695 | $28,691 | | Visits | $32,537 | $30,736 | | Other | $2,769 | $4,805 | | Total Revenue | $64,001 | $64,232 | - Total revenue remained relatively flat year-over-year, with a slight decrease of $231 thousand. Visit revenue increased by $1.8 million, while 'Other' revenue decreased by $2.0 million[43] Allowance for Credit Losses (in thousands): | Item | Three Months Ended March 31, 2023 | Year Ended December 31, 2022 | | :----------------------------------- | :-------------------------------- | :--------------------------- | | Beginning balance | $1,884 | $1,809 | | Provisions | $202 | $803 | | Write-offs | $(17) | $(728) | | Ending balance | $2,069 | $1,884 | Deferred Revenue (in thousands): | Item | Three Months Ended March 31, 2023 | Year Ended December 31, 2022 | | :----------------------------------- | :-------------------------------- | :--------------------------- | | Beginning balance | $55,794 | $75,896 | | Additions | $47,477 | $106,330 | | Recognized | $(29,486) | $(126,432) | | Ending balance | $73,785 | $55,794 | | Current deferred revenue | $65,607 | $49,505 | | Non-current deferred revenue | $8,178 | $6,289 | - The aggregate transaction price allocated to remaining performance obligations was $194,993 thousand as of March 31, 2023, with 47% expected to be recognized in the next 12 months[50] 4. National Telehealth Network Discusses the consolidation of National Telehealth Network and non-controlling interest - The Company obtained control over National Telehealth Network (NTN) on January 1, 2016, and consolidates its operations, recognizing net loss attributable to non-controlling interest[52] - The proportionate share of net loss attributed to non-controlling interest was $821 thousand for Q1 2023, up from $216 thousand in Q1 2022[53] - The carrying value of the non-controlling interest was $19,153 thousand as of March 31, 2023[53] 5. Fair Value Measurements Presents the fair value hierarchy for financial assets, including money market funds and U.S. government securities Fair Value Hierarchy for Financial Assets (in thousands): | Item | March 31, 2023 (Level 1) | March 31, 2023 (Level 2) | March 31, 2023 (Total) | | :-------------------- | :----------------------- | :----------------------- | :--------------------- | | Money market funds | $32,514 | — | $32,514 | | U.S government securities | — | $394,309 | $394,309 | | Total financial assets | $32,514 | $394,309 | $426,823 | | Item | December 31, 2022 (Level 1) | December 31, 2022 (Level 2) | December 31, 2022 (Total) | | :-------------------- | :------------------------ | :------------------------ | :------------------------ | | Money market funds | $445,856 | — | $445,856 | | Total financial assets | $445,856 | — | $445,856 | - The Company's investments shifted significantly from primarily money market funds (Level 1) at year-end 2022 to include a large portion of U.S. government agency bonds (Level 2) by March 31, 2023[56] 6. Investments Details the company's investments by type of security, amortized cost, and fair value Investments by Type of Security (in thousands): | Item | Amortized Cost (March 31, 2023) | Gross Unrealized Gains (March 31, 2023) | Fair Value (March 31, 2023) | | :-------------------- | :------------------------------ | :-------------------------------------- | :-------------------------- | | U.S government securities | $389,990 | $4,319 | $394,309 | | Item | Amortized Cost (December 31, 2022) | Gross Unrealized Gains (December 31, 2022) | Fair Value (December 31, 2022) | | :-------------------- | :------------------------------- | :--------------------------------------- | :----------------------------- | | U.S government securities | — | — | — | - As of March 31, 2023, the Company held $394,309 thousand in U.S. government securities, with $4,319 thousand in gross unrealized gains[58] 7. Goodwill and Intangible Assets Reports changes in goodwill, including impairment charges, and details identified intangible assets Goodwill Changes (in thousands): | Item | Three Months Ended March 31, 2023 | | :----------------------------------- | :-------------------------------- | | Beginning Balance as of January 1 | $435,279 | | Goodwill impairment | $(330,309) | | Currency translation adjustments | $1,737 | | Ending Balance | $106,707 | - The Company recorded a $330,309 thousand non-deductible, non-cash goodwill impairment charge for Q1 2023 due to sustained decreases in its publicly quoted share price and market capitalization[59][60] Identified Intangible Assets (in thousands): | Item | Gross Amount (March 31, 2023) | Accumulated Amortization (March 31, 2023) | Carrying Value (March 31, 2023) | Weighted Average Remaining Life (Years) | | :-------------------------- | :---------------------------- | :---------------------------------------- | :------------------------------ | :-------------------------------------- | | Customer relationships | $80,341 | $(26,958) | $53,383 | 7.2 | | Technology | $89,747 | $(34,550) | $55,197 | 4.0 | | Internally developed software | $16,905 | $(846) | $16,059 | 2.9 | | Total | $201,690 | $(66,289) | $135,401 | | | Item | Gross Amount (December 31, 2022) | Accumulated Amortization (December 31, 2022) | Carrying Value (December 31, 2022) | Weighted Average Remaining Life (Years) | | :-------------------------- | :----------------------------- | :----------------------------------------- | :------------------------------- | :-------------------------------------- | | Customer relationships | $80,168 | $(24,919) | $55,249 | 7.4 | | Technology | $89,262 | $(30,895) | $58,367 | 4.2 | | Internally developed software | $10,155 | — | $10,155 | 3.0 | | Total | $194,132 | $(59,152) | $134,980 | | - Amortization expense for intangible assets increased to $6,932 thousand in Q1 2023 from $6,186 thousand in Q1 2022, partly due to the amortization of internally developed software[62] 8. Accrued Expenses and other current liabilities Summarizes accrued expenses and other current liabilities, including employee compensation and professional services Accrued Expenses and Other Current Liabilities (in thousands): | Item | March 31, 2023 | December 31, 2022 | | :----------------------------------- | :------------- | :---------------- | | Employee compensation and benefits | $15,732 | $26,192 | | Professional services | $7,218 | $10,190 | | Provider services | $7,929 | $8,096 | | Other | $9,043 | $9,780 | | Total | $39,922 | $54,258 | - Total accrued expenses and other current liabilities decreased by $14,336 thousand from December 31, 2022, to March 31, 2023, primarily driven by a decrease in employee compensation and benefits[65] 9. Stockholders' Equity Details common stock, equity awards, stock option activity, and restricted stock units - As of March 31, 2023, the Company had 247,762,793 Class A, 27,390,397 Class B, and 5,555,555 Class C common shares outstanding[68] - The Company reserved 82,550,522 shares of common stock for equity awards as of March 31, 2023, an increase from 68,617,245 shares as of December 31, 2022[68] Stock Option Activity: | Item | Number of Shares (March 31, 2023) | Weighted Average Exercise Price (March 31, 2023) | | :----------------------------------- | :-------------------------------- | :--------------------------------------- | | Outstanding as of January 1, 2023 | 11,039,551 | $5.23 | | Exercised | (128,572) | $2.25 | | Forfeited | (173,320) | $5.80 | | Outstanding as of March 31, 2023 | 10,737,659 | $5.24 | Restricted Stock Units (RSUs) Activity: | Item | Shares (March 31, 2023) | Weighted Average Grant Date Value (March 31, 2023) | | :----------------------------------- | :---------------------- | :--------------------------------------- | | Unvested as of January 1, 2023 | 19,316,459 | $10.78 | | Granted | 9,675,841 | $2.76 | | Vested | (2,781,161) | $7.17 | | Forfeited | (511,008) | $4.86 | | Unvested as of March 31, 2023 | 25,700,131 | $8.27 | - The total grant date fair value of RSUs granted in Q1 2023 was $26,712 thousand, with an aggregate intrinsic value of vested RSUs of $7,693 thousand[72] - Stock-based compensation expense totaled $20,997 thousand in Q1 2023, an increase from $12,085 thousand in Q1 2022, with the largest portion ($15,812 thousand) allocated to general and administrative expenses[80] 10. Commitments and Contingencies Outlines indemnification provisions and the status of pending legal claims or litigation - The Company's arrangements generally include indemnification provisions for clients against intellectual property infringement and breaches of law/regulation or business associate agreements[81] - As of March 31, 2023, the Company did not have any pending claims, charges, or litigation expected to have a material adverse effect on its financial position[82] 11. Income Taxes Explains the company's income tax expense, valuation allowance, and deferred tax assets - The Company maintains a full valuation allowance against its domestic net deferred tax assets due to a history of net operating losses[83] - Income tax expense was $1,475 thousand for Q1 2023, primarily due to state and foreign income taxes, compared to an income tax benefit of $332 thousand in Q1 2022[83] 12. Related-Party Transactions Reports revenue and capital contributions from related parties, including Cleveland Clinic and CCAW, JV LLC - Revenue from Cleveland Clinic (a related party) was $599 thousand in Q1 2023, down from $760 thousand in Q1 2022[84] - Revenue from CCAW, JV LLC (a minority-owned joint venture with Cleveland Clinic) was $389 thousand in Q1 2023, down from $455 thousand in Q1 2022[85] - The Company made a capital contribution of $980 thousand to CCAW, JV LLC during Q1 2023[85] 13. Net Loss per Share Calculates basic and diluted net loss per share attributable to common stockholders Net Loss per Share Attributable to Common Stockholders: | Item | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss attributable to American Well Corporation | $(397,688) | $(70,037) | | Weighted-average common shares outstanding | 279,966,645 | 268,002,110 | | Net loss per share, basic and diluted | $(1.42) | $(0.26) | - Diluted net loss per share is the same as basic net loss per share because potential dilutive securities (stock options, RSUs) were anti-dilutive due to the net loss[87][88] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's analysis of financial condition, results of operations, liquidity, and capital resources, highlighting key performance drivers Special Note Regarding Forward-Looking Statements Highlights forward-looking statements and associated risks, including market growth, losses, and technological changes - The report contains forward-looking statements subject to risks, uncertainties, and assumptions, including weak growth in the virtual care market, history of losses, inability to adapt to technological changes, and dependence on a limited number of significant clients[92][93] Overview Introduces Amwell as a digital care delivery software company, its client base, and the Converge™ platform strategy - Amwell is a leading enterprise software company enabling digital care delivery, empowering health providers, payers, and innovators with core technology and services for virtual care programs[96] - As of March 31, 2023, approximately 104,500 client providers use Amwell's enterprise software, and the company powered over 1.7 million virtual care visits in Q1 2023[99][96] - The Converge™ platform, designed for hybrid care models, accounted for 36% of visits in Q1 2023, up from 28% in Q4 2022, with a strategic focus on client migration to this platform[100][101] Our Business Model Describes Amwell's revenue streams from enterprise software subscriptions, professional services, Carepoint devices, and AMG clinical services - Amwell sells enterprise software on a subscription basis, complemented by professional services, Carepoint devices, and access to Amwell Medical Group (AMG) clinical services on a fee-for-service basis[102] - Total subscription fees remained flat at $28.7 million for both Q1 2023 and Q1 2022[103] - AMG-related visit fees increased to $32.5 million in Q1 2023 from $30.7 million in Q1 2022[109] - Revenue from services and Carepoint hardware decreased to $2.8 million in Q1 2023 from $4.8 million in Q1 2022[111] Health Systems Explains Amwell's enterprise software model for health systems, based on forecasted consultations and net patient revenue - Amwell's enterprise software for health systems facilitates patient-provider consultations, with subscription fees based on forecasted consultations and net patient revenue, increasing with module expansion or exceeding volume thresholds[104] Health Plans Details the subscription model for health plans, based on member count and additional fees for add-on programs - For health plans, the software expands member access and improves outcomes, with recurring subscription fees based on member count and additional fees for add-on programs and increased covered lives[105] Innovators Describes Amwell's support for innovator clients through various subscription and service contracts - Amwell supports innovator clients like Philips, Cleveland Clinic joint venture, Meuhedet, Solaborate, and LG, with contracts ranging from subscription-only for embedded technology to comprehensive subscription and services[106] Visits Outlines revenue generation from AMG's fee-for-service clinical network, with fees varying by specialty and program - Amwell's clinical affiliate, AMG, provides a nationwide network of multi-disciplinary providers, earning fee-for-service revenue for each episode of care, with fees varying by specialty and clinical program (e.g., $59 to over $800 per consultation)[107][108] Services & Carepoint Hardware Covers professional services for virtual care implementation and proprietary Carepoint hardware sales - The Company offers professional services for virtual care implementation, workflow design, and systems integration, alongside proprietary Carepoint hardware (medical carts and kiosks) for various clinical and community settings[110][111] Acquisitions Discusses how acquisitions like SilverCloud Health and Conversa Health expanded Amwell's offerings - Acquisitions like SilverCloud Health (digital mental health) and Conversa Health (automated virtual healthcare) have expanded Amwell's enterprise software and service offerings, adding longitudinal care and behavioral healthcare capabilities[112] Key Metrics and Factors Affecting Our Performance Identifies digital care utilization, active providers, regulatory environment, and seasonality as key performance drivers Digital Care Utilization Examines digital care utilization as a driver for contract renewals and AMG clinical fees - Digital care utilization is a key driver, influencing contract renewals, increased license fees for exceeding visit thresholds, and revenue from AMG clinical fees[114] Total Overall Quarterly Visits (in thousands): | Quarter Ended | Total Overall Quarterly Visits | | :---------------- | :----------------------------- | | March 31, 2023 | 1,710 | | December 31, 2022 | 1,715 | | September 30, 2022 | 1,450 | | June 30, 2022 | 1,525 | | March 31, 2022 | 1,775 | | December 31, 2021 | 1,550 | - Total visits decreased slightly to 1.71 million in Q1 2023 from 1.775 million in Q1 2022. AMG providers accounted for 25% of total visits in Q1 2023, up from 22% in Q1 2022[116] Active Providers Tracks the number of active non-AMG and AMG providers delivering virtual care visits - Active Providers (non-AMG providers delivering at least one visit in the last 12 months) increased by approximately 1,000 in Q1 2023, all from Health System and Health Plan clients[118] Active Providers (in thousands): | Quarter Ended | Client Providers | AMG | | :---------------- | :--------------- | :-- | | March 31, 2023 | 104.5 | 3.5 | | December 31, 2022 | 103.5 | 3.5 | | September 30, 2022 | 100.5 | 3.5 | | June 30, 2022 | 97.5 | 3.5 | | March 31, 2022 | 96.5 | 3.5 | | December 31, 2021 | 92.5 | 3.5 | Regulatory Environment Discusses the impact of federal, state, and local regulations on the company's operations - The Company's operations are subject to extensive federal, state, and local regulations. While COVID-19 led to loosened regulations, many are expected to be reinstated post-May 2023 public health emergency, though no material impact on the business is anticipated[120] Seasonality Explains typical seasonal fluctuations in visit volumes, influenced by factors like flu season - Visit volumes typically rise during Q4 and Q1 due to flu season and fall in summer months, though COVID-19 has introduced unpredictable spikes[121] Non-GAAP Financial Measures Presents and reconciles non-GAAP financial measures, specifically Adjusted EBITDA, for performance evaluation Adjusted EBITDA Defines and reconciles Adjusted EBITDA, a key management metric for operating performance and planning - Adjusted EBITDA is a key performance measure used by management for evaluating operating performance, business planning, and acquisition assessment, excluding items like interest, taxes, depreciation, amortization, goodwill impairment, and stock-based compensation[123] Adjusted EBITDA Reconciliation (in thousands): | Item | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(398,509) | $(70,253) | | Add: Depreciation and amortization | $7,243 | $6,598 | | Add: Goodwill Impairment | $330,309 | — | | Add: Stock-based compensation | $20,997 | $12,085 | | Add: Severance | $1,575 | — | | Add: Noncash expenses and contingent consideration adjustments | — | $3,737 | | Add: Litigation expense | — | $1,138 | | Adjusted EBITDA | $(44,601) | $(47,135) | - Adjusted EBITDA improved to $(44,601) thousand in Q1 2023 from $(47,135) thousand in Q1 2022, despite a significantly higher net loss, primarily due to the exclusion of the goodwill impairment charge[126] Components of Statement of Operations Breaks down the components of the statement of operations, including revenue, cost of revenues, and operating expenses Revenue Describes the sources of revenue, including subscription fees, services, Carepoint sales, and AMG patient visits - Revenue is generated from recurring subscription fees for enterprise software, related services, Carepoint sales, and AMG patient visits[128] Cost of Revenues, Excluding Amortization of Intangible Assets Details the primary components of cost of revenue, such as hosting fees and provider network operations - Cost of revenue primarily includes hosting fees, professional services, technical/hosting support, and costs for the affiliated provider network operations team, driven by network size and support requirements[129] Operating Expenses Categorizes operating expenses into research and development, sales and marketing, and general and administrative - Operating expenses consist of research and development, sales and marketing, and general and administrative expenses[130] Research and Development Expenses Outlines R&D costs, including personnel, IT infrastructure, and product development, with expected future trends - R&D expenses include personnel, IT infrastructure, security, compliance, and product development costs. The Company expects a gradual decline in R&D spend during 2023 after accelerated expansion in prior years[131] Sales and Marketing Expenses Covers sales and marketing costs, including employee-related expenses and marketing campaigns - Sales and marketing expenses primarily cover employee-related costs, commissions, and marketing campaigns, with continued investment expected to grow with new prospects and existing clients[132][133] General and Administrative Expenses Details G&A expenses, including personnel and professional fees, and their expected trajectory - G&A expenses include personnel and professional fees for finance, legal, HR, IT, and executive staff, expected to increase in absolute terms but decrease as a percentage of total revenue over several years[134] Depreciation and Amortization Expense Explains depreciation and amortization expenses related to intangible assets and fixed assets - Depreciation and amortization expense includes amortization of acquisition-related intangible assets (customer relationships, technology, trade names) and depreciation of fixed assets[135] Goodwill Impairment Discusses the significant goodwill impairment charge in Q1 2023 and its underlying causes - Goodwill impairment of $330.3 million in Q1 2023 resulted from the fair value of the reporting unit being less than its carrying value, driven by sustained decreases in the Company's stock price and market capitalization[137] Interest Income and Other Income (Expense), Net Covers interest income from investments and other net income or expense items - Interest income and other income (expense), net, primarily consists of interest income from money-market and short-term investments, with no material interest expenses incurred[138] Provision for Income Taxes Explains the income tax provision, primarily due to state and foreign taxes, and valuation allowance - The income tax provision is mainly due to state and foreign income tax expense, with deferred tax assets fully offset by a valuation allowance due to historical net operating losses[139] Consolidated Results of Operations Presents a comparative analysis of consolidated financial results for Q1 2023 and 2022, highlighting key changes Consolidated Results of Operations (in thousands): | Item | 2023 | 2022 | Change | % Change | | :------------------------------------------------- | :--------- | :--------- | :--------- | :--------- | | Revenue | $64,001 | $64,232 | $(231) | 0% | | Costs of revenue, excluding D&A | $38,752 | $36,765 | $1,987 | 5% | | Research and development | $25,923 | $37,481 | $(11,558) | (31)% | | Sales and marketing | $22,726 | $21,154 | $1,572 | 7% | | General and administrative | $36,370 | $32,716 | $3,654 | 11% | | Depreciation and amortization expense | $7,243 | $6,598 | $645 | 10% | | Goodwill Impairment | $330,309 | — | $330,309 | N/A | | Total costs and operating expenses | $461,323 | $134,714 | $326,609 | 242% | | Loss from operations | $(397,322) | $(70,482) | $(326,840) | 464% | | Net loss | $(398,509) | $(70,253) | $(328,256) | 467% | | Net loss attributable to American Well Corporation | $(397,688) | $(70,037) | $(327,651) | 468% | - Revenue remained flat YoY. Costs of revenue increased by $1.9 million due to higher provider fees and consulting spend. R&D expenses decreased by $11.5 million, primarily from reduced consulting services and capitalized software development costs[142][143][144] - Sales and marketing expenses increased by $1.5 million due to higher employee-related costs. G&A expenses rose by $3.6 million, driven by employee-related costs and equity awards, partially offset by lower legal costs[145][146] - The $330.3 million goodwill impairment charge was the primary driver of the 464% increase in loss from operations and 467% increase in net loss[141][148] Liquidity and Capital Resources Assesses the company's liquidity, capital resources, and ability to fund operations, including cash flow analysis Sources of Financing Identifies principal sources of liquidity and management's assessment of funding sufficiency - Principal sources of liquidity were cash, cash equivalents, and short-term investments totaling $507.2 million as of March 31, 2023, down from $538.5 million as of December 31, 2022[155] - The Company incurred a loss from operations of $397.3 million and a net loss of $398.5 million for Q1 2023, with an accumulated deficit of $1,479.7 million[155] - Management believes existing cash and cash equivalents will be sufficient for at least the next 12 months, despite expecting future operating losses and having no debt[155][156] Cash Flow Analysis Analyzes cash flows from operating, investing, and financing activities for Q1 2023 and 2022 Summary of Cash Flow Activity (in thousands): | Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(29,148) | $(62,191) | | Net cash used in investing activities | $(397,739) | $(499,291) | | Net cash provided by (used in) financing activities | $1,556 | $(7,753) | | Total | $(425,331) | $(569,235) | - Cash used in operating activities decreased to $29.1 million in Q1 2023 from $62.2 million in Q1 2022, primarily due to non-cash expenses like goodwill impairment and stock-based compensation offsetting the net loss[157][158] - Cash used in investing activities was $397.7 million in Q1 2023, mainly for purchases of short-term investments ($390.0 million) and capitalized software development costs ($6.8 million)[159] - Cash provided by financing activities was $1.6 million in Q1 2023, from employee stock options and purchase plan proceeds, a shift from $7.8 million used in Q1 2022 (due to Conversa earnout payment)[161] Off-Balance Sheet Arrangements Confirms the absence of off-balance sheet arrangements and related financial risks - The Company has no off-balance sheet arrangements with unconsolidated entities or financial partnerships, thus not exposed to related financing, liquidity, market, or credit risks[162] Contractual Obligations and Commitments States that there have been no material changes to contractual obligations since the prior Form 10-K - There have been no material changes to contractual obligations and commitments since the prior Form 10-K filing[163] Critical Accounting Policies and Estimates Discusses management's estimates and assumptions in financial reporting and any policy changes - The preparation of financial statements requires management to make estimates and assumptions, which are subject to change based on new events and evolving operating environment[164] - No significant changes to critical accounting policies occurred during the three months ended March 31, 2023[165] Recently Issued Accounting Pronouncements Adopted Refers to Note 2 for details on recently adopted accounting pronouncements - Refer to Note 2 of the condensed consolidated financial statements for information on recently adopted accounting pronouncements[166] New Accounting Pronouncements Not Yet Adopted Refers to Note 2 for information on new accounting pronouncements not yet adopted - Refer to Note 2 of the condensed consolidated financial statements for information on new accounting pronouncements not yet adopted[167] Item 3. Quantitative and Qualitative Disclosures About Market Risk Assesses the company's exposure to market risks, including interest rate, foreign currency, and inflation risks Interest Rate Risk Evaluates the potential impact of interest rate changes on the company's cash, cash equivalents, and investments - The Company held $112.9 million in cash and cash equivalents and $394.3 million in investments (primarily money markets and U.S. Treasury bills) as of March 31, 2023[169] - A 100 basis point change in interest rates is not expected to have a material effect on the Company's business, financial condition, or results of operations[170] Foreign Currency Exchange Risk Analyzes the company's exposure to foreign currency fluctuations, given its U.S. dollar-denominated revenue - A substantial majority of revenue is U.S. dollar-denominated, and the Company has limited foreign operations (subsidiaries in Israel, with functional currencies including U.S. dollar, Euro, British pound, and Australian dollars)[171] - The Company believes it does not have a material exposure to foreign currency risk, though international expansion could increase this exposure in the future[171] Inflation Risk Assesses the historical and potential future impact of inflation on the company's financial performance - Inflation has not had a material effect on the Company's business, financial condition, or results of operations in the last two years[172] Item 4. Controls and Procedures Reports on the effectiveness of disclosure controls and procedures and internal control over financial reporting - Management concluded that the Company's disclosure controls and procedures were effective as of March 31, 2023[173] - There were no material changes in internal control over financial reporting during Q1 2023[173] PART II - OTHER INFORMATION Item 1. Legal Proceedings Confirms the absence of material legal proceedings that could adversely affect the company's financial position - As of March 31, 2023, the Company is not involved in any legal proceedings that would individually or collectively have a material adverse effect on its financial position[175] Item 1A. Risk Factors States no material changes to previously disclosed risk factors in the Form 10-K - No material changes to risk factors were disclosed in this quarterly report compared to the Form 10-K[176] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details common stock repurchases for tax obligations and confirms no unregistered equity sales Issuer Purchases of Equity Securities: | Period | Total number of shares purchased | Average price paid per share | | :---------------------- | :------------------------------- | :--------------------------- | | January 1 to January 31 | 316 | $3.86 | | February 1 to February 28 | — | — | | March 1 to March 31 | — | — | | Total | 316 | $3.86 | - The Company repurchased 316 shares of common stock in January 2023 at an average price of $3.86 per share, primarily for tax withholding obligations upon vesting of restricted stock units and exercising of options[179][180] - There were no sales of unregistered equity securities during the quarter ended March 31, 2023[179] Item 3. Defaults Upon Senior Securities States that this item is not applicable to the company for the reported period - This item is not applicable[180] Item 4. Mine Safety Disclosures States that this item is not applicable to the company for the reported period - This item is not applicable[180] Item 5. Other Information States that this item is not applicable to the company for the reported period - This item is not applicable[180] Item 6. Exhibits Lists documents incorporated by reference or filed with this Quarterly Report on Form 10-Q, including employment agreements, compensation policies, officer certifications, and XBRL-related documents - Key exhibits include employment agreements, non-employee director compensation policy, CEO and CFO certifications, and Inline XBRL documents[182] SIGNATURES Confirms the official signing of the report by the company's executive and financial officers - The report was signed by Ido Schoenberg (Co-CEO), Roy Schoenberg (Co-CEO), Robert Shepardson (CFO), and Paul McNeice (VP of Accounting) on May 3, 2023[185]