Amwell(AMWL) - 2024 Q1 - Quarterly Report

PART I Financial Information Item 1. Financial Statements The company reported total assets of $548.4 million and total liabilities of $125.0 million as of March 31, 2024. For the three months ended March 31, 2024, revenue was $59.5 million, a decrease from $64.0 million in the prior year period. The net loss significantly narrowed to $73.4 million from $398.5 million, primarily due to a $330.3 million goodwill impairment charge in the 2023 period. Net cash used in operating activities was $59.8 million Condensed Consolidated Balance Sheet As of March 31, 2024, the company's total assets decreased to $548.4 million from $589.7 million at year-end 2023, primarily driven by a reduction in cash and cash equivalents to $308.6 million. Total liabilities increased to $125.0 million from $109.5 million, largely due to a rise in deferred revenue. Consequently, total stockholders' equity declined from $480.2 million to $423.4 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $308,599 | $372,038 | | Total current assets | $414,197 | $449,582 | | Total assets | $548,383 | $589,705 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $108,426 | $93,797 | | Total liabilities | $125,025 | $109,519 | | Total stockholders' equity | $423,358 | $480,186 | | Total liabilities and stockholders' equity | $548,383 | $589,705 | Condensed Consolidated Statement of Operations and Comprehensive Loss For the first quarter of 2024, revenue decreased by 7% year-over-year to $59.5 million. The company reported a net loss of $73.4 million, a significant improvement from the $398.5 million loss in the same period of 2023. This improvement was primarily due to the absence of a goodwill impairment charge, which amounted to $330.3 million in Q1 2023. Net loss per share improved to ($0.25) from ($1.42) year-over-year Q1 2024 vs Q1 2023 Statement of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Revenue | $59,522 | $64,001 | | Loss from operations | $(75,032) | $(397,322) | | Goodwill impairment | $0 | $330,309 | | Net loss | $(73,449) | $(398,509) | | Net loss attributable to American Well Corporation | $(72,105) | $(397,688) | | Net loss per share, basic and diluted | $(0.25) | $(1.42) | Condensed Consolidated Statement of Cash Flows For the three months ended March 31, 2024, net cash used in operating activities was $59.8 million, an increase from $29.1 million in the prior-year period. Cash used in investing activities was $4.6 million, primarily for capitalized software and a joint venture investment. Cash provided by financing activities was $1.0 million. This resulted in a net decrease in cash, cash equivalents, and restricted cash of $63.4 million, ending the period with a balance of $309.4 million Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(59,756) | $(29,148) | | Net cash used in investing activities | $(4,608) | $(397,739) | | Net cash provided by financing activities | $956 | $1,556 | | Net decrease in cash, cash equivalents, and restricted cash | $(63,439) | $(425,659) | | Cash, cash equivalents, and restricted cash at end of period | $309,394 | $113,682 | Notes to the Unaudited Condensed Consolidated Financial Statements Key notes to the financial statements detail revenue disaggregation, intangible assets, and stock-based compensation. Revenue is broken down into platform subscription, visits, and other sources. Intangible assets primarily consist of customer relationships and technology. The company issued a significant number of restricted stock units and has substantial unrecognized stock-based compensation expense. Related-party transactions with Cleveland Clinic and CCAW, JV LLC are also disclosed Revenue by Source (in thousands) | Revenue Source | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Platform subscription | $24,855 | $28,695 | | Visits | $31,078 | $32,537 | | Other | $3,589 | $2,769 | | Total Revenue | $59,522 | $64,001 | - As of March 31, 2024, the aggregate amount of transaction price allocated to remaining performance obligations was $227.7 million, with 52% expected to be recognized as revenue in the next 12 months[46] - During Q1 2024, the company granted 23.7 million restricted stock units (RSUs) and had 37.7 million unvested RSUs as of March 31, 2024[64] - As of March 31, 2024, unrecognized stock-based compensation expense related to unvested awards was $70.7 million, expected to be recognized over a weighted-average period of 2.4 years[70] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's performance, highlighting the strategic importance of the Converge™ platform, with 68% of visits now conducted on it. Revenue for Q1 2024 decreased 7% YoY to $59.5 million due to customer churn during re-platforming and lower visit volumes. The company reported an Adjusted EBITDA loss of $45.7 million. Despite a net loss, the company believes its existing cash of $308.6 million is sufficient for at least the next 12 months Overview and The Converge Platform Amwell is an enterprise platform company enabling hybrid care for over 50 health plans and approximately 115 large health systems. The company's go-forward strategy is centered on its Converge™ platform, which is designed to unify in-person, virtual, and automated care. In Q1 2024, 68% of the 1.7 million total visits were conducted on the Converge platform, an increase from 52% in Q4 2023. The strategic focus for 2024 is on delivering to government and commercial clients and migrating remaining clients to the new platform - As of December 31, 2023, Amwell powered digital care for over 50 health plans (representing over 100 million covered lives) and approximately 115 of the nation's largest health systems[85] - The Converge™ platform is the company's go-forward strategy. In Q1 2024, 68% of visits were on this platform, up from 52% in Q4 2023[89] - The company powered approximately 1.7 million virtual care visits in the three months ended March 31, 2024[85] Key Metrics and Non-GAAP Measures The company monitors digital care utilization as a key metric. Total visits were 1.7 million in Q1 2024, consistent with Q1 2023. Amwell also uses Adjusted EBITDA, a non-GAAP measure, to evaluate operating performance. For Q1 2024, the Adjusted EBITDA loss was $45.7 million, slightly higher than the $44.6 million loss in Q1 2023 Quarterly Visit Volume | Quarter Ended | Overall Visits | | :--- | :--- | | March 31, 2024 | 1,665,000 | | December 31, 2023 | 1,650,000 | | September 30, 2023 | 1,445,000 | | June 30, 2023 | 1,485,000 | | March 31, 2023 | 1,710,000 | Adjusted EBITDA Reconciliation (in thousands) | Line Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net loss | $(73,449) | $(398,509) | | Adjustments (Depreciation, Interest, Taxes, etc.) | $27,798 | $353,908 | | Adjusted EBITDA | $(45,651) | $(44,601) | Consolidated Results of Operations Revenue for Q1 2024 decreased by 7% to $59.5 million compared to Q1 2023, attributed to customer churn during re-platforming and a decline in visit volume. Cost of revenue increased by 6%, while operating expenses saw mixed changes: R&D rose 3%, Sales & Marketing increased 13% due to non-recurring consulting costs, and G&A decreased 10% from lower stock compensation. The loss from operations narrowed significantly to $75.0 million from $397.3 million, mainly because the prior year included a $330.3 million goodwill impairment - Subscription revenue declined by $3.8 million due to customer churn during re-platforming, while visit revenue decreased by $1.3 million due to lower volume and specialty care utilization[125] - Cost of revenue increased by $2.4 million, driven by higher employee-related costs ($1.3 million) and third-party costs ($1.2 million)[126] - Sales and marketing expenses increased by $3.0 million, primarily due to $2.9 million in non-recurring consulting costs for organizational strategy initiatives[128] - General and administrative expenses decreased by $3.6 million, mainly due to a $3.8 million reduction in employee-related costs, particularly stock compensation expense[129] Liquidity and Capital Resources The company's principal source of liquidity is its cash and cash equivalents, which totaled $308.6 million as of March 31, 2024. The company has no debt. For Q1 2024, net cash used in operating activities was $59.8 million. Management believes that existing cash will be sufficient to meet working capital and capital expenditure needs for at least the next 12 months - Principal sources of liquidity were cash and cash equivalents totaling $308.6 million as of March 31, 2024[136] - The company incurred a loss from operations of $75.0 million and a net loss of $73.4 million for the three months ended March 31, 2024[136] - Management believes existing cash and cash equivalents will be sufficient to meet working capital and capital expenditure needs for at least the next 12 months[137] Quantitative and Qualitative Disclosures About Market Risk The company's market risk is primarily related to interest rate fluctuations on its cash and cash equivalents of $308.6 million. Management does not believe a 100-basis-point change in interest rates would have a material effect. Exposure to foreign currency exchange risk is considered immaterial as a substantial majority of revenue is in U.S. dollars. Inflation is not believed to have had a material effect on the business - The company had cash and cash equivalents of $308.6 million as of March 31, 2024, primarily invested in money markets, which are subject to interest rate risk[147] - Foreign currency exchange risk is not considered material as the majority of revenue is denominated in U.S. dollars and foreign operations are limited[149] Controls and Procedures Management, including the principal executive and financial officers, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2024. There were no material changes in internal control over financial reporting during the quarter - Based on an evaluation, the principal executive officers and principal financial officer concluded that as of March 31, 2024, the company's disclosure controls and procedures were effective[152] - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, internal controls[152] PART II Other Information Legal Proceedings The company is not currently a party to any legal proceedings that management believes would have a material adverse effect on its business, financial condition, or results of operations - The company is not presently a party to any legal proceedings that, in the opinion of management, would individually or taken together have a material adverse effect on the business[154] Risk Factors A new material risk factor has been disclosed. On April 2, 2024, the company received a notice of non-compliance from the NYSE because its Class A common stock's average closing price was below $1.00 per share for a consecutive 30-day period. The company has proposed a reverse stock split to regain compliance, but there is no assurance this will be successful - On April 2, 2024, the company received a notice from the NYSE for non-compliance with the minimum price criteria, as the average closing price of its Class A common stock was below $1.00 per share over a 30 trading-day period[155] - The company has proposed a reverse stock split for stockholder approval to cure the deficiency, but there is no assurance it will be able to regain compliance and avoid delisting[155] Unregistered Sales of Equity Securities and Use of Proceeds There were no sales of unregistered equity securities during the quarter ended March 31, 2024. Additionally, the company did not repurchase any of its equity securities during the quarter - There were no sales of unregistered equity securities during the quarter ended March 31, 2024[157] Other Information During the first quarter of 2024, none of the company's officers or directors adopted or terminated any Rule 10b5-1 trading arrangement - During the three months ended March 31, 2024, none of the company's officers and directors adopted or terminated any Rule 10b5-1 trading arrangement[159]