10-Q 1 amwl-20240331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2024

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

Commission File Number: 001-39515

 

American Well Corporation

(Exact name of registrant as specified in its charter)

 

 

Delaware

20-5009396

(State of incorporation)

(I.R.S. Employer
Identification Number)

 

75 State Street, 26th Floor

Boston, MA 02109

(Address of registrant’s principal executive offices)

(617) 204-3500

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Class A common stock,
par value of $0.01 per share

 

AMWL

 

The New York Stock Exchange

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

Accelerated filer

 

Non-accelerated filer

 

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

 

As of April 19, 2024, the number of shares of the registrant’s Class A common stock outstanding was 263,517,164, the number of shares of the registrant’s Class B common stock outstanding was 27,390,397 and the number of shares of the registrant’s Class C common stock outstanding was 5,555,555.

 

 

 


 

American Well Corporation

QUARTERLY REPORT ON FORM 10-Q

For the period ended March 31, 2024

TABLE OF CONTENTS

 

Page

PART I

Financial Information

3

Item 1.

Financial Statements

3

 

Condensed Consolidated Balance Sheet as of March 31, 2024 (unaudited) and December 31, 2023

3

 

Condensed Consolidated Statement of Operations and Comprehensive Loss (unaudited) for the three months ended March 31, 2024 and 2023

4

 

Condensed Consolidated Statement of Stockholders’ Equity (unaudited) for the three months ended March 31, 2024 and 2023

5

 

Condensed Consolidated Statement of Cash Flows (unaudited) for the three months ended March 31, 2024 and 2023

6

Notes to the Unaudited Condensed Consolidated Financial Statements

7

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

Item 4.

Controls and Procedures

29

PART II

Other Information

30

Item 1.

Legal Proceedings

30

Item 1A.

Risk Factors

30

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

30

Item 3.

Defaults Upon Senior Securities

30

Item 4.

Mine Safety Disclosures

31

Item 5.

Other Information

31

Item 6.

Exhibits

31

 

 

 

 


 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN WELL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)

 

 

March 31, 2024

 

 

December 31, 2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

308,599

 

 

$

372,038

 

Accounts receivable ($1,627 and $1,626, from related parties and net of allowances
   of $
3,092 and $2,291, respectively)

 

 

80,709

 

 

 

54,146

 

Inventories

 

 

6,578

 

 

 

6,652

 

Deferred contract acquisition costs

 

 

2,301

 

 

 

2,262

 

Prepaid expenses and other current assets

 

 

16,010

 

 

 

14,484

 

Total current assets

 

 

414,197

 

 

 

449,582

 

Restricted cash

 

 

795

 

 

 

795

 

Property and equipment, net

 

 

552

 

 

 

572

 

Intangible assets, net

 

 

114,338

 

 

 

120,248

 

Operating lease right-of-use asset

 

 

9,632

 

 

 

10,453

 

Deferred contract acquisition costs, net of current portion

 

 

5,107

 

 

 

4,792

 

Other assets

 

 

1,793

 

 

 

2,083

 

Investment in minority owned joint venture (Note 2)

 

 

1,969

 

 

 

1,180

 

Total assets

 

$

548,383

 

 

$

589,705

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

6,710

 

 

$

4,864

 

Accrued expenses and other current liabilities

 

 

39,035

 

 

 

38,988

 

Operating lease liability, current

 

 

3,602

 

 

 

3,580

 

Deferred revenue ($852 and $1,286 from related parties, respectively)

 

 

59,079

 

 

 

46,365

 

Total current liabilities

 

 

108,426

 

 

 

93,797

 

Other long-term liabilities

 

 

1,412

 

 

 

1,425

 

Operating lease liability, net of current portion

 

 

7,292

 

 

 

8,206

 

Deferred revenue, net of current portion

 

 

7,895

 

 

 

6,091

 

Total liabilities

 

 

125,025

 

 

 

109,519

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.01 par value; 100,000,000 shares authorized, no shares issued
   or outstanding as of March 31, 2024 and as of December 31, 2023

 

 

 

 

 

 

Common stock, $0.01 par value; 1,000,000,000 Class A shares authorized, 263,158,793
   and
255,542,545 shares issued and outstanding, respectively; 100,000,000 Class B
   shares authorized,
27,390,397 shares issued and outstanding; 200,000,000 Class C
   shares authorized
5,555,555 issued and outstanding as of March 31, 2024 and as of
   December 31, 2023

 

 

2,956

 

 

 

2,879

 

Additional paid-in capital

 

 

2,251,875

 

 

 

2,234,768

 

Accumulated other comprehensive income

 

 

(16,213

)

 

 

(15,650

)

Accumulated deficit

 

 

(1,829,883

)

 

 

(1,757,778

)

Total American Well Corporation stockholders’ equity

 

 

408,735

 

 

 

464,219

 

Non-controlling interest

 

 

14,623

 

 

 

15,967

 

Total stockholders’ equity

 

 

423,358

 

 

 

480,186

 

Total liabilities and stockholders’ equity

 

$

548,383

 

 

$

589,705

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


 

AMERICAN WELL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Revenue

 

 

 

 

 

 

($872 and $988 from related parties, respectively)

 

$

59,522

 

 

$

64,001

 

Costs and operating expenses:

 

 

 

 

 

 

Costs of revenue, excluding depreciation and amortization of intangible assets

 

 

41,153

 

 

 

38,752

 

Research and development

 

 

26,680

 

 

 

25,923

 

Sales and marketing

 

 

25,726

 

 

 

22,726

 

General and administrative

 

 

32,757

 

 

 

36,370

 

Depreciation and amortization expense

 

 

8,238

 

 

 

7,243

 

Goodwill impairment

 

 

 

 

 

330,309

 

Total costs and operating expenses

 

 

134,554

 

 

 

461,323

 

Loss from operations

 

 

(75,032

)

 

 

(397,322

)

Interest income and other income (expense), net

 

 

3,784

 

 

 

940

 

Loss before expense from income taxes and loss from
   equity method investment

 

 

(71,248

)

 

 

(396,382

)

Expense from income taxes

 

 

(1,275

)

 

 

(1,475

)

Loss from equity method investment

 

 

(926

)

 

 

(652

)

Net loss

 

 

(73,449

)

 

 

(398,509

)

Net loss attributable to non-controlling interest

 

 

(1,344

)

 

 

(821

)

Net loss attributable to American Well Corporation

 

$

(72,105

)

 

$

(397,688

)

Net loss per share attributable to common stockholders,
   basic and diluted

 

$

(0.25

)

 

$

(1.42

)

Weighted-average common shares outstanding, basic and diluted

 

 

291,833,853

 

 

 

279,966,645

 

Net loss

 

$

(73,449

)

 

$

(398,509

)

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

Unrealized (loss) gain on available-for-sale investments

 

 

 

 

 

4,319

 

Foreign currency translation

 

 

(563

)

 

 

2,062

 

Comprehensive loss

 

 

(74,012

)

 

 

(392,128

)

Less: Comprehensive loss attributable to
   non-controlling interest

 

 

(1,344

)

 

 

(821

)

Comprehensive loss attributable to American Well Corporation

 

$

(72,668

)

 

$

(391,307

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


 

AMERICAN WELL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(unaudited)

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

American Well
Corporation
Stockholders’

 

 

Noncontrolling

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

 

Interest

 

 

Equity

 

Balances as of January 1, 2023

 

 

277,139,679

 

 

$

2,766

 

 

$

2,160,108

 

 

$

(16,969

)

 

$

(1,082,028

)

 

$

1,063,877

 

 

$

19,974

 

 

$

1,083,851

 

Exercise of common stock options

 

 

128,572

 

 

 

1

 

 

 

288

 

 

 

 

 

 

 

 

 

289

 

 

 

 

 

 

289

 

Vesting of restricted stock units, including units with a market condition

 

 

2,927,471

 

 

 

29

 

 

 

(29

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares repurchased and retired

 

 

(316

)

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

(1

)

 

 

 

 

 

(1

)

Issuance of stock under employee stock purchase plan

 

 

513,339

 

 

 

5

 

 

 

1,263

 

 

 

 

 

 

 

 

 

1,268

 

 

 

 

 

 

1,268

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

20,997

 

 

 

 

 

 

 

 

 

20,997

 

 

 

 

 

 

20,997

 

Currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

2,062

 

 

 

 

 

 

2,062

 

 

 

 

 

 

2,062

 

Unrealized gains (losses) on available-for-sale
   securities, net of tax

 

 

 

 

 

 

 

 

 

 

 

4,319

 

 

 

 

 

 

4,319

 

 

 

 

 

 

4,319

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(397,688

)

 

 

(397,688

)

 

 

(821

)

 

 

(398,509

)

Balances as of March 31, 2023

 

 

280,708,745

 

 

 

2,801

 

 

 

2,182,627

 

 

 

(10,588

)

 

 

(1,479,717

)

 

 

695,123

 

 

 

19,153

 

 

 

714,276

 

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

American Well
Corporation
Stockholders’

 

 

Noncontrolling

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

 

Interest

 

 

Equity

 

Balances as of January 1, 2024

 

 

288,488,497

 

 

$

2,879

 

 

$

2,234,768

 

 

$

(15,650

)

 

$

(1,757,778

)

 

$

464,219

 

 

$

15,967

 

 

$

480,186

 

Vesting of restricted stock units

 

 

6,542,751

 

 

 

66

 

 

 

(66

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of stock under employee stock purchase plan

 

 

1,073,497

 

 

 

11

 

 

 

945

 

 

 

 

 

 

 

 

 

956

 

 

 

 

 

 

956

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

16,228

 

 

 

 

 

 

 

 

 

16,228

 

 

 

 

 

 

16,228

 

Currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(563

)

 

 

 

 

 

(563

)

 

 

 

 

 

(563

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(72,105

)

 

 

(72,105

)

 

 

(1,344

)

 

 

(73,449

)

Balances as of March 31, 2024

 

 

296,104,745

 

 

 

2,956

 

 

 

2,251,875

 

 

 

(16,213

)

 

 

(1,829,883

)

 

 

408,735

 

 

 

14,623

 

 

 

423,358

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5


 

AMERICAN WELL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(73,449

)

 

$

(398,509

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Goodwill impairment

 

 

-

 

 

 

330,309

 

Depreciation and amortization expense

 

 

8,236

 

 

 

7,242

 

Provisions for credit losses

 

 

883

 

 

 

199

 

Amortization of deferred contract acquisition costs

 

 

585

 

 

 

476

 

Amortization of deferred contract fulfillment costs

 

 

85

 

 

 

107

 

Stock-based compensation expense

 

 

16,238

 

 

 

21,008

 

Loss on equity method investment

 

 

926

 

 

 

652

 

Deferred income taxes

 

 

(5

)

 

 

(13

)

Changes in operating assets and liabilities, net of acquisition:

 

 

 

 

 

 

Accounts receivable

 

 

(27,506

)

 

 

2,340

 

Inventories

 

 

74

 

 

 

299

 

Deferred contract acquisition costs

 

 

(947

)

 

 

(793

)

Prepaid expenses and other current assets

 

 

(1,611

)

 

 

4,198

 

Other assets

 

 

262

 

 

 

(210

)

Accounts payable

 

 

1,851

 

 

 

(247

)

Accrued expenses and other current liabilities

 

 

33

 

 

 

(14,159

)

Deferred revenue

 

 

14,589

 

 

 

17,953

 

Net cash used in operating activities

 

 

(59,756

)

 

 

(29,148

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(75

)

 

 

(18

)

Capitalized software development costs

 

 

(2,818

)

 

 

(6,751

)

Investment in less than majority owned joint venture

 

 

(1,715

)

 

 

(980

)

Purchases of investments

 

 

 

 

 

(389,990

)

Net cash used in investing activities

 

 

(4,608

)

 

 

(397,739

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from exercise of common stock options

 

 

 

 

 

289

 

Proceeds from employee stock purchase plan

 

 

956

 

 

 

1,268

 

Payments for the purchase of treasury stock

 

 

 

 

 

(1

)

Net cash provided by financing activities

 

 

956

 

 

 

1,556

 

Effect of exchange rates changes on cash, cash equivalents, and restricted cash

 

 

(31

)

 

 

(328

)

Net decrease in cash, cash equivalents, and restricted cash

 

 

(63,439

)

 

 

(425,659

)

Cash, cash equivalents, and restricted cash at beginning of period

 

 

372,833

 

 

 

539,341

 

Cash, cash equivalents, and restricted cash at end of period

 

$

309,394

 

 

$

113,682

 

Cash, cash equivalents, and restricted cash at end of period:

 

 

 

 

 

 

Cash and cash equivalents

 

 

308,599

 

 

 

112,887

 

Restricted cash

 

 

795

 

 

 

795

 

Total cash, cash equivalents, and restricted cash at end of period

 

$

309,394

 

 

$

113,682

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for income taxes

 

$

630

 

 

$

458

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

6


 

AMERICAN WELL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

(unaudited)

1. Organization and Description of Business

American Well Corporation (the “Company”) was incorporated under the laws of the State of Delaware in June 2006. The Company is headquartered in Boston, Massachusetts. The Company is a leading enterprise software company enabling digital delivery of care for healthcare’s key stakeholders. The Company empowers our clients with the core technology and services necessary to successfully develop and distribute virtual care programs that meet their strategic, operational, financial and clinical objectives under their own brands.

 

2. Summary of Significant Accounting Policies

There have been no material changes to the significant accounting policies described in the Company’s Form 10-K for the fiscal year ended December 31, 2023, that have had a material impact on the consolidated financial statements and related notes.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring accruals and adjustments) necessary for the fair statement of the Company’s financial position, results of operations and cash flows at the dates and for the periods indicated. The interim results for the three months ended March 31, 2024 are not necessarily indicative of results for the full 2024 calendar year or any other future interim periods. The information included in the interim financial statements should be read in conjunction with the annual consolidated financial statements and accompanying notes included in the Form 10-K.

The unaudited condensed consolidated financial statements include the accounts of American Well Corporation, its wholly-owned subsidiaries, those of professional corporations, which represent variable interest entities in which American Well has an interest and is the primary beneficiary (“PC”), and National Telehealth Network (“NTN”), an entity in which American Well controls fifty percent or more of the voting shares (see Note 4). Intercompany accounts and transactions have been eliminated in consolidation.

The Company’s reporting currency is the U.S. dollar. The Company determines the functional currency of each subsidiary based on the currency of the primary economic environment in which each subsidiary operates. Items included in the financial statements of such subsidiaries are measured using that functional currency. Foreign currency denominated monetary assets and liabilities are remeasured into U.S. dollars at current exchange rates and foreign currency denominated nonmonetary assets and liabilities are remeasured into U.S. dollars at historical exchange rates. Gains or losses from foreign currency remeasurement and settlements are included in interest income and other income (expense), net in the condensed consolidated statements of operations and comprehensive loss.

For consolidated entities where American Well owns or is exposed to less than 100% of the economics, the net loss attributable to noncontrolling interests is recorded in the condensed consolidated statements of operations and comprehensive loss equal to the percentage of the economic or ownership interest retained in each entity by the respective non-controlling party. The noncontrolling interests are presented as a separate component of stockholders’ deficit in the condensed consolidated balance sheets.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reported periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, revenue recognition, the estimated customer relationship period that is used in the amortization of deferred contract acquisition costs, the valuation of assets and liabilities acquired in business combinations, goodwill, the useful lives of intangible assets and property and equipment and the valuation of common stock awards. The Company bases its estimates on historical experience, known trends, and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates, as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ from those estimates or assumptions.

7


 

Segment Information

The Company’s chief operating decision makers (CODMs), its two Chief Executive Officers, review financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. The Company operates and manages its business as one reportable and operating segment. In addition, substantially all of the Company’s revenue and long-lived assets are attributable to operations in the United States for all periods presented.

Variable Interest Entities

The Company evaluates its ownership, contractual and other interests in entities to determine if it has any variable interest in a variable interest entity (“VIE”). These evaluations are complex and involve judgment. If the Company determines that an entity in which it holds a contractual or ownership interest is a VIE and that the Company is the primary beneficiary, the Company consolidates such entity in its condensed consolidated financial statements. The primary beneficiary of a VIE is the party that meets both of the following criteria: (i) has the power to make decisions that most significantly affect the economic performance of the VIE; and (ii) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Management performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change. Changes in consolidation status are applied prospectively.

The aggregate carrying value of total assets and total liabilities included on the condensed consolidated balance sheets for the PCs after elimination of intercompany transactions were $33,565 and $1,944, respectively, as of March 31, 2024 and $33,842 and $1,803, respectively as of December 31, 2023.

Total revenue included on the condensed consolidated statements of operations and comprehensive loss for the PCs after elimination of intercompany transactions was $17,580 and $19,746 for the three months ended March 31, 2024 and 2023, respectively. Net loss included on the condensed consolidated statements of operations and comprehensive loss was not material for the three months ended March 31, 2024 and 2023.

Investment in Minority Owned Joint Venture

The Company and Cleveland Clinic partnered to form a joint venture, under the name CCAW, JV LLC, to provide broad access to comprehensive and high acuity care services via digital care delivery. The Company does not have a controlling financial interest in CCAW, JV LLC, but it does have the ability to exercise significant influence over the operating and financial policies of CCAW, JV LLC. Therefore, the Company accounts for its investment in CCAW, JV LLC using the equity method of accounting. The joint venture is considered a variable interest entity under ASC 810-10, but the Company is not the primary beneficiary as it does not have the power to direct the activities of the joint venture that most significantly impact its performance. The Company’s evaluation of ability to impact performance is based on Cleveland Clinic’s managing directors and Cleveland Clinic’s ability to appoint and remove the chairperson who has the ability to cast the tie breaking vote on the most significant activities.

In 2020, the Company contributed $2,940 as its initial investment for a 49% interest in CCAW, JV LLC. The agreement also requires aggregate total capital contributions by the Company up to an additional $11,800 in two phases, which is yet to be defined. During the three months ended March 31, 2023, the Company made a capital contribution of $980, related to a portion of the phase one capital commitment. There was a $1,715 contribution made in the three months ended March 31, 2024.

For the three months ended March 31, 2024 and 2023, the Company recognized a loss of $926 and $652 as its proportionate share of the joint venture’s results of operations, respectively. Accordingly, the carrying value of the equity method investment as of March 31, 2024 and December 31, 2023 was $1,969 and $1,180, respectively.

Concentrations of Credit Risk and Significant Clients

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents, investments and accounts receivable. The Company invests its excess cash with large financial institutions that the Company believes are of high credit quality. Cash and cash equivalents are invested in highly rated money market funds. At times, the Company’s cash balances with individual banking institutions are in excess of federally insured limits. The Company’s investments are invested in U.S. government agency bonds. The Company has not experienced any losses on its deposits of cash, cash equivalents or investments. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company performs ongoing assessments and credit evaluations of its clients to assess the collectability of the accounts based on a number of factors, including past transaction experience, age of the accounts receivable, review of the invoicing terms of

8


 

the contracts, and recent communication with clients. The Company has not experienced significant credit losses from its accounts receivable. As of March 31, 2024, two clients accounted for 41% and 13% of outstanding accounts receivable, and as of December 31, 2023, one client accounted for 40% of outstanding accounts receivable.

During the three months ended March 31, 2024 and 2023, sales to one client represented 29% and 25% of the Company’s total revenue, respectively.

Goodwill

The Company recognizes the excess of the purchase price over the fair value of identifiable net assets acquired as goodwill. Goodwill is not amortized but is tested for impairment annually on November 30 or more frequently if events or changes in circumstances indicate that the carrying amount of the goodwill may not be recoverable. These events include: (i) severe adverse industry or economic trends; (ii) significant company-specific actions, including exiting an activity in conjunction with restructuring of operations; (iii) current, historical or projected deterioration of our financial performance; or (iv) a sustained decrease in our market capitalization, as indicated by the Company’s publicly quoted share price, below our net book value. Our goodwill impairment tests are performed at the enterprise level given our single reporting unit.

When testing goodwill for impairment, we have the option of first performing a qualitative assessment to determine whether it is more likely than not that the fair value of our reporting unit is less than its carrying amount. If we elect to bypass the qualitative assessment, or if a qualitative assessment indicates it is more likely than not that carrying value exceeds its fair value, we perform a quantitative goodwill impairment test. Under the quantitative goodwill impairment test, if our reporting unit’s carrying amount exceeds its fair value, we will record an impairment charge based on that difference. A charge is reported as impairment of goodwill in the consolidated statements of operations and comprehensive loss. In the three months ended March 31, 2023 there was a partial impairment of the goodwill balance. The full goodwill balance was written off as of September 30, 2023.

Intangible Assets

Intangible assets acquired in a business combination are recognized at fair value using generally accepted valuation methods deemed appropriate for the type of intangible asset acquired and reported net of accumulated amortization, separately from goodwill. Finite-lived intangible assets, which primarily consist of customer relationships, contractor relationships, technology and trade name, are stated at historical cost and amortized over the assets’ estimated useful lives. Intangible assets are re-evaluated whenever events or changes in circumstances indicate that their estimated useful lives may require revision and/or the carrying value of the related asset group may not be recoverable by its projected undiscounted cash flows. If the carrying value of the asset group is determined to be unrecoverable, an impairment charge would be recognized in an amount equal to the amount by which the carrying value of the asset group exceeds its fair value.

Impairment of Long-Lived Assets

Long-lived assets consist primarily of property and equipment and intangible assets. Long-lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets, among others. When testing for asset impairment, the Company groups assets and liabilities at the lowest level for which cash flows are separately identifiable. If an impairment review is performed to evaluate a long-lived asset group for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset group to its carrying value. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset group are less than the asset’s carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset group over its fair value. The Company did not identify a triggering event in the three months ended March 31, 2024. To date, the Company has not recorded any impairment losses on long-lived assets. No impairments were identified during the three months ended March 31, 2024 and 2023.

Recently Issued Accounting Pronouncements and Disclosure Rules

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which includes amendments to improve reportable segment disclosures. For public entities that are Securities and Exchange Commission filers, ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024. Early adoption is permitted. The adoption is not expected to have a material effect on the Company’s consolidated financial statements.

9


 

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which includes amendments to improve income tax disclosures primarily related to the rate reconciliation and income taxes paid information. For public entities that are Securities and Exchange Commission filers, ASU 2003-09 is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The adoption is not expected to have a material effect on the Company’s consolidated financial statements.

In March 2024, the U.S. Securities and Exchange Commission ("SEC") adopted the final rule under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors. This rule will require registrants to disclose certain climate-related information in registration statements and annual reports. The disclosure requirements will apply to the Company's fiscal year beginning January 1, 2026. The Company is currently evaluating the final rule to determine its impact on the Company's disclosures.

3. Revenue

The following table presents the Company’s revenues disaggregated by revenue source:

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Platform subscription

 

$

24,855

 

 

$

28,695

 

Visits

 

 

31,078

 

 

 

32,537

 

Other

 

 

3,589

 

 

 

2,769

 

Total Revenue

 

$

59,522

 

 

$

64,001

 

 

Accounts Receivable, Net

Accounts receivable primarily consist of amounts billed currently due from clients. Accounts receivable are presented net of an allowance for credit losses, which is an estimate of amounts that may not be collectible. In determining the amount of the allowance at each reporting date, the Company makes judgments about general economic conditions, historical write-off experience and any specific risks identified in client collection matters, including the aging of unpaid accounts receivable and changes in client financial conditions. Account balances are written off after all means of collection are exhausted and the potential for non-recovery is determined to be probable. Adjustments to the allowance for credit losses are recorded as general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss.

Changes in the allowance for credit losses were as follows:

 

 

 

Three Months Ended March 31, 2024

 

 

Year Ended December 31, 2023

 

Allowance for credit losses, beginning of the
   period

 

$

2,291

 

 

$

1,884

 

Provisions

 

 

882

 

 

 

1,034

 

Write-offs

 

 

(81

)

 

 

(627

)

Allowance for credit losses, end of the period

 

$

3,092

 

 

$

2,291

 

 

The Company has rights to consideration for services completed but not billed at the reporting date. Unbilled receivables are classified as receivables when the Company has the right to invoice the client. The amount of unbilled accounts receivable included within accounts receivable on the consolidated balance sheet was $4,550 and $5,500 as of March 31, 2024 and December 31, 2023, respectively.

Deferred Revenue

Contract liabilities consist of deferred revenue and include billings in advance of performance under the contract. Such amounts are recognized as revenue over the contractual period. For the three months ended March 31, 2024 and 2023, the Company recognized revenue of $15,947 and $16,198, respectively, that was included in the corresponding contract liability balance at the beginning of the periods presented.

10


 

Changes in the Company’s deferred revenue balance for the three months ended March 31, 2024 and year ended December 31, 2023 were as follows:

 

 

Three Months Ended March 31, 2024

 

 

Year Ended December 31, 2023

 

Total deferred revenue, beginning of the period

 

$

52,456

 

 

$

55,794

 

Additions

 

 

41,763

 

 

 

124,091

 

Recognized

 

 

(27,245

)

 

 

(127,429

)

 

 

 

 

 

 

 

Total deferred revenue, end of the period

 

$

66,974

 

 

$

52,456

 

 

 

 

 

 

 

 

Current deferred revenue

 

 

59,079

 

 

 

46,365

 

Non-current deferred revenue

 

 

7,895

 

 

 

6,091

 

 

 

 

 

 

 

 

Total

 

$

66,974

 

 

$

52,456

 

 

Transaction Price Allocated to Remaining Performance Obligations

As of March 31, 2024 and December 31, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $227,672 and $217,736, respectively. The substantial majority of the unsatisfied performance obligations will be satisfied over the next three years.

As it pertains to the March 31, 2024 amount, the Company expects to recognize 52% of the transaction price in the 12 month period ended March 31, 2025, in its condensed consolidated statement of operations and comprehensive loss with the remainder recognized thereafter.

4. National Telehealth Network

In 2012, the Company and an affiliate of Elevance Health Inc. formed National Telehealth Network LLC ("NTN") to expand the availability and adoption of telemedicine. The Company did not have a controlling financial interest in NTN, but it had the ability to exercise significant influence over the operating and financial policies of NTN. Therefore, the Company accounted for its investment in NTN using the equity method of accounting through December 31, 2015.

On January 1, 2016, the Company made an additional investment in NTN, which increased its ownership percentage above 50%. The Company also obtained the right to elect the Chairman of NTN, who has the ability to cast the tie-breaking vote in all decisions. Therefore, on January 1, 2016, the Company obtained control over NTN and has the power to direct the activities that most significantly impact NTN’s economic performance. This step-acquisition was accounted for as a business combination and the results of the operations of NTN from January 1, 2016, have been included in the Company’s condensed consolidated financial statements. However, because the Company owns less than 100% of NTN, the Company recognizes net loss attributable to non-controlling interest in the condensed consolidated statements of operations and comprehensive loss equal to the percentage of the ownership interest retained in NTN by the respective non-controlling party.

The proportionate share of the loss attributed to the non-controlling interest amounted to $1,344 and $821 for the three months ended March 31, 2024 and 2023, respectively.

The carrying value of the non-controlling interest was $14,623 and $15,967 as of March 31, 2024 and December 31, 2023, respectively.

11


 

5. Fair Value Measurements

Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The following tables presents the Company’s fair value hierarchy for its assets and liabilities that are measured at fair value on a recurring basis and indicate the level within the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value:

 

 

 

March 31, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Money market funds

 

$

242,707

 

 

$

 

 

$

 

 

$

242,707

 

Total financial assets:

 

$

242,707

 

 

$

 

 

$

 

 

$

242,707

 

 

 

 

December 31, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Money market funds

 

$

299,300

 

 

$

 

 

$

 

 

$

299,300

 

Total financial assets:

 

$

299,300

 

 

$

 

 

$

 

 

$

299,300

 

 

The Company’s cash equivalents were invested in money market funds and were valued based on Level 1 inputs. During the three months ended March 31, 2024, there were no transfers between fair value measurement levels.

12


 

6. Intangible Assets

Identified intangible assets consisted of the following:

 

 

 

Gross
Amount

 

 

Accumulated
Amortization

 

 

Carrying
Value

 

 

Weighted
Average
Remaining
Life

 

March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

Customer relationships

 

$

80,483

 

 

$

(35,116

)

 

 

45,367

 

 

 

6.3

 

Contractor relationships

 

 

535

 

 

 

(340

)

 

 

195

 

 

 

4.8

 

Tradename

 

 

14,079

 

 

 

(5,875

)

 

 

8,204

 

 

 

3.9

 

Technology

 

 

89,478

 

 

 

(48,682

)

 

 

40,796

 

 

 

3.1

 

Internally developed software

 

 

28,029

 

 

 

(8,253

)

 

 

19,776

 

 

 

2.7

 

 

$

212,604

 

 

$

(98,266

)

 

$

114,338

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross
Amount

 

 

Accumulated
Amortization

 

 

Carrying
Value

 

 

Weighted
Average
Remaining
Life

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Customer relationships

 

$

80,558

 

 

$

(33,109

)

 

 

47,449

 

 

 

6.5

 

Contractor relationships

 

 

535

 

 

 

(329

)

 

 

206

 

 

 

5.0

 

Trade name

 

 

14,303

 

 

 

(5,389

)

 

 

8,914

 

 

 

4.1

 

Technology

 

 

90,204

 

 

 

(45,482

)

 

 

44,722

 

 

 

3.3

 

Internally developed software

 

 

25,210

 

 

 

(6,253

)

 

 

18,957

 

 

 

2.4

 

 

$

210,810

 

 

$

(90,562

)

 

$

120,248

 

 

 

 

 

The Company capitalized $2,818 in the three months ended March 31, 2024, related to internally developed software to be sold as a service incurred during the application development stage and is amortizing these costs over the expected lives of the related services. Amortization expense related to intangible assets for the three months ended March 31, 2024 and 2023 was $8,144 and $6,932, respectively. Estimated future amortization expense of the identified intangible assets as of March 31, 2024, is as follows:

 

2024

 

$

24,577

 

2025

 

 

33,370

 

2026

 

 

22,887

 

2027

 

 

12,127

 

2028

 

 

9,647

 

Thereafter

 

 

11,730

 

 

$

114,338

 

 

7. Accrued Expenses and other current liabilities

Accrued expenses and other current liabilities consist of the following:

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Employee compensation and benefits

 

$

14,801

 

 

$

15,573

 

Professional services

 

 

7,208

 

 

 

3,838

 

Provider services

 

 

7,007

 

 

 

7,437

 

Other

 

 

10,019

 

 

 

12,140

 

Total

 

$

39,035

 

 

$

38,988

 

 

13


 

8. Stockholders’ Equity

Undesignated Preferred Stock

The Company’s Amended and Restated Certificate of Incorporation authorizes the issuance of 100,000,000 shares of undesignated preferred stock, par value of $0.01 per share, with rights and preferences, including voting rights, designated from time to time by the board of directors. No shares of preferred stock were issued or outstanding as of March 31, 2024 and December 31, 2023.

Common Stock

In the three months ended March 31, 2024, no shares of Class B common stock were converted to Class A common stock. As of March 31, 2024, the par value of the Class A, Class B and Class C shares was $2,625, $275, and $56, respectively.

 

 

 

Shares
Authorized

 

 

Shares
Issued

 

 

Shares
Outstanding

 

Class A

 

 

1,000,000,000

 

 

 

263,158,793

 

 

 

263,158,793

 

Class B

 

 

100,000,000

 

 

 

27,390,397

 

 

 

27,390,397

 

Class C

 

 

200,000,000

 

 

 

5,555,555

 

 

 

5,555,555

 

 

 

 

1,300,000,000

 

 

 

296,104,745

 

 

 

296,104,745

 

 

As of March 31, 2024 and December 31, 2023, the Company had reserved 83,295,920 and 74,506,099 shares of common stock for the exercise of outstanding stock options, the vesting of restricted stock units, the vesting of performance-based market condition share awards, and the number of shares remaining available for future grant, respectively.

Stock Plans and Stock Options

The Company maintains the 2006 Employee, Director and Consultant Stock Plan as amended and restated (the “2006 Plan”) and 2020 Equity Incentive Plan (the “2020 Plan” together, the “Plans”) under which it has granted incentive stock options, non-qualified stock options, and restricted stock units to employees, officers, and directors of the Company. In connection with the adoption of the 2020 Plan, the then-remaining shares of common stock reserved for grant or issuance under the 2006 Plan became available for issuance under the 2020 Plan, and no further grants will be made under the 2006 Plan.

Options issued under the Plans are exercisable for periods not to exceed ten years, and vest and contain such other terms and conditions as specified in the applicable award document. Options to buy common stock are issued under the Plans, with exercise prices equal to the closing price of shares of the Company’s common stock on the New York Stock Exchange on the date of award.

Activity under the Plans is as follows:

 

 

 

Number of
Shares

 

 

Weighted
Average
Exercise Price

 

 

Weighted Average
Remaining
Contractual
Term (Years)

 

 

Aggregate
Intrinsic Value

 

Outstanding as of January 1, 2024

 

 

9,989,049

 

 

$

5.09

 

 

 

4.6

 

 

$

 

Granted

 

 

 

 

$

 

 

 

 

 

 

 

Forfeited

 

 

(170,819

)

 

$

5.67

 

 

 

 

 

 

 

Expired

 

 

 

 

$

 

 

 

 

 

 

 

Exercised

 

 

 

 

$

 

 

 

 

 

 

 

Outstanding as of March 31, 2024

 

 

9,818,230

 

 

$

5.08

 

 

 

4.4

 

 

$

 

Vested and expected to vest as of December 31, 2023

 

 

9,978,545

 

 

$

5.09

 

 

 

4.6

 

 

$

 

Vested and expected to vest as of March 31, 2024

 

 

9,810,553

 

 

$

5.08