American Well Corp 10-Q

Item 1. Financial Statements AMERICAN WELL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) (unaudited) September 30, 2021 December 31, 2020 Assets Current assets: Cash and cash equivalents $ 790,402 $ 941,616 Investments — 99,963 Restricted cash — 1,095 Accounts receivable ($ 497 and $ 12,053 , from related parties and net of allowances of $ 1,497 and $ 1,556 , respectively) 39,851 45,296 Inventories 9,100 9,128 Deferred contract acquisition costs 1,339 2,134 Prepaid expenses and other current assets 13,902 14,055 Total current assets 854,594 1,113,287 Restricted cash 795 — Property and equipment, net 2,714 3,836 Goodwill 443,903 193,877 Intangible assets, net 159,926 55,528 Operating lease right-of-use asset 17,780 6,609 Deferred contract acquisition costs, net of current portion 1,921 1,327 Other assets 1,520 1,430 Investment in minority owned joint venture 1,205 752 Total assets $ 1,484,358 $ 1,376,646 Liabilities, Convertible Preferred Stock and Stockholders’ Deficit Current liabilities: Accounts payable $ 5,278 $ 5,797 Accrued expenses and other current liabilities 45,910 42,135 Contingent consideration liabilities 11,850 — Operating lease liability, current 3,121 6,357 Deferred revenue ($ 683 and $ 14,421 from related parties, respectively) 60,949 66,693 Total current liabilities 127,108 120,982 Other long-term liabilities 4,210 64 Contingent consideration liabilities, net of current portion 33,340 Operating lease liability, net of current portion 14,988 1,296 Deferred revenue, net of current portion ($ 26 and $ 486 from related parties, respectively) 7,050 8,107 Total liabilities 186,696 130,449 Commitments and contingencies (Note 12) Stockholders’ equity: Preferred stock, $ 0.01 par value; 100,000,000 shares authorized, no shares issued or outstanding as of September 30, 2021 and as of December 31, 2020 — — Common stock, $ 0.01 par value; 1,000,000,000 Class A shares authorized, 227,158,943 and 201,488,097 shares issued, and 227,158,943 and 200,751,168 shares outstanding, respectively; 100,000,000 Class B shares authorized, 26,650,761 and 30,427,128 shares issued, and 26,650,761 and 29,297,382 shares outstanding, respectively; 200,000,000 Class C shares authorized 5,555,555 issued and outstanding as of September 30, 2021 and December 31, 2020 2,595 2,357 Treasury stock, no shares and 1,866,675 shares as of September 30, 2021 and December 31, 2020, respectively — ( 37,568 ) Additional paid-in capital 2,038,012 1,841,405 Accumulated other comprehensive income ( 2,237 ) 297 Accumulated deficit ( 762,441 ) ( 582,359 ) Total American Well Corporation stockholders’ equity 1,275,929 1,224,132 Non-controlling interest 21,733 22,065 Total stockholders’ equity 1,297,662 1,246,197 Total liabilities and stockholders’ equity $ 1,484,358 $ 1,376,646 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 September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Revenue ($ 698 , $ 15,912 , $ 11,005 and $ 29,160 from related parties, respectively) $ 62,223 $ 62,551 $ 180,039 $ 184,833 Costs and operating expenses: Costs of revenue, excluding depreciation and amortization of intangible assets 35,184 42,116 104,778 118,969 Research and development 27,399 25,275 72,817 57,848 Sales and marketing 16,370 13,758 44,891 39,978 General and administrative 34,380 43,113 79,946 138,537 Depreciation and amortization expense 4,340 2,576 9,330 7,371 Total costs and operating expenses 117,673 126,838 311,762 362,703 Loss from operations ( 55,450 ) ( 64,287 ) ( 131,723 ) ( 177,870 ) Interest income and other (expense) income, net ( 382 ) 255 ( 97 ) 1,410 Loss before expense from income taxes and loss from equity method investment ( 55,832 ) ( 64,032 ) ( 131,820 ) ( 176,460 ) Benefit (Expense) from income taxes 5,454 ( 78 ) 5,042 ( 330 ) Loss from equity method investment ( 554 ) ( 486 ) ( 2,095 ) ( 1,250 ) Net loss ( 50,932 ) ( 64,596 ) ( 128,873 ) ( 178,040 ) Net income (loss) attributable to non-controlling interest 562 ( 1,515 ) ( 332 ) ( 3,920 ) Net loss attributable to American Well Corporation $ ( 51,494 ) $ ( 63,081 ) $ ( 128,541 ) $ ( 174,120 ) Net loss per share attributable to common stockholders, basic and diluted $ ( 0.20 ) $ ( 0.92 ) $ ( 0.51 ) $ ( 3.38 ) Weighted-average common shares outstanding, basic and diluted 257,283,961 68,499,106 250,115,414 51,492,988 Net loss $ ( 50,932 ) $ ( 64,596 ) $ ( 128,873 ) $ ( 178,040 ) Other comprehensive income (loss), net of tax: Unrealized gain on available-for-sale investments 0 ( 135 ) ( 85 ) ( 415 ) Foreign currency translation ( 2,377 ) 37 ( 2,449 ) 215 Comprehensive loss ( 53,309 ) ( 64,694 ) ( 131,407 ) ( 178,240 ) Less: Comprehensive loss attributable to non-controlling interest 562 ( 1,515 ) ( 332 ) ( 3,920 ) Comprehensive loss attributable to American Well Corporation $ ( 53,871 ) $ ( 63,179 ) $ ( 131,075 ) $ ( 174,320 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 4 AMERICAN WELL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (in thousands, except share amounts) (unaudited) Common Stock Treasury Additional Paid-In Accumulated Other Comprehensive Accumulated American Well Corporation Stockholders’ Noncontrolling Total Stockholders’ Shares Amount Stock Capital Income (Loss) Deficit Equity Interest Equity Balances as of January 1, 2021 235,604,105 $ 2,357 $ ( 37,568 ) $ 1,841,405 $ 297 $ ( 582,359 ) $ 1,224,132 $ 22,065 $ 1,246,197 Exercise of common stock options 3,474,375 34 — 10,096 — — 10,130 — 10,130 Vesting of restricted stock units 853,842 9 — ( 9 ) — — — — — Retirement of treasury stock purchased in 2020 — — 37,568 ( 15 ) — ( 37,553 ) — — — Shares withheld related to net share settlement and retired treasury stock in 2021 ( 402,060 ) ( 4 ) — 4 — ( 9,771 ) ( 9,771 ) — ( 9,771 ) Stock-based compensation expense — — — 8,642 — — 8,642 — 8,642 Currency translation adjustment — — — — ( 52 ) — ( 52 ) — ( 52 ) Unrealized gains on available-for-sale securities, net of tax — — — — 34 — 34 — 34 Net loss — — — — — ( 39,188 ) ( 39,188 ) ( 617 ) ( 39,805 ) Balances as of March 31, 2021 239,530,262 2,396 — 1,860,123 279 ( 668,871 ) 1,193,927 21,448 1,215,375 Exercise of common stock options 1,812,491 18 — 6,656 — — 6,674 — 6,674 Vesting of restricted stock units 844,900 9 — ( 9 ) — — — — — Shares withheld related to net share settlement and retired treasury stock in 2021 ( 68,750 ) ( 1 ) — 1 — ( 1,857 ) ( 1,857 ) — ( 1,857 ) Stock-based compensation expense — — — 10,726 — — 10,726 — 10,726 Currency translation adjustment — — — — ( 20 ) — ( 20 ) — ( 20 ) Unrealized gains on available-for-sale securities, net of tax — — — — ( 119 ) — ( 119 ) — ( 119 ) Net loss — — — — — ( 37,859 ) ( 37,859 ) ( 277 ) ( 38,136 ) Balances as of June 30, 2021 242,118,903 2,422 — 1,877,497 140 ( 708,587 ) 1,171,472 21,171 1,192,643 Exercise of common stock options 491,598 5 — 1,872 — — 1,877 — 1,877 Vesting of restricted stock units 3,989,239 40 — ( 40 ) — — — — — Shares withheld related to net share settlement and retired treasury stock in 2021 ( 211,494 ) ( 2 ) — 2 — ( 2,360 ) ( 2,360 ) — ( 2,360 ) Issuance of stock under employee stock purchase plan 178,021 2 — 1,597 — — 1,599 — 1,599 Issuance of common stock in acquisitions 12,798,992 128 — 143,979 — — 144,107 — 144,107 Stock-based compensation expense — — — 12,388 — — 12,388 — 12,388 Capital contributed by selling shareholders of acquired businesses — — — 717 — — 717 — 717 Currency translation adjustment — — — — ( 2,377 ) — ( 2,377 ) — ( 2,377 ) Net loss — — — — — ( 51,494 ) ( 51,494 ) 562 ( 50,932 ) Balances as of September 30, 2021 259,365,259 $ 2,595 $ — $ 2,038,012 $ ( 2,237 ) $ ( 762,441 ) $ 1,275,929 $ 21,733 $ 1,297,662 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 AMERICAN WELL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (in thousands, except share amounts) (unaudited) Convertible Preferred Stock Common Stock Treasury Additional Paid-In Accumulated Other Comprehensive Accumulated American Well Corporation Stockholders’ Noncontrolling Total Stockholders’ Shares Amount Shares Amount Stock Capital Income (Loss) Deficit Deficit Interest (Deficit) Balances as of January 1, 2020 14,012,935 $ 655,799 42,302,845 423 $ ( 158 ) 50,289 $ 250 $ ( 357,927 ) $ ( 307,123 ) $ 26,259 $ ( 280,864 ) Issuance of Series C convertible preferred stock, net of issuance costs of $ 261 170,000 12,489 — — — — — — — — — Exercise of common stock options — — 7,392 — — 2 — — 2 — 2 Vesting of restricted stock units — — 146,969 1 — ( 1 ) — — — — — Stock-based compensation expense — — — — — 4,458 — — 4,458 — 4,458 Retirement of treasury stock — — — — 158 ( 158 ) — — — — — Currency translation adjustment — — — — — — ( 171 ) — ( 171 ) — ( 171 ) Unrealized gains on available-for-sale securities, net of tax — — — — — — 43 — 43 — 43 Net loss — — — — — — — ( 24,381 ) ( 24,381 ) ( 843 ) ( 25,224 ) Balances as of March 31, 2020 14,182,935 668,288 42,457,206 424 — 54,590 122 ( 382,308 ) ( 327,172 ) 25,416 ( 301,756 ) Issuance of Series C convertible preferred stock, net of issuance costs of $ 750 1,342,750 133,525 — — — — — — — — — Treasury stock — — ( 61,600 ) ( 163 ) — — — ( 163 ) — ( 163 ) Exercise of common stock options — — 768,106 8 — 2,322 — — 2,330 — 2,330 Vesting of restricted stock units — — 204,829 2 — ( 2 ) — — — — — Stock-based compensation expense — — — — — 67,638 — — 67,638 — 67,638 Currency translation adjustment — — — — — — 349 — 349 — 349 Unrealized gains on available-for-sale securities, net of tax — — — — — — ( 323 ) — ( 323 ) — ( 323 ) Net loss — — — — — — — ( 86,658 ) ( 86,658 ) ( 1,562 ) ( 88,220 ) Balances as of June 30, 2020 15,525,685 801,813 43,368,541 434 ( 163 ) 124,548 148 ( 468,966 ) ( 343,999 ) 23,854 ( 320,145 ) Exercise of common stock options — — 885,253 9 — 1,877 — — 1,886 — 1,886 Vesting of restricted stock units — — 3,458,849 34 — ( 34 ) — — — — — Class A and Class B shares withheld to net share settlement of loans — — ( 1,340,354 ) ( 13 ) ( 24,157 ) 13 — — ( 24,157 ) — ( 24,157 ) Conversion of Series A, Series B, and Series C convertible preferred stock into Class A shares ( 15,525,685 ) ( 801,813 ) 136,625,900 1,366 — 800,447 — — 801,813 — 801,813 Issuance of Class A shares in connection with initial public offering, net of offering costs and underwriting discounts of $ 53,730 — — 45,681,499 457 — 768,080 — — 768,537 — 768,537 Issuance of Class A shares in connection with Google Private Placement, net of offering costs of $ 900 — — 5,555,555 56 — 99,044 — — 99,100 — 99,100 Stock-based compensation expense — — — — — 34,420 — — 34,420 — 34,420 Currency translation adjustment — — — — — — 37 — 37 — 37 Unrealized gains on available-for-sale securities, net of tax — — — — — — ( 135 ) — ( 135 ) — ( 135 ) Net loss — — — — — — — ( 63,081 ) ( 63,081 ) ( 1,515 ) ( 64,596 ) Balances as of September 30, 2020 — $ - 234,235,243 $ 2,343 $ ( 24,320 ) $ 1,828,395 $ 50 $ ( 532,047 ) $ 1,274,421 $ 22,339 $ 1,296,760 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 AMERICAN WELL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, except share and per share amounts) (unaudited) Nine Months Ended September 30, 2021 2020 Cash flows from operating activities: Net loss $ ( 128,873 ) $ ( 178,040 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization expense 9,330 7,371 Provisions for doubtful accounts 401 1,236 Amortization of deferred contract acquisition costs 1,254 852 Amortization of deferred contract fulfillment costs 535 510 Accretion of contingent consideration 600 — Noncash compensation costs incurred by selling shareholders 717 — Stock-based compensation expense 31,756 106,516 Loss on equity method investment 2,095 1,250 Deferred income taxes ( 4,184 ) — Changes in operating assets and liabilities, net of acquisition: Accounts receivable 11,325 ( 8,468 ) Inventories 28 ( 4,671 ) Deferred contract acquisition costs ( 1,053 ) ( 1,575 ) Prepaid expenses and other current assets 946 ( 1 ) Other assets 319 426 Accounts payable ( 1,332 ) ( 135 ) Accrued expenses and other current liabilities ( 1,564 ) 2,353 Other long-term liabilities ( 1,784 ) ( 194 ) Deferred revenue ( 17,130 ) ( 15,364 ) Net cash used in operating activities ( 96,614 ) ( 87,934 ) Cash flows from investing activities: Purchases of property and equipment ( 221 ) ( 3,261 ) Investment in less than majority owned joint venture ( 2,548 ) ( 2,940 ) Purchases of investments — ( 159,608 ) Proceeds from sales and maturities of investments 100,000 69,132 Acquisitions of business, net of cash acquired ( 156,526 ) Net cash used in investing activities ( 59,295 ) ( 96,677 ) Cash flows from financing activities: Proceeds from issuance of Series C convertible preferred stock, net of issuance costs — 146,014 Proceeds from exercise of common stock options 18,539 4,235 Proceeds from employee stock purchase plan 1,599 — Payments for the purchase of treasury stock ( 13,988 ) ( 18,417 ) Proceeds from issuance of common stock in initial public offering, net of underwriting costs and commissions — 772,931 Proceeds from issuance of common stock to Google — 100,000 Payment of deferred offering costs ( 1,613 ) ( 1,456 ) Net cash provided by financing activities 4,537 1,003,307 Effect of exchange rates changes on cash, cash equivalents, and restricted cash ( 142 ) — Net decrease in cash, cash equivalents, and restricted cash ( 151,514 ) 818,696 Cash, cash equivalents, and restricted cash at beginning of period 942,711 138,816 Cash, cash equivalents, and restricted cash at end of period $ 791,197 $ 957,512 Cash, cash equivalents, and restricted cash at end of period: Cash and cash equivalents 790,402 956,417 Restricted cash 795 1,095 Total cash, cash equivalents, and restricted cash at end of period $ 791,197 $ 957,512 Supplemental disclosure of cash flow information: Cash paid for income taxes $ 1,414 $ 138 Supplemental disclosure of non-cash investing and financing activities: Additions to property and equipment included in accrued expenses and accounts payable $ 312 $ 19 Initial public offering and Google common stock offering costs in accrued expenses $ — $ 3,838 Treasury stock costs in accrued expenses $ — $ 5,903 Receivable related to exercise of common stock options $ 142 $ — The accompanying notes are an integral part of these condensed consolidated financial statements. 7 AMERICAN WELL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share amounts) (unaudited) 1. Organization and Description of Business 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 telehealth company that enables the digital distribution and delivery of care for healthcare’s key stakeholders. The Company’s scalable technology is deployed at the enterprise level of clients, embeds into existing offerings and workflows, spans the continuum of care and enables the delivery of this care across a wide variety of clinical, retail, school and home settings. Acquisitions On August 9, 2021 and August 27, 2021 , the Company completed the acquisitions of Conversa Health Inc. (“Conversa”) and SilverCloud Health Holdings, Inc. (“SilverCloud”), respectively (together, the “Acquisitions”). Conversa is a leader in automated virtual healthcare. SilverCloud is a leading digital mental health platform . See Note 7 “Business Combinations”. Stock Split On August 28, 2020, the Company effected an 8.8-for-1.0 stock split of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each series of the Company’s then outstanding convertible preferred stock (see Note 10). The corresponding number of shares and exercise prices related to stock options and RSUs were also adjusted. The impact of the stock split has been applied retrospectively to all periods presented. Liquidity and Capital Resources The accompanying condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets, and the satisfaction of liabilities and commitments in the ordinary course of business. On September 21, 2020, the Company closed on the IPO raising $ 822,267 in gross proceeds. On September 21, 2020, the Company closed on a private placement with Google raising $ 100,000 in gross proceeds. Since inception, the Company has incurred recurring losses. As of September 30, 2021, the Company had an accumulated deficit of $ 762,441 . The Company expects to continue to generate operating losses for the foreseeable future. The Company expects that its cash, cash equivalents and investments balance as of September 30, 2021 of $ 790,402 will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next twelve months. 8 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, 2020, 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 the financial position, results of operations and cash flows at the dates and for the periods indicated. The interim results for the three and nine months ended September 30, 2021 are not necessarily indicative of results for the full 2021 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. For substantially all of the Company’s subsidiaries, the functional currency is the U.S. dollar. 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, the useful lives of intangible assets and property and equipment and the valuation of common stock. 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. Due to the COVID-19 global pandemic, the global economy and financial markets have been disrupted and there is a significant amount of uncertainty about the length and severity of the consequences caused by the pandemic. The Company has considered information available to it as of the date of issuance of these financial statements and has not experienced any significant impact to its estimates and assumptions as a result of the COVID-19 pandemic. On an ongoing basis, the Company will continue to closely monitor the COVID-19 impact on its estimates and assumptions. 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. 9 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 $ 22,771 and $ 1,893 , respectively, as of September 30, 2021 and $ 22,682 and $ 1,998 , respectively as of December 31, 2020. Total revenue included on the condensed consolidated statements of operations and comprehensive loss for the PCs after elimination of intercompany transactions was $ 18,356 and $ 18,206 for the three months ended September 30, 2021 and 2020, respectively. Net loss included on the condensed consolidated statements of operations and comprehensive loss was not material for the three months ended September 30, 2021 and 2020. Total revenue included on the condensed consolidated statements of operations and comprehensive loss for the PCs after elimination of intercompany transactions was $ 53,511 and $ 61,596 for the nine months ended September 30, 2021 and 2020, respectively. Net loss included on the condensed consolidated statements of operations and comprehensive loss was not material for the three and nine months ended September 30, 2021 and 2020. 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 telehealth. 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 nine months ended September 30, 2021, the Company made a capital contribution of $ 2,548 , related to a portion of the phase one capital commitment. For the three months ended September 30, 2021 and 2020, the Company recognized a loss of $ 554 and $ 486 as its proportionate share of the joint venture’s results of operations, respectively. For the nine months ended September 30, 2021 and 2020, the Company recognized a loss of $ 2,095 and $ 1,250 as its proportionate share of the joint venture’s results of operations, respectively. Accordingly, the carrying value of the equity method investment as of September 30, 2021 and December 31, 2020 was $ 1,205 and $ 752 , respectively. Concentrations of Credit Risk and Significant Customers 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 customers 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 the contracts, and recent communication with customers. The Company has not experienced significant credit losses from its accounts receivable. As of September 30, 2021 and December 31, 2020, one customer accounted for 21 % and 19 % of outstanding accounts receivable, respectively. 10 During the three months ended September 30, 2021 and 2020, sales to one customer (who was a related party during the 2020 period noted) represented 26 % and 22 % of the Company’s total revenue, respectively. During the nine months ended September 30, 2021 and 2020, sales to one customer (who was a related party during the periods noted) represented 25 % and 22 % of the Company’s total revenue, respectively. Emerging Growth Company Status The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. Recently Adopted Accounting Pronouncements In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Requirements for Fair Value Measurement (‘‘ASU 2018-13’’), which modifies the existing disclosure requirements for fair value measurements in Topic 820. The new disclosure requirements include disclosure related to changes in unrealized gains or losses included in other comprehensive loss for recurring Level 3 fair value measurements held at the end of each reporting period and the explicit requirement to disclose the range and weighted-average of significant unobservable inputs used for Level 3 fair value measurements. The other provisions of ASU 2018-13 include eliminated and modified disclosure requirements. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU 2018-13 and delay adoption of the additional disclosures until their effective date. For all entities, this guidance is required to be adopted for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The guidance was adopted effective January 1, 2020 and did not have a material impact on the condensed consolidated financial statements and disclosures. In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract , which aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use-software. The standard is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. The guidance was adopted effective January 1, 2020 and did not have a material impact on the condensed consolidated financial statements and disclosures. In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes by removing certain exceptions and clarifying and amending existing guidance. ASU 2019-12 removes certain exceptions for performing intraperiod tax allocations, recognizing deferred taxes for investments, and calculating income taxes in interim periods. The guidance also simplifies the accounting for franchise taxes, transactions that result in a step-up in the tax basis of goodwill, and the effect of enacted changes in tax laws or rates in interim periods. For public entities that are Securities and Exchange Commission filers, excluding entities eligible to be smaller reporting companies, ASU 2019-12 is effective for annual periods beginning after December 15, 2020, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. The guidance was adopted effective January 1, 2021 and did not have a material impact on the condensed consolidated financial statements and disclosures. In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”), which requires that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. To achieve this, an acquirer may assess how the acquiree applied Topic 606 to determine what to record for the acquired revenue contracts. Generally, this should result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements. For public entities that are Securities and Exchange Commission filers, excluding entities eligible to be smaller reporting companies, ASU 2021-08 is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. The guidance was adopted effective July 1, 2021 and impacted the accounting of acquired deferred revenue for the Conversa and SilverCloud acquisitions that occurred in August 2021. 11 Recently Issued Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (‘‘ASU 2016-13’’), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes may result in earlier recognition of credit losses. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses , which narrowed the scope and changed the effective date for non-public entities for ASU 2016-13. The FASB subsequently issued supplemental guidance within ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief (‘‘ASU 2019-05’’). ASU 2019-05 provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. For public entities that are Securities and Exchange Commission filers, excluding entities eligible to be smaller reporting companies, ASU 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. For all other entities, ASU 2016-13 is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. The guidance will be adopted in the 2021 annual condensed consolidated financial statements. The Company is currently evaluating the impact that the adoption of ASU 2016-13 will have on its condensed consolidated financial statements. 3. Revenue The following table presents the Company’s revenues disaggregated by revenue source: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Platform subscription $ 26,736 $ 25,834 $ 78,112 $ 72,048 Visits 30,042 28,455 85,395 90,936 Other 5,445 8,262 16,532 21,849 Total Revenue $ 62,223 $ 62,551 $ 180,039 $ 184,833 Accounts Receivable, Net Accounts receivable primarily consist of amounts billed currently due from customers. Accounts receivable are presented net of an allowance for doubtful accounts, 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 customer collection matters, including the aging of unpaid accounts receivable and changes in customer 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 doubtful accounts are recorded as general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss. Changes in the allowance for doubtful accounts were as follows: Nine Months Ended September 30, Year Ended December 31, 2020 Allowance for doubtful accounts, beginning of the period $ 1,556 $ 686 Provisions 401 1,646 Write-offs ( 460 ) ( 776 ) Allowance for doubtful accounts, end of the period $ 1,497 $ 1,556 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 customer. The amount of unbilled accounts receivable was $ 6,826 and $ 3,376 as of September 30, 2021 and December 31, 2020, and has been included within accounts receivable on the condensed consolidated balance sheet. 12 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 September 30, 2021 and 2020, the Company recognized revenue of $ 16,912 and $ 43,656 , respectively, that was included in the corresponding contract liability balance at the beginning of the periods presented. For the nine months ended September 30, 2021 and 2020, the Company recognized revenue of $ 56,058 and $ 61,775 , respectively, that was included in the corresponding contract liability balance at the beginning of the periods presented. Significant changes in the Company’s deferred revenue balance for the nine months ended September 30, 2021 and the year ended December 31, 2020 were as follows: Nine Months Ended September 30, Year Ended December 31, 2020 Total deferred revenue, beginning of the period $ 74,800 $ 77,386 Additions 77,857 109,542 Recognized ( 84,658 ) ( 112,128 ) Total deferred revenue, end of the period $ 67,999 $ 74,800 Current deferred revenue 60,949 66,693 Non-current deferred revenue 7,050 8,107 Total $ 67,999 $ 74,800 Transaction Price Allocated to Remaining Performance Obligations As of September 30, 2021 and December 31, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 184,001 and $ 192,238 , respectively. The substantial majority of the unsatisfied performance obligations will be satisfied over the next three years . As it pertains to the September 30, 2021 amount, the Company expects to recognize 48 % of the transaction price in the 12 month period ended September 30, 2022, 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 Anthem, Inc. formed 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 (income)/loss attributed to the non-controlling interest amounted to $( 562 ) and $ 1,515 for the three months ended September 30, 2021 and 2020, respectively. The proportionate share of the loss attributed to the non-controlling interest amounted to $ 332 and $ 3,920 for the nine months ended September 30, 2021 and 2020, respectively. The carrying value of the non-controlling interest was $ 21,733 and $ 22,065 as of September 30, 2021 and December 31, 2020, respectively. 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 13 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: September 30, 2021 Level 1 Level 2 Level 3 Total Money market funds $ 714,097 $ — $ — $ 714,097 Investments — — — — Total financial assets: $ 714,097 $ — $ — $ 714,097 Contingent consideration — — 45,190 45,190 Total financial liabilities: $ — $ — $ 45,190 $ 45,190 December 31, 2020 Level 1 Level 2 Level 3 Total Money market funds $ 892,934 $ — $ — $ 892,934 Investments — 99,963 — 99,963 Total financial assets: $ 892,934 $ 99,963 $ — $ 992,897 The Company’s cash equivalents were invested in money market funds and were valued based on Level 1 inputs. The Company’s investments consisted of U.S. government agency bonds and were valued based on Level 2 inputs. In determining the fair value of its U.S. government agency bonds, the Company relied on quoted prices for similar securities in active markets or other inputs that are observable or can be corroborated by observable market data. The Company has classified its net liability for contingent earnout considerations relating to the Acquisitions within Level 3 of the fair value hierarchy because the fair value is determined using significant unobservable inputs, which included the Monte Carlo method that uses key assumptions to model future revenue and costs of goods sold projections. The income approach method involves calculating the earnout payment based on the forecasted revenue and the revenue discount rate of 1.3 % and 3.2 % for SilverCloud and Conversa, respectively. A description of the Acquisitions is included within Note 7. The contingent earnout payments for each acquisition are based on the achievement of certain revenue and integration thresholds. Nine Months Ended September 30, Beginning Balance as of January 1 $ — Initial estimate of fair value related to SilverCloud contingent consideration 29,360 Initial estimate of fair value related to Conversa contingent consideration 15,230 Accretion of contingent consideration 600 Ending Balance $ 45,190 During the nine months ended September 30, 2021, there were no transfers between fair value measurement levels. 14 6. Investments As of September 30, 2021 and December 31, 2020, the fair value of the Company’s investments by type of security was as follows: September 30, 2021 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Assets: U.S government securities $ — $ — $ — $ — $ — $ — $ — $ — December 31, 2020 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Assets: U.S government securities $ 99,854 $ 109 $ — $ 99,963 $ 99,854 $ 109 $ — $ 99,963 7. Business Combinations On August 27, 2021 , the Company completed the acquisition of SilverCloud through a merger in which SilverCloud became a wholly-owned subsidiary of the Company. The cash consideration paid was $ 105,195 net of cash acquired of $ 12,239 . The stock consideration was comprised of 8.1 million shares of the Company’s Class A common stock valued at $ 85,571 , and escrow share consideration of $ 6,376 . SilverCloud is a leading digital mental health platform. The Company is obligated to pay an earn-out of up to $ 40,000 contingent upon SilverCloud achieving certain revenue thresholds for the year ending December 31, 2022. The Company estimated the fair value of the contingent consideration as of the acquisition date to be $ 29,360 . The contingent consideration is subject to remeasurement at each reporting date until December 31, 2022, with the remeasurement adjustment reported in the consolidated statement of operations and comprehensive loss. The acquisition was considered a stock acquisition for tax purposes and accordingly, the goodwill resulting from this acquisition is not tax deductible. The total acquisition related costs were $ 5,571 which included transaction costs from financial and legal advisors and other transaction related fees, as well as $ 717 of noncash compensation costs, and were recognized as incurred in the Company’s consolidated statement of operations and comprehensive loss in general and administrative expenses. The noncash compensation costs related to the SilverCloud acquisition are for additional noncash compensation costs incurred by the selling SilverCloud shareholders for certain employees that have continued employment after the transaction date and through the earn-out period, and will be a reoccurring cost until the payout of earn-out in 2023 . On August 9, 2021 , the Company completed the acquisition of Conversa through a merger in which Conversa became a wholly-owned subsidiary of the Company. The cash consideration paid was $ 51,331 net of cash acquired of $ 9,735 . This consideration was comprised of 4.7 million shares of the Company’s Class A common stock valued at $ 52,160 . Conversa is a leader in automated virtual healthcare. The Company is obligated to pay an earn-out of up to $ 30,000 contingent upon Conversa achieving certain integration thresholds in the first quarter of 2022, and certain revenue thresholds for the year ending December 31, 2022. The Company estimated the fair value of the contingent consideration as of the acquisition date to be $ 15,230 . The contingent consideration is subject to remeasurement at each reporting date until December 31, 2022, with the remeasurement adjustment reported in the consolidated statement of operations and comprehensive loss. The acquisition was considered a stock acquisition for tax purposes and accordingly, the goodwill resulting from this acquisition is not tax deductible. The total acquisition related costs were $ 2,435 which included transaction costs from financial and legal advisors and other transaction related fees and were recognized as incurred in the Company’s consolidated statement of operations and comprehensive loss in general and administrative expenses. The Acquisitions were accounted for using the acquisition method of accounting, which requires, among other things, the assets acquired and the liabilities assumed be recognized at their fair values as of the acquisition date. The results of the Acquisitions were integrated within the consolidated financial statements commencing on the aforementioned acquisition dates. Actual revenue and losses of the Acquisitions since the acquisition date as well as pro forma combined results of operations for the Acquisition have not been presented because the effect of the Acquisition was not material to the Company’s consolidated financial results for the periods presented. The following table summarizes the preliminary fair value estimates of the assets acquired and liabilities assumed for the SilverCloud and Conversa acquisitions at the respective acquisition dates. The Company, with the assistance of a third-party valuation expert, estimated the preliminary fair value of the acquired tangible and intangible assets with significant estimates such as revenue projections. The allocation of the consideration transferred to the assets acquired and the liabilities assumed is preliminary. This can 15 be revised as a result of additional information obtained due to the finalization of the valuation inputs and assumptions as well as completing the assessment of the tax attributes of the business combination. Additional adjustments that could have a material impact on the Company’s results of operations and financial position may be recorded within the measurement period, which will not exceed one year from the respective acquisition date s . Identifiable assets acquired and liabilities assumed (in thousands): SilverCloud Conversa Health Purchase consideration: Cash consideration, net of cash acquired $ 105,195 $ 51,331 Stock consideration 85,571 52,160 Contingent consideration 29,360 15,230 Escrow share consideration 6,376 Working capital adjustment ( 309 ) ( 193 ) Total consideration transferred $ 226,193 $ 118,528 Allocation of Consideration transferred: Accounts receivable $ 2,630 $ 3,651 Identifiable intangible assets 78,146 34,700 Other assets 491 4,604 Total assets acquired 81,267 42,955 Current liabilities 2,155 8,463 Deferred revenue 5,813 4,655 Other long-term liabilities 8,731 1,383 Total liabilities assumed 16,699 14,501 Goodwill $ 161,625 $ 90,074 $ 226,193 $ 118,528 The amount allocated to goodwill reflects the benefits the Company expects to realize from post-acquisition cross selling opportunities from integrating customer relationships and from the growth of the respective acquisitions’ operations. The following are the identifiable intangible assets acquired in the Acquisitions and their respective weighted average useful lives, as determined based on initial valuations: SilverCloud Weighted Average Life (Years) Conversa Health Weighted Average Life (Years) Technology $ 34,996 5.0 $ 20,400 5.0 Tradename 10,800 7.0 4,200 5.0 Customer relationships 32,350 10.0 10,100 10.0 Total $ 78,146 $ 34,700 8. Goodwill and Intangible Assets Goodwill consisted of the following: Nine Months Ended September 30, Year Ended December 31, 2020 Beginning Balance as of January 1 $ 193,877 $ 193,877 Goodwill acquired 251,699 — Currency translation adjustments ( 1,673 ) — Ending Balance $ 443,903 $ 193,877 16 Identified intangible assets consisted of the following: Gross Amount Accumulated Amortization Carrying Value Weighted Average Remaining Life September 30, 2021 Customer relationships $ 81,059 $ ( 14,785 ) $ 66,274 8.6 Contractor relationships 535 ( 237 ) 298 7.3 Tradename 14,855 ( 255 ) 14,600 6.3 Technology 91,994 ( 13,240 ) $ 78,754 5.5 $ 188,443 $ ( 28,517 ) $ 159,926 Gross Amount Accumulated Amortization Carrying Value Weighted Average Remaining Life December 31, 2020 Customer relationships $ 38,782 $ ( 11,380 ) $ 27,402 7.0 Contractor relationships 535 ( 206 ) 329 8.0 Trade name 300 ( 300 ) — — Technology 37,063 ( 9,266 ) 27,797 7.5 $ 76,680 $ ( 21,152 ) $ 55,528 Amortization expense related to intangible assets for the three months ended September 30, 2021 and 2020 was $ 3,819 and $ 1,940 , respectively. Amortization expense related to intangible assets for the nine months ended September 30, 2021 and 2020 was $ 7,675 and $ 5,817 , respectively. Estimated future amortization expense of the identified intangible assets as of September 30, 2021, is as follows: 2021 $ 6,291 2022 25,114 2023 25,114 2024 25,130 2025 25,114 Thereafter 53,163 $ 159,926 17 9. Accrued Expenses and other current liabilities Accrued expenses and other current liabilities consist of the following: Nine Months Ended September 30, Year Ended December 31, 2020 Employee compensation and benefits $ 22,761 $ 20,521 Professional services 10,046 6,832 Provider services 4,428 4,632 Other 8,675 10,150 Total $ 45,910 $ 42,135 10. Line of Credit In January 2011, the Company entered into a credit agreement (the “Line of Credit”) with a financial institution that provides for maximum borrowings in one or more advances of an amount up to $ 5,000 . Borrowings under the Line of Credit accrue interest at the London Interbank Offered Rate plus 1.25 %. Borrowings are repayable immediately upon demand by the financial institution. In November 2017, the Line of Credit was amended to increase the maximum borrowings to $ 7,000 . As of September 30, 2021 and December 31, 2020, the Company had no outstanding borrowings under the Line of Credit. During any period that the Line of Credit is in effect, the Company can request the financial institution issue a letter of credit with a maximum maturity not to exceed twelve months. Any letters of credit issued by the financial institution reduce the maximum borrowings available under the Line of Credit. As of September 30, 2021, the maximum borrowing available to the Company is $ 7,000 based on the outstanding letters of credit of $ 795 that have been issued by the financial institution. As of December 31, 2020, the maximum borrowing available to the Company was $ 5,905 based on the outstanding letters of credit of $ 1,095 that have been issued by the financial institution. 11. Stockholders’ Equity Convertible Preferred Stock The authorized, issued and outstanding shares, liquidation preference, and carrying value of the Company’s convertible preferred stock as of December 31, 2019 were as follows: Shares Authorized Shares Issued Shares Outstanding Liquidation Preference Carrying Value Series A 3,200,000 3,178,650 3,130,077 51,741 28,889 Series B 833,334 787,725 787,725 37,060 23,632 Series C 13,711,111 10,095,133 10,095,133 519,648 603,278 17,744,445 14,061,508 14,012,935 608,449 655,799 In February 2020, the Company issued and sold 170,000 shares of Series C preferred stock at a price of $ 75 per share for gross proceeds of $ 12,750 . The Company incurred $ 261 of issuance costs in connection with the issuance of the Series C preferred stock In May 2020, the Company issued and sold 1,342,750 shares of Series C preferred stock at a price of $ 100 per share for gross proceeds of $ 134,275 . The Company incurred $ 750 of issuance costs in connection with the issuance of the Series C preferred stock. In conjunction with the Company’s IPO in September 2020, all shares of convertible preferred stock then outstanding, totaling 15,525,685 shares (pre-split), were automatically converted into an equivalent number of shares of Class A common stock on an 8.8-to-1.0 basis pursuant to a stock split and their carrying value, totaling $ 801,813 was reclassified into stockholders’ equity on the condensed consolidated balance sheet. In connection with the IPO, the Company filed an Amended and Restated Certificate of Incorporation which 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. 18 Common Stock In September 2020, upon completion of the IPO, the Company sold 45,681,499 shares of Class A common stock at an offering price of $ 18.00 per share, including 4,459,277 shares of Class A common stock pursuant to the exercise in full of the underwriters’ option to purchase additional shares. The Company received net proceeds of $ 767,568 , after deducting underwriting discounts and commissions of $ 49,336 and offering costs of approximately $ 4,906 . In September 2020, the Company sold 5,555,555 shares of Class C common stock in connection with the stock purchase agreement with Google, LLC for net proceeds of $ 99,100 , after deducting offering costs of $ 900 . Concurrently with the IPO, the Company used $ 24,157 of the proceeds from the IPO to repurchase 1,340,354 shares of Class A and Class B common stock from certain executive officers and other employees, to permit such executive officers and other employees to pay taxes owed in connection with the vesting of equity awards, including the repayment of third-party loans incurred to finance the payment of such taxes. In connection with the IPO, the Company filed an Amended and Restated Certificate of Incorporation which authorizes capital stock of 1,000,000,000 shares of Class A common stock, par value $ 0.01 per share, 100,000,000 shares of Class B common stock, par value $ 0.01 per share, and 200,000,000 shares of Class C common stock, par value $ 0.01 per share. Except for the rights noted below, each share of Class A, Class B and Class C common stock have the same rights, are equal in all respects and are treated by us as one class of shares. Each share of Class A and Class C common stock is entitled to one vote per share on all matters presented for a vote, except that Class C common stock does not have the right to vote for elections of directors. Subject to certain conditions, Class B common stock is collectively entitled to a number of votes equal to the product of (x) 1.0408163 and (y) the total number of votes that would be cast at such time by the holders of the Class A and Class C common stock and any other preferred stock entitled to vote under the certificate of incorporation at such time (resulting in the Class B common stock collectively holding 51% of the total outstanding voting power) , and each share of Class B common stock will be entitled to a number of votes equal to the total number of votes held by all Class B common stock divided by the total number of then outstanding shares of Class B common stock. Shares of Class B and Class C common stock will be converted into shares of Class A common stock on a one-for-one basis upon the occurrence of certain events. Shares of Class B common stock will automatically convert on the first business day (i) after the date on which the outstanding shares of Class B common stock constitutes less than 5% of the aggregate number of shares of common stock then outstanding, (ii) after the date on which neither founder is serving as an executive officer or (iii) following seven years after the date the amended and restated certificate of incorporation becomes effective, provided that, such period may, to the extent permitted by law and applicable stock exchange rules, be extended for three years upon the affirmative vote of the holders of a majority of the voting power of the then-outstanding shares of Class A common stock entitled to vote thereon, voting separately as a class. Shares of Class C common stock will be convertible at the option of the holder upon determination that a Hart-Scott-Rodino Antitrust Improvements Act (“HSR”) filing is not necessary prior to the holder’s conversion of such shares or, if required, upon expiration or termination of the HSR waiting period. In the nine months ended September 30, 2021, 3,865,035 shares of Class B common stock were converted to Class A common stock. As of September 30, 2021, the par value of the Class A, Class B and Class C shares was $ 2,272 , $ 267 , and $ 56 , respectively. Shares Authorized Shares Issued Shares Outstanding Class A 1,000,000,000 227,158,943 227,158,943 Class B 100,000,000 26,650,761 26,650,761 Class C 200,000,000 5,555,555 5,555,555 1,300,000,000 259,365,259 259,365,259 As of September 30, 2021 and December 31, 2020, the Company had reserved 61,572,141 and 61,392,747 shares of common stock for the exercise of outstanding stock options, the vesting of restricted stock units 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. The 2020 Plan is administered by the board of directors with respect to awards to non-employee directors and by the compensation committee, with respect to other participants, are 19 collectively, referred to as the plan administrator. The exercise prices, vesting and other restrictions are determined at the discretion of the plan administrator. 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, 2021 23,167,514 $ 4.37 6.2 $ 487,758 Granted — $ — Forfeited ( 386,694 ) $ 5.76 Expired — $ — Exercised ( 5,778,464 ) $ 3.30 Outstanding as of September 30, 2021 17,002,356 4.70 6.0 $ 77,588 Vested and expected to vest as of December 31, 2020 21,744,937 $ 4.14 6.0 $ 460,712 Vested and expected to vest as of September 30, 2021 16,317,595 $ 4.49 5.9 $ 75,687 Options exercisable as of December 31, 2020 17,640,827 $ 3.71 5.5 $ 381,511 Options exercisable as of September 30, 2021 13,833,503 $ 4.20 5.6 $ 68,029 No options were granted in the nine months ended September 30, 2021. The weighted-average grant date fair value of common stock options granted during the nine months ended September 30, 2020 was $ 5.06 . The weighted-average of assumptions that the Company used to determine the fair value of the common stock options granted to employees and directors were as follows: Nine Months Ended September 30, 2021 2020 Risk-free interest rate N/A 1.09 % Expected term (in years) N/A 6.1 Expected volatility N/A 52 % Expected dividend yield N/A 0 % Executive Equity Awards Each CEO has received restricted stock units, equaling 1.5 % of the Company’s fully-diluted outstanding capital stock as a result of the IPO (“IPO RSUs”), 50 % of the IPO RSUs (representing 0.75 % of the Company’s fully diluted outstanding capital stock immediately prior to the IPO or 3,230,750 shares of Class A common stock) were granted on the closing date of the IPO based on the closing price per share on the IPO closing date, and 50 % (representing 0.75 % of the Company’s fully diluted outstanding capital stock immediately prior to the IPO or 3,230,750 shares of Class A common stock) was granted on the 180-day anniversary of the IPO, based on a specific range of the price per share of the Company’s publicly traded common stock prior March 16, 2021, and will vest over a three-year period, with one-third vesting on the first anniversary of the IPO’s closing date and the remaining vesting in equal quarterly installments thereafter. As the issuance of the second 50% tranche was based upon events that are probable the expense related to both tranches of the IPO RSUs was recognized in the three months ended September 30, 2020. The grant-date fair value of each of the awards issued on the IPO closing date and issued on the 180-day anniversary of the IPO was estimated using a binomial lattice approach. The main inputs to valuing the IPO RSUs include the fair value of Class A common stock ($ 9.96 post-split), expected volatility ( 60 %) and the expected date of the IPO (September 30, 2020). The Company recognized a total of $ 23,644 in stock-based compensation expense, which included both tranches of the IPO RSUs for each CEO, on the date of the IPO as the requisite future service of the awards is not substantive for accounting purposes. 20 Restricted Stock Units During the year ended December 31, 2020, the Company granted 13,816,885 restricted stock units which vest over the service period of one to four years . During the nine months ended September 30, 2021, the Company granted 7,284,665 restricted stock units which vest over the service period of one to four years . Activity for the restricted stock units is as follows: Shares Weighted Average Grant Date Fair Value Unvested as of January 1, 2021 11,014,450 $ 14.43 Granted 7,284,665 18.89 Vested ( 5,687,981 ) 10.65 Forfeited ( 187,398 ) 15.67 Unvested as of September 30, 2021 12,423,736 $ 18.76 The total grant date fair value of RSU’s granted for the nine months ended September 30, 2021 was $ 137,604 . During the nine months ended September 30, 2020 the Company granted 13,039,392 restricted stock units. The aggregate intrinsic value of restricted stock units vested for the nine months ended September 30, 2021 and 2020 was $ 77,949 and $ 32,137 , respectively. 2020 Employee Stock Purchase Plan In July and August 2020, the Company’s board of directors adopted, and the Company’s stockholders approved, the 2020 Employee Stock Purchase Plan (“ESPP”). A total of 3,084,218 shares of Class A common stock were reserved for issuance under the ESPP. The ESPP became effective March 1, 2021. Rights granted under the ESPP will be issued only with respect to shares of Class A common stock. The purchase price of the shares will not be less than 85 % of the fair market value of Class A common stock on the lower of the purchase date, which will be the final trading day of the purchase period, or the enrollment date, which will be the first trading day of the offering period. During the three and nine months ended September 30, 2021, the Company issued 178,021 shares under the ESPP. As of September 30, 2021 2,906,197 shares remained available for issuance. For the three and nine months ended September 30, 2021, the Company recorded stock-based compensation expense related to the ESPP of $ 372 and $ 756 , respectively, based on elections made under the plan to-date. There was no expense for the three and nine months ended September 30, 2020. Stock-Based Compensation Stock-based compensation expense was classified in the condensed consolidated statements of operations and comprehensive loss as follows: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Cost of revenues $ 436 $ 309 $ 1,346 $ 668 Research and development 2,173 2,083 5,851 3,519 Selling and marketing 2,033 1,138 6,022 2,684 General and administrative 7,746 30,890 18,537 99,645 Total $ 12,388 $ 34,420 $ 31,756 $ 106,516 21 As of September 30, 2021, the unrecognized stock-based compensation expense related to unvested common stock-based awards was $ 86,486 , which is expected to be recognized over a weighted-average period of 1.2 years. 12. Commitments and Contingencies Indemnification The Company’s arrangements generally include certain provisions for indemnifying customers against third-party claims asserting infringement of certain intellectual property rights in the ordinary course of business. The Company also regularly indemnifies customers against third-party claims that the company’s products or services breach applicable law or regulation or from claims resulting from a breach of the business associate agreement in place with the customer. In addition, the Company indemnifies its officers, directors and certain key employees while they are serving in good faith in their capacities. Through September 30, 2021 and December 31, 2020, there have been no claims under any indemnification provisions. Litigation From time to time, and in the ordinary course of business, the Company may be subject to various claims, charges, and litigation. On September 14, 2020, the Company received a letter from Teladoc Health, Inc. alleging that certain of the Company’s cart products and associated peripherals infringe upon their patents. On October 12, 2020, Teladoc Health, Inc filed a claim against the Company related to these allegations. The Company believes that these claims lack merit and intends to defend against them vigorously. As of September 30, 2021 and December 31, 2020, the Company did no t have any pending claims, charges or litigation that it expects would have a material adverse effect on its consolidated financial position, results of operations or cash flows. 13. Leases The Company’s primary lease represents the lease for its corporate headquarters in Boston, Massachusetts. The Company modified the corporate headquarter lease during the third quarter of 2021, the future payments on the new lease are $ 17,169 . The carrying value of the Company’s right-of-use assets are substantially concentrated in real estate as the Company primarily leases office space. The Company’s policy is not to record leases with an original lease term of one year or less on the consolidated balance sheets. The Company recognizes lease expense for these short-term leases on a straight-line basis over the lease term. The Company does not have any lease contracts with the option to purchase as of September 30, 2021. Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 The components of lease cost under ASC 842 were as follows: Operating lease cost $ 1,267 $ 1,784 $ 4,414 $ 5,065 Short-term lease cost — — — — Variable lease cost — — — — Total lease cost $ 1,267 $ 1,784 $ 4,414 $ 5,065 Nine Months Ended September 30, 2021 2020 Supplemental cash flow information: Cash paid for amounts included in measurement of lease liabilities: Operating cash flows from operating leases $ 5,207 $ 5,213 Non-cash lease activity: Right-of-use lease assets obtained in exchange for new operating lease liability: Operating leases $ 15,506 $ 417 22 Nine Months Ended September 30, Year Ended December 31, 2020 Supplemental balance sheet information related to leases is as follows: Operating leases Operating lease right-of-use assets $ 17,780 $ 6,609 Total operating right-of-use lease assets $ 17,780 $ 6,609 Operating lease liabilities, current 3,121 6,357 Operating lease liabilities, net of current portion 14,988 1,296 Total operating lease liabilities $ 18,109 $ 7,653 Weighted-average remaining lease term (in years) 5.1 years 1.3 years Weighted-average discount rate 3.2 % 2.9 % As of September 30, 2021, minimum future lease payments for these operating leases were as follows: Years ending December 31, 2021 $ 1,283 2022 3,409 2023 3,679 2024 3,416 2025 3,484 Thereafter 4,447 Total lease payments $ 19,718 Less imputed interest ( 1,609 ) Total present value of lease liabilities $ 18,109 14. Income Taxes As a result of the Company’s history of net operating losses (“NOL”), the Company continues to maintain a full valuation allowance against its domestic net deferred tax assets. For the three and nine months ended September 30, 2021, the Company recognized an income tax benefit of $ 5,454 and $ 5,042 , primarily due to a partial release of valuation allowance in the U.S resulting from the deferred tax liabilities established as part of the Acquisitions consummated during the quarter. During the three and nine months ended September 30, 2020, the Company recorded income tax expense of $ 78 and $ 330 , respectively. 15. Related-Party Transactions Teva Pharmaceuticals, Industries Ltd Teva Pharmaceuticals, Industries Ltd (“Teva”) was determined to be a related party because a member of the Company’s board of directors was the President and CFO of Teva Pharmaceuticals’ North America Commercial through June 2021. In addition, Teva is a non-significant shareholder of the Company. As of September 30, 2021 it was determined that Teva was no longer a related party. As of December 31, 2020, short-term and long-term deferred revenue from this customer was no t material. As of December 31, 2020, amounts due from Teva were no t material. Prior to the board member’s departure from the board of directors in June 2021, the Company recognized an immaterial amount of revenue from contracts with this customer. During the three and nine months ended September 30, 2020, revenues recognized from this customer were no t material. Philips Holding USA, Inc. Philips Holding USA, Inc. (“Philips”) was determined to be a related party because a member of the Company’s board of directors is the Business Leader of Philips Population Health Management through June 2021. In addition, Philips is a non-significant shareholder of the Company. As of September 30, 2021 it was determined Philips was no longer a related party. As of December 31, 23 2020 , the Company held short-term and long-term deferred revenue of $ 2,549 , from contracts with this customer. As of December 31, 20 20 , amounts due from Philips were $ 763 . Prior to the board member’s departure from Philips in June 2021, the Company recognized revenue of $ 708 , from contracts with this customer. During the three and nine months ended September 30, 2020, the Company recognized revenue of $ 418 and $ 1,126 , respectively from contracts with this customer. Anthem Inc. Anthem Inc. (“Anthem”) was determined to be a related party because a member of the Company’s board of directors served as the Vice President of Anthem through February 2021. In addition, Anthem is a non-significant shareholder of the Company. As of September 30, 2021 it was determined Anthem was no longer a related party. As of December 31, 2020, the Company held short-term and long-term deferred revenue of $ 11,347 , from contracts with this customer. As of December 31, 2020, amounts due from Anthem were $ 8,391 . Prior to the board member’s departure from Anthem in February 2021, the Company recognized revenue of $- from contracts with this customer. During the three and nine months ended September 30, 2020 the Company recognized revenue of $ 13,522 and $ 40,677 , respectively from contracts with this customer. Cleveland Clinic Cleveland Clinic is a related party because a member of the Company’s board of directors is an executive advisor to Cleveland Clinic. As of September 30, 2021 and December 31, 2020, the Company held short-term and long-term deferred revenue of $ 281 and $ 606 , respectively from contracts with this customer. As of September 30, 2021 and December 31, 2020, amounts due from Cleveland Clinic were $ 497 and $ 1,020 , respectively. During the three months ended September 30, 2021 and 2020, the Company recognized revenue of $ 286 and $ 514 , respectively, from contracts with this customer. During the nine months ended September 30, 2021 and 2020, the Company recognized revenue of $ 816 and $ 1,004 , respectively, from contracts with this customer. CCAW, JV LLC CCAW, JV LLC is a related party because it is a joint venture formed between the Company and Cleveland Clinic for which the Company has a minority owned interest in. During the year ended December 31, 2020, the Company made an initial investment in CCAW, JV LLC of $ 2,940 for its less than 50 % interest in the joint venture. During the nine months ended September 30, 2021, the Company made a capital contributed of $ 2,548 , related to a portion of the phase one capital commitment. During the three months ended September 30, 2021 and 2020 the Company recognized revenue of $ 412 and $ 404 from contracts with this customer, respectively. During the nine months ended September 30, 2021 and 2020 the Company recognized revenue of $ 1,286 and $ 1,190 from contracts with this customer, respectively, As of September 30, 2021 and December 31, 2020, the Company held short and long term deferred revenue of $ 428 and $ 1,496 , respectively, from contracts with this customer. As of September 30, 2021 and December 31, 2020, amounts due from CCAW, JV LLC were no t material. Loans to Officers During 2020, the Company entered into secured promissory notes with executive officers in the amount of $ 16,441 . These loans were to fund the taxes associated with the restricted stock units and were collateralized by all of the capital stock of the Company that the employee owned or would own in the future and the employees’ personal assets. These loans are recorded within prepaids and other current assets in the Company’s condensed consolidated balance sheet. All outstanding loans with officers were repaid in August 2020 prior to the Company’s IPO. 24 16. Net Loss per Share Basic and diluted net loss per share attributable to common stockholders was calculated as follows: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Numerator: Net loss $ ( 50,932 ) $ ( 64,596 ) $ ( 128,873 ) $ ( 178,040 ) Net loss attributable to non-controlling interest 562 ( 1,515 ) ( 332 ) ( 3,920 ) Net loss attributable to American Well Corporation $ ( 51,494 ) $ ( 63,081 ) $ ( 128,541 ) $ ( 174,120 ) Denominator: Weighted-average common shares outstanding —basic and diluted 257,283,961 68,499,106 250,115,414 51,492,988 Net loss per share attributable to common stockholders—basic and diluted $ ( 0.20 ) $ ( 0.92 ) $ ( 0.51 ) $ ( 3.38 ) The Company’s potential dilutive securities, which include stock options, convertible preferred stock and unvested restricted stock units, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential common shares equivalents presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Unvested restricted stock units 7,162,432 5,455,654 7,162,432 5,455,654 Options to purchase shares of common stock 17,002,356 24,064,300 17,002,356 24,064,300 24,164,788 29,519,954 24,164,788 29,519,954 25