What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-28 compared with 2021-03-26 · 150 added, 207 removed, 320 unchanged (53% of the section changed)

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Item 6.

Selected Financial Data” and our consolidated financial statements and related notes included elsewhere in this Annual Report.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report.

In addition to historical consolidated financial information, the following discussion and analysis and information contains forward-looking statements that involve risks, uncertainties and assumptions.

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Risk Factors.”

We are a leading telehealth company enabling digital delivery of care for healthcare’s key stakeholders.

We empower our clients at the enterprise level with the core technology and services necessary to successfully develop and distribute telehealth programs that meet their strategic, operational, and social objectives under their own brands.

The Amwell Platform is a complete digital care delivery solution that equips our health system, health plan and innovator, including government, clients with the tools to enable new models of care for their patients and members.

Our scalable technology embeds with our clients’ existing offerings and clinical workflows, spanning the continuum of care and enabling care delivery across a wide variety of clinical, retail, school and home settings.

Our client-focused approach drives our success as one of the largest telehealth companies.

As of December 31, 2020, we powered the digital care programs of 58 health plans, which support over 36,000 employers and collectively represent more than 80 million covered lives, as well as 158 of the nation’s largest health systems, encompassing more than 2,000 hospitals.

We are a leading enterprise software company enabling digital delivery of care for healthcare’s key stakeholders.

We empower 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.

The Amwell Platform is a complete digital care delivery solution that equips our health system, health plan, government, and innovator clients with the tools to enable new models of care for their patients and members.

Our scalable technology integrates with our clients’ existing offerings and clinical workflows, spanning the continuum of care and enabling care delivery across a wide variety of clinical, retail, school and home settings.

Our client-focused approach drives our success as one of the largest global digital healthcare enterprise software companies.

As of December 31, 2021, we powered the digital care programs of over 55 health plans, which collectively represent more than 80 million covered lives, as well as approximately 150 of the nation’s largest health systems, encompassing more than 2,000 hospitals.

Since inception, we have powered over 14.3 million telehealth visits for our clients, including more than 5.8 million in the year ended December 31, 2021.

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Our contracts are typically three years in length but may be longer for our largest strategic customer partners.

Key Factors Affecting Our Performance

We believe our future growth, success and performance are dependent on many factors, including those set forth below.

While these factors present significant opportunities for us, they also represent the challenges that we must successfully address in order to grow our business and improve our results of operations.

Telehealth Utilization

Telehealth utilization is a key driver of our business.

A client’s overall utilization of its telehealth platform provides an important measure of the value they derive.

Telehealth utilization drives our business in three important ways.

First, to the extent a client succeeds with its telehealth program and sees good usage, they are more likely to renew and potentially expand their contract with us.

Second, our health systems agreements typically include a certain number of visits conducted by their own providers annually and provide that as certain volume thresholds are exceeded, its annual license fees will rise to reflect this growing value.

Third, to the extent that clients utilize provider services from AMG, Amwell derives revenue from clinical fees.

We expect that our future revenues will be driven by the growing adoption of telehealth and our ability to maintain and grow market share within that market.

In the year ended December 31, 2019, our clients completed a total of 1.1 million visits on the Amwell Platform, while in the year ended December 31, 2020, clients significantly expanded their use of the Amwell Platform with 5.9 million completed visits.

During the COVID-19 crisis, utilization of the platform achieved levels not seen before, evident by a larger number of clients’ own providers using the Amwell Platform.

AMG providers accounted for 27% of total visits performed versus 66% of total visits performed on the Amwell Platform during the years ended December 31, 2020 and 2019, respectively.

New Use Patterns and Functionality

Looking past COVID-19, we can see that some effects of the current period may be felt beyond the immediate crisis.

In particular, we are seeing the growing awareness among consumers of the availability and efficacy of telehealth for many healthcare needs and we are seeing more widespread hands-on experience among providers in delivering care via telehealth.

It remains unclear the extent to which the currently more relaxed regulatory environment, favorable reimbursement policies, and leniency with respect to cross-state provider licensure will become normative.

However, we believe that the current experience is more likely to be favorable to telehealth and Amwell’s business than otherwise over the longer term.

New Client Acquisition

We believe our ability to add net new health system and health plan clients is a key indicator of our increasing market adoption and future revenue potential.

We maintain dedicated direct sales teams for both health systems and health plans focused on selling solutions that meet each of their respective needs.

Our direct sales teams sell our full suite of technology, services and Carepoints.

Channel partners also play an important role in marketing and selling our products to our customer base, primarily focusing on the Amwell Platform and Carepoints.

Channel partners reduce our sales cycle and lower customer acquisition costs.

For example, through our EHR channel partners we are able to natively embed our technology into existing health system technology infrastructure which, as a competitive differentiator, may lead to a higher win rate.

In addition, because of the technology integration, an EHR partner sale may accelerate our ability to launch the technology and ultimately recognize revenue.

Carepoint channel partners primarily consist of value-added resellers that have established relationships with health systems and health plans.

We typically generate lower revenues in connection with sales obtained through these channel partner agreements.

Client Expansion and Retention

Health system contracts are initially priced based on the size of the system and their projected visit activity.

The contract value is typically expected to grow as the health system increases the number of providers on the platform and the number of consultations performed through the platform or adds the ability to deliver new use cases across their enterprise whether by the health system’s own providers or through AMG.

When a client chooses to adopt a new use case, Amwell configures a module for its Amwell Platform instance.

A module represents a unique patient or provider workflow, documentation requirement, or technology integration and associated services.

Our platform modules currently support over 100 active use cases with new modules continually being developed as virtual care continues to expand into new areas.

We expand business with health plans when they expand the number of members who have access to our Amwell Platform and AMG services or through offering new clinical programs to eligible plan members.

In many cases health plans pay Amwell incremental subscription fees for adding new members to the Amwell Platform, and for each clinical program that is deployed, which over time increases the annual contract value per health plan, a key indicator of the growth of our business.

We believe our ability to grow subscription revenue in our existing health plan client base is an indicator of the long-term value of our customer relationships.

Active Providers

An important indicator of the value of our Amwell Platform to our clients is the number of non-AMG providers that are active on the Amwell Platform.

We define “Active Providers” as providers that have delivered a visit on the Amwell Platform at least once in the last 12 months.

Active Providers demonstrate the prevalence of telehealth within our clients in both home and hospital environments.

We believe Active Providers is a measure of our success in delivering on our mission of enabling access to care.

We expect that the number of Active Providers will increase over time as a result of several factors:

the number of modules and use cases deployed within health systems

the adoption of telehealth by providers across the spectrum of care

the number of programs offered through health plans

the continued improvement in the regulatory environment for telehealth, including reimbursement for telehealth services

the ongoing consumerization of healthcare

Invest in Growth

We expect to continue to focus on long-term revenue growth through investments in technology development and sales and marketing efforts.

In addition, we believe additional investments in platform modules and clinical programs will allow us to continue to penetrate our products and services further in to our existing client relationships.

Accordingly, in the short term we expect these activities to increase our net losses, but in the long term we anticipate that these investments will positively impact our results of operations.

Regulatory Environment

Our operations are subject to comprehensive United States federal, state and local and international regulation in the jurisdictions in which we do business.

Our ability to operate profitably will depend in part upon our ability, and that of our affiliated providers, to maintain all necessary licenses and to operate in compliance with applicable laws and rules.

The COVID-19 pandemic has resulted in a reduction of regulatory and reimbursement barriers for telehealth, including removing the originating site restrictions for fee for service Medicare;

the expansion of Medicare and commercial reimbursement for telehealth and an easing of state licensure policies for providers.

However, it is uncertain how long the relaxed policies will remain in effect, and there can be no guarantee that once the COVID-19 pandemic is over that such restrictions will not be reinstated or changed in a way that adversely affects our business.

For additional discussion of this factor, see “Item 1A.

Risk Factors—Risks Related to Government Regulation.”

Business Combinations

In July 2018, we acquired all of the outstanding stock of Avizia.

This acquisition brought a comprehensive acute care capability, including a hospital-based cart lineup and custom software workflows for more than forty clinical specialties, including telestroke and tele-behavioral health.

This acquisition enhanced options available to clients across Amwell’s diverse telehealth ecosystem, including health systems, health plans and innovators, enabling clients to choose one comprehensive single platform solution.

The aggregate consideration for this transaction was $137.8 million, and included $65.3 million paid in cash and $72.5 million in equity comprised of 1,115,934 shares of Series C preferred stock at a price of $65.00 per share.

The acquisition was a stock purchase and the goodwill resulting from this acquisition is not deductible for tax purposes.

The results of operations of Avizia have been included within our operations from the date of acquisition.

In November 2019, we acquired all of the outstanding stock of Aligned Telehealth.

This acquisition combines Aligned’s ability to access an affiliated network of psychiatrists and advanced practice psychiatric nurses, with the Company’s health system and health plan client relationships to address the mounting challenges of psychiatric clinician shortages, fragmented care and societal stigmas impeding adequate behavioral health access and treatment.

The aggregate consideration for this transaction was $82.9 million, and included $48.7 million paid in cash and $34.3 million in equity comprised of 456,667 shares of Series C preferred stock at a price of $75.00 per share.

The agreement also included a component of contingent earnout consideration to be earned if certain financial performance metrics were achieved.

There was no payout related to this consideration.

The acquisition was a stock purchase and the goodwill resulting from this acquisition is not deductible for tax purposes.

The results of operations of Aligned have been included within our operations from the date of acquisition.

Visit volumes typically follow the annual flu season, rising during quarter four and quarter one and falling in the summer months.

The future impact of COVID-19 on seasonality is unknown as there could be additional surges and demand on telehealth visits.

While we sell to and implement our solutions to clients year-round, we experience some seasonality in terms of when we enter into agreements with our clients and when we launch our solutions to members.

Key Metrics and Factors Affecting Our Performance

We monitor the following key metrics to help us evaluate our business, identify trends affecting our business, formulate business plans and make strategic decisions.

We believe the following metrics are useful in evaluating our business:

Active Providers:

Years Ended December 31,

Total Active Providers

Active Providers :

providers that have delivered a visit on the Amwell Platform at least once in the last 12 months

providers from our affiliated Amwell Medical Group

our Health Plan and Health System customer’s own providers (non-AMG providers) that are active on the Amwell Platform

Health Systems:

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Health System Subscription Revenue:

Health System subscription revenue consists of all platform-related fees for a health system, including subscription licenses, fees related to software modules, and overage charges, and primarily represents the fee to access our platform over the contractual period.

Health System subscription revenue consists of all Platform-related fees for a health system, including subscription licenses, fees related to software modules, and overage charges, and primarily

represents the fee to access the Amwell P latform over the contractual period.

Subscription revenue may include immaterial amounts from non-health system clients whose business model acts similarly to those clients.

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Health Plan Subscription Revenue:

Health Plan subscription revenue consists of all platform-related fees for a health plan, including subscription licenses, per member/per month charges and fees related to clinical programs, and primarily represents the fee to access our platform over the contractual period.

Health Plan subscription revenue consists of all Platform-related fees for a health plan, including subscription licenses, per member/per month charges and fees related to clinical programs, and primarily represents the fee to access the Amwell Platform over the contractual period.

Subscription revenue may include immaterial amounts from non-health plan clients whose business model acts similarly to those clients.

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Annual contract value is defined as total health plan subscription revenue for the fiscal period divided by average number of health plan clients.

We believe our future growth, success and performance are dependent on many factors, including those set forth below.

While these factors present significant opportunities for us, they also represent the challenges that we must successfully address in order to grow our business and improve our results of operations.

Telehealth Utilization

Telehealth utilization is a key driver of our business.

A client’s overall utilization of its telehealth platform provides an important measure of the value they derive.

Telehealth utilization drives our business in three important ways.

First, to the extent a client succeeds with its telehealth program and sees good usage, they are more likely to renew and potentially expand their contract with us.

Third, to the extent that clients utilize provider services from AMG, Amwell derives revenue from clinical fees.

We expect that our future revenues will be driven by the growing adoption of telehealth and our ability to maintain and grow market share within that market.

COVID-19 has dramatically accelerated telehealth adoption seen in both overall volumes and embracement of delivering higher acuity care in a virtual medium.

Peak COVID-19 pandemic visit growth reflected several factors.

Many patients needed assessment for respiratory or other COVID-19-like symptoms and sought to be assessed for possible referral to hospital or testing facilities.

In addition, many patients, especially those with health vulnerabilities, sought to avoid going into brick and mortar facilities – and indeed our health systems’ clients preferred wherever possible to treat patients remotely at home for non-COVID-19 related ongoing healthcare needs.

Finally, we saw significant expansion of reimbursement for telehealth during the COVID-19 crisis, which made telehealth more affordable for many people.

We continue to experience these levels of telehealth adoption and usage of our Platform and products.

In the year ended December 31, 2020, our clients completed a total of 5.9 million visits on the Amwell Platform, while in the year ended December 31, 2021 5.8 million visits were completed.

Visits in 2020 were driven by the height of the COVID-19 pandemic while visits in 2021 were driven by expanded utilization of the Amwell Platform evident by a larger number of clients’ own providers using the Amwell Platform.

AMG providers accounted for 24% of total visits performed versus 27% of total visits performed on the Amwell Platform during the years ended December 31, 2021 and 2020, respectively.

We demonstrated that virtual care goes beyond urgent care pandemic needs through the increase in scheduled visits.

Scheduled visits increased from 3.3 million to 4.2 million during the years end December 31, 2020 and December 31, 2021, respectively.

Years Ended December 31,

AMG Visits (thousands)

Overall Visits

Total Visit Revenue

116.6 million

117.2 million

Revenue per Visit

An AMG visit is a case completed by our AMG affiliate providers and visit revenue reflects fee-for-service revenue to AMG for the visit.

Active Providers

An important indicator of the value of our Amwell Platform to our clients is the number of non-AMG providers that are active on the Amwell Platform.

We define “Active Providers” as providers that have delivered a visit on the Amwell Platform at least once in the last 12 months.

Active Providers demonstrate the prevalence of telehealth within our clients in both home and hospital environments.

We believe Active Providers is a measure of our success in delivering on our mission of enabling access to care.

We expect that the number of Active Providers will increase over time as a result of several factors:

the number of modules and use cases deployed within health systems

the adoption of telehealth by providers across the spectrum of care

the number of programs offered through health plans

the continued improvement in the regulatory environment for telehealth, including reimbursement for telehealth services

the ongoing consumerization of healthcare

A significant number of providers were added to the Amwell Platform in Q2 and Q3 of 2020 by our Health Plan but predominately by our Health System customers to handle the anticipated extraordinary increase in COVID-related consultations.

Additional AMG providers were also added to absorb COVID-related spikes in care.

As the 12 month measurement period for “Active Providers” advanced beyond the peak COVID period of Q2 2020, these extraordinary COVID-related additional AMG and customer providers cycled out of the Active Provider count thus we experienced a reset to the core base in Q2 2021.

We continue to experience growth in core active providers as seen in Q3 and Q4 2021, where approximately 17,000 active providers were added to the Amwell Platform all coming from our Health System and Health Plan customers.

Total Active Providers:

Years Ended December 31,

Customer Providers

Total Active Providers

providers from our affiliated Amwell Medical Group

Customer Providers :

our Health Plan and Health System customer’s own providers (non-AMG providers) that are active on the Amwell Platform

Active Providers :

providers that have delivered a visit on the Amwell Platform at least once in the last 12 months

Invest in Growth

We expect to continue to focus on long-term revenue growth through investments in technology development and sales and marketing efforts.

Accordingly, in the short term

we expect these activities to increase our net losses, but in the long term we anticipate that these investments will positively impact our results of operations.

We have expanded and intend to continue to expand our Platform through research and development as well as the pursuit of selective acquisitions.

We have completed multiple acquisitions since our inception, which we believe have expanded the channels that we serve and our distribution capabilities as well as broadening our service offering.

The Aligned Telehealth acquisition combined Aligned’s ability to access an affiliated network of psychiatrists and advanced practice psychiatric nurses, with the Company’s health system and health plan client relationships to address the mounting challenges of psychiatric clinician shortages, fragmented care and societal stigmas impeding adequate behavioral health access and treatment.

Our acquisitions of SilverCloud and Conversa add proven longitudinal care and behavioral healthcare capabilities to our digital care enablement platform.

SilverCloud is a leading digital mental health platform.

Conversa is a leader in automated virtual healthcare.

Acquisition costs and integration costs are an additional one time cost incurred as part of the acquisitions and investment in the future growth of the business.

Visit volumes typically follow the annual flu season, rising during quarter four and quarter one and falling in the summer months.

COVID-19 has altered these historical trends during the years ended December 31, 2021 and 2020 as the precautions being taken to prevent the spread of COVID-19 have essentially flattened the spike traditionally experienced related to the flu season.

The future impact of COVID-19 on seasonality is unknown as there could be additional surges and demand on telehealth visits.

Non-GAAP Financial Measures

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Stock-based compensation

Initial public offering expenses

Public offering expenses (2)

Acquisition-related (income) expenses

Noncash expenses and contingent consideration adjustments (3)

COVID-19-related expenses (1)

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COVID-19-related expenses include non-recurring provider bonus payments, emergency hosting licensing fees and non-medical provider temporary labor costs related to on-boarding non-AMG providers incurred in response to the initial outbreak of the COVID-19 virus as Amwell attempted to scale quickly to meet unusually high patient and non-AMG provider demand.

Public offering expenses include non-recurring expenses incurred in relation to our initial public offering for the year ended December 31, 2020, and our secondary offering for the year ended December 31, 2021.

Noncash expenses and contingent consideration adjustments include, noncash compensation costs incurred by selling shareholders and adjustments made to the contingent consideration.

Some of the limitations of adjusted EBITDA include (i) adjusted EBITDA does not properly reflect capital commitments to be paid in the future, and (ii) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and adjusted EBITDA does not reflect these capital expenditures.

Our IPO and acquisition-related expenses, including legal, accounting and other professional expenses, reflect cash expenditures and we expect such expenditures for acquisitions to recur from time to time.

Our public offering and acquisition-related expenses, including legal, accounting and other professional expenses, reflect cash expenditures and we expect such expenditures to recur from time to time.

Our adjusted EBITDA may not be comparable to similarly titled measures of other companies because they may not calculate adjusted EBITDA in the same manner as we calculate the measure, limiting its usefulness as a comparative measure.

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Components of Results of Operations

The Company has demonstrated continued revenue growth as a direct result of the acceptance of telehealth, our penetration of the market, and the successful integration of recent acquisitions.

The Company has demonstrated continued revenue growth as a direct result increasing acceptance of telehealth, our penetration of the market, and the successful launch of new or expanded products that enable broadened applications of settings for care delivered virtually.

Revenue performance is reflective of the strong foundation that has been built, focused around health plans, health systems, our provider network and a consistently increasing visit base.

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Our health plan and health system customers believe that overall utilization of telemedicine and care delivered virtually will continue to increase during and after the COVID-19 crisis.

By partnering with our customers during the crisis, we understand the increased volume and additional types of care they intend to deliver virtually on our platform.

We originally expected this increase in volume, evolution and advancement of telemedicine usage to occur over the next few years but we have now adjusted our research and development strategies to match the views of our customer partners, thus accelerating the expansion of our platform volume capacity and the development of additional

functionality through new programs and modules.

By partnering with our customers during the crisis, we understand the increased volume and additional types of care they intend to deliver virtually on the Amwell Platform.

We originally expected this increase in volume, evolution and advancement of telemedicine usage to occur over the next few years but we have now adjusted our research and development strategies to match the views of our customer partners, thus accelerating the expansion of our Platform volume capacity and the development of additional functionality through new programs and modules.

We have also expanded the use of offshore resources to provide more efficient rates on the increased research and development spend.

While an increase in the research and development expense is expected in the near-term future periods, the corresponding future revenue growth is expected to result in lower expenses as a percentage of revenue.

Further, while we expect to see an increase in research and development expense during the next several quarters, this expense represents an investment in a more scalable and economically beneficial solution.

The temporary increase will properly position the Company to benefit in the long term.

Our research and development expenses may also fluctuate as a percentage of our total revenue from period to period due to the seasonality of our total revenue and the timing and extent of our research and development expenses.

Amwell is accelerating its multiyear technology investment in 2021.

The purpose of this acceleration is to accommodate significant growth in market demand for increasingly broad and sophisticated telehealth enablement infrastructure following COVID-19.

We expect our increased spend on R&D to continue into 2021 and potentially for the entire year, perhaps at elevated levels versus those experienced in the latter part of 2020.

We are accelerating our multiyear technology investment to accommodate the anticipated significant growth in market demand for increasingly broad and sophisticated telehealth enablement infrastructure following COVID-19.

Sales and Marketing Expenses

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We expect to hire additional sales personnel and related account management and sales support personnel to properly service our growing client base and to identify and capitalize on new strategic market opportunities.

Marketing expenses consist primarily of personnel and related expenses (inclusive of stock-based compensation) for our marketing staff, including costs of communications materials that are produced to generate greater awareness and utilization of our platform among our clients and their users.

Marketing costs also include third-party independent research, participation in trade shows, brand messaging, and public relations costs.

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General and administrative expenses include personnel and related expenses, and professional fees incurred by finance, legal, human resources, information technology, our executives, and executive administration staff.

They also include stock-based compensation for employees in these departments and expenses related to auditing, consulting, legal, and corporate insurance.

They also include stock-

based compensation for employees in these departments and expenses related to auditing, consulting, legal, and corporate insurance.

We expect our general and administrative expenses to increase for the foreseeable future due to costs that we incur as a new public company, as well as other costs associated with continuing to grow our business.

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Years Ended December 31,

Change 2020 vs.

Change 2019 vs.

Fiscal Year 2021 to Fiscal Year 2020

Fiscal Year 2020 to Fiscal Year 2019

(in thousands)

Costs and operating expenses:

Costs of revenue, excluding deprecitaion and

amortization of intangible assets

Costs of revenue, excluding depreciation and amortization of intangible assets

Research and development

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Loss from operations

Interest income and other income

(expense), net

Loss before benefit from income taxes

and loss from equity method

Interest income and other income (expense), net

Loss before benefit (expense) from income taxes and loss from

equity method investment

Benefit (expense) from income taxes

Loss from less than majority owned JV

Net (loss) income attributable to

noncontrolling interest

Net loss attributable to American Well

Loss from equity method investment

Net loss attributable to non-controlling interest

Net loss attributable to American Well Corporation

For the year ended December 31, 2021, the increase in revenue from the prior period was substantially driven by an increase in subscription revenue.

Subscription revenue increased by $9.9 million, or 10% as a result of new customers subscribing to the Amwell Platform and existing customers expanding their use of the Amwell Platform through increasing the number of members they provided access to the Amwell Platform, increased number of programs, increased modules and increased volume of care delivered on our Platform by our customers’ own providers.

Visit revenue earned from AMG patient visits decreased by $0.6 million.

The decrease was primarily driven by reduced visit volume versus the height of the COVID-19 pandemic experienced in the second quarter of 2020, but was slightly offset by the overall increased utilization of telemedicine as a part of now normal delivery of healthcare and the rise of visit volume attributable to the Covid variants in the fourth quarter of 2021.

For the year ended December 31, 2021, the increase in revenue was partially offset by the decrease of services and Carepoints revenue.

Services and Carepoints were significant in 2020 as customers spent heavily to meet the initial requirements of providing care during the COVID-19 pandemic.

For the year ended December 31, 2020, the increase in revenue was substantially driven by an increase in visit revenue volume ($76.5 million increase).

Visit revenue has increased due to the impact of the COVID-19 crisis.

Revenue increase was also attributable to new clients using our platform and existing clients adding additional modules to their platform subscriptions, such as our COVID-19 module.

We believe that the strength of our technology platform will continue to serve as the foundation for our revenue growth.

Revenue increase was also attributable to new clients using Amwell Platform and existing clients adding additional modules to their platform subscriptions, such as our COVID-19 module.

We believe that the strength of our Platform will continue to serve as the foundation for our revenue growth.

Subscription revenue from health systems was $49.8 million for the year ended December 31, 2020, compared to $38.8 million during December 31, 2019, an increase of $11.0 million, or 28%.

Revenue earned from AMG patient visits increased by $76.5 million, or 188%, from $40.7 million for the year ended December 31, 2019 to $117.2 million in the December 31, 2020.

The increase was primarily driven by increased utilization across our health system and health plan clients primarily from the COVID-19 pandemic as well as overall increased acceptance of telemedicine.

The increase was primarily driven by increased utilization across our health system and health plan clients primarily from the COVID-19 pandemic as well as overall increased acceptance of

telemedicine.

AMG visits constituted 27 % of the total visits for the year ended December 31, 2020 , compared to 66 % for the year ended December 31, 2019 .

Revenue earned from services and Carepoints was $29.7 million for the year ended December 31, 2020, compared to $24.5 million during December 31, 2019, an increase of $5.2 million, or 21%.

Revenue earned from services and Carepoints w as $ 29.7 million for the year ended December 31, 2020, compared to $ 24.5 million during December 31, 2019 , an increase of $ 5.2 million, or 21 %.

The increase in services and Carepoints revenue was largely due to the overall increased volume of Carepoints sales and partially the result of timing with respect to the performance of services and the timing of delivery of Carepoints.

For the year ended December 31, 2019, the increase in revenue was predominately the result of new clients using the platform as the average number of health system and health plan clients on our platform increased by 50, to 194 as of December 31, 2019 from 144 as of December 31, 2018, a 35% increase.

We believe that the strength of our technology platform will continue to serve as the foundation for our revenue growth.

Subscription revenue from health system clients was $38.8 million for the year ended December 31, 2019, compared to $27.3 million during the year ended December 31, 2018, an increase of $11.5 million, or 42%.

This increase was substantially driven by a 50% increase in the average number of subscription clients increasing from 92 to 138.

Subscription revenue from health plan clients was $30.6 million for the year ended December 31, 2019, compared to $23.6 million during the year ended December 31, 2018, an increase of $7.0 million, or 30%.

This increase was driven by an 8% increase in the average number of subscription clients, increasing from 52 to 56, and increases in the health plan client average contract value increasing 21%.

The total number of paid AMG patient visits increased 38%, by 208,000, from 551,000 in the year ended December 31, 2018 to 759,000 in the year ended December 31, 2019.

This increase was primarily driven by increased utilization across our health system and health plan clients.

AMG visits constituted 66% of the total visits for the year ended December 31, 2019, compared to 73% for the year ended December 31, 2018.

Costs of Revenue, Excluding Depreciation and Amortization of Intangible Assets

For the year ended December 31, 2021, the decrease in cost of revenue was primarily due to a decrease of $5.6 million in provider related costs due to technology and process efficiencies realized in our AMG visit processes as well as lower visit volume.

The Company also experienced a $4.6 million decrease in hardware costs due to lower hardware unit sales volume.

The decrease was offset by an increase of $1.4 million related to the cost of marketing services.

For the year ended December 31, 2020, the increase in cost of revenue was primarily due to an increase of $50.8 million in provider related costs, with some portion of these provider costs due to increased visit volumes.

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The impact of COVID-19 has increased our visit revenue, which generates a lower gross margin contribution.

For the year ended December 31, 2019, the increase in cost of revenue was primarily due to an increase of $4.6 million in employee-related expense (inclusive of stock compensation expense) and a $16.8 million increase in other costs, primarily provider related costs, combined with implementation and hosting related expenses.

With respect to employee-related expense, our total administrative employee headcount dedicated to servicing AMG increased to 158 on December 31, 2019, as compared to 145 on December 31, 2018.

As a percentage of revenue, cost of revenues have remained relatively consistent year over year.

Research and Development Expenses

For the year ended December 31, 2021, the increase in research and development was primarily driven by an increase of $14.1 million in employee-related costs (inclusive of stock compensation expense).

The increase in research and development expense was further driven by a $7.9 million increase in consulting services primarily driven by increased spend in the first half of the year related to Converge.

Research and development expenses increased for the year ended December 31, 2020, compared the year ended December 31, 2019, which was primarily driven by an increase of $11.4 million in employee-related costs (inclusive of stock compensation expense).

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There was also an increase in product development costs of $1.3 million.

Research and development expenses increased for the year ended December 31, 2019, compared the year ended December 31, 2018, which was primarily driven by an increase of $11.6 million from employee-related costs (inclusive of stock compensation expense).

The increase in research and development expense was further driven by a $5.8 million increase in third party consulting related spend.

In 2019 and 2020, the Company has initiated a focused effort to invest in the area of research and development.

The Amwell platform as well as its embedded modules, programs and Carepoints will evolve to offer the ecosystem highly innovative, valuable and differentiating capabilities that will be delivered in a staged release process through 2021.

The Company has initiated a focused effort to invest in the area of research and development.

The Amwell Platform as well as its embedded modules, programs and Carepoints will evolve to offer the ecosystem highly innovative, valuable and differentiating capabilities that will be delivered in a staged release process through 2022 and beyond.

We believe that our accelerated investment will have a multiyear positive impact on our future results.

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Sales and Marketing Expenses

For the year ended December 31, 2021, the increase primarily consisted of $7.5 million in employee-related costs (inclusive of commissions and stock compensation expense).

Marketing expenses during the year ended December 31, 2021 also included an increase of $1.6 million related to third-party contractor usage for marketing campaign fulfillment and $1.8 million related to tradeshows and marketing promotional items.

Sales and marketing expenses increased for the year ended December 31, 2020, compared to the year ended December 31, 2019, which primarily consisted of a $9.7 million increase in employee-related costs (inclusive of commissions and stock compensation expense).

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The increase was offset by a decrease in marketing and promotional items of $2.9 million and travel expenses of $2.1 million due to travel being restricted during the COVID-19 pandemic.

Sales and marketing expenses increased for the year ended December 31, 2019, compared to the year ended December 31, 2018, which primarily consisted of direct marketing spend, a $9.0 million increase in employee-related costs including commissions (inclusive of stock compensation expense) and, to a lesser extent, an increase $1.3 million in trade show and sponsorship expenses.

Total sales and marketing employee headcount increased to 185 on December 31, 2020, as compared to 149 on December 31, 2019 and 121 on December 31, 2018.

Total sales and marketing employee headcoun t increased to 249 on December 31, 2021 , as compared to 185 on December 31, 2020 and 149 on December 31, 2019 .

General and Administrative Expenses

For the year ended December 31, 2021, the decrease in general and administrative expense was driven by a decrease in stock-based compensation expense of $81.5 million predominantly related to awards granted to the co-CEOs related to our IPO in 2020.

The decrease was also driven by the fair value adjustment to the contingent consideration of $13.7 million.

The decrease was offset by increases related to employee-related costs (excluding stock compensation expense) of approximately $2.8 million, $5.9 million increase in insurance costs for our directors and officers, $4.7 million in consulting costs largely related to the August 2021 Acquisitions and $5.4 million in increased legal costs largely related to the Teladoc litigation and the August 2021 Acquisitions.

The decrease in general and administrative expenses was further offset by a $4.0 million increase in system costs to enhance administrative processing.

General and administrative expenses are expected to continue to increase (in absolute dollars) in future periods as we continue to grow in size and complexity while at the same time recognizing the impact of the regulatory and compliance costs associated with being a publicly traded company.

General and administrative expenses increased for the year ended December 31, 2020, compared to the year ended December 31, 2019.

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The increase in expenses was partially offset by savings in consulting expenses of $1.5 million (as the Company required less reliance on outside third parties) and a decrease of $0.7 million for meals and travel expenses as the Company was working remotely for the majority of the year.

General and administrative expenses increased for the year ended December 31, 2019, compared to the year ended December 31, 2018.

The increase was driven in part by increases in employee-related costs (including bonuses and stock compensation expense) of approximately $12.2 million, consulting of $3.3 million, service support agreements of $1.5 million and acquisition and integration costs of $0.7 million.

Each of these expenses were partially offset by savings in non-compensation related administrative expenses.

General and administrative expenses, excluding the increase in stock-based compensation, are expected to continue to increase (in absolute dollars) in future periods as we continue to grow in size and complexity while at the same time recognizing the full year impact of the regulatory and compliance costs associated with being a publicly traded company.

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Depreciation and Amortization Expense

Depreciation expense remained consistent for the year ended December 31, 2021.

Amortization expense increased by $5.9 million for the year ended December 31, 2021.

The increase in amortization was related to the intangible assets acquired in the August 2021 Acquisitions.

Depreciation expense increased by $0.3 million and amortization expense increased by $2.0 million, for the year ended December 31, 2020, compared to the year ended December 31, 2019, which was primarily driven by a $2.0 million increase in amortization as a result of the amortization of acquired intangible assets related to the Aligned Acquisition in November 2019.

Depreciation and amortization expenses for the year ended December 31, 2019 increased compared to the year ended December 31, 2018, which was primarily driven by a $2.3 million increase in amortization as a result of the amortization of acquired intangible assets related to the Avizia Acquisition in July 2018.

Interest Income and Other Income (Expense), net

For the year ended December 31, 2020, interest income and other expenses consist entirely of interest income and gains from our cash equivalents and short-term investments.

For the year ended December 31, 2021, interest income and other expenses consist primarily of interest income and gains from our cash equivalents and short-term investments, the decline in interest income is due to the decline in the investments held during the year.

Interest income and other expense for the year ended December 31, 2020, consists entirely of interest income from our cash equivalents and short-term investments.

Benefit (Expense) from Income Taxes

Income tax benefit was $5.4 million for the year ended December 31, 2021, compared to income tax expense of $0.6 million for the year ended December 31, 2020.

The increase in the benefit is primarily due to a $5.8 million release of the valuation allowance in the U.S.

due to the August 2021 Acquisitions.

Income tax expense was $ 0.6 million for the year ended December 31, 2020, compared to an income tax benefit of $ 0.8 million during December 31, 2019 .

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Therefore, the Company accounts for its investments in CCAW, JV LLC using the equity method of accounting.

During the year ended December 31, 2020, the Company recognized a loss of $2.2 million as its proportionate share of the joint venture results of operations.

Consolidated Quarterly Results of Operations

The following table sets forth our unaudited quarterly statements of operations data for each of the quarters indicated.

The unaudited quarterly statements of operations data set forth below have been prepared on the same basis as our audited consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, that are necessary for the fair statement of such data.

Our historical results are not necessarily indicative of the results that may be expected in the future, and the results for any quarter are not necessarily indicative of results to be expected for a full year or any other period.

The following quarterly financial data should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this Annual Report.

Three Months Ended

September 30,

Costs and operating expenses:

Costs of revenue, excluding depreciation

and amortization of intangible assets

Research and development

Sales and marketing

General and administrative

Depreciation and amortization expense

Total costs and operating expenses

Loss from operations

Interest income and other income

(expense), net

Loss before benefit (expense) from

income taxes and loss from equity

method investment

Benefit (expense) from income taxes

Loss from equity method investment

Net (loss) income attributable to non-

controlling interest

Net loss attributable to American Well

Net loss per share attributable to

common stockholders, basic and

Weighted-average common shares

outstanding, basic and diluted

Basic and diluted net loss per share attributable to common stockholders are computed independently for each of the quarters presented.

Therefore, the sum of quarterly basic and diluted per share information may not equal annual basic and diluted per share information.

During the year ended December 31, 2021 and 2020, the Company recognized a loss of $3.1 million and $2.2 million as its proportionate share of the joint venture results of operations, respectively.

Liquidity and Capital Resources

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In September 2020, we completed our initial public offering, or IPO, and issued and 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.

We received net proceeds of $ 767.6 million, after deducting underwriting discounts and commissions of $ 49 .3 million and estimated deferred offering costs of approximately $4.

We received net proceeds of $767.6 million, after deducting underwriting discounts and commissions of $49.3 million and estimated deferred offering costs of approximately $4.9 million.

In conjunction with the IPO we closed on the Google LLC private placement and issued 5,555,555 shares of Class C common stock for proceeds of $99.1 million, net of offering costs of $0.9 million.

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In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all.

If we are unable to raise additional capital when desired, our business, financial condition and results of operations would be adversely affected.

are unable to raise additional capital when desired, our business, financial condition and results of operations would be adversely affected.

Cash Used in Operating Activities

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The primary driver of this use of cash was our net loss of $88.4 million.

The cash used for operating activities was primarily driven by the overall growth of our business including an increase in new clients (through organic growth and the Avizia Acquisition) and expansion of business by existing clients.

The net loss was partially offset by non-cash charges totaling $15.1 million, which was primarily comprised of stock-based compensation of $7.7 million and depreciation and amortization expense of $5.3 million.

Cash Provided by Investing Activities

The net loss for the year was reflective of the investments made back into the Company (from both a personnel and technology perspective), partially offset by the overall growth of our business including an increase in new clients and expansion of business with existing clients.

The net loss was partially offset by non-cash expenses of $21.0 million (primarily stock-based compensation of $12.1 million and depreciation and amortization of $7.8 million).

Cash (Used in) Provided by Investing Activities

Cash used in investing activities was $59.6 million for the year ended December 31, 2021.

Cash used in investing activities consisted of $156.5 million in acquisitions of businesses, a $2.5 million investment in the CCAW, JV LLC joint venture with Cleveland Clinic and $0.6 million in the purchases of property and equipment offset by $100.0 million in proceeds from maturities of investments.

Cash used in investing activities was $66.8 million for the year ended December 31, 2020.

Cash used in investing activities consisted of $159.6 million in purchases of investments, partially offset by $99.1 million in proceeds from maturities of investments.

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Further, cash used in investing activities included $1.3 million in the purchases of property and equipment.

Cash used in investing activities was $245.9 million for the year ended December 31, 2018.

Cash used in investing activities consisted of $355.2 million in purchases of investments and $175.6 million in proceeds from the sale of securities.

Further, the Company used $64.4 million (in addition to Series C stock consideration) in connection with the acquisition of Avizia and $1.9 million for the purchases of property and equipment.

Cash Provided by Financing Activities

Cash provided by financing activities for the year ended December 31, 2021, was $5.8 million.

Cash provided by financing activities consisted of $20.8 million of proceeds from the exercise of employee stock options.

These proceeds were offset by cash payments primarily for the purchase of treasury stock of $15.0 million

Cash provided by financing activities for the year ended December 31, 2020, was $983.1 million.

Cash provided by financing activities consisted of $146.0 million of cash proceeds from our issuance of Series C Convertible Preferred Stock, net of issuance costs, $772.9 million of cash proceeds from our IPO, net of underwriting commissions and $99.1 million cash proceeds from the issuance of Class C common stock to Google, LLC in a private placement offering.

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Cash provided by financing activities consisted of $45.8 million of cash proceeds from our issuance of Series C Convertible Preferred Stock, net of issuance costs, and $1.0 million of proceeds from the exercise of employee stock options.

Cash provided by financing activities for the year ended December 31, 2018, was $278.2 million.

Cash provided by financing activities consisted of $280.4 million of cash proceeds from our issuance of Series C Convertible Preferred Stock, net of issuance costs, and $0.6 million of proceeds from the exercise of employee stock options.

Cash provided by financing activities was partially offset by $2.9 million used to repurchases Series A Convertible Preferred Stock.

Indebtedness & Lines of Credit

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As of December 31, 2020 and 2019, 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 instrument reduce the maximum borrowings available under the Line of Credit.

As of December 31, 2020, the maximum borrowing available to the Company is $5.9 million based on the outstanding letters of credit of $1.1 million that have been issued by the financial institution.

Contractual Obligations and Commitments

The Line of Credit arrangement expired during the year ended December 31, 2021.

Contractual Obligations

The following summarizes our contractual obligations as of December 31, 2021:

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Obligations under contracts that we can cancel without a significant penalty are not included in the table above.

Off-Balance Sheet Arrangements

During the periods presented, we did not have, nor do we currently have, any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

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Revenue Recognition

The Company generates revenue from contracts with customers who purchase access to the Company’s hosted telehealth platform which includes access to the Company’s network of medical professionals.

The Company also provides implementation and post go-live professional services for its telehealth platform.

Access to the platform, includes the ability for customers to access the AMG network of medical professionals, as well as, in certain cases, support and maintenance and other professional services.

The Company generates revenue from contracts with customers who purchase access to the Company’s hosted Platform which includes access to the Company’s network of medical professionals.

The Company also provides implementation and post go-live professional services for its Platform.

Access to the Amwell Platform, includes the ability for customers to access the AMG network of medical professionals, as well as, in certain cases, support and maintenance and other professional services.

The typical contract term is three years.

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Customers typically have the right to terminate their contracts for cause if the Company fails to perform in accordance with the contractual terms.

For customers who purchase access to the Amwell Platform, the Company hosts a dedicated instance of the telehealth platform, white-labeled under the customer’s own name, branding, and with customized workflows and operating choices.

For customers who purchase access to the Amwell Platform, the Company hosts a dedicated instance of the Platform, white-labeled under the customer’s own name, branding, and with customized workflows and operating choices.

Certain implementation services are required in order for the customer to drive its intended benefit.

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and our remaining performance obligations.

These evaluations require significant judgment that could affect the timing and amount of revenue recognized.

These evaluations require significant judgment around the proper identification of performance obligations, which could affect the timing and amount of revenue recognized.

Deferred revenues consist of the unearned portion of billed fees for our enterprise software access fees and related services, which is subsequently recognized as revenue in accordance with our revenue recognition policy.

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Goodwill and Intangible Assets

Amortization of acquired intangible assets is the result of the consolidation of NTN which occurred in 2016, the acquisition of Avizia which occurred in 2018 and the acquisition of Aligned which occurred in 2019.

Amortization of acquired intangible assets is the result of the consolidation of NTN which occurred in 2016, the acquisition of Avizia which occurred in 2018, the acquisition of Aligned which occurred in 2019, and the acquisitions of Conversa and SilverCloud which occurred in 2021.

As a result of these transactions, contractor and customer relationships, acquired technology, and trade name were identified as intangible assets, and are amortized over their estimated useful lives.

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Refer to Note 2 of our consolidated financial statements included elsewhere in this Annual Report for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the date of this Annual Report.

Emerging Growth Company Status

We are an emerging growth company, as defined in 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.

We have elected to use this extended transition period for complying with 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, our financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis