Revenue, Deferred Revenue, and Deferred Device and Contract Costs

3 Months Ended

Mar. 31, 2022

Revenue, Deferred Revenue, and Deferred Device and Contract Costs

Revenue, Deferred Revenue, and Deferred Device and Contract Costs

Note 3. Revenue, Deferred Revenue, and Deferred Device and Contract Costs

The Company generates access fees from customers, consisting of employers, health plans, hospitals and health systems, insurance, and financial services companies (collectively “Clients”), as well as individual members, accessing its professional provider network, hosted virtual healthcare platform and chronic care management platforms. Visit fee revenue is generated for general medical, expert medical service and other specialty visits. In addition, other revenue is primarily associated with virtual healthcare device equipment included with its hosted virtual healthcare platform. Access revenue accounted for 87% and 84% of the Company’s revenue for the quarters ended March 31, 2022 and 2021, respectively.

The following table presents the Company’s revenues disaggregated by revenue source (in thousands):

	Quarter Ended
	March 31,
	2022		2021
Access Fees Revenue
U.S.	$	421,146	$	327,553
International		70,191		54,553
Total		491,337		382,106
Visit Fee Revenue
U.S.		64,473		57,128
International		3,455		3,383
Total		67,928		60,511
Other
U.S.		5,581		10,671
International		504		387
Total		6,085		11,058
Total Revenues	$	565,350	$	453,675

During the fourth quarter of 2021, the Company refined its definition of international revenues to reflect all international revenues based on location of the customer. Previously, Direct-to-Consumer (“D2C”) activities were primarily reflected based on the location of operations. In addition, certain activities related to the Company’s international operations are now reflected in visit revenues versus access fee revenues. Prior period amounts have been recast to conform with current presentation.

Deferred Revenue

Deferred revenue represents billed, but unrecognized revenue, and is comprised of fees received in advance of the delivery or completion of the services and amounts received in instances when revenue recognition criteria have not been met. Deferred revenue associated with upfront payments for a device is amortized ratably over the expected member enrollment period. Deferred revenue that will be recognized during the succeeding twelve-month period is recorded as current deferred revenue and the remaining portion is recorded as noncurrent deferred revenue.

For certain services, payment is required for future months before the service is delivered to the member. The Company records deferred revenue when cash payments are received in advance of the Company’s performance obligation to provide services. Deferred revenue, current plus long-term, was $87.1 million at March 31, 2022 and $73.2 million at March 31, 2021. The net increase of $7.6 million and $18.4 million in the deferred revenue balance for the three months ended March 31, 2022 and 2021, respectively, was primarily driven by InTouch and Livongo as well as BetterHelp, the Company’s D2C mental health product, and cash payments received or due in advance of satisfying the Company’s performance obligations, offset by revenue recognized that were included in the deferred revenue balance at the beginning of the period. The Company anticipates that it will satisfy most of its performance obligation associated with the deferred revenue within the prospective fiscal year. Revenue recognized during the quarters ended March 31, 2022 and 2021 that was included in deferred revenue at the beginning of the periods was $51.6 million and $32.7 million, respectively.

The Company expects to recognize $73.0 million and $5.0 million of revenue in 2022 and 2023, respectively, related to future performance obligations that are unsatisfied or partially unsatisfied as of March 31, 2022.

Deferred Device and Contract Costs

Deferred device and contract costs are classified as a component of Prepaid expenses and other current assets or Other assets depending on term, and consisted of the following as of March 31, 2022 (in thousands):

	As of March 31,		As of December 31,
	2022		2021
Deferred device and contract costs, current	$	27,335	$	22,304
Deferred device and contract costs, noncurrent		7,636		6,249
Total deferred device and contract costs	$	34,971	$	28,553

Deferred costs and other activity were as follows (in thousands):

	Deferred Device and Contract Costs
Beginning balance as of December 31, 2021	$	28,553
Additions		13,986
Cost of revenue recognized		(7,568)
Ending balance as of March 31, 2022	$	34,971