shcr-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________

FORM 10-Q

_____________________________________________


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended March 31, 2024


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from to

Commission file number 001-39535

SHARECARE, INC.

(Exact name of registrant as specified in its charter)


Delaware						85-1365053
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

255 East Paces Ferry Road NE, Suite 700 Atlanta, Georgia						30305
(Address of Principal Executive Offices)						(Zip Code)

(404) 671-4000

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	SHCR	The Nasdaq Stock Market LLC
Warrants, each warrant exercisable for one share of common stock, each at an exercise price of $11.50 per share	SHCRW	The Nasdaq Stock Market LLC

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

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

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


Large accelerated filer	o	Accelerated filer	x
Non-accelerated filer	o	Smaller reporting company	o
		Emerging growth company	x

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

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

As of May 6, 2024, there were 362,409,958 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

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Sharecare, Inc.

Table of Contents


		Page
Part I. Financial Information
Item 1.	Financial Statements	1
	Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023 (unaudited)	1
	Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2024 and 2023 (unaudited)	2
	Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the three months ended March 31, 2024 and 2023 (unaudited)	3
	Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023 (unaudited)	5
	Notes to Consolidated Financial Statements (unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	32

Part II. Other Information
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
Signatures		36

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Part I - Financial Information

ITEM 1. FINANCIAL STATEMENTS

SHARECARE, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share amounts)


	As of March 31, 2024		As of December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	100,320	$	128,187
Accounts receivable, net (net of allowance for doubtful accounts of $8,348 and $8,544, respectively)	124,936		128,173
Other receivables	2,213		2,262
Prepaid expenses	9,875		6,007
Other current assets	2,814		3,178
Total current assets	240,158		267,807
Property and equipment, net	2,751		3,375
Other long-term assets	13,599		13,863
Intangible assets, net	130,263		136,552
Goodwill	191,860		192,037
Total assets	$	578,631	$	613,634
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity
Current liabilities:
Accounts payable	$	45,530	$	45,388
Accrued expenses and other current liabilities (Note 3)	55,516		65,706
Deferred revenue	5,735		5,517

Total current liabilities	106,781		116,611
Warrant liabilities	317		403
Long-term debt	586		519
Other long-term liabilities	7,171		8,032
Total liabilities	114,855		125,565
Commitments and contingencies (Note 7)
Series A redeemable convertible preferred stock, $0.0001 par value; 5,000,000 shares authorized; 5,000,000 shares issued and outstanding, aggregate liquidation preference of $50,000 as of March 31, 2024 and December 31, 2023	58,205		58,205
Stockholders’ equity:
Common stock $0.0001 par value; 600,000,000 and 600,000,000 shares authorized; 358,572,273 and 353,430,357 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively	36		35
Additional paid-in capital	1,168,869		1,157,737
Accumulated other comprehensive loss	(2,551)		(2,263)
Accumulated deficit	(760,460)		(725,373)
Total Sharecare, Inc. stockholders’ equity	405,894		430,136
Noncontrolling interest in subsidiaries	(323)		(272)
Total stockholders’ equity	405,571		429,864
Total liabilities, redeemable convertible preferred stock and stockholders’ equity	$	578,631	$	613,634

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

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SHARECARE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share amounts)


	Three Months Ended March 31,
	2024		2023
Revenue	$	90,861	$	116,295
Costs and operating expenses:
Costs of revenue (exclusive of depreciation and amortization)	51,121		67,890
Sales and marketing	13,558		15,348
Product and technology	14,544		20,808
General and administrative	34,907		34,121
Depreciation and amortization	13,331		14,781
Total costs and operating expenses	127,461		152,948
Loss from operations	(36,600)		(36,653)
Other income:
Interest income	1,274		1,680
Interest expense	(217)		(430)
Other income	368		429
Total other income	1,425		1,679
Loss before income tax benefit (expense)	(35,175)		(34,974)
Income tax benefit (expense)	31		(31)
Net loss	(35,144)		(35,005)
Net loss attributable to noncontrolling interest in subsidiaries	(57)		(346)
Net loss attributable to Sharecare, Inc.	$	(35,087)	$	(34,659)

Net loss per share attributable to common stockholders, basic and diluted	$	(0.10)	$	(0.10)
Weighted-average common shares outstanding, basic and diluted	354,208,908		352,923,217

Net loss	$	(35,144)	$	(35,005)
Other comprehensive loss adjustments:
Foreign currency translation	(282)		307
Comprehensive loss	(35,426)		(34,698)
Comprehensive loss (income) attributable to noncontrolling interest in subsidiaries	(51)		(289)
Comprehensive loss attributable to Sharecare, Inc.	$	(35,375)	$	(34,409)

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

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SHARECARE, INC.

CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

(In thousands, except share amounts)


	Redeemable Convertible Preferred Stock			Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Noncontrolling Interest		Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount
Balance at December 31, 2023	5,000,000	$	58,205	353,430,357	$	35	$	1,157,737	$	(2,263)	$	(725,373)	$	(272)	$	429,864
Stock options exercised	—	—		40,278	—		24		—		—		—		24
Common stock issued upon vesting of restricted stock units	—	—		7,674,863	1		(1)		—		—		—		—
Issuance of warrants in connection with debt and revenue arrangements	—	—		—	—		27		—		—		—		27
Share-based compensation	—	—		—	—		13,866		—		—		—		13,866
Net income (loss) attributable to noncontrolling interest in subsidiaries	—	—		—	—		—		—		—		(57)		(57)
Currency translation adjustment	—	—		—	—		—		(288)		—		6		(282)
Common stock repurchased related to tax withholding for exercised employee stock options and vested restricted stock units	—	—		(2,573,225)	—		(2,784)		—		—		—		(2,784)
Net income (loss) attributable to Sharecare, Inc.	—	—		—	—		—		—		(35,087)		—		(35,087)
Balance at March 31, 2024	5,000,000	$	58,205	358,572,273	$	36	$	1,168,869	$	(2,551)	$	(760,460)	$	(323)	$	405,571

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

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SHARECARE, INC.

CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

(In thousands, except share amounts)


	Redeemable Convertible Preferred Stock			Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Noncontrolling Interest		Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount
Balance at December 31, 2022	5,000,000	$	58,205	354,463,620	$	35	$	1,120,024	$	(2,794)	$	(595,820)	$	1,155	$	522,600
Stock options exercised	—	—		281,042	—		282		—		—		—		282
Common stock issued upon vesting of restricted stock units	—	—		1,759,615	—		—		—		—		—		—
Issuance of warrants in connection with debt and revenue arrangements	—	—		—	—		14		—		—		—		14
Cumulative effect of adopting ASU 2016-13	—	—		—	—		—		—		(1,055)		—		(1,055)
Share-based compensation	—	—		—	—		10,406		—		—		—		10,406
Net income (loss) attributable to noncontrolling interest in subsidiaries	—	—		—	—		—		—		—		(346)		(346)
Currency translation adjustment	—	—		—	—		—		250		—		57		307
Common stock repurchased related to tax withholding for exercised employee stock options and vested restricted stock units	—	—		(214,984)	—		(396)		—		—		—		(396)
Net income (loss) attributable to Sharecare, Inc.	—	—		—	—		—		—		(34,659)		—		(34,659)
Other	—	—		—	—		(131)		—		—		—		(131)
Balance at March 31, 2023	5,000,000	$	58,205	356,289,293	$	35	$	1,130,199	$	(2,544)	$	(631,534)	$	866	$	497,022

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

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SHARECARE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands, except share and per share amounts)


	Three Months Ended March 31,
	2024		2023
Cash flows from operating activities:
Net loss	$	(35,144)	$	(35,005)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense	13,331		14,781
Non-cash interest expense	68		254
Amortization of contract liabilities	—		(451)
Accretion of contract liabilities	—		68
Lease right-of-use assets expense	566		1,138
Change in fair value of warrant liability and contingent consideration	(379)		(138)
Share-based compensation	13,596		9,969
Deferred income taxes	(36)		59
Other	151		2,120
Changes in operating assets and liabilities:
Accounts receivable, net	2,842		(1,387)
Prepaid expenses and other assets	(3,747)		(5,795)
Accounts payable and accrued expenses	(10,422)		(10,608)
Operating lease liabilities	(635)		794
Deferred revenue	218		703
Net cash used in operating activities	(19,591)		(23,498)
Cash flows from investing activities:
Purchases of property and equipment	(51)		(368)
Capitalized internal-use software costs	(5,135)		(4,806)
Net cash used in investing activities	(5,186)		(5,174)
Cash flows from financing activities:
Payments for shares repurchased	(2,784)		(131)
Proceeds from exercise of common stock options	24		1,023
Payments on financing lease obligations	(285)		(370)
Net cash (used in) provided by financing activities	(3,045)		522
Effect of exchange rates on cash and cash equivalents	(45)		72
Net decrease in cash and cash equivalents	(27,867)		(28,078)
Cash and cash equivalents at beginning of period	128,187		182,508
Cash and cash equivalents at end of period	$	100,320	$	154,430
Supplemental disclosure of cash flow information:
Cash paid for interest	$	151	$	236
Cash paid for amounts included in the measurement of lease liabilities	$	626	$	1,336
Assets obtained in exchange for lease obligations	$	—	$	1,695

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

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Sharecare, Inc.

Notes to Unaudited Consolidated Financial Statements

(Unaudited)

1.Nature of Business and Significant Accounting Policies

Nature of Business

Sharecare, Inc. (“Sharecare” or the “Company”) was founded in 2009 to develop an interactive health and wellness platform and began operations in October 2010. Sharecare’s virtual health platform is designed to help people, patients, providers, employers, health plans, government organizations, and communities optimize individual and population-wide well-being by driving positive behavior change. The platform is designed to connect each stakeholder to the health management tools they need to drive engagement, establish sustained participation, increase satisfaction, reduce costs, and improve outcomes. Sharecare bridges scientifically validated clinical programs with content to deliver a personalized experience for its members, beginning with the RealAge® test, Sharecare’s health risk assessment that shows members the true age of their body, capitalizing on people’s innate curiosity of how “young” they are to draw them into the platform. The Sharecare platform provides members with a personalized action plan to guide and educate them on the habits and behaviors making the biggest impact, both positive and negative, on their RealAge. Sharecare provides the resources members need to manage their health through lifestyle or disease management and coaching programs, such as diabetes management and smoking cessation, well-being solutions, such as financial health and anxiety management; care navigation tools such as find-a-doctor, prescription savings, clinical decision support, medical records, home care, and more. In January 2023, Sharecare launched Sharecare+, a digital-first, comprehensive advocacy solution designed to deliver value through benefits navigation, clinical engagement, virtual care, and chronic case and utilization management. Additionally, Sharecare provides secure, automated release of information, audit and business consulting services to streamline the medical records process for medical facilities. Sharecare delivers value via its provider, enterprise, and life sciences channels.

Basis of Presentation and Consolidation Policy

The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts of Sharecare, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Segment Information

The Company operates as a single operating segment. The Company’s chief operating decision maker is its chief executive officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance and allocating resources for the entire company.

Unaudited Interim Financial Information

The accompanying interim Consolidated Balance Sheet as of March 31, 2024 and the Consolidated Statements of Operations and Comprehensive Loss, Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit), and Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023 are unaudited. These unaudited interim consolidated financial statements are presented in accordance with the rules and regulations of the SEC and do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with U.S. GAAP. In management’s opinion, the unaudited interim consolidated financial statements have been prepared on the same basis as the annual financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of March 31, 2024 and the Company’s consolidated results of operations and cash flows for the three months ended March 31, 2024 and 2023. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full fiscal year or any other future interim or annual periods. The information contained within the unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s annual financial statements for the year ended December 31, 2023.

Use of Estimates

The preparation of these unaudited interim consolidated financial statements in conformity with GAAP requires the use of management estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the

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Sharecare, Inc.

Notes to Unaudited Consolidated Financial Statements

(Unaudited)

consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions reflected in these consolidated financial statements include goodwill, revenue recognition, stock-based compensation, and income taxes. 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.

Concentration of Credit Risk

The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company’s cash deposits are held with well-known financial institutions and may exceed federally insured limits. The Company grants credit to its customers in the normal course of business and generally requires no collateral from its customers.

Fair Value Measurements

The carrying value of the Company’s financial instruments, including cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximates fair value due to their short-term nature.

The Company measures financial assets and liabilities at fair value at each reporting period using a fair value hierarchy that requires management to maximize the use of observable inputs and minimize the use of unobservable inputs. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

•Level 1 — Quoted prices in active markets for identical assets or liabilities

•Level 2 — Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

•Level 3 — Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability

Assets and Liabilities that are Measured at Fair Value on a Non-recurring Basis

Assets and liabilities that may be measured at fair value on a non-recurring basis relate primarily to the Company’s tangible fixed assets and other intangible assets. For these assets, the Company does not periodically adjust the carrying value to fair value except in the event of an impairment. When the Company determines that an impairment has occurred, the carrying value of the asset is reduced to its fair value and an impairment charge is recorded within operating loss in the Consolidated Statements of Operations and Comprehensive Loss.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable, net, consists of trade accounts receivable which are due under normal trade terms requiring payment, typically within 45 days from the invoice date. The allowance for doubtful accounts is based on management's estimate for expected credit losses for outstanding trade accounts receivable and is recorded as an offset to accounts receivable. Changes in the allowance for doubtful accounts are classified as general and administrative expense in the Consolidated Statements of Operations and Comprehensive Loss. The Company determines expected credit losses based on historical write-off experience, an analysis of the aging of outstanding receivables, customer payment patterns, and adjusts based on expectations of changes in macro-economic conditions and customer-specific information that may impact the collectability of outstanding receivables. The Company reassesses the adequacy of the allowance for doubtful accounts each reporting period.

The changes in the allowance for doubtful accounts are as follows (in thousands):

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Sharecare, Inc.

Notes to Unaudited Consolidated Financial Statements

(Unaudited)


	Three Months Ended March 31,
	2024		2023
Allowance for doubtful accounts – beginning balance	$	8,544	$	7,197
Provision for doubtful accounts	411		1,869
Amounts written off and other adjustments	(607)		(640)
Allowance for doubtful accounts – ending balance	$	8,348	$	8,426

Contract Liabilities

In connection with certain acquisitions, the Company has recognized current and noncurrent contract liabilities, representing off-market values associated with certain wellness program royalty agreements. Amortization of these contract liabilities was $0 and $0.5 million for three months ended March 31, 2024 and 2023, respectively, all of which was included within cost of revenues in the Consolidated Statements of Operations and Comprehensive Loss. Additionally, the Company has recognized certain contract liabilities due to a former related party in the amount of $17.5 million, related to service agreements, which is included in accrued expenses and other current liabilities in the Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023.

Deferred Revenue

The Company records contract liabilities, which consist of deferred revenue and contract billings in excess of earned revenue, pursuant to ASC 606.

Deferred revenues arise from contracts that permit upfront billing and the collection of fees covering the entire contractual service period, which is generally six to twelve months and in advance of the satisfaction of the performance obligations identified within the related contract. As of March 31, 2024 and December 31, 2023, such fees were $5.7 million and $5.5 million, respectively. The Company recognized $1.2 million of revenue during the three months ended March 31, 2024 that was included in deferred revenue at December 31, 2023.

Revenue Recognition

Performance-Based Revenue

Certain contracts place a portion of fees at risk based on achieving certain performance metrics, such as customer cost savings, and/or clinical outcomes improvements (performance-based). The Company uses the most likely amount method to estimate variable consideration for these performance guarantees. The Company includes in the transaction price some, or all, of a variable consideration amount only to the extent that it is not probable that a significant reversal in the amount of cumulative revenue recognized will occur when the uncertainty associated with the variable consideration is subsequently resolved. The Company utilizes customer data to measure performance. Performance-based fees subject to refund that the Company has not recognized as revenues are generally due to either: (1) data from the customer is insufficient or incomplete to measure performance; or (2) interim performance measures indicate that it is not probable that the Company will meet the relevant performance target(s). As of March 31, 2024 and December 31, 2023, such fees included within deferred revenue were $4.8 million and $4.9 million, respectively.

In the event that performance measures are not met by the end of the measurement period, typically one year, some or all of the performance-based fees are required to be refunded. During the settlement process under a contract, which generally occurs six to eight months after the end of a contract year, performance-based fees are reconciled and settled. Approximately $1.5 million and $1.2 million of revenues recognized during the three months ended March 31, 2024 and 2023, respectively, were performance-based. As of March 31, 2024 and 2023, the cumulative amount of performance-based revenues that had met the criteria for recognition and had been recognized but had not yet been settled with customers, totaled $1.9 million and $6.5 million, respectively. During the three months ended March 31, 2024, $0.7 million of revenue was recognized, which related to services provided prior to December 31, 2023.

Remaining Performance Obligations

Remaining performance obligations represent contracted revenues that are non-cancellable and have not yet been recognized due to unsatisfied or partially satisfied performance obligations. This includes deferred revenues and amounts that will be invoiced and recognized as revenues in future periods. As of March 31, 2024, future estimated revenue related to

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Sharecare, Inc.

Notes to Unaudited Consolidated Financial Statements

(Unaudited)

performance obligations with terms of more than one year that are unsatisfied or partially unsatisfied at the end of the reporting period was approximately $61.2 million. As of March 31, 2024, the Company expects to recognize revenue on approximately 91% of these unsatisfied performance obligations over the following 24 months and the remainder thereafter.

Disaggregated Revenue

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


	Three Months Ended March 31,
	2024		2023
Enterprise	$	46,960	$	70,193
Provider	28,427		28,974
Life Sciences	15,474		17,128
Total Revenue	$	90,861	$	116,295

Other Income

For the three months ended March 31, 2024 and 2023, other income (expense) consisted of the following (in thousands):


	Three Months Ended March 31,
	2024		2023
Re-measurement of contingent consideration	$	294	$	138
Re-measurement of warrant liabilities	85		—
Other	(11)		291
Total other income	$	368	$	429

Accounting Standards Not Yet Adopted

As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies (that is, those that have not had a registration statement declared effective under the Securities Act of 1933, as amended (the “Securities Act”), or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company has elected to use this extended transition period under the JOBS Act until such time as the Company is no longer considered to be an EGC. The adoption dates discussed below reflect this election.

Income Taxes. In December 2023, the FASB issued ASU No. 2023-09 "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." The new ASU requires public business entities, on an annual basis, to provide a tabular rate reconciliation (using both percentages and reporting currency amounts) of (1) the reported income tax expense (or benefit) from continuing operations, to (2) the product of the income (or loss) from continuing operations before income taxes and the applicable statutory federal (national) income tax rate of the jurisdiction (country) of domicile using specific categories and separate disclosure for any reconciling items within certain categories that are equal to or greater than a specified quantitative threshold. A public business entity is required to provide an explanation, if not otherwise evident, of the individual reconciling items disclosed, such as the nature, effect, and underlying causes of the reconciling items and the judgment used in categorizing the reconciling items. For each annual period presented, the ASU requires all reporting entities to disclose the year-to-date amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign. It also requires additional disaggregated information on income taxes paid (net of refunds received) to an individual jurisdiction equal to or greater than 5% of total income taxes paid (net of refunds received). The ASU requires that all reporting entities disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign, and income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign.

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Sharecare, Inc.

Notes to Unaudited Consolidated Financial Statements

(Unaudited)

The ASU is effective for public entities for annual periods beginning after December 15, 2024. We are still evaluating the impact on our financial statement disclosures.

Segment Reporting. In November 2023, the FASB issued ASU No. 2023-07 "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures." The amendments in this update address the requirement for a public entity to disclose its significant segment expense categories and amounts for each reportable segment. A significant segment expense is any significant expense incurred by the segment, including direct expenses, shared expenses, allocated corporate overhead, or interest expense that is regularly reported to the chief operating decision maker and is included in the measure of segment profit or loss. The disclosure of significant segment expenses is in addition to the current specifically-enumerated segment expenses required to be disclosed, such as depreciation and interest expense. If a public entity does not disclose any significant segment expenses for a reportable segment, it is required to disclose narratively the nature of the expenses used by the chief operating decision maker to manage the segment's operations. The ASU is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024. We are still evaluating the impact on our financial statement disclosures as it pertains to the Company’s single reportable segment.

2. Fair Value Measurements

The Company’s financial instruments consist of cash equivalents, accounts receivable, accounts payable, accrued liabilities, warrant liabilities, and contingent consideration liabilities. Cash equivalents are comprised of money market funds stated at amortized cost, which approximates fair value at the balance sheet dates, due to the short period of time to maturity. Accounts receivable, accounts payable, and accrued liabilities are stated at their carrying value, which approximates fair value due to the short time to the expected settlement date. The warrant liabilities and contingent consideration liabilities are recorded at estimated fair value.

The following tables present the fair value hierarchy for assets and liabilities measured at fair value as of March 31, 2024 (in thousands):


	March 31, 2024
	Level 1		Level 2		Level 3		Total Fair Value
Cash equivalents
Money market funds	$	10,470	$	—	$	—	$	10,470
Total cash equivalents at fair value	$	10,470	$	—	$	—	$	10,470

Liabilities
Warrant liabilities	$	317	$	—	$	—	$	317
Contingent consideration – other liabilities	—		—		101		101
Total liabilities at fair value	$	317	$	—	$	101	$	418

The warrants issued during the initial public offering by Falcon Capital Acquisition Corp. “FCAC” and the warrants issued by FCAC simultaneously with its initial public offering in a private placement, are both classified within Level 1 as they are publicly traded and have an observable market price in an active market. Additionally, the warrant liabilities are exercisable for one share of common stock at an exercise price of $11.50.

Contingent consideration is classified within Level 3 as it is valued using certain unobservable inputs. The fair value of the contingent consideration is estimated based on the Company’s stock price and number of shares expected to be issued related to acquisitions in prior years and are estimated using a Monte Carlo simulation with inputs for the Company’s stock price, expected volatility, risk-free rate, first and second earnout hurdles and expected term.

The following is a schedule of changes to the contingent consideration — other liabilities classified as Level 3 for the periods presented (in thousands):

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Sharecare, Inc.

Notes to Unaudited Consolidated Financial Statements

(Unaudited)


December 31, 2023	$	395
Re-measurement of contingent consideration	(294)
March 31, 2024	$	101

3. Balance Sheet Components

Accrued Expenses and Other Current Liabilities

As of March 31, 2024 and December 31, 2023, accrued expenses and other current liabilities consisted of the following (in thousands):


	March 31, 2024		December 31, 2023
Accrued expenses	$	17,304	$	15,546
Accrued compensation	10,506		16,235
Accrued media costs	2,506		5,168
Accrued taxes	1,509		1,837
Operating lease liabilities, current	1,684		1,826
Contract liability due to the Series A Preferred Stockholder	17,496		17,496
Accrued expenses due to the Series A Preferred Stockholder	3,255		6,084
Accrued other	1,256		1,514
Total accrued expenses and other current liabilities	$	55,516	$	65,706

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Sharecare, Inc.

Notes to Unaudited Consolidated Financial Statements

(Unaudited)

4. Goodwill and Other Intangible Assets

Intangible assets and the related accumulated amortization for each class of intangible asset as of March 31, 2024 were as follows (in thousands):


	March 31, 2024
	Cost		Accumulated Amortization		Net		Weighted Average Remaining Life
Definite-lived, intangible assets
Technology – features/content	$	62,926	$	(29,650)	$	33,276	7.2
Trade name	3,549		(2,091)		1,458		3.3
Customer relationships	77,849		(41,121)		36,728		8.2
Internal-use software	189,631		(140,630)		49,001		1.8
Total definite-lived, intangible assets	$	333,955	$	(213,492)	$	120,463

Intangible assets not subject to amortization
Internal-use software projects in process	$	4,770	$	—	$	4,770
Indefinite-lived, trade names	5,030		—		5,030
Total intangible assets not subject to amortization	9,800		—		9,800
Total intangible assets	$	343,755	$	(213,492)	$	130,263

The following tables set forth the changes in the carrying amount of the Company’s goodwill for the period presented (in thousands):


December 31, 2023	$	192,037
Foreign currency translation adjustment	(177)
March 31, 2024	$	191,860

Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subjected to annual tests of impairment. The Company tests goodwill and indefinite-lived intangible assets for impairment annually in the fourth quarter and between annual tests if an event occurs or circumstances change that would indicate that it is more likely than not that the carrying amount may be impaired. The Company initially evaluates qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment is not conclusive, a quantitative assessment of the fair value of a reporting unit is performed to test goodwill for impairment using a combination of income and market approaches. There have been no impairments of goodwill since the Company’s inception.

As a result of the sustained decline in the Company’s stock price and associated market capitalization, the Company performed an impairment test during the first quarter of 2024. The fair value of the reporting units for goodwill impairment testing was determined using both an income approach and market approach. The income approach was based on discounted projected future (debt-free) cash flows for each reporting unit. The discount rates applied to these cash flows were based on the weighted average cost of capital for each reporting unit, which takes market participant assumptions into consideration. For the market approach, we used both the guideline public company and similar transaction methods. The guideline public company method analyzes market multiples of revenue and EBITDA for a group of comparable public companies. Under the similar transactions method, valuation multiples are calculated utilizing actual transaction prices and revenue and EBITDA data from target companies deemed similar to the reporting unit. As a result of the interim test, the fair values of each of our reporting units exceeded their respective book values in excess of approximately 10%, and the Company determined there was no impairment. An increase of 100 basis points in the weighted average cost of capital or a decrease of 100 basis points in annual forecasted revenues would have resulted in a 3% and 9% decline in the fair value, respectively of our reporting units which would not have resulted in impairment.

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Sharecare, Inc.

Notes to Unaudited Consolidated Financial Statements

(Unaudited)

Amortization expense for intangible assets during the three months ended March 31, 2024 and 2023 totaled $12.7 million and $14.0 million, respectively. Amortization expense is included in depreciation and amortization in the Consolidated Statements of Operations and Comprehensive Loss.

The following is a schedule of estimated future amortization expense for intangible assets as of March 31, 2024 (in thousands):


Year ending December 31:
Remainder of 2024	$	33,671
2025	31,239
2026	17,572
2027	10,104
2028	6,932
Thereafter	20,945
Total	$	120,463

5. Income Taxes

As a result of the Company’s history of net operating losses, the Company has provided for a full valuation allowance against its deferred tax assets, with the exception of its German and French operations. For the three months ended March 31, 2024, the Company recognized income tax benefit of less than $0.1 million, primarily due to tax on foreign income. For the three months ended March 31, 2023, the Company recognized income tax benefit of less than $0.1 million, primarily due to tax on foreign income.

6. Common Stock and Stockholders’ Equity

Warrants

In connection with debt and equity financings and certain partnership arrangements, the Company may issue warrants. Warrants classified as liabilities generally vest immediately and are exercisable upon issuance and have an expiration of seven years from the date of issuance. Warrants classified as equity generally vest after three years from the date of issuance and have an expiration of seven years from the date of issuance.

As of March 31, 2024, the following warrants to purchase common stock were issued and outstanding:


Classification	Warrants Outstanding	Exercise Price per Share
Equity	1,278,746	$4.21 - $5.61
Liability	17,433,334	$11.50

The Company has also entered into, and may in the future enter into, contractual arrangements with certain customers and other parties and earnout arrangements in connection with acquisitions that, in each case, provide for the issuance of warrants and/or common stock upon the achievement of specified milestones. As of March 31, 2024, these agreements provide for the issuance of up to 3,238,675 shares of common stock and 6,353,577 warrants to purchase shares of common stock. With respect to these arrangements, there were 52,589 warrants earned but not issued as of March 31, 2024.

Share-based Payments

Stock option and restricted stock unit activity, prices, and values during the three months ended March 31, 2024 are as follows (in thousands, except share and per share amounts):

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Sharecare, Inc.

Notes to Unaudited Consolidated Financial Statements

(Unaudited)


	Options Outstanding						Restricted Stock Units
	Number of Options	Weighted- Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in thousands)		Number of Plan shares outstanding	Weighted-Average Grant Date Fair Value per share
Outstanding as of December 31, 2023	92,218,339	$	3.01	5.87	$	1,256	49,007,766	$	1.93
Granted	—	—					15,089,859	$	1.03
Exercised/Released	(40,278)	$	0.59		$	7	(7,674,699)	$	2.38
Cancelled/Forfeited	(2,685,153)	$	2.40				(661,764)	$	1.85
Outstanding as of March 31, 2024	89,492,908	$	3.03	5.58	$	260	55,761,162	$	1.62
Vested and/or exercisable as of March 31, 2024	73,764,072	$	1.88	5.24	$	260
Vested and/or exercisable as of December 31, 2023	73,902,493	$	1.89	5.49	$	1,256

The intrinsic value is calculated as the difference between the exercise price of the underlying common stock option award and the estimated fair value of the Company’s common stock. Vested but unissued restricted stock units as of March 31, 2024 and December 31, 2023 were immaterial.

Share-based compensation expense for employee and nonemployee options and restricted stock units included in the Consolidated Statements of Operations and Comprehensive Loss is as follows for the three months ended March 31, 2024 and 2023 (in thousands):


	Three Months Ended March 31,
	2024		2023
Cost of revenues	$	204	$	111
Sales and marketing	1,508		828
Product and technology	1,664		1,068
General and administrative	10,468		7,962
Total share-based compensation expense	$	13,844	$	9,969

Additionally, share-based compensation costs, reflected within additional paid-in capital in the Consolidated Statement of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the three months ended March 31, 2024 and 2023, included approximately $0.2 million and $0.4 million related to capitalizable internally developed software activities, respectively.

On May 31, 2023, each of the principal executive officer, principal financial officer, other named executive officers, and certain eligible employees of the Company voluntarily elected to forgo up to 25% of their cash base salary for the next 12 months, and in lieu thereof received restricted stock units (“RSUs”) with a value equal to the cash amount they elected to forego over the 12-month period. In consideration for forgoing guaranteed cash compensation, each individual will receive an additional number of RSUs with a value equal to 25% of the amount of cash salary they have elected to forgo. The RSUs were issued in June 2023 and will vest in four equal quarterly installments over the next 12 months, subject to the individual’s continued employment. The ability of the named executive officers and other eligible employees to make such election to forgo guaranteed cash compensation and receive RSUs in lieu thereof was approved by the Compensation and Human Capital Committee of the Company’s board of directors. The unvested RSUs are classified as a liability. As of March 31, 2024, there was $0.4 million of unvested RSUs classified as a liability and recorded to accrued expenses and other current liabilities in the Consolidated Balance Sheets. As such, share-based compensation costs, reflected within additional paid-in capital in the Consolidated Statement of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the three months

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Sharecare, Inc.

Notes to Unaudited Consolidated Financial Statements

(Unaudited)

ended March 31, 2024 does not reflect the cost associated with these awards. Upon vesting of these RSUs, amounts will be reclassified from liability to equity.

7. Commitments and Contingencies

Legal Matters

From time to time, the Company is subject to litigation in the normal course of business. The Company is of the opinion that, based on the information presently available, the resolution of any such legal matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. The Company has accrued for losses that are both probable and estimable.

We are also party to investigations and legal disputes and losses related to certain matters that are reasonably possible, but at this time, we cannot estimate a loss or range of losses.

8. Related-Party Transactions

Sul América Serviços de Saúde S.A. (Sul América), is a customer of and owns a 49% interest in Sharecare Brasil Servicios de Consultoria, Ltda. As of the year ended December 31, 2023, the Company ended the services contract with this related party and ceased operations of Sharecare Brasil Servicios de Consultoria, Ltda. Revenues recognized for the three-month period ended March 31, 2024 and 2023 from Sul América totaled $0.3 million and $1.3 million, respectively. For the three-month period ended March 31, 2024, the revenues recognized represent variable termination fee revenue, which was previously contrained and for which uncertainty about the variable amount to be received was resolved.

The Series A Preferred Stock is held by a customer that also had an employee serving on the Sharecare Board. During the three month period ended June 30, 2023, the board member ceased employment with the customer. Subsequent to the board member’s termination of employment with the customer, this customer was no longer considered a related party. Revenues recognized for this customer for the three months ended March 31, 2023 totaled $6.2 million. As of December 31, 2023, $13.0 million in receivables were outstanding from this related party.

During the third quarter of 2022, we entered into a revenue contract with the Series A Preferred Stockholder to provide patient advocacy services. We also entered into separate agreements to purchase distinct goods and services. These agreements are now subject to a dispute. Separate from the above disclosed amounts for this related party, revenues recognized related to these distinct services for the three months ended March 31, 2023 totaled $10.6 million. Additionally, revenue for the three months ended March 31, 2023, included $0.4 million of amortization of contract assets. For the three months ended March 31, 2023, cost of sales totaled $10.9 million. Amounts paid under the agreements that were not determined to be distinct were recorded as a reduction of revenues.

As of December 31, 2023, there were $34.3 million in receivables and $51.1 million in accounts payable and accrued expenses recorded in connection with these distinct agreements. Additionally, in 2022 the Company acquired certain intellectual property which was determined to be distinct and recorded an intangible asset, which is being amortized over its estimated useful life. The unamortized balance of intangible asset was $3.1 million as of December 31, 2023. As of March 31, 2024, the receivables, accounts payable, and accrued expenses balances recorded in connection with these distinct agreements remained unchanged.

The Company has a customer that was a related party for the year ended December 31, 2023 due to an affiliation with a member of the Sharecare Board. This member was nominated during the first quarter of 2023 and has subsequently ceased employment with the customer. This customer is no longer considered a related party as of December 31, 2023. As of December 31, 2023, $1.0 million in receivables were outstanding from this related party and revenues recognized for the three months ended March 31, 2023 totaled $0.7 million.

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Sharecare, Inc.

Notes to Unaudited Consolidated Financial Statements

(Unaudited)

9. Net Loss Per Share

Basic and diluted net loss per share attributable to common stockholders was calculated as follows (in thousands, except share and per share amounts):


	Three Months Ended March 31,
	2024		2023
Numerator
Net loss	$	(35,144)	$	(35,005)
Less: Net loss attributable to noncontrolling interests in subsidiaries	(57)		(346)
Net loss available to common stockholders	$	(35,087)	$	(34,659)

Denominator
Weighted-average common shares outstanding, basic and diluted	354,208,908		352,923,217
Net loss per share attributable to common stockholders, basic and diluted	$	(0.10)	$	(0.10)

The Company’s potential dilutive securities, which include stock options and restricted stock units, redeemable convertible preferred stock, and contingently issuable shares, have been excluded from the computation of diluted net loss per share for the three-months ended March 31, 2024 and 2023, as they are anti-dilutive and 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 share 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 March 31,
	2024	2023
Stock options and restricted stock units	2,660,077	30,951,366
Redeemable convertible preferred stock	5,000,000	5,000,000

Total	7,660,077	35,951,366

Additionally, stock options of 89.1 million that have exercise prices in excess of the average market price of common shares for the three months ended March 31, 2024 and restricted stock units of 53.5 million as of March 31, 2024 are not included in the calculation of potentially dilutive securities, but could become dilutive in future periods.

For the prior period, stock options of 73.7 million that have exercise prices in excess of the average market price of common shares for the three months ended March 31, 2023 and restricted stock units of 32.5 million as of March 31, 2023 are not included in the calculation of potentially dilutive securities.

10. Subsequent Events

The Company considers events or transactions that occur after the balance sheet date, but before the consolidated financial statements are issued, to provide additional evidence relative to certain estimates or identify matters that require additional disclosures. The Company evaluated subsequent events through, May 9, 2024, the date on which the consolidated financial statements were available to be issued, noting no such material events.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the financial condition and results of operations of Sharecare, Inc. (for purposes of this section, “the Company,” “Sharecare,” “we,” “us” and “our”) should be read together with the Company’s audited financial statements as of and for the years ended December 31, 2023, 2022, and 2021, together with the related notes thereto, included in our Annual Report on Form 10-K filed with the SEC on March 29, 2024, and Sharecare’s unaudited interim financial statements as of March 31, 2024 and for the three months ended March 31, 2024 and 2023, together with the related notes thereto, included elsewhere in this Quarterly Report on Form 10-Q. Actual results may differ materially from those contained in any forward-looking statements.

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements regarding, among other things, the plans, strategies and prospects, both business and financial, of Sharecare. These statements are based on the beliefs and assumptions of our management. Although we believe that our plans, intentions, and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties, and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words “believes,” “estimates,” “expects,” “forecasts,” “may,” “will,” “should,” “seeks,” “plans,” “scheduled,” “anticipates,” “possible,” “continue,” “might,” “potential” or “intends” or similar expressions. Forward-looking statements contained in this report include, but are not limited to, statements regarding our expectations as to:

•

SEC Form 10-Q filed by Sharecare Inc.