Accolade Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
June 29, 2023

There are 14 speakers on the call.

Operator

Good day and thank you for standing by and welcome to Accolade First Quarter 24 Earnings Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded.

Operator

I would now like to introduce your host for today's call, Todd Friedman, Senior Vice President of Investor Relations. You may begin.

Speaker 1

Thanks, operator. Welcome everyone to our fiscal Q1 earnings call. With me on the call today are our Chief Executive Officer, Rajiv Singh and our Chief Financial Officer, Steve Barnes. Shantanu Nandy, our Chief Health Officer, will join for the question and answer portion of the call later. Before turning the call over to Rajiv, please note that we will be discussing certain non GAAP financial measures that we believe are important when evaluating Immokalee's performance.

Speaker 1

Details on the relationship between these non GAAP measures to the most comparable GAAP measures and the reconciliations thereof can be found in the press release that is posted on our website. Also, please note that certain statements made during this call will be forward looking statements as defined by the Private Securities Litigation Reform Act of 1995. Such forward looking statements are subject to risks, uncertainties and other factors that could cause the actual results for Accolade to differ materially from those expressed or implied in this call. For additional information, please refer to our cautionary statement in our press release and our filings with the SEC, all of which are available on our website. With that, I'd like to turn the call over to our CEO, Rajiv Singh.

Speaker 2

Thank you, Todd, and thank you everyone for joining us today. We enter fiscal Q2 with optimism regarding our company, our category and our opportunity to build a nationwide customer obsessed healthcare delivery system off the foundation Let's get into the reasons for our excitement. First, revenue and adjusted EBITDA were both ahead of our guidance Fiscal Q1. Revenue in the quarter was $93,200,000 with an adjusted EBITDA loss of $12,600,000 both ahead of our previous guidance and leaving an accolade in solid financial position to start the year. Revenue highlights in the quarter were marked by continued strength in Virtual primary care and mental health offerings, both consumer and enterprise strong growth in our Expert Medical Opinion segment and some early recognition of performance based revenues.

Speaker 2

We're increasing guidance for both revenue and adjusted EBITDA this quarter. Both our growth engine and our path to profitability are firing on all cylinders. Steve will give you all the details in his prepared remarks shortly. 2nd, the selling season is off to a strong start. Fiscal Q1 is really the Q1 our buyers put pen to paper on contracts, And we saw large companies in Food Services and Retail choose Accolade.

Speaker 2

Fiscal Q2 is also a major quarter for signing new business and the pipeline continues to look strong. Notably, more of the deals in the pipeline include multiple offerings and 1 or more trusted partner solutions. We view this as powerful validation of our overall vision as well as the importance of embracing the ecosystem. This is reflective of continued interest in Category and our ability to win more than our fair share of the market with our differentiated personalized health care suite. From our foundation of advocacy, we are making advocacy led primary care a critical factor for companies evaluating in our category.

Speaker 2

3rd, calling out 2 other drivers of growth for our business. As I mentioned earlier, both our expert medical opinion business, Accolade ExpertMD and our virtual primary care and mental health business, Accolade Care and PlushCare are demonstrating strength. Today, we'll focus on the virtual primary care business. On the enterprise side of the business, we fully deployed all of our new business sales from last fiscal year on January 1, 2023, and those customers are ramping up adoption of primary care and mental health services according to our expectations. Given that it's our 1st year of deployments, achieving our usage expectations in the Q1 is notable.

Speaker 2

On the consumer side of the business, We continue to see strong demand for the high quality longitudinal care delivered by our physicians and therapists and growth rates remain strong and steady. Since I'm sure we'll get a question about the impact of GLP-one drugs, let me make a few comments here. Accolade's approach is different than many other companies in this space. That said, we did see a benefit from interest in these treatment options and our primary care business is benefiting from the demand associated with GLP-one weight loss drugs. I call this out for two reasons to bring your attention to how Accolade differs from other companies who have a role or a part to play in this healthcare journey.

Speaker 2

While it is a fact that GLP-one drugs are driving interest in virtual primary care, this is in many ways no different than when COVID drove demand for virtual primary care or during flu seasons. What is important is how we applied the same clinical focus and rigor, balance customer acquisition and physician resources and maintain our obsession with the customer experience that has resulted in NPS scores over 90 for our virtual primary care services. Our care delivery teams led by Doctor. Shantanu Nandy and Doctor. James Wantagh are ensuring that we apply the proper clinical rigor in prescribing these drugs only to patients who meet the defined criterion for prescription.

Speaker 2

We don't earn money for prescribing medications, so there are no incentives driving behavior to the contrary. Additionally, because of the nature of our service, We have the ability to help the patient with other needs such as behavioral health and ultimately lifestyle change that might be required when no longer taking the drug. Thus, much like patients who engaged with us during the COVID lockdown, we expect to retain many of these customers on our platform long term. Final point on this topic. The robust nature of our suite of offerings here make us unique in the market.

Speaker 2

For example, while not everyone qualifies for these medications, Partners like Virta may be a strong alternative for our customers and members seeking to address their need. Moving on, 4th, our government business continues to grow on the strength of our autism care demonstration and other opportunities we are pursuing. As we have said previously, the T5 award remains in a protest phase with a decision on HealthNet's protest now due in September. The official launch date has been pushed to August 2024, but that still remains subject to the protest timing. We continue to work with our T5 A vital element of the value proposition for our customers continues to grow.

Speaker 2

Our customers, benefits buyers, are overwhelmed by the number of solutions available to them in the market. Our trusted partner ecosystem solved that problem by vetting critical partners in core categories. Last quarter, we added equip, a leader in delivering eating disorder treatments. We'll continue to add new partners in a highly curated way and and leverage our technology and data platforms to ensure strong adoption and efficacy for those programs. Finally, in terms of quarterly highlights, we made tremendous progress on our 1 Accolade initiative.

Speaker 2

This is already having the effect of streamlining decision making in Accolade and improving our operating structure as we scale to serve 100 more customers and millions more members. Now wrapping up, before I turn the call over to Steve, let's briefly take a giant step backward and look at our opportunity. Our mission is rooted in the idea that every person should have the opportunity to live their healthiest life and that this opportunity should not be hindered by an overly complex We are demonstrating through outcomes, engagement and measurable ROI that an Advocacy led population health strategy, one we call personalized healthcare, is the key to transforming the U. S. Healthcare system for our customers.

Speaker 2

To address that challenge, we're aspiring to build the 1st customer obsessed nationwide delivery system in the United States. That is no small task, but the opportunity for the company that succeeds there is enormous. The heart of that business An advocacy led primary care practice that once again puts primary care in the center of delivering high quality care. Over the last 50 years, for a variety of reasons, Primary care spend as a percentage of total healthcare spend and utilization has gone down, while specialty care and pharmacy costs have continued to skyrocket. Accolade's strategy of virtual primary care and mental health built off of a foundation of simplicity, service and data delivered by our advocacy service Is a scalable means of reversing that trend, and our clients and prospects are agreeing and voting with their dollars.

Speaker 2

The market opportunity for doing this successfully is enormous. Our ability to influence many different parts of the healthcare journey has many significant vectors. Advocacy by itself is a $25,000,000,000 market. Expert medical opinion is similarly sized. Primary care is a 200,000,000,000 Plus market and our immediately addressable piece is north of $100,000,000,000 Mental health is a large and growing market.

Speaker 2

The federal government represents a huge opportunity and the capacity to enable dozens of ecosystem partners is also extraordinary. Today, fewer than 1,000 companies have adopted true advocacy led benefits programs. There are over 35,000 companies with more than 500 employees who we consider our target market. Put it all together and we see runway for years to come with the real beneficiary being the healthcare consumer. We encourage all of you to review our proxy statement filed this week, which goes into more detail on our strategy and our vision.

Speaker 2

Now, I'm going to turn the call over to Steve to review our financials. Steve?

Speaker 3

Thanks, Raj. First, I'll recap the results for 1st fiscal quarter and then provide details on the rest of fiscal 2024. We generated $93,200,000 in revenue in the Q1 of Fiscal 20 24 representing 9% growth year over year or 19% pro form a growth excluding the impact of a large Termination in fiscal 'twenty three. Revenue highlights in the Q1 included strong growth in our primary care and expert medical opinion offerings, each of which grew in the range of 30% on a year over year basis. In Q1, we also recognized approximately $1,000,000 in Performance related revenue earlier than expected as we had initially forecasted this PG to be earned in fiscal Q4.

Speaker 3

As we've noted previously and highlighted in our Capital Markets Day presentation on May 8, at the start of the fiscal year, we generally forecast that savings related PGs will be recognized in our fiscal Q4. When we earned those PGs earlier, we call them out to the extent they are notable. Fiscal Q1 adjusted gross margin was 43.5% compared to 45.6% in the prior year period. The primary factor impacting the year over year comparison was high gross margin performance guarantee revenue recognized in Q1 of last year. Net of that PG timing impact, technology driven efficiencies as well as prudent spend management contributed to gross margin performance.

Speaker 3

Adjusted EBITDA in the Q1 of fiscal 2024 was a loss of $12,600,000 The positive performance versus guidance reflects the revenue over performance as well as a keen focus on spend management as we continue on our path to profitability. Note that fiscal Q1 reflects some duplicative costs as we transition and consolidate roles in certain of our office locations. This dynamic will continue into fiscal second quarter with savings from the cost actions we announced on February 28 being fully realized in the second half of the fiscal year. Turning to the balance sheet. Cash and cash equivalents totaled $303,000,000 at the end of the 1st fiscal As a reminder, our convertible notes are not due for about 3 years.

Speaker 3

So with $303,000,000 cash on hand, We have more than adequate liquidity to achieve our financial plans without going back to the capital markets, placing us in a strong position to execute against our objectives. Finally, we currently have approximately 75,600,000 shares of common stock outstanding. Now turning to guidance. We're updating our guidance today for fiscal year 2024. Given the strong performance in fiscal Q1 And our optimistic outlook on growth as well as our continued drive towards profitability, we are raising fiscal 2024 revenue guidance to a range of $410,000,000 to $414,000,000 representing year over year growth of approximately 21% at the midpoint, excluding the customer termination noted earlier.

Speaker 3

We are also raising our full year outlook on our bottom line, Updating our adjusted EBITDA loss for fiscal 2024 to a range of $6,000,000 to $12,000,000 And with respect to the fiscal second quarter, we are now guiding to revenue in the range of $93,000,000 to $95,000,000 And adjusted EBITDA loss in the range of $11,000,000 to $14,000,000 This adjusted EBITDA guide puts you at roughly $25,000,000 for the first half of the year, which when combined with our annual guidance shows that we expect to be Significantly positive on an adjusted EBITDA basis for the second half of the year as our cost initiatives become fully realized and we turn the corner towards full year profitability on an adjusted EBITDA basis in fiscal 'twenty five. And with that, we'll open the call to questions.

Operator

And thank and wait for your name to be announced. And we ask that you have one question and no follow-up. Again, that's one question and no follow-up. Bear with me one moment while we get the first Question. One moment, please.

Operator

And our next question our first question comes from Ryan Daniels from Blair, your line is now open.

Speaker 2

Yes, good evening.

Speaker 4

Thanks for taking the question. Maybe a big picture one for you. We're seeing a lot of recent data that indicates that 2024 could be one of the larger Healthcare cost trend increases for employers in about a decade. So maybe a 2 part here. Number 1, do your early channel conversations lead you to believe Yes.

Speaker 4

This is being widely recognized in the market. And then number 2, if so, is that really helping your efficacy led PCP initiative It's kind of a means to battle that trend at scale. Thanks.

Speaker 2

Hey, Ryan. Thanks for the question and thanks for being here. I'll address I'll address the question and Steve, if you got anything you want to jump in, I'll just do. First part of the question, are we looking at a year ahead where medical trend line is going to be Higher or materially higher than it has been in years past. I think that's very consistent with the feedback we're hearing both from our customers, From the consulting community and from the indexes, so the early view on the indexes for the year.

Speaker 2

And I think it's the corollary to that, Ryan, It is very true. Now when companies are looking at increased cost, when companies are looking at significant changes in the landscape Things like GLP-one or other material waves that are hitting the healthcare ecosystem in 2023 2024. They're looking for broad based solutions that solve the problem at scale across the entirety of their population. And that's where we think we really differentiate ourselves. Primary care is a part of the story, but primary care built off of an advocacy platform where you can surround primary care with data, Service and simplicity, we think is really differentiated and that's no doubt is playing a role in, the growth of our pipeline on a quarter over quarter basis.

Operator

And thank you. And one moment for our next question. And our next question comes from Craig Hettenbach From Morgan Stanley, your line is now open.

Speaker 5

Yes. Thank you. Raj, you spoke to some of the strength in Expert Medical opinion, and it does Look like maybe there's some pent up demand out there. Can you maybe just give a little bit more color in terms of some of the patents that you're seeing and what that means for your outlook here?

Speaker 2

Yes. Craig, first of all, thanks for the question. I'm glad you're here. 2 things that drives Expert Medical Opinion Revenues and growth. The first is new logo acquisition.

Speaker 2

Are we growing by acquiring new customers? And we do that Both with our direct sales channel and with our Health Plan partner channel. The answer to that question is yes. We're continuing to see strong growth there. The demand for a service like that one that's so rationally aligned with the customer needs continues to be strong.

Speaker 2

The second part of that story is utilization. And we're continuing to see utilization at levels that we've previously seen. And both of those things are driving the growth rate of the expert medical opinion

Operator

And our next question comes from Jeff Garro from Stephens Inc. Your line is now open.

Speaker 2

Yes. Good afternoon, guys, and thanks for taking the question. So it sounds like I'm hearing an increased emphasis on virtual primary care So I was hoping you could comment a little bit more on that and also the mention of an increase in interest in more than one product at a time. So relatedly there, curious to hear on any particular themes of combinations of products that prospects are interested in. Yes.

Speaker 2

Thanks for the question, Jeff. Let me start with the back end of your question. Last year, when you look at the deals we closed last year and we had a strong bookings year last year, 30% growth off the year before, That year, we saw the majority of new customer acquisition came in with more than one product. And so whether that was advocacy plus primary care, T plus DMO, advocacy plus a trusted partner. We saw the majority of our deals come in with multiple products as Part of the first sale.

Speaker 2

We think that's reflective of customers understanding the strategy, believing that a personalized healthcare suite is aligned with their needs And also wanting to see a platform to weave all of those capabilities together. And so that trend continues into this year. And so I think I would guess over time that that just becomes the norm and that what we're looking at are customers who are looking for a suite of solutions to solve A litany of challenges they're facing when they're trying to reduce healthcare costs and improve patient experience or member experience. First part of your question, Jeff, we would say that the way we've been thinking about our service from the beginning is that Primary care on a platform of advocacy is fundamentally differentiated, particularly when you're talking about an advocacy platform that today It is between 2,500,000 and 3,000,000 members. We have an extraordinary experience of delivering advocacy.

Speaker 2

We're now layering primary care on top of it. And what that really means is every primary care physician that works at Accolade Has a 360 degree view of history of the patients that we're serving, has an understanding of the medications that are on and the conditions that they're facing And also have an understanding of the benefits ecosystem that the employer has aligned for that patient. That gives our primary care physicians a superpower that other primary care And so a year ago, we really just got started in bringing primary care to market, the Accolade Care offering. And I think we were learning about How customers wanted to understand and embrace the solution, what we saw was a strong embrace of the solution last year. We deployed those customers on January 1.

Speaker 2

We're seeing great uptick in terms of their utilization. And I think it's fair to say, Jeff, that it's a More significant and pronounced part of our value proposition is go to market today because we saw such traction in it last year.

Operator

And thank you. And our next question comes from Jessica Tassane from Piper Sandler. Your line is now open.

Speaker 6

Hi, guys. Thank you so much for taking the question and congrats on the quarter. We were just hoping you could remind us what the performance revenue in S1Q23 was, whether there was any in this Quarter and then just is that kind of what accounts for the year over year change in adjusted gross margin? Thanks.

Speaker 3

Hi, Jess, it's Steve. Thanks for the question. Yes, there are certainly some performance guarantee impact in Q1. Let Let me just walk you through. So the guidance range for the quarter was $89,000,000 to $91,000,000 So we beat the midpoint of the range by a little more than $3,000,000 in the top end of the range, a little more than $2,000,000 There was about $1,000,000 of performance guarantee Pull forward recognized in Q1 that we expect it to be recognized later in the year.

Speaker 3

So we called that out. So the TrueBeat was call it $2,000,000 $2,200,000 at the midpoint and $1,000,000 at the top of the range. If you look back to last year, you'd see that in this quarter last year, we had a fairly significant performance guarantee Revenue item recognized in Q1 for a little more than $3,000,000 So the year over year Comp there is driving some of the change or actually most of the change in the gross margin. And the full year outlook for gross margin, we remain consistent with call it high 40s expectation for the year.

Operator

And thank you. And one moment for our next question. And our next Question comes from Michael Cherny from Bank of America. Your line is now open.

Speaker 2

This is Alan in for Mike. Thanks for taking the questions. Raj, you mentioned, or I guess at Investor Day, you talked a lot about the partnership strategy. And I think one of your partners, Virta, talked about how he was already Driving some volume into their business. I guess, is there any way at this point in the year to quantify the referral momentum that you're seeing or maybe total partners, how that's changed?

Speaker 2

And I guess, how important is the partnership strategy as you think about the 2025 selling season? Thanks. I appreciate the question, Alan. I think whether you're talking about the 2024 selling season, the 2020 Hi, excellent season. The partnership strategy is an essential part of the way we position our value to customers.

Speaker 2

Remember, if you were to step back, Customers are looking to solve 3 core problems. The first, they want a better experience for their employees. They believe fundamentally that the existing healthcare ecosystem Makes it difficult for people to understand and get the healthcare that they need. 2nd, as Brian spoke about in his first question today, they're looking at trend lines That is beginning to have a very negative impact on their business and off of big, big numbers. They want to be able to control that trend line.

Speaker 2

And the third thing they're wrestling with is an extraordinarily complicated healthcare ecosystem with a whole suite of carve out solutions that Offer extraordinary innovation to their members, but their members have a very difficult time finding and the benefits buyers have a very difficult time managing. That third value proposition is fundamentally addressed by our trusted partner ecosystem and our capacity to go to market With a vetted set of partners where we've built real product integration and we have an opportunity to help manage those partners on behalf of That's been essential to the value proposition forever. And what we've seen now is that as the ecosystem has grown and the integrations have delivered more depth, We're driving the kinds of results that, as you mentioned, Sami Yinkanen spoke about at Investor Day, right? 2x utilization at accolade customers 1st, it's not a acolyte customers. That value proposition is so clean and so crisp for customers that it impacts buying behaviors.

Speaker 2

And so in terms of quantification, I'd say there's a couple of ways to look at it today that we speak about. First is the breadth of the relationships. If you look across all the categories that our customers are looking at, I think you'll find that our ecosystem is broader and has more depth in the categories that matter to those customers than any other ecosystem in the space. The second part of that story is customer uptick. And we've been talking over the course of the last couple of years about the fact that we're seeing an increasing majority of customers who have taken at least one Trusted Partner Ecosystem Relationship.

Speaker 2

Those 2 things should give you some sense, Alan, that This is right at the heart of the value proposition we deliver to our customers.

Operator

And thank you. And one moment for our next question. And our next question comes from Stephanie Davis From SVB Securities, your line is now open.

Speaker 6

Hey, guys. Thanks for taking my question. Congrats on a good quarter. I wanted to also touch on that trusted partner ecosystem. Is this something where there's exclusivity with these partners, so there's some sort of head to head As you try to go and get them in your network versus that of another peers?

Speaker 6

Or is this something where it's more of a question of breast And having kind of the widest possible bench for folks that might want some variance in who they're partnering with.

Speaker 2

Thanks for the question, Stephanie. I think it's actually neither of those. And so let me start with the question of exclusivity. In fact, our partners we partner with multiple companies in certain categories and we would expect to continue to partner with multiple companies in certain categories. The rationale for that is fundamentally around ensuring that our customers have the right choice.

Speaker 2

It also breeds competition and innovation Each of those categories, which we think is good for the universe, good for our members and good for our customers. And your opportunity to build Differentiation with those partners, which could be exclusive if your differentiation and your investment in building integration with those partners is real, It's where we think we have the opportunity to differentiate ourselves from potential competitors in the category who also have partnerships, but also give our customers incremental value. So hopefully that addresses the exclusivity point. On the second point, as it relates to breadth of the service, We're going to be very focused on categories that our customers care about, categories where they're spending money, categories where clinical outcomes can be improved and that we think Tangently have hard impacts on trend line. And in those categories, we're going to go deep.

Speaker 2

But I think what's important in terms of our strategy is we're going to vet those partners. We won't choose a multitude of partners. We'll choose a couple, 2, maybe top end 3 that we believe are at the high end of that category in terms of value delivery, at the high end of that category in terms of accountability And also around what our customers are most interested in. So we won't go wide necessarily than we have to. We'll be focused on the categories that matter And being really smart about the companies that we've met.

Operator

And thank you. And one moment for our next question. And our next question comes from Ryan MacDonald From Needham and Company, your line is now open.

Speaker 7

Hi, congrats on the quarter and thanks for taking my question. Raj, You talked about in the prepared remarks like the government business continues to grow nicely there with areas like the initiatives in autism care. But obviously, you've got some delays on the T5 contract. As we think about the growth opportunity in government over the next couple of years here, What do you expect the primary drivers to be? And are you dependent on success with T5 to be able to continue to grow that government vertical?

Speaker 3

Thanks for the

Speaker 2

question, Ryan. I'll hit it in a couple of different ways. First, autism care Continues to be an exciting part of the business. It grew modestly on a year over year basis. We expect it to continue to grow.

Speaker 2

We have an opportunity to continue to grow that. And it will be an important part of our government business moving forward. In terms of opportunities to grow beyond that, there are multiple incremental evaluations happening inside the government that we'll continue to pursue. They'll range from the TRICARE universe to other parts of the government universe that because we're still in the depths of those conversations, we haven't really talked But then, of course, the T5 relationship. We believe the T5 relationship presents Significant opportunity as we've talked about it now given the past.

Speaker 2

Unfortunately, the government appeals process tends to delay things. And so it's now at least at this point delayed until August It could potentially delay beyond that. We don't know. But what we can say is between autism care, between our other pursuits in the government, We can grow without the T5 arrangement. But with the T5 arrangement, we think there's a very real opportunity to show strong growth across the category.

Operator

And our next question comes from Jonathan Young from Credit Suisse. Your line is now open.

Speaker 8

Just on the pipeline commentary, it sounds like things are tracking well. But I guess can you provide any color on how it's developing against Your internal expectations, is the pipeline larger than last year? And alongside that, it sounds like you're selling more or There's more interest in multi product solutions. So I guess can you give any additional color on that and what are people looking for, which I think you talked about before, but just A little more color there. Thanks.

Speaker 2

Yes. Hey, Jonathan. Pipeline is bigger than it was last year at this time. Pipeline continues to grow. I wouldn't say beyond our expectations because our expectations are always aggressive, but the pipeline continues to grow in a way that will support the objectives we have for the As it relates to multiproduct deals, last year, the majority of our deals were multiproduct deals.

Speaker 2

And that same phenomenon is we're quite confident. Q1 witnessed the same phenomenon. We're quite confident that, that same thing will happen in Q2 through Q4. And because of the breadth of our trusted partner ecosystem and because of the breadth of our solutions, Advocacy, primary care and mental health and expert medical opinion, that desire for customers To one stop shop across a number of categories, we think differentiates us against a number of our competition.

Operator

And thank you. And one moment for our next question. And our next question comes from Jalendra Singh from Truist Securities.

Speaker 9

It's a good try. This is Jalendra Singh from Truist Securities. Congrats on a good quarter. Thanks for taking my questions. 1 of your competitors recently announced a partnership with in home care provider to add Virtual to in home care model to its offerings.

Speaker 9

I was just curious on your thoughts on extending your offerings to home. And have you seen any demand in this area among your employer clients?

Speaker 2

Thanks, Shailesh. A couple of thoughts here. First, you'll see us continue to expand our partner ecosystem into new categories. We announced today partnerships that we're really excited about, A company called Equip that's focused on really improving the service for people, families challenged by eating disorders. If you look across the breadth of the categories that we're delivering, we're delivering the widest set of Solutions to customers in categories that are directly relevant to, as I mentioned before, improving clinical outcomes, improving convenience for their members and lowering costs.

Speaker 2

Do we believe over time that home health is an area that could potentially have an impact in those three categories? Absolutely, we do. And you stay tuned in terms of whether we for us, it's always about finding the right partner, checking those three boxes and ensuring That is aligned with our customers' expectations.

Operator

And our next question comes from Sandy Draper from Guggenheim. Your line is now open.

Speaker 10

Thanks very much and I appreciate taking the question. I'll try to see if I can frame this right, probably for you, Steve. With the EBITDA outperformance this quarter, Improving guidance in EBITDA or lower EBITDA losses, are you thinking that as you go through the year, looking beyond that, do you Change the way you think about, okay, maybe we step back up some reinvestments in sales and marketing and R and D or maybe we go back into the M and A market or is it really what we just want to scale margins, improve to ourselves, improve to the market, we can get closer and closer to those EBITDA targets you set at Investor Day. I'm just trying to think with a strong start to the year, you're not going to make a snap decision. But if this type of performance continues By the end of the year, do you start to think about changing either M and A or internal investments or is it really just Let's just ramp faster in terms of margins.

Speaker 10

Hopefully, that makes sense. Thanks.

Speaker 3

Yes. It makes great sense. Thanks, Andy. This is Steve. So A couple of things.

Speaker 3

First of all, you're right, we had a strong quarter in Q1, beat bottom line by about $4,000,000 and you see us raising our guidance for the full year For most of that, call it $3,000,000 and the other $1,000,000 you could consider that to be timing of investments and things like marketing programs, etcetera. But we're very focused on getting the company to profitability as we laid out Capital Markets Day. And by the second half of this We will be there and on a full year basis in fiscal 'twenty five. So that's a very important operational and strategic initiative for us. We also believe, Sandy, for other reasons Raj has laid out, given the strength we're seeing in the business and the strength of the platform and being diversified across Advocacy, primary care, expert medical opinion, the partner ecosystem, there's a lot of ways for us to grow, and we believe we're I am pleased to achieve the growth targets we've laid out, while also driving the company to profitability, as we laid out in And a lot of detail on Investor Day.

Speaker 3

So that's a little bit more color around the EBITDA guide and how it ties into our balance of growth and profitability.

Operator

And our next question comes from Richard Close from Canaccord Genuity. Your line is now open.

Speaker 11

Hi. This is John Penney on for Richard Close. Congrats on the quarter. I was just hoping you can get some commentary on the Virtual Blue plan and how that's progressing or any commentary you can provide there would be great. Thanks.

Speaker 2

Yes. I appreciate the questions. The partnership continues to progress as expected. We've got the first round of going to market in that space. We've seen the first green shoots of customer acquisition and utilization.

Speaker 2

And so, yes, I'd say The good news is we have the relationship in hand. The good news is we've actually deployed and delivered. And It's a little bit too early for us to give you any color commentary on the kind of utilization that we're seeing. But I can tell you that we continue to be really excited about the relationship and

Operator

And our next question comes from Stan Berenstain from Wells Fargo. Your line

Speaker 1

is now

Speaker 11

open. Hi. Thanks for taking my questions. Maybe on PlusCare, what percentage of the incremental growth expected to come this year Will be coming from the enterprise channel. And can you also maybe comment on customer acquisition costs on the consumer side?

Speaker 11

Thanks.

Speaker 2

Sure. Sure. Steve, do you want to grab this one?

Speaker 3

I'll start and then you want to jump in. So First of all, Sam, thank you for the question. The growth coming today that you're seeing in revenue is largely driven by the consumer business. But Importantly, we just launched several customers and more than 500,000 members on the enterprise side of the platform. So That was on January 1st where most of those launched.

Speaker 3

So it's early days, but we're seeing strong utilization in line with our expectations here in that Q1. Most of the near term growth has been on the consumer side, but our expectations are that, that will also we'll see significant contributions from the enterprise side. With respect to customer acquisition costs, I would say, without getting specific about the dollar amount, we've seen it be Consistently attractive and in the same range that we've seen over the past period of time, past 12 months. And so there's been a lot of opportunities to capitalize on that.

Operator

And thank you. And one moment for our next question. And our next question comes from David Larsen from BTIG. Your line is now open.

Speaker 12

Hi, congrats on the good quarter. You clearly have a very robust Solution that's very comprehensive and impacts trend and improves the quality of care. One of the things that we've heard though is that When a customer decides to implement or potentially decides to implement Accolade, it can be a heavy lift. You got to switch call centers from the carrier. Sometimes they have to switch TPAs.

Speaker 12

And because of that, sometimes, they may delay or not choose to implement Accolade. Just what are your thoughts around that? Do you ever get pushback From that or not, thanks. Appreciate it.

Speaker 2

Thanks for the question, David. Here's the way to think about it. If you look at the growth of the category, look at the growth of our customer base, our company had 54 customers on July 3, 2021 2020, excuse me, when we went public, the last time we talked about our customer count, here we are in 2023 with more than 800 customers. When we think about bookings growth from fiscal 2022 to fiscal 2023, our bookings grew by 30%. We're looking at a strong year ahead And we had a very strong Q1 as it relates to bookings.

Speaker 2

So when we look at customer adoption of a brand new category, when you talk about healthcare services, I don't know that there's a category in the enterprise segment where we're going directly to employers and to health plans that's growing more aggressively At this scale, at this size, when you think about our revenue forecast for the year, we just took our top line guidance from $410,000,000 to $410,000,000 to $414,000,000 from a range perspective, each of those representing the strength of the business. The strength of the business is always fundamentally driven by growth As it relates to new customer acquisitions.

Speaker 3

So hopefully that answers your question, Dave.

Operator

And thank you. And one moment for our next question. And our next question comes from Robert Simmons from D. A. Davidson.

Operator

Your line is now open.

Speaker 2

Hey, thanks for taking the question. I was wondering if

Speaker 13

you could put a finer point on your commentary around Carry around new sales or new bookings in the quarter being strong. Like how much did they actually grow? And what are your expectations for the year?

Speaker 2

Thanks for the question. We don't traditionally talk about bookings numbers at the outset of the year. We've talked about Consistent growth on bookings on a year over year basis last year, even outperforming our expectations and growing at 30%. We expect bookings to grow in that 20% 20% to 25% range on a year over year basis. And that's the way we're thinking about the year ahead.

Speaker 2

And so we'll give you more color commentary on that

Speaker 3

at the

Speaker 2

end of the year. But what we can tell you, as we mentioned in the prepared remarks We're tracking to our expectations with a stronger pipeline than

Speaker 3

we've seen in the past.

Operator

And thank you. And I am showing no further questions. I would now like to turn the call back over to Todd Friedman for closing remarks.

Speaker 2

Thanks everyone for being here. This is Raj. We appreciate you spending the time with us and we look forward to future conversations.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker 6

Goodbye.

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Earnings Conference Call
Accolade Q1 2024
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