Accolade, Inc. (ACCD) Q1 2022 Earnings Call
On July 8, 2021, Accolade made its Q1 2022 (quarter ended May 31, 2021) earnings call.
The call began with Accolade CEO Rajeev Singh, who began by sharing some of the latest news. The company is one month past the close of the PlushCare acquisition and is well underway with the work of integrating Accolade, PlushCare, and 2nd.MD into a single business.
“Combine that with the excellent financial results to start the new fiscal year and the return of our first wave of employees to our offices, as well as a sense of normalcy returning to the communities in which we live, and there is a strong feeling of optimism at Accolade today,” Singh said.
Revenue of $59.5 million was 66% greater than last year, and an adjusted EBITDA loss of $12.8 million reflects some of the investments the company had made and the integration and launch of a new enterprise primary care business.
“In just three months since we closed the acquisition [of 2nd.MD], we’ve signed our first cross-sell customers with organizations like the City of Fort Worth and a Fortune 50 insurance company, adding expert medical opinion to their existing advocacy services,” Singh said. “The value proposition, and more importantly, the measurable impact on employee well-being and health outcomes have immediately become apparent to our customers.”
Not only has Accolade seen cross-selling success, but the first Accolade/2nd.MD joint customer went live on July 1.
Large employers tend to make decisions related to their healthcare and benefits plans in the summer in anticipation of fall open enrollment and a January 1 launch. Although Accolade sells throughout the year, summer is a very important time in the industry, and the company has seen success with both renewals and new business. Accolade signed McKesson, a Fortune 50 pharmaceutical company, for Total Health and Benefits, its premier offering.
In fiscal Q1, Accolade saw its first upgrades from Total Benefits and Total Care to Total Health and Benefits. One of those was Pepsi-Cola and National Brand Beverages group.
“Finally, we’re continuing to see an increase in interest in mental and behavioral health,” Singh said. This past quarter, Accolade signed more customers to its mental health integrated care solution with Ginger, and company leaders are excited about the embedded mental health capabilities in its new PlushCare primary care solutions.
“As COVID has exposed the incredible mental health crisis in the country, we believe our ability to provide a multifaceted behavioral health solution to customers integrated with the most critical touchpoint, primary care, is going to be very meaningful to our customers, their employees, and their families,” Singh said.
Following Singh’s introductory talk, Accolade Chief Financial Officer Steve Barnes joined the call.
“Keep in mind that we closed the 2nd.MD acquisition on March 3, just a few days into our fiscal first quarter,” Barnes said. “The PlushCare acquisition closed in June after the first quarter ended, so there’s no PlushCare contribution or impact in any of these results.”
Accolade generated $59.5 million of revenue in the first fiscal quarter, representing a 66% year-over-year growth on a GAAP basis over the prior-year period and 35% growth year over year.
“While the pro forma revenue growth and profitability numbers are intended to reflect the acquisitions as stand-alone, it may not always be a perfect representation of how we sell to customers and run the business overall,” Barnes said. “As a quick example, we sell expert medical opinion as part of Accolade’s Total Care, as an upsell, and as a stand-alone solution. Some of that would be reported as 2nd.MD revenue for pro forma purposes and some would be recognized as Accolade’s revenue.”
Barnes added that Accolade’s customer member accounts and performance-related revenues exceeded the expectations built into the company’s fiscal Q1 guidance, including the timing of achievement of a customer performance guarantee that pulled forward approximately $1 million of revenue into the first quarter, which positively benefited adjusted EBITDA. Fiscal Q1 adjusted gross margins of 14.2% compared favorably to 38.3% in the prior-year period; the company had expected gross margin to remain relatively flat this year. Adjusted operating expenses decreased slightly to 62% of revenues in Q1 of fiscal 2022 versus 65% of revenues in the prior-year period.
For more of the financial details and a full transcript of the earnings call, go here.