Accolade, Inc.

Q3 2022 Earnings Conference Call


spk_0: hello thank you for standing by and welcome to the accolade third quarter two thousand and twenty two earnings results conference call at this time all participants analysts and only mode after the speaker presentation they'll be a question answer session got a question during the session you'll need to press star one on your telephone please be advised that today confronted being recorded if you require any further assistance please press start a zero i'll acknowledge and the and so if your speaker today type friedman please go ahead
spk_1: thanks operator what mother one to our fiscal third quarter earnings call with me on a call today are keeping that them up surmise you think and our chief financial officer it's new parts can you know the our chief medical officer will join the question and answer portion of the call before trying the cover regime please note that will be discussing certain non gaap financial measures that we believe our importantly they are you waiting accolades prep mormons details on a relationship between the non got measures most couple got measures in a reconciliation thereof can be found the personally that posted on a website they're also slightly the company was happens call that are available on the webcast is like to be available for download following call also please know that certain statements made during his column would be for the statements at the firemen a private securities litigation reform acted nice ninety five such for the statements are subject to risks uncertainties and other factors that could cause the actual results for accolade did materially from those express or implied the top for additional information please refer to a cautionary statement and are personally and are fine the as you see all of which are available on her website with that electrical over to our ceo my effect
spk_0: hello everyone and happy new year hope you're all evil enjoy time with family and friends during the holiday season
spk_2: as where the fourth quarter fiscal two thousand twenty two we continue to make outstanding progress towards building a great and enduring healthcare company a fiscal que three we outperform guidance across the board and are again raising our forecast for the year steve our ship all will cover the specific later in the call including more detail and how to look at accolade now that we've diversified are offering portfolio expanded our go to market engine and become a more strategic enabler of our customers people objectives when it comes to providing health and wellness that at a drive employee satisfaction engagement and retention but i couldn't resist a little teaser to first hit them key point at our core were dedicated to consistently delivering and our commitments quarter after quarter today we're providing you with preliminary guys for fiscal two thousand and twenty three reaffirming our commitment to our long term growth rate and our path the profitability
spk_0: our progress you to the hard work of our colleagues is nothing short of remarkable i'll i'll i'll let progress for you briefly now before turning the call over to steep
spk_2: as we entered the current fiscal year accolade was an advocacy company serving about a hundred customers representing two million members with a twenty four billion dollar address or market today we have more than six hundred customers representing more than ten million members and our market opportunity has grown tax to more than two hundred billion with are integrated offerings and expanded partner servants is built on top of the market leading help carrying engagement engine we own the personalized healthcare category from a business perspective this has resulted in far more diversified foundation at a time of our i feel are single largest customer represented twenty five percent of our total revenues and are top for customers made up sixty percent of our revenues today no single customer represents more than ten percent of robidas most importantly thanks to our broad portfolio the advocacy expert medical opinion primary care and mental health services
spk_0: we are far more strategic and bible to the customers and members that we search
spk_2: tax demonstrated in our performance so far this year more than twenty new enterprise customers bought accolade advocacy and accolade expert and be together more than twenty existing advocacy customers have purchased accolade expert md and less than three months after we launched accolade care and accolade one our first tranche of customers have already gone live on a solution additionally our momentum and new customer growth continues and leading organizations like halliburton chuck todd nation of oklahoma and choicehotels joining our customer base these data points reflect both the strength of our strategic relationship with our customers and their belief in the vision of personalized health care and we set forth to the market already the combination of our services is driving higher utilization rate for expert medical opinion when delivered in tandem with advocacy we expect the same patterns to hold with our virtual primary care and mental health services providing further proof points that services layer on top of our engagement platform will drive outsized engagement and performance just as are offering sweet pricing model and customer base or diversified and differentiated so too is our go to market strategy
spk_0: we have a long track record of reaching new customers via direct sales channel that has been remarkably efficient and effective more recently with added help find partners like often at edna bluecross blueshield of michigan lucille the california and humana as referral and reseller partners
spk_2: additionally new partnerships with leading companies like plan source represent our commitment to meeting customers were and how they choose to buy on that foundation we are well positioned for the future
spk_0: as i mentioned earlier looking at fiscal two thousand and twenty three from a financial perspective we're committed to delivering act against our longstanding goal of twenty five percent topline grow into the foreseeable future and we will improve our adjusted ebitda loss in the your head of than a dollar and percentage of revenue basis and as the will describe in more detail we're projecting adjusted ebitda break even in fiscal two thousand twenty five at approximately six hundred million dollars of revenue at accolade we believe that you can build a lasting healthcare company a growth engine and a discipline business at the same time that have were running our company earlier this month we shared are set of beliefs about how care is supposed to work for people in this country
spk_2: feeling the words of simon the next it's important for companies to have a just cause that brings its employees customers partners and shareholders together are just cause is that we believe healthcare as a human right and that everyone regardless of their socio economic status should have access to the care that they need we believe in treating the whole person by building long term trusted relationship not just the symptom or the transaction
spk_0: we believe that mental health and physical health are completely intertwined to support the whole percent and we know that it's time for our industries start getting paid for outcomes not just for providing services
spk_2: you can find our credo the we believe section on our website we run our business with a fervent committed those beliefs every day
spk_0: if the past two years has taught us anything it's that we can only predicts so much about the future whether it's colvin or government policy changes or the labor market
spk_2: our customers expected to remain true to our mission and our beliefs and that's how we operated acolyte
spk_0: before i turned the color receive one last point health care to date represents twenty percent of our country's gdp it is massive and it needs to do better had serving people no single company will solve the problem collectively we can and we must strive to improve we're committed to partnering with others who share our beliefs with those who embodied this deep rooted sense of purpose for the people we serve through empathy experience and most critically engagement and trust we can light up those partner services on the basis of our open platform and the most advanced technology stack in the industry in the last year alone we added sword berta character activity vivante help and employer direct health care to the industry's most comprehensive partner ecosystem our progress in each of these areas new offerings more innovation more partners and doubling down on the importance of advocacy at the heart of connecting now curico system is why we continue to grow and thrive and why all of us that accolade are so excited about the future with that the mic turn the called over to ski parts are chief financial officer safe
spk_2: spencer as first or recap the results for the third quarter of fiscal two thousand twenty two keep in mind that we close second of the acquisition and que one and the plus their opposition and early teach few where appropriate or provide color on year over year comparisons and the find additional pro forma detail on the thank you we can aid eighty three and a half million dollars in revenue in the third fiscal quarter representing a hundred seventeen percent year over year growth and i got a fuss over the prior year period this reflects a significant be against the top and of our guidance range you'll recall that after the second quarter we indicated that we expected to recognize two and a half million dollars of performance guarantee revenue and que three and set of to for
spk_0: as a result of continued strong execution against their performance metrics we recognize to the seven million dollars of fiji revenue in cute three rather than cute for inclusive of the two and a half million dollars in our previous guidance
spk_2: we office of fabric favorable member count and pg performance compared to our original work that on a pro forma basis the combined business group forty four percent year over year broken down as forty five percent growth for accolade advocacy twenty eight percent growth for adelaide accurate m d and fifty three percent growth were directed consumer virtual primary care for plus care
spk_0: still continues to perform strongly and benefit from the tell and of kobe pushing more people toward virtual primary care while our expert medical opinion business was relatively flat on a sequential basis as you medical procedures than expected are contributing to a reduction in second opinion
spk_2: i'll come back to this dynamic in my guns for queue for were and got twenty three
spk_1: the tokyo three adjusted gross margin was forty seven percent compared to forty one point eight percent in the prior year period which reflects the positive revenue be as well as investments and staffing our frontline care teams to support growth and integration
spk_0: walk you through gross margin what's favorably impacted by them back a new training item as they dated and earnings cause we expect adjusted gross margin to remain relatively flat on a full year that's got twenty two bases compared to it's good twenty twenty one
spk_3: adjusted either than a third quarter of fiscal twenty two like a lot of eleven point nine million dollars which compares to eleven former and i lived in the prior year third fiscal quarter
spk_2: it's is significantly ahead of our gardens primarily do that to the performance county revenue timing item noted above as well as lower spending then planned in the corner in some areas such as hiring and personnel costs twenty two the balance sheet cash and cash equivalents total of three hundred sixty six million dollars at the end of the a quarter and accounts receivable the as those in line with prior quarters said about twenty four gauge revenue outstanding finally we had approximately sixty six point nine million shared a common stock up damning a good november thirtieth twenty twenty one that did not include any shares related to the second md or plus there are now
spk_3: for your models they're up to approximately two point two million additional shares related to the second the or and out and up to one point four million shares related to the plus there are out to be issued in calendar twenty twenty two and now turning to guidance
spk_2: for the fiscal fourth quarter and in february twenty eight twenty twenty two we expect revenue in the range of ninety to ninety three million dollars representing a year over year growth rate of one hundred and thirty eight percent and thirteen percent and a proponent beta to adjust for the acquisition of second and the imposter
spk_3: adjusted habitat loss for the fiscal fourth quarters expected to be in the range of work to eight million dollars
spk_0: to provide some context on the year over year growth rate and the guys keep in mind that we recognize approximately eight million buys of pg revenue be the first three quarters that we initially work after to be recognized in the fourth quarter defeat million dollars is comprised of the seven million dollars and cute three noted earlier and one
spk_3: million dollars and que one
spk_2: if you would add that back to queue for the year over year growth rate and cute for would be about twenty five percent and que three would have been thirty two percent growth instead of forty four percent as a reminder we recognize pg revenues a planet she'd meant of the underlying performance county
spk_3: pg include a variety of items such as member engagement rate member satisfaction clinical metrics and cost saving face metrics the mix and priming a pg very but to be clear achieving and recognizing pg revenue and early quarters is positive as we establish a chocolate it has consistently achieving rpgs and recognizing them more evenly throughout the year it will have the impact that lessening art historical cute were revenue back
spk_0: author those fiji revenue typically come in and a much higher positive impact the gross margin and adjusted he did that
spk_2: the that of all this is that be consistently point you to the full year numbers which are not subject to the quarterly movements a pg maddening recognition timing and margin within a given year moving the guidance for the fiscal year ended february twentieth twenty twenty two we expect revenue in a range of three hundred six to three hundred nine million dollars representing eighty one percent growth over the prior year at the midpoint and thirty percent on a pro forma basis to adjust for the acquisition that second ambient
spk_4: last year
spk_2: adjusted even our loss for the year in the range of forty eight to fifty two million dollars representing approximately negative sixteen percent of revenues at the midpoint of guidance
spk_3: we also provide a preliminary view of fiscal twenty twenty three that new garden today based on our current estimate and assuming no significant change in a healthcare spend environment we project revenue will grow approximately twenty five percent over fiscal year twenty twenty two two about three hundred eighty five million dollars and expect the gefilte the bad loss will improve to about eleven to twelve percent of revenues as
spk_2: we continue on our path to profitability after pausing for a year on that progress what completing the acquisitions and making material progress and integration
spk_3: to help you build your models and understand the components of the revenue growth or guys breaks down like this
spk_2: we expect the cooler accolade that to grow practically twenty five percent in line with our previous statement our virtual primary her business which in fiscal twenty three will be driven by or plus fair directly consumer business is experience strong growth and we expect it will grow about thirty percent next year
spk_3: and while we the main very confident in the expert medical opinion market opportunity and have driven significant customer additions in that space and the acquisition
spk_2: until we keep that in opinion bounty trying to historical norms with work at the at accolade expert and the revenue will grow approximately twenty percent next year
spk_3: underlying our guidance of course is the a see the for annual contact value as a fiscal twenty twenty two year and as you know as he did not a final metric until the years over but i promise we want to give me some color from the end of selling season particularly as it helps you build your models for fiscal twenty three as an important reference point when we went public about eighteen months without a few be represented the near totality of our book of business and as such as a good proxy for modeling are falling years revenue today a cb remains a very useful metric from analysts a large portion of our revenue but given the changes in the business since our i pl we will continue to a bath and metric to ensure these relevant as you build your models
spk_2: more specifically a see the historically would not include pm okay it's eighth avenue
spk_0: normally include the plastic consumer revenue which is comprised of subscription fees as well as visit feet
spk_2: given that we're evolving the business would case week that any from ppm for expert medical opinion as we leverage the strength of our engagement pot for him
spk_3: when we report in april and the final a be metric for the and that that's what's funny to we expect to include at the minute the i'm okay sweet lebanese as well as contracted enterprise virtual primary care revenues
spk_0: most importantly our goal here to help you understand that different inputs of our business were actively model our growth
spk_2: first we call that a cb at the end of fiscal year twenty twenty one with approximately two hundred forty eight million dollars adjusted to include second i'm deanna cook on a basis
spk_3: at that time we said a cb did not include the portion of second and be revenue that would build on a teacher basis you start with that base and then build
spk_2: that's with the vast majority of new business signed we are on track the time between fifty and fifty nine dollars at new business in the crisis will you year and a d one for you rpm ppm revenue plus or at them in a pm okay trade revenue and enterprise primary care of the the fees
spk_3: then we add or subtract normal customer just make such a change of and headcounts or termination and as we said before we model for approximately ninety five percent growth valerie tension and we're on track for that this year
spk_0: additionally we have one unusual item in packing a pp and revenue next year which is that we made the decision not to renew and legacy health and customer relationship that had become particularly low margin and man strategic as our business about
spk_2: while that lowers that's what's one in twenty three and revenue and eighty v by approximately nine million dollars we believe it's uprooted decision to walk away from business that that not fit within our financial stupid profile
spk_3: that's a framework with that will that will get us to a final a cb of february twenty twenty twenty two in order to build to the fiscal twenty twenty three twenty five percent revenue growth projections you would start with that a see the which includes the advocacy expert nd an enterprise virtual primary care offering
spk_2: ad revenue for new business sold and launch with inches got twenty twenty three plus incremental partner revenue adjust or timing of launches and add to that the fiscal twenty twenty three plus care where consumer virtual primary care revenue forecast than that of all that brings you to the twenty five percent revenue growth rate and our preliminary guide
spk_0: now before turning your questions i like to highlight an important item which is our path to break even including a picture of the leverage in our pricing model as we are the new solutions to the portfolio
spk_2: we've consistently stated that our goal is to make meaningful progress towards profitability each year on the strength of our revenue growth an attractive enough economics we also guided to a pause and that progress for the current fiscal year as we absorb to significant acquisitions
spk_0: you can see in our guides for next year we expect to continue making meaningful progress on that path
spk_2: i like it a little deeper to help you understand and not just the timing but also the underlying in in economics for those of you looking at the applied on our web past you can see our historical march toward break even
spk_3: and kids the twenty eighteen ugly but the seventy seven million dollar revenue business with adjusted gross margin of just over thirty percent and adjusted a bit i lost a fifty six percent of revenue
spk_0: over the next few years even while we invested heavily in technology sales and distribution and added the cost of being a public company are gross margins improve materially and he jeopardy that i lost declined as a percentage of revenue from negative fifty six percent to forty one to twenty five and then negative sixteen percent and fiscal twenty one he for flattening out this year
spk_3: with our preliminary dance for next year you can see that adjusted ebitda improved from negative sixteen percent issue year to and eleven to twelve percent range and fiscal twenty three then cuts in half the following year with a break even target than fiscal year twenty twenty five and that improvement of fiscal twenty twenty three would represent a reduction in it just for the but i laugh and an absolute power basis as well from a size and scale perspective twenty five percent annual revenue growth over that same period lead to a six hundred million dollar revenue target at breakeven and fiscal year twenty twenty five
spk_0: it got to help with the show you have a union economics work for the with the accolade fitness as well as the incremental margin contribution from my new solutions
spk_2: if you start with the legacy accolade added to the business you can see the unit economic than the chart that i just shared
spk_3: ppm for a full suite with approximately twenty dollars and historical improvement and adjusted either dying gross margin was largely driven by the incremental gross margin from existing customers as we increase engagement and build deeper relationships with our members the new solutions we added this year particularly expert medical opinion and primary care i generally price on a per visit for per case basis
spk_0: those visits and consultations i delivered at a higher incremental bros fight and that the advocacy revenue which we expect the further expand as we leverage are either advocacy engagement investment with cross our customers providing additional lift to the model
spk_2: on top of that as we gain traction with their accolade one solution there's additional opportunity for increased margin contribution from game share performance and lastly we expect our partner revenue to grow nicely this year and into the future also at a higher margin than her advocacy business we're not changing our long term targets model today but if you think about the expected growth and contribution from the solution you can begin to see the layering effective adding higher gross margin revenue and years to come
spk_3: advocacy will remain the largest revenue contributor this year and next and we expect higher margin case we and visit the to grow and it's fiscal twenty four and be up
spk_2: and we expect our higher margin game share of avenue making may contribute and fits what's funny for vr as we expand beyond their initial pilot customers
spk_0: at that we believe we are building a business foundation and portfolio to drive growth and margin improvement for years to come
spk_3: and with that will open the because questions
spk_0: thank you as a reminder that good question you need to address star one on your telephone to join question press the pound keep please limit yourself to one question our first question comes around and was weirdly where he may proceed with your question
spk_5: your guys can read some it's drunk or thanks for taking the question steve maybe one for you you highlight it just attraction you're seeing and organization selecting multiple offerings and that laying the foundation for accolade one and actually care so i'm hoping you could dive a little bit more into the pipeline and outlook there and maybe even tie into that at some of the recent executive hires if if you added your first customer success officer and and chief customer officer so love to hear how that ties into that groceries well thanks
spk_6: thanks for the for the question is right in the u i cannot want to see them and you've been intercepted behind it that he passed he'll be to jump in manager or to it
spk_2: a primer worried about the the group profile and company in then and the continued the man in ah each the marketing of them were performing in and so you you will recall people use got a can be managed with to expand into the middle market where we're seeing ah continue growth birth mother get perspective it's been a city respective the enterprise think the same story and so you're exactly right we bought with we actually invested in ah customer of them if they see who are who we think is going to do amazing things in helping us scale the services that delivered really of the adding our customer satisfaction levels of in the
spk_0: my and years to the next month we don't have from customer six hundred and one asked him
spk_6: as well we added to marking answer on truly love of who are you in syndrome on a rich history of that happening in healthcare industry helping us bill now and drown expansion plans across every one other segments so big the really positive view in our mind ryan is that the space itself is continuing to show grown and their customers are in briefing this expanded value proposition for my health care and and that yielding a tv grew up with talked about and the growth of the team the humidity you question
spk_0: quick your next like cinco some glenn and to jello with everything they proceeded request
spk_7: i think so see that's wonderful up on somebody that comments i just want to make sure that i'm doing the math right if i if i kind of fuck play your numbers through your guidance you for the fourth quarter it looks like a sort of modeling ah eat it all for the full year to be a loss of somewhere in the high forties may be wrong forty nine million and then if i use your guidance and the percentages you provide for fiscal twenty three using the me points it looks like we're and you're expecting about forty four forty five million in the ball also a little bit better but he knows you think about the path to profitability it certainly looks better on a percentage basis than an absolute basis i'm just trying to make sure that i'm looking at all those numbers correctly thanks
spk_8: sure thanks for the question glenn and i think god fair to say you're spot on for this year at the got twenty two begin at the midpoint it out a bit early mean range for this year is fifty million dollars on that at that to be a thick the three oh nine revenue number we gave and for next year about forty four that's a good number to be read where is it that it's early yet as far as the guide for next year women again but think of it in that mid forties range and the improvement an absolute dollars but also on a percentage of revenue basis as were growing the business top line and at twenty five percent year over year we think is very healthy and then and importantly laying out that mode the year period all the way out to break even in fiscal twenty five as make that study and step down toward breakeven was very important to us in the longer term guide
spk_0: take your next question cause i'm craig hadn't up with morgan stanley he may proceed with your question
spk_9: yes thanks so much on and appreciate the transparency about the customer that you're walking away from and implications on the business in terms of law margin maybe just touch on at the same time you're talking about it rapid leagues expanding rally tam and the opportunity said in just maybe weaving those two things together like the ability to kind of be more discipline because his lot of growth happy chain front of you and how you may how you imagine the business in terms of growth first first margins as we go forward
spk_6: that's great my prevent the question thank you thank you being you today i it did the transparency providers related to the customer that we decided to go to move on from the really don't run if i that we'd started observing that customers pollen five years ago ah in really through to she's population on behalf of that casper and over time we began to realize that he wasn't non paint why not agree that we were going for can spend an extraordinary my time blowing ah and with operating impact on our platform ah where we didn't bleed out with our poor platform and so to i think the decision to me
spk_2: the borders really wanna work that we're talking all the barn bath and artwork man for were targeting all of that investment around innovation and weeping appeals to employers and to the try here business that were so excited about ah and that him that business we can not only deliver outside in a piece an incredible engagement and clinical out i'm a little often see the kind of mars expansion a thief outline over the course the next several years the you're exactly right and fewer very correlated is is about the discipline of our investment the discipline of are investing of our i he and the discipline towards our at the profitable
spk_0: take your next question comes from michael journal of bank of america may proceed with your question
spk_2: power after they guy congratulations on the nice results
spk_0: i want as one clarification question in one clear picture question this grief about in case of get cut off after just i want to make sure relative speed to the nine million dollars you mentioned he walked away from assuming that that mean that haiti not in the baseline for next year's this year so you can see in the growth rate within cause your the high twenties in the event that kate that's when it came from that and then rog i wanted a little bit into some of the early the back you're receiving from the customers that shows the slacks on the a new platforms i'm see i know funny when they went live on one one when i actually know how it's going well as you're going through that lunch period especially implementing the were silly
spk_2: patients new got a market platforms what were some learning he took out in lower some of the pieces that your customers really want to make sure you get baseline the you're able to deliver from them i think the question might not be given here of a with it the second question person must be them to your profession right up and that i immediately upon bring a that new solutions to the marketplace with our customers with attraction policy that for medical begin with outlined ahead to play admin all out not funny customers by both are haven't few the amount of gather or i played expert and the together we also saw another twenty four twenty or so i am on top of actually advocacy a for every one of those customers that a day or during the tougher than i played care they're not interested in his for for
spk_0: on that deliver to provide rather this that there is an integrated engagement hard drive value for next to him and very clear the fact that the did the things that are coming from happily to drive an alpha engagement love of them when they would have seen from other from other vendors actually and so
spk_2: that the case you the party the manifest national reality terms of physics we're seeing to customers around and gave read this the that part one pittsburgh don't just want multiple solutions for the same manner they want integrated solutions built up the same technology platform ah and when i agree on a specific about you and i think point to of that story it odd that has the manifest in integrate their teams as well and so when we're talking about delivering value for talking about the capacity the theme of the transfer from our frontline here for to our primary care provision for to our expert medical of inhibitory of without having to leave the interaction without having to leave the top or interface we think that's a really important part of a custard why
spk_10: he gonna take part you that are one and a question
spk_3: sure absolutely the make bad the clarification there and that nine million a year correct that we that contract out we let that go at the and they're bad december county or twelve thirty one for that nine million dollars impact think about it about a three percent headwind on growth rate and fiscal at twenty three compared to fiscal two
spk_8: on a to nine on that that three of them and happening point
spk_0: take your next question cause i'm gay a singlet credit suisse you may proceed with your question
spk_11: thank you like congratulations on a good gotta the up on fiscal twenty two out of the outlook
spk_2: thanks all color there and dog and with that efficiently of from our michael on a second mb the expectations
spk_11: now you're expecting twenty percent growth was of thirty percent black what the business has seen that but if it a mindless again how that businesses that between the mpm and case raid and cool what your underlying assumptions are that aspect to alert goes as vs thing advance knowledge expecting trying to stay the same level lot of get worse and guy related on a mods in a booming expecting fiscal twenty three is that all operational leverage are expecting from implementing these leagues and actually says if i can just one outdated or like an odd if elected due to cover in fiscal two minutes a day are driving some upside to your pet goat kid avenue would that have any a impact on my toes in fiscal jonesy
spk_8: i joined had give and
spk_3: yeah a guy that one and though but you had a few things there let's start though with the trend as far as volume jade you heard to talk about at two hundred added customers on a or hundred or so customers have taken together post the acquisition so we bad significant growth in customers many of those are our
spk_8: buying expert medical opinion either on standalone or together as a sweet with advocacy that the very important to us we're hearing over and over again from the market that customers highly value it particularly when it tried to the accolade engagement engine so we're very bullish on the category
spk_3: overall and the opportunity to weed them together a the the volumes yes we're seeing a procedures down for sure you feel guilty of roughly flat quarter to quarter growth from from cute to que three am what you're saying and the guide from us is as in a thing assumption that those utilization rate
spk_8: they about where they are for now until we have better visibility into the future so certainly at those procedures pick up in a more like of medical opinion there would be some upside there and then as far as the fiscal twenty three guide goes there are there is operating leverage on the our backs for sure but we're also forecasting that
spk_3: gross margins will begin to expand again year over year this year as for twenty two vs physical twenty one we've been consistent in guiding to a bath about flat gross margin we expect to see gross margin pick up next year and fiscal twenty three and again and twenty four and twenty five on that march the break even
spk_8: and so the combination of both gross margin expansion with other the offering taken together and operating leverage
spk_0: take your next question cause i'm jeff gargle with i present my proceeded requests
spk_2: the hi good afternoon as compress in the corner and thanks for taking the questions or last a couple are around performance guaranteed trends so that the first one is is whether the poor forward of performance guarantees so far in the fiscal year reduces potential volatility be i think you're mostly to that the applied for your political forth quarter and then just more broadly is it's customer interest in performance guarantee the park contracts increasing given your integrated offerings and and how would you expect that to layer into the portfolio overtime
spk_8: ah thanks to the question jeff it's the at though let me hit that was there with the first by on the billboard word an earlier recognition of pg yeah you're absolutely right it does we do some volatility in the fourth quarter fraught i made a point in my prepared remarks to say this is a good thing you know and we get guy and we are of is very important to us that the investment mean he understands were giving full year garden and then as we achieved pg that we achieve them throughout the year we booked them as their earned and that's a good thing for the take them both so the way from the fourth quarter i'm so perhaps that that takes away some up guidance and down five and the fourth quarter in doing so yeah that we think a very positive trend and into your point about customers over in again it's very important that customers understand that there's in our ally associated with the work that were doing in the value that were providing an outlet gear the fact that we have shown to mean and the arch medical officer on the line is spending a lot of time with customers and the when apple capability that we've been adding ah let me take it over to him for a second because he said some real nice and interactions with customers on this front company when it take it from here
spk_0: yes sir at school and i think it's a great part your question around good customer interest and pg the and clinical pages in particular and i think it's it's definitely a core part of my hypothesis the gone back and idea or site healthcare in person all data driven and i based on what we're seeing and marketed that gap has hearts are really interested in how we're measuring or outcomes and and and there's a lot of interest and as as guarantees on and it's something that that we think it is gonna be really hard on for for for others to be able to replicate in out actually showing that weekend can deliver on those on i bought comes a sign that leaves we've done in the past and i think that on the cusp our interest in those i think it was a really good sign that but the core thesis behind that for site how carrots is it is right like your next question goes from david larson with hiv in a procedure your question
spk_12: hi i'm if a health plan were to come to you and say hey we want you to bear full risk for this cohort of lives for tax dollars per member per month is that something you'd be able to do or is at a truck that you might sort of beyond to to do longer tom and then i'm just any arm thoughts around i'm in person care with with plush virtual is great but i mean a lot of time to meet the draw blood yeah you have to have and in person diagnostic peace to virtual care how are you addressing that thanks very much
spk_6: you didn't think for the question appreciate day being here a minimum amount to keep the second part of that question to shop new you keep not gloucester the talk a little bit about how we believe virtual care keyboard and collaborate with for the mortar care as much with think about that in terms of way we not a service to our customers on the first topic
spk_2: the way we were working most ah prevalently would help i and today is approaching their a commercial populations where our service either in tandem with a other components their clinical services or are directly with it with our service in it's entirety being an arm up with their ah with number so a cyclical service functions because i am but the reseller and a referral models ah and and it's very complimentary to are thought direct sales model or the questions you're asking around would we be willing to take full potential risk heart gothic the their population think it's it's it's not something that you should model into our business into what way
spk_6: looking out for next year or even really hot the for this your next year david it's certainly something that will evaluate down the road as we continue to prove about our path is right updating and improved clinical outcomes for customers are we shouldn't have a rich track record doing so but nothing the cat model and or plan or something when i hit that a question about the about break the mark air
spk_0: yeah absolutely it's a it's a great question it i think we'll one other thing that we really liked about the put carpet bomb that it's really purpose built for primary care right so that means that there were able to provide comrade the prairie care said your point about lad drive a partnering with national laboratories for that that same thing goes by partnering with at pharmacies around the country are on medication are delivering vaccines at the point of care with in pharmacies as i think really that point that regulated be around collaboration that's really the key and i someone who so practices primary care and brick and mortar contact you know there's a significant portion my patients who need to see a specialist in it's it allows were similarly if you're providing parent are virtually you're absolutely right that gonna be a portion of patients and perhaps panic or center south korean i need to have something done in a brick and mortar contacts i think the question the keith either way is really how are you enabling that cooperation and i think for at that bar data and technology platform comes from outcome come then i think it you think about how we felt an ecosystem and all that from partnership that we talk about earlier in the call of kids the same sort of concept on that we believe to be really the key and and that's what patients are looking for ultimately they're looking for and for us to to deliver a service the them and for us there really put those pieces together in at at an experience that works take your next question cause on running with donald would need it with companies may proceed with your question
spk_7: hi thanks for taking my questioning congrats on a great quarter on appreciated the funnel collar on the on the long term targets here as you think about that progression towards a break even adjusted he be done and sort of the the revenue threshold that you need to hit you know as you look at the next couple of years how visible or how much visibility you think you have on to some the or
spk_2: is around virtual primary carer expert md and and sort of the consistency are the linear any of that progression and you think about the organic move towards that break even level as
spk_8: but thanks to the question i appreciated the and you know one think we're seeing that were really bullish about as we sit here in in the fourth quarter is the power of the platform the diversification of it the fact that will we've seen strong contribution across the board i'm in terms of new customer growth in expert medical opinion the compliment advocacy plus care the direct to consumer to promote i make our business growing
spk_2: that very nicely on it's own while you're taking care of them of that yeah most valued that you see a bit to being a bit south you we had entered the next year we have a strong base of contract and revenue that gives of compliments and that guide for the think of it at the advocacy an expert medical pay
spk_8: in the be to be or enterprises as and a plus care business performing very shortly on it's own i really in all aspects in terms of new subscriber acquisition visit raise customer satisfaction doctor satisfaction the far from all of that gives us confident that the foundation a strong and we get the give the that visibility towards ah be thing next year and then you think about the fact that most of our contracts and to be long term contracts so three year business to business contracts so get good visibility there with got strong retention high net promoters forth across their memory base so all of those thing the combined with a strong our ally for our customers is really the backbone that we build our our our our business on in our revenue models on so those are combined the give us a visibility
spk_0: baker an question calls or richard close canaccord genuity in it received a your question
spk_2: yeah given the second opinion or second md trends are still expect the contingency consideration threshold to be achieved i'm and then what is the timing again i know you said calendar twenty two for that the shares to call me and of back and give a sort of the quarterly
spk_3: timing i know you sent your february year and not sure if it comes in and the fourth quarter sure hi richard appreciate the question yet though couple of things on the so each of the second md and puskar acquisition had a contingent consideration are in earn out associated with them or plus care calculation will be based on a calendar year or twenty twenty one basis so it's fact that to wrap up by the end of the yeah fiscal year here for school twenty two and that for a second indeed there they are in out there as well which will be based in large part on a january twenty twenty two or this month
spk_8: run rate revenue that we expect those to rb wrapped up if not completely by the end of the fiscal year certainly by fiscal que one of fiscal twenty twenty three and in you'll see a calculation in the queue and in large part those we expect to be earned fully but but were doing those final calculations over that the next month or so and have murdered for on that in the next quarterly call
spk_0: thank you and as a reminder that the question you'll need to press star woman your on our next question concerns that needed this with as the be learn you may proceed with your crush
spk_13: all guys get milk and stigma question that got a a two part question the out your margin guide their specific amount of my generalize does the specific side should we think about the down margin as anything from a step up and twenty three didn't the contract find down a profitable and one linear path and twenty three two one five are there any new on from there and then marginally where that toggles at the get above or below a preliminary twenty three and twenty five
spk_14: it with our failure
spk_3: stephanie i thank you for the question is the would you mind repeating the first part about the that pacific point about you but died that broke up to the little bit and and now i'm not sure i heard it clearly
spk_13: malaise as insane friday than twenty three figure that benefit from that step up and margins given be on top the contract wind down portion of that at the my linear path at the got one five
spk_8: i don't understand up yeah i'm honored you know on in marginal basis that nine million dollars or so are our our point there was that yeah was essentially a lower gross margin that of business other there's some up left their think overall it's it's fairly minor the underlying key point for us is that gross margin expansion will be a contributing there and we we expect something in the mid forty percent forty five percent range for this current year fiscal twenty
spk_3: q and expanding that up that we expected to go up into the high forty or fifty percent by that visible twenty five breakeven day on a somewhat linear path to give it the more color there and and the toggled up and down again that certainly will have to do with the the success level that we have withdrawn
spk_8: having better engagement and more engagement of the case a revenue than an expert medical opinion business and on visits time that virtual primary care and mental health died as we bring together all the offerings and then the offerings recalling actually care and accolade one and then finally me out yeah there were twenty five and beyond you know we've spoken about that opportunity for gain share revenues and and accolade one we have not made any a grand function in our target moto the around that we you think it's important that we learn about how that goes by they're certainly would be upside there
spk_3: if we were to perform well against though that ensure opportunities and moat will report more on that in the coming quarters
spk_8: thanks again for the question
spk_0: fake unilaterally further questions at this time of analogous or nickel back over to management for any further marks
spk_6: figure operator thank you have joined by we appreciate the ah the opportunity to outline are he three results are coupon plans was are plenty twenty three a great a few nights
spk_0: thank you mr glyphs i offered school they can participate without disconnect

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