Accolade, Inc.

Good day, and thank you for standing by. Welcome to the Accolade First Quarter 2023 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during a session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would like to hand the conference over to your speaker today, Todd Friedman. Senior Vice President of Investor Relations. Please go ahead.

Thanks, Victor. Welcome, everyone, to our first quarter earnings call. With me on the call today are our Chief Executive Officer, Rajiv Singh, and our Chief Financial Officer, Steve Barnes. Shantanu Nundi, our Chief Financial Officer, will join for the question and answer portion of the call. Before turning the call over to Rajiv, please note that we'll be discussing certain non-GAAP financial measures that we believe are important when evaluating accolades performance. Details and relationship between these non-GAAP measures, the most comparable GAAP measures, and the reconciliations thereof can be found in the press release that's 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 the risks, uncertainties, and other factors that could cause the actual results for accolades to differ materially from those expressed or implied on the call. For additional information, please refer to our cautionary statement and our press release and our files with the SEC, all of which are available on our website. And with that, I would turn the call over to our CEO, Rajiv Singh. Raj?

Thanks, Todd, and thank you all for being here. The first few months of a new fiscal year provide useful insight about the year ahead. Today, we'll share with you what we've seen thus far. and provide our perspective on the market and accolades opportunities. Let me kick off with our financial performance for the quarter. We came in above the high end of our guidance ranges for both revenue and adjusted EBITDA. I'll leave it to Steve to cover that good news in more detail in his section of the call. Turning to the commercial employer space in the early selling season, here's what we've seen in the first quarter of our fiscal year. Closed more new business in fiscal Q1 than has been our historical precedent. Among the new advocacy deals, we signed a large West Coast University system that became a customer that further demonstrates our strength in the university vertical. Additionally, both our direct selling channel and our health plan distribution partnerships continue to do very well in standalone expert medical opinion transactions. Regarding upsell and cross-sell of our offerings, today nearly 10% of our 10 million members are using more than one Accolade solution. reflecting tremendous progress since adding our virtual care and expert medical opinion offerings last year. We also replaced competitors in a number of Fortune 100 companies in the expert medical opinion market. Those wins include a warehouse retailer, financial services firm, and an insurance company. With these wins, more than 30% of the Fortune 100 is using an accolade service today. Most importantly, our pipeline for new business in the commercial segment remains very strong. Investors oftentimes have questions about how the downturn in the market or potential recession is impacting the buying behavior of commercial customers. Two observations for us today. First, we're participating in more RFPs than ever before. We just had a very strong Q1 in terms of new bookings. Second, customers in this environment are more focused than ever on the rising cost of health care. This plays well to our solutions and our proven track record of consistently delivering cost savings over the course of a multi-year contract. Now, let's turn our attention to the health plan market. Three years ago, Accolade announced our first health plan partnership with Humana, still a strong and valued partner. Since then, we've added partnerships via acquisition, specifically partners like UnitedHealthcare Optum, Aetna, Blue Cross Blue Shield of Michigan, and BCBS Massachusetts. In addition to our advocacy partnerships like Humana and Blue Shield of California, we recently signed an advocacy and virtual primary care relationship with Priority Health of Michigan. As it relates to our virtual primary care relationship, Priority will be leveraging our virtual primary care and mental health offering to power their virtual first plan design. We expect to announce more virtual primary care partners in the months ahead. At this point, we have health plan partners representing our advocacy, expert medical opinion, and primary care and mental health offerings to the market. We expect to continue to grow our relationships and add new ones moving forward. Performance in the health plan space in FQ1 across all these sectors was good, especially in Accolade Expert MD customer additions. Via the health plan channel, we added a number of brand name customers in the retail, energy, and technology industries. highlighting the attractiveness of Accolade Expert MD across sectors and employer profiles. Our expert medical opinion service continues to be differentiated and seeing strong win rates. Now, looking at our government business, in fiscal Q1, the Defense Health Agency agreed to extend the TRICARE Select Navigator Program for the third and final year of the pilot. With that news in hand, let's take a step back and look at the DHA business as a whole. There are now two elements to that business. First is the TRICARE Select Navigator business I just mentioned. As the DHA makes a vendor selection for their carrier relationship later this year in what is referred to as the T5 bid, we believe that the success of this pilot will lead to the DHA looking for these types of capabilities as innovations from their selected vendor in T5. In that respect, we're very well positioned with teaming relationships signed with three of the four companies bidding on T5. As with all things with an entity the size of the Defense Health Agency, it will take time. But we continue to position ourselves well for this opportunity in the future. The second part of our DHA business is our work on the TRICARE autism care demonstrations. As you can imagine, military families with children on the spectrum have unique needs. With our partnership with Health Net, our specialized nurses are now assisting those families. We see opportunities to expand this population over time. And in aggregate, we see strong possibilities to continue to grow our overall government business. Before we turn to a discussion on market dynamics and competitive landscape, let me give you a quick recap of what we've covered. We have market-leading offerings in advocacy, expert medical opinion, and virtual primary care and mental health. Collectively, a personalized healthcare suite. And we have distribution channels through the government, direct to commercial clients, and through health plan. This diversified product and distribution strategy minimizes risk, while with strong execution, maximizing upside. Now, let's discuss market landscape and competitive dynamics. Our competitive win rate remains strong, and our pricing discipline in those transactions remains at historical levels. It's important to note that in the context of the buying dynamics of our industry, Customers will often hire consultants who write detailed RFPs that include such requirements as staffing ratios and performance guarantees. Those customers are concerned with the quality, comprehensiveness, and value of the service, given it's a service that they will ultimately have to stake their reputations on with every one of the employees in their business. Those very same employers are wary of vendors who commit to delivering a less comprehensive service at cut rate prices. All that said, our competitive differentiation for our personalized healthcare suite comes from our comprehensive approach to engage widely, our data-driven approach to population health, and our personalized approach to delivering care and building relationships. We're the best in the world at what we do, and our customers continue to show their willingness to pay for that value based on our closed deals and current pipeline. That differentiation and that success will continue to drive the 20% growth rate of our business moving forward. We're committed to building that growth while driving profitability and making consistent progress towards our long-term operating margin targets of 15% to 20%. To that end, we took some actions across elements of the business since our last call to effectively reap the synergies from three acquisitions last year, among other things. Steve will talk more about that in his section of the call. Finally, I'd like to spend a moment on our direct-to-consumer virtual primary care and mental health business. business is strategic to Accolade for a number of reasons. And of course, the first, the underlying tech stack and capabilities power our Accolade care business in our B2B space. It's also important to point out that the D2C business is a powerful growth and innovation engine for Accolade. In fiscal Q1, the business continued to perform well. Given the performance of other players in the virtual care space, we often hear questions regarding the environment for our D2C business. In short, we continue to grow well in the space with attractive customer acquisition costs. We attribute our performance in the business, which is differentiated from others, to several factors. First, we are a primary care and mental health provider versus other companies' urgent care-focused approach. This is particularly important because people who discovered our service for urgent care needs due to COVID restrictions at office visits oftentimes enjoy the service so much that they embrace our primary care offering. other urgent care only focused players don't see that conversion. Beyond that, our long-term primary care relationships with our members lead to strong retention rates compared to other D2C players. One of the unique things about our service is that our physicians are required to practice with us the majority of their time, and a majority of our clinicians are full-time employees. Thus, our consumers can choose a single doctor and build a long-lasting relationship. And finally, Our collaborative care model that blends primary care with mental health is a more effective and scalable way to drive behavioral health visits while delivering better whole-person care for our consumers. We'll continue to provide regular updates on our DVC business in the quarters ahead as its core to our strategy moving forward. With that, I'll turn the call over to Steve.