Accolade, Inc.

Thank you for standing by and welcome to the Accolade third quarter conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question at that time, please press star 11 on your touchtone telephone. As a reminder, today's conference call is being recorded. I will now turn the conference over to your host, Mr. Todd Freeman, Senior Vice President of Investor Relations. Please go ahead, sir.

Thanks, Operator. Welcome, everyone, to our fiscal third quarter 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 Medical Officer, will join with the question and answer portion of the call later. Before I turn 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 on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliations thereof can be found in the press release 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 to accolade to different materially from those expressed or implied in this call. For additional information, please refer to our cautionary statement in our press release and our findings with the SEC, all of which are available on our website. With that, I'll turn the call over to our CEO, Rajiv Singh.

Thanks, Scott, and thanks, everyone, for being here. While we still have one quarter left to finish the fiscal year, our Q3 call really marks the end of the calendar selling season and the start of the new plan year for many of our customers. As such, on this call, we're happy to provide our preliminary outlook for the next fiscal year and share the foundational details that give us confidence in our market position and our outlook to drive sustainable growth and profitability. We had a successful 2022, adding new customers, expanding existing relationships, and increasing our footprint with our growing portfolio of offerings. The market is speaking clearly that employees and their families want and deserve a better healthcare experience. Accolades years of proven results, especially our ability to scale with the most demanding and growing customers, are factoring heavily on the minds of buyers, and they responded by helping us achieve our strongest booking performance in company history. Steve will give you more detail, but we expect that when fiscal 2023 is complete, we will have grown ARR bookings by more than 30% over last year. giving us confidence in fiscal 24, but also providing the early foundation for continued growth into fiscal 25. Most notable is the mix of those bookings. Continuing the trends that we've described over the past year, our new, renewed, and expanded commercial customer relationships were spread across customer size, across distribution channel, across solution, and across industry verticals. It's that diversity that validates our strategy and our approach. Accolade solutions are resonating across the board, especially as we see the majority of new deals evaluating and selecting multiple solutions. Our renewals are also increasingly expanding to add additional Accolade solutions and partner solutions as well. More and more, we're hearing customers talk about their employees' healthcare experience as a key strategic imperative for driving employee satisfaction and retention. One of the places where we see this clearly is the volume of advocacy deals this year. In 2022, we saw a renewed focus on the employee healthcare experience and on return on investment. And advocacy was once again front and center for our customers and the consulting community. With our expanded offering set, we're now able to leverage that advocacy discussion to also include other things like primary care, mental health, and expert medical opinions. Again, Steve will cover this in more detail in the guidance section, but our confidence in our fiscal 24 guide is rooted both in the growth in our newer solution as well as the strength of the advocacy market and our position as the leader of that market. That leadership was borne out by our performance in this fiscal year, and we intend to press our advantage in the years ahead. The focus on employee experience and return on investment is true of our health plan relationships as well. Health plans have been an important contributor to our growth this year, both from a logo and a revenue perspective. Certainly one of the key reasons behind that attraction is the expansion of our offerings to include expert medical opinion in virtual primary care and mental health. This growth has positioned Accolade as a core strategic partner as health plans also look to the member experience as a critical measure of success. Today, member satisfaction is an executive priority for most health plans, and Accolade's high NPS is very attractive as a complement to their existing solutions. Before I touch on our consumer and primary care business, I'd also like to give you an update on our government business. By now, most of you have heard that the Defense Health Agency made an initial selection for the vendors who will service T5, the next generation of health plan services, to their 9 million-plus beneficiaries. Humana was awarded the eastern region, and TriWest was awarded the west. While the vendor selection still needs to be finalized pending a likely appeals process, we were thrilled to hear the decision as we've been anticipating an award for some time. There were three bidders for the T5 award. We have teaming agreements with two of the bidders and a strong relationship with a third. With this decision, we are positioned to serve a significant number of TRICARE families once the implementation begins. Until that time, we'll continue to work on our current government contracts, demonstrating the tremendous value Accolade brings to our current military families through the Tricare Select pilot and the autism care demonstration. And we'll work with the selected T5 vendors to define our potential scope and we'll provide an update when that scope is finalized. But we're very excited to be moving past the evaluation phase of this opportunity and into the planning and execution phase. For our category of services, we're extremely well positioned to see the government sector be a driver of growth for our business in the years ahead, as it has been for several years. With respect to our virtual care business, PlusCare has continued to deliver outstanding results quarter over quarter. Our PlusCare team, led by founders Ryan McQuaid and Dr. James Wontuck, have been in front of the market since its inception. We deliver a wow experience for our members and a rich platform for our physicians. The result has been increasing subscriber counts with well-managed customer acquisition costs. Importantly, on January 1st, we turned on a number of enterprise virtual primary care customers. significantly expanding the number of lives we're prepared to serve. The combination of our consumer-focused business, which requires a different level of user experience to drive acquisition and retention, and our commercial business, which requires a different understanding of how to scale to serve millions of lives, creates a powerful platform to drive growth for years to come. About a year and a half after the acquisition of PlusCare, the core hypothesis of this transaction has been validated in both the consumer and enterprise segments, and we're bullish on the future of this business. Before I talk a bit about the upcoming year and our strategy to continue our momentum, I want to take a minute to highlight something that many people take for granted, but it's really the foundation of our customer satisfaction. Every year between October and December, almost all of our customers go through an open enrollment process, especially when a customer is changing their benefits in some way. This is not only the busiest time of year for our frontline care teams, but it can also be the most stressful times for our members and their families. To give you some comparison, at the time of our IPO in 2020, Accolade had roughly 50 customers in total. This year, we managed open enrollment for hundreds of customers. We're now operating at a level of scale with millions of members and high engagement rates that would place us among the largest carriers in the country by membership. Aside from the obvious importance of delivering the service at scale with high member and customer satisfaction, Open enrollment presents something far more critical for Accolade's success. For new customers, this is usually the first touchpoint that a new member has with an Accolade health assistant. It is the moment that we plant the seeds of proving the value of creating a personal relationship with every engagement opportunity. It is that ability to build personal relationships with millions of members to drive better healthcare outcomes that differentiates Accolade from our competitors, and it's the key reason for our high win rate. Turning to the outlook for the next fiscal year and why we believe strongly that we're set up for continued success, I'll start with the financials and we'll end with a word about our strategy and our identity. Simply put, our ARR booking success in the past selling season gives us great visibility and high level of confidence for our fiscal 2024 revenue guide and our profitability outlook. Steve will give you more details here, but we're pleased coming through a difficult macroeconomic environment with this outlook. We have a business that's diverse in many ways. It's diverse in how we sell. We sell across a number of channels, including our direct commercial sales force, through our health plan partners, leveraging our trusted partner ecosystem, and to the federal government and direct to consumers. It's diverse in the mix of solutions we offer. Our service offerings allow us to meet customers where they see fit, either with individual solutions or increasingly as bundles with multiple offerings. Our growing primary care business allows us to impact both health outcomes and overall healthcare costs in more meaningful ways. And it is diverse in terms of its revenue foundation. Our highly visible revenue model allows us to set our investment strategy to pursue the areas of most impactful growth to help drive us towards cashflow positive in the next year and beyond. This diversification is now a core strength of our business, a driver of complimentary value across offerings, segments, and solutions, and stands in stark contrast to our business even just three years ago. As we make the turn to free cash flow positive in fiscal 2025, which begins just 14 months from now, we will be one of the few scaled, diversified healthcare disruptors in the market. For our customers, while they want to know that we're financially strong, they're far more focused on who Accolade is as a business and as their personalized healthcare partner. They know that we've built solutions and services that are engineered to care. Accolade has spent more than 15 years engineering a better healthcare experience, one that predictably engages members to understand their care needs, proactively navigates them to quality care and informed healthcare decisions, and addresses barriers to taking healthcare actions, including social determinants of health, all while delivering an exceptional personalized experience. For employers and payers looking to improve the healthcare and benefits experience for members while reducing the cost of healthcare, Accolade is the one company that delivers improvements in outcomes and plan performance by guiding members to the next best clinical action in their personal healthcare journey. And we do it at scale across entire employer populations. Unlike our competition, Accolade's solution is predictive, proactive, and personalized, allowing us to address barriers to care and offer proven results. When we say that Accolade is engineered to care, it's important to recognize the multiple dimensions of what it means to care Care is about the act of physically or virtually delivering medical care, whether that is through one of our own physicians and nurses, through a trusted partner like Virta or Care at Fertility, or through our members' own trusted medical providers. But care is also about the act of caring for another human being. It's the empathetic listener instead of the anonymous call center agent. That is a personal element of the care journey that we can't fully replace with technology, but that we can make better through engineering. It starts with a fully integrated set of offerings that we can deliver value singularly, but really begins to transform the healthcare experience when it's used in concert. It is about having a robust and modular open platform that allows us to plug in third-party services and solutions with trusted partners. Our intelligent technology and proprietary approach help Accolade care teams build lasting personal relationships with everyone we serve. This unique approach rests on three foundational pillars. The promise of being engineered to care is that we enable predictive engagement, deliver proactive care, and address barriers to healthcare access. You'll be hearing more about these pillars in the months to come. But in short, our predictive engagement model continuously captures critical population and unique member health insights so we can proactively address clinical and cost-related risks across the organization. Supported by this intelligence, our team proactively identifies and engages individuals in need of care. guiding each member to the next best clinical action so they can achieve the best possible outcome. And lastly, Accolade's diverse care team, supported by predictive data, is trained to understand and address the needs of each member so we can engage those likely to face barriers to care and guide them to the right care. You'll hear more about our engineered to care approach in the months to come, and I look forward to sharing more customer success stories around this vision. With that, I'll turn the call over to Steve.