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spk09: Good day and thank you for standing by. Welcome to Accolade's second quarter 2024 earnings results conference call. At this time, all participants are in a listen-only mode. After this speaker's presentation, there will be a question and answer session. To ask a question during a session, you will need to press star 101 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 101 again. Please be advised that today's conference is being recorded. I would like to hand the conference over to your speaker today, Todd Freeman, Senior Vice President of Investor Relations. Please go ahead.
spk17: Thanks, Operator. Welcome, everyone, to our fiscal second quarter earnings call. With me in our Houston office today are our Chief Executive Officer, Rajiv Singh, and our Chief Financial Officer, Steve Barnes. Dr. Shantanu Nundi, our Chief Health Officer, will join us 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 accolades performance. 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 accolades to differ materially from those expressed or implied on 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. And with that, I'll turn the call over to our CEO, Rajiv Singh.
spk03: Thank you, Todd, and thank you, everyone, for joining us today. Having now completed the first half of our fiscal year, there are four clear takeaways we'd like our shareholders to take from this call. First, we came in ahead of guidance and consensus in Q2 on both revenue and adjusted EBITDA. Second, with each passing quarter, We're closer to crossing the threshold of becoming a profitable, scalable business that will improve people's lives by changing the way healthcare is experienced. Third, the demand environment for our solutions remains strong. And fourth, we're presenting the market with a unique and differentiated perspective, grounded in our roots in advocacy and powered by care delivery that our competition does not offer. That differentiation is bearing us fruit today and will continue into the future. I'll give you more color on those bullets in a moment, but first, Let's head to second quarter highlights. First, revenue and adjusted EBITDA were both ahead of our guidance for Q2. Revenue in the quarter was $96.9 million, with an adjusted EBITDA loss of $8.8 million, both ahead of our previous guidance. Revenue highlights in the quarter were marked by continued strength in our virtual primary care and mental health offerings and some early recognition of performance-based revenues. Steve will give you all the details in his prepared remarks shortly. Over the past couple of months, there have been a number of consistent questions and themes in our investor meetings. I'll take this time today to hit on those topics and provide some current color. The first question we usually hear is about the selling season. The demand environment remains strong and the selling season continues at a solid pace. I'll remind investors here that with the growth of our middle market visit and customer selling motion, selling season is a year-long process at Accolade now. We've seen strength across verticals and customer size. As we've said before, more of the deals in the pipeline include multiple offerings and one 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 our category and our ability to win more than our fair share of the market with our differentiated personalized healthcare suite. The customer additions continue in both our traditional direct channel as well as our rapidly growing health plan business. On the direct side, advocacy and bundle deals have included brand name manufacturers, retail, automotive, CPG, medical, real estate, public sector, financial services, and many others. And our health plan channel has delivered both quantity and quality, including some notable competitive takeaways. Through a combination of our direct sales force, expansions of existing relationships, and new logos through our health plan partners, Accolade Expert MD added fantastic customers, including Nissan North America, Tyson Foods, Phillips, TIAA, Spirit Airlines, Mutual of Omaha, and Clorox this quarter. We also signed another major health plan partner to resell our advocacy and care solutions. In the quarters ahead, we'll give you more visibility into this partnership and how we see the target addressable market within our health plan relationships continuing to grow. We view these partnerships as incredible opportunities to drive sustainable growth for years to come. Next, let's talk about the competitive landscape and do it on a couple of vectors. First, in a traditional employer sale driven by a consultant RFP in the strategic and enterprise account space, our competitors remain the usual suspects we've talked about in the past. Our win rate remains strong as evidenced by our growth in bookings over the last several years. Second, in pursuit of health plan relationships, Our breadth of product offerings, our technology stack, and our open platform oftentimes have us competing with low engagement tech-only platforms instead of advocacy competitors, and our win rate there is very high. Why are our win rates strong? Because we're deeply differentiated from the rest of the market. Our customers know that one of the primary underlying causes of the dysfunction in the healthcare system is the complete fragmentation of the patient experience. from understanding their benefits to how they're passing through the care journey from specialist to specialist with little coordination or empathy. A fundamental principle of Accolade's strategy is to embed the physician in the entire care journey and to do so with advocacy at the core. Accolade connects physicians longitudinally with members through our advocacy and healthcare services. Accolade's treating physicians are uniquely positioned to connect brick and mortar physicians with members' benefits and pharmacy coverage through claims and benefits specialists. We can refer to and provide collaborative care with specialists, therapists, and point solutions for specific medical conditions that are covered under these members' employer health plan. This is a unique role that only Accolade plays with our customers. By providing the benefits advocacy and navigation services their members need to fully leverage their healthcare options, as well as operating a large and growing care delivery organization, we can fully engage the population identify and reach high-risk members, and guide them down care pathways for major costs and misery drivers like cancer, MSK, diabetes, and more in a measurable, scalable, and deeply differentiated way. This is the next generation of advocacy and accolades leading the way. Recently, we've also fielded a number of questions about GLP-1 drugs and their impact on our business. On this topic, the healthcare industry, employers, and consumers continue to learn from their experience with treatment regimens, usage patterns, and drug availability. Drug availability has clearly driven some fluctuation in usage on a month-over-month basis, and we expect that volatility, both upward and downward, to continue in the quarters ahead. That said, demand continues to be strong, and we've also seen the growing attractiveness of non-pharmaceutical alternatives like Virta, a company in our trusted partner ecosystem that we profiled in our capital markets day and specializes in diabetes reversal. We're also beginning to see new approaches to managing the cost and prescription of these drugs. The University of Texas system decided to stop covering weight loss drugs after seeing its cost for the drugs increase from $1.5 million monthly to more than $5 million monthly over 18 months. And BCVS of Michigan has changed its policy so that patients will be required to be on a lifestyle modification program for at least six months before granting approval for weight loss drug therapy. What all of these data points reflect is the clear importance of engaging physicians in the weight loss treatment and a strong advocacy program to help ensure proper usage and program adherence. Finally, regarding the DHAT-5 agreement, we continue to await the final resolution of Health Net's protest, which we expect to hear over the coming months and we'll have more to report after that process resolves. With that, I'm going to turn the call over to Steve to review the financials.
spk07: Steve? Thanks, Raj. First, I'll recap the results for the fiscal second quarter and then provide details on the rest of fiscal 2024. As Raj noted earlier, we generated $96.9 million in revenue in the second quarter of fiscal 2024, representing 11% growth year over year, or 19% pro forma growth, excluding the impact of a large customer termination in fiscal 23. Revenue highlights in the second quarter included strong contributions across our offerings, reflecting the strength of a diversified, personalized healthcare platform with multiple revenue streams. Notably, GLP-1 demand remained strong in the quarter, However, not at the surge level we saw in Q1, which contributed to a slight sequential decline in utilization-based revenues from fiscal Q1 to Q2. And in fiscal Q2, we also recognized approximately $2 million in performance guarantee-related revenue earlier than expected. We had initially forecasted these particular PGs to be earned in the amount of about $1 million in each of fiscal Q3 and Q4. As we've discussed previously and highlighted in our Capital Markets Day presentation on May 8th, at the start of the fiscal year, we generally forecast that savings-related PGs will be recognized in our fiscal Q4. And when we earn those PGs earlier, we call them out to the extent they are notable. As a reminder, we had a similar pull-forward dynamic of about $1.5 million in last year's fiscal Q2. So, adjusting for both of those, as well as the customer termination, yield pro forma revenue growth of that same 19% noted earlier. Fiscal Q2 adjusted gross margin was 44.2% compared to 44.7% in the prior year period. The year-over-year change was driven by investments in our frontline care teams, including investments to launch our enterprise virtual primary care capability. There were also some duplicative staffing costs in Q2 associated with the workforce realignment actions we took at the end of fiscal 2023 as we transitioned some roles to new geographic locations. And as we discussed in Capital Markets Day, as well as our prior earnings call, we expect to see the benefits of the workforce realignment materialize in our P&L beginning in the second half of fiscal 2024. Adjusted EBITDA in the second quarter of fiscal 2024 was a loss of $8.8 million. The positive performance versus our guidance reflects the revenue over performance, as well as a keen focus on spend management as we continue on our path to profitability. In turning to the balance sheet, cash and cash equivalents totaled $292 million at the end of the second fiscal quarter. And as a reminder, our convertible notes are not due for about two and a half years. Finally, we currently have approximately 76.2 million shares of common stock outstanding. Now, turning to guidance. We've remained optimistic about our outlook on growth as well as our continued drive towards profitability. And with that, we are maintaining our full fiscal year 2024 revenue guidance in a range of $410 to $414 million, representing pro forma year-over-year growth of approximately 21% at the midpoint. We're also maintaining our full year outlook on the bottom line for an adjusted EBITDA loss for fiscal 24 in a range of $6 to $12 million. With respect to the fiscal third quarter, keep in mind my earlier comment that we recognized about $2 million of PG revenue in fiscal Q2 that shifted about $1 million revenue each from fiscal Q3 and Q4. And with that, we're providing fiscal Q3 guidance today of revenue in the range of $95 to $97 million, and adjusted EBITDA loss in the range of $5 to $8 million. Tying this adjusted EBITDA guidance to our full-year target, we are forecasting positive adjusted EBITDA in the fourth fiscal quarter between $17 and $20 million when we earn the bulk of our PG revenues in that fourth quarter and realize the impact of new customer launches on January 1st as we outlined in depth on Capital Markets Day. This projection for fiscal Q4, combined with our fiscal year-to-date performance on our bottom line, give us visibility and confidence in our projections for 2% to 4% adjusted EBITDA positive in fiscal year 2025 and growing profitably thereafter. And with that, we'll open the call to questions.
spk09: As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw a question, please press star 11 again. Please limit yourself to one question. Please send Bob a compiled Q&A roster.
spk10: One moment for our first question. And our first question will come from the line of Jeff Garo from Stevens. Your line is open. Jeff Garrow, your line is open.
spk09: One moment for our next question.
spk10: Our next question comes from the line of Craig Hedenbach from Morgan Stanley.
spk09: Your line is open.
spk12: Yes, thank you. Raj, you mentioned a few competitive wins. Can you just touch on kind of what's differentiating relative to competitors in the marketplace and then also any additional color on the multiple offerings? What else do you see getting pulled through when customers choose to have more than one offering from you?
spk03: Thanks, Greg. I think the core of our differentiation that we're seeing manifest in many of our platform-style deals where people are buying our advocacy service plus other services is the differentiation associated with having physicians embedded in the care teams, number one. Number two, the capacity to engage with brick-and-mortar care teams from those physician interactions to drive longitudinal care and improve the fragmentation or actually alleviate the issues associated with fragmentation in the healthcare system. Our value proposition is built off of our incredible capabilities from an advocacy perspective that we've built over the years, now adding the incremental services and the incremental capabilities associated with physicians, behavioral health specialists, and specialists associated with our expert medical opinion service. As it relates to the capabilities or the product offerings, We're seeing strength in advocacy in terms of new bookings. We're seeing strength in advocacy, expert medical opinion, and customers taking advantage of our accolade care service. And so, incrementally, we mentioned in the script or in the prepared remarks earlier that an increasing number of customers are taking advantage of the trusted partner ecosystem as well.
spk09: Thank you. One moment. Our next question. And our next question comes from Jessica Tasson from Piper Sandler. Your line is open.
spk01: Hi, guys. Thank you for the question, and congrats on the strong quarter. I was hoping if you could maybe clarify, are you still expecting to see core navigation XCOM cast return to about 20% growth in FY24? And maybe just You know, how much visibility do you have into that kind of 4Q ramp at this point, and any update on the annual growth rates for each of the businesses would be really helpful if they're changed relative to prior expectations. Thanks so much.
spk07: Hi, Jess. This is Steve. So, first of all, with respect to fiscal 2024, Yes, we're still expecting that the growth rate overall to be in that range of 20, 21% at the midpoint for the year and lining up around the offerings where advocacy would be in the neighborhood of 20%. Growth rate and EMO or the expert medical opinion offering in the range of 20 as well and the virtual primary care business growing a bit faster than that. We've got good visibility to that number. As Raj mentioned in his prepared remarks, the selling season has been, the demand environment is strong selling season. We've had several good wins. Selling season continues right through here, but we've got good visibility to that for the end of this fiscal year and then visibility towards our 20% long-term growth rate that we've spoken about for next year in particular.
spk09: One moment for our next question. And our next question will come from Jaylandra Singh from Tourist Securities. Your line is open.
spk14: Thank you and congratulations on a strong quarter. I just want to go back to the selling season commentary. We have heard this year that there has been some delay in employer This is making in terms of deciding on benefits for next year. Just curious if you have seen anything on that line among your client base or just the market in general. And related to that, clearly addressing the GLP-1 medications demand is on top of mind for most employers. So are you seeing that outsized piece of wallet or mindshare impacting the discussion on other areas in any ways? Clearly new client wins for you guys don't seem to reflect any impact, but just curious your thoughts on both items.
spk03: I think, one, we're continuing to see a strong demand environment. We're continuing to see customers who buy for the three core reasons that they've always purchased our solution. First, the desire to control trend lines. Second, the desire to improve the employee experience. And third, the desire to improve outcomes as it relates to healthcare outcomes for their employees. The commentary on GLP-1 is actually tied pretty nicely into that in many ways, Jalinder, meaning what our employer is definitely experiencing is this idea that a new medication has come onto the market that's driving health care costs up. They've got to adjust both from a policy perspective and understand how they're going to apply the appropriate clinical rigor to get the outcomes that they want and to drive the value for their employees that's necessary while controlling costs. And so we think in some ways, absolutely, it's driving an increment in spend, which employers are going to have to fund from somewhere. But incrementally, it actually drives real demand for services like ours. I'll use this opportunity as a moment to defer to our Chief Health Officer, Shantanu Nandy, to talk a little bit about our clinical view on how to drive value for corporations as it relates to GLP-1 and the cost of GLP-1.
spk11: Shantanu? Yeah. Absolutely, Raj. It's always good to hear from you. Fantastic question. Yeah, I think the key that we're hearing from employers, and I think for me as a practicing physician makes sense clinically, is that, you know, we want to use the demand for GLP-1s to really create a much more comprehensive evaluation and a much more comprehensive plan for these members, right? I think too many actors in the healthcare system are sort of taking a patient who's interested in a GLP-1 and saying, okay, well, let me just prescribe that for you. And I think what we're able to do is, you know, we have nutritionists on our staff. We are able to, we have mental health therapists. So some of these folks, you know, their underlying core issue is actually not related to metabolic issue, but much more related to their mental health. We have people like we alluded to in the opening remarks who, are actually just interested in addressing obesity and they're not aware of non-pharmacologic means like reversal of diabetes. And so I think our ability to be able to take that moment of people's interest in sort of what's become a fad, really use that as a way to open up this much more longitudinal relationship and then have a very broad set of clinical tools and interventions at our disposal. I think it's ultimately serving what members want and, you know, serving that employer's interest in, you know, managing costs and improving outcomes.
spk09: Thank you. One moment for our next question. Our next question will come from Jared Haas from William Blair. Your line is open.
spk02: Yeah. Good afternoon. Thanks for taking the questions. This is Jared Haas on for Ryan Daniels. Two-part question here. And just sticking with the demand environment favorability here, I'm curious if there's been any changes in terms of sort of the themes that are driving that environment, or is it still largely focused on cost savings, just especially when we think about the expected price increases coming on next year? And then related to that, as we think about sort of your ability to communicate ROI around cost savings, is there anything that's kind of uniquely changed in terms of how you actually communicate that with clients? Do you have any additional sort of tools in the tool bag, so to speak, to really showcase that to prospects. Thanks.
spk03: Thanks, Jared. As it relates to the first question, it's certainly trend line is always an issue, but also true and it's been increasingly true post the 2020 pandemic and shutdown is that healthcare is becoming increasingly complex. And so while costs are always a driver, even before 2023, 2024, and the forecast of increased trend line, the increasing fragmentation associated with the increased point solution, fragmentation associated with the complexity of healthcare and the growth of third-party solutions that create that fragmentation is another real driver. And that is a driver that points directly to solutions like ours that act as an umbrella to the healthcare system paper over the fragmentation using tools like our advocacy teams are by position. And so I think it's a combination of both of those things that's really driving the demand for our services and perhaps any mismatch between the demand you might be hearing about for services that are more point solution oriented or in other categories. As it relates to your second question, we are consistently showing our customers our value proposition as it relates to the interventions and the engagements that we're driving. Let's start there. How much of their population are we engaging? The interventions that we drive on their behalf, leading to the claim saving that actually we derive on their behalf as well. And so that's been very consistent over the years, and our performance has been extraordinarily consistent as well.
spk09: Thank you. One moment for our next question. Our next question will come from the line of Greg Santangelo from Jefferies. Your line is open.
spk08: Thanks for taking my question. Hey, Steve, I want to follow up with you on a couple of financial questions. You know, when we look at your long-term guidance that you provided, that five-year look at the fiscal 29, I think the assumption was, right, you're assuming 20% compounded annual revenue growth getting to a 10% to 15% margin. you know, in that year, should we assume that, you know, that the progression to get there will be somewhat linear? And is it also a fair assumption to assume that your cash flow will somewhat equate to your adjusted EBITDA, similar to maybe how it's trended this year? And I guess the reason I'm asking, right, is because I think, you know, as you mentioned in your prepared remarks, You said the converts are only two and a half years away into 2026, and basically the amount of converts are almost exactly equal with the cash that you have. And those converts are trading, you know, somewhere in the low 80s. And so I'm kind of curious as to what the plan is and how we think about profitability and cash generation in the next kind of couple years to prepare to basically refinance or do something with those converts. Sorry, a lot of questions here.
spk07: My bad. I'll stop. Yeah, yeah, but all closely tied together, so I appreciate it. I'll kind of wrap them all together, Glenn. First of all, you have it right that that 20% growth rate CAGR that we're seeing is all based upon the demand environment and our execution over the past several years and what we're seeing, as Raj was just describing, and so we're expecting that to continue, call it, over that foreseeable future, particularly that five-year period you talked about, which is Back in our investor day back in May, we laid out that path to 20% growth towards a billion dollars. And fairly linear progression is how we're thinking about that EBITDA bottom line. As we break through into next year in the positive territory there and adjusted EBITDA, our guidance is the range of 2% to 4% of revenue and would expect, as we always do, balancing growth with profitability, as we've done historically. on our way to break even and into profitability. And then going forward, there's a big opportunity in front of us, so we want to make sure we invest accordingly, which we will do, but also drive profitability on that path. To your other part to your question around free cash flow and balance sheet, yes, we would expect free cash flow to be within range of adjusted EBITDA. You know, there are always puts and takes around working capital timing, but the capex on the business is fairly modest, typically, you know, a few million dollars a year or, you know, percentage point or two of revenue. And that's usually with respect to things like the capitalized software and, you know, normal kind of workstation capex for employees, but that's really the extent of it. With respect to the balance sheet, you're right. We've got about $292 million in cash on the balance sheet as we end the August quarter. The converts are due in two and a half years in August of 2026. And we would expect by that time to be well into cash flow positive and have a lot of optionality around whether we pay it down in part or in full or refinance it. We'll certainly be... you know, looking about that and talking about it with investors over the coming quarters as that becomes closer, but we'll feel we'll have lots of optionality around that as we break through into cash flow confidence and profitability.
spk09: Thank you. One moment for our next question. Our next question will come from Alan Lutz from Bank of America. Your line is open. Thanks for taking the questions.
spk06: One for Raj or Steve. Raj, you talked about the rapidly growing health plan channel. Is there a way to frame how much of the 19% growth you saw in the quarter is coming from the health plan channel? And then I guess over time, is the expectation that that's going to grow as a percentage of growth? And then one for Steve, I guess, is there anything to call out related to the GLP-1 dynamic and why GOP-1 related activity declined quarter over quarter? Thanks.
spk03: Yeah, sure. On the first question associated with breaking out health plan new bookings versus our employer or government new bookings, we haven't broken them out that way, Alan. What I will say is when we talk about the announcement of a new partner like we talked about today, what we're really talking about is the expansion of our TAM, new opportunities to go into a health plan book of business in this case, for advocacy care and our expert medical opinion capabilities. And that opportunity manifests over quarters and years, and we expect that we're really excited about this particular opportunity, more to come in terms of commentary around that TAM in future quarters. We would expect over time, absolutely, that the health plan channel, which was relatively nascent, if you knew our company four years ago, there wasn't much of a health plan channel in terms of our go-to-market motion today, if you're to look across our book of business, it's a pretty material part of how we go forward. And we believe we're competing very effectively in terms of winning new opportunities to approach Alpine books of business. So yes, we expect it to be a growing percentage of our new bookings in years ahead.
spk07: Steve, do you want to grab the GLP-1? Sure. And Alan, to your question about GLP-1, both Raj and I had some elements of comments in here that Overall, this has been a driver of interest and strength, particularly around our primary care capabilities of consumers and employees of our commercial customers have inquired about and sought advice and prescriptions for that. We had quite a big surge for it in Q1. Growth continued there, but not quite at that same level in Q2. As we've read, I think even perhaps in one of your pieces recently about some supply constraints happening that may affect some of those prescriptions and for us visits. But I think what we are really positive about here is we think about the strength of the performance of the company on the back of a diversified platform that in any given quarter is not dependent upon outsized growth in any one of those. Importantly, the advocacy offering continues to grow at attractive rates, same with expert medical opinion and primary care, all growing along the lines of those growth rates we outlined, you know, in the past and certainly in depth on our investor day. So, that's a bit about what we're seeing specifically with GLP-1 in terms of financially and more broadly across the platform.
spk09: Thank you. And one moment for our next question. Our next question will come from Jeff Garrow from Stevens. Your line is open.
spk10: Jeff, your line is open. You may be on mute. All right, we'll go ahead and continue. One moment for our next question.
spk09: Our next question comes from David Larson from BTIG. Your line is open.
spk13: Hi. Can you give a little bit of color around your ACV, your annual contract value and your pipeline? I think it came in at $309 million at the end of the last fiscal year. So if we increase that by 20%, should we expect $371 million for fiscal 24? And then your bookings, I think we're turning in around $70 million. Should we expect that number to be like 84 million for fiscal 24 annually, which would be up 20%? Just any color there would be very helpful. Thank you.
spk07: I'll kick it off, Raj, and feel free to jump in, of course. Dave, so with respect to bookings, Raj talked about selling season. The fact is we're right in the midst of selling season right now and continuing to close deals around that. You're right in the data you're quoting as far as end of year last year ACV and ARR, but we report out on those at the end of the fiscal year, so we'll come back to you, given that those are key metrics that we hit in the fourth quarter call. But in terms of color, as we both were commenting on in various ways, got good visibility towards our current year outlook in terms of our guidance for the year. and towards that 20% top-line growth rate that we've been speaking about consistently.
spk09: Thank you. One moment for our next question. Our next question comes from the line of Stan Berenstein from Wells Fargo. Your line is open.
spk05: Hi. Thanks for taking my questions. Maybe sticking with for-child primary care, Can you share what percent of new plus care members in the quarter joined as a result of those members seeking GLP-1-related care?
spk03: Thanks. And we haven't broken out membership by condition that they're seeking. What we can tell you, and we talked about in the past quarters, is that a double-digit percentage of those visits came from or were associated with GLP-1 or weight loss, and that trend continued into this quarter.
spk09: Thank you. One moment for our next question. And our next question will come from Robert Simmons from DA Davidson. Your line is open.
spk04: Hey, thanks for taking the question. Can you talk a bit about the kind of ramp and traction that you're seeing with virtual primary care and with taking flush to the enterprise?
spk03: Yeah, absolutely. Happy to. I think it's one of the parts of the business that when we took accolade care or taking flush care to the enterprise, as you put it, in last year, that we were most excited about the opportunity to go live with, call it, you know, half a million people or so at the beginning of the year. What we're seeing, and I'll give Dr. Nundy an opportunity to weigh in here as well, what we're seeing is first that not only do we go live with that base, but that we saw the kind of utilization that we would expect on that base in the first seven, eight months since we've gone live. The second thing, we learned a lot. We learned a lot about incremental ways in which people were engaging with our solution, which has led us to really refine our value proposition associated with physicians being embedded in our advocacy care teams. And the reason for that is just the use cases that customers and members are identifying through their usage that we're really excited about. Sean, would you like to add a little bit more color there?
spk11: Yeah, absolutely. And it's such a great question. Yeah, I mean, just to give a couple of clinical examples of areas where, like Roger alluded to, I mean, I think we you know, we anticipated, you know, we know that 20, 30% of Americans don't have primary care physicians and we, you know, that our solution, because we're delivering primary care virtually comprehensively would be, you know, a great option for them. I think some of the learnings beyond that was, you know, we started seeing members who have primary care physicians, but just weren't able to access them or weren't able to get sort of the solutions from those primary care physicians come to us. So one example is, you know, patients being discharged from the hospital, you know, very well. studied that patients get better outcomes if they see their PCP within 48 hours of discharge from the hospital. But because of the access issues, a lot of times people weren't able to see their doctors in that shorter period of time. And so our physicians were able to see those numbers right in that critical moment. And I think resulting in downstream reductions and things like readmissions. A second example is, you know, pretty commonly members can't get in to see their physicians around a time where they need to refill. And we're finding that that's an opportunity to actually talk to those members about the chronic conditions that they're getting the results for and inform them about some of the trusted partners that we have that can also help complement sort of the pharmacologic options. So just some examples of where we're able to drive, you know, value for employers and sort of those moments of need and really lean into that physician-led advocacy approach. Thank you.
spk09: One moment for our next question. And our next question comes from Jack Wallace from Guggenheim Partners. Your line is open.
spk15: Hey, thanks for taking my questions, and congrats on the beat. Speaking of the beat, you beat by more than the $2 million pull forward, but you kept the full year guidance. I'm just wondering if you could help us think about the kind of the buckets of where the You could end up in the higher end of the range or the lower end of the range, just thinking of, you know, whether it's performance guarantees, new wins, or even some of the utilization, you know, fees and those assumptions in the back half of the year. And on that point, you know, just how much of that might be a swing factor related to the GLP-1 space. Thank you.
spk07: Hey, Jack. It's Steve. So, you're right. We beat the range by a little bit more than the performance guarantee. Remember, just walking you back a quarter ago, we raised guidance last quarter. We're reaffirming that guidance as we're here moving through selling season and driving growth across the business. As we head into the back half of the year, certainly the variables on the business are around the items you talked about, the virtual primary care utilization and EMO utilization and PGs. We factor into our guidance, you know, historical performance and what we're seeing this year as well into the guidance and have good confidence in that number. And, you know, we'll certainly report back on how we progressed there. But important point here is that we raised guidance last quarter and we're reaffirming that today.
spk09: Thank you. One moment for our next question. Our next question will come from John Penny from Tenacore Genuity. Your line is open.
spk16: Hi, John Penny on for Richard Close. Congrats on the quarter. I guess going back to virtual primary care, is that 20%, 21% that you're calling for in guidance? Is that, like, consistent across commercial and consumer? Is, like, commercial kind of coming off a smaller base and going to be bigger? Any color around that would be great. Thanks.
spk07: Sure. So, first of all, the 20%, 21% growth rate, that's for the entire business. The way to think about that is that we've got the three different offerings that are driving growth in the business. The advocacy business itself will be in the neighborhood of 20%. Virtual primary care business growing faster than 20%. And the enterprise primary care business will be growing quite a bit faster than that, but it's off of a small base because we're in our first year there. So when you take that together with the consumer business, you put those together, it's growing faster. you know, faster than that, call it mid-20s, and then expert medical opinion offering growing in the neighborhood of 20. So all of that together gets you to that about 20 to 21% growth for this year with the virtual primary care business growing a bit faster than that.
spk09: Thank you. One moment for our next question. And our next question will come from Ryan McDonald from Needham and Company. Your line is open.
spk18: Thanks for taking my questions. Congrats a nice quarter, maybe just to touch on the T five contract mentioned that you're still waiting decision on the health net appeal here. But you know, given that the congressional research service had provided an updated timeline now, does that give you any increased confidence on that we're sort of nearing a conclusion? We are actually gonna get a final decision on the appeal, and that we can start moving forward with this process. Thanks.
spk03: Ryan, there's one thing certain. We know this can't last forever. We expect to see a conclusion to the appeals process in what I would expect to be a reasonable timeframe, call it over the course of the next three to six months. As the government has proven over the course of the last year, it's difficult to bank on those types of timelines, even though there is expressions of a desire to get to the end of the appeals process. But yeah, we'd agree. We'd expect over the course of the next six months or so that we're going to get to some sort of conclusion and that At that point, we're going to be in a place where we're well-positioned to grow our business within the government.
spk09: Thank you. And I'm not showing any further questions in the queue. With that, I'll turn the call back over to Rajiv Singh for any closing remarks.
spk03: I appreciate everyone being here. Thanks for the time, and we look forward to talking with you next quarter.
spk09: And this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.
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