Q1 2021 Accolade Inc Earnings Call
Today's conference is scheduled to begin shortly please continue standby. Thank you for your patience.
[music].
Since I've been trying to listen only mode at the other speakers presentation. There will be a question and answer session tap. The question. During the session. You want me to press Star one on your telephone if you require any further assistance. Please press star zero. Please be advised that today's conference is being recorded hosting todays call, our Rajiv Singh Chief Executive Officer.
Accolades and seaborne Chief financial Officer of accolade, Rajiv and Steve will offer the prepared remarks, then they will take your questions. The accolade press release webcast link and other related materials are available on the really Investor Relations section of accolades website.
These statements are made as of August 12, 2020, and reflect management's views and expectations at this time and are subject to various risks uncertainties and assumptions.
This call contains forward looking statements that his statements related to future not passed events.
This context forward looking statements often address our expected future business and financial performance and financial condition and often contain words, such as anticipate believe contemplate continue could estimate expect intend may plan potential predict project.
Should target well or would or similar expressions.
Forward looking statements by their nature address matters that are two different degrees uncertain for us particular, uncertainties that could cause our actual results to be materially different than those expressed in our forward. Looking statements include our ability to achieve or maintain puppets stability, our reliance on a limited number of customers for a substantial portion.
And of our revenue, our expectations and management of future growth, our market opportunity and our ability to estimate the size of our target market the effects of increased competition as well as innovation by new and existing competitors in our market.
And our ability to retain or existing customers and take rates. Our number of customers. This call can include non-GAAP financial measures. These non-GAAP financial measures are in addition to and not as a substitute or superior to measures of financial performance prepared in accordance with gap there are a number of.
Limitations related to the use of these non-GAAP financial measures. For example, other companies may calculate similar title non-GAAP financial measures differently refer to the appendix for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures with that I'll turn the call over to rushing thing deal of alkali.
Good regime.
Hello, everyone and thank you for joining accolades first earnings call as a public company today will be reviewing our results from the first fiscal quarter as what was speaking to our.
At quarter end the year had.
Good food again, let me ask my appreciation to the investors and analysts to not with us and our recent IPO roadshow.
I took the time to understand our mission and vision here and accolade.
Many of you are familiar with accolade for those of you who are new to our story I'd like to start our call today with a brief overview, what we do and how we do it.
After that I'll review highlights for Mcaleese first quarter results.
Scott, how we're meeting the needs of our members and customers amid the ongoing pandemic.
And provide some color on the strength of our sales pipeline.
I'll, then turn it over to Steve bonds, our CFO to.
To review the quarter's financial results in more detail.
One more no before we jump in.
Certainly we open every company meeting with a member story, because it's so important oh, we stay ground because in the real life needs of our members and the opportunity half day in and day out to make an impact.
We'd like to expand that tradition to our earnings calls so something you'll see us consistently do because we've been a member story into these calls with the intensive making certain concepts, we're discussing more tangible for you.
With that let me begin with an overview of our business briefly recapping who yard what we do.
One thing all the people that accolade will tell you is we are a mission driven business our vision that for every person to live there healthiest life.
I understand that health care in this country as a complicated opaque system, which too often does not meet the needs of the patients it's supposed to sure.
Even while health care costs in this country continue to grow.
We addressed that problem for employers and other payors by providing their employees and their families, whom we referred to as our members how single place to go to address all of their health care and benefits questions and needs.
Our solution consistent empathetic front line care teams made up of accolade health systems and experience clinicians nurses doctors pharmacists and behavioral health specialists, who built long term relationships and that brilliant technology and by an extensive and proprietary data center to guide our members to the right care at the right.
Time in the right setting.
The result for our customers are extraordinary and differentiated.
Hi engagement across the full population extremely high member satisfaction rates.
For health care outcomes, and lower health care costs, some data points to this and are available in the posted presentation.
In normal times, our offerings are a powerful remedy for employers wrestling with rising healthcare costs were often once described as the tape work of American economic competitiveness.
In the pandemic Euro on health care in this country, even more complicated and the potential swings in cost more volatile we believe customers have finding our solutions essential.
We are unique in the industry because of the combination of our deep health care roots more than a decade of delivering impactful evidence base interventions in our next generation technology stack.
Technology stack is able to ingest rich disparate data sets and since the site.
Breaking down the silos that plagued the broader industry.
I would like more transactional or condition focused solutions, we turned that data into longitudinal 360 degree view of our members health care Gerry.
And leverage artificial intelligence to make sense either actionable.
When and wire remember, yes, and our position to provide them with personalized intervention.
This powerful tech stack is also flexible enough to power in innovation engine that is littered five new offerings over the last two years.
Coming off a strong year with 40% topline growth for fiscal 2020, which ended this past February we also had a strong start to fiscal 2021.
We delivered revenue of $35.9 million in fiscal Q1, reflecting an increase of 25% over the first quarter of last year.
Our full year revenue guidance for fiscal 2021 reflects approximately 20% year over year growth at the midpoint of the range of $158 million to $161 million.
Importantly, this range reflects our best estimate of unemployment related impacts to our revenues given the effects of the pandemic on our customer base, including the airlines, which will cover in more depth shortly.
We expect the business will return to a higher annual growth rate, which we believe will be in the 25% range for the foreseeable future once we get through the uncertainty attributable to the pandemic.
From a bottom line perspective, our adjusted EBITDA loss in fiscal Q1 was $9.4 million, representing a 2.3 million dollar or 90% improvement versus the first quarter last year.
For bottom line guidance, we expect the fiscal 2021, adjusted EBITDA loss will be in the range of $32 million to $36 million.
Turning now to the covert 19 pandemic and its impact on our business.
First and foremost the Corona virus has put an incredible strain on the health care system in this country and the corresponding increasing complexity for our members has made our value proposition more compelling than ever.
Our customers a film this as does the strength of our pipeline.
To meet the unique needs at the moment in a way that Leverages, our technology platform, our clinical model and our front line care teams.
We released a new offering in fiscal Q1.
Accolade Kobin response here.
Which is designed to help employers reopen their workplaces safely by supporting employee testing certification and contact tracing capabilities.
Also supporting those employees with any ongoing clinical support they may require if they test positive with the virus.
Since its launch at the end of May be offering quickly secured a number of customers, including Johnson controls the world's leader in making building smarter via products technology software and services.
It should be noted the Johnson controls will also deployed accolade total health and benefits next year.
Accolade Cold Winter Sports care has also created the opportunity for new dialogues with brokers consultants and prospects, who otherwise might not have reach who are keen to engage with us as a thought leader in this rapidly changing environment.
More tangibly, let me speak to the near term impacts in the pandemic in our business.
As we've discussed in the past our offerings have proven attractive to airlines, who are unfortunately wrestling with the dramatic drop off in travel during the pandemic.
Airlines represented 22% of our revenues during the last fiscal year and as we outlined on the road show we have factored in their anticipated head count reduction into our future forecasts.
Due to this uptick prior to going public we have no news to report in this regard.
This acknowledged a number of our customers are experiencing a cold the tailwind and year to date, while some customers have incurred employee losses, our net member count is unchanged.
We continue to monitor health and hiring of our customer base and will ensure our forecast her kept up today accordingly.
On a macro basis, the pandemic has materially reduced healthcare utilization in the United States.
Members had been forced to postpone elective procedures and beyond that have understandably demonstrated in a reticence to engage with the health care system in a time with the contagious virus pretty throughout the country.
We know that chronic conditions have not gone away and that our members need help managing their clinical needs.
Quickly pivoted to outbound engagement strategies to meet our members, where they are and guide them through the right clinical pathways.
Importantly, we expect that at healthcare utilization returns, though the timeframe is uncertain.
Customers will Russell with other challenges related to access to care for their members and of course unlikely Spike in health care trends.
In fact, the Health Research Institute for Pwc pointed to a potential double digit increase in health care spend in 2021.
This change in healthcare utilization the uncertain outlook for next year's healthcare spend and the outstanding challenges associated with returning to work safely have notably push the conversation around health care advocacy and navigation to the forefront for Ceos, Cfos and board, who must confront the new reality.
The health care and wellness is no longer a check the box benefit, but instead something that directly impacts business continuity.
We envision a world where just as board audit committees now routinely review income secretary options for their companies.
Other born committees will now be reviewing the health care strategies for their businesses.
View this increased scrutiny is positive.
Customers have long viewed us as a strategic partner and our ability to serve easily in that role is especially valued as our customers Shepherd their businesses through these uncertain times.
We believe our value proposition today resonates with an even broader audience of employers and we're ready to serve as a trusted partner going forward.
Before moving onto a more detailed update on demand and new customer acquisition I'd like to take a minute to reinforce the extent to which the comprehensive support accolade provides is helping our members managed during these difficult times.
To do so let me we're kind of recent member story that I think shows you the remarkable powerbar Sir.
Recently member reached out asking for help to find a therapist in their network.
Adhering to our engagement model are absolutely health assistant asked probing and empathetic questions to better understand the members' needs and motivations.
Within minutes she learned the following things about the member.
First she was seeking a therapist given a host of challenges at home that had are feeling anxiety and stress.
Her husband had recently lost his job did the economic downturn.
Third she was feeling tax by the home schooling required for her child.
And finally her stress was compounded because they're sister in law had recently just been admitted to the hospital with Covidien team and put on a respirator.
By taking the seemingly simple step of asking about the reason behind the need for a therapist, the accolade health assisting could user experience.
Acknowledges the members benefits and the technology provided there to highlight some opportunities the member had not considered to.
So while the member had a therapist in mind and our health system could leverage our provider selection tools to verify the therapists was in network at the right price point, how consistent when a step further confirmed tele health benefits for comfort.
Then given that all of the employers benefits were available to our health assistant in our purpose built tool for our front line care teams. She educated the member about her employee assistance program, which would provide for six free visits.
Our member learning this expressed how grateful she was for this information given the financial strain the family was under.
Understanding this stream our health assistant went even further and encouraged the member to leverage for health savings account to cover any additional therapy visits while also sharing some information about local food banks as well some strategies for negotiating extensions uncertain utility bills.
Has the conversation progressed, our accolade health assistant build trust with the member the member shares at the family had been spending a lot of money on medication, which led to a conversation about signing up for mail order prescription programs that would reduce the cost of their medication.
As a route the accolade health assistant encouraged the member to download our mobile App and provided her with her direct line phone number two the they can maintain a dialogue and address any further concerns that they arrive.
I Love. This example, because it's so clearly shows how well positioned we are going to educate members on available benefits like EAP, HSH and mailer prescription programs, when they're most relevant, thereby encouraging appropriate utilization and driving better outcomes, both health and financial.
Remember this story started with a simple request to find in network Farecast and ended with our accolade health assistant unlocking so much more value from the interaction.
It reminds us that health needs don't exist in isolation, especially now is our members juggled. The many complexities that present moment, our model, which allows our front line care teams to gather context account for various member need leverage the capabilities of our tech platform and ultimately provide personal life support is critical as.
It is powerful.
With that I will conclude my remarks, with the sales and customer uptake.
In part due to the trends I mentioned above demand for our services remains strong and we've seen traction in each of our core market segments.
Additionally, in fiscal Q1, we saw a new transactions for each of our core offerings.
A couple of highlights for the quarter.
First our Humana partnership continues to yield positive results.
Fiscal Q1 joint offering Humana impact with accolade was selected by Hillsborough County School District in Florida.
Importantly, this is an example of a fully insured customer embracing our solutions via their carrier.
Hillsboro isn't employer in the enterprise segment for accolade.
We're excited to continue to deepen their relationship with Humana.
Second existing customers continue to find value in our trusted supplier program through which they can purchase and seamlessly integrate third party solutions through accolade with the assurance that vendors had been evaluated for clinical quality operational scalability information security compliance and financial viability.
Sedgwick and Temple University health systems, expanding their relationships with us.
In our government market segment, the defense Health Agency launched its pilot with accolade and Matt and satisfaction levels for DHL beneficiaries have been very positive as a reminder, accolade was selected as the only vendor to serve a population of around 80000 beneficiaries with an offering called accolade Tri care select navigator.
The offering is based off of our accolade total care offering with a few adjustments to accommodate the unique needs of Tri care beneficiaries.
I'll now turn the call over to Steve to review the financials in more detail.
Thanks, Raj and I also want to thank the investors and analysts on our call today and for the time spent with us leading up to the IPO.
To start my remarks, I'll share a recap of our IPO.
July 7th we closed or initial public offering having issued just over 11.5 million shares at $22 per share, resulting in gross proceeds of $253.6 million to accolade.
We're quite pleased with the outcome, which reflects pricing above the initial range and full exercising the underwriters greenshoe over allotment option.
Before I walk through our financial results and outlook for the year I'd like to spend a couple of minutes discussing our business model.
We believe it offers compelling and differentiated value for our members our customers and frankly.
We earned revenue from providing personalized health guidance solutions to our members our solutions our price based on a recurring per member per month, where PMPM. The typically consisting of both at fixed PMPM base fee and a performance based PMPM fee component.
As a result generally a portion of our potential revenue is variable subject to our achievement of performance metrics and the realization of savings in healthcare spend by our customers, resulting from the utilization of our solution.
For a typical accolade total health and benefits customer about two thirds of the PMPM fias fixed and about one third is his performance space.
We have a strong track record of achieving a substantial portion of the contractual performance metrics and realization and savings of healthcare spend which comprise the variable component.
Turning over 95% in the aggregate maximum potential revenue under our contracts over the most recent threeq fiscal years.
The combination of our PMPM revenue model multiyear customer contracts, which are typically three years in length and high customer retention rates provide strong visibility to our future revenues.
Turning to financial results I'd like to remind you that our fiscal year runs from March through February.
Results for our fiscal first quarter, which ended in May were as follows we generated $35.9 million in revenue representing 25% year over year group.
We're pleased to report that revenue exceeded the top end of the range provided in our S. One by about $900000.
Growth was driven primarily by strength in new customer adds, particularly in the enterprise segment, which we define as employers with between 5035 and 35000 employees.
And the Midmarket segment, which we define as employers with fewer than 5000 employees.
As we noted in our S. One we finished fiscal 2020. This past February with 54 customers and as of July 1st we had 60 customers.
For reference this compares to 20 customers at the end of fiscal 2019.
For those 60 customers as of July 1st we served more than 1.7 million members.
We recorded adjusted gross margin of 38.3% in the quarter.
This compares to 39.6% in the prior year period.
Slight decrease in year over year adjusted gross margin percentage reflect investments we made in the first fiscal quarter, which hit our cross cost that revenue line.
In preparation for new customer launches in particular, the defense Health Agency Tri care government customer, which we launched in May that Raj noted earlier.
Our adjusted operating expenses, which represents product and technology.
Sales and marketing and GNS expenses net of stock based compensation expenses totaled 65% of revenues in Q1 fiscal 2021 first with 80% of revenues in the prior year period.
This improvement reflects scale efficiencies as well as a slight pullback we've made on expense growth in the first quarter after quarter 19th in order to manage our spend given the uncertain environment.
Adjusted EBITDA loss in the first quarter fiscal 2021 was $9.4 million, which compares favorably to $11.7 million in the prior year first fiscal quarter.
This year over year improvement was driven by increased an adjusted gross profit partially offset by an increase in adjusted operating expenses.
We're pleased to report that our adjusted EBITDA loss performance beat the $11 million to $13 million range provided in our S. One.
Which favorability was primarily attributable to adjusted gross profit generation.
Now turning to the balance sheet cash at the end of fiscal Q1 totaled $77.7 million and total debt outstanding with $73.2 million.
IPO proceeds net of fees and offering expenses totaled $231.6 million.
And then July subsequent to the IPO, we paid down all of our outstanding debt.
Leaving us with $236.1 million cash on a pro forma basis post IPO as of the end of fiscal Q1.
Finally, we had approximately 49.1 million shares of common stock outstanding as of July 30, Onest 2020.
In terms of financial guidance, we believe the best way to evaluate our business is on an annual basis.
In that vein, we planned in the future to provide annual guidance for revenues and adjusted EBITDA during our fourth fiscal quarter earnings call for the following year.
With updates toward our progress compared to the annual guidance, including a look ahead due to the next quarter with each quarterly call.
Given this is our first earnings call as a public company today, we're providing initial guidance as follows.
For the fiscal second quarter, ending August 30, Onest 2020, we expect revenue in the range of $34.5 million to $35.5 million, an adjusted EBITDA loss in the range of $12.5 million to $14.5 million.
And for the full year ending February 20, Eightth 2021, we expect revenue in the range of $158 million to $161 million, an adjusted EBITDA loss in the range of $30 million to $36 million.
This guidance range for the full year reflects year over year revenue growth of about 20% at the midpoint of the range and includes our expectation of potential employment related impact to our revenues given our PMPM model and exposure to unemployment with some of our customers due to cobot, particularly the two airlines in our customer base.
Thanks.
That said the demand environment for our offerings is strong and fiscal year to date customer wins in bookings are positive across a variety of industries and product offerings.
This gives us confidence in achieving our revenue guidance for the year and we will continue to keep you apprised as we have more clarity on the potential impact of the pandemic honor business over the coming quarters.
One last note on the topic of our guidance relates the seasonality of our business.
As a reminder, a portion of our performance based revenues, particularly the part related to cost savings it typically deferred until the fourth fiscal quarter.
This leads to a disproportionate amount of our revenues and adjusted gross margin being deferred and recognized in our fourth fiscal quarter.
Over the long term given that demand we see for offerings the value, we create for members and customers, which drives both customer acquisition and retention as well as opportunities to grow the business across multiple factors, we expect to achieve a top line growth rate in the range of 25% on an annual base.
Yes.
With that I'll now turn it back over to rush for closing remarks.
Thank you, Steve I think you've heard today, our offerings are built to support people in today's challenging environment when accessing health care is even more complicated than normal.
I'm pleased to report our positive first quarter and I want to thank every member of the accolade team for their hard work and ongoing dedication.
And with that operator, let's open the call for questions.
Our first question comes on line of Bob Jones from Goldman Sachs. Your line is now open.
Great. Thanks for the questions. Good evening Rogen, Steve appreciate all the details that you shared the 60 clients as at the end of July certainly encouraging already with new ads, but I believe as you highlighted a lot of your your new bookings given the selling season come kind of late summer early fall. So I was hoping.
Maybe you could just give us a sense of how the selling season has been trending you know given the onset of coded and then I guess just within that anything you'd be willing to share beyond the comments already about how the various cohorts had been trending as you think about the strategic bucket versus enterprise versus mid market would be helpful.
Sure Bob Thanks for the question Thanks for being here.
I'll start and Steve you give anything to add fleet to jump it and.
As noted in the call Bob we actually saw traction across each of the market segments, leading into walking into this call.
So we saw customer acquisition in each of those market segments, and we saw customer acquisition across each of our core offerings, including accolade cope with response care. So the demand environment. We think has continued to be very strong and in part we think that's driven by the complexity created by covert 19.
Impart by an increasing acknowledgement from customers that navigation and AG season important category.
As it relates to.
The cohorts buying by market segment.
We think that you traditionally see strategic and enterprise customers signed earlier in the year.
In mid market and bottom end of enterprise customers continuing through the remainder of the year, we expect that will continue.
Okay, Great and I guess, maybe just to follow on some of the newer offerings that I'd be curious where you could share around the code response offering just maybe what the economics of that look like relative to some of the other offerings and then more specifically as you think about total care and total benefits I know a little bit on them.
Newer side of the offering set and so just curious what the response has been from clients how much traction you're seeing at this stage of the selling season around those offerings as compared to maybe to core total health and benefits offer it would be helpful.
Sure as it relates to cope and response care accurately covered or songs here. Let me start there were really bullish on the offering giving given the incredible interest we've seen in it we think that interest is actually interesting bobbing that.
It not only generate interest for that as an offering itself and also we generate interest from customers who are they may be very focused on returning to work today.
Also by virtue of exploring our accurately Toby response care offering beginning to explore other category or excuse me other elements of our product strategy and so in that way the product is very strategic for us the price point on the offering depending upon market segment and whether we're selling back in their customer base, where a new prospects ranges from that low single digit.
Yes.
Mm to the mid to high single digit ppm.
And as it relates to total benefits actually told benefits and likely total care how one of the things. We're really excited about is that in the first quarter. We saw traction on each of the core offerings and so we saw total benefit in total care closed new customers.
And and looking at deployment, starting you're not too distant future.
Okay, great. So just just to be clear on that last point you haven't seen traction from total care total benefits come at the expensive total health and benefits I guess would ultimately be the.
The clarification.
I think that's that's a fair characterization.
Great. Thanks, so much appreciate it thank you.
Thank you. Our next question comes in the line of Ricky Goldwasser from Morgan Stanley. Your line is now open.
Yes, hi, good evening and congrats on the first.
Quarter as a public company.
You know when we.
I hear from probably play employers and other companies I health care service companies about this gap between the unemployment numbers at the benefited employers are still providing.
Two employees.
This gap.
Closes.
Towards yearend.
How do you think this is going to impact your outlook.
How much are your client sharing with you.
The look to plan ahead for the rest of the year.
Hi, Ricky Thank you for being here and thank you for the congratulations for through the here.
As it relates to let me make sure I'm answering your question I believe your question is related to health care utilization and client outlook around health care spending utilization in 2021 and beyond or even in the fourth quarter. This year do I characterize that properly.
So if it's if you look at beyond the utilization itself, but the fact that for the time being.
Employers are covering health care benefits.
Furloughed employees, it, but that's something that they.
[music].
And that sort of benefit at the table and over time.
So if that does happen.
How is that factored into the guidance that you gave us today and also how much visibility to do you have.
For any of these changes.
If you want to grab.
Yes, sure Hi, Ricky.
A couple of things about that first of all you're right. If you look at our base for sure RPM Kim model kinds of membership creates potential exposure tour for furloughed employees and otherwise.
Year to date, our net membership across the entire book has actually maintained we've had some customers who have pad.
Losses, and unemployment, but we've also had customers who grown through the pandemic, which has offset that now let's say, we're in close touch with our customers understanding what those look like.
To the extent I think the most.
Important one that we're looking at from a revenue standpoint, certainly the airlines.
Visibility we have to them is certainly in line with the public statements that they've made that there could be furloughs in the fall after that the government bailout.
Money expires at the end of September and importantly, we factored in our expectation of that impact into our numbers. This year. So the guidance that you've seen.
Take that into account and our expectations of that rolling into next year fiscal 2002.
Okay.
And then onto federal contracts I mean, obviously you had now.
A few months experience with that vertical he can you just give us a little bit more details about the program.
The termed the length of the demo type of services aim any early experiences that takes.
Sure early experience is a very positive.
Beneficiary satisfaction scores are extraordinarily high we've had we've had great traction in terms of.
Engaging in adding value to beneficiaries lives as we as we started the rollout.
The the term for the for the pilot period will be at least a year and potentially longer.
As we continue to rollout and we expect that.
The.
Criterion for the for the success of the pilot.
Our things that are very closely related to the traditional performance criteria that we've laid out for most of our clients in that we have done a very good job over the last 10 years in terms of achieving.
Right.
Okay.
And then lastly, just in terms of housekeeping.
We saw the P.A., our number to Dsos went up.
From February to me any color there.
Nothing in particular note Ricky it's still a relatively small amount.
$3 million at the end of May.
Generally our customers pay us.
Lastly in advance.
What you're seeing there, it's just timing of a particular.
Some are payment.
Nothing in particular point out the Dsos in the business are extremely low given the fact that our contracts typically have customers pay much in advance.
Thank you.
Thank you for the questions.
Thank you. Our next question comes from a line of Michael Cherny from Bank of America. Your line is now open.
Good afternoon, and I Echo my congratulations on the first public company call.
I wanted to dive in a little bit to the care I'd be kits and your team you talked about the product rollout relative to.
The Cove response team, but can you give a little sense as well on the type of update the you're providing.
To your team members to make sure that they can best react to some of the inbound call forget and also best follow up on outreach, depending on how public health are publicly available data continues to change.
I appreciate that question a great to hear Mako. Thank you for the question I think.
In fact, what are the things that we're most excited about as it relates to the technology platform. We deliver is its capacity to be flexible and nimble, allowing us to deliver either new clinical programs, which is really where co. Good response care was born.
Within a week and a half of the pandemic really shutting down the country, we delivered a brand new clinical program to our customers, helping guide them with both education education information as well as clinical guidance around how to manage what was a very chaotic environment back in March.
We quickly learned and our customers had more needs and just clinical guidance around the Ron Cohen.
And wanted more as it related to return to work our capacity to quickly create new content to get that new content all of our front line care teams, including our clinicians.
To make sure that that content is evidenced based and then in turn to feed workload and and data to our care team. So that we can follow physician led evidenced based guidelines is one of the things that we think really separates us our capacity to nimbly react to the way that the market is working we're in this case.
To the weighted clinical needs are changing.
Something we're really excited about and so we leverage our technology stack.
Our content management capabilities, our workflow capabilities and those physician led evidenced based care teams.
The drivers of being able to react so quickly.
Thanks, Let's just a quick follow up to Bob's question Rela guarding the selling season can you just give us a sense how the industry representation is across the prospects are seeing and the pipeline you have how widespread is there any concentration in one area. The other in terms of you'd be prospects.
Sure absolutely Michael the.
I'm just I'm just.
Scrolling through this thinking about it myself and in fact, we're not seeing any particular industry segment or category.
In any sort of particularly weighted perspective in terms of our existing pipeline. We're in terms of what's been closed already this year and so in fact outside of the airlines that Steve mentioned earlier, that's reflective of our the entirety of our customer base. You know, we find that we're adding value across multiple industry segments. Most.
It's a wrestling if not all are wrestling with rising healthcare costs and increased complexity associated with health care and we think that's reflected for sure in our existing customer base as well as in our new business pipeline.
Great. Thanks, so much.
Thank you.
Thank you. Our next question comes from the line Oh, Sean Wieland from Piper Sandler Your line is helping.
Hi, Thanks, and congrats for being back in the saddle again of the public company CEO. So I wanted to ask How's your sales team adapted to this new virtual world selling in the selling process to get.
To get in front of the right decision makers into pushed deals through the final its first time for all of us.
Great chat against Sean and not and thank you.
In fact, it's been one of the one of the most.
Eliminating points about our team more broadly Sean to be very candid with you. We have 1200 50 employees and in the first week of March we had to get every one of them to work from home because we knew that was the safest place for them to be.
And within about seven to 10 days, we did that and and so.
We have different but you didnt answer the question I'm going to nominate celebrated our front line care teams and clinicians who got to work from home and kept service levels.
At par, which is spectacular or better in the midst of all that chaos.
Our sales teams actually had a different challenges and the challenge was oftentimes prospects, who evaluate services like ours across the entire spectrum of what we deliver want to meet the teams that there that they're speaking that they're going to be working with the come on site do wrong. They do site visits they spend time understanding the culture of the company etcetera, and so we had the quickly pivotal.
To figure out how we could deliver and on a site visit in an online form and we did just that and because in fact on top of that a great deal of what we use beyond.
The human relationship, which we could demonstrate via virtual calls et cetera, where we're doing with our prospects, but also because.
So somebody has really find valuable about us is the next generation Tech stack that allows you to engage not just via the phone, but the other vehicles.
We found that are that our capacity to demonstrate our value proposition.
Actually expanded fairly well to a virtual selling environment I think we're all looking forward to getting back to a personal selling environment.
But our team has responded really well and and I think that's why we're bullish on our on our pipeline our future.
Thanks, I appreciate that.
On the gross margin front.
The as you noted the decline in gross margins with maybe some onetime stuff getting ready for for Tri care.
But any more details you can provide on that are those costs going to be ongoing and how should we think about gross margins throughout the rest of the year.
Hey, Schon this is Steve thanks, Thanks for that question as well.
A couple of things absolutely, we have a very big opportunity with with Tha and Tri care, which we launched in May and as a reminder, we're starting that relationship with the only company serving them and that capacity. It's about 75 to 80000 members out of an opportunity that eight to 9 million.
The numbers. So we believe it's extremely important to serve them incredibly well how do we do with all of our customers, but to make some additional investment to allow for scale and the bill deep relationships there overtime.
Speaking the gross margins stepping back for a minute.
Over the past few years, we have made substantial steps and improving gross margin from the low thirtys three years ago and fiscal 18.
Up to the mid Fortys over the past year, and we expect this year that will moderate in that mid Fortys range and as we make some investment, particularly around DHL and then we expect that gross margin to continue to expand over the coming years and into that fit these over the next several years.
Super Thanks, so much of the comments.
Thanks, Sean.
Thank you. Our next question comes in the line of Jailing dressing from credit Suisse. Your line is now open.
Thanks, Hello, everyone and congrats from my side as well what do you have first earnings call it as a public company.
And I wanted to check on that I don't know if I missed this but.
Did you give out your fiscal <unk> 21, ACB expectations and end up is called 21 I know you ended fiscal 2020 had 161.4 million. We're just trying to figure out why did it in your full year outlook with respect to new out of Max and accretion aligns.
Hi, Joinders, Steve and first of all thank you for the nice words and further question.
Yes, not giving guidance to the HCV number in particular.
But what we were doing is giving a sense of our expectations on revenues for the year.
And so that range of 158 to 161, which we've got good confidence and even taking into into account our expectations of some potential attrition hits this year from co that.
Pencils out to.
The numbers that would would give us confidence in that growth rate.
With respect to HCV and some other metrics, we would expect to provide the report out on the actual number at the end of the year and do so on an annual basis.
But provide some color and picking up on Rogers coins earlier.
This point in this selling season, we've had.
Some some important wins across segments across products that give us good confidence in achieving the revenue number for the year.
Okay, and then my follow up.
Maybe barrage that has been some developments, but on industry consolidation and done how did the teladoc on the bango emerging I know you guys don't directly compete either of them, but I'm curious on your thoughts on the industry consolidation in this done held and whats rolling accolade is likely to play in that but I guess.
I appreciate the questions and undercuts talking again.
Yes, maybe before I answer the question Jay Leno music, it's important to kinda zoom out and reiterate first and foremost we're in the early early innings up.
Market leadership in a category that have huge opportunity for growth and so we look at our business and as we've discussed before we think our businesses more than enough headroom to grow organically or 25% or better for some period of time.
That said you know getting into the meat of your question I think our platform, where we are the single place to turn for all things health care and benefits for our members means that if we acquire any come in complimentary categories. We have an opportunity to achieve positive utilization synergies almost immediately by virtue of the incredible engagement that we draw.
We demonstrated that capability with the MD inside our acquisition, we completed back in fiscal 2020.
And we expect that.
I'll close with this we're constantly looking for ways to add value to members and the customers. We serve we want to reinvent how healthcare is consumed in this country by Reorienting it with the member in the Middle and we've got a coffee hypothesis about how exactly that should be done and so we will always be looking for ways to simplify that consumer journey and to make aspects of it.
We're in more effective and to the degree we find assets that help us achieve that.
M&A will be a part of our strategy and and we will proceed if the opportunity presents itself.
Okay. Thanks, a lot guys.
Thank you.
Thank you. Our next question comes from the line of Ryan Daniels from William Blair. Your line is now open.
Yes. Thanks for taking my question guys and will continue with the course of congrats on the strong start first releases of public company I guess my focus a little bit more strategic you mentioned earlier that what's going on today in the marketplace is really push the need for health and wellness solutions like yours with a high value proposition to the forefront.
Exactly yes, we so I'm wondering if that's also kind of pushing more conversation with carriers.
California, Blue and Humana that have partnered with you because they're kind of notoriously poor delivering communications and working with their customers to create value.
I think even in the pandemic, that's kind of standing out even more so.
Thanks, Ryan I appreciate the question and thanks for the congratulations good to talk again.
Look I'll take a first crack at that question steeply to jump in if you've got a anything to throw to throw in.
Without question Ryan we are seeing that this buying cycle. He is he's driving a more strategic look then it might have in years past CEO CFO Chr rose more often are participating in the buying process and we think with that it's generating increased scrutiny, which.
Offices, nothing but positive meaning we're a company has long been prided itself on measurable ROI that we actually put at risk in order to align our interest with out of our customers and so we look at that scrutiny as a means of differentiating against us against competition that oftentimes isn't quite as high as rigorous and.
In the measurement of their value.
Adding to the.
To your going to the next part of your question are we do see the carriers as a logical growth segment for our business got Humana and accolade have been a.
Really excellent fit in that.
Bowsher passion for adding value and improving members lives and because of that we were able to quickly come to market with the new offering that seem really strong adoption last year and heading into this year.
With the winners and Hills Republic schools are representative of that we you pointed out, California Blue Shield were really bullish on that relationship.
Maybe last one on that Ryan.
We're going to continue to look at relationships like that and we believe that are that the tiered product strategy, we offer which is unique in our category gives us different ways to partner with carriers and and is increasingly being met our positively and with those carriers into.
You should expect us to continue to pursue that going forward.
Okay very helpful color and then maybe one quick one and this is somewhat of a follow up to a few you've been asked in your commentary. So given covert 19, I'm curious if that is referring more intra year interest not only in the cobot offering, but also in boost and trusted supplier and thinking.
Just to get employers with employees family members of chronic conditions. It may have not gotten appropriate care back in to the marketplace to ensure that there.
Sure outcomes don't deviate from what you would want to see and then on the trusted supplier.
Tele health and things like digital care management.
We are more demand than ever before given the lack of access to physician offices. So that actually also driving some into your sales more than it normally would upsell into the client base. Thank you.
Hello.
We try to tackle that in a few different vectrus Brian.
First as it relates to has coded driven incremental interest in our AD offerings back into the customer base I'll start with this when the pandemic really shutdown the country in early March we immediately began to deliver boost to our customers to drive engagement and adoption.
And so that we could get educational information out to all of our customers. We did that at cost me excuse me. We did that brought US we did that for free for our customers because.
We believe we knew as important we knew they needed it and we didn't feel like that was a moment to be asking our customers for money, but instead of a moment to be grabbing youre doing the right thing for our customers.
Subsequent to that has as we've now identifying new needs and new opportunities you're absolutely right. We have seen in that we mentioned there with temple University health systems.
And Sedgwick in our prepared remarks, we're seeing customers adopt a trusted supplier program adopt activation boost capabilities as a means of reaching.
As a means of reaching out to their to their members and educating them on what is a radically changing environment. Every single day can so it's very few question Ryan absolutely we're seeing.
Okay. Thanks, again, guys I really appreciate it.
Thanks right. Thank you.
Thank you. Our next question comes from the line of Matthew Gilmore from Baird. Your line is now open.
Hey, Thanks for the question I wanted to ask about that performance fees associated with cost reduction Steve I was curious how you're treating those within that the rent revenue guidance are you expecting a higher level of a payment this year because of lower utilization or will that be treated differently because of how unique coveted impacting that business.
Hey, Matt Thanks to the question.
You're right.
With respect to cost savings and healthcare spend it has come down significantly this year.
For across the country and so we're certainly factoring that in into our guidance.
Stepping back for a minute you know historically we've achieved.
More than 95% other the total PMPM opportunity across our book and when we look at the guidance. We're providing few today. This year, we're factoring in essentially that same range.
With a haircut that we applied for the potential downdraft in employment in our base so to be direct on your question. We don't see a dramatic shift in the earnings on the performance based fees. This year, but we'll continue to track that through the end of the year as more data comes out to us.
Okay Fair enough and then if I could ask one on Johnson controls its obviously a very nice win.
Sure should we be thinking about.
That contract covering all of their U.S. employees are or will that be some sort of subset.
It's actually a great question, Matt Thanks for bringing up.
Johnson controls is a great example of a customer who's taking advantage of multiple offerings. They are starting with accolade cope with response care.
In that situation we're actually.
We're actually pricing the offering by the number of participants that we serve that number will be more focused on their U.S. employees.
And we expect that number could get has high should we expected to be as high as about 30000 number somewhere around that range or participants.
And then it's important to note that the beyond that.
They also signed up to be a accolade total health and benefits customer that deployment will happen a little bit leader and when they do all their U.S. employees being part of that offering.
Okay, great. Thanks very much.
Sure.
Thank you. Our next question comes or the line of Stephanie Davis from SDB. Your line is now open.
Hey, guys. Thank you for taking my questions and congrats on that first public lawyer.
I was hoping as big a little bit into your federal opportunity, maybe compare and contrast distribution with more of your your plain vanilla employer contract.
Could you walk us through maybe how much longer sales cycle looks like and what level of intensity you expect these deals potentially.
Maybe talk here when they try here or there can't the ups out Mr. Rob benefits.
I think so first of all thanks for the question Stephen Thanks for being here I think we we look at the Defense Health Agency agreement has an opportunity to demonstrate value for a population that is in many ways very unique to standard employer populations in fact.
DHX beneficiaries are often times you are seeing relocation more often you're seeing more complex set of challenges associated with both government, Karen and personalized care all of which I'll, let us to create an offering loosely based off of accolade total care.
We called track here, so like navigator that capability is now deployed to population of a little bit north of 80000 members or beneficiaries excuse me.
We expect that we can continue to grow that population as we as we prove out the pilot and the pilot now going to I think the meat. If your question. The pilot will be measure on a set of agreed upon success criteria that look a lot like the performance guarantees that we often provide to our customers across whether that's total care or total health and benefits.
And so we've got a great deal of experience in so doing how will that manifest as Steve mentioned in his in his earlier answer to a question. There's eight to 9 million members in that in that DAK population now we believe it's feasible in fact that population might see uptake on different.
Prominence of our offering depending upon their particular need but it's a little too early to tell me exactly how that will play out.
I missed that so hopefully overtime and then switching gears a little bit I was hoping you could tell us about tech stack, maybe how you differentiate your platform from the other care navigation players that are more on the tech side.
Sure sure I.
I Love that question and here's the reason why.
What makes us unique is our capacity to build human relationships.
With front line care teams that build into Pedic relationships, and then extend that value clinically perfect with our nurses doctors pharmacists behavioral health specialists are text that enable enables those relationships and it does so fine first weaving together a whole bunch of disparate datasets that the industry has not done a particularly good job in the past.
We sit on health insurance claims are thought pharmaceutical claims behavioral health claims. We also look at eligibility data benefits plan data.
So all that together what allows us to do is build a 360 degree view of that members life and importantly also their families life, because we're covering all of the numbers in the population.
Dataset powers in artificial intelligence engine to allows us to be very smart about who we target how we target and how we guide them all of which is built off of a the core idea that you need both the human relationship into next generation technology stack to consistently and scalability.
Reliably every single time do the right thing therefore, driving the cost savings.
And incredibly high engagement in satisfaction levels that are core to what we do oftentimes when you think about our competition you think about competition that either a is very digitally oriented and doesn't want to invest in the human relationship beep is very human oriented but doesn't have the technology to allow.
Smart insights to be created by leveraging it really rich data set of next generation technology or see companies that have attempted to pivot into the category from individual silos or the space, but without the longitudinal understanding our consumers health care Jeremy.
At the Super helpful. Thank you again.
Thank you.
Thank you at this time I'm showing no further questions I would like to turn the call back over to regime CEO for closing remark.
We appreciate all of you being here for our first earnings call. We we appreciate all your questions and we look forward to updating you in just a couple of months time. Thank you.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.
[music].