Q2 2023 Accolade Inc Earnings Call
Good day, and thank you for standing by welcome Suzanne accolades.
Second quarter 'twenty three Ernie.
Results Conference call.
At this time all participants are in a listen only mode.
The speaker's presentation, there will be a question and answer session.
Ask a question during the session you will need to press star one one on your telephone.
Please be advised that today's conference call is being recorded.
I'd now like to turn the conference over to your speaker for today, Todd Friedman senior.
President of Investor Relations. Please go ahead Sir.
Okay.
Thanks, Operator, welcome everyone to our fiscal second quarter earnings call with me on the call today is our Chief Executive Officer, Rajiv <unk>, Our Chief Financial Officer, Steve Barnes Chartering <unk>, our Chief Medical Officer.
Of course, you got this call before turning the call over to Rajeev. Please note that we will be discussing certain non-GAAP financial measures that we believe are important when evaluating aggregates performance details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliations thereof can be found in the press release posted on our website also please note that certain statements made during this call before they can stay.
With a 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 actual results for accolade materially from those expressed or implied on this call for additional information. Please refer to our cautionary statement, our press release and our filings with the SEC all of which are available on our website with that I'd like to turn the call over to Archie.
Rajeev Suri, thanks, Todd and thank you everyone for being here.
We're now officially more than halfway through our fiscal year and even more so just the traditional health care buying season for employers, which of course makes up a material component of our growth outlook for the year ahead.
Additionally, as we open this call we're in the heart of an open enrollment season for our existing customers are typically marks the beginning of a very basic broccoli's Cherokee.
In the implementation process for many of our new customers, who are targeting a January one 2023.
But those notes as a backdrop and in spite of a challenging macroeconomic backdrop accolades continue to perform well across every major segment of the business.
Of course that begins with our financial performance.
Our fiscal Q2 2023, we came in above the high end of our guidance ranges for both revenue and adjusted EBITDA and we are well positioned for a strong second half of the year.
Deep Barnes, our Chief Financial Officer will cover our financial performance in more detail later in this call.
Turning our attention to the business landscape, a few high level observations before I get into the specifics on each of our core business segments.
First the strategic expansion of our product portfolio in fiscal year 2022 is paying dividends in fiscal year 2023 and.
In our commercial our employer segment the majority of our customers purchasing our advocacy services are choosing to purchase our accolade care and accolade expert MD services at the same time, thus validating the personalized healthcare suite accolade unveiled last summer.
In our health plan and government segments, we're seeing interest across the breadth of our offerings as well.
Second across every major segment that we.
We are in the early stages of cultivating them massive target addressable market that today is largely underpenetrated.
The recent Willis towers Watson survey estimated at 20% of company have some form of navigation Felicia other.
Other surveys represented penetration rate below 20% for full carve outs positions Buckeye.
Regardless of which survey you read all indicate there's a massive uncertain marketplace.
Accordingly, those same studies expect penetration to more than double over the next several years.
Third we are well positioned to win in the market, we created because we are differentiated and diversified.
Our differentiations brings from the breadth of our offerings and the proof points of performance.
No other company in our category and point to integrated offerings and advocacy expert medical opinion and primary care and behavioral health.
Third party validated savings across a variety of customers.
Our long term customer retention rates validate that.
Our diversification is a product of our investment in building multiple distribution channels, including the commercial employer segment health plans government and direct to consumer.
The strength of our position is furnished by our strong balance sheet and our plan to achieve profitability in the near term.
Now, let me provide more specific updates on each of our business segments, starting with the commercial segment.
While our business has shifted to a model where we are now selling throughout the year, it's still true that summer and fall months are the most important for businesses, we're making buying decisions to prepare for January one launch.
Continued the momentum from last quarter across all solutions and segments to.
To date, we are on pace to exceed our annual recurring revenue results from last year and put ourselves in a positive position to drive growth for next year.
There still remains a number of key customers in rfps to close, but our win rate and mix of business gives us confidence in our ability to continue signing new business throughout the year.
Contracts, we signed today are generally slated to go live in January or later, so while deal signed in calendar 2020 to provide a small amount of revenue in the fiscal fourth quarter. The real benefit provided the foundation for revenue growth in fiscal 2024 and beyond this is an important element of our business model.
It provides visibility into next year's revenues for.
We're experiencing strength across all segments and solutions across verticals as well.
Significant customers across a broad swath of industries, including retail telco financial services higher at match natural resources technology manufacturing and so on.
Mercury purchased multiple solutions, including a well known digital finance company National gas and convenience store operator in a multibillion dollar industrial manufacturer.
Notably many existing accolade advocacy customers added accolade expert MD inactivate care, including a fortune 100 insurance company.
We're seeing a more existing accolade expert MD customers evaluate and select our traditional advocacy solutions, including a fortune 100 financial services company.
Well I'll talk about our health plan distribution relationships in a moment I also want to note.
Several health plans are now offering accolades solutions to their own employees.
We see this as tremendous validation of our solution and believe that internal use of <unk> will help drive success in our distribution relationships as these health plan partners experienced the value we deliver firsthand.
Now, let's turn to the health plan market.
As we noted last quarter, a health plan partnership channel has become an increasingly material part of our business over the last two years.
Starting with our expert medical opinion relationships with key national and regional plans like UHC, Optum, Aetna, and BCBS, Michigan advocacy relationships with Humana, and Blue Shield of California, and now into multi product relationships with carriers like priority health in Michigan.
We expect more relationships to materialize in the quarters ahead, and also expect existing relationships to continue to expand as we continue to demonstrate our value to them and their members.
Our partnerships with health plans much like our relationships with our trusted partner ecosystem.
Our long held belief that fixing health care for people in this country is a team sport and then we have to partner with Likeminded company to make it work for as many people as possible.
From a growth perspective, the health plan channel, adding new marquee logos to our roster in the last quarter alone. We added a number of fortune 500 companies through these partnerships, including our retail and apparel fitness leader one of the leading providers of scientific equipment and instruments, several large banks and a well known motorcycle manufacturer.
Turning our attention to our relationship with the Defense Health Agency, we continue to await a decision on their <unk> RFP, which we expect to come soon.
Our success with our pilot populations, along with our carrier partner strategy with those bidding the business have us well positioned for the opportunities that may present themselves keep in mind that the <unk> contract is set for a January one 2024 phased implementation. So this doesn't materially impact our outlook for the current.
For next fiscal year.
We also continue to work closely with Tricare on our autism care demonstration and have been very encouraged by the results we've been able to deliver it thus far.
Next I'd like to provide a broader update on our direct to consumer primary care business.
It's been just over a year since we closed the bus care acquisition and our consumer primary care growth has continued to be strong.
At a time when other telehealth vendors have seen growth rates contract.
Our consumer subscriber base has grown more than 30% since the acquisition.
We believe the reason for this performance is very simple while others are focused on virtual primary care as a replacement for urgent care plus chair was built from day, one as a true primary care solution.
The impact on growth is substantial.
See more repeat visits during the year that traditional telehealth vendors, which provides better predictability and sustainability for the membership base.
As an aside the direct to consumer position platform that supports the growth of plus there is the very same platform that supports our enterprise alkylate care business as we roll more customers onto accolade care.
We already have the capacity to support the growth in that business.
One other note on the growth drivers in our primary care business, we've been able to drive this membership growth without seeing a material increase in customer acquisition costs, reflecting both the efficacy of our demand generation efforts as well as what we see as the notable difference between our virtual primary care platform and traditional telehealth.
At Standalone mental health offerings.
We remain firmly convinced that our vision for bringing these companies together was both the right choice.
It will be a key driver behind accolade for long term success.
Before I turn the call to Steve I'd like to offer a couple of quick thoughts that are key to our current and future success.
First we've already added more than 100 customers. This year and now have more than 700 total customers.
You'll remember that we had 54 customers when we filed our IPO asphalt.
That growth delivers more than just diversification of revenues it delivers clear validation that personalized healthcare.
Which combines the capabilities of advocacy primary care and behavioral health and expert medical opinion is a category that meets a profound need for healthcare buyers.
Second our new customer growth also points to the operational scale enabled by our open technology platform or.
Our incredible Cherokees powered by a dataset and a platform built for this purpose.
Proving that they can deploy hundreds of customers and support millions of members through new deployment plan design changes and open enrollment demonstrating.
Demonstrating this scale as we grow revenues, while improving profitability each year bodes well for our future and our competitive prospects.
With that I'll turn the call over to Steve.
Thank you Raj.
First I'll recap the results from the second quarter of fiscal 2023, and then provide some details on forward guidance.
In the quarter, we generated $87 $6 million in revenue, representing 20% year over year growth on a GAAP basis over the prior year period.
Revenue was higher than originally forecast due primarily to strength in our direct to consumer business as well as member counts for our commercial customers and approximately $1 $5 million and performance guarantee revenue timing.
Fiscal Q2, adjusted gross margin was 44, 7% compared to 49% in the prior year period, which reflects the positive revenue be including.
<unk> the performance guarantee revenue timing that benefited gross margin and adjusted EBITDA. In addition to higher margin offering mix.
Adjusted EBITDA in the second quarter of fiscal 2023 was a loss of $13 7 million, which compares to a loss of $19 $4 million in the prior year second fiscal quarter.
This was ahead of our guidance, primarily due to the revenue outperformance and lower spend than planned in the quarter and some areas such as hiring and personnel costs as well as reduced sales and marketing costs.
Note also that we took a $3 $1 million charge for severance costs in the second fiscal quarter associated with the staff reductions we discussed in our first fiscal quarter earnings call.
This amount is excluded from adjusted EBITDA, given the nonrecurring nature.
Turning to the balance sheet cash and cash equivalents totaled $331 million at the end of the fiscal second quarter and accounts receivable Dsos were in line with prior quarters at about 25% as revenues outstanding.
Finally, we had approximately 71 5 million shares of common stock outstanding as of August 31, 2022.
This increase from Q1 reflects the distribution of the vast majority of the shares related to the earn out provision of the second MD <unk> acquisition.
Now turning to guidance on how to think about our financial model progression towards breakeven.
We are updating our guidance today for fiscal 2023 are as follows.
Now forecasting fiscal 2023 revenue will be in a range of $358 million to $365 million representing growth of approximately 17% at the midpoint and.
And we are maintaining our adjusted EBITDA loss guidance between 35 and $40 million.
As Roger outlined earlier, we're having a strong selling season and feel confident in our business and our ability to achieve our growth targets.
We are always mindful of the economic environment, we are operating in particularly the certain impact of inflation on overall healthcare spend overall employment trends and company buying cycles.
As such we think that viewpoint that outperformance in the quarter in this environment, particularly serves.
De risk the lower end of our guidance much as we did in the first quarter.
And as Raj also noted earlier, our strong <unk> bookings fiscal year to date gives us increased confidence in our outlook for fiscal 'twenty for revenue growth.
And with respect to the fiscal third quarter, we are providing guidance today of revenue in the range of $86 million to $88 million and adjusted EBITDA loss in the range of $11 million to $13 million.
And with that we are reiterating our objective of positive adjusted EBITDA and cash flow in fiscal 2025, which aligns with calendar year 2024.
As I noted last quarter, our convertible bonds are not due for approximately three and a half years.
So with $331 million cash on hand, we have more than adequate liquidity to achieve our financial plans without going back to the capital market, placing us in a strong position to execute against our objectives.
In short we continue to believe passionately in the strength depth and breadth of our platform the diversification of our offerings, our revenue streams and our customer base and we have an engine built for growth and sustainability, which will ultimately drive significant positive cash flow.
And with that we'll open the call to questions.
Thank you.
Remind you if you have a question please.
Please press star one on your <unk>.
<unk>.
Also we ask that you limit yourself to one question. Please please standby, while we compile the Q&A roster.
First question is coming from Michael Cherny Bank.
<unk> America.
Good afternoon, and congratulations on the nice quarter that you put up.
Maybe if we can start on the selling season, certainly encouraging given the broader macroeconomic worries about the performance that you've put up so far year to date can you maybe just dive in a little bit closer in terms of relative to the conversations.
Coal pieces question, one have you seen any changes in either the timing of the specific.
Sales cycle <unk> at the close timing and then second relative to what you are leading with given that the product portfolio and <unk> portfolio has expanded so drastically is there anything thats really coming to the forefront in terms of for the customers, especially are already signed up early what are they most focused on the <unk> can provide for them.
Thanks for the question, Mike Great to hear from you.
This is raj.
Ben and Stephen talk if you've got anything you want to add to our shop.
Quickly first youre exactly right.
NAND environment continues to be strong for the offering one of the things we really like about our business in 2022 is the diversification.
The channels that we're actually delivering through as well as the diversification of the product offerings and so what we're seeing is really strong demand across each of those channels and across each of those offerings. So maybe the best part of the story from my perspective, Mike to answer your question directly is.
Customers are increasingly looking at two things one the complexity of their ecosystem and the desire to to buy.
Find a way to get the maximum leverage they can from a purchase that will drive value to the rest of their ecosystem and to an acknowledgment that health care cost continue to go up and the desire to lower costs.
And all of that's yielding value for us and I think specifically the data point I'd call out.
That we that we talked to in our prepared remarks, but the idea that customers can buy advocacy.
A majority of them today are buying not just advocacy, but also buying our primary care services and our expert medical opinion service.
Which indicates to us a validation of the personalized healthcare suite that we released last year. So I think it's about the complexity of their ecosystem I think it's about lowering costs.
And we feel fortunate that we've got offerings that solve those problems.
Next question will be coming from Goldman Sachs.
Zero with Jefferies.
Hey, Ross I just missed in your prepared remarks.
How many customers you said you have now and I was wondering if you could just sort of give us a sense for.
How many of those customers that you've been signing up the selling season are slated for a January one start because I think I heard you correctly that you said even customers are signing up now you think you can squeeze in for January one and the reason I ask is because it sounds like things are going well, but I'm trying to tie that back.
As to the full year guidance, because it looks like.
Just on your <unk> guidance, you're guiding to $101 million.
A little bit better than that in the fourth quarter, which would only be about 8% up over the fourth quarter last year, if I'm doing that math right. So I was just wondering if you could just sort of flesh that out a little bit for me.
Yeah.
Yes.
We will break that down for us great great to talk to you Glenn. Thanks for the question, we'll break it down into two parts I'll answer the first part Steve can tackle the second as it relates to new customers.
We talked in the prepared remarks about the idea that we have now more than 700 customers who spend more than 100 this year.
Again going back to the point that we answered Mike's question one of the things we love it.
The diversification of the revenue streams in the context of this answer speaking to that across product line, we're signing customers with.
Primary care and behavioral health expert medical opinion and for advocacy.
Clearly.
So the preponderance of our customers in the past I've always got a lot on January one that changes a bit now that we've got expert medical opinion customers and advocacy customers, who might go live or excuse me care customers, who might go live after January one given that they don't necessarily have to see the carve off from their plant at the <unk>.
Advocacy business has traditionally been known for and so we'll see.
<unk> of those customers are advocacy customers go live most of them on January one, but many others will go lie potentially later than that or earlier than that depending upon their knees, Steve anything you want to add to that.
Just a bit hi, Glen.
The guide for the year first of all really pleased with a strong quarter.
The strength in the quarter really came across all aspects of the business, we saw strengthen advocacy and expert medical opinion as well.
The primary care business.
It's been a direct side with best care.
We also did have some timing of revenue there.
That got pulled forward from the fourth quarter, Glenn So what youre hearing from US is a strong outlook for the year, mostly January one starts but not all of them and in this current economic environment, where we are.
Really strong confidence in that range that we're providing today for the full year.
One moment for the next question.
The next question is coming from.
Jonathan Yes.
Jim.
Credit Suisse. Please go ahead with your question.
Hi, Thanks for taking my question I was just curious on plus Karen the strength Youre seeing I was wondering if you could expand on that.
Are you guys seeing higher levels of utilization just from the population base and its just remaining elevated or is it actually accelerating and then given some of the shakeup in the telehealth entities in recent months do you see yourself, taking share from them or is it just core growth of the market and youre just exceeding the market. Thanks.
So the question Jonathan.
Very early days in the idea of virtual primary care and behavioral health.
2020 with Covid.
The pandemic really saw an explosion in urgent care utilization as you might expect excuse me in Tele medicine urgent care as you might expect.
Plus chair and one of the reasons, we liked that business. So much is that plus share even in that environment was extraordinarily focused on building from the ground up a primary care offering have focused on being able to deliver primary care and hold onto your primary care position over the long term as you.
In as you had in the brick and mortar world.
So we believe that first of all to answer the first part of your question. These are early days and so this isn't about taking share from other telemedicine players instead, it's about creating a brand new market space and being the leader in that brand new market space. The second part of your question in terms of.
Perhaps extrapolating the question a bit and speaking to our growth rate versus the growth rate of other players in the space not knowing their businesses exceptionally well what we can say is that we are unique and differentiated because we're a primary care player with behavioral health embedded in that primary care different than the urgent care offerings that most of our competitors are talking.
Sure.
Our capacity to have a primary care physician stay with the patient on a long term leads to better long term retention rates.
Therefore leads to at least a better growth rates than other other players are seeing we're also seeing that while at the same time seeing customer acquisition costs.
Come in at.
Better than expected levels, which is something that we're really excited about as well.
Thank you while we prepare for our next question.
Next question is coming from Julian drug.
Please go ahead.
Yes, Thank you and thanks, Roger and Steve for all the color on all the contract wins I was wondering if you could share some color around the trends you saw it on the pricing or even contract structures for <unk>.
Next next fiscal year. For example, you guys have talked about a shift to more risk based revenue in the past did you see that accelerating for next year and is that does that waiting by products and solutions and how does that shift impacting employers' willingness to work with the vendors in this space.
Thanks for the question, Dave under Great to talk with you.
<unk>.
When we think about that.
The makeup of the deals that we're closing as we as we talked about during the prepared remarks, we're excited about the demand environment.
We spoke even last quarter to the idea that in a strong demand environment as the leader in this space, we expect to win more than our fair share of those transaction FX that actually occurred in Q2.
And one of the other things we're excited about it that those things are that those deals are pricing at historic levels, meaning.
But we're seeing that.
That customers are willing to pay for value add accolade, we do price a premium offering and we're seeing customers willing to pay that premium.
Maybe the last part of the question associated with <unk>.
These at risk by and large our customer contract look very much like they have looked historically I do believe over time, a couple of things will be true breaking out your question into more detailed J leather first when you look at advocacy primary care and expert medical opinion.
And expert medical opinion in primary care, because we drive such high utilization and we are quite happy whether a customer wants to pass on a <unk> basis or on a case rate or utilization basis that makes us unique from the rest of the industry. Because we know we can drive the utilization of the right way and I think thats something that will continue.
Keep an eye on moving forward, Steve anything to add there.
Thank you got it I think that last part about case rate is something in a trend we're seeing in plays well into the model.
Thank you.
Our next question will come from Cindy Motz.
Goldman Sachs. You May go ahead. Please.
Hi can you hear me.
Hello, we can hear you great.
Well, yes, congratulations thanks for taking my questions and correct. Congratulations on a really good quarter. So I just wanted to follow up on plus care, but also some of the segment.
Details. So it looks like is advocacy is still running around Q.
Thursday or is it more like 64, 65%.
And.
Of your revenues and then it looks like yes, plus carriers definitely growing maybe a little faster than you expected and certainly that's anecdotally, what you're seeing with some of.
Some of the op data I'm curious how much of it is mental health and then do you feel like some of these point solutions I know you've done you've given us some good commentary here, but.
Have you seen sort of a decline in some of these point solutions with mental health sort of falling off in.
Again is that maybe why you're accelerating thanks.
Hi, its Andy.
So let me take the first part of your question and rationale type team on the second part, but you are right in terms of the splits of the business. The advocacy portion of that business runs in the range of low <unk> percent of the total revenues.
With the balance being made up of expert medical opinion, and virtual primary care and you're right. The bus care side of the business is growing a bit faster, but we commented last quarter that the business is growing on a 30% or so annualized growth rate year over year and that maintain maintaining through the second quarter as well so positive.
Performance, there with respect to where that's coming from and what we're seeing in terms of primary care mental health.
Start by saying remember that <unk> leads with a virtual primary care offering and then has that capability to get that person efficiently to our behavioral health specialist or team as needed let me hand it suraj.
Any comments on some trends there I think what we're seeing across the board is that customers are interested in the in all of the offerings.
Knowing that they need and advocacy foundation of our personalized healthcare platform Foundation by which we can drive not only utilization for primary care behavioral health and expert medical opinion, but also the rest of their digital health care solutions and so maybe tying.
Tying out your question around are they seeing decreased utilization in those other things are potentially moving away from them in fact quite the contrary, we continue to see customers looking at other digital solution I think what they are really focused on now is the return on investment from those solutions and we think we have a platform and our customers believe we have a platform to deliver that on their behalf.
Okay.
Thank you. The next question is can be from Craig Hallum.
Outstanding.
We have Morgan Stanley . Thank you.
Just a question Raj more broadly on the macro uncertainty.
Really whats changed with customer conversations or discussions and I think you touched on some of it in terms of the broad offering is helping you in this type of backdrop.
Anything else kind of from maybe the beginning of the year, how conversations have evolved and any anecdotes you can share in terms of what's underpinning.
Some of your relative shrank near term.
I think there is some consistency correct great to talk to you again and.
Thank you for the question I think there is.
Level of consistency over the course of the last year associated with the conversations the reality is even in a macroeconomic environment that has some uncertainty we're continuing to see job growth, we're continuing to see a relatively full employment environment at least for the time being.
Employers therefore are very focused on regaining their employees in attracting new employees at the same time, there is an acknowledgment that costs cost reduction from a health care perspective.
Perhaps even more important in the year or two years ahead and it was in years past Accolated always been very good at being the only proven vendor in the space with independently validated data that speaks to our cost reduction capability and then finally this.
And it's a question that came earlier in a couple of the questions earlier today.
The acknowledgment that the digital landscape.
<unk> solutions is so complex at this point given the.
The profound amount of innovation happening in the space that customers need platforms by which they can weave all that together and manage those that complexity. Those three themes are consistent with almost every employers slashed payer we talked to you.
And that's why we think we're well positioned.
Thank you for your question. The next question is.
Company from Stephanie Davis.
Yes.
VEB Securities.
Thank you for taking my question.
You got to understand that with some of your new wins commentary that doesn't make it just kind of fully clarify this.
From the new logos in the prepared remarks.
So predominantly ones into quite expert second opinion, takeaways or plus kerwin or should we think of these wins is more on the larger bundled platform plus category and that same token how is that looking that next in your pipeline.
Thanks for the question Stephanie great to chat.
Think about it in terms of in terms of quantity and then think about it in terms of annual recurring revenue contribution in terms of annual recurring revenue contribution I think it's fair to say that more than more than a plurality of those deals are coming from multi platform deals where they are buying efficacy expert medical appeal.
And care.
In aggregate I think in terms of quantity of transactions.
And number of transaction.
Youre going to see.
Greater distribution across some of the smaller deals potentially expert medical opinion and care being drivers of those smaller transaction sizes.
Thank you. The next question will be coming from Ryan Daniels.
William Blair.
Yes, guys. Thanks for taking the question congrats on another strong quarter wanted to ask about the three themes. You just mentioned so the complexity of the ecosystem the need to drive lower cost in your proven ROI how does that.
And a positive environment kind of work into your current thoughts on investing in sales and marketing and R&D. So just.
Kind of.
Desire to ramp towards EBITDA breakeven through 2025, but also what might be a more appealing market for you to continue to gain share and land and expand how do you balance those two as an organization.
Thanks for the question so.
Really important point you are raising here because we see this very large market opportunity strong growth and with an eye towards this plan to get the profitability over the next two years. So you see that balance where we're investing around innovation in terms of R&D in the platform.
The two acquisitions that we did over the past year in integrating those together and we're seeing the real fruits of that to Roger's point that many of the deals we're selling today are.
Really validating the.
Purpose and strategic element of those acquisitions.
Selling multiple offerings into and to that end.
And customer in terms of sales and marketing spend one of the pieces big elements of leverage we're seeing now is having brought the three companies together, where you have strong efficiency out of the direct sales forces that we brought together and very importantly, the channels that we have access customers are providing a lot of leverage.
The health plan channel in particular, where we're selling expert medical opinion, both on its own and in some cases together.
With other offerings is providing leverage so we're looking at the unit economics, which are quite attractive and balanced with that goal to get to profitability.
About two years out from now one of the reasons, we often get the question Hey, guys beat the top end are you, bringing up the bottom end. The EBITDA number we're actually very comfortable with the current EBITDA projections, while we grow the top line because of the size of the opportunity and the strength of our balance sheet. So we look at all of that.
He came together and the big.
As of the opportunity in front of us.
Balancing all of that out together.
Thank you.
The next question is coming from Richard close of Canaccord Genuity.
Congratulations maybe a follow up to the conversation question earlier.
Raj heavier any customers just shut down conversations with you guys because of the economic outlook.
Or would you characterize the level of conversations increasing due to the that the expectation healthcare costs that you cited in the surveys.
Thanks for the question Richard I think.
A couple of ways to think about the answer to your question first.
No.
We always have customers as they go through the process a certain percentage of them go through the process to choose to buy we win more than our fair share of those transactions.
There is always customers as well in any given selling season, regardless of environment, who kick the tires and choose to wait until next year I think those ratios have been fairly constant.
And although the total number of Rfps slash evaluations has grown on a year over year basis and grew materially this year.
So we haven't seen any sort of push in that regard.
To think about it in context, what the environment looks like this year increasingly customers looking at those three themes that I've talked about in the past are looking and saying.
Perhaps in years passed they might be just buying digital point solutions for particular carve out category are beginning to grasp perhaps more so this year than in years past.
Those things by themselves will not drive the trend line improvement that they might otherwise be seek and that they meet what they need is a woven together platform that ties all those states those solutions together and I think that certainly may be driving increased <unk>.
<unk> on personalized health care suites like ours.
Great. Thanks.
Next question.
It's coming from Stan Bernstein.
Wells.
Margo.
Hi, Thanks for taking my questions.
First some comments you made earlier about.
The strength in the quarter was partially driven by.
Outside surprise number growth I guess excluding.
Any impact from client churn that youre anticipating how much of the growth expectations for this year are coming purely from member growth.
Hey, Ben.
Thanks for the question.
No.
We've had over the past couple of years, we've seen modest year over year growth.
Back to the time, we came public during the pandemic, we've never had a quote unquote normal year yet so.
Employee counts have grown within the book over the past couple of years, we don't assume a whole lot of that given the backdrop the macro economic backdrop in our guidance, we did see some upside surprise for that through the second quarter. So.
When you step back I think the.
Part of your question is probably around the guidance for the full year, we've got good confidence in the range, we're providing today and also providing.
Certain level of caution and pragmatism around employee counts given given the macro environment.
The next question is coming from Dan.
We're in Shire being Baird go ahead. Please.
Okay.
Hi can you guys hear me.
We just got to catch up.
Oh, great Hey.
Thanks for taking my question.
Good quarter here.
Looking toward the end of the year I wanted to talk a little bit about the.
Performance guaranteed revenue accolade, one was kind of more of that conversation I think last year.
It has been kind of.
So this year, but.
Clients thinking about the performance guaranteed portion of revenue within contracts.
Is that an important selling point and then.
What percentage as a percentage of contract value is it performance guaranteed portion hiring these new contracts that you're signing are similar to last year any color on that would be helpful. Thank you.
Hey, David Thanks for the question. This is Raj I'm going to take the first part of your question Steve will take the.
The second part of your question as it relates to accolade, one think about accolade one as an offering that ultimately it was where customers take advantage of all of our capabilities.
A select few partner capabilities that we think embedded with the offering can drive even better savings and clinical outcomes.
We're seeing this year, which we're really excited about is the preponderance of customers who are buying from us are buying our three core offerings advocacy expert medical opinion, and virtual primary care and behavioral health as a first shot when they are contracting with US we expect a number of them to come back and actually procure those partner.
<unk> downstream over time as our customer selling organization goes back into those organizations. After they have gone live and so we're still really excited about the prospects for alkylate, one and the opportunity to see that full suite of offerings.
Take place across the preponderance of our customers I'll, let Steve answer the performance guarantees.
Sure.
So to your point clearly the willingness of the part of our fees at risk because they are really key selling point in.
The ROI that we provide that's validated for the customer each year.
Do claims evidence of claim savings continues to be a key selling point.
In large part the ratios.
PGE our fees that risks the base fee is roughly the same as you've heard from us in the past on a typical advocacy contract it might be something like two thirds fixed fee and about a third at risk and again thats at risk for things like cost savings, but also other elements that are important to customers.
For example engagement rate adoption.
Trusted partner ecosystem partners.
And net promoter score measurement of customer satisfaction in large part that ratio has remained the same and then suraj as point, we're quite enthused that.
New sales are having often multiple offerings bolt ons to the advocacy offering.
It does.
Straight at an attractive ROI for customers.
The next question will be coming from Brian Mcgee.
Mcdonald.
Nathan.
Thanks for taking my questions and congrats on a nice quarter.
To understand the health partner channel and the impact we could see going forward first.
100 customers you've added this year.
<unk> sort of what the mix of where that came from either direct sources or the partner channel and then as we look out into the pipeline for the remainder of the year into next year.
What sort of magnitude of impact could we see from that both on a sort of total number of deals. But then also sort of dollar value number of deals.
Those relationships mature thanks.
Question, Ryan, we haven't really broken out customer.
Customer numbers between health plan.
And direct but let me give you some color on a broader basis.
If you wouldn't mind I'll first step back and speak to why we're so excited about the opportunity.
The health plan channel really began for us with Humana.
Four years ago, taking advantage of our advocacy solutions and delivering it to their self insured book.
Post the second MD acquisition, we actually entered the health plan channel in a more.
Pronounced way with an expert medical opinion business that we're selling through Unitedhealthcare optum Aetna as well as through cost we showed in Michigan and other plants. We've had the opportunity to continue to expand those relationships, while more recently, signing blue shield of California, as well as priority health, what's great about what's happened over the last several years is not just at the.
Channel has expanded in terms of number of partners, but they're also now beginning to look at all of our solutions not just expert medical opinion, not just <unk>, but also as in the case of priority health, where we're actually seeing our virtual primary care and behavioral health solutions being used to power a virtual first plan design.
For priority health and so we believe over time that we have an opportunity to expand that channel not just by signing new partners, but also by growing the product portfolio within those existing partners today, we're generating call. It a double digit percentage of new IRR coming out of that health plan channel.
And we expect that it hasnt, we could have an opportunity to continue to grow as a overall percentage of total IRR delivered in any given year.
Thank you. Our next question will be coming from Sandy Draper of Guggenheim.
Okay.
Thanks, very much and congrats you guys are doing a nice job of proving me wrong so far.
My question is maybe on plus care.
Direct to consumer I know generally you guys.
V ourselves as a premium priced product and selling the value, but if I just sort of look at.
Unnamed primary care model the charges of $109 a person or another one that telehealth is 300 Bucks a month.
One of the things I was really surprised when I was going through plus care for my family of five I can get all of it for $99 is the consumer not through my employer didn't pay out if I did the similar thing in a lot of primary care models that will cost me 1000 Bucks I mean, do you think I don't how much your survey, but do you think given the macro environment. The consumer one of the reasons the <unk>.
<unk> sided plus gear is you deliver a tremendous amount of value, but your entry point is theres not a big sticker shock if someone says it's 99 box for my family.
Yes, it's not insignificant, but that's a lot less in other areas and youre still getting tremendous value I don't know if thats something you guys are tracking focused on and you think that's something that's just driving the business.
Thanks for the question Sandy and I appreciate you digging in on the offering.
And appreciate all the feedback slash insight.
First of all I do agree with you, but we do believe that we've presented a really compelling capabilities to the market. We've done so at a price point that actually compels people to try the service and when they try the service we deliver a 90 plus NPS that means they stay with the service they stay with the service they stay with their primary care physician.
Multiple repeat visits and we retain that customer and a long term basis better than most urgent care slash telemedicine solutions on the market today.
We're constantly looking at innovating on both price points.
And potential new models by wished for servicing families or or elements of families and so I'd just ask you to stay tuned on that one as we as we continue to explore how we can grow we do believe for sure that the opportunity for services like that one to expand into that families life with other.
Capabilities in the consumer business is as a future part of the growth model.
Thank you. The next question is coming from Jessica.
Hansen.
Piper Sandler.
Sandler.
And I'm, hoping you can you guys just maybe frame what the impact of the primary care and expert medical opinion by ups within core advocacy look like.
And then I think you would recognize that revenue.
For both commercial primary Karen expert I'm.
Over that Ratably over the course of the year based on estimated utilization, but can you just confirm again that thats the correct way to think about it.
Thanks.
Hey, Jeff. Thanks for the question I think yes, that's a correct way to think about it.
What's important maybe to point out before I.
Before we speak to the pricing on either offering is.
One of the things that make that really really unique is that we encourage our customers to do what they think is best for them to meet our customers, where they where they want to be met.
Looking for at the ppm price for care and expert medical opinion or accurately care and alkylate expert MD you should think about that in the low single digits ppm for those offerings, depending upon utilization expectation, but we're also quite happy that those customers take advantage of the service on a case rate billing or per visit.
Basis, because we can drive extraordinary utilization based off.
Our personalized healthcare platform and the engagement levels, we drive for all of our customers and so there are two different ways to buy and customers are choosing boat right now and it's too early to say, which of those will be the preponderance of the model on the care side on the expert MD side, we're seeing more and more customers choose the case rate billing model.
And yes, I would just add to your question about timing of earning that revenue if it's FTE pm.
Obviously, that's monthly and then to the extent it case rate or visit base, where we're recording that revenue as that happens.
The other thing I would add to Rogers comments as to the extent a customer chooses <unk> model, we're oftentimes, having some kind of tears around utilization rates to sort of protect the margin profile of the company, while we meet the customer where they want to be in terms of how to budget for the service and the <unk>.
Nation in ROI show up for that.
Thank you.
The last question is coming from Robert Simmons of.
D. A davidson. Please go ahead.
Hey, Thanks for taking the question.
You've talked in the past to see customers, who left you start to look at coming back can you talk to that trend are you actually seeing them re sign with you or what's kind of the situation there.
Yeah.
Thanks for the question and.
I think maybe the biggest point there might be.
If we were to take a giant step back and look at the customer retention levels of the company over the last five years, we retained about 95% of our customers on a year over year basis, we've actually had years in the last three or four where we retained 100% of our customers in any given year.
And so it's a relatively small and in terms of the number of customers who've left us we have seen customers actually.
Step away from the service and come back but.
From a from an impact on the P&L perspective, it's not a material number nor a material impact on the top line.
That concludes the Q&A session one moment.
You all for joining the conference today.
You all may disconnect.
Goodbye.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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