Q2 2024 Accolade Inc Earnings Call

Speaker 1: And thank you for standing by. Welcome to Accolade second quarter 2024 earnings results conference call. At this time, all participants are in a listen-only mode. After this speaker's presentation, there will be a question and answer session. To ask a question during a session, you will need to press star 1 1 on your telephone.

Good day, and thank you for saying that diet walking to the accolade second quarter 'twenty 'twenty four earnings results conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question answer session to ask a question. During the session you will need to press star one on your touch.

Speaker 1: You will then hear an automated message advising your hand is raised. To withdraw your question, please press spot one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to speaker today, Todd Freeman, senior vice president of international relations. Please go ahead.

So we didn't hear an automated message advisor in your hand as race to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now.

The conference over to your Speaker today, Tom Freeman Senior Vice President of Investor Relations. Please go ahead.

Speaker 2: Thanks operator welcome everyone to our fiscal second quarter earnings call with in our Houston office today our chief executive officer Rajiv Singh and our chief financial officer Steve Barnes. Dr. Shantanu Nandu our chief health officer will join us for the question and answer portion of the call later.

Thanks, Operator, welcome everyone to our fiscal second quarter earnings call with you know our Houston office today, our Chief Executive Officer Rajiv.

And our Chief Financial Officer, Steve bonds, but the shot to noon in New York. She felt officer will join the question and answer portion of the call later before turning the call over to Rajeev. Please note that we'll be discussing certain non-GAAP financial measures that we believe are important when evaluating performance details on the relationship between these non-GAAP measures. The most comparable GAAP measures and a reconciliation.

Speaker 2: Before turning the call over to Rajee, please note that we will be discussing certain non-GAAP financial measures that we believe are important when evaluating accurate performance.

Speaker 2: Details in the relationship between these non-GAAP measures, the most comparable GAAP measures and the reconciliations thereof can be found in the press release that is posted on our website. Also, please note that certain statements made during this call will be forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties, and other factors that could cause the actual results for accolades, if different materially, from those expressed or implied on this call. For more information, visit www.usda.gov.au

Thereof can be found in the press release that is posted on our website also please note that certain statements made during this call will be forward looking statements as defined by the private Securities Litigation Reform Act of 1995.

Forward looking statements are subject to risks uncertainties and other factors that could cause actual results for alkylate to differ materially from those expressed or implied on this call for additional information. Please refer to our cautionary statement in our press release and our filings with the SEC all of which are available on our website with that I will turn the call over to our CEO Rajeev said.

Speaker 3: For additional information, please refer to our cautionary statement in our press release and our filings with the SEC, all of which are available on our website. And with that, I'll turn the call over to our CEO , Rajeev Singh. Thank you, Todd, and thank you, everyone, for joining us today. Having now completed the first half of our fiscal year, there are four clear takeaways we'd like our shareholders to take from this call.

Thank you Todd and thank you everyone for joining us today, having now completed the first half of our fiscal year. There are four clear takeaways, we'd like our shareholders to take from this call.

Speaker 3: First, we came in ahead of guidance and consensus in Q2 on both revenue and adjusted events.

We came in ahead of guidance Central Texas in Q2 on both revenue and adjusted EBITDA.

Speaker 3: Second, with each passing quarter, we're closer to crossing the threshold of becoming a profitable, scalable business and will improve people's lives by changing the way healthcare is experienced.

Second with each passing quarter, we're closer to crossing that threshold to becoming a profitable scalable business that will improve peoples lives by changing the way health care is experienced.

Speaker 3: Third, the demand environment for our solutions remains strong.

Third the demand environment for our solutions remains strong.

Speaker 3: And fourth, we're presenting the market with unique and differentiated perspective grounded in our roots in advocacy and powered by care delivery that our competition does not offer. That differentiation is bearing us through today and will continue into the future. I'll give you more color on those bullets in a moment, but first, let's head to second quarter highlights.

And fourth we're presenting the market with unique and differentiated perspective grounded in our roots in advocacy and powered by care delivery that our competition does not offer that differentiation are bearing fruit today and will continue into the future I will give you more color on those bullets in a moment, but first let's get the second quarter highlights.

Speaker 3: First, Revenoon Adjusted Ebit, that were both ahead of our guidance for Q2.

Revenue and adjusted EBITDA were both ahead of our guidance for Q2.

Speaker 3: Revenue in the quarter was $96.9 million, within a just a little bit of loss of $8.8 million. Both ahead of our previous guys.

Revenue in the quarter was $96 $9 million within adjusted EBITDA loss of $8 8 million.

Speaker 3: Revenue highlights in the quarter, remarks by continued strength in our virtual primary care and mental health offerings, and some early recognition of performance-based revenues. People will give you all the details that his prepared remarks shortly.

Ahead of our previous guidance.

Revenue highlights in the quarter were marked by continued strength in our virtual primary care mental health offerings.

Some early recognition of performance based revenues he will give you all the details in his prepared remarks shortly.

Speaker 3: Over the past couple of months, there's been a number of consistent questions and themes in our investor meetings. I'll take this time today to hit on those topics and provide some current color. The first question we usually hear...

Over the past couple of months Theres been a number of questions and themes in our investor meetings I'll take this time today to hit on those topics and provide some current color.

Speaker 3: The demand environment remains strong and the selling season continues at a solid pace. I'll remind investors here that with the growth of our middle market visit and customer selling motion, selling season is a year-long process that actually

The first question, we usually hear is about the selling season.

Demand environment remains strong in the selling season continues at a solid pace.

Mind investors here that with the <unk>.

Both of our middle market business.

And customer selling motion selling seat a year long process correctly.

Speaker 3: We've seen strength across verticals and customer size. As we've said before, more of the deals in the pipeline include multiple operas and one or more trusted partners.

We've seen strength across vertical and customer size as we've said before more of the deals in the pipeline with multiple offerings and one or more trusted partner solutions.

Speaker 3: We view this as powerful validation of our overall vision as well as the importance of embracing the echoes.

We view this as powerful validation of our overall vision as well as the importance of embracing the ecosystem.

Speaker 3: This is reflective of continued interest in our category and our ability to win more than our share of the market with our differentiated personalized healthcare suite.

This is reflective of continued interest in our category and our ability to win more than our fair share of the market with our differentiated personalized health care suite.

Speaker 3: The customer additions continue in both our traditional direct channel, as well as our rapidly growing health plan.

Her addition continue in both our traditional direct channel as well as our rapidly growing health plan business.

Speaker 3: On the direct side, advocacy and bundle deals have included brand name manufacturers, retail, automotive, DPG, medical, real estate, public sector, financial services, and many others.

On the direct side advocacy and bundled deal have included brand name manufacturers retail automotive CPG medical real estate public sector financial services and many others.

Speaker 3: And our Health Plan channel has delivered both quantity and quality, including some notable competitive takeaways. Through a combination of our direct sales force, expansions of existing relationships, and new logos through our Health Plan partners, accolade expert MD at his fantastic customers, including Nissan North America, Tyson Foods, Phillips, PIA, Spirit Airlines, Mutual Oma and Clorox this quarter.

And our health plan channel have delivered both quantity and quality, including some notable competitive takeaways.

Combination of our direct sales force expansions of existing relationships and new logos through our health plan partners accolade expert MD at added fantastic customers, including Nissan North America types of foods.

TIAA Spirit Airlines mutual of Omaha, again, Clorox this quarter.

Speaker 3: We also signed another major health plan partner to resell our advocacy and care.

We also signed another major health plan partner to retailer efficacy in care solutions.

Speaker 3: In the quarters ahead, we'll give you more visibility into this partnership and how we see the target addressable market within our health plan relationships continuing to grow.

In the quarters ahead, we'll give you more visibility into this partnership and how we see the targeted addressable market within our health plan relationships continuing to grow.

Speaker 3: We view these partnerships as incredible opportunities to drive sustainable growth for years to come.

We view these partnerships I think incredible opportunity to drive sustainable growth for years to come.

Speaker 3: Next, let's talk about the competitive landscape and do it on a couple of back.

Now, let's talk about the competitive landscape and do it on a couple of vectors.

Speaker 3: First, in a traditional employer's sale driven by X-Solven's RFP in the strategic and enterprise account space, our competitors remain the usual suspects we've talked about in the past.

In a traditional employer sales driven by our consultants RFP industry, He Jake and enterprise account space our competitors remain the usual suspects we've talked about in the past.

Speaker 3: A win rate remains strong as evidenced by our growth and bookings over the last of weeks.

Our win rate remains strong as evidenced by our growth in bookings over the last several years.

Speaker 3: Second, in pursuit of health plan relationships, our breadth of product offerings, our technology stack, and our open platform oftentimes have us competing with low engagement tech-only platforms instead of advocacy competitors. And our win rate there is very high.

Second in pursuit of health plan relationships, our breadth of product offerings, our technology stack and our open platform oftentimes have us competing with low engagement tech only platforms instead of advocacy competitors and our win rate there it's very hot.

Speaker 3: Why are windweights strong? Because we're deeply differentiated from the rest of the mark.

Wire when made strong because we're deeply differentiated from the rest of the market.

Speaker 3: Our customers know that one of the primary underlying causes of the dysfunction in the healthcare system is the complete fragmentation of the patient experience from understanding their benefits to how they're passed through from the care journey from specialist to specialist with little coordination or empathy.

Our customers know that one of the primary underlying causes of the dysfunction in the health care system is the complete fragmentation of the patient experience from understanding their benefits to how their pass through the care journey from specialist specialist with little coordination or empathy.

Speaker 3: A fundamental principle of accolade strategies to embed the position in the entire care journey and to do so with advocacy at the core. Accolade connects physicians longitudinally with members through our advocacy and health care.

Our fundamental principle of accolades strategies to embed the physician and the entire care journey and to do so with advocacy at the core.

Accolade connects positioned longitudinally with members through our advocacy and health care services accolade trading positions are uniquely positioned to connect brick and mortar position with members benefit and pharmacy coverage through claims and benefits specially.

Speaker 3: Accolades treating physicians are uniquely positioned to connect brick and mortar positions with members' benefits and pharmacy coverage through claims and benefits special.

Speaker 3: We can refer to and provide collaborative care with specialists, therapists, and point solutions for specific medical conditions that are covered under these members' employer help.

We can refer to and provide collaborative care with specialist therapists and point solutions for specific medical conditions that are covered under the members employer health plan.

Speaker 3: This is a unique role that only accolades plays with our customers.

This is a unique role that only activate place with our customers.

Speaker 3: by providing the benefits advocacy and navigation services that their members need to fully leverage their health care options, as well as operating a large and growing care delivery order.

Providing the benefits advocacy and navigational services their members need to fully leverage their health care options as well as operating a large and growing care delivery organization. We can fully engaged population identify and reach high risk members and guide them down care pathways for major cost and Missouri drivers like cancer.

Speaker 3: We can fully engage the population, identify and reach high risk members, and guide them down care pathways for major costs and misery drivers like cancer, MSK, diabetes, and more in a measurable, scalable, and deeply differentiated way. This is the next generation of advocacy and accolade is leading the way.

S K diabetes, and more measurable scalable and deeply differentiated way.

As the next generation of advocacy and accolade, leading the way.

Speaker 3: Recently, we've also filled a number of questions about GLP-1 drugs and their impact on our

Recently, we've also built a number of questions about DLP, one drug and their impact on our business.

Speaker 3: On this topic, the health care industry, employers and consumers continue to learn from their experience with treatment regimens, usage patterns,

On this topic, the health care industry employers and consumers continue to learn from their experience with treatment regimens.

Speaker 3: Drug availability has clearly driven some fluctuation in usage at a month-over-month basis, and we expect that volatility, both upward and downward, to continue in the quarters ahead. That said, demand continues to be strong.

Usage patterns and drug availability.

Drug availability has clearly driven some fluctuation usage on a month over month basis, and we expect that volatility both upward and downward to continue in the quarters ahead.

Speaker 3: And we've also seen the growing attractiveness of non-pharmaceutical alternatives like Burda, a company in our trusted partner ecosystem that we've profiled in our capital market space and specializes in diabetes reverse.

That said demand continues to be strong.

And we've also seen the growing attractiveness of non pharmaceutical alternatives like Herta, our company and our trusted partner ecosystem that we profiled in our capital markets day and specializes in diabetes rehearsal.

Speaker 3: We're also beginning to see new approaches to managing the cost and prescription of these drugs. The University of Texas System decided to stop covering weight loss drugs after seeing its costs for the drug increase from $1.5 million monthly to more than $5 million monthly over 18 months.

We're also beginning to see new approaches to managing the cost of prescription of these drugs.

University of Texas system decided to stop covering weight loss drug after seeing its cost for the drug can treat from $1 5 million monthly to more than $5 million monthly over 18 months.

Speaker 3: And VCS of Michigan has changed its policy so that patients will be required to be on a lifestyle modification program for at least six months before granting approval for weight loss drug therapy.

And BCBS of Michigan has changed its policy so that patients will be required to be on a lifestyle modification program for at least six months before granting approval for weight loss drug therapy.

Speaker 3: What all of these data points reflect is the clear importance of engaging physicians in the weight loss treatment and a strong advocacy program to help ensure proper usage of program.

But all of these data points reflect is the clear importance of engaging physicians in the weight loss treatment and a strong advocacy program to help ensure proper usage at program at <unk>.

Speaker 3: Finally, regarding the VHAT-5 agreement, we continue to await the final resolution of HealthMest's protest, which we expect to hear over the coming months, and we'll have more to report after that process results.

Finally regarding the <unk> agreement, we continue to await the final resolution of health net protest, which we expect to hear over the coming months and we'll have more to report after that process resolves.

Speaker 3: With that, I'm going to turn the call over to Steve to review the financials. Steve, thanks, Raj. Bye.

So with that I'm going to turn the call over to Steve to review the financials, Steve. Thanks Raj.

Speaker 4: First I'll recap the results for the fiscal second quarter and then provide details on the rest of fiscal 2024.

First I'll recap the results for the fiscal second quarter, and then provide details on the rest of fiscal 2024.

Speaker 4: As Raj noted earlier, we generated $96.9 million in revenue in the second quarter of fiscal 2024, representing 11% growth year over year, or 19% pro-sorma growth, excluding the impact of a large customer termination in fiscal 23.

As Raj noted earlier, we generated $96 $9 million in revenue in the second quarter of fiscal 2024, representing a 11% growth year over year or 19% pro forma growth, excluding the impact of a large customer termination in fiscal 'twenty three.

Speaker 4: Revenue highlights in the second quarter included strong contributions across our offerings, reflecting the strength of a diversified personalized healthcare platform with multiple revenues.

Revenue highlights in the second quarter included strong contributions across our offerings, reflecting the strength of a diversified personalized health care platform with multiple revenue streams.

Speaker 4: Notably, GLP-1 demand remains strong in the quarter. However, not at the surge level, we saw in Q-1, which contribute to a slight sequential decline in utilization-based revenues from fiscal Q-1 to Q-2.

Notably <unk> one demand remained strong in the quarter. However, not at the surge level. We saw in Q1, which contributed to a slight sequential decline in utilization based revenues from fiscal Q1 to Q2.

Speaker 4: And in fiscal Q2, we also recognize the approximately $2 million in performance guarantee related revenue earlier than expected.

And then in fiscal Q2, we also recognized approximately $2 million and performance guarantee related revenue earlier than expected.

Speaker 4: We had initially forecasted these particular PGs to be earning the amount of about $1 million in each of fiscal Q3 and Q4.

We had initially forecasted these particular pega to be earned in the amount of about $1 million in each of fiscal Q3 and Q4.

Speaker 4: As we've discussed previously and highlighted in our capital markets, say, presentation on May 8th. At the start of the fiscal year, we generally forecast that savings related PGs will be recognized in our fiscal Q4.

As we've discussed previously and highlighted in our capital market day presentation on May eight.

At the start of the fiscal year, we generally forecast that savings related PGS will be recognized in our fiscal Q4.

Speaker 4: And when we earn those PGs earlier, we call them out to the extent they are notable.

We earned those Pg's earlier, we call them out to the extent there are notable.

Speaker 4: As a reminder, we had a similar poll for a dynamic of about $1.5 million in last year's Cisco Q2. So adjusting for both of those, as well as the customer termination, yielded pro-former revenue growth of that same 19% noted earlier.

As a reminder, we had a similar pull forward dynamic of about $1 5 million in last year's fiscal Q2, so adjusting for both of those as well as the customer termination yield pro forma revenue growth at that same 19% noted earlier.

Speaker 4: Fiscal Q2 adjusted gross margin was 44.2% compared to 44.7% in the prior year period.

Fiscal Q2, adjusted gross margin was 44, 2% compared to 44, 7% in the prior year period.

Speaker 4: The year-over-year change was driven by investments in our frontline care teams, including investments to launch our enterprise virtual primary care capability.

The year over year change was driven by investments in our frontline care teams, including investments to launch our enterprise virtual primary care capability.

Speaker 4: There are also some duplicative staffing costs in Q2 associated with the workforce re-alignment actions we took at the end of fiscal 2023 as we transitioned some roles to new geographic location.

There are also some duplicative staffing costs in Q2 associated with the workforce realignment actions. We took at the end of fiscal 2023, as we transition some road to new geographic locations.

Speaker 4: And as we discussed in Capital Markets Day, as well as our prior earnings call, we expect to see the benefits of the workforce re-alignment materialized in our P&L beginning in the second half of fiscal 2024.

And as we discussed in capital markets day, as well as our prior earnings call. We expect to see the benefits of the workforce realignment materialize in our P&L beginning in the second half of fiscal 2024.

Speaker 4: The Judgedy Debaton, the second quarter of fiscal 2024, was a loss of 8.8 million dollars.

Adjusted EBITDA in the second quarter of fiscal 2024 was a loss of $8 $8 million.

Speaker 4: The positive performance versus our guidance reflects the revenue over performance, as well as the keen focus on spend management as we continue on our path to profitability.

The positive performance versus our guidance reflects the revenue over performance as well as our keen focus on spend management as we continue on our path to profitability.

Speaker 4: And turning to the balance sheet, cash and cash equivalent totaled $292 million at the end of the second fiscal quarter. And as a reminder, our convertible notes are not due for about two and a half years.

And turning to the balance sheet cash and cash equivalents totaled $292 million at the end of the second fiscal quarter.

And as a reminder, our convertible notes are not due for about two and a half years.

Speaker 4: Finally, we currently have approximately 76.2 million shares of common stockout standing. Finding one as the other $acks

Finally, we currently have approximately $76 2 million shares of common stock outstanding.

Speaker 4: We remain optimistic about our outlook on growth as well as our continued drive towards profitability.

Now turning to guidance.

We remain optimistic about our outlook on growth as well as our continued drive towards profitability.

Speaker 4: And with that, we are maintaining our full fiscal year 2024 revenue guidance in a range of $410 to $414 million for representing pro-form a year-over-year growth or approximately 21% at the mid-

And with that we are maintaining our full fiscal year 2020 for revenue guidance in a range of $410 million to $414 million, representing pro forma year over year growth of approximately 21% at the midpoint.

Speaker 4: We're also maintaining our full year outlook on the bottom line for an adjusted EBITDA loss for fiscal 24 in a range of six to 12 million dollars.

We are also maintaining our full year outlook on the bottom line for an adjusted EBITDA loss for fiscal 'twenty, four and a range of $6 million to $12 million.

Speaker 4: With respect to the fiscal third quarter, keep in mind my earlier comment that we recognize about $2 million of PG revenue in fiscal Q2 that shifted about a million dollars revenue each from fiscal Q3 and Q4.

With respect to the fiscal third quarter keep in mind My earlier comment that we recognized about $2 million of PG revenue in fiscal Q2 that shifted about $1 million revenue each from fiscal Q3 and Q4.

Speaker 4: And with that, we're providing Cisco Q3 guidance today of revenue in the range of 95 to $97 million, and a Justiti Badaalos in the range of five to $8 million.

And with that we are providing fiscal Q3 guidance today of revenue in the range of $95 million to $97 million and adjusted EBITDA loss in the range of $5 million to $8 million.

Speaker 4: tying the suggested EBITDA guidance to our full-year target, we're forecasting positive adjusted EBITDA in the fourth fiscal quarter, between $17 and $20 million. When we earn the bulk of our PG revenues in that fourth quarter, and realize the impact of new customer launches on January 1st, as we outlined in depth on capital markets best.

Tying this adjusted EBITDA guidance, our full year target, we're forecasting positive adjusted EBITDA in the fourth fiscal quarter between 17 and $20 million.

When we earn the bulk of our PG revenues in that fourth quarter and realize the impact of new customer launches on January one as we outlined in depth on capital markets day.

Speaker 4: This projection for fiscal Q4, combined with our fiscal year-to-day performance on our bottom line, give us visibility and confidence in our projections for two to four percent adjusted even without positive in fiscal year 2025 and growing profitably thereafter. And with that,

This projection for fiscal Q4, combined with our fiscal year to date performance on our bottom line give us visibility and confidence in our projections for 2% to 4% adjusted EBITDA positive in fiscal year, 2025, and growing profitability thereafter.

With that we'll open the call to questions.

Speaker 1: As a reminder to ask a question, 5th press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please limit yourself to one question. Please find out what can probably be the Q&A roster. Thank you.

As a reminder, cancer questions. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please limit yourself to one question. Please symbolic compile the Q&A roster.

One moment for our first question.

Speaker 5: and her first question will come from line of Jeff Garrow from Stevens, United's Open.

And our first question will come from the line of Jeff Garro from Stephens. Your line is open.

Jeff Garro your line is open.

Okay.

One moment for our next question.

Speaker 1: Our next question, Comfort Line of Craig Heidenbach from Morgan Stanley . Your line is up.

Our next question comes from the line of Craig <unk> from Morgan Stanley .

Speaker 6: Yes, thank you. Raj, you mentioned a few competitive wins. Can you just touch on kind of what's differentiating relative to competitors in the marketplace and then also any additional color on the multiple offerings? What else you see getting pulled through when customers choose to have more than one offering from you?

Line is open.

Yes. Thank you Raj you mentioned a few competitive wins can you just touch on kind of what's differentiating relative to competitors in the marketplace. And then also any additional color on the multiple offerings what else do you see getting pulled through when customers choose to have more than one offering from you.

Thanks, Craig.

I think the core of our differentiation that we're seeing manifest in many of our platform style deals where people are buying our advocacy service plus other services.

Speaker 3: is the differentiation associated with having physicians embedded in the care teams, number one, number two, the capacity.

Differentiation associated with having physicians embedded in the care teams number one.

Number two the.

After the two.

Engage with brick and mortar care teams from those physician interactions to drive launched seasonal care.

And improve the fragmentation or actually alleviate the issues, especially with fragmentation in the health care system, our value proposition is built off.

Our incredible capabilities from an advocacy perspective that we've built over the years now, adding the incremental services in the incremental capabilities associated with physicians behavioral health specialist and specialist associated with our expert medical opinion service as it relates to the capabilities for the product offering we're seeing strength in advocacy in terms.

Speaker 6: How it relates to the capabilities or the product offering, we're seeing strengths in advocacy, in terms of new bookings, we're seeing strength in advocacy, expert medical opinion, and customer taking advantage of our Acolic Care Service. And so, incrementally, we mentioned in the script where in the prepared remarks earlier, that an increasing number of customers you take advantage of the trust and partner ecosystem as well.

New bookings were seeing strength in advocacy expert medical opinion and customers taking advantage of our equity care service and so.

Incrementally we mentioned in the script or in the prepared remarks earlier.

An increasing number of customers were taking that matches the trusted partner ecosystem as well.

Thank you one moment our next question.

Speaker 1: And our next question of conflino, Jessica Tasson from Piper Seller. Your line is open.

And our next question comes from the line of Jeff.

Tucson from Piper Sandler Your line is open.

Speaker 7: Hi guys, thank you for the question and congrats on the strong quarter. I was hoping if you could maybe clarify, are you still expecting to see core navigation XCOMCAST return to about 20% growth in FY24? And maybe just, you know, how much visibility do you have into that kind of 4Q ramp at this point and any update on the annual growth rate for each of the businesses would be really helpful if they're changed relative to prior expectations. Thanks so much.

Hi, guys. Thank you for the question and congrats on the strong quarter.

Was hoping you could maybe clarify are you still expecting to see core navigation ex Comcast return to about 20% growth in FY 'twenty four.

And maybe just.

How much visibility do you have into that kind of four key ramp at this point and any update on the annual growth rate for each of the businesses.

It would be really helpful. If they're if they're changed relative to prior expectations. Thanks, so much.

Speaker 4: Hi, Jess, this is Steve. So first of all, with respect to fiscal 2024, yet we're still expecting that the growth rate overall to be in that range of 21% at the midpoint for the year and lining up around the offerings where advocacy would be in the neighborhood of 20%.

Hi, Jeff This is Steve so.

First of all with respect to fiscal 2024, yes.

Yes, we're still expecting that the growth rate overall to be in the range of 20%, 21% at the midpoint for the year and lining up at around the offerings were advocacy would be in the neighborhood of 20%.

Speaker 4: Growth rates and EMO or the extramedical opinion offering in the range of 20 as well and the virtual primary care business growing that faster than that.

Growth rate.

GMO or the expert medical opinion offering in the range of 'twenty as well.

The virtual primary care business growing faster than that we've got good visibility to that number I've met Raj mentioned in his prepared remarks.

Speaker 4: We've got good visibility to that number. As Matt Raj mentioned in the preparatory remarks, the selling season has been, there's a man environment is strong, selling season. We've had several good wins, selling season continues right through here, but we've got good visibility to that for the end of this fiscal year, and then visibility towards our 20% long-term growth rate that we've spoken about for next year in particular.

Selling season has been.

And environment, a strong selling season, we've had several good win selling season continues right through here, but we've got good visibility to that for the end of this fiscal year, and then visibility towards our 20% long term growth rate that we've spoken about for next year.

In particular.

One moment sorry next question.

Speaker 1: And our next question from ComforLano. J. Lendressing from CURIS Securities. Your line is...

Okay.

And our next question comes from the line of Cherilyn dressing from tourists Securities. Your line is open.

Speaker 8: Thank you and congratulations on a strong quarter. I just want to go back to selling season commentary. We have heard this year that there has been some delay in employer decision making in terms of deciding on benefits for next year. Just curious if you have seen anything on that line among your client base or just a market in general. And related to that, clearly addressing the GLP1 medication demand is on top of mind for most employers. So are you seeing that outsized piece of wallet or mind share impacting the discussion on other areas in any way?

Thank you and congratulations on a strong quarter I just wanted to go back to the selling season commentary.

Yes.

There has been some delay in employer decision, making in terms of deciding on benefits for next year. Just curious if you have seen anything on that line among your client base or just the market in general and related to that clearly addressing the DLP. One medications demand is on top of mind for most employers. So are you seeing that outsized piece of.

While net of mindshare impacting the discussion on other areas and any base clearly new client wins for you guys don't seem to have slipped any impact, but just curious your thoughts on both items.

Speaker 8: Clearly new client wins for you guys don't seem to reflect any impact but just curious your thoughts on both that

Operator: Today, and thank you for standing by.

Speaker 3: As you've learned, I think one, we continue to see a strong demand environment, we're continuing to see customers.

Operator: Welcome to Accolade's second quarter, 2024, earnings results conference call. At this time, all participants are not listening only mode. After this speaker's presentation, there will be a question and suggestion. To ask a question during the session, you will need to press star one one on your telephone. Within here, an automated message advising your hand is raised. To withdraw your question, please press star one one again.

Yes, Andrew I think one we are continuing to see a strong demand environment, we're continuing to see customers.

Speaker 3: who, by the three core reasons that they've always purchased solutions, our solution, first the desire to control a trend line, second the desire to improve the ablaze experience.

Who.

For the three core reasons that they've always purchase solution our solution.

First the desire to control a trend line second the desire to improve the employee experience.

Speaker 3: And third, the desire to improve outcomes as it relates to healthcare outcomes for their employees. That-

And third the desire to improve outcomes as it relates to.

Operator: Please be advised that today's conference is being recorded.

Todd Friedman: I want to add a kind of conference over to you, speaker today, Todd Friedman, Senior Vice President, and rest relations. Please go ahead. Thanks, Alfredo.

Speaker 3: The commentary on GLP1 is actually tied pretty nicely into that in many ways, Jill.

Health care outcomes for their employees.

Yes.

The commentary on DLP, one is actually tied pretty nicely into that in many ways to lender meaning.

Speaker 3: Meaning what our employers definitely experience is this idea that

Todd Friedman: Welcome over one to our fiscal second quarter, earnings call. With the NRG's in office today, our Chief Executive Officer, Rajeev Singh, and our Chief Financial Officer, Steve Barnes. Dr. Shantanu Nundy, our Chief Health Officer, we'll join for the question and answer portion of the call later. Before turning the call over to Rajeev, please note that we will be discussing certain non-gap financial measures that we believe are important when evaluating accurate performance.

Our employers definitely experiencing is this idea that.

Speaker 3: A new medication has come onto the market that's driving healthcare and cost. They've got to adjust both from a policy perspective and understand how they're gonna apply the appropriate clinical rigor to get the outcomes that they want and to drive the value for their employees that's necessary while controlling costs.

Our new medication has come onto the market, that's driving health care call.

<unk> got to adjust both from a policy perspective, and understand how they're going to apply the appropriate clinical rigor to get the outcomes that they want and to drive the value for their employees as necessary, while controlling cost and so we think in some ways are absolutely, it's driving an incremental spend which employers are going to and from somewhere but.

Todd Friedman: Details in the relationship between these non-gap measures, the most comfortable gap measures and the reconciliation thereof, can be found in the press release that is posted on our website. Also, please note that certain statements may during this call will be for looking statements defined by the Privacy Curious Litigation Reform Act of 1995. So, it's for looking statements are subject to risks, uncertainties, and other factors that could cause the actual results to act related to different material from those expressed or implied on this call.

Speaker 3: And so we think in some ways, absolutely, it's striving and incrementing spend, which employers are gonna have to fund from somewhere. But incrementally, it actually drives real demand for services like ours.

Incrementally it actually drives a real demand for services like ours.

Speaker 3: I'll use this opportunity as a moment to defer to our chief health officer, Shelfin, who know the talk a little bit about our clinical view on how to drive value for corporations as it relates to GLP1 and the cost of GLP1. Shelfin, I'm going to talk about it.

I'll use this opportunity as a moment to defer to our Chief Health Officer Sharpening you.

You talk a little bit about our clinical view on how to drive value for corporations as it relates to <unk>, one and the cost of GOP sharpener.

Todd Friedman: For additional information, please refer to our cautionary statement in our press release and our filings with the SEC, all of which are available on our website.

Speaker 9: Yeah, absolutely, Rajan. It's always good to hear from you and fantastic question. Yeah, I think the key that we're hearing from employers, and I think for me as a practicing physician, makes sense clinically, is that, you know, we want to use the demand for GLP ones to really create a much more comprehensive evaluation and a much more comprehensive plan for these numbers, right? I think...

Yeah, absolutely rosin lender always good to hear from you and it's fantastic question, Yes, I think I think the key that we're hearing from employers and I think for me as a practicing physician makes sense clinically is that we want to use.

Rajeev Singh: And with that, I'll turn the call over to our CEO, Rajeev Singh. Thank you, Todd, and thank you everyone for joining us today. Having now completed the first half of our fiscal year, there are four clear takeaways we'd like our shareholders to take from this call. First, we came in ahead of guidance and consensus in Q2 on both revenue and adjusted EBITDA. Second, with each passing quarter, we're closer to crossing the threshold to becoming a profitable, scalable business, and will improve people's lives by changing the way health care's experienced.

The demand for DLP wants to really create a much more comprehensive.

Evaluation in a much more comprehensive plan.

Speaker 9: Too many actors in the healthcare system are sort of taking a patient that's interested in a GLP one and saying, okay, well, let me just prescribe that for you. And I think what we're able to do is, we have nutritionist on our staff. We are able to, we have mental health therapists, so some of these folks.

For these numbers right I think.

Too many.

Actors in the health care system are sort of taking a patient who is interested in our <unk> and saying, okay. Well, let me just prescribed that for you and I think what we're able to do is we have nutritionists on our SaaS. We are able to we have mental health therapist. So some of these folks.

Rajeev Singh: Third, the demand environment for our solutions remains strong. And fourth, we're presenting the market with unique and differentiated perspective grounded in our roots and advocacy and powered by care delivery that our competition does not offer. That differentiation is bearing us through today and will continue into the future. I'll give you more color on those bullets in a moment.

Speaker 9: They're underlying core issue is actually not related to metabolic issue, but much more related to their mental health. We have people like the alluded to in the opening remarks who are actually just interested in addressing obesity and they're not aware of non-pharmacologic means like perversal of diabetes. So I think our ability to be able to...

The underlying core issue is actually not related to metabolic issue, but much more related to their mental health and we have people like we alluded to in the opening remarks, who are actually just interested in addressing obesity and they are not aware of non pharmacologic means like.

Rajeev Singh: But first, let's head to the second quarter highlights. First, revenue and adjusted EBITDA will both ahead of our guidance for Q2. Revenue in the quarter was $96.9 million, within adjusted EBITDA loss of $8.8 million, both ahead of our previous guidance. Revenue highlights in the quarter remarks by continued strength in our virtual primary care and mental health offerings, and some early recognition of performance-based revenues. People will give you all the details that his prepared remarks shortly.

For vessel of diabetes, and so I think our ability to be able to take them that moment of peoples interest and sort of what's become a fad really use that as a way to open up a much more longitudinal relationship and then have a very broad set.

Speaker 9: take them that moment of people's interest in sort of what's become a fad, really use that as a way to open up this much more longitudinal relationship and then have a very broad set of clinical tools and interventions that are disposal. I think it's ultimately serving.

Clinical tools and interventions that are disposal I think it's ultimately serving.

Speaker 9: what members want and serving that employer's interest in managing costs and improving outcomes. Welcome.

Members want and serving that employers interested in managing costs and improving outcomes.

Rajeev Singh: Over the past couple of months, there's been a number of consistent questions and themes in our investor meetings. I'll take this time today to hit on those topics and provide some current color. The first question we usually hear is about the selling season. The demand environment remains strong, and the selling season continues at a solid pace. I'll remind investors here that with the growth of our middle market business and customer selling motion, selling season is a year-long process that actually now.

Thank you one moment our next question.

Speaker 1: Oh next question we're going to have Jared Haas from William Blair. Your line is open.

Our next question comes from the line of Jared Haas from William Blair. Your line is open.

Speaker 10: Yeah, good afternoon. Thanks for taking the questions. This is Jared Hassan for Ryan Daniels. Two-part question here. And just sticking with the demand environment favorability here. I'm curious if there's been any changes in terms of sort of the themes that are driving that environment or is it still largely focused on cost savings? Just especially when we think about the expected price increases coming on next year.

Yes, good afternoon, and thanks for taking the question. This is Jared Haase on for Ryan Daniels.

Two part question here.

And just sticking with the demand environment favorability here I'm curious if there's been any changes in terms of sort of the themes that are driving that environment or is it still largely focused on cost savings, especially when we think about the expected price increases coming on next year.

Rajeev Singh: We've seen strength across verticals and customer size. As we've said before, more of the deals in the pipeline include multiple offerings, and one or more trusted partners. Solution. We view this as powerful validation of our overall vision, as well as the importance of embracing the ecosystem. This is reflective of continued interest in our category and our ability to win more than our share of the market with our differentiated personalized healthcare suite.

Speaker 10: And then related to that is we think about sort of your ability to communicate ROI around cost savings. Is there anything that's kind of uniquely changed in terms of how you actually communicate that with clients? Do you have any additional sort of tools in the tool bag so to speak to really showcase that? To cross-lex.

And then related to that as we think about sort of your ability to communicate.

Around cost savings. So is there anything thats kind of meaningfully changed in terms of how you actually communicate that with clients do you have any additional sort of tools in the tool bag, so to speak to really showcase that to prospects.

Rajeev Singh: The customer additions continue in both our traditional direct channel, as well as our rapidly growing health plan business. On the direct side, advocacy and bundle deals have included brand name manufacturers, retail, automotive, DPG, medical, real estate, public sector, financial services, and many others. And our health plan channel has delivered both quantity and quality, including some notable competitive takeaways. Through a combination of our direct sales force, expansions of existing relationships, and new logos through our health plan partners, Accolade Expert MD and added fantastic customers, including Nissan North America, Tyson Foods, Phillips, PIA, Spirit Airlines, Mutualo Omaha, and Clorox this quarter.

Speaker 3: Thanks, Jared. As it relates to the first question, it's certainly trend line is always an issue, but also true and it's been, it's increasingly true, host the 2020 pandemic and shutdown, is that health care is becoming increasingly complex. While costs are always a driver, even the 4-2023, 2020-4 and the forecast have increased trend line.

Thanks Jared.

As it relates to the first question.

It's certainly trend line is always an issue, but also true in its Ben.

Kris Maly true post the 2020 pandemic and shutdown is that health care is becoming increasingly complex and so while costs are always a driver even before 2023 2024 and the forecast of increased trend line.

Speaker 3: The increasing fragmentation associated with the increased point solution, fragmentation associated with the complexity of healthcare and the growth of third-party solutions that creates that fragmentation, is another real driving. And that is a driver that points directly to solutions like R that act as an umbrella to the healthcare system.

The increasing fragmentation associated with increased point solution fragmentation associated with.

The complexity of healthcare and the growth.

Third party solutions that create that fragmentation is another real driver and that is a driver that points directly to solutions like ours that act as an umbrella to the healthcare system.

Rajeev Singh: We also signed another major health plan partner to resell our advocacy and care solutions. In the quarters ahead, we'll give you more visibility into this partnership, and how we see the target addressable market within our health plan relationships continuing to grow. We view these partnerships as incredible opportunities to drive sustainable growth for years to come.

Speaker 3: paper over the fragmentation using tools like our advocacy team are by position. And so I think it's a combination of both of those things that's really driving to demand for our services and perhaps any mismatch between the demands you might be hearing about for services that are more point solution oriented or in other categories.

Paper over the fragmentation using tools like our <unk> power by physician and so I think it's a combination of both of those things thats really driving the demand for our services.

Any mismatch between the demand you might be hearing about for services that are more point solution oriented or in other category.

Rajeev Singh: Next, let's talk about the competitive landscape and do it on a couple of vectors. First, in a traditional employer sale driven by X consultant RFP in the strategic and enterprise account space, our competitors remain the usual suspects we've talked about in the past. Our win rate remains strong as evidenced by our growth and bookings over the last several years. Second, in pursuit of health plan relationships, our breadth of product offerings, our technology stack, and our open platform oftentimes have us competing with low engagement tech only platforms instead of advocacy competitors.

Speaker 11: As it relates to your second question, we are consistently showing our customers our value proposition as it relates to the interventions and the engagements that we're driving, but start there, well, how much of their population are we engaging? The interventions that we drive on their behalf, leading to the claims saving that actually we derive on their behalf as well. And so that's been very consistent over the years and our performance has been extraordinarily consistent as well.

As it relates to your second question.

We are consistently.

Showing our customers our value proposition as it relates to the interventions and engagements that were driving let's start there.

How much of their population are we engaging the interventions that we drive on their behalf leading to the claim savings that actually we derive on their on their behalf as well and so that's been very consistent over the years and our performance has been extraordinarily consistent as well.

Rajeev Singh: And our win rate there is very hot. Why are win rates strong? Because we're deeply differentiated from the rest of the market. Our customers know that one of the primary underlying causes of the dysfunction in the healthcare system is the complete fragmentation of the patient. From understanding their benefits to how they're passed through from the care journey from specialist to specialist with little coordination or empathy. A fundamental principle of accolade strategies to embed the position in the entire care journey and to do so with advocacy at the core.

Thank you one moment our next question.

Speaker 1: Our next question will come from the line of Greg Santangelo from Jeffries. Your line is open.

Our next question will come from the line of Greg <unk> from Jefferies. Your line is open.

Speaker 10: Thanks for taking my question. Hey Steve, how's the fault with you on a couple of financial questions? You know, when we look at your long-term guidance that you provided that five-year look at the fiscal 29, I think the assumption was right, you're assuming 20% compounded annual revenue growth, getting to a 10 to 15% margin.

Okay.

Thanks for taking my question, Hey, Steve one follow up with you on a couple of financial questions.

If you look at your long term guidance that you provided that five year look out to fiscal 'twenty nine I think the assumption was right youre, assuming 20% compounded annual revenue growth getting to a 10% to 15% margin.

Rajeev Singh: Accolade connects positions longitudinally with members through our advocacy and healthcare services. Accolade treating positions are uniquely positioned to connect brick and mortar positions with members benefit and pharmacy coverage. Through claims and benefits specialist. We can refer to and provide collaborative care with specialist therapists and point solutions for specific medical conditions that are covered under these members employer health plan. This is a unique role that only accolade places our customers by providing the benefits advocacy and navigation services their members need to fully leverage their healthcare options as well as operating a large and growing care delivery organization.

Speaker 10: you know, in that year. Should we assume that, you know, that the progression to get there will be somewhat linear? And is it also a fair assumption to assume that your cash flow will somewhat equate to your adjustments?

In that year should we assume that.

That's the progression to get there will be somewhat linear and is it also a fair assumption to assume that your cash flow will somewhat equate to your adjusted EBITDA similar to maybe how it's trended this year and I guess the reason I'm asking this because we think as you mentioned in your prepared prepared remarks, you said the converts.

Speaker 10: EBITDA similar to maybe how it's trended this year. And I guess the reason I'm asking right is because I think, you know, as you mentioned, you're prepared, prepared marks.

Speaker 10: I said the converts are only two and a half years away into 2026 and basically the amount of converts are almost exactly equal with the cash that you have. And those converts are trading somewhere in the low 80s. And so I'm kind of curious as to what the plan is and how we think about profitability and cash generation in the next kind of couple of years to prepare to basically refinance or do something with those converts.

Only two and a half years away into 2026, and basically the amount of converts are almost exactly equal with the cash that you have in those converts are trading.

Rajeev Singh: We can fully engage the population identify and reach high risk members and guide them down care pathways for major costs and misery drivers like cancer, MSK diabetes and more in a measurable scalable and deeply differentiated way.

Somewhere in the low eighties, and so I'm kind of curious as to what the plan is and how we think about profitability and cash generation in the next couple of years.

To prepare to basically refinance or do something with those converts.

Speaker 4: Sorry, a lot of questions. Hey, my best. Yeah, yeah, but all closely tied together. So, appreciate all kind of wrap them all together. And first of all, you have it right that 20% growth rate cater that we're seeing is all based upon the demand environment and our execution over the past several years and what we're seeing as Raj was just describing. And so we're expecting that to continue to call it over that foreseeable future. Particularly that five year period he talked about, which is...

Rajeev Singh: This is the next generation of advocacy and accolade is leading the way.

Sorry, a lot of question I got my bad, Yes, yes, but.

Rajeev Singh: Recently, we've also filled a number of questions about GLP-1 drugs and their impact on our business. On this topic, the health care industry, employers, and consumers continue to learn from their experience with treatment regimens, usage patterns, and drug availability. Drug availability has clearly driven some fluctuation in usage on a month-over-month basis, and we expect that volatility, both upward and downward, to continue in the quarters ahead. That said, demand continues to be strong, and we've also seen the growing attractiveness of non-farmaceutical alternatives like Burda, a company in our trusted partner ecosystem that we've profiled in our capital market state, and specializes in diabetes reversal.

Closely tied together so I appreciate it.

To wrap them altogether, Glenn first of all you have it right that 20% growth rate CAGR that we're seeing is all based upon the demand environment in our execution over the past several years and what we're seeing as Raj was just describing and so we're expecting that to continue call it over that debt.

Foreseeable future, particularly that five year period, you talked about which is back in our Investor day back in May we laid out that path too.

Speaker 4: Back in our investor day back in May we laid out that path to 20% growth towards a billion dollars and fairly linear projection is how our progression is how we're thinking about that Eva Bob online as we break through into next year in the positive territory there in adjusted EBITDA our guidance is a range of 2 to 4% of revenue And what expect as we we always do balancing growth with profitability as we've done historically on our way to break even into profitability and then going forward There's a big opportunity in front of us so we want to make sure we invest accordingly which we will do but also drive profitability on that path

20% growth towards $1 billion and fairly linear projection is how our progression is how we're thinking about that EBITDA bottom line as we breakthrough into next year in the positive territory. There in adjusted EBITDA. Our guidance is the range of 2% to 4% of revenue and we would expect.

Rajeev Singh: We're also beginning to see new approaches to managing the cost and prescription of these drugs. The University of Texas System decided to stop covering weight loss drugs after seeing its costs for the drug increase from $1.5 million monthly to more than $5 million monthly over 18 months, and BCBS of Michigan has changed its policy so that patients will be required to be on a lifestyle modification program for at least six months before granting approval for weight loss drug therapy. What all of these data points reflect is the clear importance of engaging physicians in the weight loss treatment and a strong advocacy program to help ensure proper usage and program adherence.

We always do balancing growth with profitability as we've done historically on our way to breakeven and enter profitability and then going forward Theres, a big opportunity in front of us. So we wanted to make sure we invest accordingly, which we will do but also drive profitability on that path.

Speaker 4: to your other part, to your question around free cash flow and balance sheet.

To your other part to your question around free cash flow and balance sheet.

Speaker 4: Yes, we would expect free cash flow to be within range of adjusted EBITDA. There are always puts and takes around working capital timing, but the capEx on the business is fairly modest, typically a few million dollars a year, or a percentage point, or two of revenue. And that's usually with respect to things like the capitalized software and normal kind of work station capEx firm employees, but that's really the expense of it.

Yes, we would expect free cash flow to be within the range of adjusted EBITDA.

These puts and takes around working capital timing, but the capex on the business. It's fairly modest typically a few million dollars a year or a percentage point or two of revenue and thats, usually with respect to things like.

Rajeev Singh: Finally, regarding the DHA-T5 agreement, we continue to await the final resolution of Health Nets protest, which we expect to hear over the coming month, and we'll have more to report after that process results.

Stephen Barnes: With that, I'm going to turn the call over to Steve to review the financials. Steve, thanks, Raj. First, I'll recap the results for the fiscal second quarter and then provide details on the rest of fiscal 2024. As Raj noted earlier, we generated $96.9 million in revenue in the second quarter of fiscal 2024, representing 11% growth year over year, or 19% pro-former growth excluding the impact of a large customer termination in fiscal 23.

Capitalized software and.

Normal kind of workstation capex for employees, but that's really the extent of it.

Speaker 4: With respect to the balance sheet, you're right. We've got about $292 million in cash on the balance sheet as we ended the August quarter that converts our due and two and a half years within August .

With respect to the balance sheet, you're right we've got about.

$292 million in cash on the balance sheet as we ended the August quarter. The converts are due in two and a half years in August .

Speaker 12: of 2026 and we would expect by that time to be well into cash flow positive and has a lot of optionality around whether we pay it down in in part or in full or refinance it will certainly be looking about that and talking about with investors over the common quarters as that becomes closer but we'll feel we'll have lots of optionality around that as we break through into cash flow positive and profitability.

2026, and we would expect by that time could be well into cash flow positive and had a lot of optionality around whether we pay it down.

Stephen Barnes: Revenue highlights in the second quarter included strong contributions across our offerings, reflecting the strength of a diversified personalized health care platform with multiple revenue streams. Notably, GLT-1 demand remains strong in the quarter. However, not at the surge level, we saw in Q1, which contributed to a slight sequential decline in utilization-based revenues from fiscal Q1 to Q2. And in fiscal Q2, we also recognized the approximately $2 million in performance guarantee related revenue earlier than expected.

In part or in full or refinance it will certainly be.

Looking about that and talking about with investors over the coming quarters.

That becomes closer, but moorefield will have lots of optionality around that as we breakthrough cash.

Cash flow positive and profitability.

Thank you.

For next question.

Speaker 1: The next question of a friend of Alan Lutz from Bank of America, Udain is open.

Okay.

Next question comes from the line of Allen Lutz from Bank of America. Your line is open.

Speaker 13: Thanks for taking the questions. One for a Roger Steve. Roger, you talked about the rap of the growing health plan channel. Is there a way to frame how much of the 19% growth you saw in the quarter is coming from the health plan channel? And then I guess over time is the expectation that that's going to grow as a percentage of growth. And then one for Steve, I guess is there anything to call out related to the GOP1 dynamic in the...

Stephen Barnes: We had initially forecasted these particular PGs to be earned in the amount of about $1 million in each of fiscal Q3 and Q4. As we've discussed previously and highlighted in our capital market, say, presentation on May 8. At the start of the fiscal year, we generally forecast that savings-related PGs will be recognized in our fiscal Q4. And when we earn those PGs earlier, we call them out to the extent they are notable.

Yes.

Thanks for taking the question.

One for Roger speed Rajiv talked about the rapidly growing health plan channel is there a way to frame how much of the 19% growth you saw in the quarter is coming from the health plan Channel and then I guess over time is the expectation that that's going to grow as a percentage of growth and then one for Steve I guess is there.

Anything to call out related to the GOP, one dynamic and why GOP, one related activity decline quarter over quarter.

Speaker 13: why GLP-1 related activity decline quarter over quarter. Thanks.

Stephen Barnes: As a reminder, we had a similar call for a dynamic of about $1.5 million in last year's fiscal Q2. So adjusting for both of those, as well as the customer termination, yielded pro-former revenue growth of that same 19% noted earlier. Fiscal Q2 adjusted gross margin, what's 44.2% compared to 44.7% in the prior year period. The year-over-year change was driven by investments in our frontline care teams, including investments to launch our enterprise virtual primary care capability.

Speaker 11: Yeah, sure. On the first question, if I should have with Breaking Out Health Plan, new bookings versus...

Yes sure.

The first question associated with breaking out health plan, new bookings versus.

Speaker 11: Our employer, our government new bookings, we haven't broken them out that well. And what I will say is when we talk about the announcement of a new...

Our employer or a government new bookings, we haven't broken them out that well and what I will say is when we when we talk about the announcement of a new partner like we talked about today, but we're really talking about is the expansion of our Tam new opportunities to go into a health plan book of business in this case for advocacy care and our expert medical opinion.

Speaker 11: partner like we talked about today, or we're really talking about is the expansion of our camp. New opportunities to go into a health plan book of business, in this case, for advocacy, care, and our expert medical opinion capabilities.

Stephen Barnes: There were also some duplicative staffing costs in Q2 associated with the workforce re-alignment actions we took at the end of fiscal 2023 as we transitioned some rules to new geographic locations. And as we discussed in capital markets, say, as well as our prior earnings call, we expect to see the benefits of the workforce re-alignment materialized in our P&L beginning in the second half of fiscal 2024. Adjusted EBITDA on the second quarter of fiscal 2024 was a loss of $8.8 million.

Speaker 11: And that opportunity manifests over a, over, more quarters and years. And we expect that we're really excited about this particular opportunity, more to come in terms of commentary around that town in future quarters.

<unk> abilities.

And that opportunity manifests over a over quarters and years and we expect that we're really excited about this particular opportunity more to come in terms of.

Speaker 11: We would expect over time absolutely that the Health Plan channel, which was relatively nascent, if you knew our company four years ago, there wasn't much of a Health Plan channel in terms of our go-to-market motion today.

Commentary around that Tam in future quarters.

We would expect over time, absolutely that the health plan channel, which was relatively nascent if you knew our company four years ago. There wasn't much of a health plan channel in terms of our go to market motion today.

Speaker 11: If you're to look across our book of business, it's a pretty material part of

If you look across our book of business, it's a pretty material part of how we go forward and we are and we believe we're competing very effectively in terms of winning new opportunity to approach <unk> books of business. So yes, we would expect it to be a growing percentage of our new bookings in years ahead stipulate grabbed the GLC one sure and out.

Speaker 11: how we go forward and we believe we're competing very effectively in terms of winning new opportunity to approach Alpine books of business. So yes, we've affected to be a growing percentage of our new bookings in years ahead.

Stephen Barnes: The positive performance versus our guidance reflects the revenue overperformance as well as the keen focus on spend management as we continue on our path to profitability. In turning to the balance sheet, cash and cash equivalence totaled $292 million at the end of the second fiscal quarter. And as a reminder, our convertible notes are not due for about two and a half years. Finally, we currently have approximately 76.2 million shares of common stockout spending.

Speaker 4: So you feel like you're going to grab the GLP one? Sure. And I'll tell you a question about GLP ones. Both Raj and I had some elements of comments in here that overall this has been the driver of interest and strength around our particularly around our primary care capabilities of consumers.

To your question about <unk>, both Ross and I had some elements of comment in here that overall this has been a driver of interest and strength around our particularly around our primary care capability that consumers and employees of R.

Speaker 4: and employees of our commercial customers have inquired about and sought advice and prescriptions for that. We had quite a big surge for it in Q1. Growth continues there, but not quite at that same level. So I in Q2, as we've read, I think even perhaps in one of your pieces recently about some can supply constraints happening that may affect some of those prescriptions and for us rot Francis.

Stephen Barnes: Now, turning to guidance. We've remained optimistic about our outlook on growth as well as our continued drive towards profitability. And with that, we are maintaining our full fiscal year 2024 revenue guidance in a range of $410 to $414 million, representing pro-form a year-over-year growth or approximately 21 percent at the midpoint. We're also maintaining our full year outlook on the bottom line for an adjusted EBITDA loss for fiscal 24 in a range of $6 to $12 million.

Our commercial customers have inquired about.

<unk> sought advice and prescriptions.

For that we had a quite a big surge for it in Q1 growth continues there, but not quite at that same level.

In Q2.

Brad I think the bank drafts in one of your pieces recently about some supply constraints happening that may affect some of those prescriptions and for us visit but I think what we are really.

Speaker 14: I think what we are really...

Speaker 4: positive about here is we think about the strength of the performance of the company on the back of a diverse five platform that in any given quarter is not dependent upon outside growth in any one of those.

Stephen Barnes: With respect to the fiscal third quarter, keep in mind my earlier comment that we recognize about $2 million of PG revenue and fiscal Q2 that shifted about a million dollars revenue each from fiscal Q3 and Q4. And with that, we're providing fiscal Q3 guidance today of revenue in the range of $95 to $97 million and adjusted EBITDA loss in the range of $5 to $8 million. Tying this adjusted EBITDA guidance to our full year target, we're forecasting positive adjusted EBITDA in the fourth fiscal quarter between $17 million and $20 million.

Positive about here as we think about the strength of the performance of the company on the back of a diversified platform that in any given quarter is not dependent upon outsized growth in any one of those.

Speaker 4: Importantly, the advocacy offering continues to grow at attractive rates, same with medical, medical opinion and primary care all growing along the lines of those growth rates we outlined, you know, in the past and certainly in depth on our investor's day. So that's a bit of out what we're seeing specifically with GLP1.

Accordingly, the advocacy offering continues to grow at attractive rates seen with met.

Our medical opinion and primary care all growing along the lines of those growth rates we outlined.

In the past and certainly in depth on our Investor day. So.

That's a bit about what we're seeing specifically with <unk> one.

Speaker 12: in terms of financially and more broadly across the platform. Thank you.

Financially and more broadly across the platform.

Stephen Barnes: When we earn the bulk of our PG revenues in that fourth quarter and realize the impact of new customer launches on January 1st as we outlined in depth on capital markets day. This projection for fiscal Q4 combined with our fiscal year-to-day performance on our bottom line give us visibility and confidence in our projections for 2 to 4 percent adjusted EBITDA positive in fiscal year 2025 and growing profitably thereafter.

Thank you and one woman for next question.

Speaker 5: Our next question will come flying up Jeff Garrow from Stevens. Caroline is open. And then an opening permit in three rounds will come simultaneous withign preparation authority. And then an opening permit in three rounds will come simultaneous withign preparation authority.

Okay.

Our next question will come from the line of Jeff Garro from Stephens. Your line is open.

Jeff. Your line is open you may be on mute.

Operator: And with that, we'll open the call to questions. As a reminder to ask a question, fifth press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

We'll go ahead and continue.

One moment for your next question.

Speaker 1: Alright, this question will come from a native David Larson from BTIG. Your line is off.

Our next question comes from the line of David Larsen from <unk>. Your line is open.

Speaker 15: Hi, can you give a little bit of color around your ACV, your annual contract value and your pipeline. I think it came in at 309 million at the end of the last fiscal year. So if we increase that by 20%, should we expect 371 million for fiscal 24? And then your bookings, I think we're trying to get around 70 million annually. Should we expect that number to be like 84 million for fiscal 24 annually, would be up 20%. Just any color there, we very helpful. Thank you.

Hi, can you give a little bit of color around your <unk>.

CV your annual contract value in your pipeline.

Jeffrey Garro: Please and her first question, we'll come from line of Jeff Garro from Stevens. Your line is open. Jeff Yes, thank you. Raj, you mentioned a few competitive wins. Can you just touch on kind of what's differentiating relative to competitors in the marketplace and then also any additional color on the multiple offerings? What else you see getting pulled through when customers choose to have more than one offering for you? Thanks, Greg.

<unk> came in at $309 million at the end of the last fiscal year. So if we increase that by 20% should we expect 371 million for fiscal 'twenty four and then your bookings I think we are turning it around $70 million annually should we expect that number to be like 84 million for fiscal 'twenty four annually, which would be up 20% just any color there would be very healthy.

Speaker 4: I'll take it off, Raj. And I'll just feel free to jump in, of course. Dave, so with respect to looking to Raj talked about selling season, the fact is we're right in the midst of selling season right now and continuing to close deals around that, but you're right in the data you're quoting as far as end of year, last year, ACB and ARR. Well, we report out on those at the end of the fiscal year. So we'll come back to you given that those are key metrics that we hit in the fourth quarter call, but in terms of color, as we both were commenting on in various ways.

Thank you.

I'll kick it off Brian feel free to jump in of course.

Dave So with respect to bookings you Raj talked about selling season.

Fact is we're right in the midst of selling season, right now and continuing to close deals around that but.

Youre right in the data you are quoting as far as end of year last year, ATV and IRR, but we report out on those at the end of the fiscal year. So we'll come back to you.

Given that those are key metrics that we hit in the fourth quarter call, but in terms of color as we both.

Speaker 12: Got good visibility towards our current year outlook in terms of our guidance for the year and towards that 20% Top line growth rate that we've been been speaking about consistently

We're commenting on in various ways.

Good visibility towards our current year outlook in terms of our guidance for the year and towards that 20% topline growth rate.

Rajeev Singh: I think the core of our differentiation that we're seeing manifest in many of our platform style deals where people are buying our advocacy service, other services, is the differentiation associated with having physicians embedded in the care teams, number one, number two, the capacity to engage with brick and mortar care teams from those position interactions to drive longitudinal care and improve the fragmentation or actually alleviate the issues especially with fragmentation in the healthcare system. Our value proposition is built off of our incredible capabilities from the advocacy perspective that we've built over the years.

We've been speaking about consistently.

Thank you one moment for our next question.

Speaker 1: Our next question of coffee lines is Van Berenstein from Wells Fargo. He line is open.

Our next question comes from the line of Stan Bernstein from Wells Fargo. Your line is open.

Speaker 15: Hi, I think my question's maybe sticking with virtual primary care. Can you share what percent of view plus care members in the quarter joined as a result of those numbers seeking JLP 1 related care? Thanks.

Hi, Thanks for taking my questions, maybe sticking with virtual primary care.

Can you share what percent of your plus care members in the quarter joined as a result of those members seeking GOP one related care.

Speaker 11: And we haven't broken out membership by conditions that they're seeking. What we can tell you, and we talked about in the past quarters, is that a double digit percentage of those businesses came from, or were associated with GLP1 or weight loss, and that trend continued into the score.

Thanks.

Yeah.

And we haven't we haven't broken out the.

Membership by condition that they are seeking what we can't tell you when we talked about in the past quarters is that a double digit percentage of those business.

Rajeev Singh: Now adding the incremental services and incremental capabilities associated with physicians, behavioral health specialists and specialists associated with our extramedical opinion service has a relation to the capabilities or the product offering. We're seeing strength in advocacy in terms of new new bookings, we're seeing strength in advocacy, extramed medical opinion and customers taking advantage of our actually care service and so incrementally we mentioned in the script where in the prepared remarks earlier that an increasing number of customers are taking advantage of the trust and partner ecosystem as well. Thank you. One moment. Our next question.

<unk> from our we're associated with.

<unk>, one our weight loss and that trend continued into this quarter.

Thank you one moment for our next question.

Speaker 1: And our next question of Confiland, Robert Simmons from DA Davidson, United Zoologist.

And our next question comes from the line of Robert Symons from D. A Davidson your line is open.

Speaker 15: Hey, thanks for taking a question. Can you talk a bit about the ramp and traction that you're seeing with virtual parameter and with taking a question to the enterprise?

Hey, Thanks for taking the question.

So can you talk a bit about kind of the ramp and traction that you're seeing with virtual primary care and with taking your questions.

Jessica Tassan: And our next question, Confilina Jessica Tassan from Piper Sallair. Your line is open. Hi guys, thank you for the question and congrats on the strong quarter.

Speaker 11: Yeah, absolutely happy to. I think it's one of the parts of the business that when we took accolades care.

To the enterprise.

Yes, absolutely happy to I think one of the parts of the business.

Speaker 11: or taking plus care of the enterprise, but as you put it in last year that we were most excited about the opportunity to go live with.

When we took accurately care or taking plus care to the enterprise as you put it in last year that we were most excited about the opportunity to go live with.

Stephen Barnes: I was hoping if you could maybe clarify are you still expecting to see core navigation ex-comcast return to about 20% growth in FY24 and maybe just how much visibility do you have into that kind of 4Q ramp at this point and any update on the annual growth rate for each of the businesses would be really helpful if they're if they're changed relative to prior expectations. Thanks so much. Hi, Jess. This is Steve.

Speaker 11: call it, you know, half a million people or so at the beginning of the year. What we're seeing, and I'll give Dr. Nundi an opportunity to weigh in here as well. What we're seeing is first that not only do we go live with that base, but that we saw the kind of utilization that we would expect on that page.

Call it.

Half a million people or so at the beginning of the year, what we're seeing in I'll give dr.

Dr 90, an opportunity to weigh in here as well what we're seeing at first that not only do we go live with that base that we saw the kind of utilization that we would expect on that base.

Speaker 11: in the first seven, eight months since we've gone live. The second thing we learned a lot. We learned a lot about incremental ways which people were engaging with our solution, which has led us to really refine our value proposition associated with positions being embedded in our advocacy care team.

In the first seven or eight months since we've gone live the second thing we learned a lot we learned a lot about.

Stephen Barnes: So first of all, with respect to fiscal 2024, yes, we're still expecting that the growth rate overall to be in that range of 21% at the midpoint for the year and lining up around the offerings where advocacy would be in the neighborhood of 20% growth rate and EMO or the expert medical opinion offering in the range of 20 as well and the virtual primary care business growing that faster than that. We've got good visibility to that number.

Our incremental ways in which people were engaging with our solution.

Which has led us to to really refine our value proposition associated with.

Physicians being embedded in our advocacy care teams.

Speaker 11: And the reason for that is just the use cases that customers and members are identifying through their usage that we're really excited about. Shampidy, would you like to add a little bit more?

The reason for that is just the use cases that customers and members are identifying through their usage that we're really excited about.

Would you like to add a little bit more.

Speaker 9: Yeah, absolutely. And it's such a great question. Yeah, I mean, just to give a couple of clinical examples of areas where like Roger alluded to, I mean, I think we...

There.

Yes, absolutely and Thats a great question, Yes, I mean, just to give a couple of clinical examples of areas, where like Raj alluded to I mean, I think we.

Stephen Barnes: As Matt Raj mentioned in his preparatory remarks, the selling season has been the demand environment is strong selling season. We've had several good wins selling season continues right through here but we've got good visibility to that for the end of this fiscal year and then visibility towards our 20% long-term growth rate that we've spoken about for next year in particular. One moment for our next question.

Speaker 9: You know, we anticipate it, you know, we know that 20, 30% of Americans don't have primary care positions and we, you know, that are solution because we're delivering primary care virtually, comprehensively would be, you know, a great option for them. I think some of the learning beyond that was, you know, we started seeing members who have primary care positions but just weren't able to access them or weren't able to get.

We anticipated we know that 2030% of Americans don't have primary care physicians and we did.

But our solution because we are delivering primary care virtually comprehensively would be great option for them I think some of the learnings beyond that.

We started seeing members who have primary care physicians, but just weren't able to access them or weren't able to get.

Speaker 9: sort of the solutions from those primary care physicians come to us. So one example is patients being discharged from the hospital. Very well studied that patients get better outcomes if they see their PCP within 48 hours of discharge from the hospital.

The solutions from those primary care physicians come to US. So one example is patients being discharged from the hospital.

Jailendra Singh: And our next question, Confilano, Jailendra Singh from Curious Securities. Your line is open. Thank you and congratulations on a strong quarter. I just want to go back to a selling season commentary. We have heard this year that there has been some delay in employer decision making in terms of deciding on benefits for next year. Just curious if you have seen anything on that line among your client base at just a market in general.

Very well studied that patients get better outcomes that they see their PCP within 48 hours of discharge from the hospital.

Speaker 9: Because of the access issues, a lot of times people weren't able to see their doctors and that's shorter of here at a time. And so our physicians were able to see those numbers right in that critical moment. And I think resulting in downstream reductions in things like readmissions.

Does the access issues a lot of times people weren't able to see their doctors in that short period of time and so our physicians were able to.

See those numbers right in that critical moment, and I think resulting in downstream reductions in things like Readmissions.

Speaker 9: A second example is, you know, pretty commonly members can't get into see their physicians around a time where they need to refill.

An example is pretty commonly members can't get in to see their positions around the time, where they need to refill and we're finding that that's an opportunity to actually talk to those numbers about the chronic conditions that theyre getting the retail floor and and inform them about some of the trusted.

Jailendra Singh: And related to that, clearly addressing the GLP one medication demand is on top of mind for most employers. So are you seeing that outsized piece of wallet or mind share impacting the discussion on other areas in any way?

Speaker 9: And we're finding that that's an opportunity to actually talk to those members about the chronic conditions that they're getting the results for and and inform them about some of the trusted partners that we have that can also help complement sort of the pharmacologic option.

Rajeev Singh: Clearly new client wins for you guys don't seem to reflect any impact but just curious your thoughts on both items. As Jailendra, I think one, we continue to see a strong demand environment or continue to see customers who buy for the three core reasons that they've always purchased solutions, our solution. First, the desire to control trend line. Second, the desire to improve the employee experience. And third, the desire to improve outcomes as it relates to healthcare outcomes for their employees.

Partners that we have that can also help complement the pharmacologic option. So just some examples of where we're able to drive value for employers and sort of those moments of need and really lean into that physician led at sea approach.

Speaker 9: Some examples of where we're able to drive value for employers and sort of those moments of need and really lean into that position but have to see approach.

Thank you.

Our next question.

Speaker 1: And our next question, conflina, Jack Wallace from Guggenheim Partners, you're line is over.

Okay.

And our next question comes from the line of Jack Wallace from Guggenheim Partners. Your line is open.

Speaker 15: Hey, thanks for taking my questions and your apps on the beat. Speaking of the beat, you beat by more than the $2 million poll forward, but you kept the full year guidance and just you're wondering if you could help us think about the...

Hey, Thanks for taking my questions and congrats on the beat.

Rajeev Singh: The commentary on GLP one is actually tied pretty nicely into that in many ways, Jailendra. Meaning what are employers definitely experiencing is this idea that a new medication has come on to the market that's driving healthcare costs. They've got to adjust both from a policy perspective and understand how they're going to apply the appropriate clinical rigor to get the outcomes that they want and to drive the value for their employees that's necessary while controlling costs. And so we think in some ways, absolutely, it's driving an increment in spend which employers are going to have to fund from somewhere. But incrementally, it actually drives a real demand for services like ours.

Speaking of the beat you beat by more than the $2 million pull forward, but you kept the full year guidance I'm. Just wondering if you could help us think about the kind of the buckets of where the.

Speaker 16: kind of the buckets of where the, you could end up in the higher end of the range or the lower end of the range, just thinking of whether it's performance guarantees, new wins or even some of the utilization fees and those assumptions in the back half of the year.

You could end up in the higher end of the range at the lower end of the range just thinking of whether it's the performance guarantees new wins or are you in some of the utilization.

Speaker 16: And on that point, just how much of that might be a swing factor related to the the GLP one space. Thank you.

Fees and those assumptions in the back half of the year.

And on that point, just how much of that might be a swing factor related to the DLP one space. Thank you.

Speaker 4: Hey Jack, it's Steve. So you're right, we would be the range by a little bit more than the performance guarantee. These, remember, swapping you back a quarter ago, we raised guidance last quarter. We're reaffirming that guidance as we're here moving through selling season and driving growth across the business. As we head into the back half of the year, certainly the variables on the business are around the item G talked about.

Hey, Jeff It's Steve. So you are right, we would be the range by a little bit more than the performance guarantee be remembered walking you back a quarter ago, we raised guidance last quarter, we're reaffirming that guidance as we're here moving through selling season and driving growth across the business as we head into the back.

Shantanu Nundy: I'll use this opportunity as a moment to defer to our chief health officer, Shafi Nguni, to talk a little bit about our clinical view on how to drive value for corporations as it relates to GLP one and the cost of GLP one. Shafi Nguni? Yeah, absolutely, Rajan. It's always good to hear from you and this is a fantastic question. Yeah, I think the key that we're hearing from employers, and I think for me as a practicing physician, makes sense clinically, is that we want to use the demand for GLP ones to really create a much more comprehensive evaluation and a much more comprehensive plan for these members.

Back half of the year.

Certainly in the variables on the business are around that <unk> talked about.

Speaker 4: Virtual primary care, utilization and EMO utilization and PG.

Virtual primary care utilization and emo utilization in PGS, we factor into our guidance historical performance and what we're seeing.

Speaker 4: We factor into our guidance, historical performance and what we're seeing this year as well into the guidance and a good confidence in that number. And what certainly...

This year as well into that guidance and I have good confidence in that number and.

Speaker 12: report back on how we progressed there. But an important point here is that we raised guys last quarter and were reaffirming that today.

Certainly.

We report back on how we progressed there but important point here is that we raised guidance last quarter and we're reaffirming that today.

Shantanu Nundy: I think too many actors in the healthcare system are sort of taking a patient that's interested in a GLP one and saying, okay, well, let me just prescribe that for you. And I think what we're able to do is we have nutritionists on our staff. We are able to, we have mental health therapists, so some of these folks, their underlying core issue is actually not related to metabolic issue, but much more related to their mental health.

Thank you one moment for our next question.

Speaker 1: Our next question we're going to have John Penny from Canacore Genuity. You guys know?

Our next question comes from the line of John <unk> from Canaccord Genuity. Your line is open.

Speaker 16: Hi, John Pinyon for Richard Close. Congrats on the quarter. I guess going back to virtual primary care, is that 20, 21% air-conform guidance is that consistent across commercial and consumer is commercial kind of coming up with smaller base and it's going to be bigger or any color around that would be great.

Hi, John <unk> on for Richard close congrats on the quarter.

I guess going back to a virtual primary care is that 2021%.

Shantanu Nundy: We have people like the alluded to in the opening remarks who are actually just interested in addressing obesity and they're not aware of non-pharmacologic means like perversal of diabetes. And so I think our ability to be able to take them that moment of people's interest in sort of what's become a fad. Really use that as a way to open up this much more longitudinal relationship and then have a very broad set of clinical tools and interventions that are disposal. I think it's ultimately serving what members want and serving that employer's interest in in a managing cost and improving up. Thank you. One moment for our next question.

You're calling for in guidance is that consistent across commercial and consumer as like commercial kind of coming off a smaller base is going to be bigger or any color around that would be would be great. Thanks.

Speaker 4: Sure. So first of all, the 2021 percent growth rate for that's for the entire business, the way to think about that is that we've got the three different offerings that are driving driving growth in the business, the advocacy business itself is will be in the neighborhood of 20% virtual primary care business growing faster than 20 and the enterprise primary care business will be growing quite a bit faster enough, but it's off of a small base because we're in our first year there. So when you take that together with with the customer in the business, with each particular benefit, one assistance, you're following, you're running

Sure. So first of all the 20 and 21% growth rate, but thats, where the entire business the way.

Think about that is that we've got the three different offerings that are driving driving growth in the business. The advocacy business itself is will be in the neighborhood of 20% virtual primary care business is growing faster than 'twenty.

The enterprise primary care business will be growing quite a bit faster than that but it's off a small base because we are in our first year. There. So when you take that together with the consumer business.

Jared Haase: Our next question will come flying out of Jared Haase from William Blair. Your line is open. Yeah, good afternoon. Thanks for taking the question. This is Jared Haase on for Ryan Daniels. Two-part question here. Just sticking with the demand environment, favorability here. I'm curious if there's been any changes in terms of sort of the themes that are driving that environment or is it still largely focused on cost savings? Just especially when we think about the expected price increases coming on next year.

Speaker 12: You put those together, it's growing faster than that, call it mid-20s, and then the expert medical opinion, offering growing in the neighborhood of 20. So all that together gets you to that about 20 to 21% growth for this year with the virtual apartment care of business growing faster than that.

You put those together, it's growing faster than that call. It mid 2000, and then expert medical opinion.

<unk> growing in the neighborhood of 2000, and so all of that together get you to that about 20% to 21% growth for this year with a virtual primary care business growing faster than that.

Thank you.

Moment for our next question.

Speaker 1: And our next question of covering line Orion McDonald from Needham and Company, United Zone.

And our next question comes from the line of Ryan Macdonald from Needham and company. Your line is open.

Jared Haase: And then related to that is we think about sort of your ability to communicate our ally around cost savings. Is there anything that's kind of uniquely changed in terms of how you actually communicate that with clients? Do you have any additional sort of tools in the tool bag so to speak to really showcase that to cross-lex? Thanks, Jared.

Speaker 17: Thanks for taking my questions, Congrats and I, as Cordor, maybe just to touch on the T5 contract, mentioned that you're still waiting decision on the health net appeal here, but given that the Congressional Research Service had provided an updated timeline now, does that give you any increased confidence on sort of mirroring a conclusion where you're actually gonna get a final decision on the appeal and that we can start moving forward with this process? Thanks.

Hi, Thanks for taking my questions. Congrats on a nice quarter, maybe just to touch on the key five contract mentioned that Youre still waiting decision on the health net.

Appeal here, but given that the congressional research service have provided an updated timeline now does that give you any increased confidence on and we're sort of nearing a conclusion.

Rajeev Singh: As it relates to the first question, it's certainly trend line is always an issue, but also true and it's been is increasingly true post the 2020 pandemic and shutdown. Is that health care is becoming increasingly complex? And so while costs are always a driver, even before 2023, 2024 in the forecast of increased trend line, the increasing fragmentation associated with increased point solution. The fragmentation associated with the complexity of health care and the growth of third-party solutions that creates that fragmentation is another real driver.

You're going to get a final decision on the appeal and that we can start moving forward with this process.

Speaker 11: Ryan, there's one thing certain we know this can last forever. We expect

Ryan There is one thing certainly we know that can't last forever and we expect.

Speaker 11: We expect to see a conclusion to the appeals process in what I'm going to expect you to do a reasonable time frame call over the course of the next three to six months.

We expect to see a conclusion to the appeals process.

I would expect it would be a reasonable time frame call. It over the course of the next three to six months.

Speaker 11: As the government has proven over the course of the last year.

Speaker 11: It's difficult to bank on those tax timelines even though there is expressions of a desire to get to be in a field process but yeah we agree we'd expect over the course of the next six months or so that we're going to get to some sort of conclusion and that at that point we're going to be in a place where we're well positioned to grow our business within the government.

The government has proven over the course of the last year.

It's difficult to bank on those types of timelines, even though there is expression of the desire to get to the end of the appeals process, but yes. We would agree we would expect over the course of the next six months or so that we're going to get some sort of conclusion and that at that point, we're going to be in a place where we're well positioned to grow our business within the government.

Rajeev Singh: And that is a driver that points directly to solutions like ours that act as an umbrella to the health care system. Paper over the fragmentation using tools like our advocacy team are by position. And so I think it's a combination of both of those things that's really driving the demand for our services and perhaps any mismatch between the demand you might be hearing about for services that are more point solution oriented or in other categories.

Speaker 1: Thank you. And I'm not showing any further questions in the queue. With that, I'll turn the call back over to Regime Scene for any closer remarks.

Thank you and I'm not showing any further questions in the queue with that I will turn the call back over to Rajeev <unk> for any closing remarks.

Speaker 11: Appreciate everyone being here. Thanks for the time and we look forward to talking with you next course.

I appreciate everyone being here thanks for the time and we look forward to talking with you next quarter.

Speaker 1: And this concludes today's conference call. Thank you for participating. You may not disconnect. Everyone, have a great day.

And this concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.

Rajeev Singh: As it relates to your second question, we are consistently showing our customers our value proposition as it relates to the interventions and the engagements that we're driving, but start there. Well, how much of their population are we engaging? The interventions that we drive on their behalf leading to the claims saving that actually we derive on their on their behalf as well. And so that's been very consistent over the years and our performance has been extraordinarily consistent as well. Thank you.

Goodbye.

Operator: One moment for an next question.

Okay.

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Greg Santangelo: Our next question will come flying over Greg Santangelo from Jeffries. Your line is open. Thanks for taking my question. Hey, Steve, what's the fault with you on a couple of financial questions? You know, when we look at your long term guidance that you provided that five year look at the fiscal 29, I think the assumption was right, you're assuming 20% compounded annual revenue growth, getting to attend the 15% margin, you know, in that year.

Okay.

Okay.

Sure.

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Greg Santangelo: Should we assume that, you know, that the progression to get there will be somewhat linear and is it also a fair assumption to assume that your cash flow will somewhat equate to your adjusted EBITDA similar to maybe how it's trended this year. And I guess the reason I'm asking right is because I think, you know, as you mentioned, you're prepared, prepared remarks. You said the converts are only two and a half years away into 2026 and basically the amount of converts are almost exactly equal with the cash that you have.

Yeah.

So.

Tim.

Yes.

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Greg Santangelo: And those converts your trading, you know, somewhere in the low 80s. And so I'm kind of curious as to what the plan is and how we think about profitability and cash generation in the next kind of couple of years. To prepare to basically refinance or do something with those converts. Sorry, a lot of questions. Yeah, but all closely tied together, so I appreciate all kind of wrap them all together, Glen.

Yes.

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Speaker 5: I.

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Stephen Barnes: First of all, you have it right, that 20% growth rate keger that we're seeing is all based upon the demand environment and our execution over the past several years, and what we're seeing as Raj was just describing, and so we're expecting that to continue, call it over that foreseeable future, particularly that five-year period you talked about, which is back in our investor day, back in May, we laid out that path to 20% growth towards a billion dollars, and fairly linear projection is how we're progression is how we're thinking about that EBITDA bottom line as we break through into next year in the positive territory there in the justice EBITDA. Our guidance is a range of 2% to 4% of revenue, and what effect we always do, balancing growth with profitability as we've done historically on our way to break even into profitability, and then going forward, there's a big opportunity in front of us, so we want to make sure we invest accordingly, which we will do, but also drive profitability on that path.

Yes.

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Stephen Barnes: To your other part to your question around free cash flow and balance sheet, yes, we would expect free cash flow to be within range of adjusted EBITDA. There are always puts and takes around working capital timing, but the capex on the business is fairly modest, typically a few million dollars a year, or percentage point, or two of revenue, and that's usually with respect to things like capitalized software, and normal kind of workstation capex for employees, but that's really the expense of it.

Stephen Barnes: With respect to the balance sheet, you're right, we've got about $292 million in cash on the balance sheet as we ended the August quarter that converts are due in two and a half years in August of 2026. We would expect by that time to be well into cash flow positive and have a lot of optionality around whether we pay it down in part or in full or refinance it. We'll certainly be looking about that and talking about with investors over the common quarters as that becomes closer, but we'll feel we'll have lots of optionality around that as we break through into cash flow and profitability. Thank you. One moment for our next question.

Alan Lutz: Our next question comes from Alan Lutz from Bank of America. Your line is open. Thanks for taking the questions.

Rajeev Singh: One for Raj or Steve. Raj, you talked about the rapidly growing health plan channel. Is there a way to frame how much of the 19 percent growth you saw in the quarter is coming from the health plan channel? And then I guess over time is the expectation that that's going to grow as a percentage of growth.

Rajeev Singh: And then one for Steve, I guess is there anything to call out related to the GLP1 dynamic and why GLP1 related activity declined quarter over quarter? Thanks. Yeah, sure. On the first question, if I should have with breaking out health plan, new bookings versus our employer or government new bookings, we haven't broken them out that well. And what I will say is when we talk about the announcement of a new partner, like we talked about today, what we're really talking about is the expansion of our camp.

Rajeev Singh: New opportunities to go into a health plan book of business. In this case, for advocacy, care and our expert medical opinion capabilities. And that opportunity manifests over a quarter of years. And we expect that we're really excited about this particular opportunity more to come in terms of commentary around that time in future quarters. We would expect over time absolutely that the health plan channel, which was relatively nascent. If you knew our company four years ago, there wasn't much of a health plan channel in terms of our go-to-market motion.

Rajeev Singh: Today, if you're to look across our book of business, it's a pretty material part of how we go forward. And we believe we're competing very effectively in terms of winning new opportunities to approach health plan books of business. So yes, we've expected to be a growing percentage of our new bookings in years ahead.

Stephen Barnes: Steve, do you want to grab the GLP1? Sure. And Alan, to your question about GLP1, both Raj and I had some elements of comments in here that overall, this has been the driver of interest and strength around our particularly around our primary care capabilities of consumers and employees of our commercial customers have inquired about and sought advice and prescriptions for that. We had quite a big surge for it in Q1. Growth continued there, but not quite at that same level.

Stephen Barnes: So I'm in Q2, as we've read, I think he even grasped in one of your pieces recently about some of the five constraints happening that may affect some of those prescriptions and for us visits. But I think what we are really positive about here is we think about the strength of the performance of the company on the back of a diversified platform that in any given quarter is not dependent upon outside growth in any one of those.

Stephen Barnes: Importantly, the advocacy offering continues to grow at attractive rates seen with medical, medical opinion and primary care all growing along the lines of those growth rates we outlined in the past and certainly in depth on our investor's day. So that's a bit about what we're seeing specifically with GLP1 in terms of financially and more broadly across the platform.

Operator: Thank you. And one moment for an next question.

Jeffrey Garro: Our next question on the line of Jeff Garro from Stevens. Your line is open. Jeff, your line is open.

Operator: You may be on mute. We'll go ahead and continue.

Operator: One moment for an next question.

David Larsen: Our next question on the line of David Larsen from BTIG.

Rajeev Singh: Your line is open. Hi, can you give a little bit of color around your ACV, your annual contract value and your pipeline. I think it came in at 309 million at the end of the last fiscal years. If we increase that by 20%, should we expect 371 million for fiscal 24? And then your bookings, I think we're trying to get around 70 million annually. Should we expect that number to be like 84 million for fiscal 24 annually, which would be up 20%. Just any color there would be very helpful.

Rajeev Singh: Thank you.

Rajeev Singh: I'll take it off, Rajeev Singh. I'll just feel free to jump in. Of course, Dave, so with respect to bookings, Rajeev talked about selling season. The fact is we're right in the midst of selling season right now and continuing to close deals around that, but you're right in the state or you're quoting as far as end of year last year ACV and ARR. What we report out on those at the end of the fiscal year, so we'll come back to you, given that those are key metrics that we hit, you know, in the fourth quarter call.

Rajeev Singh: But in terms of color, as we both were commenting on in various ways, got good visibility towards our current year outlook in terms of our guidance for the year and towards that 20% top line growth rate that we've been speaking about consistently.

Operator: Thank you.

Operator: One moment for our next question.

Operator: Our next question of conflagnistan baronstein from Wells Fargo. Your line is open. Hi, I think my questions. Maybe sticking with virtual primary care. Can you share what percent of view plus care members in the quarter joined as a result of both members seeking GLP one really to care. Thanks. And we haven't broken out membership by conditions that they're seeking. Well, we can't tell you what we talked about in the past quarters is that a double digit percentage of those businesses came from or were associated with GLP one or weight loss and that trend continued into the score. Thank you.

Operator: One moment for our next question.

Rajeev Singh: And our next question of conflagnistan baronstein from DA Davidson. Your line is open. Hey, thanks for taking a question. Can you talk a bit about the kind of ramp and traction that you're seeing with virtual primary care and with taking a push to the inner product? Yeah, absolutely, happy to. I think it's one of the parts of the business that when we took Accolade care or taking plus care of the enterprise, as you put it in last year that we were most excited about.

Rajeev Singh: The opportunity to go live with, call it, you know, half a million people or so at the beginning of the year. What we're seeing, and I'll give Dr. Nundy an opportunity to weigh in here as well. What we're seeing is first that not only do we go live with that base, but that we thought the kind of utilization that we would expect on that base in the first seven, eight months since we've gone live.

Rajeev Singh: The second thing we learned a lot, we learned a lot about, about incremental ways which people were engaging with our solution, which has led us to really refine our value proposition associated with physicians being embedded in our advocacy care teams. And the reason for that is just the use cases that customers and members are identified, through their uses that we're really excited about. Sean, could you like to add a little bit more color there?

Rajeev Singh: Yeah, absolutely, and it's such a great question. Yeah, I mean, just to give a couple of clinical examples of areas where like Roger alluded to, I mean, I think we, you know, we anticipate it, you know, we know that 20, 30% of Americans don't have primary care physicians and we, you know, that our solution because we're delivering primary care virtually, comprehensively would be, you know, a great option for them. I think some of the learning beyond that was, you know, we started to be seeing members who have primary care physicians, but just weren't able to access them or weren't able to get sort of the solutions from those primary care physicians come to us.

Rajeev Singh: So one example is, you know, patients being discharged from the hospital, you know, very well studied that patients get better outcomes if they see their PCP within 48 hours of discharge from the hospital. But because of the access issues, a lot of times people weren't able to see their doctors and that's shorter of here at a time. And so our physicians were able to see those members right in the hospital. And that critical moment, and I think resulting in downstream reductions and things like readmissions, a second example is, you know, pretty commonly members can't get into see their physicians around a time where they need to refill.

Rajeev Singh: And we're finding that that's an opportunity to actually talk to those members about the chronic conditions that they're getting the results for. And and inform them about some of the trusted partners that we have that can also help complement sort of the pharmacologic options. So just some examples of where we're able to drive, you know, value for employers and sort of those moments of need and really lean into that position, but have to be approached. Thank you. One moment for next question.

Jack Wallace: And our next question of conflina Jack Wallace from Guggenheim Partners. Your line is open. Hey, thanks for taking my questions and we're out on the beat.

Operator: Speaking of the beat, you beat by more than the two million dollar pull forward, but you kept the full year guidance and just you're wondering if you could help us think about the kind of the buckets of where the you could end up in the higher end of the range or the lower end of the range just thinking of, you know, whether performance guarantees, new wins or even some of the utilization, you know, fees and those assumptions in the back half of the year. And on that point, you just how much of that might be a swing factor related to the GLP one space.

Operator: Thank you. Hey, Jack, it's Steve. So, you're right, we would be the range by a little bit more than the performance guarantee. Remember, swapping your back a quarter ago, we raised guidance last quarter, we're reaffirming that guidance as we're here moving through selling season and driving growth across the business. As we head into the back half of the year, certainly the variables on the business are around the items you talked about, the virtual primary care utilization and EMO utilization and PGs.

Operator: We factor into our guidance, historical performance and what we're seeing this year as well into the guidance and a good confidence in that number. And we'll certainly report back on how we progressed there, but an important point here is that we raised guidance last quarter and we're reaffirming that today. Thank you. One moment for our next question.

Ryan McDonald: Our next question will come from the land of John Pinney from Canada Corp. Genuity. The land is open.

Stephen Barnes: Hi, John Pinney on for Richard Close, congrats on the quarter. I guess going back to virtual primary care, is that 20-21% that you're calling for in guidance is that consistent across commercial and consumer is commercial kind of coming up a smaller base and going to be bigger or any color around that would be great, thanks. Sure, so first of all, the 20-21% growth rate for that's for the entire business, the way to think about that is that we've got the three different offerings that are driving growth in the business.

Stephen Barnes: The advocacy business itself will be in the neighborhood of 20% virtual primary care business growing faster than 20. And the enterprise primary care business will be growing quite a bit faster than that, but it's off of a small base because we're in our first year there. So when you take that together with the consumer business, you put those together, it's growing faster than that, called mid-20s, and then expert medical opinion offering growing in the neighborhood of 20. So all that together gets you to that about 20-21% growth for this year with the virtual primary care business growing a bit faster than that.

Stephen Barnes: Thank you. One moment for our next question.

Rajeev Singh: And our next question comes from Ryan McDonald from Needham and Company. Your line is open. All right, thanks for taking my questions, congrats on the ice quarter. Maybe just to touch on the T5 contract. I mentioned that you're still waiting decision on the health met appeal here, but given that could the congressional research service had provided an updated timeline now, does that give you any increased confidence on that we're sort of mirroring a conclusion where you're actually going to get a final decision on the appeal and that we can start moving forward with this process?

Rajeev Singh: Thanks. Ryan, there's one thing certain we know this can last forever. We expect to see a conclusion to the appeals process in what I'm going to expect you to be a reasonable time frame called over the course of the next three to six months. As the government has proven over the course the last year, it's difficult to bank on those types of timelines, even though there is expressions of a desire to get to the entity of the appeals process.

Rajeev Singh: But yeah, we'd agree. We'd expect over the course of the next six months or so that we're going to get to some sort of conclusion, and that at that point we're going to be in a place where we're well positioned to grow our business within the government. Thank you.

Rajeev Singh: And I'm not showing any further questions in the queue with that. I'll turn the call back over to Rajeev Singh for any closing remarks. I appreciate everyone being here. Thanks for the time and we look forward to talking with you next quarter. And this concludes today's conference call. Thank you for participating. You may not disconnect everyone. Hello, great day. Goodbye. Bye.