Q4 2024 Accolade Inc Earnings Call
Operator: Hello, and thank you for standing by. Welcome to Accolade's 4th Quarter 2024 Earnings Results Conference Call.
Hello, and thank you for standing by welcome to Alkylate fourth quarter 'twenty 'twenty four earnings results Conference call.
Operator: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. I would now like to hand the conference over to Todd Friedman, Senior VP of Investor Relations.
Then her automated message advising your hand, it's rice.
To withdraw your question. Please press star one again.
Todd Friedman: I would now like to hand, the cockpit something to talk Freeman senior VP of Investor Relations you may begin.
Todd Friedman: Thanks, Operator. Welcome, everyone, to our fiscal fourth quarter earnings call. With me on the call today are our CEO, Rajeev Singh, and our CFO, Steve Barnes. 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 Accolade's performance. Details on the relationship between these non-GAAP measures and the most comfortable GAAP measures and the reconciliations thereof can be found in the press release that's posted on our website.
Todd Friedman: Thanks, Operator, walkman, one of our fiscal fourth quarter earnings call with me on the call today are CEO, Rajiv thing and our CFO, Steve bonds before turning the call over to Rajeev. Please note, we'll be discussing certain non-GAAP financial measures that we believe are important.
Walkman: Performance details the relationship between these non-GAAP measures to the most comparable GAAP measures. The reconciliations thereof can be just the press release is posted on our website.
Todd Friedman: 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 Accolade to be materially misexpressed or implied on the call. For additional information, please refer to our cautionary statement in our press release and our SEC policy, both of which are available on our website.
Please note that certain statements made during this call before looking statements as defined by the private Securities Litigation Reform Act like 95, such forward looking statements are subject to risks uncertainties and other factors that could cause actual results to activate materially from those expressed or implied for additional information. Please refer to our cautionary statement in our press release that policy.
Todd Friedman: Additionally, there are slides that will accompany the CFO presentation on this call that will be available on the webcast. The slides will be available for download following the call. With that, I'll turn the call over to Rajeev.
Walkman: All of which are available on our website. Additionally, our slides that will accompany the CFO presentation of this call will be available on the webcast. The slides will be available for download all of them to call with that I'll turn the call over to Rajiv.
Rajeev Singh: Thank you, Todd, and thank you to everyone for joining us today on our fiscal 25 kickoff earnings call. This is an important moment for Accolade and for our shareholders. Over the last several years, markets, including health care, have fundamentally changed. Success today requires a balanced growth mindset with a focus on execution, discipline, and profitability. Speaking specifically to healthcare, it's time for digital healthcare disruptors to prove their business models have product market fit in the large market, operating leverage, a discernible competitive advantage, and teams that can execute in a challenging environment. Some will succeed, and others will not; MedImpact is amongst that select group that has succeeded by checking each of these boxes.
Rajiv: Thank you Todd and thank you to everyone for joining us today on our fiscal 'twenty five kickoff earnings call. It's.
Rajiv: This is an important moment for accolade and for our shareholders over the last several years markets, including healthcare fundamentally changed.
Rajiv: Success today requires a balanced growth mindset with a focus on execution discipline and profitability.
Rajiv: Speaking specifically to health care, it's time for digital health care Disruptors to prove their business models have product market fit and a large market operating leverage a discernible competitive advantage and teams that can execute through a challenging environment, some will succeed and others will not.
Rajiv: ACA latest amongst that select group that has succeeded by checking each of these boxes today, we're well positioned company.
Rajeev Singh: Today, we're a well-positioned company, positioned to build a strong and enduring business for our customers, shareholders, employees, and partners. With those high-level remarks behind us, let's begin to zoom in on our business and where we stand. We just completed a fiscal year where we delivered north of 20% top-line growth and improved our adjusted EBITDA by approximately $30 million year over year. Both of these achievements are above the expectations that we set at the outset of the business.
Rajiv: This is to build a strong and enduring business for our customers shareholders employees and partners.
Rajiv: With those high level remarks behind us, let's begin to zoom in on our business and where we stand with.
Rajiv: We just completed a fiscal year, where we delivered north of 20% topline growth and improved our adjusted EBITDA approximately $30 million year over year.
Rajiv: Both of these achievements are above the expectations that we set at the outset of the fiscal year.
Rajeev Singh: As a brief aside on the consistency of our execution, with the exception of a quarter where we lost a large customer two years ago, we have consistently met or exceeded expectations since we became a public company in July 2020. Our outlook for fiscal year 25 is also strong.
Rajiv: As a brief aside on the consistency of our execution with the exception of a quarter, where we lost a large customer two years ago, we have consistently met or exceeded expectations. Since we became a public company in July 2020.
Rajiv: Our outlook for fiscal year 'twenty five is also strong consistent with our long term guidance, we expect topline growth in the neighborhood of 20% and profitable adjusted EBITDA on a full year basis.
Rajeev Singh: Consistent with our long-term guidance, we expect top line growth in the neighborhood of 20% and profitable adjusted EBITDA on a full year basis. Today, serving more than 14 million lives across more than 1,200 customers, we are a scaled healthcare services company with a direct line of sight to becoming a Rule of Forty company in the years ahead. Our growth in the year ahead is driven by several things. First, an annual recurring revenue growth rate of 20% in the last fiscal year, reflecting the strength of our business-to-business employer, government, and health plan offerings.
Rajiv: Good day, serving more than 14 million lives across more than 200 customers. We are a scaled healthcare services company with a direct line of sight to becoming a rule of 40 company in the years ahead.
Rajiv: Our growth in the year ahead is driven by several things.
Rajiv: First in annual recurring revenue growth rate of 20% in the last fiscal year, reflecting the strength of our business to business employer government and health plan offerings.
Rajeev Singh: Second, the continued strength of a direct-to-consumer business that, again, grew over 20 percent last year, and it's highly differentiated in a competitive market. And third, the exceptional growth of what you will hear us refer to today as platform-connected revenue. These are revenues from offerings, either our own or from our partners, that are delivered because they are connected to our healthcare navigation platform. More to come on Platform Connected and usage-based revenues later in today's call.
Rajiv: The continued strength of a direct to consumer business that again grew over 20% last year, and it's highly differentiated and our competitive market.
Rajiv: And third the exceptional growth above you will hear us refer to today as platform connected revenues.
Rajiv: Our revenues from offerings, either our own or from our partners that are delivered because they are connected to our health care navigation platform.
Rajiv: <unk> to come on platform connected and usage based revenues later in today's call.
Rajeev Singh: Let's get into more depth on each element of our business and offerings and why they continue to grow at rates that outpace the market. Our business-to-business offerings, focused on employers, health plans, and the government, are highly differentiated, valuable to our customers and members, and scaled to deliver growth and profitability. Our healthcare navigation platform is seamlessly integrated with our own primary care and expert medical opinion capabilities and with our trusted partners. This seamless integration is particularly compelling to employers and unique to our competition.
Rajiv: Let's get into more depth on each element of our business and offerings and why they continue to grow at rates that outpaced the market.
Rajiv: Business to business offerings focused on employers health plans and the government are highly differentiated valuable to our customers and members and scale to deliver growth and profitability.
Rajiv: Our health care navigation platform is seamlessly integrated with our own primary care and expert medical opinion capabilities and with our trusted partners. This seamless integration is particularly compelling to employers and unique from our competition.
Rajeev Singh: From an employer's perspective, we solve the physician gap, helping people get access to the right care when they need it from us, our partners, or from brick and mortar health. Something that is particularly challenging for underserved urban, rural, or minority populations.
Rajiv: From an employer perspective, we solve the physician gap, helping people get access to the right care when they need it from us our partners or from brick and mortar health systems, something that is particularly challenging for underserved urban rural or minority populations.
Rajeev Singh: That seamless integration from navigation all the way to care delivery is enabled by a technology stack that is at scale, state-of-the-art, and market-leading. It is extensible, and as new capabilities have emerged like generative AI, we've been able to embrace them at pace and deliver leverage to our business. We were recently the recipient of the Artificial Intelligence Excellence Award from the Business Intelligence Group.
Rajiv: That seamless integration from navigation all the way to care delivery is enabled by our technology stack, which is at scale state of the art and market leading.
Rajiv: It is extensive and is new capabilities have emerged like generative AI, we've been able to embrace them at pace and deliver leverage to our business.
Rajiv: We were recently the recipient of the artificial intelligence Excellence Excellence award from the business Intelligence group.
Rajeev Singh: AI and our investment in technology writ large are key contributors to the significant improvement in our profitability over the last several years. This seamless integration enables platform-connected revenue. These revenues reflect visits with our primary care physicians, second opinion consults with expert specialists, and enrollments in our Trusted Partners program. These revenues grow in two ways, through customer adoption of new services and through member utilization of those services. Once we see customer adoption in any given year, we expect member usage of those respective services to grow in each following year up to an appropriate threshold based on the relevance of the respective service to a given population. The flywheel is extremely simple.
Rajiv: And our investment in technology writ large are key contributors to the significant improvement in our profitability over the last several years.
That seamless integration enables platform connected revenues. These revenues reflect visits with our primary care physicians second opinion consult with expert specialists and enrollments in our trusted partners program.
Rajiv: These revenues grow in two ways through customer adoption of new services and through member utilization of those services. Once we see customer adoption in any given year. We expect member usage of those respective services to grow in each following year up to an appropriate threshold based on the relevance of the respective sir.
Rajiv: <unk> to a given population.
Rajeev Singh: Flywheel is extremely simple customer adoption of the service deployment of the service employee engagement at the service, which grows each year as a cohort.
Rajeev Singh: Customer adoption of the service, deployment of the service, and employee engagement of the service, which grows each year as a cohort. One final point on our business-to-business. The diversity of our offerings gives us access to a variety of growth opportunities. In previous quarters, we discussed the demand for our offerings from both employers and the government. In today's call, I want to give you more depth on our appeal to health. As many of you know, for many years now, we've maintained productive relationships with health plans, such as UnitedHealthcare and Aetna, that resell our expert medical opinion service.
Rajiv: One final point on our business to business offerings. The diversity of our offerings gives us access to a variety of growth engines in previous quarters. We've discussed the demand for our offerings from both employers and the government in today's call I want to give you more depth on our appeal to health plans.
Rajiv: As many of you. Many of you know for many years now we've maintained productive relationships with health plans, such as Unitedhealthcare and Aetna that resell our expert medical opinion service.
Rajeev Singh: We're increasingly seeing health plans interested in relationships where certain of our capabilities are embedded into their own employer offering. Just this past quarter, Blue Shield of California published the results from the first full year of offering a virtual first plan design called Virtual Blue, powered by Accolade. The results were outstanding. Here are some highlights.
Rajiv: We're increasingly seeing health plans interested in relationships, where certain of our capabilities are embedded into their own employer offerings.
Rajiv: This past quarter Blue Shield of California, published the results from the first full year of offering a virtual first plan design called virtual blue powered by accolade.
Rajiv: The results were outstanding here are some highlights the reduction in overall cost for the population of 8% to 10% emergency room claims down 11%.
Rajeev Singh: Reduction in overall cost for the population of 8 to 10 percent. Emergency room claims are down 11 percent. 85% of members received mental health treatment. And, bringing you back to the physician gap, two-thirds of their members received an appointment within a single day. In addition, recently, as some of you may have noticed, Blue Cross Blue Shield of Arkansas launched an employer offering powered by our navigation platform, where customers have the option to also add Accolade Care or Second Opinion Care.
Rajiv: 85% of members received a mental health screening.
Rajiv: And bringing you back to the physician gap two thirds of their members received an appointment within a single day.
Rajeev Singh: In addition recently at Summit, you noted Blue Cross Blue Shield of Arkansas launched an employer fluor offering powered by our navigation platform, where customers have the option to also add oxalate care, our second opinion capabilities.
Rajeev Singh: We expect our relationships with health plans, both reseller arrangements and partnerships focused on offerings where Accolade capabilities are fundamental to the new solution, to be a growth engine for the business in the years ahead. And Steve will give you more color on how to model these revenues and his remarks. Moving to our D2C offerings.
Rajiv: We expect our relationships with health plans, both reseller arrangements and partnerships focused on offerings were accolade capability are fundamental to the new solution to be a growth engine for the business in the years ahead.
Rajiv: And Steve will give you more color on how to model. These revenues in his remarks.
Rajiv: Moving to our D to C offerings, we offer a compelling and differentiated virtual primary care and mental health offering that continues to grow faster than the rest of the market.
Rajeev Singh: We offer a compelling and differentiated virtual primary care and mental health offering that continues to grow faster than the rest of the market. Let me outline for you why this growth has continued to outpace other telehealth offerings in the employer and health plan markets and why such growth is sustainable. First, most telehealth offerings in the market offer urgent care, meaning the physicians do not have access to the longitudinal care record of the patient or any information on their corporate benefits. Patients cannot ask to see the same physician again, and most physicians are employed in a gig economy part-time role. Our PlusCare Direct-to-Consumer offering is the opposite of those solutions.
Rajiv: My outline for you why this growth has continued to outpace other telehealth offerings in the employer and health plan markets and why such growth is sustainable.
Rajiv: First most telehealth offerings in the market offer urgent care, meaning that physicians do not have access to the longitudinal care record of the patient or any information on their corporate benefits patients cannot asked to see the same position again and most physicians are employed in a gig economy part time role.
Rajiv: Our plus care direct to consumer offering is the opposite of those solutions.
Rajiv: Our positions utilizing built for purpose longitudinal EMR system patients can select the primary care physician and stay with them and our position spend at least 60% of their time, serving accolade patients.
Rajeev Singh: Our physicians utilize a built-for-purpose longitudinal EMR system. Patients can select the primary care physician they want and stay with them. And our physicians spend at least 60% of their time serving Accolade patients. Second, we've built an integrative collaborative care model that embeds mental health care into our primary care model. As Blue Shield California noted in their study, we perform mental health screenings on the majority of our patients, and we have behavioral health specialists embedded in every visit, thereby providing a scalable mental health service that patients love.
Rajiv: Second we built it integrated collaborative care model that Embeds mental health care into our primary care model as Blue Shield of California noted in their study we performed mental health screenings in the majority of our patients and we have behavioral health specialists embedded in every care team.
Rajiv: Thereby providing a scalable mental health service that patient love.
Rajiv: Third our services powered by our state of the art digital experience and dedicated physicians from the top 50 medical schools in the country a combination that yields net promoter scores of around 90 consistently we.
Rajiv: We simply have an easy to use service that delivers exceptional patient value.
Speaker Change: One final point.
Speaker Change: <unk> integrated the teams services and capabilities from plus care since our 2021 acquisitions in a way that has fostered the continued growth of the consumer business, while allowing us to extend access to the same ex tax exceptional care experience from these dedicated physicians to our employer customers.
Rajeev Singh: Third, our service is powered by a state-of-the-art digital experience and dedicated physicians from the top 50 medical schools in the country, a combination that yields NEPTR motor scores of around 90 consistently. We simply have an easy to use service that delivers exceptional patient value. One final point, we've tightly integrated the teams, services, and capabilities from PlusCare since our 2021 acquisition, in a way that has fostered the continued growth of the consumer business while allowing us to extend access to the same exceptional care experience from these dedicated physicians to our employer customers.
Speaker Change: Notably.
Speaker Change: <unk>, 80% of the new alkylate customers that launched on January one of this year deployed accolade cure.
Rajeev Singh: Plus care and other acquisitions have flourished since being brought under the accolade umbrella both individually and as critical components of our <unk> offerings.
Rajeev Singh: Notably, approximately 80% of the new Accolade customers that launched on January 1st of this year deployed Accolade Care. PlusCare and other acquisitions have flourished since being brought under the Accolade umbrella, both individually and as critical components of our B2B office. As I turn the call over to Steve, a closing thought. I have never been more bullish about the strength of the market we compete in, the scale and the leverage of our model, and the team we've aligned to execute against our vision. As one of our investors, Andreessen Horowitz, said in a recent blog post, Time to Build in Healthcare, Accolade is leading the way. Steve
Speaker Change: As I turn the call over to Steve a closing thought I have never been more bullish about the strength of the market. We compete in the scale and the leverage of our model and the team we've aligned to execute against our vision as one of our investors Andreessen Horowitz said in a recent blog post its time to build and healthcare accolade is leading the way Steve.
Speaker Change: Yes.
Steve: Thanks Ross.
Steve: Ill recap the results for the fiscal fourth quarter.
Steve: Comment on our outlook and forward guidance and provide additional color on the key drivers of our model as our business has expanded and diversified materially since our IPO in 2020.
Stephen H. Barnes: I'll recap the results for the fiscal fourth quarter, comment on our outlook and forward guidance, and provide additional color on the key drivers of our model as our business has expanded and diversified materially since our IPO in 2020. The webcast will show a set of slides to support these comments, and the slides will be posted to our IR website after the conclusion of the call.
Steve: The webcast will show a set of slides to support these comments and the slides will be posted to our IR website. After the conclusion of the call.
Steve: We hit on this at length in our capital markets day presentation last may and it's worth reiterating we have executed on our strategy that have meaningfully diversified our offering mix, our customer base and our partnerships and by extension the sources of our revenue.
Stephen H. Barnes: We hit on this at length in our Capital Markets Day presentation last May, and it's worth reiterating that we have executed on a strategy that has meaningfully diversified our offering mix, our customer base, and our partnerships, and, by extension, the sources of our revenue. Our margin leverage, both gross margin and operating margin, is likewise rooted in this diversification, as offerings like primary care in our trusted partner ecosystem carry attractive gross margins, and also because the attachment and increasing contribution of usage-based revenue, like EMO case rate, primary care visit fees, and partner ecosystem revenues, create the opportunity to capture more wallet share during the year without incremental sales and marketing costs.
Steve: Our margin leverage both gross margin and operating margin is likewise rooted in diversification as offerings like primary care and our trusted partner ecosystem carry attractive gross margins and also because the attachment and increasing contribution of usage based revenue like emo case rate primary care visit fees and <unk>.
Steve: Partner ecosystem revenues create the opportunity to capture more wallet share during the year without incremental sales and marketing costs.
Speaker Change: Youll note that we are using the term usage based revenue instead of utilization based revenue for clarification, starting with this quarter and in our 10-K.
Speaker Change: As I walk through the results our key metrics and then our guidance. Please keep this diversification and evolution of our business in mind.
Speaker Change: And that thing and I'll note that many of you asked for more detail on the various revenue streams and dynamics driving our business.
Stephen H. Barnes: You'll note that we're using the terms usage-based revenue instead of utilization-based revenue for clarification, starting with this quarter and in our 10-K. As I walk through the results, our key metrics, and then our guidance, please keep this diversification and evolution of our business in mind. In that vein, I'll note that many of you have asked for more detail on the various revenue streams and dynamics driving our business. Today we will provide some of that additional color to illustrate the breadth and strength of our business as we accelerate into profitability. First, let's start with the quarter.
Speaker Change: Today, we will provide some additional color to illustrate the breadth and strength of our business as we accelerate into profitability.
Speaker Change: First let's start with the quarter.
Stephen H. Barnes: The slide on the webcast, you'll see we generated approximately $125 million in revenue in the fourth quarter of fiscal 'twenty, four representing 30% pro forma growth over Q4 of fiscal 'twenty three.
Speaker Change: This growth was driven by a healthy mix of PG performance, new customer loss revenues usage based visit and case rate revenues.
Speaker Change: <unk> virtual primary care.
Speaker Change: Adjusted EBITDA was also strong coming in at $18 5 million the largest quarter for adjusted EBITDA and accolades history.
Stephen H. Barnes: On the slide in the webcast, you'll see we generated approximately $125 million in revenue in the fourth quarter of fiscal 24, representing 30% pro forma growth over Q4 of fiscal 23. This growth was driven by a healthy mix of PG performance, new customer launch revenues, usage-based visit and case rate revenues, and D2C virtual primary care. Adjusted EBITDA was also strong, coming in at $18.5 million, the largest quarter for adjusted EBITDA in Accolade's history. Fiscal Q4 adjusted growth margin was 54.2% versus 50.5% in the prior year period. And for the full year, revenue was $414.3 million, and adjusted EBITDA losses were $7.5 million.
Speaker Change: Fiscal Q4, adjusted gross margin was 54, 2% versus 55% in the prior year period.
Speaker Change: And for the full year revenue was $414 3 million and adjusted EBITDA loss was $75 million.
Speaker Change: In fiscal 'twenty, four we generated almost $100 million in revenue from plus care, our DTC offering which reflects the value and differentiation of that offering in the platform as Raj described earlier.
Speaker Change: To provide further depth on our various revenue streams shortly.
Speaker Change: Adjusted gross margin for the year increased to 47, 6% for 42 from 46, 8% from the prior year.
Speaker Change: Now turning to the balance sheet cash cash equivalents in marketable securities totaled $237 million at the end of the fourth fiscal quarter, reflecting an increase of $7 million during the quarter.
Stephen H. Barnes: Note, in fiscal 24, we generated almost $100 million in revenue from PlusCare, our D2C offering, which reflects the value and differentiation of that offering and the platform, as Raj described earlier. I'll provide further depth on our various revenue streams shortly. The adjusted gross margin for the year increased to 47.6% from 46.8% in the prior year. Now turning to the balance sheet, cash, cash equivalents, and marketable securities totaled $237 million at the end of the fourth fiscal quarter, reflecting an increase of $7 million during the quarter.
Speaker Change: Our cash balance combined with our turn to profitability continue to provide us confidence in the strength of our balance sheet and our plans to manage our convertible notes, which mature in April 2026.
Speaker Change: Before turning to guidance allow me to reiterate that we had a strong selling season in fiscal 'twenty four with $86 million of IRR bookings, representing approximately 20% growth over fiscal 'twenty three.
Speaker Change: Keep in mind, the nature of our bookings.
Speaker Change: Reflect the strength breadth and appeal of our capabilities to a wide range of participants in the industry.
Stephen H. Barnes: Our cash balance, combined with our turn to profitability, continues to provide us confidence in the strength of our balance sheet and our plans to manage our convertible notes, which mature in April 2026. Before turning to guidance, allow me to reiterate that we had a strong selling season in fiscal 24, with $86 million of ARR bookings, representing approximately 20% growth over fiscal 23. Keep in mind, the nature of our ARR bookings is evolving to reflect the strength, breadth, and appeal of our capabilities to a wide range of participants in the industry.
Speaker Change: In addition to contributions from the employer and government markets Health plan partnerships are meaningful contributors and represent significant growth opportunities for athlete.
Speaker Change: Relevant to that point, let me touch on two annual metrics that we have shared historically.
Speaker Change: ACB or annual contract value was $351 million at the end of fiscal 'twenty, four which compares to $309 billion at the edge.
Speaker Change: End of fiscal 'twenty three.
Stephen H. Barnes: As we discussed in detail at capital markets Day last year ACB is the metric whose relevance has evolved since the time of our IPO.
Speaker Change: Four years ago, when we our advocacy only and all of our revenue with PMT MB ACB represented more than 90% of the following year's revenue forecast.
Stephen H. Barnes: In addition to contributions from the employer and government markets, health plan partnerships are meaningful ARR contributors and represent significant growth opportunities for Accolades. Relevant to that point, let me touch on two annual metrics that we have shared historically. First, ACV, or annual contract value, was $351 million at the end of fiscal 24, which compares to $309 million at the end of fiscal 23.
Speaker Change: With the dramatic expansion of our business since that time, the increasing contribution of usage and our direct to consumer virtual primary care offering ACB is still a relevant metric, but less so than historically. This is why we are providing additional color about usage fee growth and the drivers there in <unk> as well as the breakout of PC revenues.
Speaker Change: Gross dollar retention or <unk> was 89% at the end of fiscal year end 2004, and we expect it to be in the 90% range going forward.
Stephen H. Barnes: As we discussed in detail at Capital Markets Day last year, ATV is a metric whose relevance has evolved since the time of our IPO. Four years ago, when we were advocacy only, and all of our revenue was PMPM-based, ATV represented more than 90% of the following year's revenue forecast. With the dramatic expansion of our business since that time, the increasing contribution of usage fees, and our direct-to-consumer virtual primary care offering, ATV is still a relevant metric, but less so than historically.
Stephen H. Barnes: A couple of comments about GDR.
Speaker Change: A portion of the difference from our historical GDR range.
Speaker Change: <unk> year end 'twenty four is associated with the ending of our tractor and April 23, and the delayed launch of T spot.
Speaker Change: We are bullish on the continued growth and value we provide the government via our oxygen care demonstration offering and the opportunity to drive revenue in the future via the <unk> program.
Speaker Change: Another aspect of GDR relates to the maturing profile of our business. Our company now has more than 200 customers versus 54 at the time of our IPO.
Stephen H. Barnes: This is why we are providing additional color about usage fee growth and the drivers therein, as well as a breakout of VC revenue. Gross Dollar Retention, or GDR, was 89% at the end of fiscal year 2024, and we expect it to be in the 90% range going forward. A couple of comments about GDR.
Speaker Change: We are making decisions across the business that are highly aligned with our commitment to delivering profitable growth.
Stephen H. Barnes: As we make that turn our current focus on offering portfolio is not always aligned with some customer relationships and their contracts with us. We acknowledge that this is part of building a growing company that are disrupting established health care system, and we are making choices that are in the long term interests of accolade and our shareholders.
Stephen H. Barnes: First, a portion of the difference from our historical GDR range at fiscal year end 24 is associated with the ending of our Tricare pilot on April 23 and the delayed launch of T5. We are bullish on the continued growth and value we provide the government via our Autism Care Demonstration Offering and the opportunity to drive revenue in the future via the T5 Program. Another aspect of GDR relates to the maturing profile of our business.
Stephen H. Barnes: Now turning to guidance we.
Stephen H. Barnes: We are reiterating our fiscal 'twenty five revenue guidance and providing an initial range of $480 million to $500 million rep.
Speaker Change: Representing year over year growth in the range of 16% to 21%.
Speaker Change: I'll provide some detail on the revenue build from a couple of viewpoints and in a moment walk through some slides illustrates.
Speaker Change: As Raj noted earlier, we view our business through two broad categories.
Speaker Change: <unk>, which comprises employer health plan and government and partner and markets and DTC, representing plus share our direct to consumer BPC and Metro health offering.
Stephen H. Barnes: Our company now has more than 1200 customers versus 54 at the time of our IPO. We are making decisions across the business that are highly aligned with our commitment to delivering profitable growth. As we make that turn, our current focus and offering portfolio are not always aligned with some customer relationships and their contracts with us. We acknowledge that this is part of building a growing company that is disrupting the established healthcare system, and we are making choices that are in the long-term interest of Accolade and our shareholders. Now I am turning to God.
Speaker Change: On the <unk> side are health care navigation platform serves as the chassis upon which we deliver our core advocacy offering along with integrated AD on elements of BPC CMO and our broad set of TCE partners, which cover a range of critical clinical categories. We called these add on elements platform connected.
Speaker Change: Revenues typically we drive P. P M or P. MTM access fee revenues from our navigation platform and usage based revenues from our platform connected offerings.
Speaker Change: In addition, our <unk> offering is sold on a standalone basis, primarily through channel partnerships with health plans.
Speaker Change: In DTC, we derive revenues from visit fees and subscription fees or.
Speaker Change: Our <unk> margin profile is attractive and we carefully manage customer acquisition costs retention.
Stephen H. Barnes: We are reiterating our fiscal 25 revenue dime in providing an initial range of $480 to $500 million, representing year over year growth in the range of 16 to 21%. I'll provide some detail on the revenue bill from a couple of viewpoints, and in a moment, walk through some slides to illustrate. As Raj noted earlier, we view our business through two broad categories: B2B, which comprises employer, health plan, government, and partner end markets, and D2C, representing PlusCare, our direct-to-consumer VPC and mental health office.
Speaker Change: Retention rates and Ltvs.
Speaker Change: Remember that the same virtual primary care offering about sending doctors care providers and technology serves our BW customers, including employers and health plans.
Speaker Change: The range of our revenue guidance reflects that there is variability in some elements of our model that we managed carefully to balance growth profitability and shareholder value creation.
Stephen H. Barnes: With respect to adjusted EBITDA, we are improving our guidance for fiscal 'twenty five to a range of 3% to 4% of revenue were approximately $15 million to $20 million.
Speaker Change: And we are providing fiscal Q1 guidance today of revenue in the range of $103 million to $106 million and adjusted EBITDA loss in the range of $9 million to $12 million.
Stephen H. Barnes: On the B2B side, our healthcare navigation platform serves as the chassis upon which we deliver our core advocacy offerings, along with integrated add-on elements of BPC, EMO, and our broad set of TPE partners, which cover a range of critical clinical categories. We call these add-on elements Platform Connected Revenue. Typically, we drive PEPM or PMPM access fee revenues from our navigation platform and usage-based revenues from our platform connected off. In addition, our EMO offering is sold on a standalone basis, primarily through channel partnerships with health plans.
Stephen H. Barnes: You'll see on slide six that we will let we lay out a view of our expected approximately approximate quarterly revenues and adjusted EBITDA ramp in fiscal 'twenty, five which some to the midpoint of their respective annual ranges.
Speaker Change: As a reminder for advocacy replaced on average about 10% to 15% of our feed that risk on a performance basis to demonstrate measurable health care cost savings for our customers as.
Speaker Change: As in previous years at the start of the year, we forecast that the majority of those claims based steaming PGS will be recognized in fiscal Q4, which along with the impact of forecasted new customer launches on January one.
Stephen H. Barnes: In D2C, we derive revenues from visit fees and subscriptions. Our D2C margin profile is attractive, and we carefully manage customer acquisition costs, retention rates, and lifetime value. Remember that the same virtual primary care offering about sending doctors, care providers, and technology serves our B2B customers, including employers and health.
Speaker Change: The primary drivers of the higher portion of annual revenue in fiscal Q4.
Speaker Change: This quarterly ramp is very similar to their app. We outlined this time last year in our capital markets day, which we ultimately exceed it.
Stephen H. Barnes: The range of our revenue guidance reflects that there is variability in some elements of our model that we manage carefully to balance growth, profitability, and shareholder value creation. With respect to adjusted EBITDA, we are improving our guidance for fiscal 25 to a range of 3 to 4% of revenue for approximately $15 to $20 million. And we are providing fiscal Q1 guidance today of revenue in the range of $103 million to $106 million and adjusted EBITDA loss in the range of $9 to $12 million.
Speaker Change: Yes.
Stephen H. Barnes: On the next slide Youll see a view of adjusted EBITDA, and which we expect the loss to narrow in fiscal Q2, then to be approximately breakeven in fiscal Q3 with the second half of the year generating significant positive adjusted EBITDA.
Speaker Change: On the next slide we will walk through revenue competition, we've talked about the growing contribution of usage based revenues over the past few years.
Speaker Change: This represents the biggest shift in our business model since the IPO with.
Stephen H. Barnes: You'll see on slide six that we will let you lay out a view of our expected approximately approximate quarterly revenues and adjusted EBITDA ramp in fiscal 25, which some to the midpoints of the respective annual range. As a reminder, for advocacy deals, we place on average about 10 to 15% of our fees at risk on a performance basis to demonstrate measurable healthcare cost savings for our customers.
Stephen H. Barnes: With a few years of operating history behind us filing the plus current second MD acquisitions wed like to lay out in some detail the impact of the usage base revenue.
Speaker Change: For definition usage based revenue largely represents a primary care visit fees expert medical opinion case, III consultations and TPB revenue that is tied to usage.
Stephen H. Barnes: As in previous years, at the start of the year, we forecast that the majority of those claims-based savings PGs will be recognized in fiscal Q4, which, along with the impact of forecasted new customer launches on January 1st, is the primary driver of a higher portion of annual revenue in fiscal Q4. This quarterly ramp is very similar to the ramp we outlined this time last year in our capital markets day, which we ultimately exceeded.
Speaker Change: Importantly usage based revenue has grown from 15% of revenue in fiscal 'twenty, 2% to 27% in fiscal 'twenty four and we expect it will represent approximately 30% to 35% of revenue in fiscal 'twenty five.
Speaker Change: This this represents.
Stephen H. Barnes: Growth from the existing navigation customers, who are adding platform connected offerings.
Speaker Change: Growth from new customers launched within our bundled solution, which includes the platform connected offering emo in care and increasingly choosing to also attached a trusted partner.
Stephen H. Barnes: On the next slide, you'll see a view of adjusted EBITDA, which we expect the loss to narrow in fiscal Q2, then to be approximately break even in fiscal Q3, with the second half of the year generating significant positive adjusted EBITDA.
Stephen H. Barnes: As well as the increasing utilization of these platform connected offerings by the populations have access to that.
Stephen H. Barnes: As noted by the dark blue bars in the graph platform connected revenue approximately doubled in each of fiscal year 'twenty, three and 'twenty four and we expect those revenues to continue to grow materially in fiscal 'twenty five as we drive incremental usage based revenues from each of our cohorts of customers.
Stephen H. Barnes: On the next slide, we'll walk through revenue composition. We've talked about the growing contribution of usage-based revenues over the past two years. This represents the biggest shift in our business model since the IPO. With a few years of operating history behind us following the Flush Care and Second MD acquisitions, we'd like to lay out in some detail the impact of usage-based revenue. For definition, usage-based revenue largely represents primary care visit fees, expert medical opinion case rate consultations, and TPE revenue that is tied to usage. Importantly, usage-based revenue has grown from 15% of revenue in fiscal 22 to 27% in fiscal 24. And we expect it will represent approximately 30 to 35% of revenue in fiscal 25.
Speaker Change: What's most exciting about this dynamic as we don't expect or need to see dramatic changes in usage rates to drive revenue opportunity we.
Stephen H. Barnes: We have more than 12 million lives covered under expert MD and more than one 5 million lives under athlete care relatively small increases in emo utilization BTC attach rates for TCE referrals can add meaningful revenue growth in any year.
Stephen H. Barnes: Health plan partners, leveraging accolade carat to deliver virtual primary care will also be a driver of usage revenues as evidenced by the Blue Shield of California example, that Raj described earlier.
Stephen H. Barnes: This represents growth from existing navigation customers who are adding platform-connected offerings, plus growth from new customers launched within our bundled solution, which includes the platform-connected offerings EMO and CARE and increasingly choosing to also attach a trusted partner, as well as the increasing utilization of these platform-connected offerings by the populations who have access. As noted by the dark blue line in the graph, platform-connected revenues approximately doubled in each of fiscal years 23 and 24, and we expect those revenues to continue to grow materially in fiscal 25 as we drive incremental usage-based revenues from each of our cohorts of customers.
Stephen H. Barnes: And on slide nine Youll see a view of fiscal 'twenty five revenue when you apply the contact with contracts that I just laid out you will see in the current year forecast a walk from fiscal 'twenty four results to our fiscal 'twenty five guidance.
Speaker Change: Starting with the fiscal 'twenty revenue of $414 million. These first few bar should look familiar from our capital markets day last year.
Stephen H. Barnes: You have the impact of churn offsetting growth in new <unk> and in your launches.
Stephen H. Barnes: Also note that we don't carry 100% of IRR for the following year's revenue forecast based on start dates and some conservatism around PG attainment in year, one of the new contract.
Speaker Change: I'll point out two columns that provide additional detail on our model.
Stephen H. Barnes: First is the increase in usage based revenue and the second is the growth in PBC primary care.
Stephen H. Barnes: What's most exciting about this dynamic is we don't expect or need to see dramatic changes in usage rates to drive revenue opportunities. We have more than 12 million lives covered under Expert MD and more than one and a half million lives under Accolade Care.
Stephen H. Barnes: To better understand the dynamic of increasing revenue from new offerings and increased usage, let's look at an example customer on the next slide.
Stephen H. Barnes: This slide shows one of our larger customers, who started with accolade navigation platform in 2018.
Stephen H. Barnes: Relatively small increases in EMO utilization, VPC at patch rates, or TPE referrals can add meaningful revenue growth in any way. Health Plan Partners leveraging AccoladeCare to deliver virtual primary care will also be a driver of usage revenues, as evidenced by the Blue Show of California example that Nash described earlier. And on slide nine, you'll see a view of fiscal 25 revenue. When you apply the context that I just laid out, you'll see in the current year forecast a walk from fiscal 24 results to our fiscal 25 guidance.
Speaker Change: We show a five year progression on the slide starting with fiscal 'twenty when the PM TM revenue was approximately $8 all on an access fee only basis over.
Stephen H. Barnes: Over the next few years this customer grew modestly through head count and CPE adoption.
Speaker Change: Then in fiscal 'twenty, two the customer added emo in fiscal 'twenty three the customer added accolade care and several more tpa solutions.
Stephen H. Barnes: Can see that we have delivered more offering more services and more care to the customer and its members. We have also seen our revenue from this customer growth with the PMT, increasing approximately 50% from its start at the navigation only customer.
Stephen H. Barnes: Starting with a fiscal 24 revenue of $414 million, these first few bars should look familiar from our capital markets day last year. You have the impact of churn offsetting growth in new ARR and in-year launches. You'll also note that we don't carry 100% of ARR into the following year's revenue forecast based on start dates and some conservatism around PG attainment in year one of the new contract. I'll point out two columns that provide additional detail on our model.
Stephen H. Barnes: We consider this a model customer while much has been invested with us to deploy a fully integrated stack of health care capabilities rendered as a single place for all of its employees and members of our families to turn for their healthcare and benefits needs.
Stephen H. Barnes: The impact of the customer is better outcomes across their population and lower medical expense.
Speaker Change: And as we look ahead, we expect our wallet share with this customer to continue to grow.
Stephen H. Barnes: When you apply that model to a broader book of health care navigation customers as we drive additional attachment and usage of these platform connected offerings, we can see a significant revenue expansion opportunity in the range of 50%.
Stephen H. Barnes: The first is the increase in usage-based revenue, and the second is the growth in D2C primary care. To better understand the dynamic of increasing revenue from new offerings and increased usage, let's look at an example customer on the next slide. This slide shows one of our larger customers who started with Accolade's navigation platform in 2018. We show a five-year progression on this slide, starting with Fiscal 20, when the PMPM revenue was approximately $8, all on an access-fee-only basis. Over the next few years, this customer grew modestly through headcount and TPE adoption. And then, in Fiscal 22, the customer added EMO.
Speaker Change: This incremental revenue lift with existing customers layers on top of our enterprise and consumer growth engines, providing the foundation for sustainable revenue and margin expansion.
Speaker Change: To recap today, we outlined several elements at the heart of the business, we are building, including delivery of platform connected revenue on top of our health care navigation platform, which drives scale and differentiation.
Stephen H. Barnes: Reverse the strength of our diversified revenue streams, the integration of our platform operations offerings and capabilities and the predictability of our model.
Speaker Change: Combined with the close of another year of solid execution give us confidence that fiscal year 'twenty five will be our first full year of profitability on an adjusted EBITDA basis on a path to creating significant value for our members customers partners and our employees and shareholders and with that we'll open the call to questions.
Stephen H. Barnes: And in Fiscal 23, the customer added Accolade Care and several more TPE solutions. You can see that as we have delivered more offerings, more services, and more care to the customer and its members, we have also seen our revenue from the customer grow, with the PMPM increasing approximately 50% from its start as a navigation-only customer. We consider this a model customer, one that has invested with us to deploy a fully integrated stack of healthcare capabilities, rendered as a single place for all its employees and members of their families to turn for their healthcare and benefits needs.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, as a reminder to ask a question. Please press star one on your telephone and then wait to hear your name announced to withdraw your question. Please press star one again.
Speaker Change: This time, we ask that you limit yourself to one question only.
Speaker Change: Please standby, while we compile the Q&A roster.
Stephen H. Barnes: Our first question comes from the line of Joel interesting with <unk> Securities. Your line is open.
Stephen H. Barnes: The impact to the customer is better outcomes across their population and lower medical expenses. And as we look ahead, we expect our wallet share with this customer to continue to grow. When you apply that model to our broader book of healthcare navigation, and as we drive additional attachment and usage of these platform-connected offerings, we can see a significant revenue expansion opportunity in the range of 50 percent. This incremental revenue lift with existing customers layers on top of our enterprise and consumer growth engines, providing the foundation for sustainable revenue and margin expansion.
Joel: Thank you and thanks for taking my questions.
Speaker Change: Wanted to ask about the bgs and relationship with the platform connector revenues.
Joel: But if I missed guarantees a meaningful contributor for the company in Q4, and just curious how did those trends trend compared to expectations in the quarter were there any particular benchmark. So ABS you outperform but any areas you see improvement in future and just curious if theres any change in the way the speeds have been getting designed for next year essentially.
Speaker Change: In context of this focus on platform connecting revenues and level of engagement enrollment with trusted partners, becoming bigger portion of your LPG benchmarks.
Stephen H. Barnes: To recap, today we outlined several elements at the heart of the business we are building, including delivery of platform-connected revenues on top of our healthcare navigation platform, which drives scale and differentiation. The strength of our diversified revenue stream, the integration of our platform, operations, offerings, and capabilities, and the predictability of our model. Combined with the close of another year of sound execution, this gives us confidence that fiscal year 25 will be our first full year of profitability on a justified EBITDA basis on the path to creating significant value for members, customers, partners, and our employees and shareholders. And with that, we'll open the call to questions. Thank you, ladies and gentlemen.
Stephen H. Barnes: Let me take let me take a first cut at that Steven and I will turn it over to you Jim. Thanks for the question. This is Raj.
Raj: One of the core value propositions, we have always have with our customers is the need to connect their ecosystem and to drive downstream utilization up there.
Stephen H. Barnes: Their chosen partners over the last five years, we've assembled trucks trusted partner ecosystem and driving the utilization of those capabilities has often been one of the PGS or performance metric, but customers have measured and compensated us by and so in that context, I think it's very consistent with our long term strategic direction of the company.
Speaker Change: I wouldn't say that materially changed the achievement of performance guarantees moving forward that said one last point, we get paid.
Operator: Ladies and gentlemen, as a reminder to ask a question, please press star 1-1 on your telephone and then wait to hear your name announced. To withdraw your question, please press star 11 again. In the interest of time, we ask that you limit yourself to one question only. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jailendra Singh with Truer Securities. Your line is open.
Speaker Change: And Steve referred to it as soon as prepared remarks at 10% to 15% of total revenues oftentimes on savings associated with a particular customer when we drive downstream utilization trusted partners or our own primary care expert medical opinion service it accrues value to driving savings for the customer and therefore, it gives us more calm.
Jailendra P. Singh: And our capacity to achieve those pge's downstream, Steve anything you'd add.
Jailendra P. Singh: Thank you, and thanks for taking my questions. I want to ask about the PGs and the relationship with platform-connected revenues. Clearly, performance guarantees were a meaningful contributor for the company in Q4. I'm just curious, how did those trends compare to expectations in the quarter? Were there any particular benchmarks or areas you outperformed? Were there any areas you see improvement in the future? And just curious if there's any change in the way these PGs are getting designed for next year, essentially in the context of this focus on platform-connected revenues, is the level of engagement or enrollment of trusted partners becoming a bigger portion of your PG benchmarks?
Steve: With respect to Q4, because I think that's part of our challenge is question as well we saw quite consistent performance by accolade as compared to prior years, even with the elevation of health care costs that we saw certainly in calendar year 'twenty three headed guaranteed 24 and that is a reminder, about the fact that when.
Jailendra P. Singh: We structure, our contracts, where essentially meaning to beat the index and so do better than those higher cost I will say you asked about contract wins heading into next year Raj noted this as well customers are extremely sensitive to the elevated cost environment that we're in so we continue to align with them with this <unk>.
Rajeev Singh: Let me take a first cut at that, Steve, and then I'll turn it over to you. Jailendra, thanks for the question. This is Raj.
Steve: <unk> in our contract.
Steve: And certainly make the case that the integration of all of our capabilities is a great way to match.
Rajeev Singh: One of the core value propositions we've always had with our customers is the need to connect their ecosystem and to drive downstream utilization of their chosen partners. Over the last five years, we've assembled a trusted partner ecosystem, and driving the utilization of those capabilities has often been one of the PGs or performance metrics that customers have measured and compensated us by. And so, in that context, I think it's very consistent with the long-term strategic direction of the company.
Rajeev Singh: Manage that cost for their company spend as well as further helps us there.
Rajeev Singh: And the members.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of Stephanie Davis with Barclays. Your line is open.
Speaker Change: Hey, guys. Thank you for taking my question.
Stephanie July Davis: I was hoping you could help us think about the attach rate in cross sell opportunity within your existing customer base as you move more towards focusing on them versus kind of a new bed.
Rajeev Singh: I wouldn't say that it materially changed the achievement of performance guarantees moving forward. That said, one last point. We get paid, and Steve referred to it in his prepared remarks, at 10% to 15% of total revenues, oftentimes on savings associated with a particular customer. When we drive downstream utilization of trusted partners or our own primary care expert medical opinion service, it adds value to driving savings for the customer and therefore gives us more confidence in our capacity to achieve those PGs downstream. Steve, anything you'd add? I'd just add, with respect to Q4.
Rajeev Singh: In terms of benchmarks as their high end within your customer base revenue per life or Adjacencies attach rate that you could highlight and how does that kind of factor into your growth as you think about the coming year.
Speaker Change: Thanks for the question Stephanie I think the first thing I would say is we're focusing on both on growth in terms of new customer acquisition in the enterprise space, where we're focusing on.
Speaker Change: Employers health plans and the government. We're also focusing on growth from our direct to consumer perspective, and yet we're also focusing on growth as it relates to platform connected revenues inside the customer base I think Steve really captured it well in his prepared remarks as he pulled as he walked through platform connected.
Stephen H. Barnes: I'll just add, with respect to Q4, because I think that's part of Jailendra's question as well, we saw quite consistent performance by Accolade as compared to prior years, even with the elevation of health care costs that we saw certainly in calendar year 23, heading here into 24. And that is a reminder about the fact that when we structure our contracts, we're essentially meaning to beat the index and so do better than those higher costs. I will say, you asked about contracting heading into the next year. Raj knows this as well. Customers are extremely sensitive to the elevated cost environment that we are in.
Stephen H. Barnes: 98% of our customers last year on January one this past year on January one deployed both our navigation platform and accolade cared 96% of our customers deployed our navigation platform and expert medical opinion, and so a part of the story at the pull through of the actual adoption of those services or our trusted partner.
Speaker Change: <unk> by those customers. The next part of that story is the actual adoption and usage by employees and we expect the usage of each of those services to grow based on what the respective services needs are within that customer base or within that member base and so when we think about the targeted opportunities. These glass side like I said, it's the best.
Stephen H. Barnes: So we continue to align with them on this PG dynamic in our contract and certainly make the case that the integration of all of our capabilities is a great way to manage that cost for their company's spending as well as for the health of their employees and their members. Thank you. Please stand by for our next question. Our next question comes from the line of Stephanie Davis with Barclays. Your line is open. Hey guys, thank you for taking my question.
Stephanie July Davis: A target customer that has actually grown p/e pm or in the case of this slide <unk> by almost 50% simply through embracing solutions not all of our trusted partner solutions, that's a subset of them along with the.
Operator: Please stand by for our next question. Our next question comes from the line of Stephanie Davis with Barclays. Your line is open.
Operator: A virtual primary care and expert medical opinion and growing.
Speaker Change: <unk> of that account by about 50%, there's still room to sell them more trusted partner ecosystem solution. There is still room to grow primary care and expert medical opinion utilization, but we'd expect that that example apply to any of our customers, which means we could grow ppm on the navigation business by about 50%.
Stephanie July Davis: Thanks for the question, Stephanie. I think the first thing I would say is we're focusing on both growth in terms of new customer acquisition in the enterprise space, where we're focusing on employers, health plans, and the government. We're also focusing on growth from a direct-to-consumer perspective, and yes, we're also focusing on growth as it relates to platform-connected revenues inside the customer base. I think Steve really captured it well in his prepared remarks as he walked through platform-connected.
Stephanie July Davis: <unk>.
Stephanie July Davis: Or more and we will watch this customer grow and we think over time that ceiling on that growth will continue to improve.
Speaker Change: Thank you.
Stephanie July Davis: Please standby for our next question.
Rajeev Singh: Eighty percent of our customers last year on January 1, this past year on January 1, deployed both our navigation platform and Accolade Care. Ninety-six percent of our customers deployed our navigation platform and expert medical opinion. And so, a part of the story is the pull-through, the actual adoption of those services or our trusted partner solutions by those customers. The next part of that story is the actual adoption and usage by employees.
Stephanie July Davis: Our next question comes from the line of Ryan <unk>.
Rajeev Singh: <unk> with William Blair. Your line is open.
Speaker Change: Yes, thanks for taking the question and thanks for all the detailed information in the Powerpoint deck I guess, maybe Steve one for you is platform connected revenues are more usage base can you talk a little bit about what you can do as an organization to continue to drive that and what I mean, there is I assume.
Rajeev Singh: And we expect the usage of each of those services to grow based on what the respective service needs are within that customer base or within that member base. And so when we think about the targeted opportunities, Steve's last slide probably said it was a bet, a target customer that has actually grown PEPM, or, in the case of this slide, PMPM, by almost 50% simply through embracing solutions, not all of our trusted partner solutions, but a subset of them along with virtual primary care and expert medical opinions and growing the PEPM or PMPM of that account by about 50%.
Rajeev Singh: Every year that a client has the solutions. It grows naturally as members to use it they continue to use it but what can you do maybe one to market and drive awareness of what you are offering to covered lives and then number two are there things you can do with analytics internally to kind of promote those services during <unk>.
Rajeev Singh: Points of contact when you're engaging with members to also drive that use.
Speaker Change: Okay. Thanks, very much for the question Ryan.
Rajeev Singh: The platform connected revenues are.
Rajeev Singh: Credible and important part of what we do at accolade the entire business candidly. It's focused around this if you think back to our Investor day, and we laid out how we think about starting with stratify populations and then applying what we call true health actions to that which is a data informed and applying the <unk>.
Rajeev Singh: There's still room to sell them more trusted partner ecosystem solutions. There's still room to grow primary care and expert medical opinion utilization. But we'd expect that that example applies to any of our customers, which means we could grow PEPM on the navigation business by about 50% or more. And we'll watch this customer grow. And we think over time, the ceiling on that growth will continue to improve.
Rajeev Singh: Intelligent platform that we have inside of athletes to get the right remember it to the right place efficiently get them to a primary care appointment arent expert medical opinion or to the right clinical program to one of our partners that is.
Operator: Please stand by for our next question. Our next question comes from the line of Ryan Daniels with William Blair. Your line is open.
Ryan Scott Daniels: Absolutely the part of the way, we think about the business when we think about it like a funnel if you think about it.
Ryan Scott Daniels: Yeah, thanks for taking the question and thanks for all the detailed information in the PowerPoint deck. I guess maybe, Steve, one for you is platform-connected revenues are more usage-based.
Ryan Scott Daniels: Essentially a marketing company sorting through the members to get to the right place at the right time very efficiently all of that is a critical part of our business.
Stephen H. Barnes: Can you talk a little bit about what you can do as an organization to continue to drive that? And what I mean there is, I assume every year that a client has those solutions, it grows naturally. As members use it, they continue to use it. But what can you do, maybe one, to market and drive awareness of what you're offering to cover lives? And then, number two, are there things you can do with analytics internally to kind of promote those services during points of contact when you're engaging with members to also drive that use? Thanks.
Stephen H. Barnes: With respect to using analytics.
Speaker Change: It's exactly how we think about the populations that we serve in the end, we think of ourselves as a population health oriented company.
Stephen H. Barnes: Look at the the members who are not only in need.
Speaker Change: Help right now, but may be headed towards it needs and leverage that true.
Stephen H. Barnes: Engine in order to get them to that that help at the right time, they're really compelling part of that from a financial standpoint, if you go back to that slide with the Blue line.
Stephen H. Barnes: Thanks very much for the question, Ryan. Platform-connected revenues are an incredibly important part of what we do at Accolade. The entire business, candidly, is focused around this. If you think back to our investor day, we laid out how we think about starting with stratifying populations and then applying what we call true health actions to them, which is data-informed and using the intelligent platform that we have inside of Accolade to get the right members to the right place efficiently, get them to a primary care appointment, or an expert medical opinion, or to the right clinical program with one of our That is absolutely part of the way we think about the business, and we think about it like a funnel.
Stephanie July Davis: On slide nine hundreds are slide 10, we see the acceleration of those platform connected revenues, we feel that we're just getting started and have a whole lot of proof points that tell us when we integrate our offerings. We can get people to the right place and also drive revenue traffic and Ryan I think one addition that I would add.
Stephen H. Barnes: Or put on the pot here for you to think about as well all of these are in the vein of improving clinical outcomes from our customers most of our customers believe that they're underspending on primary care that the lack of access to primary care for their populations is harming their health and increasing their costs and so they will charter off with improving utilization of <unk>.
Rajeev Singh: If you think about it, essentially, a marketing company, sorting through the members to get to the right place at the right time very efficiently, all of that is a critical part of our business. The really compelling part of that from a financial standpoint, if you go back to that slide with the blue line on slide 9 or slide 10, you see the acceleration of those platform-connected revenues. We feel that we're just getting started and have a whole lot of proof points that tell us when we integrate our offerings, we can get people to the right place and also drive revenue for Accolade.
Stephen H. Barnes: I'm Mary care.
Rajeev Singh: In part, we do that by segmenting populations, but we actually run campaigns to people who have not seen a primary care physician in the last 12 months people, who have been to the emergency room, but haven't seen a primary care physician post that emergency room visit those types of things are outbound capability that we can using our digital mobile or portal capabilities.
Rajeev Singh: Reach members in their time of need and expose them to capabilities that meet clinical needs for our customers improve outcomes and lower cost.
Speaker Change: Thank you.
Stephen H. Barnes: And Ryan, I think one addition that I would add or put on the table here for you to think about as well: all of these are in the vein of improving clinical outcomes for our customers. Most of our customers believe that they're underspending on primary care, that the lack of access to primary care for their populations is harming their health and increasing their costs. And so they will charter us with improving utilization of primary care.
Speaker Change: Please standby for our next question.
Stephen H. Barnes: Our next question comes from the line of Michael Cherny with Leerink Partners. Your line is open.
Speaker Change: Good afternoon. Thank you for all the color so far.
Stephen H. Barnes: Steve you talked about the success during the selling season.
Stephen H. Barnes: Do you think about the changing landscape of your business. How are you positioning that with consultants with industry participants. So that when you go to market into Rfps that you know that you can pitch more than what you've done previously was that education process look like and what some of the feedback and making sure that the new messaging is landing.
Stephen H. Barnes: In part, we do that by segmenting populations, but we actually run campaigns to people who have not seen a primary care physician in the last 12 months or people who have been to the emergency room but haven't seen a primary care physician post that emergency room visit. Those types of things are outbound capabilities that we can, using our digital, mobile, or portal capabilities, reach members in their time of need and expose them to capabilities that meet clinical needs for our customers, improve outcomes, and lower costs.
Stephen H. Barnes: Yes.
Stephen H. Barnes: Mike I appreciate that you're trying to farm that wanted to Steve everyone's trying to get me to stop talking and kick it over to Steve, but I'm going to take that one.
Stephen H. Barnes: Steve If you want to chime in you can.
Stephen H. Barnes: Sorry.
Stephen H. Barnes: There'll be sorry, Tobey sorry at all I'm teasing you.
Stephen H. Barnes: Our relationship with the consulting firms whether that be Willis towers Watson on Mercer Lockton Gallagher you name. It it's really important part of our business in part because.
Operator: Please stand by for our next question. Our next question comes from the line of Michael Cherny with Lerate Partners. Your line is open.
Michael Aaron Cherny: Mike, I appreciate that you tried to farm that one to Steve. Everyone's trying to get me to stop talking and kick it over to Steve, but I'm going to take that one. And Steve, if you want to chime in, you can. Sorry. No, don't be sorry at all.
Michael Aaron Cherny: There are critical and strategic consultants to our customers and the work that they do.
Michael Aaron Cherny: <unk> enables us to reach customers and to drive our value to those customers. We have an entire team built it accolade entirely around.
Michael Aaron Cherny: Partnering with consultants actually partnering with them on the future of our business the focus of our business and also of course on educating the field in those consulting organizations around those new capabilities.
Rajeev Singh: I'm teasing you. Listen, our relationship with the consulting firms, whether that be Willis-Torres, Watson, Aon, Mercer, Lockton, Gallagher, you name it. It's a really important part of our business, in part because they're critical and strategic consultants to our customers, and the work that they do enables us to reach customers and to drive our value to those customers. We have an entire team built at Accolade entirely around partnering with consultants, actually partnering with them on the future of our business, the focus of our business, and also, of course, on educating the field in those consulting organizations around those new
Rajeev Singh: Seven years ago, we were an efficacy only or company today, our capacity to reach those consultants to partner in different regions with them to actually educate customers and then drive value is a huge part of our business, Steve anything you'd add.
Rajeev Singh: No the only thing I would ratchet the continuing education of the breath of our platform compared to what might be the only customer because sometimes those rfps show up as advocacy and we view it as our job to educate yes. That's the starting point that's the starting point, but there is so much more to be done with the customer and help.
Rajeev Singh: Five, seven years ago, we were an advocacy-only company. Today, our capacity to reach those consultants, to partner in different regions with them, to actually educate customers and then drive value is a huge part of our business. Steve, anything you would add? You know, I
Rajeev Singh: Kate them on that as not just clinical value, but also national value in terms of savings and other opportunities for customers. It's a big part of what we do day to day.
Speaker Change: Thank you.
Speaker Change: Please standby for our next question.
Stephen H. Barnes: No, the only thing I would, Raj, is the continuing education about the breadth of our platform compared to what might be an advocacy-only customer. Because sometimes those RFPs show up as advocacy, and we do it as our job to educate.
Speaker Change: Our next question comes from the line of Richard close with Canaccord. Your line is open.
Speaker Change: Yes, Thank you and congratulations on a strong fiscal year.
Speaker Change: I was just curious on the revenue guidance, the 16% to 21% obviously it straddles the preliminary of 20%, but I'm just curious what your thoughts are on the low end, which is in the mid teens.
Rajeev Singh: Yes, that's the starting point. But there's so much more to be done with a customer and help educate them on that, and not just clinical value but also financial value in terms of savings and other opportunities for customers is a big part of what we do day to day.
Rajeev Singh: Just what's going into that.
Rajeev Singh: Sure It has something to do with the usage base.
Operator: Please stand by for our next question. Our next question comes from the line of Richard Close with Canaccord. Your line is open.
Operator: <unk>.
Richard Collamer Close: Alright expectations through the year, but.
Richard Collamer Close: Yes, thank you. And congratulations on a strong fiscal year. I'm just curious about the revenue guidance, the 16 to 21%. Obviously, it straddles the preliminary of 20%. But I'm just curious what your thoughts are on the low end, which is in the mid-teens.
Richard Collamer Close: Just curious what's going into that.
Richard Collamer Close: Any of the PPE is there any of that recurring in nature or is that just like one time.
Richard Collamer Close: Okay.
Speaker Change: Thanks for the question Richard let.
Richard Collamer Close: Let me start with when you think about our commitment and visibility over a longer term period towards that 20% growth rate for the business, we see yet another year of performance in which we grew bookings in terms of new IRR at a 20% rate you see the growth rate on the direct to consumer side of the business growing in excess of.
Stephen H. Barnes: Just what's going into that. I'm sure it has something to do with the usage-based, you know, expectations through the year. But just curious what's going into that. And is any of the TPE, is any of that recurring in nature? Or is that just, you know, like one time?
Stephen H. Barnes: Thanks for the question, Richard, and let me start by saying that when you think about our commitment and visibility over a longer-term period towards a 20 percent growth rate for the business, we see yet another year of performance in which we grew bookings in terms of new ARR at a 20 percent rate. You see the growth rate on the direct-to-consumer side of the business growing in excess of 20 percent, and you see the growth rate for these platform-connected revenues growing quite a bit in excess of 20 percent. All of these contribute to the growth profile and the diversification of the growth engine, which is really what is super inspiring to us.
Stephen H. Barnes: 20% and you see the growth rate for these platform connected revenues growing quite a bit in excess of 20% all of these contribute to the growth profile and the diversification of the drip as a growth engine, which is really what is that super and inspiring to us when you hear us provide a range at that level.
Stephen H. Barnes: Look we look at the beginning of the year at $20 million.
Stephen H. Barnes: The $4 $90 million to $500 million midpoint being 4% as a very good place to be while we consider the fact that there is some variability in the revenues associated with these platform connected elements for sure in the direct to consumer revenues, let me make sure I tie and the bottom line.
Stephen H. Barnes: When you hear us provide a range at that level, look, we look at it at the beginning of the year at $20 million on a $490 to $500 million midpoint as being 4 percent, while we consider the fact that there is some variability in the revenues associated with these platform-connected elements, for sure, and the direct-to-consumer revenues. Let me make sure I tie in the bottom line and our path to profitability to this part of the conversation because you also saw us raise the bottom line target from what was previously $10 to $20 million to now being $15 to $20 million.
Stephen H. Barnes: Path to profitability to that part of the conversation.
Stephen H. Barnes: You also saw us raise the bottom line target from what was previously a 10% to $20 million to now being 15% to $20 million, what we're saying hopefully very clearly is that we're excited about the topline growth rate opportunity for the business and also we're incredibly committed to being.
Stephen H. Barnes: Our profitable business within a range of revenues that we think is incredibly attractive. So we keep that all tied together, we're now coming up on $5 billion in revenue and breaking through to profitability, we're going to make smart choices every day about the.
Stephen H. Barnes: What we're saying, hopefully, very clearly, is that we're excited about the top line growth rate opportunity for the business. And also, we're incredibly committed to being a profitable business within a range of revenues that we think is incredibly attractive. So we keep that all tied together. We're now coming up on a half billion dollars in revenue and breaking through to profitability. We're going to make smart choices every day about the, you know, at the margin trade between, you know, that growth and that profitability.
Stephen H. Barnes: At the margin trade between that growth and that profitability commitment.
Speaker Change: Thank you.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of Craig Hudson Box with Morgan Stanley. Your line is open.
Speaker Change: Yes. Thanks.
Speaker Change: And noisy start to the year, including the change security breach and so Raj just curious just from a macro perspective versus 90 days ago anything you would highlight in terms of.
Operator: Please stand by for our next question. Our next question comes from the line of Craig Hettenbach with Morgan Stanley. Your line is open. Yes, thanks.
Craig Matthew Hettenbach: Sales cycles any engagement with customers like anything there to note.
Craig Matthew Hettenbach: Sorry about that, Craig. We had some cell phones; we had some sort of an amber alert in our area, and our cell phones were all going crazy.
Operator: Okay.
Craig Matthew Hettenbach: Okay.
Craig Matthew Hettenbach: Sorry about that Craig we had some cell phones with some sort of an amber alert in our in our area in our sub bonds are all going crazy. Thanks for the question.
Rajeev Singh: Thanks for the question. This is Raj Bigging. First of all, I agree there's been some tumult in the overall marketplace as it relates to things like the change breach. That said, I think the biggest thing on customers' minds today is the healthcare trend line, as Steve mentioned.
Speaker Change: <unk> speaking.
Rajeev Singh: Doug first of all I agree theres been some two months in the overall marketplace as it relates to things like the change breach.
Rajeev Singh: That said I think the biggest thing on customers' minds today as health care trend line, Steve mentioned, it it's true not only around <unk> through not only around cancer, but it's also true around.
Rajeev Singh: It's true not only around GLP-1, it's true not only around cancer, but it's also true around inflationary pressures and customers' obsession with return on investment. Customers are really pushing hard to see a return on their existing investment. And in many respects, it's why we're so excited about platform-connected revenues. When our existing customer base, which is now 1,200 strong, is coming back to us and saying, "How can you help us maximize the value of everything we've already purchased?"
Rajeev Singh: Inflationary pressures and customer obsession with return on investment and our customers are really pushing hard to see the return on their existing investment.
Rajeev Singh: And in many respects, it's why we're so excited about the platform connected revenues exists.
Rajeev Singh: Existing our existing customer base, which is now 200 strong is coming back to us and saying how can you help us maximize the value of everything we've already purchased in fact, one of our customers called it sweating has existing assets and you can imagine that it might be a manufacturing company that use that expression.
Rajeev Singh: In fact, one of our customers called it sweating his existing assets. And you can imagine that it might be a manufacturing company that used that expression. Our platform gives us the capacity to do exactly that, and so we believe that individual cohorts who are deploying on any given solution will grow on a year over year basis. And that focus of growing individual cohorts on existing assets is really where we think our customers are most focused.
Rajeev Singh: Our platform gives us the capacity to do exactly that and so we believe that individual cohorts, who are deploying on any given solution will grow on a year over year basis and that focus of growing individual cohorts on existing assets is really where we think our customers are most focused.
Rajeev Singh: The second point on that would be we fundamentally believe as well that customers in this environment are looking at the navigation platforms more so than they were in quarters past, and that's reflecting a stronger, Thank you. Thank you. Thank you.
Rajeev Singh: The second point on that would be.
Rajeev Singh: We fundamentally believe as well that customers in this environment.
Rajeev Singh: Our looking at the navigation platforms more so than they were in quarters past and thats, reflecting a stronger pipeline.
Speaker Change: Thank you.
Operator: Please stand by for our next question. Our next question comes from the line of Jeff Garro with Stevens. Your line is open.
Rajeev Singh: Please standby for our next question.
Jeffrey Robert Garro: Our next question comes from the line of Jeff Garrow with Stephens. Your line is open.
Jeffrey Robert Garro: Yeah, good afternoon. Thanks for taking the questions. I really appreciate the helpful information about seasonality of performance guarantee revenue, but I want to ask about seasonality for usage-based fees and where our expectations should be there. And part of the question is trying to get a better understanding of the revenue growth implied for the first quarter versus the full year and kind of recalling that surge in GLP-1-related activity early last year. Thanks. Hey Jeff, this is Steve.
Jeffrey Robert Garro: Yes. Good afternoon. Thanks for taking the questions really appreciate the helpful information about seasonality of performance guarantee revenue, but I wanted to ask about seasonality for usage based fees and where our expectation should be there.
Steve: Part of the question is trying to get a better understanding of the revenue growth implied for the first quarter versus the full year and kind of recalling that surge in GOP one related activity early last year.
Stephen H. Barnes: Steve, great question. You know, when you think about it, there are a few different angles on usage-based fees, for sure. Once a customer is up and running, we think of this as cohorts of customers who launch. So think of a brand new set of customers launching in year one, like Raj described. Virtually all of our customers have accolade care and or expert medical opinion attached, and in some cases, a trusted partner. And they're starting from zero because those are all research-based fees.
Stephen H. Barnes: Yes.
Steve: Jeff This is Steve.
Stephen H. Barnes: Great question, you think about it there are a few different angles on usage based fees for sure. Once the customer is up and launch. So we think that the cohorts of customers. We launched so think of a brand new set of customers launching on year. One like Raj described on virtually all of our customers have activated <unk>.
Stephen H. Barnes: For medical opinion attached in some cases.
Stephen H. Barnes: The partner and but they are starting from zero because those are all going to be usage based fees that customer is going to get ramped up and hit may take two to three years to get to what we view is that kind of rationale targeted utilization.
Stephen H. Barnes: That customer is going to, you know, get ramped up and hit, might take two to three years to get to what we view as that kind of rational, targeted utilization max type of place that Raj was describing. So in year one, you should see it grow a bit throughout the year after, you know, into the second half of the year for that first set of customers. Then once they're up and running, we see pretty consistent growth through the course of the year.
Stephen H. Barnes: Mac type of place at <unk>, describing so in year, one you should see it grow a bit throughout the year after into the second half of the year for that first set of customers and then once they're up and running we see pretty consistent through the course of the year certainly in the case that for example, our primary care offering in case or in the case of.
Stephen H. Barnes: Plus care on the direct to consumer or enterprise side, you see some impact from flu season and elements like that but it's fairly consistent throughout the year.
Stephen H. Barnes: Certainly, in the case of, for example, our primary care offering and plus care on the direct consumer or enterprise side, you see some impact from flu season and elements like that, but it's fairly consistent throughout the year.
Raj: Yeah, Jeff I think if you were to if we were fully penetrated to all of our customers and deployed for several years across all of those customers with all of our services, that's when you'd start to see seasonality happening impact on non platform connected revenues.
Rajeev Singh: Jeff, I think if you were to, if we were fully penetrated into all of our customers and deployed for several years across all those customers with all of our services, that's when you'd start to see seasonality have an impact on platform-connected revenues. But today, I think the way Steve described it means it's going to be fairly up and to the right, like you see on the chart that we displayed on slide 7.
Rajeev Singh: But today I think the way we've described it means it's going to be it's going to be fairly up into the right like you see in the chart that we display from the mines in slide seven.
Speaker Change: Jeff There is one other if I think about just to add onto that.
Rajeev Singh: Health plans have been becoming a more important part of our.
Rajeev Singh: Our revenue growth.
Rajeev Singh: Rhythm if you think about the arrangement with.
Rajeev Singh: Either Arkansas.
Rajeev Singh: California Blue Shield, where we're just launching Youre also seeing there that could dream type of cohort effect, where we're having an opportunity to do outreach work with that that health plan to do.
Stephen H. Barnes: There's, you know, Jeff, there's one other thing I should add on to that, health plans have been becoming a more important part of our revenue growth algorithm. If you think about the arrangement with either Arkansas or California Blue Shield, where we're just launching, you're also seeing that same type of cohort effect, where we have the opportunity to do outreach, work with that health plan to do engagement on a kind of co-branded basis.
Stephen H. Barnes: Engagement as it kind of co branded basis, those are going to ramp up over time. So those will have I wouldn't necessarily point that seasonality as much as a ramping part that will take to also hit those those that rational peaks of utilization opportunities.
Speaker Change: Thank you.
Stephen H. Barnes: Please standby for our next question.
Stephen H. Barnes: Our next question comes from the line of Ryan Macdonald with Needham <unk> Company. Your line is open.
Speaker Change: Alright, Thanks for taking my questions I wanted to ask about carrying the T five contract.
Stephen H. Barnes: Those are going to ramp up over time. So those will have, I wouldn't necessarily point to seasonality as much as a ramping part that will take to also hit those, those call it, rational peaks of utilization.
Stephen H. Barnes: Earlier this year, obviously, we I think finally completed.
Jeff: Appeals process and we have full awards and at least from the sort of government website. It looks like but they are still tracking to launch and start providing care in January of 25, So what if any at all sort of revenues are you building into that fiscal 'twenty five guide from that at this point.
Operator: Will you stand by for our next question? Our next question comes from the line of Ryan MacDonald with Needleman Company. Your line is open. All right, thanks for joining us.
Ryan Michael MacDonald: Thanks for the question, Ryan. We continue to build on the growth of the autism care demonstration. That's a population we serve exceptionally well. Satisfaction levels are really high, and we expect that business to continue to grow. We're modeling that at modest growth, and we're really not factoring in any material new growth in the T5 agreement until we can see, until we get a little closer to the actual innovations that the government's going to mandate for the vendors that were selected. We expect that we'll see a lot more color on that over the course of the next two to three quarters.
Ryan Michael MacDonald: Okay.
Ryan Michael MacDonald: Hi.
Speaker Change: Thanks for the question, Brian we continue to build in the growth of the autism care demonstration that the population, we serve exceptionally well and satisfaction levels are really high.
Ryan Michael MacDonald: And we expect that business to continue to grow were modest.
Ryan Michael MacDonald: We're modeling that at modest growth and we're really not factoring in any material new growth in the <unk> agreement until we can see until we get a little closer to.
Ryan Michael MacDonald: So the actual innovations that the government is going to mandate are there for the vendors that were selected we expect that we'll see a lot more color on that over the course of the next two to three quarters.
Rajeev Singh: Will you stand by for our next question? Our next question comes from the line of Jess Tassan with Piper Sandler. Your line is open.
Jessica Elizabeth Tassan: Please standby for our next question.
Jessica Elizabeth Tassan: Our next question comes from the line of Jeff <unk> with Piper Sandler Your line is open.
Operator: Hi, thanks so much for taking the questions and I appreciate all the detail. I just wanted to confirm the FY24 ACV number; can you just remind us again what that comprises? What percent of ACV is PMPM versus contingency-based revenue? And what kind of attainment is the assumed attainment of quality and cost-based contingencies in that ACV number? And finally, sorry for the multi-part question, but just finally, can you confirm utilization-based revenue from both an enterprise and a plush care perspective would be excluded from that ACV year-end number? Thank you. I get it.
Speaker Change: Hi, Thanks, so much for taking my questions and I appreciate all the detail I just I wanted to confirm for the FY 'twenty for ACB number can you just remind us again, what that comprises what percent of ACB. It's P. M. P M versus contingency based revenue and then kind of what's the assumed attainment of quality and cost base contingencies in that ACB number.
Operator: And then finally.
Operator: Sorry for the Multipart question, but just finally can you confirm utilization based revenue from both enterprise and plus care perspective would be excluded from that ACB.
Jessica Elizabeth Tassan: Hi Jess, this is Steve.
Speaker Change: Your line number thank you.
Stephen H. Barnes: I'll grab that one. So what goes into ACV is just B2B contract revenue. So to your last part of your question, it does not include direct revenue to consumers, but it would include an estimate of 4 or 12 months of utilization-based revenues. To your earlier – the first part of your question, if you think about the ARR number, we spoke about $86 million. We see a conversion of 80 to 85 percent of that number into the ACV number.
Jessica Elizabeth Tassan: Hi, Jeff This is Steve I'll grab that one so what goes into ACB.
Stephen H. Barnes: Just to be to be contract revenue. So to your last part of your question that does not include direct to consumer revenue, but it would include an estimate for 12 months utilization base revenues.
Stephen H. Barnes: To your earlier the first part of your question. If you think about the IRR number we spoke about $86 million, we see conversion of 80% to 85% of that number into the into the ACB number.
Stephen H. Barnes: There's a – we essentially haircut for PG realization and timing of launches. So if you were to think about the walk from last year's ending number, less terminations, to GDR, the gross dollar retention, and then add in about 80 to 85 percent of that ARR number, you get to 351. Importantly, one of the key points we're hoping to drive home here today is that the business has expanded and diversified so much since we went public that ACV is one important predictor.
Stephen H. Barnes: <unk>.
Stephen H. Barnes: We essentially haircut for PGE realization and timing of launch it. So if you think about the walk from last year's ending number less termination suit GDR gross dollar retention and then add in.
Stephen H. Barnes: Dollars to 85% of that <unk> number you get to the.
Stephen H. Barnes: 351 importantly.
Stephen H. Barnes: One of the key points, we're hoping to drive home here today as the business has expanded and diversified so much since we went public that ACB is one important predictor I think it's in the range of <unk> 70, or so percent of this year's revenue when you add onto that the growth vectors.
Stephen H. Barnes: I think it's in the range of 70 or so percent of this year's revenue. When you add on to that, the growth vectors on the platform-connected revenues that will also add to that ACV number and the direct to consumer growth rate and the in-year revenues from new ARR bookings and launches, that is how we build up the guide to the fiscal 25 percent.
Stephen H. Barnes: The platform connected revenues that will also add into that ACB number and the direct to consumer growth rate and the in year revenues from new IRR bookings and launches.
Stephen H. Barnes: How do we build up the guide to fiscal 'twenty five.
Stephen H. Barnes: Please stand by for our next question. Our next question comes from the line of David Larsen with BTIG. Your line is open.
Speaker Change: Thank you.
David Michael Larsen: Please standby for our next question.
Stephen H. Barnes: Our next question comes from the line of David Larsen with BTG. Your line is open.
Operator: Hi, congratulations on your success with Blue Shield of California. I think two of your competitors may be serving that region, and both of them seem to be under significant pressure, partly because of the things it sounds like you're able to do that maybe they're not.
David Michael Larsen: Hi, congratulations on your success.
David Michael Larsen: With Blue Shield of California.
David Michael Larsen: I think two of your competitors, maybe serving in that region and both of them seem to be under significant pressure, partly because of the things it sounds like youre able to do that maybe they're not.
David Michael Larsen: When you talk about utilization and activation, aside from like plush care and the expert medical opinion service, which are both sort of obviously utilization-based, when we talk about things like Virta, for example, or a vendor that you're connecting to, are you measuring activation of those services? And then what is it typically across your entire network? Is it like 20 to 25%? Or is it like 80%? And then how much revenue is coming from those sort of partner vendors if we exclude plush toys and also expert medical opinion, please? Thank you.
David Michael Larsen: When you talk about utilization and activation.
David Michael Larsen: Died from Hush care and the expert medical opinion service, which are both sort of obviously utilization base. When we talk about like avert a for example, or a vendor that youre connecting.
David Michael Larsen: Are you measuring activation of those services and then what is it typically across your entire network is it like 20% to 25% or is it like 80% and then how much revenue is coming from.
David Michael Larsen: Sort of partner vendors, if we exclude.
David Michael Larsen: Plush and also expert medical opinion. Please thank you.
Rajeev Singh: We're going to tag-team this answer, David, and first of all, thank you for the question. Our success with Blue Shield of California has been a partnership effort, and Blue Shield of California and the team here at Accolade get a ton of credit. We've partnered really well, and the Virtual Blue plan is something that I think both companies are really proud of. Secondly, as it relates to platform-connected revenues, you're correct. They include both our expert medical opinion and primary care services and those services or the utilization of the services in our trusted partner ecosystem.
Speaker Change: We're going to tag team this answer David and first of all thank you for the question.
Rajeev Singh: Our success with Blue Shield of California has been been a partnership operated and Blue Shield of California, and the team here at <unk>.
Rajeev Singh: On a credit we partnered really well and the virtual Blue plan is something that I think both companies are really proud of.
Speaker Change: Secondly, as it relates to platform connected revenues Youre correct.
Rajeev Singh: You include.
Rajeev Singh: Both our expert medical opinion in primary care services and those services are the utilization of the services in our trusted partner ecosystem. Let me give you. An example of how we think about a trusted partner ecosystem.
Rajeev Singh: Let me give you an example of how we think about a trusted partner ecosystem utilization. We'll take Virta as an example. 9% of most populations, 9% of the American population, wrestles with diabetes. And I'm just going to use this simple map.
Rajeev Singh: Utilization will take Berta as an example, 9% of most populations, 9% of the American population wrestles with diabetes and I'm just going to use this simple math. So you might presume that 9% of our population using accolades navigation platform and Berta is a candidate for using Berta.
Rajeev Singh: So you might presume that 9% of a population using Accolade's navigation platform in Virta is a candidate for using Virta. Let's say a third of that population is reachable in the first year. That might be a cohort that we convert at, let's say, 50% in that first year. And so we're talking about 1.5% of the 9% that we reach in that first year. Each year, we have an opportunity to grow that utilization rate as we build a relationship with that membership because we've got a long-term relationship with that customer and extraordinary engagement rates.
Rajeev Singh: Let's say a third of that population is reachable in the first year that might be a cohort that we convert at I'd say, 50% in that first year and so we're talking about one 5% of the 9% that we reached in that first year.
Rajeev Singh: Each year, we have an opportunity to grow that utilization rate as we build a relationship with that membership because we've got a long term relationship with that customer and extraordinary engagement rates and so it will depend on the service date.
Rajeev Singh: And so it'll depend on the service, Dave. With a vendor like Virta, it might be focused on people who are pre-diabetic and diabetic with an offering like musculoskeletal, like Hinge or Sword. It might be those who are wrestling with musculoskeletal issues, but that might be a smaller percentage of the population. But each has an opportunity to grow each year. Steve or Jeff? I would just add, Dave, to that.
Rajeev Singh: With with a vendor like Berta might be focused on people, who are pre diabetic and diabetic with a an offering like muscular skeletal like hinge or sort it might be those who are wrestling with muscular skeletal issues that might be a smaller percentage percentage of the population, but each have an opportunity to.
Speaker Change: ROE each year, Steve for Jeff I would just add.
Stephen H. Barnes: If you think back to Capital Markets Day last year, Sammy and I can, from Virta, remark that when Accolade is present, we're seeing sometimes 2x utilization there. And so there's a very symbiotic relationship here between certainly the partner in Accolade, which we share to the extent we're able to drive incremental revenue, and also the customer who's procured that solution believes that they They want to see engagement and ultimate completion.
Rajeev Singh: To that if you think back to the capital markets day last year, I think sanmina, Ken some of her to remark that when accolade. Its present, we're seeing sometimes to act utilization. There. So it is a very symbiotic relationship here between certainly the partner and accolade in which we're sharing in the to the extent, we're able to drive incremental revenue.
Stephen H. Barnes: And also to the customer who is procured that solution believes that they have a real need within their population they want to see that engagement and ultimate completion. So we've chosen that select set of TPS and design relationships with them. Those partners. So that we can share in the revenue when we drive that high quality engagement with the <unk>.
Stephen H. Barnes: So we've chosen that select set of TPEs and designed relationships with them, those partners, so that we can share in the revenue when we drive that high-quality engagement with the partners. So today, it's a very important part of our revenue, still fairly small in terms of the total revenue that Accolade is driving, but very strategically important and growing rapidly. You saw the chart of platform-connected revenues and the rapid growth rate there. TPEs are a really important part of that growth rate. Thank you.
Stephen H. Barnes: Gartner so.
Stephen H. Barnes: Today, it's a very important part of our revenue is still fairly small in terms of the total revenue that activate is driving but a very strategically important and growing rapidly.
Stephen H. Barnes: Saw that the chart our platform connected revenues.
Stephen H. Barnes: The rapid growth rate there Gpus are.
Stephen H. Barnes: We are really important part of that growth rate.
Speaker Change: Thank you.
Speaker Change: Please standby for our next question.
Stephen H. Barnes: Okay.
Stephen H. Barnes: Our next question comes from the line of Stan with Wells Fargo. Your line is open.
Speaker Change: Hi, Thanks for.
Operator: Please stand by for our next question. Our next question comes from the line of Stan with Wells Fargo. Your line is open.
Speaker Change: My questions Raj, maybe just going back to the prepared remarks, I think you touched on the fact that you are continuing to execute against a bit of a backdrop of a challenging sales environment can you just clarify what are you seeing in terms of end market demand may be competitive dynamics.
Stan: Maybe if you can frame that and how that compares versus the trailing 12 months. Thanks.
Stanislav Berenshteyn: Yes, Stan, I appreciate you asking the question because I need to clarify maybe any perception that might have been in the prepared remarks. Our new business growth as it relates to ARR growth over the last couple of years has continued to be very strong, and so we are executing well in the market. We don't think the demand environment has changed dramatically.
Stanislav Berenshteyn: Yes, Dan I appreciate you asking the question because I need to clarify maybe the any perception that might've been in the prepared remarks.
Stanislav Berenshteyn: Hi.
Stanislav Berenshteyn: Our new business growth as it relates to our growth over the last couple of years has continued to be very strong and so.
Stanislav Berenshteyn: We are executing well in the market. We don't think the demand environment has changed dramatically. We think it continues to grow we think it continues to grow both for <unk>.
Stephen H. Barnes: We think it will continue to grow both for new business ARR as well as for platform-connected revenues. I think perhaps what you may have been referring to is me speaking to changing economic conditions and the need to drive profitable growth for companies like ours and the significance of the turn where we're entering fiscal year 2025 with our first full year of adjusted profitability. And that profitable growth, along with the strong demand that we're seeing, is the buzzword of our business, not just growth. We're going to grow profitably, and we're going to grow responsibly. And we expect to continue to grow aggressively moving forward.
Stephen H. Barnes: New business.
Stephen H. Barnes: <unk> as well as for platform connected revenues I think perhaps what you may have been referring to as me speaking to the changing the changing economic conditions and the need to drive profitable growth.
Stephen H. Barnes: For companies like ours, and the significance of the turn where we're entering fiscal year 2025, with our first full year of adjusted EBITDA profitability and profitable growth.
Stephen H. Barnes: Along with the strong demand that we're seeing is.
Stephen H. Barnes: The buzzword of our business not just growth, we're going to grow profitably and we're going to grow responsibly and we expect to continue to grow aggressively going forward.
Unknown Executive: I'm showing no further questions in the queue. I would now like to turn the call back over to management for closing remarks.
Speaker Change: Thank you.
Speaker Change: I'm showing no further questions in the queue I would now like to turn the call back over to management for closing remarks.
Unknown Executive: We appreciate all of you being here, and we look forward to our follow-up conversations in the days ahead.
Unknown Executive: Okay.
Unknown Executive: We appreciate all of you being here and we look forward to our follow up conversations in the days ahead.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Operator: Okay.
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