Accolade Announces Results for Fiscal Second Quarter 2023 

October 6, 2022
  • Fiscal second quarter 2023 revenue of $87.6 million, a 20% increase compared to fiscal second quarter 2022 revenue of $73.3 million 

SEATTLE, Oct. 06, 2022 (GLOBE NEWSWIRE) -- Accolade, Inc. (NASDAQ: ACCD) today announced financial results for the fiscal second quarter ended August 31, 2022.

“Accolade executed across all of our key initiatives in the second quarter, marked by our financial outperformance as well as a strong start to the traditional selling season. We remain excited by the opportunities we see ahead, with a competitive leadership position that is becoming clearer every day. During the second quarter, we experienced strong win rates that were most notable for the breadth of the customers across industries and offerings, as well as the increasing importance of offering a full range of solutions to both enterprise customers and health plan partners. Importantly, this is also our first full year selling our broader integrated services, and we are receiving strong validation from both new and current customers that our integrated portfolio is the right approach,” said Rajeev Singh, Accolade Chief Executive Officer.

Financial Highlights for Fiscal Second Quarter ended August 31, 2022

          
  Three Months Ended August 31, % 
     2022    2021    Change(2) 
  (in millions, except percentages)   
GAAP Financial Data:         
Revenue $87.6  $73.3  20%
Net Loss $(46.5) $(62.4) 25%
          
Non-GAAP Financial Data(1):         
Adjusted EBITDA $(13.7) $(19.4) 29%
Adjusted Gross Profit $39.2  $30.0  31%
Adjusted Gross Margin  44.7  40.9   

(1) A reconciliation of GAAP to non-GAAP results has been provided in this press release in the accompanying Financial Tables. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

(2) Percentages are calculated from accompanying Financial Tables and may differ from percentage change of numbers in Financial Highlights table due to rounding.

Steve Barnes, Accolade Chief Financial Officer, commented, “Accolade outperformed expectations on the strength and diversification of our business, and our ability to deliver results against our performance guarantees. We also are benefiting from the continued momentum in PlushCare’s direct to consumer virtual primary care business. We are once again raising the midpoint of our revenue guidance for fiscal 2023 and reaffirming our commitment to consistently improve our Adjusted EBITDA loss, with an expectation for positive cash flow and Adjusted EBITDA in fiscal year 2025.”

Financial Outlook

Accolade provides forward-looking guidance on revenue and Adjusted EBITDA, a non-GAAP financial measure.

For the fiscal third quarter ending November 30, 2022, we expect:

  • Revenue between $86 million and $88 million
  • Adjusted EBITDA between $(11) million and $(13) million

For the fiscal year ending February 28, 2023, we expect:

  • Revenue between $358 million and $365 million
  • Adjusted EBITDA between $(35) million and $(40) million, representing a range of (10)% to (11)% of revenue

Accolade has not reconciled guidance for Adjusted EBITDA to net loss, the most directly comparable GAAP measure, and has not provided forward-looking guidance for net loss, because there are items that may impact net loss, including stock-based compensation, that are not within the company’s control or cannot be reasonably predicted.

Quarterly Conference Call Details 

The company will host a conference call today, October 6, 2022 at 4:30 p.m. E.T. to discuss its financial results.  

To Listen via Telephone: Pre-registration is required by the conference call operator. Please pre-register by clicking here (https://register.vevent.com/register/BI3e5e3134283944ee9de48f54c3d5cb84). Upon registering, you will be emailed a dial-in number, direct passcode and unique PIN. 
  
To Listen via Internet: The conference call can be accessed via a live audio webcast that will be available online at http://ir.accolade.com
  
Replay: A replay of the call will be available via webcast for on-demand listening shortly after the completion of the call, at http://ir.accolade.com.

Forward-Looking Statements 

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements include statements regarding our future growth and our financial outlook. Forward-looking statements are subject to risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “maintain,” “might,” “likely,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or similar expressions and the negatives of those terms.

Important risks and uncertainties that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the risks described under the heading “Risk Factors” in Accolade’s most recently filed Annual Report on Form 10-K and subsequent filings, which should be read in conjunction with any forward-looking statements. All forward-looking statements in this press release are based on information available to Accolade as of the date hereof, and it does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made, except as required by law.

About Accolade, Inc. 

Accolade (Nasdaq: ACCD) provides millions of people and their families with an exceptional healthcare experience that is personal, data driven and value based to help every person live their healthiest life. Accolade solutions combine virtual primary care, mental health support and expert medical opinion services with intelligent technology and best-in-class care navigation. Accolade's Personalized Healthcare approach puts humanity back in healthcare by building relationships that connect people and their families to the right care at the right time to improve outcomes, lower costs and deliver consumer satisfaction. Accolade consistently receives consumer satisfaction ratings over 90%. For more information, visit accolade.com.

Investor Contact:

Todd Friedman, Investor Relations, IR@accolade.com

Media Contact:

Public Relations, Media@accolade.com

Source: Accolade

Financial Tables

Accolade, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited)
(In thousands, except share and per share data)

       
  August 31,  February 28, 
     2022    2022
Assets      
Current assets:      
Cash and cash equivalents $330,633  $365,853 
Accounts receivable, net  23,489   21,116 
Unbilled revenue  7,119   9,685 
Current portion of deferred contract acquisition costs  3,445   3,015 
Prepaid and other current assets  10,101   9,468 
Total current assets  374,787   409,137 
Property and equipment, net  12,306   11,797 
Operating lease right-of-use assets  32,300   33,126 
Goodwill  278,191   577,896 
Intangible assets, net  223,946   244,690 
Deferred contract acquisition costs  8,792   7,205 
Other assets  1,362   1,678 
Total assets $931,684  $1,285,529 
Liabilities and stockholders’ equity      
Current liabilities:      
Accounts payable $11,094  $7,837 
Accrued expenses and other current liabilities  9,931   11,000 
Accrued compensation  30,940   39,189 
Due to customers  8,519   16,263 
Current portion of deferred revenue  45,005   30,875 
Current portion of operating lease liabilities  7,173   6,589 
Total current liabilities  112,662   111,753 
Loans payable, net of unamortized issuance costs  281,500   280,666 
Operating lease liabilities  30,721   32,486 
Other noncurrent liabilities  203   4,562 
Deferred revenue  284   268 
Total liabilities  425,370   429,735 
       
Commitments and Contingencies      
Stockholders’ equity      
Common stock par value $0.0001; 500,000,000 shares authorized; 71,538,377 and 67,098,477 shares issued and outstanding at August 31, 2022 and February 28, 2022, respectively  7   7 
Additional paid-in capital  1,390,296   1,350,431 
Accumulated deficit  (883,989)  (494,644)
Total stockholders’ equity  506,314   855,794 
Total liabilities and stockholders’ equity $931,684  $1,285,529 

Accolade, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (unaudited)
(In thousands, except share and per share data)

             
  Three months ended August 31,  Six months ended August 31, 
     2022    2021    2022    2021
Revenue $87,643  $73,288  $173,171  $132,815 
Cost of revenue, excluding depreciation and amortization  49,830   44,334   97,445   80,270 
Operating expenses:            
Product and technology  26,194   22,512   53,011   38,451 
Sales and marketing  24,936   24,009   50,550   38,518 
General and administrative  21,020   26,170   41,258   48,172 
Depreciation and amortization  11,571   11,021   23,147   19,717 
Goodwill impairment        299,705    
Change in fair value of contingent consideration     19,686      30,146 
Total operating expenses  83,721   103,398   467,671   175,004 
Loss from operations  (45,908)  (74,444)  (391,945)  (122,459)
Interest expense, net  (236)  (776)  (870)  (1,394)
Other income (expense)  (130)  11   (180)  (44)
Loss before income taxes  (46,274)  (75,209)  (392,995)  (123,897)
Income tax benefit (expense)  (249)  12,845   3,650   12,826 
Net loss $(46,523) $(62,364) $(389,345) $(111,071)
             
Net loss per share, basic and diluted $(0.66) $(0.97) $(5.54) $(1.81)
             
Weighted-average common shares outstanding, basic and diluted  70,475,778   64,404,223   70,251,890   61,332,729 

The following table summarizes the amount of stock-based compensation included in the condensed consolidated statements of operations:

             
  For the three months ended  For the six months ended
  August 31,  August 31, 
  2022    2021    2022    2021
  (in thousands) (in thousands)
Cost of revenue $1,270 $1,054 $2,398 $1,382
Product and technology  5,625  6,366  13,115  8,188
Sales and marketing  4,270  4,054  8,259  5,427
General and administrative  6,349  8,301  13,131  12,453
Total stock‑based compensation $17,514 $19,775 $36,903 $27,450

Accolade, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
(In thousands)

       
  Six months ended August 31, 
     2022    2021
Cash flows from operating activities:      
Net loss $(389,345) $(111,071)
Adjustments to reconcile net loss to net cash used in      
Operating activities:      
Goodwill impairment  299,705    
Depreciation and amortization expense  23,147   19,717 
Amortization of deferred contract acquisition costs  1,713   1,246 
Change in fair value of contingent consideration     30,146 
Deferred income taxes  (3,859)  (12,865)
Noncash interest expense  838   823 
Stock-based compensation expense  36,903   27,450 
Changes in operating assets and liabilities, net of effect of acquisitions:      
Accounts receivable and unbilled revenue  193   1,440 
Accounts payable and accrued expenses  3,623   (267)
Deferred contract acquisition costs  (3,730)  (2,349)
Deferred revenue and due to customers  6,403   16,735 
Accrued compensation  (8,249)  (5,782)
Other liabilities  (474)  (75)
Other assets  (322)  (3,792)
Net cash used in operating activities  (33,454)  (38,644)
Cash flows from investing activities:      
Purchase of marketable securities     (99,998)
Sale of marketable securities     99,998 
Capitalized software development costs  (1,499)  (356)
Purchases of property and equipment  (1,405)  (1,573)
Cash paid for acquisition, net of cash acquired     (261,873)
Net cash used in investing activities  (2,904)  (263,802)
Cash flows from financing activities:      
Proceeds from stock option exercises  1,178   5,654 
Payments of equity issuance costs     (60)
Payment of debt issuance costs     (8,368)
Payment for purchase of capped calls     (34,443)
Proceeds from employee stock purchase plan  1,788   2,282 
Proceeds from borrowings on debt     287,500 
Payment of contingent consideration for acquisition  (1,828)   
Net cash provided by financing activities  1,138   252,565 
Net decrease in cash and cash equivalents  (35,220)  (49,881)
Cash and cash equivalents, beginning of period  365,853   433,884 
Cash and cash equivalents, end of period $330,633  $384,003 
Supplemental cash flow information:      
Interest paid $820  $102 
Fixed assets included in accounts payable $429  $166 
Other receivable related to stock option exercises $4  $75 
Income taxes paid $22  $60 
Common stock issued in connection with acquisitions $  $446,525 
Replacement awards issued in connection with acquisitions $  $6,729 

Non-GAAP Financial Measures

In addition to our financial results determined in accordance with GAAP, we use the following non-GAAP financial measures to help us evaluate trends, establish budgets, measure the effectiveness and efficiency of our operations, and determine employee incentives. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently or may use other measures to evaluate their performance. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business. In evaluating these non-GAAP financial measures, you should be aware that in the future we expect to incur expenses similar to the adjustments in this presentation. Our presentation of non-GAAP financial measures should not be construed as an inference that our future results will be unaffected by these expenses or any unusual or nonrecurring items.

Adjusted Gross Profit and Adjusted Gross Margin

Adjusted Gross Profit is a non-GAAP financial measure that we define as revenue less cost of revenue, excluding depreciation and amortization, and excluding stock-based compensation and severance costs. We define Adjusted Gross Margin as our Adjusted Gross Profit divided by our revenue. We believe Adjusted Gross Profit and Adjusted Gross Margin are useful to investors, as they eliminate the impact of certain noncash expenses and allow a direct comparison of these measures between periods without the impact of noncash expenses and certain other nonrecurring operating expenses.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that we define as net loss adjusted to exclude interest expense (net), income tax expense (benefit), depreciation and amortization, stock-based compensation, acquisition and integration-related costs, goodwill impairment, change in fair value of contingent consideration, and severance costs. We consider severance costs to include severance payments related to the realignment of our resources. We believe Adjusted EBITDA provides investors with useful information on period-to-period performance as evaluated by management and comparison with our past financial performance. We believe Adjusted EBITDA is useful in evaluating our operating performance compared to that of other companies in our industry, as this measure generally eliminates the effects of certain items that may vary from company to company for reasons unrelated to overall operating performance.

Adjusted Gross Profit, Adjusted Gross Margin and Adjusted EBITDA have certain limitations, including that they exclude the impact of certain non-cash charges, such as depreciation and amortization, whereas underlying assets may need to be replaced and result in cash capital expenditures, and stock-based compensation expense, which is a recurring charge.

The following table presents, for the periods indicated, a reconciliation of our revenue to Adjusted Gross Profit:

             
  For the three months ended  For the six months ended
  August 31,  August 31, 
  2022    2021 2022    2021
  (in thousands, except percentages) (in thousands, except percentages)
Revenue $87,643  $73,288  $173,171  $132,815 
Less:                
Cost of revenue, excluding depreciation and amortization  (49,830)  (44,334)  (97,445)  (80,270)
Gross profit, excluding depreciation and amortization  37,813   28,954   75,726   52,545 
Add:                
Stock‑based compensation, cost of revenue  1,270   1,054   2,398   1,382 
Severance costs, cost of revenue  114      114    
Adjusted Gross Profit $39,197  $30,008  $78,238  $53,927 
Gross margin, excluding depreciation and amortization  43.1  39.5  43.7  39.6
Adjusted Gross Margin  44.7  40.9  45.2  40.6

The following table presents, for the periods indicated, a reconciliation of our Adjusted EBITDA to our net income (loss):

             
  For the three months ended  For the six months ended
  August 31,  August 31, 
  2022    2021    2022    2021
  (in thousands) (in thousands)
Net loss $(46,523) $(62,364) $(389,345) $(111,071)
Adjusted for:                
Interest expense, net  236   776   870   1,394 
Income tax (benefit) expense  249   (12,845)  (3,650)  (12,826)
Depreciation and amortization  11,571   11,021   23,147   19,717 
Stock‑based compensation  17,514   19,775   36,903   27,450 
Acquisition and integration‑related costs     4,517      12,897 
Goodwill impairment        299,705    
Change in fair value of contingent consideration     19,686      30,146 
Severance costs  3,075      3,075    
Other expense (income)  130   (11)  180   44 
Adjusted EBITDA $(13,748) $(19,445) $(29,115) $(32,249)



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