0001558370-23-011609 | 10-Q | XBRL Viewer

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Stock-based Compensation - Stock Option Activity Under Option Plan and Incentive Plan (Details) $ / shares in Units, $ in Thousands	3 Months Ended
	May 31, 2023 USD ($) $ / shares shares
2020 Equity Incentive Plan
Stock Options
Beginning Balance \| shares	8,050,519
Granted \| shares	10,792
Exercised \| shares	(498,569)
Forfeited \| shares	(130,193)
Ending Balance \| shares	7,432,549
Weighted average exercise price
Beginning Balance (in USD per share) \| $ / shares	$ 10.52
Granted \| $ / shares	14.25
Exercised \| $ / shares	4.87
Forfeited \| $ / shares	17.31
Ending Balance (in USD per share) \| $ / shares	$ 10.78
Weighted remaining contractual life in years	4 years 9 months 18 days
Ending Balance \| $	$ 32,193
PlushCare, Inc. Stock Incentive Plan
Stock Options
Beginning Balance \| shares	153,608
Exercised \| shares	(48,680)
Forfeited \| shares	(1,505)
Ending Balance \| shares	103,423
Weighted average exercise price
Beginning Balance (in USD per share) \| $ / shares	$ 1.63
Exercised \| $ / shares	2.12
Forfeited \| $ / shares	2.88
Ending Balance (in USD per share) \| $ / shares	$ 1.38
Weighted remaining contractual life in years	6 years 2 months 12 days
Ending Balance \| $	$ 1,102

Basis of Presentation and Summary of Significant Accounting Policies - Property and Equipment and Capitalized Internal Use Software Costs (Details) - USD ($) $ in Thousands	3 Months Ended
	May 31, 2023	May 31, 2022
Property, Plant and Equipment [Line Items]
Amortization expenses	$ 11,640	$ 11,576
Computer software
Property, Plant and Equipment [Line Items]
Useful life	3 years
Capitalized cost	$ 2,410	766
Amortization expenses	$ 346	$ 290

Commitments and Contingencies	3 Months Ended
May 31, 2023
Commitments and Contingencies.
Commitments and Contingencies	(10) Commitments and Contingencies (a) Legal Proceedings The Company is involved in various claims, inquiries and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters is not expected to have a material adverse effect on the Company’s financial position or liquidity. As of May 31, 2023, the Company had accruals of $3,500 related to legal matters. On May 8, 2021, a purported class action complaint (Robbins v. PlushCare, Inc. et al.) was filed in the United States District Court for the Northern District of California against the Company’s wholly owned subsidiary, PlushCare, Inc. The complaint, as amended, alleges that certain of PlushCare’s subscription payment practices violate California and other state automatic renewal laws and the Federal Electronic Funds Transfer Act, among other claims, arising from allegations that PlushCare failed to provide adequate disclosures to members. The lawsuit seeks restitution of subscription fees, statutory damages for each violation, subject to trebling, reasonable attorneys’ fees, and injunctive relief. Under the terms of the agreement to purchase PlushCare, the selling shareholders will indemnify Accolade for losses related to this matter, subject to a cap. The parties have tentatively agreed on a settlement and the Company has recorded a contingent liability. The majority of the Company’s liability is eligible to be paid through third-party insurance and the remaining indemnification from the selling shareholders of PlushCare. The remainder amounted to $1,244 at May 31, 2023. (b) Employment Agreements Certain officers of the Company have employment agreements providing for severance, continuation of benefits, and other specified rights in the event of termination without cause, including in the event of a change of control of the Company, as defined in the agreements. (c) Purchase Obligations The Company has minimum required purchase commitments of $40,323 pursuant to an agreement primarily related to cloud computing services. Portions of the total purchase commitment are required to be met prior to the end of each contract year, September 30, in each of fiscal years 2023 through 2027. If total purchases in a contract year do not meet the portion of the commitment required for that year, the shortfall must be prepaid and can be used for future purchases through September 30, 2027. As of May 31, 2023, the Company has remaining future purchase commitments under this agreement of $30,232.

Commitments and Contingencies

3 Months Ended

May 31, 2023

Commitments and Contingencies.

Commitments and Contingencies

(10) Commitments and Contingencies

(a) Legal Proceedings

The Company is involved in various claims, inquiries and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters is not expected to have a material adverse effect on the Company’s financial position or liquidity. As of May 31, 2023, the Company had accruals of $3,500 related to legal matters.

On May 8, 2021, a purported class action complaint (Robbins v. PlushCare, Inc. et al.) was filed in the United States District Court for the Northern District of California against the Company’s wholly owned subsidiary, PlushCare, Inc. The complaint, as amended, alleges that certain of PlushCare’s subscription payment practices violate California and other state automatic renewal laws and the Federal Electronic Funds Transfer Act, among other claims, arising from allegations that PlushCare failed to provide adequate disclosures to members. The lawsuit seeks restitution of subscription fees, statutory damages for each violation, subject to trebling, reasonable attorneys’ fees, and injunctive relief. Under the terms of the agreement to purchase PlushCare, the selling shareholders will indemnify Accolade for losses related to this matter, subject to a cap. The parties have tentatively agreed on a settlement and the Company has recorded a contingent liability. The majority of the Company’s liability is eligible to be paid through third-party insurance and the remaining indemnification from the selling shareholders of PlushCare. The remainder amounted to $1,244 at May 31, 2023.

(b) Employment Agreements

Certain officers of the Company have employment agreements providing for severance, continuation of benefits, and other specified rights in the event of termination without cause, including in the event of a change of control of the Company, as defined in the agreements.

The Company has minimum required purchase commitments of $40,323 pursuant to an agreement primarily related to cloud computing services. Portions of the total purchase commitment are required to be met prior to the end of each contract year, September 30, in each of fiscal years 2023 through 2027. If total purchases in a contract year do not meet the portion of the commitment required for that year, the shortfall must be prepaid and can be used for future purchases through September 30, 2027. As of May 31, 2023, the Company has remaining future purchase commitments under this agreement of $30,232.

Net Loss Per Share Attributable to Common Stockholders

3 Months Ended

May 31, 2023

Net Loss Per Share Attributable to Common Stockholders

Net Loss Per Share Attributable to Common Stockholders

(9) Net Loss Per Share Attributable to Common Stockholders

The following table sets forth the computation of basic and diluted net loss per share attributable to Accolade’s common stockholders:


	Three months ended
	May 31,
	2023		2022
Net loss	$	(38,409)	$	(342,822)
Weighted-average common shares outstanding, basic		73,179,994		69,738,638
Net income (loss) per share attributable to common stockholders, basic	$	(0.52)	$	(4.92)

As the Company has reported net losses for each of the periods presented, all potentially dilutive securities are antidilutive. The following potential outstanding shares of common stock were excluded from the computation of diluted net loss per common share for the periods presented because including them would have been antidilutive:


	Three months ended
	May 31,
	2023	2022
Stock options	7,535,972	8,238,444
Unvested restricted stock units	3,341,855	2,579,247
Shares issued to 2nd.MD employees and subject to vesting	—	274,224
Shares issued to PlushCare employees and subject to vesting	537,401	831,398
Indemnity shares held in escrow in connection with PlushCare acquisition	27,342	27,342
Shares to be issued to HealthReveal shareholders upon expiration of indemnification	—	28,089
Convertible Senior Notes	5,700,297	5,700,297
Total	17,142,867	17,679,041

Stock-based Compensation - Stock Options (Narrative) (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended
	Jul. 31, 2020	May 31, 2023	May 31, 2022
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense		$ 14,278	$ 19,389
2020 Equity Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock authorized to be issued		12,135,039
Common stock available for future grants		4,857,528
2020 Equity Incentive Plan \| Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock authorized to be issued	4,300,000
Term of option	10 years
Vesting period	4 years
Compensation expense		$ 2,215	2,692
Aggregate intrinsic value of stock options		3,132	349
Unrecognized compensation expense		$ 10,768
Weighted average period		1 year 7 months 6 days
2020 Equity Incentive Plan \| Stock Option \| Tranche One
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	1 year
Vesting percentage	25.00%
2020 Equity Incentive Plan \| Stock Option \| Tranche Two
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	3 years
Vesting percentage	75.00%
PlushCare, Inc. Stock Incentive Plan \| Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense		$ 1,340	1,244
Aggregate intrinsic value of stock options		535	$ 261
Unrecognized compensation expense		$ 773
Weighted average period		1 year 1 month 6 days

Restructuring - Severance Liability (Details) $ in Thousands	3 Months Ended
	May 31, 2023 USD ($)
Restructuring Reserve [Roll Forward]
Balance at beginning of period	$ 3,996
Severance Costs	1,102
Cash payments	(2,674)
Balance at end of period	$ 2,424

Revenue - Revenues Disaggregated (Details) - USD ($) $ in Thousands	3 Months Ended
	May 31, 2023	May 31, 2022
Disaggregation of Revenue [Line Items]
Revenues	$ 93,226	$ 85,528
Access fees
Disaggregation of Revenue [Line Items]
Revenues	66,597	68,125
Utilization-based fees
Disaggregation of Revenue [Line Items]
Revenues	$ 26,629	$ 17,403

- Definition

Amount, including tax collected from customer, of revenue from satisfaction of performance obligation by transferring promised good or service to customer. Tax collected from customer is tax assessed by governmental authority that is both imposed on and concurrent with specific revenue-producing transaction, including, but not limited to, sales, use, value-added and excise.

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+ Details

Stock-based Compensation - Performance Stock Units (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended
	May 31, 2023	May 31, 2023	May 31, 2022
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense		$ 14,278	$ 19,389
Performance Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense		$ 0	$ 1,312
Units issued	747,687

Net Loss Per Share Attributable to Common Stockholders (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	May 31, 2023	May 31, 2022
Net Loss Per Share Attributable to Common Stockholders
Net loss	$ (38,409)	$ (342,822)
Weighted-average common shares outstanding, basic	73,179,994	69,738,638
Net income (loss) per share attributable to common stockholders, basic	$ (0.52)	$ (4.92)

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

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The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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Reference 21: http://www.xbrl.org/2003/role/disclosureRef
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Reference 22: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

Commitments and Contingencies - Purchase Obligations (Details) $ in Thousands	May 31, 2023 USD ($)
Commitments and Contingencies.
Purchase Obligation	$ 40,323
Purchase obligation, remaining future purchase commitments	$ 30,232

Stock-based Compensation (Tables)

3 Months Ended

May 31, 2023

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Schedule of stock-based compensation


	Three months ended May 31,
	2023		2022
Cost of revenue, excluding depreciation and amortization	$	911	$	1,128
Product and technology		6,966		7,490
Sales and marketing		3,826		3,989
General and administrative		2,575		6,782
Total stock-based compensation	$	14,278	$	19,389

Schedule of restricted stock units activity


		Restricted Stock Units
Balance, February 28, 2023		4,266,990
Granted		150,564
Vested		(600,227)
Forfeited		(475,472)
Balance, May 31, 2023		3,341,855

2020 Equity Incentive Plan

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Schedule of stock option activity


		Weighted		Weighted
		average		remaining	Aggregate
		exercise		contractual life	intrinsic
	Stock Options	price		in years	value
Balance, February 28, 2023	8,050,519	$	10.52
Granted	10,792		14.25
Exercised	(498,569)		4.87
Forfeited	(130,193)		17.31
Balance, May 31, 2023	7,432,549	$	10.78	4.8	$	32,193

PlushCare, Inc. Stock Incentive Plan

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Schedule of stock option activity


		Weighted		Weighted
		average		remaining	Aggregate
		exercise		contractual life	intrinsic
	Stock Options	price		in years	value
Balance, February 28, 2023	153,608	$	1.63
Exercised	(48,680)	$	2.12
Forfeited	(1,505)	$	2.88
Balance, May 31, 2023	103,423	$	1.38	6.2	$	1,102

Revenue - Revenue and Deferred Revenue (Details) $ in Thousands	May 31, 2023 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue	$ 224,939
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-06-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue	$ 127,482
Revenue remaining performance obligation satisfaction period	9 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-03-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue	$ 73,792
Revenue remaining performance obligation satisfaction period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-03-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue	$ 21,510
Revenue remaining performance obligation satisfaction period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-03-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue	$ 2,126
Revenue remaining performance obligation satisfaction period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2027-03-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue	$ 29
Revenue remaining performance obligation satisfaction period	1 year

Restructuring (Tables)

3 Months Ended

May 31, 2023

Restructuring

Summary of the amount of severance costs included in the consolidated statements of operations


		Three Months Ended May 31,
		2023
Cost of revenue, excluding depreciation and amortization	$	634
Product and technology		221
Sales and marketing		—
General and administrative		247
Total severance costs	$	1,102

Summary of the changes in severance liabilities


Balance as of February 28, 2023	$	3,996
Severance costs		1,102
Cash payments		(2,674)
Balance as of May 31, 2023	$	2,424

Debt (Details) $ / shares in Units, $ in Thousands	1 Months Ended		3 Months Ended
Debt (Details) $ / shares in Units, $ in Thousands	Mar. 31, 2021 USD ($) D $ / shares $ / derivative	Jul. 31, 2019 USD ($)	May 31, 2023 USD ($)	May 31, 2022 USD ($)	Feb. 28, 2023 USD ($)	Jul. 19, 2022 USD ($)
Debt Instrument [Line Items]
Line of credit			$ 1,311
Convertible Senior Notes
Debt Instrument [Line Items]
Debt instrument, face amount	$ 287,500
Interest rate	0.50%
Conversion ratio	19.8088
Principal amount denomination	$ 1
Conversion rate \| $ / shares	$ 50.48
Threshold percentage of stock price trigger	130.00%
Threshold trading days \| D	20
Threshold consecutive trading days \| D	30
Percentage of principal amount redeemed	100.00%
Cap price \| $ / derivative	76.20
Proceeds from notes payable	$ 279,132
Payment of costs of the capped call transactions	34,443
Cost which includes allocated pro-rata on capped call costs	8,428
Long-term debt			287,500		$ 287,500
Outstanding debt			282,742		282,323
Debt issuance cost			4,758		$ 5,177
Interest expenses			781	$ 779
Amortization of debt discount			$ 419	417
Amount allocated to capped call	$ 60
Number of business day \| D	5
Number of consecutive trading day \| D	10
Percentage of average conversion value of note	98.00%
Effective interest rate over period			1.10%
Percentage of premium over last reported sale price	100.00%
Amount allocated to the Notes	$ 8,368
Revolving Credit Facility, 2019
Debt Instrument [Line Items]
Maximum borrowing capacity		$ 80,000
Long-term debt			$ 70,497
Outstanding debt			0
Interest expenses			$ 51	$ 52
Threshold net cash for extension of debt term						$ 200,000
Revolving Credit Facility, 2019 \| Bloomberg Short-Term Bank Yield Index
Debt Instrument [Line Items]
Debt instrument variable rate		3.50%
Revolving Credit Facility, 2019 \| BSBY Rate and Base Rate
Debt Instrument [Line Items]
Debt instrument variable rate		2.50%

Stock-based Compensation - Stock-based compensation expense (Details) - USD ($) $ in Thousands	3 Months Ended
	May 31, 2023	May 31, 2022
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Compensation expense	$ 14,278	$ 19,389
Cost of revenue, excluding depreciation and amortization
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Compensation expense	911	1,128
Product and technology
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Compensation expense	6,966	7,490
Selling And Marketing Expense [Member]
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Compensation expense	3,826	3,989
General and administrative
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Compensation expense	$ 2,575	$ 6,782

Stock-based Compensation - Employee Stock Purchase Plan - (Details) - USD ($) $ in Thousands		1 Months Ended	3 Months Ended
	Mar. 01, 2023	Jul. 31, 2020	May 31, 2023	May 31, 2022	Feb. 28, 2023
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense			$ 14,278	$ 19,389
2020 Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock initially reserved		1,100,000
Number of automatic annual increase in common share	3,058,760
Percentage of lower in fair market value		85.00%
Compensation expense			$ 468	$ 411
Issuance of common stock in connection with the employee stock purchase plan (shares)			280,162	343,310
Proceeds from Stock Plans			$ 1,992	$ 1,788
Employee Payroll Contributions Accrued			$ 191		$ 1,384
Maximum \| 2020 Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of employee contribution on compensation		15.00%
Participant accrued purchase rights		$ 25,000

Debt (Tables)

3 Months Ended

May 31, 2023

Debt

Schedule Of Debt


	May 31, 2023		February 28, 2023
Principal	$	287,500	$	287,500
Unamortized issuance costs		(4,758)		(5,177)
Net carrying amount	$	282,742	$	282,323

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	May 31, 2023	May 31, 2022
Income Taxes
Income tax provision (benefit)	$ 91	$ (3,899)
Effective income tax rate	(0.20%)	1.10%

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

Fair Value Measurements

3 Months Ended

May 31, 2023

Fair Value Measurements

Fair Value Measurements

(5) Fair Value Measurements

The following table sets forth the fair value of the Company’s financial assets and liabilities within the fair value hierarchy:


	May 31, 2023
	Level 1		Level 2		Level 3		Fair Value
Assets
Cash equivalents:
Money market funds	$	121,054	$	—	$	—	$	121,054


	February 28, 2023
	Level 1		Level 2		Level 3		Fair Value
Assets
Cash equivalents:
Money market funds	$	99,861	$	—	$	—	$	99,861
United States treasury bills	$	39,995	$	—	$	—	$	39,995

The estimated fair value of the convertible senior notes (Note 6) was $233,795 as of May 31, 2023, based on quoted market prices of the Company’s instrument in markets that are not active and are classified as Level 2 within the fair value hierarchy. Considerable judgment is necessary to interpret the market data and develop an estimate of the fair value. Accordingly, the estimate is not necessarily indicative of the amount at which this instrument could be purchased, sold, or settled.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	May 31, 2023	Feb. 28, 2023
Current assets:
Cash and cash equivalents	$ 302,870	$ 321,083
Accounts receivable, net	22,539	23,435
Unbilled revenue	3,760	3,260
Current portion of deferred contract acquisition costs	3,933	4,022
Prepaid and other current assets	15,372	14,149
Total current assets	348,474	365,949
Property and equipment, net	16,608	14,763
Operating lease right-of-use assets	28,080	29,525
Goodwill	278,191	278,191
Intangible assets, net	192,829	203,202
Deferred contract acquisition costs	9,679	9,815
Other assets	1,846	1,624
Total assets	875,707	903,069
Current liabilities:
Accounts payable	5,461	10,155
Accrued expenses and other current liabilities	13,782	11,744
Accrued compensation	27,628	39,346
Due to customers	14,761	15,694
Current portion of deferred revenue	44,189	35,191
Current portion of operating lease liabilities	6,915	7,284
Total current liabilities	112,736	119,414
Loans payable, net of unamortized issuance costs	282,742	282,323
Operating lease liabilities	25,741	27,189
Other noncurrent liabilities	168	203
Deferred revenue	142	154
Total liabilities	421,529	429,283
Commitments and Contingencies (note 10)
Stockholders' equity
Common stock par value $0.0001; 500,000,000 shares authorized; 75,264,400 and 73,089,075 shares issued and outstanding at May 31, 2023 and February 28, 2023, respectively	8	7
Additional paid-in capital	1,446,873	1,428,073
Accumulated deficit	(992,703)	(954,294)
Total stockholders' equity	454,178	473,786
Total liabilities and stockholders' equity	$ 875,707	$ 903,069

Debt - Notes (Details) - Convertible Senior Notes - USD ($) $ in Thousands	May 31, 2023	Feb. 28, 2023
Debt Instrument [Line Items]
Principal	$ 287,500	$ 287,500
Unamortized issuance costs	(4,758)	(5,177)
Net carrying amount	$ 282,742	$ 282,323

- Definition

Amount, excluding unamortized premium (discount) and debt issuance cost, of long-term debt. Excludes lease obligation.

+ References + Details

Restructuring - Severance Costs (Details) $ in Thousands	3 Months Ended
Restructuring - Severance Costs (Details) $ in Thousands	May 31, 2023 USD ($)
Restructuring Cost and Reserve [Line Items]
Severance Costs	$ 1,102
Cost of revenue, excluding depreciation and amortization
Restructuring Cost and Reserve [Line Items]
Severance Costs	634
Product and technology
Restructuring Cost and Reserve [Line Items]
Severance Costs	221
General and administrative
Restructuring Cost and Reserve [Line Items]
Severance Costs	$ 247

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	May 31, 2023	Feb. 28, 2023
Condensed Consolidated Balance Sheets
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	75,264,400	73,089,075
Common stock, shares outstanding	75,264,400	73,089,075

Net Loss Per Share Attributable to Common Stockholders (Tables)

3 Months Ended

May 31, 2023

Net Loss Per Share Attributable to Common Stockholders

Schedule of computation of basic and diluted net loss per share


	Three months ended
	May 31,
	2023		2022
Net loss	$	(38,409)	$	(342,822)
Weighted-average common shares outstanding, basic		73,179,994		69,738,638
Net income (loss) per share attributable to common stockholders, basic	$	(0.52)	$	(4.92)

Schedule of common stock were excluded from the computation of diluted net loss per share attributable to common stockholders


	Three months ended
	May 31,
	2023	2022
Stock options	7,535,972	8,238,444
Unvested restricted stock units	3,341,855	2,579,247
Shares issued to 2nd.MD employees and subject to vesting	—	274,224
Shares issued to PlushCare employees and subject to vesting	537,401	831,398
Indemnity shares held in escrow in connection with PlushCare acquisition	27,342	27,342
Shares to be issued to HealthReveal shareholders upon expiration of indemnification	—	28,089
Convertible Senior Notes	5,700,297	5,700,297
Total	17,142,867	17,679,041

Stock-based Compensation

3 Months Ended

May 31, 2023

Stock-based Compensation

Stock-based Compensation

(7) Stock-based Compensation

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


	Three months ended May 31,
	2023		2022
Cost of revenue, excluding depreciation and amortization	$	911	$	1,128
Product and technology		6,966		7,490
Sales and marketing		3,826		3,989
General and administrative		2,575		6,782
Total stock-based compensation	$	14,278	$	19,389

In July 2020, the Company adopted the 2020 Equity Incentive Plan (the Incentive Plan), which authorized the Company to grant up to 4,300,000 shares of common stock to eligible employees, directors, and consultants to the Company in the form of stock options, restricted stock units, and other various equity awards, including any shares subject to stock options or other awards granted under the Company’s prior stock option plan that expire or terminate for any reason (other than being exercised in full) or are cancelled in accordance with the terms of the prior stock option plan. The Incentive Plan also includes an annual evergreen increase, and the amount, terms of grants, and exercisability provisions are determined by the board of directors. The term of an award may be up to 10 years and options generally vest over four years, with one quarter of an award vesting one year after grant and the remainder vesting on a monthly basis over three years. As of May 31, 2023, there was a total of 12,135,039 shares of common stock authorized for issuance under the Incentive Plan, of which 4,857,528 were available for future grants.

(a) Stock Options

The following is a summary of stock option activity under the Incentive Plan:


		Weighted		Weighted
		average		remaining	Aggregate
		exercise		contractual life	intrinsic
	Stock Options	price		in years	value
Balance, February 28, 2023	8,050,519	$	10.52
Granted	10,792		14.25
Exercised	(498,569)		4.87
Forfeited	(130,193)		17.31
Balance, May 31, 2023	7,432,549	$	10.78	4.8	$	32,193

For the three months ended May 31, 2023 and 2022, the Company recognized $2,215 and $2,692 in compensation expense related to stock options, respectively. As of May 31, 2023, approximately $10,768 of unrecognized compensation expense related to our stock options is expected to be recognized over a weighted average period of 1.6 years. The aggregate intrinsic value of stock options exercised was $3,132 and $349 for the three months ended May 31, 2023 and 2022, respectively.

(b)PlushCare Stock Options

In connection with the acquisition of PlushCare, Inc. (PlushCare) on June 9, 2021, the Company assumed all stock options that were awarded under the PlushCare Plan and that were outstanding as of the closing of the acquisition. These options were converted into options to purchase the Company’s common stock at a ratio determined in the purchase agreement. The Company has no intent to grant any further options under the PlushCare Plan beyond the options granted and outstanding as of the Company's acquisition of PlushCare. The following is a summary of stock option activity under the PlushCare Plan:


		Weighted		Weighted
		average		remaining	Aggregate
		exercise		contractual life	intrinsic
	Stock Options	price		in years	value
Balance, February 28, 2023	153,608	$	1.63
Exercised	(48,680)	$	2.12
Forfeited	(1,505)	$	2.88
Balance, May 31, 2023	103,423	$	1.38	6.2	$	1,102

For the three months ended May 31, 2023 and 2022, the Company recognized $1,340 and $1,244, respectively, in compensation expense related to PlushCare stock options. As of May 31, 2023, approximately $773 of unrecognized compensation expense related to PlushCare stock options is expected to be recognized over a weighted average period of 1.1 years. The aggregate intrinsic value of stock options exercised was $535 and $261 for the three months ended May 31, 2023 and 2022, respectively.

Time-based restricted stock units have generally been subject to a vesting period of two to four years. For two-year grants, one-eighth of an award generally vests quarterly for the first year after the grant with the remainder vesting ratably on a monthly basis over the subsequent year. For three-year grants, one-third of an award generally vests one year after grant with the remainder vesting ratably on a monthly basis over the subsequent two years. For four-year grants, one quarter of an award generally vests one year after grant and the remainder vests ratably on a monthly basis over the subsequent three years.

The following is a summary of activity for the three months ended May 31, 2023:


		Restricted Stock Units
Balance, February 28, 2023		4,266,990
Granted		150,564
Vested		(600,227)
Forfeited		(475,472)
Balance, May 31, 2023		3,341,855

For the three months ended May 31, 2023 and 2022, the Company recognized $6,679 and $6,632, respectively, in restricted stock unit compensation expense with $48,288 remaining total unrecognized compensation costs related to these awards as of May 31, 2023. The total unrecognized costs are expected to be recognized over a weighted-average term of 2.2 years. The weighted average grant date fair value of restricted stock units granted during the three months ended May 31, 2023 was $14.08.

In connection with the PlushCare acquisition, the agreement provided for the issuance of time-based restricted stock units for 64,694 shares of common stock to existing PlushCare shareholders upon the achievement of the contingent

consideration revenue milestones. During the second quarter of fiscal 2023, 57,124 of these restricted stock units were issued. These restricted stock units are included in the table above.

(d) Performance Stock Units

During fiscal 2023, performance-based restricted stock units (PSUs) were approved to be issued as part of the Company’s fiscal 2023 corporate bonus program. In association with the Company’s fiscal 2023 corporate bonus payout, 747,687 fully-vested PSUs were issued in May 2023. During the three months ended May 31, 2023 and 2022, the Company recorded $0 and $1,312, respectively, in stock-based compensation expense related to these performance-based restricted stock units.

(e) Employee Stock Purchase Plan

In July 2020, the Board of Directors adopted the Company’s 2020 Employee Stock Purchase Plan (the ESPP), which became effective immediately prior to the effectiveness of the registration statement for the Company’s initial public offering (IPO). The total shares of common stock initially reserved under the ESPP was limited to 1,100,000 shares. On March 1, 2023, there was an automatic annual increase, which increased the total available common shares to 3,058,760.

Under the ESPP, eligible employees can purchase the Company’s common stock through accumulated payroll deductions at such times as are established by the compensation committee. Eligible employees may purchase the Company’s common stock at 85% of the lower of the fair market value of the Company’s common stock on the first day of the offering period or on the last day of the offering period. Eligible employees may contribute up to 15% of their eligible compensation. Under the ESPP, a participant may not accrue rights to purchase more than $25,000 worth of the Company’s common stock for each calendar year in which such right is outstanding.

Employees who elect to participate in the ESPP commence payroll withholdings that accumulate through the end of the respective period. In accordance with the guidance in ASC 718-50 – Compensation – Stock Compensation, the ability to purchase shares of the Company’s common stock for 85% of the lower of the price on the first day of the offering period or the last day of the offering period (i.e. the purchase date) represents an option and, therefore, the ESPP is a compensatory plan under this guidance. Accordingly, share-based compensation expense is determined based on the option’s grant-date fair value as estimated by applying the Black Scholes option-pricing model and is recognized over the withholding period. The Company recognized share-based compensation expense of $468 and $411 during the three months ended May 31, 2023 and 2022, respectively, related to the ESPP.

During the three months ended May 31, 2023 and 2022, employees who elected to participate in the ESPP purchased a total of 280,162 and 343,310 shares of common stock, respectively, resulting in cash proceeds to the Company of $1,992 and $1,788, respectively. ESPP employee payroll contributions accrued as of May 31, 2023 and February 28, 2022 totaled $191 and $1,384, respectively, and are included within accrued compensation in the consolidated balance sheet. Cash withheld via employee payroll deductions is presented in financing activities as proceeds from stock purchases under employee stock purchase plan on the consolidated statement of cash flows.

(f) Other

In connection with the acquisition of Innovation Specialists, LLC d/b/a 2nd.MD (2nd.MD) on March 3, 2021, several 2nd.MD individuals entered into agreements with the Company whereby these individuals are eligible to receive an aggregate of 608,332 shares that required continued employment with the Company. These shares are excluded from the above restricted stock units table. Included in the 608,332 shares are 281,531 shares that were also contingent upon the achievement of the contingent consideration milestones. These shares are considered compensatory in the post business combination periods due to the additional service requirement for these individuals. These shares vested 50% on the first anniversary of the acquisition date and 50% on the second anniversary of acquisition date. The Company recognized stock-based compensation expense of $3,358 during the three months ended May 31, 2022.

In connection with the acquisition of PlushCare, certain PlushCare individuals entered into agreements with the Company whereby these individuals are eligible to receive an aggregate of 806,161 shares that require continued employment with the Company. These shares are excluded from the above restricted stock units table. These shares are considered compensatory in the post business combination periods due to the additional service requirement for these individuals. One third of these shares vested on the first anniversary of the acquisition date, one third vested on the second anniversary of acquisition date, and one third will vest on the third anniversary of the acquisition date. As of May 31, 2023, there were 537,401 unvested shares outstanding with a grant date fair value of $52.52 per share. The Company recognized stock-based compensation expense of $3,557 during the three months ended May 31, 2023 and 2022. The unamortized compensation expense of $14,461 will be recognized over a weighted average remaining period of 1.0 years.

Revenue (Tables)

3 Months Ended

May 31, 2023

Revenue

Disaggregation of revenue


	Three Months Ended May 31,
	2023		2022
Access fees	$	66,597	$	68,125
Utilization-based fees		26,629		17,403
Total	$	93,226	$	85,528

Revenue expected to be recognized from remaining performance obligations


Fiscal year ending February 28(29),
Remainder of 2024	$	127,482
2025		73,792
2026		21,510
2027		2,126
2028		29
Total	$	224,939

Commitments and Contingencies - Legal Proceedings (Details) $ in Thousands	3 Months Ended
	May 31, 2023 USD ($)
Commitments and Contingencies.
Accruals related to legal matters	$ 3,500
Remaining amount	$ 1,244

Fair Value Measurements (Tables)

3 Months Ended

May 31, 2023

Fair Value Measurements

Schedule of fair value of financial assets and liabilities


	May 31, 2023
	Level 1		Level 2		Level 3		Fair Value
Assets
Cash equivalents:
Money market funds	$	121,054	$	—	$	—	$	121,054


	February 28, 2023
	Level 1		Level 2		Level 3		Fair Value
Assets
Cash equivalents:
Money market funds	$	99,861	$	—	$	—	$	99,861
United States treasury bills	$	39,995	$	—	$	—	$	39,995

Revenue

3 Months Ended

May 31, 2023

Revenue

Revenue

(3) Revenue

The following table presents the Company’s revenues disaggregated by revenue source:


	Three Months Ended May 31,
	2023		2022
Access fees	$	66,597	$	68,125
Utilization-based fees		26,629		17,403
Total	$	93,226	$	85,528

As of May 31, 2023, revenue is expected to be recognized from remaining performance obligations as follows:


Fiscal year ending February 28(29),
Remainder of 2024	$	127,482
2025		73,792
2026		21,510
2027		2,126
2028		29
Total	$	224,939

The expected revenue includes variable fee estimates for the non-cancellable term of the Company’s contracts. The expected revenue does not include amounts of variable consideration that are constrained.

Significant changes to the contract liability balances during the three months ended May 31, 2023 and 2022 were the result of revenue recognized and net cash received. Significant changes in the deferred revenue balances during the three months ended May 31, 2023 and 2022 were the result of recognized revenue of $24,746 and $24,447, respectively, that were previously included in deferred revenue. In addition, significant changes to the contract asset balances during the three months ended May 31, 2023 and 2022 were the result of revenue recognized as well as transfers to accounts receivable. Contract assets relating to unbilled revenue are transferred to accounts receivable when the right to consideration becomes unconditional.

Revenue related to performance obligations satisfied in prior periods that was recognized during the three months ended May 31, 2023 and 2022 was $1,433 and $1,829, respectively. These amounts relate to the ratable recognition through the minimum contract term of performance obligations satisfied in prior periods related to the Company’s achievement of healthcare cost savings.

Cost to obtain and fulfill a contract

The Company capitalizes sales commissions paid to internal sales personnel that are both incremental to the acquisition of customer contracts and recoverable. These costs are recorded as deferred contract acquisition costs in the accompanying consolidated balance sheets. The Company capitalized commission costs of $642 and $838 for the three months ended May 31, 2023 and 2022, respectively. The Company defers costs based on its sales compensation plans only if the commissions are incremental and would not have occurred absent the customer contract. Payments to direct sales personnel are typically made upon signature of the contract. The Company does not pay commissions on contract renewals.

Deferred commissions paid on the initial acquisition of a contract are amortized ratably over an estimated period of benefit of five years, which is the estimated customer life. The Company determined the period of amortization for deferred commissions by taking into consideration current customer contract terms, historical customer retention, and other factors. Amortization is included in sales and marketing expenses in the accompanying consolidated statements of operations and totaled $838 and $592 for the three months ended May 31, 2023 and 2022, respectively. The Company

periodically reviews deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the estimated period of benefit. There were no impairment losses recorded during the periods presented.

For certain customer contracts, the Company may incur direct and incremental costs related to customer set-up and implementation. The Company recorded deferred implementation costs of $107 and $86 for the three months ended May 31, 2023 and 2022, respectively. These implementation costs are deferred and amortized over the expected useful life of the Company’s customers, which is five years. Amortization is included in cost of revenues in the Company’s consolidated statements of operations and totaled $278 and $225 for the three months ended May 31, 2023 and 2022, respectively.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI https://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 10
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130551-203045

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130556-203045

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 9
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130550-203045

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (e)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (d)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 15
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130558-203045

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (c)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

+ Details

Stock-based Compensation - Restricted Stock Units (Details) - USD ($) $ / shares in Units, $ in Thousands			3 Months Ended
	Jun. 09, 2021	Mar. 03, 2021	May 31, 2023	Aug. 31, 2022	May 31, 2022
Summary of activity
Compensation expense			$ 14,278		$ 19,389
Time-based restricted stock units
Summary of activity
Beginning Balance			4,266,990
Granted			150,564
Vested			(600,227)
Forfeited			(475,472)
Ending Balance			3,341,855
Compensation expense			$ 6,679		6,632
Remaining of total unrecognized compensation costs			$ 48,288
Weighted average period			2 years 2 months 12 days
Weighted average grant date fair value			$ 14.08
Time-based restricted stock units \| Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			2 years
Time-based restricted stock units \| Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			4 years
Time-based restricted stock units \| PlushCare
Summary of activity
Number of shares issued in connection with the acquisition to the existing shareholders	64,694
Non option equity instruments				57,124
Individuals Agreements With Company \| Acquisition of 2nd.MD
Summary of activity
Compensation expense					3,358
Shares Eligible To Be Received By Individuals Of Company With Continued Employment		608,332
Additional Shares Eligible To Be Received By Individuals Of Company, Upon Achievement Of Contingent Consideration Milestones		281,531
Individuals Agreements With Company \| PlushCare
Summary of activity
Ending Balance			537,401
Compensation expense			$ 3,557		$ 3,557
Unamortized compensation expense			$ 14,461
Unamortized Compensation Expense, Weighted Average Remaining Period			1 year
Weighted average grant date fair value			$ 52.52
Shares Eligible To Be Received By Individuals Of Company With Continued Employment	806,161
Individuals Agreements With Company \| Tranche One \| Acquisition of 2nd.MD
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage		50.00%
Individuals Agreements With Company \| Tranche One \| PlushCare
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	33.33%
Individuals Agreements With Company \| Tranche Two \| Acquisition of 2nd.MD
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage		50.00%
Individuals Agreements With Company \| Tranche Two \| PlushCare
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	33.33%
Individuals Agreements With Company \| Tranche Three \| PlushCare
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	33.33%
Time based restricted stock units granted for two years \| Tranche One
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			2 years
Vesting percentage			12.50%
Time based restricted stock units granted for three years \| Tranche Two
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			3 years
Vesting percentage			33.33%
Time based restricted stock units granted for three years \| Tranche Two \| Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			1 year
Time based restricted stock units granted for three years \| Tranche Two \| Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			2 years
Time based restricted stock units granted for four years \| Tranche Three
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			4 years
Vesting percentage			25.00%
Time based restricted stock units granted for four years \| Tranche Three \| Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			1 year
Time based restricted stock units granted for four years \| Tranche Three \| Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			3 years

Goodwill and Intangible Assets - Intangible assets (Details) - USD ($) $ in Thousands	3 Months Ended
	May 31, 2023	May 31, 2022
Goodwill and Intangible Assets
Gross Value	$ 283,576
Accumulated Amortization	(90,747)
Net Carrying Value	192,829
Amortization expense for intangible assets	10,372	$ 10,372
Customer relationships
Goodwill and Intangible Assets
Gross Value	124,050
Accumulated Amortization	(17,336)
Net Carrying Value	$ 106,714
Weighted Average Remaining Useful Life	17 years 8 months 12 days
Customer relationships \| Minimum
Goodwill and Intangible Assets
Useful Life	2 years
Customer relationships \| Maximum
Goodwill and Intangible Assets
Useful Life	20 years
Technology
Goodwill and Intangible Assets
Gross Value	$ 111,526
Accumulated Amortization	(50,811)
Net Carrying Value	$ 60,715
Weighted Average Remaining Useful Life	2 years 8 months 12 days
Technology \| Minimum
Goodwill and Intangible Assets
Useful Life	2 years
Technology \| Maximum
Goodwill and Intangible Assets
Useful Life	5 years
Supplier-based network
Goodwill and Intangible Assets
Useful Life	5 years
Gross Value	$ 25,000
Accumulated Amortization	(11,250)
Net Carrying Value	$ 13,750
Weighted Average Remaining Useful Life	2 years 9 months 18 days
Trade name
Goodwill and Intangible Assets
Useful Life	10 years
Gross Value	$ 13,700
Accumulated Amortization	(2,825)
Net Carrying Value	$ 10,875
Weighted Average Remaining Useful Life	7 years 10 months 24 days
Non-compete agreement
Goodwill and Intangible Assets
Gross Value	$ 9,300
Accumulated Amortization	(8,525)
Net Carrying Value	$ 775
Weighted Average Remaining Useful Life	9 months 18 days
Non-compete agreement \| Minimum
Goodwill and Intangible Assets
Useful Life	2 years
Non-compete agreement \| Maximum
Goodwill and Intangible Assets
Useful Life	3 years

Restructuring

3 Months Ended

May 31, 2023

Restructuring

Restructuring

(11) Restructuring

During the year ended February 28, 2023, the Company initiated certain measures to accelerate the integration of recent acquisitions through strategic reductions in the Company’s workforce, including increasing hiring in lower cost regions to support its growth, scale, and profitability objectives. As a result, severance expense was recorded for the impacted employees. The Company continued to incur costs associated with these measures during the three months ended May 31, 2023.

The following table summarizes the amount of severance costs included in the consolidated statements of operations:


		Three Months Ended May 31,
		2023
Cost of revenue, excluding depreciation and amortization	$	634
Product and technology		221
Sales and marketing		—
General and administrative		247
Total severance costs	$	1,102

The following is a summary of the changes in the severance liabilities related to the workforce reductions. These liabilities are included within accrued compensation on the consolidated balance sheets:


Balance as of February 28, 2023	$	3,996
Severance costs		1,102
Cash payments		(2,674)
Balance as of May 31, 2023	$	2,424

The Company expects remaining severance-related liabilities to be paid out in cash during fiscal 2024. Additional expenses associated with these restructuring activities are not expected to be material.

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	May 31, 2023	May 31, 2022
Cash flows from operating activities:
Net loss	$ (38,409)	$ (342,822)
Adjustments to reconcile net loss to net cash used in Operating activities:
Goodwill impairment		299,705
Depreciation and amortization expense	11,640	11,576
Amortization of deferred contract acquisition costs	1,116	817
Deferred income taxes		(3,999)
Noncash interest expense	440	419
Stock-based compensation expense	14,278	19,389
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable and unbilled revenue	396	2,323
Accounts payable and accrued expenses	(1,690)	(1,258)
Deferred contract acquisition costs	(891)	(924)
Deferred revenue and due to customers	8,052	862
Accrued compensation	(11,718)	(15,598)
Other liabilities	(1,131)	(240)
Other assets	(1,370)	(711)
Net cash used in operating activities	(19,287)	(30,461)
Cash flows from investing activities:
Capitalized software development costs	(2,500)	(766)
Purchases of property and equipment	(877)	(506)
Net cash used in investing activities	(3,377)	(1,272)
Cash flows from financing activities:
Proceeds from stock option exercises	2,459	358
Proceeds from employee stock purchase plan	1,992	1,150
Net cash provided by financing activities	4,451	1,508
Net decrease in cash and cash equivalents	(18,213)	(30,225)
Cash and cash equivalents, beginning of period	321,083	365,853
Cash and cash equivalents, end of period	302,870	335,628
Supplemental cash flow information:
Interest paid	769	769
Fixed assets included in accounts payable	506	228
Other receivable related to stock option exercises	84	5
Income taxes paid	$ 53	$ 22

Net Loss Per Share Attributable to Common Stockholders - Antidilutive (Details) - shares	3 Months Ended
	May 31, 2023	May 31, 2022
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of diluted net loss per share	17,142,867	17,679,041
Stock Option
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of diluted net loss per share	7,535,972	8,238,444
Unvested restricted stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of diluted net loss per share	3,341,855	2,579,247
Shares issued to 2nd.MD employees and subject to vesting
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of diluted net loss per share		274,224
Shares issued to PlushCare employees and subject to vesting
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of diluted net loss per share	537,401	831,398
Indemnity shares held in escrow in connection with PlushCare acquisition
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of diluted net loss per share	27,342	27,342
Shares to be issued to HealthReveal shareholders upon expiration of indemnification
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of diluted net loss per share		28,089
Convertible Senior Notes
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of diluted net loss per share	5,700,297	5,700,297

Revenue - Cost to Obtain and Fulfill a Contract (Details) - USD ($) $ in Thousands	3 Months Ended
	May 31, 2023	May 31, 2022
Capitalized Contract Cost [Line Items]
Deferred amortization term	5 years
Impairment loss on deferred commission	$ 0	$ 0
Selling And Marketing Expense [Member]
Capitalized Contract Cost [Line Items]
Amortization of contract cost	838	592
Sales commission
Capitalized Contract Cost [Line Items]
Capitalized cost	$ 642	838
Customer set up cost
Capitalized Contract Cost [Line Items]
Deferred amortization term	5 years
Amortization of contract cost	$ 278	225
Deferred implementation costs
Capitalized Contract Cost [Line Items]
Amortization of contract cost	$ 107	$ 86

Background

3 Months Ended

May 31, 2023

Background

Background

(1) Background

Accolade, Inc. (Accolade or together with its subsidiaries, the Company) provides an advocacy-led, nationwide care delivery service comprised of personalized, technology-enabled solutions that help people better understand, navigate, and utilize the healthcare system and their workplace benefits. The Company’s customers are primarily employers that deploy Accolade solutions in order to provide employees and their families (the members) a single place to turn for their health, healthcare, and benefits needs. The Company also offers expert medical opinion services to commercial customers (which includes employers, health plans, and governmental entities) and virtual primary care both directly to consumers and to commercial customers. These services are designed to improve the member experience, encourage better healthcare outcomes, and lower costs for both members and customers. Accolade is co-headquartered in Seattle, Washington and Plymouth Meeting, Pennsylvania.

Goodwill and Intangible Assets

3 Months Ended

May 31, 2023

Goodwill and Intangible Assets

Goodwill and Intangible Assets

(4) Goodwill and Intangible Assets

The Company’s goodwill balance at May 31, 2023 and February 28, 2023 was $278,191. As a result of sustained decreases in the Company’s stock price and market capitalization, the Company conducted an impairment test of its goodwill and intangible assets as of May 31, 2022 resulting in an impairment loss of $299,705. Goodwill at May 31, 2023 and February 28, 2023 is net of this impairment loss.

Annually, and upon the identification of a triggering event, management is required to perform an evaluation of the recoverability of goodwill. Triggering events potentially warranting an interim goodwill impairment test include, among other factors, declines in historical or projected revenue, operating income or cash flows, and sustained declines in the Company’s stock price or market capitalization, considered both in absolute terms and relative to peers. While management cannot predict if or when additional future goodwill impairments may occur, additional goodwill impairments could have material adverse effects on the Company’s operating income, net assets, and/or the Company’s cost of, or access to, capital.

Intangible assets consisted of the following:


		As of May 31, 2023
	Useful Life	Gross Value		Accumulated Amortization		Net Carrying Value		Weighted Average Remaining Useful Life (Years)
Customer relationships	2 to 20 years	$	124,050	$	(17,336)	$	106,714	17.7
Technology	2 to 5 years		111,526		(50,811)		60,715	2.7
Supplier-based network	5 years		25,000		(11,250)		13,750	2.8
Trade name	10 years		13,700		(2,825)		10,875	7.9
Non-compete agreement	2 to 3 years		9,300		(8,525)		775	0.8
		$	283,576	$	(90,747)	$	192,829

Amortization expense for intangible assets was $10,372 during the three months ended May 31, 2023 and 2022, respectively.

Revenue - Revenue and Deferred Revenue Narratives (Details) - USD ($) $ in Thousands	3 Months Ended
	May 31, 2023	May 31, 2022
Revenue
Contract with customer liability revenue recognized	$ 24,746	$ 24,447
Revenue related to performance obligations satisfied in prior periods	$ 1,433	$ 1,829

Condensed Consolidated Statements of Stockholders Equity (Deficit) - USD ($) $ in Thousands	Common stock	Additional paid-in capital	Accumulated deficit	Total
Balance at Feb. 28, 2022	$ 7	$ 1,350,431	$ (494,644)	$ 855,794
Balance (shares) at Feb. 28, 2022	67,098,477
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Settlement of acquisition-related contingent consideration (shares)	1,939,853
Exercise of stock options and vesting of restricted stock units		358		358
Exercise of stock options and vesting of restricted stock units (shares)	228,701
Issuance of common stock in connection with the employee stock purchase plan		1,788		1,788
Issuance of common stock in connection with the employee stock purchase plan (shares)	343,310
Stock-based compensation expense		19,389		19,389
Net loss			(342,822)	(342,822)
Balance at May. 31, 2022	$ 7	1,371,966	(837,466)	534,507
Balance (shares) at May. 31, 2022	69,610,341
Balance at Feb. 28, 2023	$ 7	1,428,073	(954,294)	473,786
Balance (shares) at Feb. 28, 2023	73,089,075
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Exercise of stock options and vesting of restricted stock units	$ 1	2,530		2,531
Exercise of stock options and vesting of restricted stock units (shares)	1,895,163
Issuance of common stock in connection with the employee stock purchase plan		1,992		1,992
Issuance of common stock in connection with the employee stock purchase plan (shares)	280,162
Stock-based compensation expense		14,278		14,278
Net loss			(38,409)	(38,409)
Balance at May. 31, 2023	$ 8	$ 1,446,873	$ (992,703)	$ 454,178
Balance (shares) at May. 31, 2023	75,264,400

Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	May 31, 2023	Jun. 23, 2023
Document and Entity Information [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	May 31, 2023
Document Transition Report	false
Entity File Number	001-39348
Entity Registrant Name	ACCOLADE, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	01-0969591
Entity Address, Address Line One	1201 Third Avenue
Entity Address, Address Line Two	Suite 1700
Entity Address, City or Town	Seattle
Entity Address State Or Province	WA
Entity Address, Postal Zip Code	98101
City Area Code	206
Local Phone Number	926-8100
Title of 12(b) Security	Common Stock, $0.0001 par value per share
Trading Symbol	ACCD
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		75,631,027
Entity Central Index Key	0001481646
Current Fiscal Year End Date	--02-29
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q1
Amendment Flag	false

Basis of Presentation and Summary of Significant Accounting Policies (Policies)

3 Months Ended

May 31, 2023

Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

(a) Basis of Presentation and Principles of Consolidation

Accolade’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and include the Company’s accounts and those of the Company’s wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The Company has various administrative service agreements (ASA) with professional medical corporations established in California, Illinois, Wyoming, and New Jersey (PC). The PCs employ or contract with medical providers who provide services via the Company’s technology platform. The ASAs are evergreen and are terminable by the parties for breach or bankruptcy. Through the ASAs, the Company provides non-clinical administrative services to the PCs and manages the economic activities that most significantly affect PCs. The PCs retain control over the provision of medical services and the PC’s clinical personnel. The PCs are variable interest entities (VIE) to the Company.

Unaudited Interim Financial Statements

(b) Unaudited Interim Financial Statements

The accompanying condensed consolidated financial statements and the related footnote disclosures are unaudited. The unaudited condensed consolidated interim financial statements have been prepared on the same basis as the annual audited consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s interim condensed consolidated financial position as of May 31, 2023, the results of its operations for the three months ended May 31, 2023 and 2022, and its cash flows for the three months ended May 31, 2023 and 2022. The results for the three months ended May 31, 2023 are not necessarily indicative of results to be expected for the year ending February 29, 2024, any other interim periods, or any future year or period. The Company’s management believes that the disclosures are adequate to make the information presented not misleading when read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended February 28, 2023.

Capitalized Internal-Use Software Costs

Costs related to software acquired, developed, or modified solely to meet the Company’s internal requirements, including tools that enable the Company’s employees to interact with members and their providers, with no substantive plans to market such software at the time of development, are capitalized. Costs incurred during the preliminary planning

and evaluation stage of the project and during the post-implementation operational stage are expensed as incurred. Costs related to minor upgrades, minor enhancements, and maintenance activities are expensed as incurred. Costs incurred during the application development stage of the project are capitalized. Internal-use software is included in property and equipment and is amortized on a straight-line basis over 3 years.

For the three months ended May 31, 2023 and 2022, the Company capitalized $2,410 and $766, respectively, for internal-use software. Amortization expense related to capitalized internal-use software during the three months ended May 31, 2023 and 2022 was $346 and $290, respectively.

Impairment of Long-Lived Assets

(d) Impairment of Long-Lived Assets

The Company reviews long-lived assets, such as property and equipment and finite-lived intangibles, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, then an impairment charge is recognized for the amount by which the carrying value of the asset exceeds the fair value of the asset. There were no long-lived asset impairment charges recorded during the three months ended May 31, 2023 and 2022.

Intangible Assets

(e) Intangible Assets

The Company has acquired intangible assets through various acquisitions. Intangible assets are recorded at fair value on the date of acquisition and are subject to amortization over the estimated useful lives of each asset. Estimates of fair value and useful lives are based on historical factors, current circumstances, and the experience and judgment of management. Estimates and assumptions used to value intangible assets are evaluated by management on an ongoing basis.

Goodwill

(f) Goodwill

Goodwill is the excess of the cost of an acquired entity over the net amounts assigned to tangible and intangible assets acquired and liabilities assumed. Goodwill is not amortized, but is subject to evaluations of its recoverability annually and upon the identification of a triggering event. The Company has a single reporting unit and all goodwill relates to that reporting unit.

The Company performs an impairment analysis of goodwill on an annual basis in the fourth quarter of each fiscal year or more frequently if changes in circumstances or the occurrence of events suggest that an impairment exists. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded. A goodwill impairment loss was recorded during the three months ended May 31, 2022. See Note 5 for further information.

Revenue and Deferred Revenue

(g) Revenue and Deferred Revenue

Revenue Recognition

The Company generates revenue by providing customers access to its advocacy, expert medical opinion, and virtual primary care services, as well as through utilization of its expert medical opinion and virtual primary care services. Contracts with customers that include expert medical opinion or virtual primary care services may contain either an access fee, a utilization-based fee, or both.

In accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers, the Company recognizes revenue when control of the promised services is transferred to its customers, in an amount that

reflects the consideration to which it expects to be entitled in exchange for those services. Accordingly, the Company determines revenue recognition through the following steps:

●

identification of the contract, or contracts with a customer;

●

identification of the performance obligations in the contract;

●

determination of the transaction price;

●

allocation of the transaction price to the performance obligations in the contracts; and

●

recognition of revenue when, or as, the Company satisfies a performance obligation.

At contract inception, the Company assesses the type of services being provided and assesses the performance obligations in the contract. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. The Company determines the standalone selling prices based on overall pricing objectives, taking into consideration market conditions and other factors, using an expected cost plus margin approach. The Company considered the variable consideration allocation exception in ASC 606 for its advocacy contracts and concluded that such exception for allocating variable consideration to distinct performance obligations or distinct time periods within a series was not met primarily due to variability in its per-member-per-month (PMPM) pricing.

The majority of fees earned by the Company are considered to be variable consideration due to both the uncertainty regarding the total number of members, consultations or visits for which the Company will invoice the customer, as well as the variable PMPM fees that are dependent upon the achievement of performance metrics and/or healthcare cost savings. Performance metrics are measured monthly, quarterly, or annually, and with respect to the achievement of healthcare cost savings targets, annually (typically measured on a calendar year basis). Accordingly, at contract inception and on an ongoing basis, as part of the Company’s estimate of the transaction price, the Company determines whether any such fees should be constrained, and the Company includes the estimated consideration for those fees to the extent that it is probable that a significant reversal of cumulative revenue recognized will not occur (and is therefore considered to be unconstrained). Consideration related to the Company’s achievement of healthcare cost savings is typically constrained until the end of the applicable calendar year due to uncertainty related to factors outside of the Company’s control. Consideration related to other performance metrics is typically not constrained based on the Company’s prior success of achieving such metrics. On an ongoing basis, the Company reassesses its estimates for variable consideration, which can change based upon its assessment of the achievement of performance metrics and healthcare cost savings, as well as the number of members, consultations, or visits.

Access Fees

The Company generates revenue primarily from contracts with customers to access the Company’s advocacy, expert medical opinion, and virtual primary care services. The Company prices access fees primarily using a recurring PMPM fee, typically with a portion of the fee calculated as the product of a fixed rate times the number of members (fixed PMPM fee), plus a variable PMPM fee calculated as the product of a variable rate times the number of members (variable PMPM fee). The fees associated with the variable PMPM fee can be earned through the achievement of performance metrics and/or the realization of healthcare cost savings resulting from use of the Company’s services. Collectively, the fixed PMPM fee and variable PMPM fee are referred to as the total PMPM fee. The Company’s PMPM pricing varies by contract. In certain contracts, the maximum total PMPM fee varies during the contract term (total PMPM rate increases or decreases annually), while in other contracts, the total PMPM maximum fee is consistent over the term, yet the fixed and variable portions vary. For example, in certain contracts the fixed PMPM fee increases on an annual basis while the variable PMPM fee decreases on an annual basis, resulting in the same total PMPM fee throughout the term of the contract.

The PMPM fees for expert medical opinion and virtual primary care services may be tiered based upon the customer’s utilization.

Access to the Company’s services represent a single stand-ready performance obligation. The Company’s contracts include stand-ready services to provide eligible participants with access to the Company’s services and to perform an unspecified quantity of interactions with members during the contract period. Accordingly, the Company’s services are generally viewed as stand-ready performance obligations comprised of a series of distinct daily services that are substantially the same and have the same pattern of transfer. For advocacy services, the Company satisfies these performance obligations over time and recognizes revenue related to its services as the services are provided using a measure of progress based upon the actual number of members eligible for the service during the respective period as a percentage of the estimated members expected to be eligible for the service over the term of the contract. The Company believes a measure of progress based on the number of members is the most appropriate measurement of control of the services being transferred to the customer as the amount of internal resources necessary to stand-ready is directly correlated to the number of members who can use the services.

For the majority of expert medical opinion services, the Company satisfies these performance obligations over time and recognizes revenue in the amount of consideration for which it has the right to invoice using the as-invoiced practical expedient. Access fees also include access to the Company’s virtual primary care services sold directly to consumers on a monthly or yearly fixed fee subscription basis. For these services, the Company satisfies these stand-ready performance obligations over time and recognizes revenue ratably over the subscription period.

Utilization-based fees

The Company also generates revenue when members utilize the expert medical opinion and virtual primary care services that are billed based on utilization. Many, but not all, contracts with customers contain utilization-based fees. For any utilization-based fees, the Company satisfies these performance obligations over time and recognizes revenue in the amount of consideration for which it has the right to invoice using the as-invoiced practical expedient for any consultations or visits sold to commercial customers as well as any non-insured consultations or visits related to virtual primary care services sold directly to consumers. For any consultations or visits that are paid through insurance claims, the Company recognizes revenue as the consultations and visits occur in an amount that reflects the consideration that is expected based upon then-current prices and historical experience from insurance payors.

Deferred Revenue

The Company typically invoices its customers in advance of the services performed on a monthly or quarterly basis, and the amount invoiced typically represents the maximum total PMPM fee for the estimated number of eligible members over the applicable invoice period. The total PMPM fee covers the stand-ready services in the Company’s typical contracts (i.e., the performance obligations are not separately priced or invoiced). The maximum total PMPM fee that is invoiced includes both the fixed PMPM fee and the variable PMPM fee related to the performance metrics and/or the realization of healthcare cost savings that can be achieved during the period. These fees are classified as deferred revenue on the Company’s consolidated balance sheet until such time that revenue can be recognized. In the event the Company fails to satisfy any of the performance metrics and/or realization of healthcare cost savings that are billed in advance, the Company will refund the applicable portion of the fee or offset the amount against a future invoice. These amounts are included in due to customers on the Company’s consolidated balance sheet. The Company’s accounts receivable represent rights to consideration that are unconditional.

Concentration of Credit Risk

(h) Concentration of Credit Risk

Financial instruments that potentially subject the Company to credit risk consist principally of cash and cash equivalents. The Company maintains its cash primarily with domestic financial institutions of high credit quality, which may exceed federal deposit insurance corporation limits. The Company invests its cash equivalents in highly rated money

market funds and U.S. treasury bills with original maturities of three months or less. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents and performs periodic evaluations of the credit standing of such institutions.

Leases

(i) Leases

Whenever the Company enters into a new arrangement, it determines, at the inception date, whether the arrangement is or contains a lease. This determination generally depends on whether the arrangement conveys to the Company the right to control the use of an explicitly or implicitly identified asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to the Company if the Company obtains the right to direct the use of, and obtain substantially all the economic benefits from, the use of the underlying asset.

For each lease, the Company then determines the lease term, the present value of lease payments, and the classification of the lease as either an operating or finance lease. The Company has elected, for all of its leases, to not separate lease and non-lease components. The lease term is the period of the lease not cancellable by the Company, together with periods covered by: (i) renewal options the Company is reasonably certain to exercise, (ii) termination options the Company is reasonably certain not to exercise, and (iii) renewal or termination options that are controlled by the lessor.

The present value of lease payments is calculated based on:

(1)

Lease payments – Lease payments included in the measurement of the lease asset or liability comprise the following: fixed payments (including in-substance fixed payments), and the exercise price of a lessee option to purchase the underlying asset if the lessee is reasonably certain to exercise.

(2)

Discount rate – the discount rate is determined based on information available to the Company upon the commencement of the lease. Lessees are required to use the rate implicit in the lease whenever such rate is readily available; however, as the implicit rate in the Company’s leases is generally not readily determinable, the Company generally uses the incremental borrowing rate it would have to pay to borrow an amount equal to the lease payments, on a collateralized basis, over a timeframe similar to the lease term.

In making the determination of whether a lease is an operating lease or a finance lease, the Company considers the lease term in relation to the economic life of the leased asset, the present value of lease payments in relation to the fair value of the leased asset and certain other factors, including the lessee’s and lessor’s rights, obligations, and economic incentives over the term of the lease.

The Company does not recognize leases with an initial term of 12 months or less on its consolidated balance sheets and recognizes these payments in the consolidated statements of operations on a straight-line basis over the lease term. Certain leases contain variable payments which are based on usage or operating costs, such as utilities and maintenance. These payments are not included in the measurement of the lease liability or corresponding right-of-use asset due to the uncertainty of the payment amount and are recorded as lease expense in the period incurred.

Basis of Presentation and Summary of Significant Accounting Policies

3 Months Ended

May 31, 2023

Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation and Summary of Significant Accounting Policies

(2) Basis of Presentation and Summary of Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited financial statements for the year ended February 28, 2023 appearing in the Company’s Annual Report on Form 10-K and filed with the Securities and Exchange Commission (the SEC) on April 28, 2023.

(a) Basis of Presentation and Principles of Consolidation

(b) Unaudited Interim Financial Statements

(d) Impairment of Long-Lived Assets

(e) Intangible Assets

(f) Goodwill

(g) Revenue and Deferred Revenue

Revenue Recognition

reflects the consideration to which it expects to be entitled in exchange for those services. Accordingly, the Company determines revenue recognition through the following steps:

●

identification of the contract, or contracts with a customer;

●

identification of the performance obligations in the contract;

●

determination of the transaction price;

●

allocation of the transaction price to the performance obligations in the contracts; and

●

recognition of revenue when, or as, the Company satisfies a performance obligation.

Access Fees

The PMPM fees for expert medical opinion and virtual primary care services may be tiered based upon the customer’s utilization.

Utilization-based fees

Deferred Revenue

(h) Concentration of Credit Risk

(i) Leases

The present value of lease payments is calculated based on:

(1)

(2)

Fair Value Measurements (Details) - USD ($) $ in Thousands	May 31, 2023	Feb. 28, 2023
Cash equivalents:
Convertible senior notes	$ 233,795
Money Market Funds
Cash equivalents:
Fair value	121,054	$ 99,861
Money Market Funds \| Level 1
Cash equivalents:
Fair value	$ 121,054	99,861
United States treasury bills
Cash equivalents:
Fair value		39,995
United States treasury bills \| Level 1
Cash equivalents:
Fair value		$ 39,995

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended
	May 31, 2023	May 31, 2022
Condensed Consolidated Statements of Operations
Revenue	$ 93,226	$ 85,528
Cost of revenue, excluding depreciation and amortization	54,203	47,615
Operating expenses:
Product and technology	25,899	26,817
Sales and marketing	25,033	25,614
General and administrative	16,080	20,238
Depreciation and amortization	11,640	11,576
Goodwill impairment		299,705
Total operating expenses	78,652	383,950
Loss from operations	(39,629)	(346,037)
Interest income (expense), net	921	(634)
Other income (expense)	390	(50)
Loss before income taxes	(38,318)	(346,721)
Income tax benefit (expense)	(91)	3,899
Net loss	$ (38,409)	$ (342,822)
Net loss per share, basic	$ (0.52)	$ (4.92)
Net loss per share, diluted	$ (0.52)	$ (4.92)
Weighted-average common shares outstanding, basic	73,179,994	69,738,638
Weighted-average common shares outstanding, diluted	73,179,994	69,738,638

Debt

3 Months Ended

May 31, 2023

Debt

Debt

(6) Debt

(a) Convertible Senior Notes and Capped Call Options

Convertible Senior Notes

The Notes consisted of the following:


	May 31, 2023		February 28, 2023
Principal	$	287,500	$	287,500
Unamortized issuance costs		(4,758)		(5,177)
Net carrying amount	$	282,742	$	282,323

In March 2021, the Company completed a private convertible note offering, pursuant to an Indenture dated as of March 29, 2021 between the Company and U.S. Bank National Association, as trustee (the Indenture), and issued $287,500 of 0.50% Convertible Senior Notes due 2026 (the Notes) that mature in April 2026, unless earlier converted, redeemed or repurchased. The Notes bear interest at a rate of 0.50% per annum, payable semiannually in arrears on April 1 and October 1 of each year, beginning on October 1, 2021 and are convertible into cash, shares of the Company’s common stock or a combination of cash and shares of common stock, at the Company’s election. The Company incurred costs of $8,428 in connection with the Notes and the capped calls, of which $8,368 was allocated to the Notes and recorded as a debt discount and $60 was allocated to the capped call and recorded directly to additional paid-in capital. Net proceeds from the issuance of Notes were $279,132, and the Company used $34,443 of the net proceeds to pay the costs of the capped call transactions described below. For the three months ended May 31, 2023 and 2022, the Company recorded interest expense of $781 and $779, respectively, of which $419 and $417, respectively, was associated with the amortization of the debt discount.

Pursuant to the terms of the Notes, a holder may convert all or any portion of its Notes at its option at any time prior to October 1, 2025 and only under the following circumstances: (1) during any fiscal quarter commencing after the

fiscal quarter ending on August 31, 2021, if the last reported sale price of the Company’s common stock for at least 20 trading days during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per $1 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; (3) if the Company calls such Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date, but only with respect to the Notes called (or deemed called) for redemption; or (4) upon the occurrence of specified corporate events. On or after October 1, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Notes at any time, regardless of the foregoing circumstances.

The initial conversion rate is 19.8088 shares of the Company’s common stock per $1 principal amount of Notes (equivalent to an initial conversion price of approximately $50.48 per share of the Company’s common stock). The conversion rate is subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date, or if the Company delivers a notice of redemption, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Notes in connection with such a corporate event or convert its Notes called (or deemed called) for redemption in connection with such notice of redemption, as the case may be.

The Company may not redeem the Notes prior to April 6, 2024. On or after April 6, 2024, the Company may redeem for cash all or any portion of the Notes (subject to the partial redemption limitation set forth in the Indenture), at its option, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days, including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Notes.

Upon a fundamental change (as defined in the Indenture), holders may, subject to certain exceptions, require the Company to purchase their Notes in whole or in part for cash at a price equal to the principal amount of the Notes to be purchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date (as defined in the Indenture). In addition, upon a Make-Whole Fundamental Change (as defined in the Indenture), the Company will, under certain circumstances, increase the applicable conversion rate for a holder that elects to convert its Notes in connection with such Make-Whole Fundamental Change.

Under the Indenture, the Notes may be accelerated upon the occurrence of certain customary events of default. If certain bankruptcy and insolvency-related events of default with respect to the Company occur, the principal of, and accrued and unpaid interest on, all of the then outstanding Notes shall automatically become due and payable. The Indenture provides that the sole remedy for an event of default relating to certain failures by the Company to comply with reporting covenants, including timely filings, consists exclusively of the right to receive additional interest on the Notes.

As of May 31, 2023, none of the conditions of the Notes to early convert have been met. The Notes are the Company’s senior, unsecured obligations that rank senior in right of payment to the Company’s future indebtedness that is expressly subordinated to the Notes, rank equally in right of payment with the Company’s future senior unsecured indebtedness that is not so subordinated, effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing such indebtedness, and structurally subordinated to all existing and future indebtedness and other liabilities (including trade payables and preferred equity (to the extent the Company is not a holder thereof)) of the Company’s subsidiaries. The Notes contain both affirmative and negative covenants. As of May 31, 2023, the Company was in compliance with all covenants in the Notes.

The Company concluded the Notes are accounted for as debt, with no bifurcation of the embedded conversion feature. Transaction costs were recorded as a direct deduction from the related debt liability in the consolidated balance sheet and are amortized to interest expense using the effective interest method over the term of the Notes. The effective interest rate for the Notes is 1.1%.

Capped Call

Concurrent with the pricing of the Notes, the Company entered into privately negotiated capped call transactions with two of the initial purchasers and/or their respective affiliates and another financial institution (the Option Counterparties). The capped call transactions are expected to offset the potential dilution to Accolade’s common stock as a result of any conversion of Notes, with such offset subject to a cap initially equal to $76.20 (which represented a premium of 100% over the last reported sale price of the Company’s common stock on March 24, 2021). The capped call transactions are separate transactions, entered into by the Company with the Option Counterparties, and are not part of the terms of the Notes.

As the capped call options are both legally detachable and separately exercisable from the Notes, the Company accounts for the capped call options separately from the Notes. The capped call options are indexed to the Company’s own common stock and classified in stockholders’ equity. As such, the premiums paid for the capped call options were included as a net reduction to additional paid-in capital in the consolidated balance sheet.

(b) Revolving Credit Facility

During July 2019, the Company entered into a revolving credit facility (the 2019 Revolver) with a syndicate of two banks. Under the 2019 Revolver, the Company has the capacity to borrow up to $80,000 on a revolving facility. Availability of borrowings on the 2019 Revolver is calculated as a multiple of the Company’s eligible monthly recurring revenues (as defined in the 2019 Revolver). As of May 31, 2023, the Company had outstanding letters of credit to serve as office landlord security deposits in the amount of $1,311, which are secured through the revolving credit facility and reduce our borrowing capacity. The capacity of the revolving credit facility was $70,497 as of May 31, 2023. No amounts are outstanding as of May 31, 2023.

The 2019 Revolver term ends on July 19, 2024. The interest rate on the outstanding borrowings are at the Bloomberg Short-Term Bank Yield Index (BSBY) rate plus 350 basis points or Base Rate (as defined) plus 250 basis points, with the BSBY rate and Base Rate subject to minimum levels. Interest payments are to be made in installments of one, two, or three months as chosen by the Company.

The Company incurred lender and third-party fees when entering into the 2019 Revolver, all of which were deferred at the onset of the facility and have been fully amortized. During the three months ended May 31, 2023 and 2022, the Company recorded interest expense of $51 and $52, respectively, related to the revolving credit facility.

On July 19, 2022, the Company entered into an amendment to the 2019 Revolver which extended the term until July 19, 2024, documented the transition from the LIBOR interest rate index to the BSBY rate, and established new minimum covenant revenue targets. The term will automatically be extended to July 19, 2025 if the Company has at least $200,000 in consolidated net cash as of May 31, 2024.

The 2019 Revolver is collateralized by substantially all of the assets of the Company.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

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-Subparagraph (b)
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Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
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-Section 50
-Paragraph 1I
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-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
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-Subparagraph (i)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

+ Details

Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended
	May 31, 2022	May 31, 2023	Feb. 28, 2023
Goodwill and Intangible Assets
Goodwill		$ 278,191	$ 278,191
Goodwill impairment	$ 299,705

- Definition

Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.

+ References + Details

Goodwill and Intangible Assets (Tables)

3 Months Ended

May 31, 2023

Goodwill and Intangible Assets

Schedule of Intangible assets


		As of May 31, 2023
	Useful Life	Gross Value		Accumulated Amortization		Net Carrying Value		Weighted Average Remaining Useful Life (Years)
Customer relationships	2 to 20 years	$	124,050	$	(17,336)	$	106,714	17.7
Technology	2 to 5 years		111,526		(50,811)		60,715	2.7
Supplier-based network	5 years		25,000		(11,250)		13,750	2.8
Trade name	10 years		13,700		(2,825)		10,875	7.9
Non-compete agreement	2 to 3 years		9,300		(8,525)		775	0.8
		$	283,576	$	(90,747)	$	192,829

Income Taxes

3 Months Ended

May 31, 2023

Income Taxes

Income Taxes

(8) Income Taxes

The provision (benefit) for income taxes consists of provisions for federal, state and foreign income taxes for separate U.S. tax filers and for entities in separate tax jurisdictions. As a result of the Company’s history of net operating losses (NOL), the Company has historically provided for a full valuation allowance against its U.S. deferred tax assets that are not more-likely-than-not to be realized. For the three months ended May 31, 2023 and 2022, the Company recorded income tax provision (benefit) of $91 and $(3,899), respectively, which resulted in effective tax rates of (0.2)% and 1.1%, respectively. The tax benefit for the three months ended May 31, 2022 is primarily related to the reversal of the deferred tax liability associated with the basis difference in goodwill from the 2nd.MD acquisition. The goodwill impairment recorded in the first quarter of fiscal 2023 required the Company to reverse that deferred tax liability during the three months ended May 31, 2022.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 21
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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-Publisher FASB
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Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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-URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-URI https://asc.fasb.org/topic&trid=2144680

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 30
-Section 50
-Paragraph 2
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

+ Details

Basis of Presentation and Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended
	May 31, 2023	May 31, 2022
Impairment of Long Lived Assets
Impairment charges	$ 0	$ 0