Accolade Announces Results for Fiscal Third Quarter 2023

 | Source: Accolade, Inc. Accolade, Inc.

  • Fiscal third quarter 2023 revenue of $90.9 million, a 9% increase compared to fiscal third quarter 2022 revenue of $83.5 million 

SEATTLE, Jan. 09, 2023 (GLOBE NEWSWIRE) -- Accolade, Inc. (NASDAQ: ACCD) today announced financial results for the fiscal third quarter ended November 30, 2022.

“Accolade enters the new year having just concluded one of the strongest selling performances in our company’s history. Notably, the strength in our business is driven by the increasing diversity in our platform across solutions, customer types, distribution channels, and industry sectors. Accolade is leading the conversation with customers because of our proven track record of delivering measurable improvements in health and cost outcomes, and because our solutions are Engineered to Care,” said Rajeev Singh, Accolade Chief Executive Officer.

“Innovations in digital health have created tremendous opportunities to advance the way healthcare is experienced in this country, but digital solutions alone are not enough to reinvent the healthcare journey. Accolade has spent more than 15 years engineering a better healthcare experience, one that predictively engages members to understand their care needs, proactively navigates them to quality care and informed decisions, and addresses barriers including Social Determinants of Health. There is a personal element of the care journey that we can’t fully replace with technology, but that we can make better through engineering. Our customers recognize the vision we share, and have responded by helping us create the foundation for years of growth and innovation.”   

Financial Highlights for Fiscal Third Quarter ended November 30, 2022

 Three Months Ended November 30, % 
 2022    2021    Change(2) 
 (in millions, except percentages)    
GAAP Financial Data:         
Revenue$90.9  $83.5  9 % 
Net Income (loss)$(39.9) $22.5  (277)%
          
Non-GAAP Financial Data(1):         
Adjusted EBITDA$(10.2) $(11.9) 14  %
Adjusted Gross Profit$41.8  $39.2  6  %
Adjusted Gross Margin 45.9%  47.0%    
            

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

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

Steve Barnes, Accolade Chief Financial Officer, commented, “Accolade again delivered against our financial promises on the strength of our diversified business and track record of delivering success for our customers. On the strength of our bookings performance throughout last year, we are pleased to introduce preliminary fiscal year 2024 guidance that reaffirms both our revenue growth and Adjusted EBITDA targets. We are firmly on track and remain committed to delivering positive Adjusted EBITDA and cash flow in fiscal year 2025.”

Financial Outlook

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

For the fiscal fourth quarter ending February 28, 2023, we expect:

  • Revenue between $97 million and $101 million
  • Adjusted EBITDA between $(1) million and $3 million

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

  • Revenue between $361 million and $365 million
  • Adjusted EBITDA between $(36) million and $(40) million

For the fiscal year ending February 29, 2024, we are introducing preliminary revenue and Adjusted EBITDA guidance as follows:

  • Revenue of approximately $410 million
  • Adjusted EBITDA between (5)% to (7)% of revenue

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

Quarterly Conference Call Details 

The company will host a conference call today, January 9, 2023 at 4:30 p.m. E.T. to discuss its financial results.  

To Listen via Telephone: Pre-registration is required by the conference call operator. Please pre-register by clicking here (https://register.vevent.com/register/BIae7d2bb974dc4198bb9154f71b0b1945). Upon registering, you will be emailed a dial-in number, direct passcode and unique PIN. 
  
To Listen via Internet: The conference call can be accessed via a live audio webcast that will be available online at http://ir.accolade.com. 
  
Replay: A replay of the call will be available via webcast for on-demand listening shortly after the completion of the call, at http://ir.accolade.com.

Forward-Looking Statements 

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

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

About Accolade, Inc. 

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

Investor Contact:

Todd Friedman, Investor Relations, IR@accolade.com

Media Contact:

Public Relations, Media@accolade.com

Source: Accolade

Financial Tables

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

 November 30,  February 28, 
 2022 2022
Assets     
Current assets:     
Cash and cash equivalents$325,637  $365,853 
Accounts receivable, net 20,483   21,116 
Unbilled revenue 3,702   9,685 
Current portion of deferred contract acquisition costs 4,075   3,015 
Prepaid and other current assets 12,334   9,468 
Total current assets 366,231   409,137 
Property and equipment, net 13,561   11,797 
Operating lease right-of-use assets 30,936   33,126 
Goodwill 278,191   577,896 
Intangible assets, net 213,574   244,690 
Deferred contract acquisition costs 9,981   7,205 
Other assets 1,317   1,678 
Total assets$913,791  $1,285,529 
Liabilities and stockholders’ equity     
Current liabilities:     
Accounts payable$9,987  $7,837 
Accrued expenses and other current liabilities 11,026   11,000 
Accrued compensation 35,467   39,189 
Due to customers 9,244   16,263 
Current portion of deferred revenue 43,500   30,875 
Current portion of operating lease liabilities 7,392   6,589 
Total current liabilities 116,616   111,753 
Loans payable, net of unamortized issuance costs 281,914   280,666 
Operating lease liabilities 28,849   32,486 
Other noncurrent liabilities 203   4,562 
Deferred revenue 256   268 
Total liabilities 427,838   429,735 
      
Commitments and Contingencies     
Stockholders’ equity     
Common stock par value $0.0001; 500,000,000 shares authorized; 72,390,727 and 67,098,477 shares issued and outstanding at November 30, 2022 and February 28, 2022, respectively 7   7 
Additional paid-in capital 1,409,807   1,350,431 
Accumulated deficit (923,861)  (494,644)
Total stockholders’ equity 485,953   855,794 
Total liabilities and stockholders’ equity$913,791  $1,285,529 
        

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

 Three months ended November 30,  Nine months ended November 30, 
 2022    2021    2022    2021
Revenue$90,946  $83,450  $264,117  $216,265 
Cost of revenue, excluding depreciation and amortization 50,412   45,156   147,857   125,426 
Operating expenses:           
Product and technology 24,254   22,846   77,265   61,297 
Sales and marketing 25,023   24,616   75,573   63,134 
General and administrative 20,037   21,464   61,295   69,636 
Depreciation and amortization 11,602   11,250   34,749   30,967 
Goodwill impairment —   —   299,705   — 
Change in fair value of contingent consideration —   (68,428)  —   (38,282)
Total operating expenses 80,916   11,748   548,587   186,752 
Income (loss) from operations (40,382)  26,546   (432,327)  (95,913)
Interest income (expense), net 386   (743)  (484)  (2,137)
Other income (expense) 201   25   21   (19)
Income (loss) before income taxes (39,795)  25,828   (432,790)  (98,069)
Income tax benefit (expense) (77)  (3,325)  3,573   9,501 
Net income (loss)$(39,872) $22,503  $(429,217) $(88,568)
            
Net income (loss) per share           
Basic$(0.56) $0.34  $(6.07) $(1.41)
Diluted$(0.56) $0.31  $(6.07) $(1.41)
            
Weighted-average common shares outstanding           
Basic 71,228,351   65,418,728   70,755,157   62,684,823 
Diluted 71,228,351   71,490,045   70,755,157   62,684,823 
                

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

 For the three months ended  For the nine months ended
 November 30,  November 30, 
 2022    2021 2022    2021
 (in thousands) (in thousands)
Cost of revenue$1,247  $949  $3,645  $2,331 
Product and technology 5,930   5,303   19,045   13,491 
Sales and marketing 4,513   3,608   12,772   9,035 
General and administrative 6,216   8,517   19,347   20,970 
Total stock‑based compensation$17,906  $18,377  $54,809  $45,827 
                

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

 Nine months ended November 30, 
 2022 2021
Cash flows from operating activities:     
Net loss$(429,217) $(88,568)
Adjustments to reconcile net loss to net cash used in     
Operating activities:     
Goodwill impairment 299,705   — 
Depreciation and amortization expense 34,749   30,967 
Amortization of deferred contract acquisition costs 2,592   1,938 
Change in fair value of contingent consideration —   (38,282)
Deferred income taxes (3,859)  (9,658)
Noncash interest expense 1,251   1,239 
Stock-based compensation expense 54,809   45,827 
Changes in operating assets and liabilities, net of effect of acquisitions:     
Accounts receivable and unbilled revenue 6,616   (5,743)
Accounts payable and accrued expenses 244   (1,881)
Deferred contract acquisition costs (6,428)  (3,304)
Deferred revenue and due to customers 5,596   16,316 
Accrued compensation (3,722)  (4,494)
Other liabilities 2,030   (1,047)
Other assets (2,512)  (3,376)
Net cash used in operating activities (38,146)  (60,066)
Cash flows from investing activities:     
Purchase of marketable securities —   (99,998)
Sale of marketable securities —   99,998 
Capitalized software development costs (2,914)  (619)
Purchases of property and equipment (1,901)  (2,297)
Cash paid for acquisition, net of cash acquired —   (260,165)
Net cash used in investing activities (4,815)  (263,081)
Cash flows from financing activities:     
Proceeds from stock option exercises 1,646   7,042 
Payments of equity issuance costs —   (60)
Payment of debt issuance costs —   (8,368)
Payment for purchase of capped calls —   (34,443)
Proceeds from employee stock purchase plan 2,927   3,574 
Proceeds from borrowings on debt —   287,500 
Payment of contingent consideration for acquisition (1,828)  — 
Net cash provided by financing activities 2,745   255,245 
Net decrease in cash and cash equivalents (40,216)  (67,902)
Cash and cash equivalents, beginning of period 365,853   433,884 
Cash and cash equivalents, end of period$325,637  $365,982 
Supplemental cash flow information:     
Interest paid$1,539  $880 
Fixed assets included in accounts payable$736  $123 
Other receivable related to stock option exercises$—  $521 
Income taxes paid$103  $103 
Common stock issued in connection with acquisitions$—  $455,586 
Replacement awards issued in connection with acquisitions$—  $6,729 
        

Non-GAAP Financial Measures

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

Adjusted Gross Profit and Adjusted Gross Margin

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

Adjusted EBITDA

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

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

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

 For the three months ended  For the nine months ended
 November 30,  November 30, 
 2022    2021 2022    2021
 (in thousands, except percentages) (in thousands, except percentages)
Revenue$90,946  $83,450  $264,117  $216,265 
Less:           
Cost of revenue, excluding depreciation and amortization (50,412)  (45,156)  (147,857)  (125,426)
Gross profit, excluding depreciation and amortization 40,534   38,294   116,260   90,839 
Add:           
Stock‑based compensation, cost of revenue 1,247   949   3,645   2,331 
Severance costs, cost of revenue —   —   114   — 
Adjusted Gross Profit$41,781  $39,243  $120,019  $93,170 
Gross margin, excluding depreciation and amortization 44.6%  45.9%  44.0%  42.0%
Adjusted Gross Margin 45.9%  47.0%  45.4%  43.1%
                

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

 For the three months ended  For the nine months ended
 November 30,  November 30, 
 2022    2021 2022    2021
 (in thousands) (in thousands)
Net income (loss)$(39,872) $22,503  $(429,217) $(88,568)
Adjusted for:           
Interest expense (income), net (386)  743   484   2,137 
Income tax (benefit) expense 77   3,325   (3,573)  (9,501)
Depreciation and amortization 11,602   11,250   34,749   30,967 
Stock‑based compensation 17,906   18,377   54,809   45,827 
Acquisition and integration‑related costs(1) 439   311   439   13,208 
Goodwill impairment —   —   299,705   — 
Change in fair value of contingent consideration —   (68,428)  —   (38,282)
Severance costs(2) 213   —   3,288   — 
Other expense (income) (201)  (25)  (21)  19 
Adjusted EBITDA$(10,222) $(11,944) $(39,337) $(44,193)
                

(1) For the three and nine months ended November 30, 2022, acquisition and integration-related costs represent expenses associated with litigation inherited through the PlushCare acquisition. Refer to Note 12 in our consolidated financial statements for further details. For the three and nine months ended November 30, 2021, acquisition and integration-related costs represent banking, legal, accounting, and consulting fees related to acquisitions.
(2) Severance costs represent expenses associated with workforce realignment actions taken by management.