Welcome, everyone. My name is Stan Berenshteyn. I cover digital health at Wells Fargo. Joining me today is Accolade CFO, Steve Barnes. Welcome. Thank you. Let me kick it over to you. Thanks, Stan, and good morning, everybody. Thanks for being here. I'm gonna start off with a little background on a video that we're gonna show here that I think really demonstrates the power of the Accolade platform. What you're gonna see today here is what we affectionately refer to as a Marjorie video. Our member, Marjorie, who's an employee of our customer, United Airlines, you'll hear from her. She has a need for some mental health support, and so she calls into Accolade, and we get her to a primary care doctor, and that primary care engagement leads to an uncovering of other things that are going on in Marjorie's health life, including a diabetic condition, which allows us to get her very efficiently over to one of our partners. Importantly, she has her own primary care doctor, but she wasn't able to get into an appointment with them, so she went to an Accolade Care doctor. What you'll see is the power of the Navigation and Advocacy platform, which connects members to the services that they need for their health, including ones that are under the Accolade umbrella, as well as through our Trusted Partner Ecosystem, in this case, Virta. I will hit this video. It's just a couple of minutes long, and I think it'll speak thousands of words for you. In 2020, I lost my mom, and about a year later, I was still struggling with that, as anyone does when they lose a mother. I had the privilege of calling Accolade, and I was able to learn from that very first call how assistive they can be. When I called, I was, of course, not in good shape. I was crying and just uncontrollable, and my first experience was the nurse just let me cry. She just let me cry, and it was probably the best thing that I needed because I needed to release and breathe so I could talk. I couldn't talk. When I called the next time, I got the privilege, which is a true privilege to speak with Jessica, as they call the assistant. They're very knowledgeable in what benefits are eligible for you based on your company benefits. I had fallen off my step stool in the garage. I said, "You know, let me call just to make sure that we're not missing anything I should look for." With that fall, we all expected that I would, you know, be okay in a few days, and that didn't happen. I started to get in a significant amount of pain without really knowing why. Called again and spoke with Jessica, who introduced me to another partner that's available, which was PlushCare, to find out, okay, let's look a little further. It was that partnership with getting to PlushCare right away because COVID was still a bit rampant, and it was hard to get doctor's appointments. And so she was able to get me a virtual appointment with PlushCare. So that was the next step. I love the fact that I know I can call and say, "Jessica, I need help with..." And whatever that is, she's going to be able to tell me who's in network, she's going to be able to tell me if I have a copay, and she would even go as far as, "Let me see who can get you in the soonest," if we had to do that. I was also introduced to Virta. Virta is the partner that is looking for reverse diabetes. When I was introduced to Virta on January 25th, I was taking on insulin and nine units. Subsequently, I lost almost 60 pounds. I could describe this partnership and what it's done for me as a blessing and a freedom, and the reason for that is benefits can be so difficult, as they are. But to know that you have all these other options and someone right there to be able to say, "Let me tell you about this particular option," is life-altering. I, I've never lost this much weight before. I can see the end of the road. I know where I'm going, and it is because of the partnership. Awesome. Well, this is a great lead, and I think very helpful to understand what you do. Maybe let's start with your core product, Navigation and Advocacy. What need are you addressing in the market, and what do you think gives you an advantage versus the competitors? Yeah, thanks for that question, Stan. It's a great kickoff, and I think the video sets a great backdrop. You know, the primary customer we serve are commercial companies and large employers that are dealing with a few things. First, ever-increasing healthcare costs. We've all just seen the news from the major consulting houses the last couple of days, calling for 6.5%-7.5%, I think, healthcare cost increases in 2024. Employers are trying to get at that problem, and to do so, they realize that their employees and their families are inside of an incredibly complex healthcare system, and that's where all the spend starts. And so what we've created is a simple, single place to go. Just like Marjorie said, I can go to one place, Accolade, to get help with everything from my benefits, all the way through to healthcare needs that I have, whether it be primary care, specialty care, expert medical opinion, or other point solutions like Virta or other kinds of services that we've integrated. And so, the way we think about it is it's a very human-based service... You need an expert, empathetic nurse to be on the phone with Marjorie when she needs it, all woven together with a Technology platform that takes in data feeds, whether it be from claims or HRIS data or partner data, to create a very clean look for our frontline care teams to know who has the highest need and how we can get to that service efficiently and integrate with the ecosystem. That's a highly differentiated service, to be able to go to one place to help employees navigate, get to a primary care doc, get to a specialty doc for a second opinion or an expert opinion, and get to each of those point solutions efficiently. That drives great ROI for customers, 'cause when you do that, you have this magical outcome of getting people to better health outcomes while also reducing costs and giving those consumers a better experience. That makes sense, and you talked about this a bit, but you've really scaled the business, right? You've gone. When you—I think I paid you, like, 50 clients. You now have over 800 clients. What changes did you have to make? You have a high-touch business that you're servicing these members. What changes did you have to make at the organizational level to ensure that you can scale with a more fragmented customer base? Yeah, absolutely, Stan. You know, three years ago, with 50 or so, 54 customers coming out public just on the Advocacy platform, which was skewed towards very large customers, today, those 800 customers go from companies with 1,000 employees up to a couple hundred thousand employees. The opportunities for scale have been multiple- fold. First of all, there's always a human at the center of the service, but we surround that human with technology. So we leverage data, and we leverage our own internal platform to make those interactions efficient and to stratify the membership, so we can identify who is most in need of the services, so we can leverage our engagement engine, do outreach, do connectivity, meet those members where they are. They may be a member who wants to connect with us digitally over a text, secure text SMS engagement or via phone or both. Leveraging those technologies has been really important. We've also invested heavily in integrating both our own internal capabilities through two important acquisitions that Accolade made over the last couple of years, one being PlushCare and the virtual primary care capability, the other being 2nd.MD for expert medical opinion services, and then connecting with ecosystem partners. All of that's been an investment in technology to create that highly integrated service, and now we're reaching a level of scale where we're seeing the payoff of that as we're driving to an attractive growth rate here in the 20% range, while we're also on the cusp of breaking through to profitability. We're starting to see the operating leverage and the payoff of those investments we've made in technology to enable the service. Great, and I, I do wanna touch on all those products that you just mentioned. Maybe before we get into that, can we just talk about the current sales environment? What are employers looking for right now? Has that changed in recent years? I think there's been a few things that have been highly consistent and others that have changed. The consistency is frustration of employers with this ever-increasing cost of healthcare. Let's call it 2x the rate of GDP growth, that they're seemingly have had very few tools to go after. One of which is the Navigation and Advocacy platform that we provide. We demonstrate a very tangible ROI for customers. It's measured every year by the way we structure our contracts with performance fees, so we have to show up with an ROI that tells that buyer that they're getting their money's worth in terms of ROI. The other thing we've all seen that's somewhat new over the past, call it three to five years, is an incredible inundation of new innovation, which is great. Companies like Virta or Sword going after MSK opportunities or folks with LGBTQ capabilities, all of those are new, great innovations, but customers who run benefits departments tend to have a pretty small team, and they have all of these 10s, 100s, maybe it's over 1,000 companies pitching them. So what Accolade has created is a very efficient way to go out and explore and curate the best of those partners and bring those to our customers after having vetted them for clinical, financial, legal, security capabilities and make it simple for them to procure and then drive engagement across those capabilities as they're needed, which is great for the member in terms of health outcomes, great for the customer, drives more ROI. It's great for the partner because they get distribution, and it's great for Accolade because we can... It fulfills our mission for great health outcomes, and we benefit the business model and financially from that. Those are the big things that employers are asking for: "Help me manage this cost, help me make the system simpler, and help me manage all these point solutions that are coming at me, and help me figure out which ones I should deploy. Okay. You touched on a couple of points that I wanted to dive deeper into. One of them, you're talking about ROI as part of the contracts that you have with clients. If we think about your revenue mix, it's predominantly recurring. Over the past couple of years, we've seen a mix shift towards utilization-based revenue, a little bit away from recurring. What's driving that mix shift? Yeah. So, you're right. We have most of our revenues are recurring, and think of that as per- employee or per- member, per- month fees. Certainly, the Advocacy business is all PEPM-based. Those couple of acquisitions that I mentioned, in primary care and Expert Medical Opinion, have an element of variable revenues associated with visit fees, in the case of the virtual primary care business. And in Expert Medical Opinion, sometimes customers are asking for a case rate fee. So, for every second opinion that we do, they'll pay for that and have an ROI attached to that. Those two elements of our business are growing rapidly, in some cases faster than our overall growth rate at 20%, which is driving some of that utilization-based fee increase. But importantly, there's another part that we are intentionally driving, which is we're bundling these offerings with Advocacy more and more frequently. New deals and existing customers, when their contracts come up or as they see a need, they're asking to bundle in Expert Medical Opinion and primary care with the Navigation engine, because the N avigation engine is essentially a way to engage members. And so when we engage those members, we can identify when they would benefit from these other services, so we can drive that utilization when we have that bundled arrangement. So you're seeing that increase. So we expect that percentage of our revenues to grow over time. We still have very good visibility to our revenues because we know about what those utilization rates look like across the book of business with lots of experience. That makes sense. You also touched on your trusted partner network. Yeah. Now, how important is that to your business? And can you maybe just discuss how do you choose a trusted partner? How does this whole thing happen? Yeah, yeah. The trusted partner element is a really important part of our business, and it's becoming more and more important as each quarter and year goes on, because of this dynamic, that there's so much great innovation out there, but customers have a hard time digesting and figuring out which categories. Where we start is we listen to our customer base, and the consultants who are advising those customers, and it tends to lean towards the highest cost areas. So we have partners in musculoskeletal, for example, and we have a couple of different partners, Sword and Hinge. Certainly, mental health is a big category where we partner both with Headspace and with Lyra. And certainly, you're seeing more and more interest in family planning and centers of excellence, places like that. We vet the marketplace for what we see as best in breed, and the way we define that is best clinical capabilities. So certainly that's where it all starts, best clinical outcomes across those partners. We also vet them for financial viability. Some of these companies are pre, pre-public, they're still private. Customers want to know, is that company gonna be around next year? So we vet it for financial. We also vet them for security and HIPAA compliance, all those things that customers care about, so they can trust Accolade that when we bring that partner to them and say, "Within the category of MSK, here's two partners that we think are great. Both operate a little bit differently, so let's figure out which one would be best for you." And when you choose it, we have a tight integration with that partner already, so we can launch and leverage data both from the customer and the partner to provide what we call closed-loop reporting. So the partner can see who's using the offering so that their clinicians can help that member, and we and the customer can also see that, and our frontline care teams can see it. So they know that this Steve Barnes guy is working with Sword because he has a bad back, so I can reach out to him and make that connection really smooth. And so that's a bit about how we work with them. There's a revenue model that works really well for us and for the partner in the sense that we refer to this as always good utilization. The customers know that they have members who need these services that they just can't get to. That's where Accolade's engagement engine comes into play, identifies the members that have those most needs, and gets them to the partner. In our investor day back in May, my colleague, Kristen Weeks, who runs this program, was on stage with one of our partners. It was actually Virta. Sami is the CEO, and he said, when their partnership or their offering is deployed with Accolade, they see a double-digit percentage increase in utilization with customers, which is saying the Accolade engagement engine is driving members to identify and know that they actually have that service and making that connection. That's really powerful for all parties involved. That's interesting. Yeah, I was gonna follow up on that. You have basically a channel for these partners. Yeah. You're providing them member services or members directly to their services, and you're getting a fee for that referral that they otherwise would... You know, these members would otherwise not get to them. That's right. And, for all of us in healthcare, I think we recognize one thing in common: It's really hard to reach the HR or benefits buyer because of their day-to-day world. They're obviously busy managing their own employee base. As I said, they have all these point solutions coming at them in their own carrier relationships. Having established relationships there really creates a channel opportunity for these companies that, in many cases, are smaller companies. They don't have the investment required to reach there, so this distribution relationships works really well, both to help them get to the customer and to drive utilization of their services, which again, is always good utilization. It's something that's needed and required. We're just helping make that connection. Okay, that makes sense. So you're a, you're a B2B2C company, right? You sell to employers, but you're really offering these services to the employers' employees, right? They're the people that are consuming your services. So a typical problem that digital health companies in your position have is maybe these employees would want to use the service, they just have no idea that it exists. They don't know that they have access to telehealth or- Right ... expert opinion or any of these services. So I guess the first question is: have you found this to be an obstacle to member utilization? And to what extent are you empowered to drive member engagement and knowledge about your services? ... Yeah, it's an important factor. It's, you know, the engagement question or the utilization question is what always comes up whenever you're looking at. This I think, particularly applies to point solution companies who they have great innovation, but it's really hard to get the attention of the member. You know, the core premise of Accolade is when we engage with a customer with our flagship offering called Accolade Plus, we replace very important services that have historically been provided by carriers. We provide all the member services, clinical services, and provider services. So every single interaction with a member now comes through Accolade. The number on the back of your health insurance card, the websites on the back of your card, turn to Accolade, and then we partner with the benefits departments to determine a outreach or engagement program that they support. They want their employees to know about these services, so we run inbound and outbound campaigns, both digitally and voice, for people who choose to engage that way. We have extremely high engagement rates across our book of business. 50%-60% of populations we will engage with. That's extremely high, and we build a trusting relationship with those members. They then are really comfortable coming to us and helping ask questions around benefits, but also around their clinical needs. Again, primary care needs, specialist needs, and some of these other point solution needs. So what we've found is this is actually a core competency of Accolade, and it's why we're leveraging that front-end Navigation Advocacy engine to then get people to these other services that they need. It's really a critical differentiator for Accolade, this engagement issue. It's really where we focused our business since the beginning of the company's founding. Makes sense. And related to this, you mentioned you acquired an Expert Medical Opinion company, second opinion. It seems like a lot of the growth expectations embedded in that is to drive utilization. Now, a lot of the utilization for Expert Medical Opinion is one-off event. Somebody has a major health event, they need a second opinion, and then that customer is not a recurring customer. So how can you drive sustained improvement in utilization in that business? Yeah. Expert Medical Opinion is, it's very similar to the Advocacy business in the sense that we're getting people to health needs that they have, but it's different because it's much lower utilization rates. You see low single-digit% of populations that need this at any given time. It's one of the reasons for the strategic logic, if you will, for the acquisition, is when we were out diligencing this market and talking to our own customer base, what we heard over and over again was they know that their members have a need for these Expert Medical Opinions because the ROI is extremely attractive. They just can't... The awareness problem is exactly what you were just asking about. So we're able to help identify through the stratification of data that we use and the member outreach techniques that we have to drive utilization here for where it's needed. But you're right, it's an ongoing. It's a partnership with the employer. Some employers choose to put an incentive in place, some have a penalty in place. There's lots of different structures, but basically what they're saying to their employees is: If you have a major surgery or you need some very costly procedure that's gonna happen, we really want you to or incentivize you to get a second opinion first, because and often what we find is the clinical direction changes, and sometimes the prescription actually changes when you get to that best-in-class expert who's looking at that case differently. So we're leveraging all those engagement engine capabilities on the Advocacy side, for customers who have just Expert Medical Opinion or who have them bundled with the Navigation service. Great. And let's, let's talk about GLP-1s for a minute. So last quarter, I think you called out incremental demand for your virtual primary care business because of GLP-1s. You obviously also have a trusted partner network that is benefiting from, from demand there. More broadly, how do you think Accolade fits within the GLP-1 narrative? Yeah, the GLP-1s, for sure. We spoke about it on our last earnings call, and I think we're all seeing it. It's a- There's a demand there for these drugs and investigation from consumers on this about how it might work for them. I think Accolade is extremely well- positioned to help here because we're a trusted advisor to members and customers. People call in to Accolade or message in because they're looking for advice, "Well, who, which doctor should I go to?" Et cetera. One of the things that we do that's really important around this GLP-1 initiative or in ever-increasing environment that we're seeing, is it's a highly clinically focused approach that we take. So if you call into Accolade and you, Accolade Care and you get a doctor, they can do a clinical review to ensure that you are right for a GLP-1 prescription and ensure that we engage and stay with that member as we go through the process. So, we're really well positioned. We've certainly seen a lot of activity from this over the last couple of quarters, as we talked about, and it doesn't seem to be going away anytime soon. Okay. And you have, so PlushCare, you have virtual primary care that's directed towards the consumer, and then you also have the enterprise business that's, you know, nascent, but growing. Are you seeing any demand on the GLP-1 side in any particular segment? Is it more on the direct-consumer side? Is it enterprise? Is it both? What's happening there? I'd say it's reflective of the population. You know, we're seeing the kinds of interest across whether we serve a person through a consumer, direct-to-consumer relationship or through the enterprise. There's very significant interest from employees of companies we work with, as there are with standalone consumers. So I'd say that, that reflects kind of broadly across our base. Okay, let's pivot to your government contracts. You have business opportunities with the government. Can you just remind us what contracts with the government you have right now? Yeah. So the government market is a very exciting one for us. You know, today, we serve a population of autistic children of military families through a program called ACD, Autism Care Demonstration. And so we serve that population with an extremely high-touch Navigation Advocacy type of offering that's geared and driven by nurse specialists in autism. That's one of our areas that we're working today. You, you'll remember also, we just concluded a pilot, a three-year pilot, with the Defense Health Agency in an offering called the TRICARE Select Navigator, which was essentially an Accolade Advocacy offering that's geared towards high- acuity, high-cost individuals within the military. And that gave us a great training ground to demonstrate that the Accolade Advocacy offering applies really well to military members and their families. So that should tee us up well for future applications in other parts of the government. The big one that's coming up next is the T-5 contract. That's the name of the carrier contract that is just in the final throes, I believe, of the final protest stage of naming a carrier for the East, which has been named, and the carrier in the West, which was named and is now being protested and should be finalized. In any case, however, that lands sometime in the relatively near future, we think. We have great relationships with all three of those and partnerships with two of them, and we expect there'll be opportunities for Accolade to deliver on the innovation initiatives within those the T-5 definition for this upcoming contract. Any updates on the timing, do you think, of when that starts? Not completely clear, but, our understanding is this is the last protest that's available, and so I think over the coming months, period of months, it should be finalized. I think the big question then would be, when does that contract actually launch? Is it 2025, or is it some other date? I think that's to be determined. Okay. Let's talk about the competitive market a bit. There's been a lot of competitors coming up. It's pretty fragmented. What competitive trends are you seeing right now? Well, first of all, let's start with the demand and the demand environment for sure. You know, this dynamic around ever-increasing healthcare costs and all the proliferation of digital health solutions is driving strong demand in terms of pipeline. And it's also important to note we're at a place now where this category, certainly for Navigation Advocacy, is fairly well established, particularly if you compare it to five, six years ago, when it was more of a missionary sale, explaining what the category is. Today, when a customer is interested or they're guided to be interested by their consultant, there's an RFP process that happens, and we face off against one of at least one of our two direct competitors. And then usually a carrier is involved in the mix, and that's been pretty consistent over the last couple of years. And we win very much our fair share of those head-to-head opportunities. Down below, there is a set of digital-only types of offerings that seek to address Navigation Advocacy. It looks like those engagement rates are lower. You don't see the same levels of ROI. Customers that are really interested in making a dent in their trend line, I think, recognize the importance of carving this service out and going head-to-head. I think the other thing that's happened over the last couple of years for sure is we've seen, you know, pricing remain relatively stable in the sense that this is a human service powered by technology. At some level, you really need to have that nurse, doctor, pharmacist, behavioral health expert, and all those clinical teams, plus the frontline care teams and management benefits, powered by a technology platform. That's great. That service has certain cost structure in order to deliver that service at the level of consumer satisfaction and ROI. We've seen that be quite stable, which I think says a lot about the competitive environment and our track record of providing an ROI on the service. Okay, and let's talk about your growth strategy a bit. So since IPO, you acquired two assets, which we talked about, virtual primary care and an expert opinion business. How do you view your portfolio as it sits today, holistically? Are you comfortable with where it is? What are your thoughts about that? Yeah, I think it's an important question. You know, I think the foundation that we have today serves us extremely well to go after, you know, the vision, the strategy we're talking about today, and we've been laying out over the past year or couple of years since the acquisitions. There's certainly a primary care shortage in the country that we all feel. That was a really important acquisition to integrate for one. Secondly, the Expert Medical O pinion business also benefits from being paired with that. And thirdly, and most importantly, the Navigation Advocacy engine is foundational to driving utilization there. We think those, combined with the capabilities we have available to us through the trusted partner ecosystem, are the foundational elements to get us to the 20% growth rate we've talked about, breaking through to profitability here over the next year and seeing real operational scale from there. That said, that's our main focus. I think we all recognize that there are gonna be interesting assets that come to market over the next couple of years with companies that are really interesting innovations that won't yet get to profitability, and they'll be looking for partners. We'll certainly have our eye on those, but only in a way that's highly accretive towards this program that we're building towards profitability, because of the fact that we recognize this is a highly differentiated position that we have with customers with a real growing need for that customer set. Okay. And you've targeted, I believe your long-term target is to hit $1 billion in revenue. That implies a 20% CAGR. In any given year, do you have a sense of how much of that growth is coming from existing clients versus new clients? We do. We do for sure. You know, we're starting to see over the last couple of years, now that we have other things in the bag, if you will, to provide for customers, being these additional services and trusted partners. We're really starting to see an uptake. You know, it's still single-digit percentages or you know, approaching 10%. I think over time, you'll see that be more like 20%-30% of growth coming just from the customer base. We can sometimes enter a customer with a lower- priced offering to demonstrate the value of Advocacy and then move up to the full Accolade Plus offering, and we're seeing these bundled deals really be more important for customers. Sometimes it's a customer that starts with Advocacy, and then a year later, they're adding and buying up to these other services. So those all add up to saying we'll see more growth come from the customer base. Today, it's small but growing, so you know, that target of 20%-30% over time towards that billion-dollar goal in five years is what we're thinking. Okay. Do you have M&A as part of your growth vision at all, or is that not a priority at the moment? I would say to get to those goals that we've laid out, not required. We'll have our eye on things, but we're incredibly focused on operational execution, getting over, clearing the hurdle to profitability here over the next year and driving profitable growth from there. Okay. Maybe just as a final question, what do you think is the most underappreciated or misunderstood part of your business? I think, the really most important point to make there is that the Navigation and Advocacy capability and member engagement is really highly differentiated in healthcare. You pointed this out earlier. Getting to members who trust that vendor, in the case of Accolade, we're not the insurance company, we're not the employer. We're an independent company hired by the employer to help their members. The ability to leverage that relationship and drive other capabilities that are needed, particularly primary care. We're seeing more and more need for that, as well as these other capabilities. That's the magic that I think we'll start to be able to demonstrate more and more for our customers and for the market to show that that capability is really the competitive moat that Accolade is building, and that started with this foundational investment in Navigation and Advocacy. That's what I think is the most underappreciated part that, as we demonstrate and execute, will become clearer and clearer. Awesome. Well, thank you, everybody, for joining. Thank you, Steve, for speaking with us. Thanks very much, Stan. Appreciate this. Thank you. Thank you.