Good morning, everyone. My name is Jessica Tassan, and I am the healthcare services analyst here at Piper. I'm thrilled to welcome Accolade CEO, Rajeev Singh, and CFO, Steve Barnes, back to the Piper Healthcare Conference. Thank you guys both for being here. Thanks for having us, Jess. Yes. So I wanted to kick off with current events. On 11/16, you all announced the repurchase of $77 million of your 2026 convert for $66 million in cash. Based on 2Q financials, that would leave Accolade with about $226 million in cash and $211 million of the 2026 notes outstanding. What drove this decision, and should we think about the convert, the rest of the convert as kind of your near-term capital allocation priority? Sure. Good morning. So a couple of things. First of all,, we were pleased to take advantage of the fact that the notes were trading at a discount, and we have more than adequate cash to execute on our business plan. So we viewed it as utilizing some excess cash to take advantage of the opportunity there. Certainly managing our balance sheet is always a priority, Jess. I wouldn't say it's a top, top priority. I think, looking at the fact that where our market cap is today relative to our debt, if there's any, shareholders out there or prospective shareholders who might look at that and say, "Hey, that's, that's a significant debt load," we thought, "Let's take advantage of the opportunity." To be clear, though, the debt is out for another two and a half years, almost, till it expires, so we've got, I think, plenty of optionality. Importantly, the business will break through to profitability and free cash flow positive in the very near term here, so the balance sheet's really strong, and, we just want to take advantage of an opportunity to continue to, improve on it. Okay. , so I think to put it in the, in the macro context, this is a signal of our, of our confidence in our execution on the business plan and what's ahead. Yep. So how should we think about, Steve, you kind of alluded to this 2.5 years, but how should we think about the remaining $211 million just in terms of the path and timeline to? So, it'll continue to be sort of at the top of the list of addressing, but plenty of time to look at that, whether we refinance it in part, pay down, pay it down, in part as well. But, you know, to Raj's point, we've got very good confidence in terms of the balance sheet and our capacity to execute on the business plan, and it'll be something that's on our list over the coming year, 18 months or so, as we approach the maturity date. Okay, great. That's very helpful. So I wanted to kind of ask about the competitive landscape, and maybe just for an update on Accolade's value proposition in terms of ROI to employer and payer customers, win rate, and kind of demand, if you could g ive an update on. Well, that's a lot, Jess. There's a whole bunch in that question. The demand environment remains really strong. I think what we're seeing is customers are continuing to want to pull levers that will control healthcare costs. And if you can do that at the same time as dramatically improving the employee experience, well, then you've got something, then you're cooking with gas. The demand environment remains really strong. The competitive landscape really hasn't changed dramatically. I'd call it the usual suspects that are competing in the category. I think the way to think about our competitive differentiation, and that's something that we've been expanding over the years, is this idea that we're solving a problem that the rest of the industry hasn't yet solved, this idea of a physician gap. Today, if you have a primary care physician, anyone in this room has a primary care physician, it'll take you about 26 days to get an appointment with that doctor. If you don't have a primary care physician or you live in an urban or a rural area, it'll take you longer. Our capacity to embed physicians into our care teams, give people access to those physicians, and then actually push that data back to their brick-and-mortar care teams on the ground, gives us an opportunity to do things that no one else in our category does, but more importantly, no one else in the industry is doing, which is providing longitudinal care in the moments that matter to the members that we serve, and today that's, you know, north of 10 million people. Got it. I think that's very helpful. What kind of data are you able to provide prospective customers or existing customers, kind of about the value that provider-enabled navigation is able to deliver? Well, clearly, it starts with ROI, meaning we'll, we make ROI guarantees to our customers that range from, you know, 2-to-1 to, you know, in out years, 3-to-1, driving extraordinary value, meaning above and beyond what we're charging them. They're, they're getting a 2-to-1, 3-to-1 return. We've also got independently validated studies that have been performed by companies like Aon, that look at our customer data on a year-over-year basis across multiple customers, validating those savings. But Jess, if you, like, let's take a, like, a giant step back. United States, just broadly against OECD nations in the around the world, we spend 5% or 6% of total costs on primary care. 94% or so are spent on specialty care and pharmaceuticals. Everyone else in the OECD spends 12, 13, 14% on primary care. And by the way, they outperform us in almost every core disease classification. So our capacity to improve access to care, not to replace the primary care ecosystem that exists on the ground, but instead to partner with it, to get better longitudinal care for people, is sensible. Like, every customer we sit in front of and say, like: "Hey, do you, do you think you're utilizing primary care in a way that's going to drive value for you?" We'll say: "No, we're not doing it well enough. We want a better strategy," and we think by embedding it into advocacy, what we've done is created that better strategy. I think that makes a lot of sense. So health plan partners are becoming a bigger part of the distribution story, which I think makes a lot of sense from an operating leverage perspective. But, can you just talk a little bit about that strategic decision to kind of involve health plans more in the distribution in your distribution strategy? And then also, how do health plan channel partnerships impact kind of ACV revenue and bookings contribution? ,L ove it. We do think health plans, like, at the end of the day, health plans cover 170 million people in the United States who are covered by their employers. They, they start that relationship with a health plan. We don't replace that health plan. No one in our category does. And so finding ways to partner with those plans to add value to what they're delivering to those customers, and to find ways to integrate. Like, from a technology perspective, we have the capacity to integrate with those partners in a way that improves the service they deliver and improves the service that we deliver. And so that's why we do—that's why we partner. We think it's better for our customers when we have that opportunity. And so with Blue Shield of California, with Priority Health, they not only chose to actually partner with our primary care service in terms of delivery to their members, but also choosing to partner with us on the advocacy platform. We'll announce another relationship here in the not-too-distant future. We're waiting for the partner to make the announcement. I thought it was gonna happen right, right now. I wish we could have done it, Jess. I wish we could have done it here, but it's up to them. They've got, they've got some work to do to get the announcement made, but it's another case where, we're gonna have access to their entire customer base. They're gonna deliver advocacy and primary care and expert medical opinion to that customer base, and we think it's a really exciting growth driver for the business and will become an increasing part of the net ARR or annual recurring revenue we deliver every single year. Okay, that's helpful. Any distinctions just from contracts booked through health plan distribution partnerships? Any, like, any kind of key distinctions in terms of ACV, revenue contribution? So the revenue, picking up on Raj's point, we're partnered with health plans to deliver essentially all of our offerings. You know, we have a historical expert medical opinion relationship with national carriers, like United, Optum, and CVS, Aetna, and others. Those tend to be either PEPM or case rate, and those, when we have those with a customer, those are gonna be embedded in our ACV number. For example, we also have arrangements where we're providing primary care services through virtual first programs or otherwise. Those will be in the ACV number as well, at an assumed utilization rate that we're continuing to get more and more experience on, that continues to grow. As we drive more advocacy and VPC and EMO and partner bundled revenues, we're seeing opportunity to drive even further utilization, which is a revenue growth driver and also contributes to the ACV number as well. Okay, got it. So, should we understand it that the initial ACV estimates are potentially conservative with upside from incremental utilization or...? Yes, and so you saw last year, I think this came up at Analyst Day, and you and I have talked about this a little bit, where we booked north of $70 million of ARR, the ACV contribution is a little north of $60 million. The difference there has to do with the timing of launches, but also some conservatism walking into a new contract that may have a utilization-based element associated with primary care or otherwise, and as we get that experience and drive that utilization, that number will increase. Okay, that is my next question, but just firstly, I want to wrap on the health plan kind of distribution piece. Just any new innovation from health plans' endemic navigation offerings that you're seeing for calendar year 2024, or are endemic offerings still kind of just competing on price? I think they're largely continuing to compete on price. Okay, great. So, Steve, to your point, historically, Accolade has attained 95% of revenue under contract. For everyone in the audience, 65%-70% of fees are fixed, 15%-20% are tied to operational PGs, and 10%-15% are tied to savings PGs. In FY 2023, Accolade, $72 million of ARR bookings translated to $61 million of year-end ACV added. What accounts for the delta, right? 84% of bookings ARR converted to ACV, historically, 95%, 95% attainment rate. What explains the difference? Before you go, can I just, if I just jump? Jess, I think one of the most interesting and exciting parts of the business right now for us is that when we acquire a customer, we acquire a customer on the advocacy base, and we drive extraordinary engagement, 70% engagement for those families. We turn that engagement into opportunities to drive incremental utilization of our trusted partners, incremental utilization of our expert medical opinion service, incremental utilization of primary care, all of which accrues to better clinical outcomes and better value for our customers. And the utilization of each of those things goes up on a year-over-year basis. And so, it, it... Our capacity from a tech platform perspective to create that engagement, we call it True Health Action, to create that engagement, create recommendations for members to drive that utilization, like, that's the most exciting part of the future of the business. This idea that the customer, if you think about ACV or sort of average revenue per customer, it grows every single year because we drive incremental utilization. So that first ACV number is oftentimes the first estimate, but that should keep growing over time. Sorry, now I'll let you take it, Steve. You hit it, Raj. I think that the two deltas between gross ARR and ACV number is certainly the part Raj is talking about, and as well as the savings-based element of advocacy contracts. So a gross ARR number is what the 100% maximum value of the advocacy part would be, and then we take a discount for that as you walk through to AC down to ACV. That, in combination with this idea of opportunity to drive utilization further over the course of a contract, is the difference between ACV and ARR. Okay, that makes sense, I think, and, it's helpful. So just the conservatism then relates to savings-based PGs and, conservative expectations around utilization. You got it. Got it. So at the end of FY 2023, Accolade reported $309 million of ACV. Is it fair to assume that that included about $31 million of expected savings-based PG revenue? That's a little on the high end. I'll walk you through that. So remember, ACV is any customer contract on a long-term basis beyond, you know, kind of the consumer-based component we don't have in ACV. Remember that there's expert medical opinion revenue in there in the early parts of enterprise virtual primary care, but the savings component really relates primarily to the advocacy part. Back on Analyst Day in May, we walked you through the idea that around 55%-60% of the total revenue for this fiscal year will be on the advocacy base. So if you take the midpoint of that, let's call it $235 or so at the midpoint, something in there, it's about 10%-12% of that will be savings-based. And then, the majority of that's gonna be recognized in the fourth quarter. Okay. We recognize some of that along the way during the year. And you hear us on calls, we try to call out, "Here's the amount that was over and above what we had embedded in terms of savings-based revenue," and try to clarify where that's coming from. Okay. So that's very helpful, slightly less than 10% of total ACV then. And then just should we think about the level of savings PGs recognized to date as about $3 million, $2 million in 2Q, $1 million in FY 1Q? It's higher than that. What we're calling out on the calls when we will say that we earned $1 million more than we had in our guidance. You know, in some of our customers are so tenured, and they're so predictable in terms of savings that we earn that we are booking them throughout the year. So in any given quarter, one, two, or three, we've got, call it, low single-digit millions of savings revenue that we're generating along the way that's baked into our guidance. And then when we achieve higher than that, we'll call it out so that you know, "Hey, that one was a pull forward. We would have assumed it in Q4 versus what's in there along the way. That's very helpful. I wanted to ask one last one on just the FY 2024 guide or revenue guide. What is your $410-$414, assuming in the back half of the year for DTC primary? Well, first, maybe you can give us just an update on first half DTC primary care trends and what the guidance is implying for back half DTC primary care. Sure. So remember, for the Accolade Care business, primary care, as Raj was talking about, we think of that as the offering overall. Today, for sure, the vast majority of that's coming from the consumer channel, with a growing component from enterprise. But the care business is growing, even faster than the 20% top line growth rate we've talked about. So think of that in the mid-20s. We saw for the first half of the fiscal year, us growing, together in that range, and our outlook for the year is continuing to be along those lines as well. Okay, great. That's very helpful. So Accolade has outlined some midterm and long-term targets, $500 million of revenue in FY 2025, with 2%-4% positive adjusted EBITDA margins. So as you execute against those long-term targets, we kind of think of enterprise revenue growth as a combination of growth, revenue, retention, and bookings. And so this gives you multiple paths to kind of a 20% top line growth rate. Is this a reasonable way to envision year-over-year growth? And are you still expecting to deliver about 20% year-over-year bookings growth in FY 2024? Do you mind if I jump in? Please. I think you hit a really important point that I just wanted to call out. Please. We're profitable in the back half of this year, and we're profitable as a whole for the year next year. So from an Adjusted EBITDA basis, we make that turn. We think it's an important moment when you're talking about... You know, we talk about 20% growth on this year's number. The $500 million are there. About $500 million of revenue is profitable. Growing at this kind of a clip puts us in a unique class, and so we're really excited about that. But, you know, I didn't wanna, I didn't wanna skip past that without acknowledging it. That is,, no, it's a fair moment of recognition. Without acknowledging the fact that, you know, there are no more unprofitable quarters in the future of our company, which we're really excited about. The second part of that story, and then I'll turn it over to Steve, because Steve's looking at me like: "Why are you answering my question? Not at all. You're doing good. Our capacity to grow is in part based on bookings. What do we sign up, and customers taking advantage of our services, but then in part, based on we are the best engagement company on the planet. When we drive that extraordinary engagement, the more utilization we drive for those downstream services, are opportunities to grow the average revenue per customer. That's not reflected in the original ACV, it's reflected in the growth opportunity of the business. And so it's different. When you first looked at Accolade in 2020, all we did was advocacy. And so your capacity to grow was really only driven by the trusted partner ecosystem and our capacity to grow average number of employees per customer. Today, our capacity to drive that utilization across all those different vectors, expert medical opinion, primary care, and trusted partner ecosystem, changed the way to think about the forward trajectory of growth for the business. Sorry. Take it away, Steve. It's a great tee up. And so to Raj's point, you know, there's a lot of different angles on growth for Accolade, which is one of the strengths of the platform, right? We're growing new bookings in the neighborhood of 20%, as you said, to grow, to continue that growth rate. We have an extremely high retention rate in the mid-90s%, as you noted earlier. Got channels to reach customers through health plans and direct to consumer, which is also powering our growth. And then, finally, this differentiating point for Accolade, where we're driving revenue per customer as we increase clinical outcomes by bringing these other capabilities, and we built a revenue model on top of that, that we can take advantage and drive incremental revenue for us. It's a combination of all those things that gives us confidence in that, you know, kind of compounding 20% growth rate from here forward into the future. So, I think that's really helpful. And just, First off, I like the no more unprofitable quarters in the future of our company. But, secondly, I think just the notion that you could drive revenue above the initial ACV of a particular contract. So effectively, retention could be above 100% for a particular contract ACV. That's one, that's 100% right. Okay. And it's to us, obviously, you know, we've built a technology platform that allows us to drive engagement in very effective, efficient ways, so we can continue to scale the unit economics of the business, while at the same time availing ourselves to new revenue opportunities that drive value for the customer. And that's obviously, to us, the most significant development over the last several years in terms of our capacity to deliver value to our shareholders. Okay. I think that's very helpful. I'd love to know just you know, what level of visibility do you have into that FY 2024 bookings number? Maybe, you know, not today, I wouldn't expect an update, but maybe on your 10/4/2023 call. At that point, what level of visibility did you have into the approximately 20% bookings growth rate? . So when we're talking about bookings, just for the audience, when we talk about bookings, we're talking about long-term customer contracts taking advantage of our services. And those are traditionally 6-12-month sales cycles, depending upon the size of the company. Our visibility into those sales cycles, the number of sales cycles that we're running, and our historical close win rate against those is very high. And so when we profess a confidence in our growth rate associated with the bookings, that's based on the fact that we have access to a lot of data that would tell us that we're in a good position to get there. Okay. That's, that's very helpful. So with 20% bookings growth, about 93% gross retention in FY 2024, we're estimating that primary care would have to grow in the low-to-mid 20% range year-over-year in FY 2025 to get to about $500 million in revenue. Is that a reasonable assumption or a reasonable kind of set of assumptions? I think it's reasonable. Jess, Jess, you know, we're, we're really focused on the combined business growing 20% on a compounding basis that gets contributions from all these different capabilities. You're right that care has been growing a bit faster than that 20, which we're really pleased with, but we've got a lot of different vectors that will drive us towards that 20% growth rate. Okay. That's helpful. Any other kind of key assumptions that you would flag underlying that $500 million revenue run rate or the 2%-4% adjusted EBITDA margin targets for FY 2025? You know, I think Raj has been hitting on a lot of the growth trajectory items, right? New customers, the demand environment, the cost savings that we show up with each year, all give us confidence in the market opportunity and the growth on the top line. Let me go to the expense side of the equation for a minute, and where we get a lot of confidence in the visibility to the profitability. We've got continuing expectations on gross margin expansion. As we're driving more efficiencies, we're leveraging the tech platform, including elements of AI that are driving our ability to continue to have confidence in more efficiency, while leveraging the human element and the tech capabilities of the business. On the OpEx side, as we get to $500 million, we're achieving a level of scale here across various items. For example, product and technology, we've invested a lot in over the years, and we're seeing the benefits of that. Even while we continue to invest and adjust, there's a lot of leverage there, and certainly across other function, functions in the business. So we're looking at balancing growth and profitability in a really healthy way that takes advantage of the market opportunity, while also delivering profitability to shareholders. Okay. I think that that's really helpful. So just to be clear, we know gross margin is gonna expand about 250 basis points to about 50% in FY 2025. I think, you guys have articulated, the other 250 basis points of margin expansion year-over-year, that, that should be skewed towards R&D? R&D, G&A would be good places to think of that. Jess, you know, a reminder too, you know, back at the beginning of the year, as we had brought all of the companies together that we'd acquired, 2nd.MD, and Accolade together, we had some cost reductions that we, we made, and we're seeing the benefits of that here in the back half of fiscal 2024, and a lot of that leverage continues going forward as we unify the technology platform in particular, and leverage our sales and marketing capabilities into the field and some G&A functions as well. So while that's absolutely true, and we're driving that leverage, and it's gonna show up as a profitable business next year, it's imperative to note we outspend the category writ large on R&D by orders of magnitude. Like, our investment from a technology perspective around things like the capacity to find physicians of high quality physicians, things like our mobile applications, things like leveraging AI to drive more leverage into our cost structure. You know, we're a very unique blend of a healthcare services company with an extraordinary technology history and investment in technology to drive value for members in a way that we think is unique to the category. I think that's a fair remark. So you all have issued and affirmed a kind of 20% consolidated long-term growth rate target. Is that an organic target? It is. It is. We... The platform that we have, integrated capabilities, including with the partner ecosystem, that bring the full breadth of clinical capabilities to our customers, gives us very good confidence that this stack of capabilities we have gives us plenty of opportunity to achieve that growth rate. Okay. That's really helpful. I wanna spend our last minute or so on Accolade Care, which for Enterprise went live on 1/1/2023 with about 500,000 members. Accolade Care integrates comprehensive virtual care into core advocacy. Why was this so important, and is this product a component of the company's 20% long-term growth algo or a source of potential upside to it? It's both. Jess, it's both. It's a, it's a component of the 20% growth rate, but remember, like, I'll keep bringing it back to the macro. The macro is we underspend on primary care in this country, and it reflects in the results, the clinical results and the cost structure for every one of our customers. The capacity to drive incremental utilization there by embedding those physicians into care teams that already get 70% engagement, that already know every condition the people are facing, know the company's benefits plans, know what's available to those employees, like, that is an extraordinarily powerful value proposition. We would bet over time that our customers will outperform the rest of, the rest of, other companies in the market as it relates to spend in primary care and overall reduction in overall healthcare costs. So yes, we think those numbers will keep growing, so it's a part of the 20%, and it's a part of the upside to the 20%. Okay, and maybe a final one. So should we think about the 500,000 meaningfully accelerating in CY 2024, and is it more a matter of upselling existing customers or as a de novo product, introducing new companies to the Accolade organization? It's a function of selling to existing customers, but most of our new customers, when they sign on, are taking advantage of Accolade Care as well. Okay. Great. So, I'd love to end on that note, and I appreciate you guys joining us so much. Thanks to the Accolade team and everyone out in the audience. Thanks for having us, Jess. Thanks.