Technical difficulties. Great. Thanks everyone for joining us today, for this session of the BofA Securities Healthcare Conference. Michael Cherny, the Healthcare tech Distribution Analyst. Pleased to have with me Accolade fresh off of their analyst day yesterday, so we have a pile of new stuff to go over. Rajeev Singh, CEO, Steve Barnes, CFO, and then Todd Friedman, who heads up IR in the crowd. Steve and I promise we'll not talk about the Celtics-Sixers game that's gonna be starting in the middle of the presentation. Boston versus Philly love. Thanks for joining us today. Look, I know we're not gonna go through every minute detail from yesterday. Sure. There were a lot of important, I would say, big picture strategic items and big picture financial items. Maybe could we just cover the real high level stuff on the long term. Then Steve, I'm gonna put you on the spot on the short term after. You got it. Sure. Let me start. I'll do the quick business highlights, and I'll turn it over for the financial highlights. There's a lot to cover in both topics. Great. First of all, thank you for having us, Mike. We really appreciate it, and we're glad to be here at such a well-attended event. If we were to think about the business context, what we're really trying to do is update people on a business that's grown materially since we went public in 2020. In 2020 when we went public, we had about 50 customers, and we were doing about $130 million in revenues. We're in our fiscal 2024, which started in March, and we're a business now with over 800 customers and analyst expectations sitting around $410 million in revenues. That business is in a greenfield market with a huge opportunity. Number one, we've got those 800 customers are in a target market of potentially 30,000 customers, along with TRICARE. Second, that greenfield opportunity is powered by a differentiated solution. We build extraordinary service relationships with the people we serve, and we deliver primary care on top of that service in a way that's highly differentiated. Third, advocacy-led benefits programs. If you were to think about the evolution of our company since 2020, we've delivered incremental value with primary care and expert medical opinion. Advocacy-led benefits programs drive incremental adoption of primary care, and we all understand that incremental adoption or engagement with primary care is a fundamental driver to improving healthcare outcomes and lowering costs. Fourth, I'll turn it over to Steve to talk to the financials. 4th, that platform of delivering enhanced primary care, leads to better utilization of downstream specialty care and better utilization of our partner programs. Steve. Sure. The other part of the presentation yesterday, Mike Cherny, was speaking to how the company is built for growth, scale, and also path to profitability. Obviously, it's been part of our path since coming public three years ago. We also recognize that the financial markets are very focused on which companies can actually get to scale and drive profitability. On a steady progression towards profitability since our IPO, yesterday laid out some new details around what it looks like next year, fiscal 2025, when we break through to profitability on the bottom line. We expect to grow. We think the opportunity is growing 20% on a CAGR basis over the next several years. We laid out a path from $410 million this year, $500, 000 or so next year to $1 billion five years out. In a steady drive towards increasing profitability beginning next year, in which we raised the bottom line guidance and improved profitability on that $500 million or so number to about 3% on the bottom line on EBITDA basis, towards our target financial guidance we've provided in the 15%-20% range in the long term. A few factors contribute to that. I'm sure we'll get into it, we're seeing gross margin expansion. We've also made some very intentional initiatives around the couple of acquisitions we've made over the last couple of years, really bringing them together, realizing some synergies of bringing the company together. Our cost structure has aligned really well on this drive into profitability. Maybe let's start there, Steve, talking about that laddering effect. We're now looking at fiscal 2025 of 2%-5% EBITDA margin, fiscal 2029 of 10%-15% to long-term run rate of 15%-20%. Maybe give us a sense of from where we are today to the each milestone, what structurally are the improvements that are going on with the business in those points in time? Sure. 1st of all, Raj spoke to this. We believe the market for our services is really large and fairly under-penetrated. Raj spoke a little bit about top-line growth. Let me talk about the profitability drivers. You know, gross margins. We are a healthcare service enabled by technology and clinical data that we enable on our platform. Today, the business operates in the high 40s percentage, 40% gross margins, 47% gross margins last year. As we drive what Raj was speaking to earlier, multi-offering solutions into our customer base, driving utilization of offerings like virtual primary care that have the dual benefit of driving better health outcomes, also driving margin expansion for Accolade. We're driving higher revenues per customer in a very efficient interaction for our care teams, our doctors, our nurses who are helping members. Those all drive towards an increasing view on gross margin over time, on that part of the P&L. We're also starting to see some material operating leverage for the business. As we approach a half billion dollars in revenues, we're seeing some break points, real leverage on G&A costs, for example, on the one hand, and on the other hand, taking advantage of the fact that we invested heavily over the past five, six years in building out a platform that's very important to our differentiation and scale. Also we're starting to see synergy there where we're continuing to invest in it, but we really are getting the benefit of a lot of that investment that's made in years past. All that contributing towards a healthy bottom line while we grow the business attractively. Got it. Just to also make sure we're level-setting from yesterday. I think this is important because I know there was some confusion that came out of earnings. You went through what typically is a unique step, I think, of companies of giving quarterly guidance after you gave your initial 1-quarter guidance. Maybe just use this as a reminder for everyone, especially, you know, for if people are tied up or busy, about how exactly that typical dynamic of performance guarantee revenue filters through your business and why simply using a year before's trajectory is not the right way to ever think about the current year going forward. Sure. To level set for anyone who's newer to Accolade, one of the really important things we do to differentiate ourselves is we align with our customers by putting a portion of our fees, particularly on our advocacy offering, we put that at risk to commit to driving actual healthcare cost savings. The way we do that is each year commit to an improved trend line on healthcare costs. Really to achieve that PG while we're delivering our service every day of the year, you measure that at the end of the year and compare it to the cost trend. We forecast that those PGs will be earned in the 4th quarter of a given fiscal year. What we did yesterday, to your point, was lay out pretty specifically, here's how we see the four quarters of this year rolling out with those savings PGs coming through at the end of the year. Importantly, that's the way we look at it every year. When we're in the 1st quarter of a year, we're gonna assume that it's gonna take a full year to earn those. Sometimes, because the business, we have a track record of delivering these, sometimes we'll earn them sooner, and we'll call those out when we do. But it's we think very pragmatic to assume those will be earned in the 4th quarter, and that'd be the way that it works every year for us. We consistently earn those PGs at a very high rate. In maybe last year's example, remind us, what was your recognition of the initial PG expectations? Yeah. Last year in fiscal 2023, we actually had earned some of those PGs earlier in Q1, Q2, Q3. At some of the dynamics of yesterday was to say, "We would recommend you don't just take last year's and put a growth rate on and assume we'll earn a PG earlier in fiscal 2024, because there are just different dynamics that may have happened year-over-year, and typically we're gonna earn those by the 4th quarter. Mike, I think Mike, your question, we typically are earning about 95% of those performance guarantees, and that's been very consistent since we took the company public and even before. Thank you. Perfect. Steve, we'll come back to you. Yeah, maybe also, you know, let's turn back to Raj in terms of the business. Mm-hmm. I like the fact that you mentioned the evolution. What have you been seeing recently, especially I would say from the non-advocacy customers, the customers that came in through PlushCare, came through 2nd.MD? Yeah. in terms of your engagement with them on the advocacy side, whether they either already had something that looked like yours- Yeah. Is this something where this is a brand-new opportunity for them? Yeah, I love that question, Mike, because actually, I was just in New York with one of our largest expert medical opinion customers, on Accolade Expert MD, who actually just purchased our advocacy platform and is moving in that direction. We knew that motion was going to come over time. We knew that we obviously we knew we could upsell expert medical opinion and primary care into our advocacy base. We're starting to see that motion happen across the business or, in the opposite direction. I think the fundamental reason why is exactly what you'd expect. Number one, even in a market where we're hearing a lot about layoffs, it's still a full employment environment. Employers wanna differentiate against their competition. Two, trend line is an increasing concern for employers, and they're looking at opportunities to manage trend, and there are very few tools out there that have an opportunity to actually drive that trend line. Third, most buyers, and this is where the expert medical opinion opportunity is so profound in actually demonstrating this. Most buyers look at their overall healthcare ecosystem, all the benefits programs that they have, and they acknowledge one thing: I'm not getting maximum utilization, I'm spending a lot of money, and I'm very frustrated by that. Our opportunity to go into our expert medical opinion customers and say, "Hey, you know what? I can drive utilization that was at X- X x 2 if we put this expert medical opinion offering on top of our advocacy platform." That dynamic also happens with companies who don't have it, obviously, but nonetheless, that's what we're seeing right now in the space. along those lines, 'cause I hear exactly what you're saying about advocacy being in demand. We pick that up a lot. Yeah. -benefit calls that we do. How do you think about that expert 2nd in terms of right now? We're constantly thinking about worrying about whether we're gonna be in a recession. Yeah. something like a recession, whatever it might be, and especially within the benefits world, trying to figure out for corporations what is necessary now versus necessary later versus nice to have later. Mm. How do you think, or at least maybe what's the reaction you're getting from the market, if that is a way to bifurcate it about how they're thinking about their priorities and the way that they engage with Accolade, given that you do have the ability to go Accolade One- Yeah. You can be modular in your approach. 100%. You can buy everything or you can buy à la carte. I think maybe the best way to speak to your question, Mike, yesterday we had two of our largest customers on stage with us virtually at our Capital Markets Day. Those two customers have really built out a benefits program built around advocacy. They would call it an advocacy-led health and benefits platform, which means all the decisions they make and the vendors that they work with are built around that advocacy platform, ours. In that context, they're making choices about where they think they can drive maximum engagement, and that maximum engagement has to have real ROI. Our expert medical opinion business now, to get back to your original question, our expert medical opinion business is actually in place for one of those customers on top of that advocacy platform. Our care business is in place for both of those customers on top of that advocacy platform. The rationale why is, one, there's a tangible ROI associated with it. Two, we'll warrant the utilization and engagement levels of that. Third, I think specifically to EMO or expert medical opinion, companies are beginning to sense not only trend line increases, but also utilization increases as it relates to surgical procedures and treatments. That's where 2nd opinions can be really powerful. Basically leads to my next question, is that utilization side. Mm-hmm. How much does that discussion change in terms of the real-time dynamic of the cost you're helping your members manage in real time versus the need to identify a solution based on what you're seeing now, but that might be part of annual cycle? Mm-hmm. And how do both sides feed each other in terms of driving both revenue for you near term, but then also that opportunity for cross-sells longer term? To me, it's such an important question because it really speaks to the fact we're collecting all of the data about healthcare utilization for that customer. That means we have their claims data, their pharmacy claims information, and a variety of other signals, including electronic medical record data for the patients that we're serving from an Accolade Care perspective. That data allows us to give our customers something called the True Health Dashboard. The True Health Dashboard gives them the opportunity to look at our engagement levels, look at the populations that we're engaging, and look at the challenges. Where is their spend? What are our opportunities? I'll give you a good example. Last week, Mike, I was on the road, visiting with customers. Customers often go through a annual review cycle of like, "Tell me what happened last year, and what should we think about?" This won't shock you at all. Everyone I've met with 3 different customers last week. Every single one of them wants to talk about what? GLP-1 drugs. What are we gonna do about Ozempic? How are we gonna think about this $1,000 a month drug, and what does it mean from a population health perspective? In the old days, that conversation would be, "Well, you're gonna have to go call your PBM, do a pre-authorization, and then cross your fingers and hope the physicians in the brick-and-mortar ecosystem do their work." On the alternative universe of an Accolade customer, we're sitting in those rooms and saying, "Okay, you're an Accolade Care customer. If someone wants the drug, we're gonna ensure that the proper clinical rigor is displayed before we prescribe it. If we do prescribe it, because it's clinically sound, we're gonna follow up with coaching, potentially behavioral health needs if you have it. We'll build a plan for you life after the drug. Most importantly, we'll give you reporting on the True Health Dashboard that helps you understand the engagement level we're seeing there. That's never been possible before. For us, those customer conversations are, "Yes, here's what we did last year," but also, "What are we gonna do now?" GLP-1's the best example I can think of of what everyone's talking about. That leads me to my next question. I appreciate the real-world example. I'm an anecdote guy myself, but I remember years and years, you've always talked about the engagements. It's the 80/20 rule or, you know, 50/50 rule of healthcare, whatever term we're using. Are you seeing a shift in terms of where Accolade's able to help engage on different patient cohorts that might... You know, like the weight loss cohort, weight loss has always been an issue, but hasn't been that cost spike dynamic until GLP-1... Right. came into fruition. I guess, what is your data set? 'Cause Accolade's always been a tech-enabled service, you know, technology platform with a overlay. What does that data set combined with that high touch consultative model for the chronic members allow you to do in terms of essentially inform employers when they're running into cost spikes they may not have known existed? 100%. Because we have the data set. Look, I think the data set is a power, is something that powers a customer engine. You know, we talk about our single-minded obsession with delivering great value for our members and our customers. We think there's companies in different industries, Amazon, Chick-fil-A, USAA, who have differentiated themselves from the rest of the universe because they're obsessed with delivering value. To do it in healthcare, you have to collect the data about that patient or about that member or about that company, and then use that data. What we do is we take that information, we stratify the population, and then we build a population health strategy for every single member of that population. Unlike the rest of the healthcare ecosystem that might be only focused on the highest cost claimants, we build a strategy for every member, and then when they're engaging with our frontline care teams, when they're engaging with our mobile application, when they're engaging with our portal, those recommendations surface themselves. It allows us to be very proactive in the care we're delivering and the way we're delivering that care, and it also allows us, to your point, to point our customers to areas where we believe if you alter your population health strategy, you're gonna see downstream benefit. You are particularly outsized from a musculoskeletal spend perspective, because you're an airline, and you have a lot of people throwing bags around. Let us help you with that problem. Last part of the answer, Mike, 'cause I'm taking too long, is our partner ecosystem allows us to help in that regard as well. We can't solve every problem by ourselves. Healthcare is a massive challenge. Our opportunity to say, "Oh, you have a musculoskeletal issue? We have two partners, Sword and Hinge. Either one of them can help you. Let us show you how we can embed that in our platform. It's almost like you were predicting where I was going next, so I appreciate that. It is that, the Trusted Partner Ecosystem. It's, you know, that whole buy versus partner approach. It's important for every company. Mm-hmm. You made strategic investments in virtual behavioral, virtual primary care. Yes. expert 2nd. Yeah. Yet you have this whole host of other partners where if somebody comes to Accolade, you're gonna be able to offer them services that are Accolade branded, also non-Accolade branded. Correct. Especially in this world where you've had a mix of just a proliferation of new companies come to market, some of which are, say, higher risk or lower quality in nature. Right. Now with a potential credit crunch and funding challenges for some of these companies, what role does Accolade play there to make sure that your Trusted Partner Ecosystem still remains as high level and strong and with the right partners as you want it to be? Yeah. It's a fantastic question. It's one of the reasons, Mike, that we choose to partner with more than one partner in every category. Let me start. Let me back up with before you can become a trusted partner and be in our Trusted Partner Ecosystem, you have to pass muster on a few things. One, we put you through the paces as it relates to financial viability, infosec, security, the clinical rigor, et cetera. Once you pass that muster there, we actually work with that partner. The partner has to embed resources or actually apply resources to our partnership to ensure we can build a real integration. We're not interested in marketing partnerships. We want there to be actual training of our frontline care teams, integration of the clinical teams, round trip with information flow so we can do end-to-end closed loop reporting. In some cases, we'll actually embed their physicians into our Find Care capabilities. All of that has to happen. Now going to the question you asked, we'll oftentimes have two partners in every category. Why? Because we wanna leave some competition. We wanna make sure that our customers have choices, that, they're competitive from a price perspective, that they're competitive from a quality perspective. What we're seeing so far is that customers, if you were to look at it from their vantage point, are interested in buying from us because we've done all that work, because we can drive better engagement. Sami Inkinen from Virta was on stage with us yesterday at our Analyst Day. Sami talked about the fact that Virta on the Accolade platform drives 2x the engagement of non-Accolade customers using Virta. That type of result for customers is extraordinary, but it also removes a whole bunch of procurement, legal, and process hassle from our customers that they really appreciate. As you think about this going forward, I guess the way I think about it, if you're going to pitch a client, how much of the pitch is we can take away all these throats that you don't have to choke anymore? I guess. 100%. What is that all-encompassing offering look like? Is it like an Accolade and friends approach? It is absolutely a part of every conversation we have with a benefits buyer. You know, they wanna do the three things that I mentioned earlier, Mike. They wanna build a better relationship with their employee, they wanna drive healthcare costs down, and they wanna improve utilization of their benefits programs. To the degree, you have a buyer who hasn't looked at musculoskeletal, diabetes, or metabolic syndrome, hasn't looked at gut health or any of the different categories where we do work, we're looking at their data and saying, "It looks like your spend is outstripping other places. You should think about a solution in this category. Whether you wanna buy that from us or not is entirely up to you, but we think our role is being that population health manager for you. This is what you should do. We can help you do it if you wanna do it. Along those lines, this market of advocacy-led business has been competitive, you know, evolving. Sure. I think of it personally, you can correct me if I'm wrong, like three major players that have some similarities to their strategy. At least 2nd and a 3rd one. Others that claim to be navigation, claim to be advocacy. Mm. really hard to frame it. As you think about, especially going to competitive RFPs, whether it's last year's experience or what you're seeing so far from an early experience, how broad is the competitive landscape that you're going after for the average customer? I'm talking more greenfield. Yeah. It's one thing when you have the massive cross-sell potential. Of course. Is it two parties being invited to the table? Is it five? Like, how do we think about who you're going up against in the average RFP? Well, I think the baseline of your question is really a really important point. This category is growing. Any category where a company like ours, as Steve talked about the fact that we're, you know, that we're looking at around half a billion dollars in revenues next year, is gonna attract competition. We think that's a good thing. It keeps everybody hungry and competing. In that context, you know, looking back at last year, we grew bookings 30% year-over-year. It was our best bookings year ever. We're competing really well. Customers are making buying decisions, and they're typically, Mike, to answer your question directly, they're typically looking at their carrier and saying, "We've been doing business with you. You're still gonna adjudicate claims. You're still delivering the network. Maybe you have a solution for me." They're gonna look at Accolade, they'll usually look at one or two of the other players that you mentioned. I think for us, where we're fundamentally differentiated is the integration of those three solutions and that Trusted Partner Ecosystem and the engagement we drive. I guess as you see that going forward, you brought up the carriers, which I think is an important component. I remember, I think the 1st time we ever met, and I asked, "Who's your biggest competitor?" You said, "Inertia. Right. Something along those lines. Right. 1,000%. Especially too, as the carriers, major carriers continue to pivot in different directions. I mean, we have at least three, and they're going down the care delivery model more so. Yes. Does that change that dynamic of the carriers being your biggest competitor? It does. There's gonna be carriers who continue to compete on advocacy, but choose to resell our expert medical opinion offering or Accolade Care offering. Here's the way I describe it for sure. Six or seven years ago, we had zero carrier partners. Yesterday at Analyst Day, Blue Shield of California was on stage with us. As one of the customers, the 1st customers and the go-to-market partner for us with the virtual 1st care design. I think as our offering has become more mainstream and as people understand that we're a market leader in that category, companies that are looking to innovate in other areas are thinking, oh, there's a, there's a smart, rational way to go to market with Accolade, and I think you'll see that continue to happen. In turning back into the businesses and thinking particularly around the two areas of on PlushCare side, virtual primary, virtual behavioral, also areas where you're not lacking in other companies that say they do this or really do this. Yeah, sure. How do you think about the way, especially because these are still newer entities, I would say maybe, expert 2nd opinion seems like it sits directly on top of advocacy. Does. These are, in my opinion, important adjacencies, but obviously not directly linked. It's kind of. Mm-hmm. closing the loop. Mm-hmm. We are trying to drive you to the lowest cost of care. By the way, we can be that lowest cost of care. How do you make sure that those two areas of the business continue to stay ahead of the curve, given that there's plenty of additional dollars chasing, competitive modes in that space? The fundamental competitive mode for our virtual primary care business, which we call Accolade Care, our consumer business called PlushCare, the fundamental competitive mode for that business is the idea that our advocacy program is embedded in our primary care program. That gives us the opportunity to turn instances. We showed a great customer story, a woman by the name of Marjorie, who works at a major airline that happens to be a customer. The Marjorie story starts with a fall off of a stepladder. That fall off of a stepladder, she wants to go see her brick-and-mortar primary care physician, but she can't get an appointment for 30 days. We get her to an Accolade Care physician. The Accolade Care physician not only treats her back pain, but because we have a True Health Engine that tells that primary care physician, "You know what? Marjorie's a diabetic." We actually solve her back pain issue and then get her to our Sword musculoskeletal health partner. Fast-forward the tape 3, 4 months later, Marjorie's lost 40 pounds. She's off of insulin, because she called us about a musculoskeletal issue, because she called us about... Excuse me, did I say musculoskeletal? You meant Virta. Virta. Yeah. For a diabetes reversal. Sorry. That story is an encapsulation of the power of the platform. A standard healthcare interaction would never have gotten her to a primary care physician to drive the kind of value we just drove. That's where I think the power of our platform is. We're running out of time, I wanna make sure I hit a couple also important check-the-box questions. More important than that. Yeah. You talked about TRICARE as a partner beyond some of the other carriers. I know there's been a lot of confusion in the market, noise, some of the dynamics of their awards. Maybe just level set on how to think about what are the steps to get you to the ability for you to help support their work and their partnership from here? Yeah. Let me start with this. I mean, 1st and foremost, Steve talked earlier to our fundamental belief we're sitting on this greenfield opportunity and a 20% CAGR in for the foreseeable future for our business. We believe that's true without any significant or material growth in terms of new business opportunities inside of T5 or the government rev part. That said, we do have a foothold in the TRICARE business. TRICARE, as most people know who are following the space, has a new bid out for carriers. That bid has been awarded and then appealed twice, with the 3rd appeal happening now. Here's the It's very common, Mike, you know that. This is the way we think about the government business. We think about it like any other huge opportunity. You know it's gonna take a long time. You can't predict when it's gonna get done, but when it gets done, you have to position yourself to be in a position to take advantage of it. We're waiting on that. It could be January 1st of next year. It could be January 1st of the year after that. Either way, we're perfectly positioned to be in a position to capitalize on it. When we can see the whites of the eyes of that opportunity, we'll update our guidance and talk to the universe about it. I guess just from a tactical perspective, there's nothing abnormally higher built into the fiscal 2024 guidance either specifically. It's just. Correct. Whatever you've talked about and had in the past would be situations. That's right. 100%. I guess, I mean, my last simple question is, you talked about this path to EBITDA profitability and cash flow that comes with it. Like, what are your plans for the cash? You've always been well capitalized. It's not like this is. Yes. a business that's massively hemorrhaging cash. Correct. Just- We took advantage of the opportunities over the last couple of years to raise capital. We have a very strong balance sheet, $321 million in cash. We have some convertible notes that are due three years out. Expect to be cash flow positive well in advance of that and really well capitalized and do not need to go back to the capital markets. We're very focused on executing on this opportunity we've been describing and looking forward to what's in front of us. Awesome. Gone red. It's all good. I'm gonna end it there. Yeah. Raj, Steve, Todd, thank you so much for joining, and thanks everyone for coming. Thanks for having us, Mike. Great. Thanks, Mike.