Hello, everyone, and welcome back from lunch. Thank you for joining the Barclays Global Healthcare Conference. As you know, I am Stephanie Davis. I cover Healthcare Technology and Distribution here at Barclays, and I am very pleased to go and welcome Steve... Thank you for that. Pleasure being here. Also got Todd in the audience. Todd Friedman, hello. Head of IR. We'll come hang out on stage. That's cool. That's fine, Todd. I'm just gonna ask him terrible questions. You can get them. Well, let's start with the not so hard one. Kind of, where we've been and where we're going question. Your company and your end market looks very different than it did at the IPO. So how do we think of this evolution from pure play care navigation to more of this platform player? I really appreciate that as a starter today, Stephanie, because you're right. We came public in 2020 on the backbone of a navigation and advocacy platform. At the time, had 54 customers and had demonstrated the value of an advocacy platform in being able to drive better outcomes and better costs for employers. But what we really saw was the opportunity to build an integrated healthcare delivery capability on a platform that's based on technology and people delivering the service. What we saw in big swath, big picture, was the fact that some of the biggest drivers of healthcare costs being so high, particularly relative to other nations, and more to the United States, and healthcare costs going so high and outcomes being so poor, was the lack of primary care utilization. We acquired a business called PlushCare in 2021. That's very much part of our navigation advocacy platform. We have primary care embedded in the navigation journey for consumers and for employers, along with an expert medical opinion capability via another acquisition, 2nd.MD, and importantly, have built out an extremely robust trusted partner ecosystem of what is now 16 partners that deliver clinical capabilities across some of the highest, most expensive pain points, let's say, behavioral health, oncology, areas like that, all delivered seamlessly to customers. That's driving better outcomes and cost savings in a way that is really showing up in terms of growth and profitability and changing healthcare for our customers. Do you think the end market has changed from being this is a nice to have, to, you should have this? I think so. I think it's a statement that our category has matured materially over the past five or six years. You know, five, six years ago, we were explaining what is navigation advocacy, why you should have it, why you should take the step of carving this out. The idea with all that was, what is care navigation? Exactly. And why doesn't our carrier just do this? And the fact is, we do it differently. We do it incredibly focused on the consumer and making this a great experience for that consumer, and helping people get to the right step, the right study, the highest quality doctor, all of those things in a very consumer friendly way. That's different than the way that the industry has historically done it. And it shows because customers who pay for their healthcare, primarily self-insured employers, are making the decision to make this move with us and change the perspective for their employees. And it's driving better outcomes and lower costs in an environment we know very well is extremely high cost, and there's a lot of confusion in the market. And so we simplify that and create a better solution for those customers. I also think it's interesting that you called out that you only had, like, 54 clients at the IPO. Yes. Historically, when we talked about your growth and the drivers of your margin expansion, it was all in the 56 clients. The 56 clients. Has it changed as you've gotten more of this kind of platform approach? It's changed a lot. Today, we've got more than 1,000 customers, off of that 54 customers just a few years ago. And of those 1,000 customers, many of them are buying advocacy and starting with advocacy. But also some of them are starting with expert medical opinion as a step into changing their healthcare journey for their employees and their families, and then expanding with us. So a lot has changed. We have an extremely healthy, diversified revenue stream across the customer base, and we're reaching customers in different ways. We do continue to go direct to employer. It's an important part of the way we reach customers. We've also expanded the way we work with health plans and carriers. So we go both directly to employers in partnership with carriers. We also bundle our services in ways that they can use them and leverage the technology investments that we've made in order to compete for new customers and more employers. So there's many ways for us to reach the end market, and we've essentially helped try to drive and expand that capability over the past few years. Maybe let's talk a little bit more about a topic you brought, your trusted partner ecosystem. What got you to the point where you said: You know what? We own everything we need to own. Let's just go partner for the rest of this. And how should we think about the economics when you have an owned solution versus a partner solution? Yeah, really important point. And so when you think about the Accolade platform today, you think of the base of the chassis as being the navigation and advocacy platform, and on top of it, the sort of owned elements that are really important, our primary care and expert medical opinion for that across our entire customer. When you go to the next step, thinking about categories like cancer or centers of excellence, companies like SurgeryPlus or Employer Direct and Carrum or behavioral health via Headspace... or MSK or Hinge Health. These are companies that we view as best in class, with who we've integrated really tightly with on our platform. We can bring to a customer, some customers may have needs for some, but not all of those. We don't need to own all of them, and generally, we wouldn't want to build against what some of those are already best in class. What we do is leverage our core competency, which is stratifying population, doing outreach and engagement with those members, both leveraging technology and human clinical, compassionate support when needed, and integrate that and bring that to a customer together. And then the revenue model, how does that work? We are driving higher utilization. We often say higher appropriate utilization or when needed. There's a lot of headroom between the number of people who could use one of those great solutions, who just don't. They either don't know about it or they're not aware of how to reach it. And companies get frustrated because they often buy these solutions, and they see underutilization. So we're leveraging our utilization platform to bring those solutions to the right members, and we get paid for that. Our, our revenue model benefits by the higher utilization that we drive with those partners. Importantly, we're coming off a week... Last week, we had our customer, our annual customer conference, which is called Evolve, and we had about 100 customers with us for a couple of days, and our partners were with us on those stages and platforms, and you could really see the value that customers saw in, in Accolade bringing this all together seamlessly. And we've invested a lot in the integration, the, the two-way communication with the partner and then with the customer. And we hear that feedback a lot from the partner ecosystem. But Accolade is truly differentiated by the depth, breadth, and continuity of those data feeds going back and forth, and it bears out that the utilization uplift when a partner is with Accolade versus on its own is often double-digit increases in utilization, 10, 12, and even up to a 100% increases in utilization when you partnered with Accolade. From a customer's perspective, what does the contract look like? They still have to have separate relationships, or they can have a master service agreement? Takes a couple of different forms. Many of our customers will have a master services agreement with Accolade, and essentially buying those services through Accolade, which is great. We can bring that, curate that for them. They don't have to have a separate procurement process for that partner, and that can take the form of a single PEPM or essentially an arrangement where we're, where we create on the good utilization we're driving. Sometimes we walk into a customer, and they've already have a relationship with Lyra or Headspace or some other firm. That's fine, too. We can use the same integration we would have otherwise, but oftentimes when they go to add another partner, they say, "Geez, this would be easier to just do that through the Accolade Master Services Agreement." We can plug and play on that very quickly and bring it up right away. We are past your open enrollment season, but we are ahead of your next one, and so it's kind of a prime time to check in with your clients. You just had your client event. What are you hearing from them? Yeah. You know, we've always heard about the high cost of healthcare since the nine years I've been at Accolade. It's always been a part of what we do. But this year we're hearing about it, you know, the loudest voice we've ever heard it. Why is that? We're coming off a year in which I think GLP-1s really had its first major foray into the market, and I think without exception, every single customer saw soaring Rx costs last year. 100% of our panel chat, the first conversation was, "What is going on with our drugs? Completely. And we had many breakout sessions at customer conference last week, and I think three of them were solely dedicated to how to manage that. It's great for employees who are utilizing it properly. It's also expensive. So how to go about that the best way, plan, design, step therapy or not, you know, how that all should work. We're right in the middle of all of that and helping customers solve that problem, but also just general trends. It's obviously inflation, but which really comes back to when we get the right people to the right place in the right setting, we want to call it steerage or however you want to think about it. We can do all those things by leveraging our platform. Employers are really continuing to look for answers to that and wanting to get to these partners who have a great solution for these different categories, but not an easy way to do it, and we represent a great path to doing that. So, that's what we're hearing most from our customers. Cost, the point solution, ecosystem, difficult to access, and then ultimately creating better outcomes for their employees. You had a lot of your partners on stage, and I, I'm assuming you had to ask the clients what the feedback was on that. Were there any areas or categories where you said, "Gosh, we should make a partnership in? Yeah. A couple that come to mind, you're maybe familiar with Virta. Virta is a partner of ours, had a strong relationship with Virta. It started as a company in diabetes reversal. Yeah. They may be here. The CEO was on our stage yesterday, back in May, and spoke about this idea of when Accolade is present, we get so much more utilization because of the way that our engine works. But that's a solution that has a lot of applicability, not just to diabetes reversal, but even they're expanding that offering toward weight loss and other applications. That's certainly one getting a lot of airtime. We also hear a lot from customers. Oncology or cancer is definitely an area of excellence. They're both partners. Those are both companies whether it's oncology or bariatric surgery, other surgeries being quite prevalent, and behavioral health continues to be high on the list along with MSK. I think those are probably three or four categories that are really pain points and can be a big source of cost for employers that they're trying to figure out. When you look at the opportunity, are you making an acceleration in that drop or you're at loss? I think there's for sure an acceleration of deployment of those within our base. One of the things I was telling people a few minutes ago, the calendar 2023, fiscal 2024 selling season for us, 8,000 feet, and in almost every single advocacy sale we made, something else went along with it. Primary care, some cases, expert medical opinion, and trusted partners oftentimes are being sold right up front. We are certainly an upsell back into the base. So the deployment of those and the utilization of those is certainly growing and contributing towards our long-term growth rate. Any early pipeline color or anything you've got, Steph? The pipeline color early here in calendar 2024 tells us that we should expect similar type of dynamics this year. You know, I think, Stephanie, when you go back to the model that HR executives, CFOs are trying to manage is, we just came off a year that you'll see the final numbers, what would they be? 7%-8% year-over-year trend, somewhere in that neighborhood. That's unsustainable. It's not sustainable. We heard Aon call out a number of 8%-10% for calendar 2024. Those are numbers 2x or 3x, right, what you expect to pay for employees. They have to find a solution. That's right at the heart of what we're hearing here in selling season. We talk a lot about your employer clients, but they're not your only client base. And I think it's funny because when we first came out, you were talking about this, everyone said: "Well, why doesn't carrier do this? Why, why would they want to go that way?" But now you're selling into some government benefits, or you're selling in more of some... I think there's more opportunities like MA as well. Can you just touch on how you should keep that growing? Yeah, absolutely. So, a couple of things, and I'll add to that health plan. But we, in some cases, an end market, they're also a channel partner that's becoming more and more robust for us. And I think we're past that sort of initial, it was probably more adversarial six, seven years ago because there was so much noise in there. And now we have a track record of having worked together with customers to create value. Health plans are now partners to many. So start there real quickly. different payer role. Great. So, number one, we do sell some of our offerings, like expert medical opinion in partnership with UnitedHealth, Aetna, and other companies, where they're essentially co-branding white label in a variety of different ways with our expert medical opinion offering. Those relationships gave us license and opportunity to build deeper relationships with Cross Plans. Now, what we're seeing fast forward is particularly regional and Blues, whether it be due to the Blues competition law or secondary law, if you will, or other competitive factors. Those firms need to partner with companies like Accolade, who have the innovation capabilities, because they don't have the innovation budgets that the national carriers have. But we're now with, for example, Blue Shield of California, to package up their offerings and sell a virtual first plan, where we're powering the primary care behind that, and as well as other solutions like advocacy and expert medical opinion. That's proliferating. We've got a few health plan partners, and we expect to have more in the future along those lines. Government, really big opportunity for us. You know, we have an arrangement in TRICARE. Today, we serve an autism population that's generating revenue for us, and also the T-5 contract, which finally has been through the process period with the announcement of the two firms who are the key carriers for the East and West. And we'll be speaking more about that down the line here, about our role and opportunity around T-5. Lots of different angles of growth and distribution. Is there any color you can give us some visibility on the financial components or metrics you're tracking in order to better judge how these are doing? Yeah, absolutely. So around that, I think in the upcoming year, next earnings call, which will be at the end of April, we will give some more color around the different distribution paths. So with employers, we've spoken about number of employees, employers we serve and population. We serve 12-13 million people with our various offerings across more than 1,000 customers. It's giving more detail on these health plan partnerships, the way that they work and the tracking opportunity we have towards revenue growth to be part of this building for sure. different payer mix, right? Yeah. That is- Changes a lot. Mm-hmm. We've got about 5 minutes left. We haven't touched on your long-term guidance. I know it's been generating a lot of buzz. You gave long-term revenue guidance, then out of nowhere, after your Analyst Day, last May, said, "Ah, well, we're gonna margin guide. We'll talk it out." Talk me through the process. What gives you the confidence to initiate the long-term guidance, but then gives you the extra confidence to raise the long-term guidance so quickly? Yeah. You know, last May, in May of 2023, we had our first Investor Day, and much of it was prompted by the fact that He said, "Our company has changed a lot since our IPO in 2020." Just like we're talking about now, let us have a forum, take four or five hours to really lay out the business model and the financial model behind that. And once that and along with that, let's give some more color behind our long-term targets. We have said even since our IPO that we think the company can grow at 20% top line for the foreseeable future and get to, get to 15%-20%, adjusted EBITDA margins over that horizon. So what does that really look like? So we laid that out on a kind of a year-over-year basis and how we see that going. And then in our January call, which we just had, you're right, we brought in essentially our long-term target into that five-year profile. The driver behind that, Stephanie, was a few things. Number one, a year ago, later, October of 2023, we announced some cost actions associated with having integrated three companies, Accolade, PlushCare, 2nd.MD. Now we have one technology platform, one go-to-market team, and we're leveraging a lot of OpEx there. By the time of the May Capital Markets Day, we didn't have quite as much visibility. Here we were, almost a year later, saying, "We've now done that integration, we've finished those cost actions and alignments internally, and we feel really positively about the expense side of the business." So that's part of it. Secondly, we've just seen more and more momentum in this cross-selling or, you know, bundled sale of additional offerings. Those are big contributors to our revenue model and gross margin story on how we expand, you know, profitable growth opportunities at Accolade. When we can package advocacy, virtual primary care and partners and expert medical opinion, it's very good for the customer, it's great for the member, it's also great for Accolade. It benefits our revenue model because we have one single instance of sale and an opportunity to drive incremental revenue off of that. And over that five-year period, we expect more and more of our ARR and the recurring revenue to come out of our own customer base. Because now we can go back in, and we have more things to bring to that customer. Obviously, we think that if we do our job well, that makes us incredibly sticky for our customers, because we should be able to be a real center point and hub for everything that they need on their healthcare needs for their company. Is that when we have to start thinking about a different metric? You know, it's a great point. I think that's fair. You know, when we came out as a public company, we talked about annual contract value, was a really important one- Got it. and a few others. Gross dollar retention, gross margin, customer counts. Those are all still important, but they're not the full story for Accolade. There's a lot more to be told about this utilization profile and others. Cross-sell. Cross-sell. Modules per... Exactly. And so in our April call and going forward, we're planning out ways that we can give some more detail around that to help the investment community understand and appreciate the profile of Accolade. Well, I hate that you guys kick off the season, but I look forward to seeing it. The last time we spoke, you talked about the ability to longer-term margin expansion. I'd like to talk about what's not in your longer-term revenue guidance. What is still a shot on goal and not about that? You know, a shot on goal for us that we haven't baked into our model, but we think about a lot strategically is this: We have more than 10 million lives on our platform, as I mentioned. A chunk of those are on the advocacy platform and across our portfolio. As we grow and we achieve scale, we have geographic concentration of members. We think we can bring even more to our employer, you know, our partners who are paying for the service, saying: Look, if we have concentrations of people in Miami, in New York, in Houston, in Dallas, that ought to give us leverage to perhaps go to health systems or other ways to say, "Let's bring... We're bringing you a served-up, highly stratified member who you could have access to all their data to see what benefits are, see their profile." That should serve up a member that's generally, you can get the right place, right time, high quality, very efficiently. There should be opportunities there. We certainly haven't mapped it out perfectly, but we think long term, that's a big part of how we have—we play a part in changing healthcare for the better in the country and for the people who pay for that healthcare. You guys have chosen the idea of doing a little more risk- on with that on the horizon? Risk on, you know, we do some of that today through our performance guarantees with our customers and through how we might participate in that as we drive more value. Absolutely, part of the vision. Looking forward to seeing you in April. That's all the time we have. Thank you so much, Stephen. Thank you. Thanks, Stephanie. Appreciate it.