Yahoo Finance Accolade, Inc. (NASDAQ:ACCD) Q1 2025 Earnings Call Transcript
Accolade, Inc. (NASDAQ:ACCD) Q1 2025 Earnings Call Transcript June 27, 2024
Accolade, Inc. beats earnings expectations. Reported EPS is $-0.35, expectations were $-0.48.
Operator: Hello, and thank you for standing by. Welcome to the Accolade First Quarter 2025 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]. I would now like to turn the call over to Todd Friedman. Sir, you may begin.
Todd Friedman : Thanks, operator. Welcome, everyone, to our fiscal first quarter earnings call. With me on the call today are Chief Executive Officer, Rajeev Singh; and our Chief Financial Officer, Steve Barnes. Before I turn the call over to Rajeev, please note that we'll be discussing certain non-GAAP financial measures that we believe are important while evaluating Accolade's performance. Details on the relationship between these non-GAAP measures to the most comparable GAAP measures, the reconciliations thereof can be found in the press release that's posted on our website. Also, please note that certain statements made during this call will be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements are subject to risks, uncertainties and other factors that could cause the actual results for Accolade differ materially from those expressed or implied on the call. For additional information, please refer to our cautionary statement in our press release and our filings with the SEC, all of which are available on our website. With that, I'd like to turn the call over to Rajeev.
Rajeev Singh: Thank you, Todd. We continue to operate in a large market with an opportunity to grow at attractive rates. Customers continue to find tangible value in the services that we deliver. We're the market leader in our category, and our objective is to create long-term value for our customers, partners, employees and shareholders by adapting our strategy of the best interest of that objective. With that in mind, this quarter, we've adjusted our revenue expectations for the year, while maintaining our adjusted EBITDA outlook. Our rationale is simple. We recognize current financial market factors and a need for reliable bottom line earnings forecast. With today's guidance, we're creating a higher level of certainty on profitability while maintaining an attractive growth rate and the upside for our market.
More details on the specifics in Steve's section later in this call. Here's what you should take away from today's call. First, we're derisking our business while maintaining attractive growth rates in our market, improving sightlines to our profitability objectives and positioning ourselves well for the long term. Second, by aligning this way, we give ourselves greater certainty on our out-year profitability and cash flows as well. We plan to give you more depth on our long-term plan at an Analyst Day later this year. Third, the category of personalized health care built off of an efficacy platform is now well established in the marketplace. Demand continues to be strong. It is true in every new market, as you pass the point of category creation, market leaders are established with advantage accruing to the leaders.
Accolade was the first and only company in our category to reach the public markets. We are now demonstrating scale in growth and profitability that reinforces our standing as the leader in the market moving forward. Establishing a new market and cementing a leadership position in health care services is a messy business and not every company chooses the same path or the same discipline. But history dictates that those companies that choose extraordinary focus on their customers’ smart growth tactics and scalable profitability always emerge as the winners. Finally, as I mentioned earlier, we're in the next stage of building an attractive market, and we're doing so in a period of massive technological innovation. No company is better positioned than Accolade to turn generative artificial intelligence and virtual services like primary care Expert Medical Opinion and a trusted partner platform into a mainstay of how health care is delivered in the years ahead.
I'll now hand it over to Steve for the financial details, and I'll return shortly for closing remarks. Steve, over to you.
Steve Barnes : Thanks, Raj. I'll recap fiscal Q1 results and then comment on our forward guidance. In fiscal Q1, we generated approximately $110.5 million in revenue, representing 18% growth over Q1 fiscal '24. The outperformance in Q1 was largely driven by timing of revenue recognition. Excluding that timing impact, Q1 revenue was within the guidance range we previously provided. That revenue recognition timing also had a corresponding positive impact on adjusted EBITDA and adjusted gross margin. With that, adjusted EBITDA loss for the quarter was $3.3 million. Adjusted gross margin increased to 47.8% from 43.5% in the prior year. Turning to the balance sheet. Cash, cash equivalents and marketable securities totaled $231 million at the end of the first fiscal quarter.
Our cash balance combined with our return to profitability, continue to provide us confidence in the strength of our balance sheet and plans to manage our convertible notes, which mature in April 2026. Now turning to guidance. We are revising our fiscal year 2025 revenue guidance to a range of $460 million to $475 million, representing year-over-year growth in the range of 11% to 15%. We are also affirming our guidance for a positive adjusted EBITDA in fiscal 2025 in the range of $15 million to $20 million. Let me take a moment to provide a few key points about the guidance. First, we're derisking the revenue guide while preserving our profitability goals. We use this word derisking a few times today, so let me be clear about what we're saying.
The feedback from The Street was consistent last quarter that the number one thing the market worry in the current environment is uncertainty. We're reducing that uncertainty by moderating the top-line while reinforcing our commitment and confidence in achieving our profitability goals. Both Accolade's business and the broader navigation market continue to have the potential to go faster but we're taking the approach to focus first on growing EBITDA and then driving incremental revenue upside as the business matures. Secondly, we are taking into account a few factors in our revised guidance. One is this focus on profitable growth. We are looking at all marketing spend to focus on the most profitable quarters -- excuse me, to focus on the most profitable opportunities.
In that vein, we expect to grow our consumer PlushCare business approximately 20% this year, which represents industry-leading growth rates for virtual care, and it's also a bit lower than what our guidance contemplated in April and will result in reduced associated marketing spend in fiscal 2025. The same is true when it comes to driving increased usage-based revenue for EMO and Enterprise Primary Care. This is largely what we refer to as platform connected revenue and it will continue to grow faster than the overall business, but with a judicious view on balancing marketing spend against our profit objectives. The third factor is customer mix and unit economics. As Raj said, the market is large, and while it is early in the traditional selling season, our pipeline remains strong.
We recently signed a multimillion-dollar advocacy deal, just to give you a sense of the selling season is off to a good start. That said, we are not compelled to chase business at margin profiles that do not align with our goal for profitable growth. We are building for the long-term and believe strongly that discipline around pricing and margins is the right way to build a healthy business. Along with those revenue factors, we continue to be laser-focused on cost management. Continuing the conversation, we started with you a year ago, we are constantly looking at ways to improve operating efficiency, including by means of our office strategy, our use of technology and the location of our recruiting efforts. The combination of these factors and the view towards balancing growth and profitability are the underlying reasons why we are maintaining our profitability targets while moderating the revenue guidance.
Next, we are providing fiscal Q2 guidance today of revenue in the range of $104 million to $106 million and adjusted EBITDA loss in the range of $8 million to $10 million. Note that the previously mentioned revenue recognition timing in Q1 is a key factor for the sequential revenue decline in Q2, along with our approach around balancing growth and profitability. Consistent with the outlook we provided in April, we expect adjusted EBITDA to be approximately breakeven in the fiscal third quarter, with significant positive adjusted EBITDA in Q4 reflecting our ramp in revenue from savings PG recognition, which occurs predominantly in Q4, along with revenue contributions from new customers we expect to launch in January 2025. Finally, for your longer-term models, we recommend a mid-teens revenue growth rate while projecting the same adjusted EBITDA margin expansion of 300 to 400 basis points per year that we have guided to previously.
With that, I'll turn the call back to Raj before taking questions.
Rajeev Singh: Thanks, Steve. We exist in a health care market that clearly requires to have innovative new companies and categories to deliver better health care outcomes for individuals and their families. As we approach $0.5 billion in revenues and profitability, we've created one of those companies in one of those categories. The creation stages of markets, especially in health care in the United States are not straight lines or necessarily smooth roads. As every entrepreneur a business person knows, if everything is a priority, then nothing is a priority. In markets like these, the best companies choose their priorities and execute in the face of headwinds, steadfast in their commitment to these principles. Today, we're choosing smart, profitable growth and certainty on the bottom line.
That approach accrues the most value to our customers, employees, partners and shareholders over the long term. We continue to lean forward in every way as it relates to evolving and growing our business and most importantly, is serving our members and our customers. Our investments in artificial intelligence tightly integrated offerings and market-leading clinical quality and capabilities will continue. Today, we have more than 1,200 customers and 14 million members who rely on us to improve their health care every day. And we have an incredibly dedicated group of more than 2,000 employees focused on creating a fundamentally improved health care experience for those companies and members. That focus has served us well as we've built our business over the last 15 years, and it will continue to serve us well moving forward.
With that, operator, we'll now open the call for questions.
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