Accolade(ACCD) - 2021 Q4 - Annual Report

Part I Business Accolade provides personalized healthcare navigation and benefits management for employers, expanding services via 2nd.MD and PlushCare acquisitions - Accolade's core business is a personalized health and benefits platform for employers, aiming to simplify healthcare navigation for employees (members) through a combination of human support (Health Assistants, clinicians) and technology[13] - The business model is based on recurring Per-Member-Per-Month (PMPM) fees from customers, with contracts averaging three years, providing significant revenue visibility[25] - In March 2021, Accolade acquired 2nd.MD, a leading expert second opinion consultation company. In April 2021, it entered an agreement to acquire PlushCare, a virtual primary care and mental health provider, for up to $450 million[20] Key Offerings | Offering | Description | | :--- | :--- | | Accolade Total Health and Benefits | Most comprehensive solution, integrating healthcare navigation, benefits management, and population health management | | Accolade Total Care | Focuses on guiding members to high-quality care options and providers | | Accolade Total Benefits | Designed to increase employee adoption and understanding of existing benefits programs | | Add-on Solutions | Includes Accolade Boost, Trusted Supplier Program, COVID Response Care, and Mental Health Integrated Care | Risk Factors The company faces significant risks including historical net losses, customer concentration, intense competition, and compliance challenges with complex healthcare regulations - The company has a history of net losses, incurring $50.7 million in fiscal 2021, and anticipates continued losses as it invests in growth[76] - Significant customer concentration exists, with the three largest customers (American Airlines, Comcast Cable, Lowe's) accounting for 38% of revenue in fiscal 2021. Comcast Cable alone accounted for 16%[79] - The business is subject to complex healthcare laws, including HIPAA. Failure to comply could result in substantial penalties, fines, and reputational harm[54][156] - Security breaches of sensitive data like Protected Health Information (PHI) and Personally Identifiable Information (PII) pose a significant risk, potentially leading to liability, regulatory penalties, and loss of customer confidence[135][136] - Competition is intense and comes from large health plans (e.g., Cigna, UnitedHealth), traditional advocacy companies (e.g., Quantum Health), and emerging digital health companies (e.g., Grand Rounds)[49] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[246] Properties Accolade maintains leased co-headquarters in Seattle and Plymouth Meeting, with additional offices in Scottsdale and Prague - The company's principal executive offices are leased co-headquarters in Seattle, WA (lease expires 2030) and Plymouth Meeting, PA (lease expires 2027)[246] Legal Proceedings The company is not currently involved in any material pending litigation or legal proceedings - There are no pending lawsuits or claims expected to have a material effect on the company[247] Mine Safety Disclosures This item is not applicable to the company's business operations - Not applicable[247] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Accolade's common stock trades on Nasdaq under 'ACCD' since its July 2020 IPO, with no anticipated cash dividends as earnings are retained for growth - Common stock is listed on the Nasdaq Global Select Market under the symbol 'ACCD', with trading beginning on July 2, 2020[247] - The company has never paid cash dividends and does not intend to in the foreseeable future, retaining funds for business development[248] - The July 2020 IPO generated aggregate net proceeds of $231.2 million after deducting underwriting discounts and offering expenses[251] Selected Financial Data This item is not applicable as per the report - Not applicable[252] Management's Discussion and Analysis of Financial Condition and Results of Operations Fiscal 2021 revenue grew 29% to $170.4 million, with a net loss of $50.7 million, supported by strong liquidity and increased customer count Fiscal Year 2021 vs. 2020 Financial Highlights (in millions) | Metric | FY 2021 | FY 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $170.4 | $132.5 | 29% | | Net Loss | ($50.7) | ($51.4) | (1.4%) | | Adjusted EBITDA | ($26.9) | ($33.1) | 18.7% | Key Business Metrics | Metric | As of Feb 28, 2021 | As of Feb 29, 2020 | | :--- | :--- | :--- | | Annual Contract Value (ACV) | $211.5 million | $161.4 million | | Customer Count | 112 | 54 | | Gross Dollar Retention | 99% | 99% | - Revenue growth of 29% in fiscal 2021 was primarily attributed to an increase in the number of customers served[305] - As of February 28, 2021, the company had $433.9 million in cash and cash equivalents and no outstanding debt, having terminated its Term Loan Facility in July 2020[312][313] Quantitative and Qualitative Disclosures about Market Risks The company's primary market risk is interest rate exposure on cash and cash equivalents, deemed immaterial due to short-term holdings - The company's market risk is primarily related to interest rate changes affecting its $433.9 million in cash and cash equivalents, but this is considered immaterial due to the short-term nature of the holdings[355] Controls and Procedures Management concluded disclosure controls were effective as of February 28, 2021, with no internal control report required for newly public companies - Management concluded that disclosure controls and procedures were effective as of February 28, 2021[358] - A management report on internal control over financial reporting is not included, as permitted for newly public companies[359] Part III Directors, Executive Officers, Corporate Governance, Compensation, and Principal Accountant Fees Information for directors, executive officers, corporate governance, compensation, and principal accountant fees is incorporated by reference from the forthcoming proxy statement - The information for Part III (Items 10, 11, 12, 13, and 14) is incorporated by reference from the forthcoming 2021 Proxy Statement[361] Part IV Exhibit and Financial Statement Schedules This section lists all exhibits filed with the Form 10-K, including consolidated financial statements and material agreements - This section provides an index of all exhibits filed with the Form 10-K, including financial statements and material agreements[365][366] Form 10-K Summary The company indicates that no Form 10-K summary is provided - None[373] Consolidated Financial Statements Financial Statements Consolidated financial statements for FY2021 show significant increases in cash and total assets post-IPO, with a net loss of $50.7 million on $170.4 million revenue Consolidated Balance Sheet Data (in thousands) | Account | Feb 28, 2021 | Feb 29, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $433,884 | $33,155 | | Total current assets | $453,981 | $48,935 | | Total assets | $475,510 | $73,248 | | Total current liabilities | $79,075 | $69,958 | | Total liabilities | $84,662 | $97,021 | | Total stockholders' equity (deficit) | $390,848 | ($256,795) | Consolidated Statement of Operations Data (in thousands) | Account | FY 2021 | FY 2020 | FY 2019 | | :--- | :--- | :--- | :--- | | Revenue | $170,358 | $132,507 | $94,811 | | Loss from operations | ($46,777) | ($48,204) | ($53,977) | | Net loss | ($50,652) | ($51,365) | ($56,496) | | Net loss per share | ($1.72) | ($9.13) | ($12.17) | Notes to Consolidated Financial Statements Notes detail accounting policies, the 2019 MD Insider acquisition, and significant subsequent events including the 2nd.MD and PlushCare acquisitions and convertible note issuance - Revenue is recognized over time as services are provided. A significant portion of fees is variable, based on performance metrics and healthcare cost savings, which requires estimation and potential constraint of revenue until achievement is probable[424][426][429] - On March 3, 2021, the company acquired 2nd.MD for $230 million in cash and 2.8 million shares of common stock, with potential for additional shares based on revenue milestones[542] - On March 29, 2021, the company issued $287.5 million of 0.50% Convertible Senior Notes due 2026[543] - On April 23, 2021, the company signed a definitive agreement to acquire PlushCare for a purchase price of up to $450 million, consisting of cash and stock[548] - Upon the IPO in July 2020, all outstanding convertible preferred stock converted into 29.5 million shares of common stock[405]