Jack Wallace

Jack Wallace from Guggenheim Securities noted the reiterated full-year subscription revenue guidance and asked for the sources of the implied sequential step-up in Q4, questioning the contribution from the DHA contract.

Answer

CFO Mark Hirschhorn clarified that the sequential increase in Q4 subscription revenue is indeed expected to come from the DHA contract. He stated that as Amwell achieves the enterprise go-live milestone during the quarter, it will begin recognizing revenue from the new contract, setting up a strong start for 2025.

Jack Wallace asked about the drivers of same-store sales growth for the upcoming year, including upselling and pricing, and whether the subscription revenue penetration per provider is expected to increase.

Answer

Executive Balaji Gandhi emphasized that the focus is on increasing the total value of deals across all three revenue streams—subscription, payments, and network solutions—rather than any single component. He reiterated that the increase in total value for new deals is the primary driver of the positive outlook.

Jack Wallace inquired about the progress of Vault CRM migration conversations, the competitive landscape, and the adoption status of the Compass data products for incentive compensation.

Answer

EVP of Strategy Paul Shawah reported that migration discussions are progressing well, with more top 20 commitments expected in the next year, and identified Salesforce as the primary competitor. CEO Peter Gassner noted that while Compass is seeing progress, no customers are using it for compensation yet, but he expects that to occur next year after a necessary period of customer education.

Jack Wallace from Guggenheim Securities inquired about the headwinds impacting the clinical business, such as compounded GLP-1s and marketing challenges, and asked for an update on the B2B pipeline's expected contribution.

Answer

CEO Sima Sistani acknowledged a significant increase in clinic customer acquisition cost (CAC) due to more competitors and higher media costs, leading to a pullback in marketing spend. She noted clinic retention is improving to 6.5 months. On the B2B front, Sistani highlighted strong sales momentum, with CFO Heather Stark adding that B2B revenue is expected to be around $30 million this year, though individual contracts are not yet material on their own.

Jack Wallace of Guggenheim Partners asked about Q2 market conditions, advertising costs, the marketing strategy for the clinical business, and how the new Personify Health partnership accelerates the B2B strategy.

Answer

CEO Sima Sistani acknowledged rising media costs but noted an intentional marketing spend shift from April to May to support a new "one membership" campaign. She explained the Personify Health partnership is a critical channel for landing large employer deals and is part of a broader, ongoing B2B strategy, not a one-off.

Inquired about expected win rates for the year and how much of any change would be due to Accolade's own discipline on pricing versus losing competitively, distinguishing between 'regrettable' and 'non-regrettable' losses.

Answer

The company expects its win rate to continue to be strong in the vast majority of deals. They will remain disciplined on price in certain large, one-off opportunities, which they would classify as 'non-regrettable' losses. For the bulk of the market where they bid competitively, they do not expect their win rates ('regrettable losses') to change. The rate of 'no decisions' is also declining as the market category matures.

Asked for the pro forma growth rate for the quarter excluding the large customer loss, and whether there was any mix shift in new bookings (utilization-based vs. non-utilization-based) that would alter visibility for the upcoming year.

Answer

Management provided the pro forma growth rate for Q3 as approximately 17%. They stated that the mix of bookings is similar to the prior year and that while they are conservative when initially valuing utilization-based contracts, they see potential revenue upside as customer engagement matures, a dynamic that has been consistent.