Accolade Posts Stellar Q3 Results; Shares Up 11.3%

Accolade, Inc. (NASDAQ: ACCD) reported stronger-than-expected fiscal Q3 results driven by higher-than-expected performance-based revenues. Notably, the company also issued impressive preliminary guidance for the fiscal year 2023.

Following the earnings announcement and optimistic guidance, shares of the technology-driven benefits and health utilization software provider gained 11.3% during the extended trading session on January 10.

Stellar Q3 Outperformance

Notably, adjusted third-quarter earnings of 31 cents per share were significantly higher than the loss of 32 cents reported in the prior-year period, and exceeded analysts’ expectations of a loss of 74 cents per share.

Furthermore, revenues of $83.5 million in the quarter more than doubled compared to $38.44 million reported a year earlier, and exceeded analysts’ estimates of $75.89 million.

Raises Fiscal 2022 and Issues Preliminary Fiscal 2023 Outlook

Based on the consistency and stability of the business, the company issued preliminary guidance for the fiscal year 2023. The company projects revenue growth of 25% for the fiscal year 2023.

The company also expects a reduction in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss during the year, with a long-term target to break-even adjusted EBITDA in the fiscal year 2025. For the fiscal year 2023, adjusted EBITDA is expected to be in the range of (11% to 12%) of revenue.

For fiscal 2022, the company now expects revenues between $306 million and $309 million, higher than the previously guided range of $303 million to $307 million. Furthermore, adjusted EBITDA is expected to range between $(48) million and $(52) million), or (16% to 17%) of revenue against the prior range of $(49) million to $(54) million.

For the fourth quarter of fiscal 2022, the company expects revenues to be between $90 million and $93 million, while adjusted EBITDA is expected to range between $(4) million and $(8) million.

Management Commentary

Sharing Accolade’s transformation journey over the last year from a navigation and advocacy company to a personalized healthcare company, CEO Rajeev Singh, commented, “With the January 1 launch of our first customers on Accolade Care and Accolade One, we have completed the transition from a company that focused solely on providing navigation, guidance, and recommendations to our members, to a dramatically more impactful company that has all the capabilities to deliver an end-to-end care journey that can transform the healthcare experience.”

Accolade CFO, Steve Barnes, said, “As we enter the fourth quarter with a more integrated suite of offerings and expanded go to market motion, we are beginning to see the positive impact of combining Accolade, 2nd.MD and PlushCare. Among our 200+ new customers, and expansions with existing customers, we are seeing more companies select multiple Accolade offerings, demonstrating the value of the extended portfolio and laying the foundation for Accolade One and Accolade Care.”

Wall Street’s Take

Following the Q3 earnings, Morgan Stanley analyst Ricky Goldwasser decreased the price target on Accolade to $30 (56.7% upside potential) from $31, and reiterated a Buy rating on the stock.

Overall, the stock has a Strong Buy consensus rating based on 5 unanimous Buys. The average Accolade stock forecast of $37.5 implies 95.92% upside potential from current levels.

Investors Weigh In

TipRanks’ Stock Investors tool shows that investors currently have a Very Positive stance on Accolade, with 6.6% of investors increasing their exposure to the stock over the past 30 days.

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