Accolade (ACCD) Reports Q3 Fiscal 2021
Yesterday after the close Accolade (ACCD) reported Q3 results that surpassed expectations on both the top and bottom lines. Revenue of $38.4 million rose 30% while EPS of -$0.32 beat by $0.03. Growth was driven by new customer growth (member population is now over 2 million) across Accolade’s markets as well as across product offerings, including new solutions such as COVID Response Care.
Given the strong performance, as well as a strong selling season (just concluded) management increased revenue guidance for fiscal 2021 (which ends on February 28) by $3 million to a range of $162 million to $165 million. At the high end that implies 25% growth, which is on par with management’s long-term growth target. Break-even is still a couple years out.
There’s no doubt the company’s fiscal 2021 has been a messed up year. It’s worth noting that at the core of Accolade’s business model it’s largely about volume and pricing. With lingering unemployment issues due to the pandemic and uncertainty around airline customers (who have done better than expected, so far) management is choosing to strike a conservative tone instead of presenting a best-case growth scenario for fiscal 2022, even though there are many encouraging signs across the business. This is smart, especially given it only has one quarter left in fiscal 2021 and that quarterly report will include a big chunk of annual revenue that comes in through performance-based contract clauses.
If we step back we see that Accolade is a small company playing in a very large healthcare technology market where there is a massive need for employers to use its services, which help control costs and coordinate care. At the end of the day, its future success rests on Accolade’s ability to drive positive ROI for clients, and the company has a great history of doing just that. I think management is being extremely conservative (again, the right call at this moment) but that there is tremendous upside should vaccine rollout and stimulus help get the economy back on track throughout 2021.
For further proof that there’s a lot to like here, I’ll note that the conference call was joined by 12 analysts from big banks. Participation was likely aided by the reality that there weren’t many other conference calls going on yesterday afternoon, but still. I think there’s a lot of interest in Accolade and we have a long-term winner here.
All that said, my best guess is that the stock will hang out near 50, plus or minus 15%, over the coming weeks. We’re right below 50 at this moment, so at this precise moment I’m maintaining a HOLD rating. If you have a small position it’s okay to add some shares here, but for larger purchases look to add below 45. HOLD