Accolade (ACCD) Reports Q2 Fiscal 2022
Today is something of a battleground day for Accolade (ACCD) given that the stock slid into yesterday’s earnings call near the low end of its 2020 trading range amidst concerns that the Delta variant would challenge the critical selling season, which is underway right now.
The good news is that Accolade beat expectations, growing revenue by 99% to $73.3 million, comfortably ahead of consensus expectations for $70 million. The revenue beat was helped by the Plush Care acquisition (contributed $2.2 million) while the core Accolade business continued to grow above 30%. Management discussed early wins with the new services Accolade One and Accolade Care, including Medisource, as well as other large customer wins, including Hyatt Hotels (H), which brings 115,000 employees onto the platform.
Management called out some pressures from the Delta variant which helped the Plushcare business (virtual care) but hurt the 2nd.MD business (second opinions for elective procedures). Given what we’ve seen in October, I think we could assume those pressures are easing (but could come back). Still, management opted to put forth what it calls a conservative view, though in practice the full-year revenue guidance increased and now suggests a range of $303 million to $307 million.
There was a lot of talk about the evolution of the Accolade platform and where it fits into the larger healthcare matrix. The takeaway is that management is doing a lot to round out Accolade’s offerings so sales teams can have a solution for all the major pain points large employers struggle with. Given the ongoing changes in the healthcare system, this is a bit like trying to change tires while a car is navigating a bumpy road. But that’s the business Accolade is in and it’s why employers turn to the company for help.
As far as the stock is concerned, the afterhours reaction yesterday wasn’t great, it improved a little this morning and, as we get into the trading day, shares of ACCD are down around 1%. Based on all the evidence in front of us, the stock should (I repeat, should) be able to recover some of the ground it recently lost. But there are no guarantees and it’s not out of the realm of possibility that the average investor just doesn’t understand anything about what Accolade does beyond “something related to healthcare for employers.” That could keep more investors from buying the stock.
For us, putting it all together I see today (and Monday) as battleground days for ACCD. We need to see some momentum come into the name here as I’m not willing to sit on it if it drifts lower. Moving to hold to reflect current uncertainty on how the coming days will go. HOLD