Accolade: little applause lately (NASDAQ:ACCD)

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“Talent is often stifled by the desire to be seen as talented.“- Mokokoma Mokhonoana

In today’s article, we take an in-depth look for the first time Accolade Inc. (NASDAQ:ACCD). Like so many cloud and SaaS small caps, shareholders have had little cause for celebration in recent months as much of the market has gone into “risk-free” mode and high beta sectors in stocks have been battered. . Is the sale of this name exaggerated? We attempt to answer this question through the analysis below.

ACCD - Stock Chart

ACCD – Stock Chart (Seeking Alpha)

Company presentation:

Accolade is based just outside of Philadelphia. The company develops, maintains and improves technology solutions that help people understand, navigate and use the healthcare system and its benefits. Accolade’s platform consists of cloud-based technology and multi-modal support provided by a team of physician assistants and clinicians.

ACCD - Basic Capabilities

ACCD – Core Capabilities (Company presentation in January)

The Company operates a healthcare information platform for businesses and end users. This comprehensive platform can provide all employee health information in one integrated system. Accolade went public in July 2020 and quickly hit $60 per share shortly after its IPO, valuing the company at over $3 billion for a while. That was more than a rich valuation considering the company had sales of just $133 million in fiscal 2019. However, sanity quickly returned to the market. Currently, the shares are trading at just under $16.00 apiece, which equates to an approximate market capitalization of $1.05 billion.

Third quarter results:

On January 10, the company released its third quarter results. The company posted earnings of 31 cents per share even as adjusted EBITDA was negative $11.9 million for the quarter. Revenue rose more than 115% to nearly $83.5 million, which was significantly above consensus. However, the “beat” was largely due to the recognition of $7 million in third-quarter revenue, which Accolade originally expected to recognize in the fourth quarter.

ACCD - Growing Capabilities

ACCD – Growing Capabilities (Company Presentation in January)

The company has done a solid job expanding its customer base and total addressable market in 2021 as it adds new capabilities to its platform.

ACCD - Achievements 2021

ACCD – Achievements 2021 (Company presentation in January)

The company also provided guidance for sales worth between $90 million and $93 million for the fourth quarter and between $306 million and $309 million for fiscal 2022, which was slightly up from forecasts. previous for the full year.

Financial Highlights for the Third Quarter of the Fiscal Year Ended November 30, 2021

Quarter ended November 30 %
2021 2020 Change(2)
(in millions, except percentages)
GAAP financial data:
Income $ 83.5 $ 38.4 117 %
Net profit (net loss) $ 22.5 $ (16.6 ) 236 %
Non-GAAP(1) financial data:
Adjusted EBITDA $ (11.9 ) $ (11.4 ) (5 )%
Adjusted gross profit $ 39.2 $ 16.1 144 %
Adjusted gross margin 47.0 % 41.8 %

For fiscal 2023, management expects revenue growth of 25% and a reduction in the adjusted EBITDA loss.

ACCD - Orientations for the 2023 financial year

ACCD – FY2023 Guidance (Company Presentation in January)

Analysts’ comments and results:

So far in 2022, a dozen analyst firms have chimed in on Accolade, including Goldman Sachs and Needham. All reiterated buy ratings, but most with downgraded price targets. Current price targets range from $30 to $52 per share.

There has been no insider activity (buying or selling) in the stock since January 2021. The company ended the third quarter with just over $365 million in cash and cash equivalents on its balance sheet versus around $280 million in long-term debt.

Verdict:

ACCD - FINANCIAL YEAR 2023

ACCD – FY2023 (Company Presentation in January)

During the third quarter earnings conference call, the company’s CEO forecast that the company will break even on an EBITDA basis in fiscal year 2025 when Accolade generates $600 million in revenue. annual.

ACCD - Targets/Financial Objectives

ACCD – Financial Targets/Objectives (Company Presentation in January)

For fiscal year 2023, the analyst consensus the company is losing nearly $2.00 per share (across a wide range of estimates) on revenue growth just north of 25% to just under $390 million. That means the company’s valuation is just a little lower than three times forward sales. Not very expensive considering the growth prospects. Accolade has done a good job of diversifying its customer base since its IPO. When they first entered the public markets seven quarters ago, their largest customer accounted for 25% of total revenue and Accolade’s top four customers accounted for 60% of overall revenue. Today, no customer represents more than 10% of sales.

For investors comfortable investing in a growth name where profitability is several years away, Accolade seems worthy of a little ‘watch the article‘ position after the recent sharp decline in stocks.

“I hope not to be like the artist who has to depend on the naivety of his audience to applaud them.“- Criss Jami

Bret Jensen is the founder and author of articles for the Biotech Forum, Busted IPO Forum and Insiders Forum

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