Credit Suisse Hosts Accolade

Credit Suisse https://www.credit-suisse.com hosted the Accolade (ACCD) https://accolade.com Management team for a virtual NDR. Management attendees included Rajeev Singh, CEO, Steve Barnes, CFO, and Todd Friedman, and SVP Investor Relations.  Credit Suisse analysts reiterated their Outperform rating with a $70 TP.

ACCD for their employee engagement/advocacy services business, breaks up the employer market into two segments: self-insured employers (110 min covered) and fully-insured employers (60 min covered) with the market constantly shifting to self-insured.

With two min members, ACCD is the leader in employee advocacy and when combined with the members covered by ACCD’s competitors, the total market coverage for carved-out employee advocacy services is still just ~4-4 min.

When combined with market opportunities in expert medical opinion and primary care (given ACCD’s recent acquisitions) the total TAM becomes massive and very tangible, with ACCD only in the first inning of growth.

ACCD has seen the employee base on an aggregate level stabilize and start to show an uptick. ACCD is roughly at pre-COVID levels (on a same store basis) in terms of employee base at their clients.

While this trend has been encouraging, ACCD continues to be cautious, given there are still some concerns with respect to COVID and the variants. In terms of ACCD’s guidance, the company has not assumed any outlandish pickups in hiring across the company’s customer base.

ACCD’s PF revenues for FY22 are growing ~30% Y/Y without much contribution from synergies. Management notes that for FY 23, organic growth in the upper-20% range is reasonable. However, LT, with 2nd.MD growing +40% and PlushCare 25% for the next several years, 35-40%, management believes ACCD can grow +25% for the next several years.

As for profitability, ACCD expects to break even within 2-3 years, and the company will then make the assessment for trading off growth versus profitability. Over the long term, management believes the business can drive 15-20% EBITDA margins at scale. With respect to M&A, despite two deals in 1H21, management continues to be opportunistic.

For questions, provide feedback or news, email Jailendra Singh at jailendra.singh@credit-suisse.com or call 212-325-8121.

 

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