accd-20231130

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________________________

FORM 10-Q

______________________________________________________


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended November 30, 2023


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from to

Commission File Number: 001-39348

ACCOLADE, INC.

(Exact name of registrant as specified in its charter)


Delaware (State or Other Jurisdiction of Incorporation or Organization)		01-0969591 (I.R.S. Employer Identification No.)
	1201 Third Avenue, Suite 1700 Seattle, WA 98101 (Address of principal executive offices including zip code)

Registrant’s telephone number, including area code: (206) 926-8100

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	ACCD	The Nasdaq Stock Market LLC (The Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	x	Accelerated filer	o

Non-accelerated filer	o	Smaller reporting company	o

		Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of December 31, 2023, 77,407,607 shares of the registrant’s common stock were outstanding.

Table of Contents

ACCOLADE, INC.

INDEX


		PAGE NUMBER
	Special Note Regarding Forward Looking Information	2

PART I FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of November 30 , 2023 and February 28, 2023	3
	Condensed Consolidated Statements of Operations for the three and nine months ended November 30 , 2023 and 2022	4
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the three and nine months ended November 30 , 2023 and 2022	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended November 30 , 2023 and 2022	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	36

PART II OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	39

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as "anticipate," "believe," "contemplate," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "target," "will," or "would" or the negative of these words or other similar terms or expressions. Forward-looking statements include information related to our financial performance and possible or assumed future results of operations and expenses, our outlook, business strategies and plans, business environment, market size, product capabilities, timing of new product releases, the impact of our focus areas and key initiatives, and potential future growth. Forward-looking statements include all statements that are not historical facts.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled "Risk Factors" and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that such information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

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PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

ACCOLADE, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (unaudited)

(In thousands, except share and per share data)


	November 30, 2023		February 28, 2023
Assets
Current assets:
Cash and cash equivalents	$	230,017	$	321,083
Accounts receivable, net	23,195		23,435
Unbilled revenue	2,362		3,260
Current portion of deferred contract acquisition costs	4,462		4,022
Prepaid and other current assets	12,054		14,149
Total current assets	272,090		365,949
Property and equipment, net	19,223		14,763
Operating lease right-of-use assets	28,847		29,525
Goodwill	278,191		278,191
Intangible assets, net	174,548		203,202
Deferred contract acquisition costs	9,588		9,815
Other assets	2,984		1,624
Total assets	$	785,471	$	903,069
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	12,667	$	10,155
Accrued expenses and other current liabilities	8,334		11,744
Accrued compensation	25,911		39,346
Due to customers	9,085		15,694
Current portion of deferred revenue	52,772		35,191
Current portion of operating lease liabilities	6,900		7,284
Total current liabilities	115,669		119,414
Loans payable, net of unamortized issuance costs	208,178		282,323
Operating lease liabilities	26,620		27,189
Other noncurrent liabilities	165		203
Deferred revenue	120		154
Total liabilities	350,752		429,283

Commitments and Contingencies (note 10)
Stockholders’ equity
Common stock par value $0.0001; 500,000,000 shares authorized; 76,966,368 and 73,089,075 shares issued and outstanding at November 30, 2023 and February 28, 2023, respectively	8		7
Additional paid-in capital	1,481,303		1,428,073
Accumulated deficit	(1,046,592)		(954,294)
Total stockholders’ equity	434,719		473,786
Total liabilities and stockholders’ equity	$	785,471	$	903,069

See accompanying notes to condensed consolidated financial statements.

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ACCOLADE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (unaudited)

(In thousands, except share and per share data)


	Three months ended November 30,				Nine months ended November 30,
	2023		2022		2023		2022
Revenue	$	99,371	$	90,946	$	289,461	$	264,117
Cost of revenue, excluding depreciation and amortization	54,518		50,412		164,038		147,857
Operating expenses:
Product and technology	23,468		24,254		74,969		77,265
Sales and marketing	26,230		25,023		75,339		75,573
General and administrative	15,474		20,037		47,813		61,295
Depreciation and amortization	11,400		11,602		33,858		34,749
Goodwill impairment	—		—		—		299,705
Total operating expenses	76,572		80,916		231,979		548,587
Loss from operations	(31,719)		(40,382)		(106,556)		(432,327)
Interest income (expense), net	1,705		386		4,340		(484)
Other income (expense)	9,281		201		10,424		21
Loss before income taxes	(20,733)		(39,795)		(91,792)		(432,790)
Income tax benefit (expense)	(331)		(77)		(506)		3,573
Net loss	$	(21,064)	$	(39,872)	$	(92,298)	$	(429,217)

Net loss per share, basic and diluted	$	(0.28)	$	(0.56)	$	(1.24)	$	(6.07)

Weighted-average common shares outstanding, basic and diluted	76,139,256		71,228,351		74,572,094		70,755,157

See accompanying notes to condensed consolidated financial statements.

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ACCOLADE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity (Deficit) (unaudited)

(In thousands, except shares)


	Stockholders' Equity (Deficit)
	Common stock			Additional paid-in capital		Accumulated deficit		Total
	Shares	Amount
Balance, February 28, 2022	67,098,477	$	7	$	1,350,431	$	(494,644)	$	855,794
Settlement of acquisition-related contingent consideration	1,939,853	—		—		—		—
Exercise of stock options and vesting of restricted stock units	228,701	—		358		—		358
Issuance of common stock in connection with the employee stock purchase plan	343,310	—		1,788		—		1,788
Stock-based compensation expense	—	—		19,389		—		19,389
Net loss	—	—		—		(342,822)		(342,822)
Balance, May 31, 2022	69,610,341	$	7	$	1,371,966	$	(837,466)	$	534,507
Settlement of acquisition-related contingent consideration	1,327,408	—		—		—		—
Exercise of stock options and vesting of restricted stock units	600,628	—		816		—		816
Stock-based compensation expense	—	—		17,514		—		17,514
Net loss	—	—		—		(46,523)		(46,523)
Balance, August 31, 2022	71,538,377	$	7	$	1,390,296	$	(883,989)	$	506,314
Exercise of stock options and vesting of restricted stock units	635,315	—		466		—		466
Issuance of common stock in connection with the employee stock purchase plan	217,035	—		1,139		—		1,139
Stock-based compensation expense	0	—		17,906		—		17,906
Net loss	0	—		—		(39,872)		(39,872)
Balance, November 30, 2022	72,390,727	$	7	$	1,409,807	$	(923,861)	$	485,953

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ACCOLADE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity (Deficit) (unaudited)

(In thousands, except shares)


	Stockholders' Equity (Deficit)
	Common stock			Additional paid-in capital		Accumulated deficit		Total
	Shares	Amount
Balance, February 28, 2023	73,089,075	$	7	$	1,428,073	$	(954,294)	$	473,786
Exercise of stock options and vesting of restricted stock units	1,895,163	1		2,530		—		2,531
Issuance of common stock in connection with the employee stock purchase plan	280,162	—		1,992		—		1,992
Stock-based compensation expense	—	—		14,278		—		14,278
Net loss	—	—		—		(38,409)		(38,409)
Balance, May 31, 2023	75,264,400	$	8	$	1,446,873	$	(992,703)	$	454,178
Exercise of stock options and vesting of restricted stock units	788,881	—		565		—		565
Release of indemnity shares in connection with acquisition	28,089	—		—		—		—
Stock-based compensation expense	—	—		15,726		—		15,726
Net loss	—	—		—		(32,825)		(32,825)
Balance, August 31, 2023	76,081,370	$	8	$	1,463,164	$	(1,025,528)	$	437,644
Exercise of stock options and vesting of restricted stock units	652,925	—		908		—		908
Issuance of common stock in connection with the employee stock purchase plan	232,073	—		1,587		—		1,587
Stock-based compensation expense	—	—		15,644		—		15,644
Net loss	—	—		—		(21,064)		(21,064)
Balance, November 30, 2023	76,966,368	$	8	$	1,481,303	$	(1,046,592)	$	434,719

See accompanying notes to condensed consolidated financial statements

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ACCOLADE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (unaudited)

(In thousands)

SEC Form 10-Q filed by Accolade Inc.