accd-20240831

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 August 31, 2024


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 September 30, 2024, 80,537,080 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 Augu st 31, 2024 and February 29, 2024	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended August 31, 2024 and 2023	4
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the three and six months ended August 31, 2024 and 2023	5
	Condensed Consolidated Statements of Cash Flows for the six months ended August 31, 2024 and 2023	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	35

PART II OTHER INFORMATION
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	36
Item 6.	Exhibits	37

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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.

Table of Contents

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)


	August 31, 2024		February 29, 2024
Assets
Current assets:
Cash and cash equivalents	$	173,315	$	185,718
Marketable securities	61,035		51,315
Accounts receivable, net	21,224		21,800
Unbilled revenue	3,994		5,902
Current portion of deferred contract acquisition costs	4,299		4,369
Prepaid and other current assets	10,869		15,808
Total current assets	274,736		284,912
Property and equipment, net	18,927		19,140
Operating lease right-of-use assets	25,647		28,340
Goodwill	278,191		278,191
Intangible assets, net	147,642		165,407
Deferred contract acquisition costs	8,733		9,608
Other assets	2,196		2,553
Total assets	$	756,072	$	788,151
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	9,027	$	13,749
Accrued expenses and other current liabilities	11,434		10,736
Accrued compensation	26,924		23,392
Due to customers	5,857		18,552
Current portion of deferred revenue	40,710		34,770
Current portion of operating lease liabilities	7,068		6,651
Total current liabilities	101,020		107,850
Loans payable, net of unamortized issuance costs	209,098		208,482
Operating lease liabilities	22,642		26,077
Other noncurrent liabilities	153		156
Deferred revenue	85		121
Total liabilities	332,998		342,686
Commitments and Contingencies (note 10)
Stockholders’ equity
Common stock par value $0.0001; 500,000,000 shares authorized; 80,373,402 and 78,070,781 shares issued and outstanding at August 31, 2024 and February 29, 2024, respectively	8		8
Additional paid-in capital	1,528,665		1,499,603
Accumulated other comprehensive income (loss)	26		(47)
Accumulated deficit	(1,105,625)		(1,054,099)
Total stockholders’ equity	423,074		445,465
Total liabilities and stockholders’ equity	$	756,072	$	788,151

See accompanying notes to condensed consolidated financial statements.

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ACCOLADE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited)

(In thousands, except share and per share data)


	Three months ended August 31,				Six months ended August 31,
	2024		2023		2024		2023
Revenue	$	106,360	$	96,864	$	216,826	$	190,090
Cost of revenue, excluding depreciation and amortization	56,922		55,317		115,533		109,520
Operating expenses:
Product and technology	22,477		25,602		48,786		51,501
Sales and marketing	24,932		24,076		53,126		49,109
General and administrative	16,536		16,259		32,544		32,339
Depreciation and amortization	10,637		10,818		21,029		22,458
Total operating expenses	74,582		76,755		155,485		155,407
Loss from operations	(25,144)		(35,208)		(54,192)		(74,837)
Interest income, net	1,687		1,714		3,384		2,635
Other income (expense)	(103)		753		(9)		1,143
Loss before income taxes	(23,560)		(32,741)		(50,817)		(71,059)
Income tax expense	(374)		(84)		(709)		(175)
Net loss	$	(23,934)	$	(32,825)	$	(51,526)	$	(71,234)

Net loss per share, basic and diluted	$	(0.30)	$	(0.43)	$	(0.65)	$	(0.96)

Weighted-average common shares outstanding, basic and diluted	80,072,045		75,487,717		79,102,868		74,334,111

Other comprehensive income:
Unrealized income on marketable securities, net	$	60	$	—	$	73	$	—
Comprehensive loss	$	(23,874)	$	(32,825)	$	(51,453)	$	(71,234)

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, 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


	Stockholders' Equity (Deficit)
	Common stock			Additional paid-in capital		Accumulated Other Comprehensive Income (Loss)		Accumulated deficit		Total
	Shares	Amount
Balance, February 29, 2024	78,070,781	$	8	$	1,499,603	$	(47)	$	(1,054,099)	$	445,465
Exercise of stock options and vesting of restricted stock units	473,121	—		125		—		—		125
Issuance of common stock in connection with the employee stock purchase plan	297,668	—		1,944		—		—		1,944
Stock-based compensation expense	—	—		15,310		—		—		15,310
Other comprehensive income (loss)	—	—		—		13		—		13
Net loss	—	—		—		—		(27,592)		(27,592)
Balance, May 31, 2024	78,841,570	$	8	$	1,516,982	$	(34)	$	(1,081,691)	$	435,265
Exercise of stock options and vesting of restricted stock units	1,531,832	—		8		—		—		8
Stock-based compensation expense	—	—		11,675		—		—		11,675
Other comprehensive income (loss)	—	—		—		60		—		60
Net loss	—	—		—		—		(23,934)		(23,934)
Balance, August 31, 2024	80,373,402	$	8	$	1,528,665	$	26	$	(1,105,625)	$	423,074

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)


	Six months ended August 31,
	2024		2023
Cash flows from operating activities:
Net loss	$	(51,526)	$	(71,234)
Adjustments to reconcile net loss to net cash used in
Operating activities:
Depreciation and amortization expense	21,029		22,458
Amortization of deferred contract acquisition costs	2,682		2,368
Noncash interest expense	616		839
Accretion of discounts/premiums on marketable securities, net	(1,148)		—
Stock-based compensation expense	26,985		30,004
Changes in operating assets and liabilities:
Accounts receivable and unbilled revenue	2,483		1,381
Accounts payable and accrued expenses	(4,075)		(1,565)
Deferred contract acquisition costs	(1,737)		(2,082)
Deferred revenue and due to customers	(6,791)		6,707
Accrued compensation	3,532		(14,020)
Other liabilities	(328)		(1,000)
Other assets	5,302		(1,181)
Net cash used in operating activities	(2,976)		(27,325)
Cash flows from investing activities:
Purchases of marketable securities	(36,000)		—
Maturities of marketable securities	27,500		—
Capitalized software development costs	(1,933)		(4,698)
Purchases of property and equipment	(1,071)		(1,965)
Net cash used in investing activities	(11,504)		(6,663)
Cash flows from financing activities:
Proceeds from stock option exercises	133		3,100
Proceeds from employee stock purchase plan	1,944		1,992
Net cash provided by financing activities	2,077		5,092
Net decrease in cash and cash equivalents	(12,403)		(28,896)
Cash and cash equivalents, beginning of period	185,718		321,083
Cash and cash equivalents, end of period	$	173,315	$	292,187
Supplemental cash flow information:

SEC Form 10-Q filed by Accolade Inc.