Q4 2024 Accolade Inc Earnings Call

Participants

Todd Freeman; Senior Vice President, Investor Relations; Accolade Inc

Rajeev Singh; Co - Founder, Concur, Member of the Board of Directors; Accolade Inc

Stephen Barnes; Chief Financial Officer; Accolade Inc

Jailendra Singh; Analyst; Truist Securities

Stephanie Davis; Analyst; Barclays

Ryan Daniels; Analyst; William Blair & Co

Michael Cherny; Analyst; Leerink Partners

Richard Close; Analyst; Canaccord Genuity

Presentation

Operator

Hello and thank you for standing by. Welcome to Accolade fourth-quarter 2024 earnings results conference call. (Operator Instructions) Again. I would now like to hand the conference over to Todd Freeman, Senior VP of Investor Relations. You may begin.

Todd Freeman

Thanks, operator. Welcome, everyone, to our fiscal fourth-quarter earnings call. With me on the call today are our CEO, Rajeev Singh; and our CFO, Steve Barnes.
Before I turn the call over to Rajeev, please note, we'll be discussing certain non-GAAP financial measures that we believe are important when evaluating Accolade's performance. Details and relationship between these non-GAAP measures to the most comparable GAAP measures and the reconciliations thereof can be found in the press release that's posted on our website.
Also, please note that certain statements made during this call will be forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties, and other factors that could cause the actual results for Accolade to be materially from those expressed or implied on the call.
For additional information, please refer to our cautionary statement in our press release and our filings with the SEC, all of which are available on our website. Additionally, there are slides that will accompany the CFO presentation on this call that will be available on the webcast. The slides will be available for download following the call.
With that, I'll turn the call over to Rajeev.

Rajeev Singh

Thank you, Todd, and thank you to everyone for joining us today on our fiscal 25 kickoff Earnings Call. This is an important moment for Accolade and for our shareholders. Over the last several years, markets, including health care, have fundamentally changed success today requires a balanced growth mindset with a focus on execution, discipline and profitability. Speaking specifically to health care, it's time for digital health care disruptors to prove their business models have product market fit in a large market operating leverage, a discernible competitive advantage and teams that can execute through a challenging environment. Some will succeed and others will not. Accolade is amongst that select group that has succeeded by checking each of these boxes. Today, we're a well-positioned company positioned to build a strong and enduring business for our customers, shareholders, employees and partners with those high-level remarks behind us.
Let's begin to zoom in on our business and where we stand. We just completed a fiscal year where we delivered north of 20% top-line growth and improved our adjusted EBITDA approximately 30 million year over year. Both of these achievements are above the expectations that we set at the outset of the fiscal year. As a brief aside on the consistency of our execution, with the exception of a quarter where we lost a large customer two years ago, we have consistently met or exceeded expectations since we became a public company in July 2020. Our outlook for fiscal year 25 is also strong, consistent with our long-term guidance. We expect top line growth in the neighborhood of 20% and profitable adjusted EBITDA on a full year basis today serving more than 14 million lives across more than 1,200 customers. We are a scaled healthcare services company with a direct line of sight to becoming a Rule of 40 company in the years that our growth in the year ahead is driven by several things. First, in annual recurring revenue growth rate of 20% in the last fiscal year, reflecting the strength of our business to business employer, government and health plan offerings.
Second, the continued strength of a direct to consumer business that again grew over 20% last year, and it's highly differentiated in a competitive market.
And third, the exceptional growth of what you will hear us refer to today has platform connected revenues. These are revenues from offerings either our own or from our partners that are delivered because they are connected to our healthcare navigation platform more to come on platform connected and usage-based revenues later in today's call. Let's get into more depth on each element of our business and offerings and why they continue to grow at rates that outpace the market. Our business-to-business offerings focused on employers, health plans and the government are highly differentiated, valuable to our customers and members and scaled to deliver growth and profitability. Our health care navigation platform is seamlessly integrated with our own primary care and expert medical opinion capabilities and with our trusted partners, this seamless integration is particularly compelling to employers and unique from our competition from an employer perspective, we solve the physician gap, helping people get access to the right care when they need it from us, our partners or from brick-and-mortar health systems, something that is particularly challenging for underserved urban rural or minority populations that seamless integration from navigation. Automated care delivery is enabled by our technology stack, which is at scale, state-of-the art and market-leading it is extensible. And as new capabilities have emerged like generative AI, we've been able to embrace them at pace and deliver leverage to our business. We were recently the recipient of the artificial intelligence excellence Excellence Award from the bill's Business Intelligence Group, KI. and our investment in technology writ large are key contributors to the significant improvement in our profitability over the last several years that seamless integration enables platform connected revenue. These revenues reflect visits with our primary care physicians second opinion consults with experts, specialists and enrollments in our trusted partners program. These revenues grow in two ways through customer adoption of new services and through member utilization of those services. Once we see customer adoption in any given year, we expect member usage of those respective services to grow in each following year, up to an appropriate threshold based on the relevance of the respective service to a given population supply will is extremely simple customer adoption of the service deployment of the service employee engagement of the service, which grows each year as a cohort.
One final point on our business-to-business offerings, the diversity of our offerings gives us access to a variety of growth engines. In previous quarters, we've discussed the demand for our offerings from both employers and the government. In today's call, I want to give you more depth on our appeal to health plan. As many of you. As many of you know, for many years now, we've maintained productive relationships with health plans such as UnitedHealthcare and Aetna that resell our expert medical opinion service. We're increasingly seeing health plans interested in relationships where certain of our capabilities are embedded into their own employer offerings. Just this past quarter, Blue Shield of California published the results from the first full year of offering a virtual first plan design called Virtual blue, powered by Akamai. The results were outstanding and here are some highlights, reduction in overall cost for the population of 8% to 10%. Emergency room claims down 11%, 85% of members received a mental health training and bringing you back to the physician gap, two thirds of their members received an appointment within a single deck. In addition, recently, as some of you noted, Blue Cross Blue Shield of Arkansas launched an employer poor offering powered by our navigation platform for customers have the option to also add Accolade care, our second opinion capability. We expect our relationships with health plans, both reseller arrangements and partnerships focused on offerings where Accolade capabilities are fundamental to the new solution to be a growth engine for the business in the years ahead and Steve will give you more color on how to model these revenues in his remarks.
Moving to our DTC offerings, we offer a compelling and differentiated virtual primary care and mental health offering that continues to grow faster than the rest of the market.
Let me outline for you why this growth has continued to outpace other telehealth offerings in the employer and health plan markets and why such growth is sustainable. First, most telehealth offerings in the market offer urgent care, meaning that physicians do not have access to the longitudinal care record of the patient or any information on the corporate benefits. Patients cannot ask to see the same position again, and most physicians are employed in a gig economy part-time role. Our plus Care, direct-to-consumer offering is the opposite of those solutions are physicians utilizing built-for-purpose longitudinal EMR system. Patients can select a primary care physician and stay with them. And our physicians spend at least 60% of their time serving actually patients.
Second, we've built an integrative collaborative care model that embeds mental health care into our primary care model. As Blue Shield, California noted in their study. We perform mental health screenings and the majority of our patients. And we have behavioral health specialists embedded in every care team, thereby providing a scalable mental health service that patients love.
Third, our services powered by a state-of-the-art digital experience and dedicated physicians from the top 50 medical schools in the country, a combination that yields net promoter scores of around 90 consistently, we simply have an easy to use service that delivers exceptional patient data.
One final point, we've tightly integrated the teams, services and capabilities, complus care since our 2021 acquisition in a way that has fostered the continued growth of the consumer business while allowing us to extend access to the same extent exceptional care experience from these dedicated physicians to our employer customers, notably approximately 80% of the new Accolade customers that lost on January 1st of this year, deployed Accolade care, PlushCare and other acquisitions have flourished since being brought under the Accolade umbrella, both individually and as critical components of our B2B offering.
As I turn the call call over to Steve, a closing thought I have never been more bullish about the strength of the market. We compete in the scale and the leverage of our model and the team we've aligned to execute against our vision as one of our investors and recent order was set in a recent blog post it's time to build and healthcare Accolade is leading the way Steve Barnes.

Stephen Barnes

I'll recap the results for the fiscal fourth quarter comment on our outlook and forward guidance and provide additional color on the key drivers of our model.
As our business has expanded and diversified materially since our IPO in 2020 the webcast will show a set of slides to support these comments and the slides will be posted to our IR website after the conclusion of the call, we hit on this at length in our Capital Markets Day presentation last May, and it's worth reiterating. We have executed on a strategy that has meaningfully diversified our offering mix, our customer base and our partnerships and by extension the sources of our revenue. Our margin leverage, both gross margin and operating margin is likewise rooted in this diversification as offerings like primary care in our trusted partner ecosystem carry attractive gross margins. And also because the attachment and increasing contribution of usage-based revenue like GMO case rate, primary care visit fees and partner ecosystem revenues create the opportunity to capture more wallet share during the year with our incremental sales and marketing costs, you'll note that we are using the terms usage-based revenue and set a utilization base revenue for clarification starting with this quarter and in our 10 K as I walk through the results, our key metrics and then our guidance, please keep this diversification and evolution of our business in mind in that thing, and I'll note that many of you have asked for more detail on the various revenue streams and dynamics driving our business today will provide some of that additional color to illustrate the breadth and strength of our business as we accelerate into profitability.
First, let's start with the quarter on the slide on the webcast. You'll see we generated approximately 125 million in revenue in the fourth quarter of fiscal 24, representing 30% pro forma growth over Q4 of fiscal 23. This growth was driven by a healthy mix of PG. performance, new customer launch revenues, usage-based visits in Q3 revenues and D to C virtual primary care. Adjusted EBITDA was also strong coming in at 18.5 million, the largest quarter for adjusted EBITDA and athletes history. Fiscal Q4 adjusted gross margin was 54.2% versus 50.5% in the prior year period. And for the full year, revenue was 414.3 million. In adjusted EBITDA loss was $7.5 million, no, in fiscal 24 we generated almost 100 million in revenue from PlushCare, our D to C offering, which reflects the value and differentiation of that offering and the platform, as Raj described earlier, I'll provide further depth depth on our various revenue streams shortly.
Adjusted gross margin for the year increased to 47.6% for 42% from 46.8% in the prior year.
Now turning to the balance sheet, cash, cash equivalents and marketable securities totaled 237 million at the end of the fourth fiscal quarter, reflecting an increase of 7 million during the quarter. Our cash balance, combined with our turn to profitability, continue to provide us confidence in the strength of our balance sheet and our plans to manage our convertible notes, which mature in April 2026.
Before turning to guidance, allow me to reiterate that we had a strong selling season in fiscal 2014 with 86 million of ARR bookings, representing approximately 20% growth over fiscal 23. Keep in mind, the nature of our ARR bookings is evolving to reflect the strength, breadth and appeal of our capabilities to a wide range of participants in the industry in addition to contributions from the employer and government markets, health plan partnerships are meaningful ARR contributors and represent significant growth opportunities for Accolade relevant.
To that point, let me touch on two annual metrics that we have shared historically. First ACV or annual contract value was 351 million at the end of fiscal 24, which compares to 309 billion at the end of fiscal 23.
As we discussed in detail at Capital Markets, Day last year, ACV as a metric whose relevance has evolved since the time of our IPO four years ago when we were advocacy only and all of our revenue was PMPM based ACV represented more than 90% of the following year's revenue forecast with the dramatic expansion of our business. Since that time, the increasing contribution of usage fees and our direct to consumer virtual primary care offering. Acv is still a relevant metric, but less so than historically. This is why we are providing additional color about usage fee growth and the drivers there in as well as a breakout of PC revenue. Gross dollar retention or GDR was 89% at the end of fiscal year 24, and we expect it to be in the 90% range going forward.
A couple of comments about GDR. first, a portion of the difference from our historical GDR range at fiscal year end 24 is associated with the ending of our tracker product in April 23 and the delayed launch of T5. We are bullish on the continued growth and value we provide to government via our oxygen carrier demonstration offering and the opportunity to drive revenue in the future via the T five program.
Another aspect of GDR relates to the maturing profile of our business. Our Company now has more than 1,200 customers versus 54 at the time of our IPO. We are making decisions across the business that are highly aligned with our commitment to delivering profitable growth as we make that term. Our current focus and offering portfolio is not always aligned with some customer relationships and their contracts with us. We acknowledge that this is part of building a growing company that is disrupting the established health care system, and we are making choices that are in the long-term interest of Accolade and our shareholders now turning to guidance, we are really reiterating our fiscal 25 revenue guidance and providing an initial range of 480 to $500 million, representing year-over-year growth in the range of 16% to 21%. And I'll provide some detail on the revenue build from a couple of viewpoints and in a moment and walk through some slides to illustrate, As Raj noted earlier, we view our business through two broad categories B2B, which comprises employer health plan, government and partner end markets, and D to C representing PlushCare our direct to consumer VPC. and mental health.
On the B2B side, our health care navigation platform serves as the chassis upon which we deliver our core advocacy offering, along with integrated add-on elements of VPCEMO. in our broad set of TPE. partners, which cover a range of critical clinical categories. We call these add-on elements platform connected revenues. Typically, we drive PDPM or PMPM access fee revenues from our navigation platform and usage-based revenues from our platform connected offerings. In addition, our EMO offering is sold on a stand-alone basis, primarily through channel partnerships with top plants in DTC, which we derive revenues from visit fee and subscription fees. Our DTC margin profile is attractive, and we carefully manage customer acquisition costs, retention rate, retention rates and LTV. Remember that the same virtual primary care offering of outstanding doctors care providers and technology serves our B2B customers, including employers and health plans. The range of our revenue guidance reflects that there is variability in some elements of our model that we manage carefully to balance growth, profitability and shareholder value accretion.
With respect to adjusted EBITDA. We are improving our guidance for fiscal 25 to a range of 3% to 4% of revenue or approximately 15 to 20 million. And we are providing fiscal Q1 guidance today of revenue in the range of 103 million to 106 million and adjusted EBITDA loss in the range of nine to 12 million. You'll see on Slide 6 that we will let we lay out a view of our expected approximately approximate quarterly revenues and adjusted EBITDA ramp in fiscal 25, which sum to the midpoints of the respective annual ranges. As a reminder, for advocacy deals, we placed on average about 10% to 15% of our fees at risk on a performance basis to demonstrate measurable health care cost savings for our customers. As in previous years, at the start of the year, we forecast that the majority of those claims base teaming PG.s will be recognized in fiscal Q4, which, along with the impact of forecasted new customer launches on January first are the primary drivers of the higher portion of annual revenue in fiscal Q4. This quarterly ramp is very similar to the ramp we outlined this time last year in our Capital Markets Day, which we ultimately exceeded.
On the next slide, you'll see a view of adjusted EBITDA in which we expect the loss to narrow in fiscal Q2 to be approximately breakeven in fiscal Q3 with the second half of the year, generating significant positive adjusted EBITDA.
On the next slide, we'll walk through revenue composition. We've talked about the growing contribution of usage-based revenues over the past few years. This represents the biggest shift in our business model since the IPO with a few years of operating history behind us following the PlushCare and second MD. acquisitions, we'd like to lay out in some detail. The impact of usage-based revenue. For definition, usage-based revenue largely represents primary care visit the Expert Medical Opinion case rate consultations and TPV. revenue that's tied to usage. Importantly, usage-based revenue has grown from 15% of revenue in fiscal 22% to 27% in fiscal 24, and we expect it will represent approximately 30% to 35% of revenue in fiscal 25 three. This represents a growth from the existing navigation customers who are adding platform connected offerings plus growth from new customers launch within our bundled solution, which includes the platform connected offering, pneumo and care and increasingly choosing to also attach a trusted partner as well as the increasing utilization of the platform connected offerings by the population to have access to them. As noted by the dark blue bar in the graph platform connected revenue approximately double in each of fiscal years, 23 and 24, and we expect those revenues to continue to grow materially in fiscal 25 as we drive incremental usage-based revenues from each of our cohorts of customers.
What's most exciting about this dynamic is we don't expect or need to see dramatic changes in usage rates to drive revenue opportunity. We had more than 12 million lives covered under expert lengthy and more than 1.5 million lives under actually care relatively small increases in DMO utilization. Cpc attach rates for TPE. referrals can add meaningful revenue growth in any year. Health plan partners leveraging Accolade care to deliver virtual primary care will also be a driver of usage revenues as evidenced by the Blue Shield of California, as an example that Matt described earlier.
And on Slide 9, you'll see a view of fiscal 25 revenue when you apply the contact with contracts that I just laid out. You'll see in the current year our forecast a walk from fiscal 24 results to our fiscal 25 guidance, starting with the fiscal 24 revenue of $414 million. These first few bars should look familiar from our Capital Markets Day last year, you have the impact of churn offsetting growth in new ARR and in your launches. You'll also note that we don't carry 100% of ARR for the following year's revenue forecast based on start dates and some conservatism around PG. attainment in year one of the new contract, I'll point out two columns that provide additional detail on our model. First is the increase in usage based revenue in the second is the growth in C primary care to better understand the dynamic of increasing revenue from new offerings and increased usage.
Let's look at an example customer on the next slide. This slide shows one of our larger customers who started with Accolade navigation platform in 2018. We show a five year progression on this slide, starting with fiscal 20, when the PMPM revenue was approximately $8, all on an access fee only basis over the next few years, this customer grew modestly to headcount and TPE. adoption. And then in fiscal 22, the customer added DMO. And in fiscal 23, the customer added actually care and several more TPE. solutions. You can see that as we have delivered more offerings, more services and more care to the customer and its members. We have also seen our revenue from this customer growth with the PMPM increasing approximately 50% from its start as a navigation only customer. We consider this a model customer one, which has invested with us to deploy a fully integrated stack of health care capabilities rendered as a single place for all its employees and members of their families to turn for their health care and benefits means the impact of the customer is better outcomes across their populations and lower medical expense. And as we look ahead, we expect our wallet share with this customer to continue to grow when you apply that model to our broader book of healthcare navigation customers. As we drive additional attachment and usage of these platform connected offerings, we can see a significant revenue expansion opportunity in the range of 50%. This incremental revenue left with existing customers layers on top of our enterprise and consumer growth engines, providing the foundation for sustainable revenue and margin expansion.
To recap today, we outlined several elements at the heart of the business. We are building, including delivery of platform connected revenue on top of our health care navigation platform, which drives scale and differentiation, the diverse, the strength of our diversified revenue streams, the integration of our platform operations offerings and capabilities and the predictability of our model combined with the close of another year of solid execution give us confidence that fiscal year 25 will be our first full year of profitability on an adjusted EBITDA basis on the path to creating significant value for our members, customers, partners and our employees and shareholders.
And with that, we'll open the call to questions.

Question and Answer Session

Operator

(Operator Instructions) Jailendra Singh, Truist Securities.

Jailendra Singh

Thank you, and thanks for taking my questions. And I want to ask about the PEGs and the relationship with platform. Currently, revenues clearly performance guarantees a meaningful contributor for the Company in Q4. Just curious, how did those trends trend compared to expectations in the quarter? Were there any particular benchmarks or areas you outperform? But any areas you see improvement in future?

Rajeev Singh

And just curious if there's any change in the way these PCs are delivering design for next year are essentially in context of this focus on platform clinical revenues, level of engagement or enrollment of trusted partners becoming a bigger portion of your your benchmark?
It was let me take up. Let me take a first cut at that Steve, and I'll turn it over to you to another.

Stephen Barnes

Thanks for the questions. Ross hot, one of the core value propositions we've always had with our customers is that need to connect their ecosystem and drive downstream utilization of their of their chosen partner. Over the last five years, we've assembled a trusted partner ecosystem and driving the utilization of those capabilities has often been one of the PG.s for performance metric that customers have measured and compensated us by. So in that context, I think it's very consistent with the long-term strategic direction of the Company. I wouldn't say that it's materially changed that the achievement of performance guarantees for the Board. That said, one last point we get paid plus and Steve referred to it as soon as prepared remarks, at 10% to 15% of total revenues, oftentimes on savings associated with a particular customer when we drive downstream utilization are trusted partners for our own primary care Expert Medical Opinion service. It accrues value to driving savings for the customer and therefore gives us more confidence in our capacity to achieve those P G.'s downstream.
Steve anything you'd add?
I would just add with respect to Q4, I think that's partially part of George's question as well. We saw a quite consistent performance by Accolade as compared to prior years, even with the elevation of health care costs that we saw certainly in calendar year 23 heading into 24. And that is that it was a reminder about the fact that when we structure our contracts were essentially meaning to beat the index and so do better than those higher costs. I will say you asked about contracting heading into next year. Raj know this as well. Customers are extremely sensitive to the elevated cost environment that we are in. So we continue to align with them with this PG. dynamic in our contracts and certainly make the case that the integration of all of our capabilities is a great way to manage that cost. Of course, there are companies spend as well as for the health of their employees and the members.

Operator

Stephanie Davis, Barclays.

Stephanie Davis

Yes, thank you for taking my question. I on I was hoping you could help us think about the attach rate and cross-sell opportunity within your existing customer base as you move more towards focusing on them versus kind of the new wins in terms of benchmarks, is there high end within your customer base of revenue per life or an adjacency, the attach rate that you could highlight? And how does that kind of factor into your growth as you think about the Company?

Rajeev Singh

Thanks for the question, Stephanie. I think the first thing I would say is we're focusing on both on growth in terms of new customer acquisition in the enterprise space, where we're focusing on employers, health plans and the government we're also focusing on growth from a direct-to-consumer perspective. And yes, we're also focusing on growth as it relates to platform connected revenues inside the customer base. I think he really captured it well in his prepared remarks as he pulled as he walked through platform connected.
Our 98% of our customers last year on January first this past year on January first deployed, both our navigation platform and Accolade care, 96% of our customers deployed our navigation platform and expert medical opinion. So a part of the story is the pull through the actual adoption of those services or our trusted partner solutions by those customers.
The next part of that story is the actual adoption in usage by employees, and we expect the usage of each of those services to grow based on what the respective services needs are within that customer base within that member base. And so when we think about the targeted opportunities. Steve's last side, like I said, it's a best a target customer that has actually grown PEPM. or in the cases by PMP. by almost 50% simply through embracing solutions, not all of our trusted partner solutions, but a subset of them a long way. Virtual primary care and expert medical opinion and growing the PEPM or PMPM of that account by about 50%. There's still room to sell them more trusted partner ecosystem solutions. There's still room to grow primary care and expert medical opinion utilization so we'd expect that, that example apply to any of our customers, which means we could grow PEPM on the navigation business by about 50% or more. And we'll watch this customer grow and we think over time that ceiling on that growth will continue to correct.

Operator

(Operator Instructions) Ryan Daniels, William Blair.

Ryan Daniels

Yes, thanks for taking the question and thanks for all the detailed information in the PowerPoint deck. I guess maybe Steve one for you is platform connected revenues or more usage-based. Can you talk a little bit about what you can do as an organization to continue to drive that and what I mean there's I assume you're every year that a client has the solutions. It grows naturally as members use it, they continue to use it.
But what can you do maybe one to market and drive awareness of what you're offering to covered lives. And then number two, are there things you can do with analytics internally to kind of promote those services during points of contact when you're engaging with members to also drive that used? Thanks.

Stephen Barnes

Thanks very much for the question, Ryan. The platform connected revenues are incredibly important part of what we do it actually at the entire business. Candidly, it's focused around this. If you think back to our Investor Day and we laid out how we think about starting with stratifying population and then applying what we call True Health actions to them, which is a data informed and applying the the intelligent platform that we have inside of actually to get the right member at the right place efficiently, get them to a primary care plan or an expert medical opinion or to the right clinical program to one of our partners. That is absolutely the part of the way we think about the business when we think about it like a funnel, if you think about it, essentially a marketing company sorting through the members to get to the right place at the right time very efficiently. All of that is a critical part of our business.
With respect to using analytics, it's exactly how we think about the populations that we serve in the end, we think of ourselves as a population health oriented company that we can look at the the members who are not only in need of help right now, but may be headed toward the need and leverage that through both engines in order to get them to that, that help at the right time, the really compelling part of that from a financial standpoint.
If you go back to that slide with the blue line, I'm on slide 9 and slide 10, we see the acceleration of those platform connected revenues. We feel that we're just getting started and have a whole lot of proof points that tell us when we integrate our offerings, we can get people to the right place and also drive revenue, frankly.

Rajeev Singh

And Ryan, I think one addition that I would add our or put on a pod here for you to think about as well. All of these are in the vein of improving clinical outcomes from our customers. Most of our customers believe that they are underspending on primary care that the lack of access to primary care for their populations is harming their health and increasing their costs. And so they will charter us with improving utilization of primary care. In part, we do that by segmenting populations, but we actually run campaigns to people who have not seen a primary care physician in the last 12 months, people who have been to the emergency room, but haven't seen a primary care physician post that emergency room visit. Those types of things are outbound capabilities that we can using our digital mobile or portal capabilities, reach members in their time of need and expose them to capabilities that meet clinical needs for our customers, improve outcomes and lower.

Operator

Michael Cherny, Leerink Partners.

Michael Cherny

Good afternoon and thank you for all the color so far. On your Steve, you talked about the success during the selling season. As you think about the changing landscape of your business, how are you positioning that with consultants with industry participants so that when you go to market into RFPs that you know that you can pitch more than what you've done previously, I guess was that education process look like what's some of the feedback and making sure that the new messaging is landing and Mike I appreciate that you tried to farm down under Steve. Everyone's trying to get me to stop talking and kick it over to Steve, and I'm going to take it out and Steve, if you want to chat with you guys.

Stephen Barnes

Sorry.

Rajeev Singh

No, they'll be sorry it off, David, sorry.
And I'm teasing you, but that's in our relationship with the consulting firms was it that the Willis Towers Watson, Aon Mercer locked in Gallagher, you name it. It's really important part of our business in part because and they are critical and strategic consulting to our customers and the work that they do car enables us to reach customers and drive our value to those customers, how we have an entire team built that Accolade entirely around our partnering with consultants, actually partnering with them on the future of our business for the focus of our business. And also, of course, on educating the field in those consulting organizations around those new capabilities. Five, seven years ago, we were an efficacy only or a company today our capacity to reach those consultants to partner in different regions with them to actually educate customers and then drive value is is a huge part of our business.
Steve, anything you'd add?

Stephen Barnes

No, I the only thing I would ratchet the continuing education of the breadth of our platform compared to what might be an app, the only customer because sometimes those RFPs show up as advocacy and we view it as our job to educate.
Yes, that's the starting point. That's the starting point, but there's so much more to be done with the customer and help educate them on that as not just a clinical value, but also natural value in terms of savings and other opportunities for customers. It's a big part of what we do there.

Operator

Richard Close, Canaccord.

Richard Close

Yes, thank you and congratulations on a strong fiscal year. I'm just curious on the revenue guidance, the 16% to 21%. Obviously, it straddles the preliminary of 20%. But I'm just curious because what your thoughts are on the low end, which is in the mid 10s. Just what's going into that, I'm sure has something to do with the usage base on, you know, expectations through the year, but I'm just curious what's going into that and is any of the ITPE., is any of that recurring in nature? Or is that just like onetime?

Stephen Barnes

And thanks for the question, Richard. And let me start with when you think about our commitment and visibility over a longer-term period towards a 20% growth rate for the business. We see yet another year of performance in which we grew bookings in terms of new ARR at a 20% rate, you see the growth rate on the direct-to-consumer side of the business growing in excess of 20%. And you see the growth rate for these platform, connected revenues growing quite a bit in excess of 20%. All of these contribute to the growth profile and the diversification of the Group as a growth engine which is really what is that super and inspiring to us when you hear us provide a range at that level.
Look, we look at it at the beginning of the year at 20 million on that on a four 90 to $500 million midpoint being 4% as a very good place to be while we consider the fact that there is some variability in the revenues associated with these platform connected elements for sure and the direct to consumer revenues, let me make sure I tie in the bottom line and our path to profitability to that part of the conversation because you also saw us raise the bottom line target from what was previously a 10 to $20 million and now being 15 to 20 million. We're saying hopefully, very clearly is that we're excited about the top-line growth rate opportunity for the business. And also we're incredibly committed to being a profitable business within a range of revenues that we think is incredibly attractive. So we keep that all tied together. We're now coming up on $1.5 billion in revenue and breaking through to profitability. We're going to make smart choices every day about the at the margin trade between that growth and that profitability commitment.

Operator

Craig Hettenbach, Morgan Stanley.

Rajeev Singh

Yes, thanks, Mr. noisy, start to the year, including the change security breach and Suraj, I'm curious just from a macro perspective versus 90 days ago, anything you would highlight in terms of sales cycles, any engaging customers like any anything there to note, but in sorry about that, Craig. We had some cell phones with some sort of an Amber Alert in our in our area and our small funds were all going crazy. Thanks for the question on this rush beginning hot, does that first of all, I agree there's been some tumult in the overall marketplace as it relates to things like the change breach that said, I think the biggest thing on customers' minds today is health care trend line. Steve mentioned that it's true not only around GLP ones through not only around cancer, but it's also true around inflationary pressures and customers' obsession with return on investment to our customers are really pushing hard to see the return on their existing investment. And in many respect, that's why we're so excited about the platform connected revenues, one, existing our existing customer base, which is now 1,200 strong. He's coming back to us and saying how can you help us maximize the value of everything we've already purchased. In fact, one of our customers called it sweating his existing assets, and that's that you can imagine that it might be a manufacturing company that use that expression. Our platform gives us the capacity to do exactly that. And so we believe that individual cohorts who are deploying on any given solution will grow on a year-over-year basis. And that focus of growing individual cohorts on existing assets is really where we think our customers are most focused.
Our second point on that would be that we fundamentally believe as well that customers in this environment, we are looking at the navigation platforms more so than they were in quarters, and that's reflecting a stronger pipeline.

Operator

Jeff Garrow, Stevens.

Stephen Barnes

Yes, good afternoon. Thanks for taking the questions.

Rajeev Singh

Really appreciate the helpful information about seasonality of performance guarantee revenue, but I wanted to ask about seasonality for usage fees and where our expectations should be there. And part of the question is trying to get a better understanding of the revenue growth implied for the first quarter versus the full year and kind of recalling that surge in GLP-1 related activity early last year?
Thanks.

Stephen Barnes

Yes, Jeff, this is Steve. Great question. You think about it, there are a few different angles on usage-based fees for sure once a customer up and launch. So we think that this is a cohort of customers who launch. So think of a brand new set of customers launching on your one like Ross described on virtually all of our customers have actually care and or Expert Medical Opinion attached in some cases as a trusted partner. And but they're starting from zero because those are all going to be usage-based fees that customer is going to get ramped up and hit now may take two to three years to get to what we view as that kind of rational targeted utilization, Max type of place that Raj was describing. So in year one, you should see it grow a bit throughout the year after into the second half of the year for that first set of customers and then once they're up and running, we see pretty consistent through the course of the year. Certainly in the case of, for example, our primary care offering, in cases in the case of PlushCare and the direct consumer or enterprise side, you see some impact from flu season and elements like that, but it's fairly consistent throughout the year.

Rajeev Singh

It's Jeff. I think if you were to if we were fully penetrated to all of our customers and deployed for several years across all those customers with all of our services, that's when you'd start to see seasonality have an impact on per ton platform connected revenues. But today, I think the way you've described it means it's going to be it's going to be fairly up and to the right, like you see in the on the chart that we displayed in lines in slide 7 know, Jeff, there's one other.

Stephen Barnes

If I think about just to add onto that health plans have been becoming a more important part of our revenue growth algorithm. If you think about the arrangement with either Arkansas or account of California, Blue Shield where we're just launching, you're also seeing there that could claim type of cohort effect where we have an opportunity to do outreach work with that a health plan to do engagement as a kind of co-branded basis, those are going to ramp up over time. So those will have I wouldn't necessarily point to seasonality as much as a ramping part that will take to also hit those, does that cause rational piece about utilization opportunity.

Operator

Ryan MacDonald, Needham and Company.

Rajeev Singh

Thanks for taking my questions. I wanted to ask about Tricare and the T5 contract earlier this year. Obviously, we I think finally completed the appeals process and we have full awards. And at least from the sort of government website, it looks like, but there's still tracking to launch and start providing care in January of 25. So what is any at all sort of revenues? Are you building into that fiscal 25 guide from that at this point?
Thanks for the question, Ryan. We continue to build in the growth of the OptumCare demonstration. That's the population we serve exceptionally well. Satisfaction levels are really high high, and we expect that business to continue to grow. We're modest we're modeling that at modest growth. And we're really not factoring in any material new growth in the T5 agreement until we can see until we get a little closer to the actual innovations that the government's going to mandate for their vendors that are that were selected. We expect that we'll see a lot more color on that over the course of the year two to three quarters.

Operator

Jeff Thompson, Piper Sandler.
Thanks so much for taking my questions and appreciate all the detail. I just wanted to confirm for the FY 24 ACV number. Can you just remind us again what that comprises, what percent of ACV is PMPM versus contingency-based revenue and kind of what's the assumed attainment of quality and cost base contingencies in that ACV number on.
And finally, I'm sorry for the multipart question but just finally, can you confirm utilization based revenue from both an enterprise and PlushCare perspective would be excluded from that ACV on your end number?

Stephen Barnes

Thank you, Jeff. This is Steve. I'll grab that one. So what goes into ACV is just the fee to be contract revenue. So to your last part of your question, it does not include direct to consumer revenues, but it would include an estimate of forward 12 months utilization based revenues.
To your earlier the first part of your question, if you think about the ARR number, we spoke about a 6 million. We see conversion of 80% to 85% of that number into the into the ACV number. There's a we essentially haircut for PG. realization and timing of launches. So if you think about the walk from last year's ending number, less terminations to GDR., the gross dollar retention and then add in about 80% to 85% of that ARR number, you get to the 53 51 importantly, and one of the key points we're hoping to drive home here today as the business has expanded and diversified so much since we went public, that ACV is one important predictor. I think it's in the range of 70 or so percent of this year's revenue when you add onto that, the growth vectors on the platform connected revenue that will also add into that ACV number and the direct-to-consumer growth rate and the in-year revenues from new ARR bookings and launches and how we build up the guide to the fiscal 25.

Operator

David Larsen, BTIG.

Stephen Barnes

Hi. Congratulations on your success with Blue Shield of California. Some I think two of your competitors may be serving that region and both of them seem to be under significant pressure, partly because of the things it sounds like you're able to do that. Maybe they're not when you talk about utilization and activation aside from like PlushCare and the Expert Medical Opinion service, which are both sort of, obviously utilization base when we talk about like a Vertiv, for example, or a vendor that you're connecting are you measuring activation of those services? And then what is it typically across your entire network? Is it like 20% to 25%? Or is it like 80% and then how much revenue is coming from like those sort of partner vendors if we exclude from plush and also expert medical opinion, please?
Thank you.

Rajeev Singh

And we're going to tag team this answer, David, and then first of all, thanks for the question. It's our success with Blue Shield of California has been a partnership effort and Blue Shield of California and the team here and actually get it. I get a ton of credit with partner really well and the virtual Blue Planet, something that I think both companies are really proud of and secondly, as it relates to platform connected revenues, you're correct, they do include our both our expert medical opinion and primary care service and those those services or the utilization of the services have been our trusted partner ecosystem. Let me give you an example of how we think about a trusted partner ecosystem. Our utilization will take bird as an example, 9% of most populations, 9% of the American population rest wrestles with diabetes. And I'm just going to use the simple math. So you might presume that 9% of a population using actually navigation platform. And Vertex is a candidate for using vertical, let's say a third of that population is reachable in the 1st year that might be a cohort that we convert it, I'd say 50% in that 1st year. And so we're talking about call it 1.5% of the 9% that we reached in that 1st year each year, we have an opportunity to grow that utilization rate as we build a relationship with that membership because we've got a long-term relationship with that customer and extraordinary engagement rates. And so it'll depend on the service have So with with a vendor like burden, might be focused on people who are prediabetic and diabetic with a an offering like musculoskeletal like Hinge or sort of might be those who are wrestling with musculoskeletal issues that might be a smaller percentage of percentage of the population, but each have an opportunity to grow each year.
Steve, for Jeff.

Stephen Barnes

I would just add to that if we think back to the Capital Markets Day last year, I think Sam and I can from Alberta remark that when actually it is present, we're seeing it's sometimes two times the utilization there. And so is a very symbiotic relationship here between certainly the partner and Accolade and which we're sharing in the to the extent we're able to drive incremental revenue and also to the customer who's procure that solution, I believe that they have a real need within their population. They want to see that engagement and ultimate completion. So we've chosen that select setup, TPE. and design relationships with them and those partners so that we can share in the revenue when we drive that high quality engagement with the partner. So today, it's a very important part of our revenue is still fairly small in terms of the total revenue that actually is driving, but a very strategically important and growing rapidly that we saw that the chart of platform connected revenues and the rapid growth rate there, TPE.s are spun up, we have really important part of that growth rate.

Todd Freeman

Thank you.

Operator

Stan, Wells Fargo.

Stephen Barnes

Thanks for taking the questions. Ross, maybe just going back to the prepared remarks, I think you touched on the fact that you're continuing to execute against a bit of a backdrop of a challenging sales environment. Can you just clarify what are you seeing in terms of end-market demand, maybe competitive dynamics? And maybe if you can frame that and how that compares versus the trailing 12 months? Thanks.

Rajeev Singh

Yes, Dan, I appreciate you asking the question because I need to clarify maybe the any perception that might have been in the prepared remarks on our new business growth as it relates to ARR growth over the last couple of years has continued to be very strong. And so we I think we are executing well in the market. We don't think the demand environment has changed dramatically. We think it continues to grow. We think it continues to grow both for on new business ARR as well as for platform connected revenues. I think press what you may have been referring to is me speaking to the changing markets and changing economic conditions and the need to drive profitable growth for companies like ours and the significance of the turn, we're entering fiscal year 2025 with our first full year of adjusted EBITDA, profitability and profitable growth along with the strong demand that we're seeing is is the buzzword of our business, not just growth. We're going to grow profitably, and we're going to grow responsibly, and we expect to continue to grow aggressively forward.

Operator

Thank you.
I'm showing no further questions in the queue. I would now like to turn the call back over to management for closing remarks.

Rajeev Singh

We appreciate all of you being here, and we look forward to our follow-up conversations.

Operator

And ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.