Accolade prices IPO

Tom Paine

Philly (Plymouth Meeting) & Seattle-based Accolade, which filed for an IPO back in February, announced its pricing this morning. The IPO’s timing was likely slowed down by Covid-19.

Accolade provides healthcare navigation assistance to client companies’ employees.. It combines the use of smart technology with human assistance. Comcast is its largest customer.

Accolade will price 8.75 million shares at between $19 and $21. raising $175 million at the midpoint and valuing the company at nearly $1 billion. Investors include Accretive at 26.9%, Andreessen Horowitz at 16.2%, Carrick Capital at 9.9%, and Comcast Ventures at 6.9%

Andreessen Horowitz also led a recent round in another Tom Spann-founded startup, Brightside. .Spann has no formal ties to Acccolade since stepping down from its. board late last year.

Accolade showed a $51.3 million net loss on $132.5 million in revenue for its fiscal year ending Feb. 29. I don’t think its unit ecconomics have been proven out to the point where they are projectible yet.

But it will probably draw a great deal of interest as a new concept in the hot digital health sector.

The company has applied to list on Nasdaq, under the ticker “ACCD.”

Questions from Accolade S-1

Tom Paine

See my previous post on Accolade’s IPO filing here.

Accolade, based in Plymouth Meeting and Seattle, submitted an S-1 to the SEC Friday (February 28) outlining plans for an IPO.

Conclusion: Some analysts probably have better information, but from info available to the general public it’s difficult to come up with an intelligent set of metrics for assessing its valuation. Not that it’s a unique case.

Accolade has raised at least $230 million in venture financing according to CrunchBase, and its last known valuation was $620 million according to Pitchbook.

It’s difficult to build a meaningful projected financial model for Accolade. Not enough history, and the economics are skewed by very large customers and high upfront development costs.

Its largest customers, Comcast Cable, Lowe’s and United Airlines, together accounted for 60% of its revenue for its 2019 fiscal year. Comcast alone represented 35% of its revenue for the year.

Customer concentration is a risk factor.

Accolade is not truly a tech company, but a technology-enabled health services company. No matter how much engineering it does, the variable people cost will still be there.

Some other health information companies that originally were full fledge tech firms are now adding more of the human factor in.

Hard to project future gross margins.

Adjusted gross margins were 30.9% in FY 2018 versus 36.4% in FY 2019; These will have to continue to improve..

Financial results for FY 2020 were left empty for now; looks like they might be filled in later (fiscal year ended 2/29)

Comparison: Perhaps the closest “twin” to Accolade is its Plymouth Meeting neighbor Health Advocate. It was snapped up by Omaha-based West Corporation for $265 million in 2014. Then buyout firm Apollo Global Management bought West Corporation (now Intrado Corporation) in 2017. Health Advocate has almost the same number of employees as Accolade, but I haven’t found any breakout of its financials.

Accolade relies on using AWS and Google Cloud for IT processing.

Accolade files S-1 for IPO

Tom Paine

Accolade Inc. today filed an S-1 with the SEC for a planned IPO. The number of shares to be offered and the price range for the offering have not yet been determined. Accolade intends to list its common stock on the Nasdaq Global Select Market under the ticker symbol ACCD.  

Here’s the S-1: https://www.sec.gov/Archives/edgar/data/1481646/000104746920001123/a2240822zs-1.htm

Accolade offers a service usually provided to enterprises that helps guide their employees through the healthcare maze to get the care that they need. Comcast is a major customer, by itself accounting for 35% of Accolade revenue in 2019.

Accolade is jointly based in Philly (Plymouth Meeting) and Seattle. The plurality of employees (about 500) are based in Plymouth Meeting, according to. LinkedIn, out of 1174 total as of November 30, 2019 as reported by the company. Investors include Andreessen Horowitz, Carrick Capital Partners, Madrona Venture Group, McKesson Ventures, and Humana.

 Revenue is up more than 47 percent so far this year: $88.1 million for the nine months ended in November 2019, with a net loss of $49.2 million for the same period. Its fiscal year ends this month.

Accolades’ last stated valuation was around $620 million. The $100 million target for the IPO mentioned in the filing is merely a placeholder.

Tom Spann was the Founding CEO of Accolade. Now it is headed by CEO Rajeev Singh, who cofounded SaaS travel expense tracker Concur and sold it to SAP for $8.3 billion in2014.