Hello and thank you for standing by. Welcome to Accolade Fourth Quarter 2024 Earnings Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Todd Friedman, Senior VP of Investor Relations. You may begin..

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 that we'll be discussing certain non-GAAP financial measures that we believe are important when evaluating Accolade's performance.

Details in 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 and uncertainties and other factors that could cause the actual results for Accolade to differ 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..

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.

The flywheel is extremely simple. Customer adoption of the service, deployment of the service, including 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 plans.

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 offering a virtual first plan design called Virtual Blue powered by Accolade. The results were outstanding. Here are some highlights. Reduction in overall cost for the population of 8% to 10% and emergency room claims down 11%.

85% of members received a mental health [indiscernible] and bringing you back to the physician gap, 2/3 of their members received an appointment within a single day.

In addition, recently, as some of you noted, Blue Cross Blue Shield of Arkansas launched an employer offering powered by our navigation platform where customers have the option to also add Accolade care or second opinion capabilities.

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 D2C 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 their corporate benefits. Patients cannot ask to see the same physician again and most physicians are employed in a gig economy part-time role.

Our PlushCare direct-to-consumer offering is the opposite of those solutions. Our positions utilizing built-for-purpose longitudinal EMR system, patients can select the primary care position and stay with them and our physicians spend at least 60% of their time serving Accolade patients.

Second, we've built an integrated collaborative care model that embeds mental health care into our primary care model.

As Blue Shield California noted in their study, we performed mental health screenings on 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 service is 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 value. One final point.

We've tightly integrated the teams, services and capabilities from PlushCare 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 exceptional care experience from these dedicated physicians to our employer customers.

Notably, approximately 80% of the new Accolade customers that launced on January 1 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 offerings. As I turn the 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 [indiscernible] said in a recent blog post, it's time to build in health care. Accolade is leading the way.

Steve?.

B2B which comprises employer health plans, government and partner end markets and D2C representing PlushCare, our direct-to-consumer VPC and mental health offering.

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 VPC, EMO and 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 PEPM 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 health plans. In D2C, we derive revenues from visit fees and subscription fees.

Our D2C margin profile is attractive and we carefully manage customer acquisition costs, retention rates and LTV. Remember that the same virtual primary care offering about spinning 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 creation. 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 million 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 $9 million to $12 million.

You'll see on Slide 6 that we will 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-based savings PGs will be recognized in fiscal Q4 which along with the impact of forecasted new customer launches on January 1, 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 at 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 then 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 [indiscernible] acquisitions, we'd like to lay out in some detail the impact of the usage-based revenue.

For definition, usage-based revenue largely represents primary care visit fees, expert medical opinion case rate consultations and TPV revenue that is 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.

This represents growth from the existing navigation customers who are adding platform connected offerings, plus growth from new customers launched within our bundled solution which includes the platform connected offerings, EMO and care and increasingly choosing to also attach a trusted partner as well as the increasing utilization of these platform connected offerings by the population who have access to them.

As noted by the dark blue line in the graph, platform connected revenues approximately doubled 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 as we don't expect or need to see dramatic changes in usage rates to drive revenue opportunity. We have more than 12 million lives covered under Expert MD and more than 1.5 million lives under Accolade care.

Relatively small increases in EMO utilization, [indiscernible] rates or 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 example that as described earlier.

And on Slide 9, you'll see a view of fiscal '25 revenue. When you apply the contracts that I just laid out, you'll see in the current year or 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 year launches. You'll also note that we don't carry 100% of ARR into the following year's revenue forecast based on start dates and some conservatism around PG attainment in year 1 of the new contracts. I'll point out 2 columns that provide additional detail in our model.

First is the increase in usage-based revenue and the second is the growth in D2C primary care. To better understand the dynamics 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 5-year progression on the 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 through head count and TPE adoption and then in fiscal '22, the customer added EMO and in fiscal '23, the customer added Accolade 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 a 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 needs.

The impact of the customer is better outcomes across their population 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 a broader book of health care 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 lift 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 revenues 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 sound 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 members customers, partners and our employees and shareholders. And with that, we'll open the call to questions..

[Operator Instructions] Our first question comes from the line of Jailendra Singh with Trust Securities..

I want to ask about the PGs and the relationship with the platform connected 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 with any areas you see improvement in future? And just curious if there's any change in the way these PGs [indiscernible] getting designed for next year, essentially in context of this focus on platform connector revenues is level of engagement or enrollment of trusted partners becoming a bigger portion of your PG benchmarks?.

Let me take a first cut at that, Steve and then I'll turn it over to you. Jailendra, thanks for the question. This is Raj. One of the core value propositions we've always had with our customers is the need to connect their ecosystem and to drive downstream utilization of their chosen partners.

Over the last 5 years, we've assembled a trusted partner ecosystem and driving the utilization of those capabilities has often been one of the PGs or performance metric but 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 materially changed the achievement of performance guarantees moving forward. That said, one last point.

we get paid and Steve referred to it in his prepared remarks, that 10% to 15% of total revenues, oftentimes on savings associated with a particular customer when we drive downstream utilization of trusted partners or 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 PGs downstream.

Steve, anything you'd add?.

I'd just add with respect to Q4 because I think that's part of Jailendra's question as well. We saw a quite consistent reperformance by Accolade as compared to prior years even with the elevation of health care costs that we saw certainly in calendar year '23 heading here into '24.

And that as a reminder about the fact that when we structure our contracts, we're essentially meaning to beat the index and so do better than those higher costs. I will say you asked about contracting heading into the next year. Raj noted 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 contract and certainly make the case that the integration of all of our capabilities is a great way to manage that cost for their company spend as well as for the health of their employees and the members..

[Operator Instructions] Our next question comes from the line of Stephanie Davis with Barclays..

I was hoping you could help us think about the attach rate and cross opportunities 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 adjacencies attach rate that you could highlight? And how does that kind of factor into your growth as you think about the coming year?.

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 Steve really captured it well in his prepared remarks as he pulled -- as he walked through platform connected.

80% of our customers last year on January 1, this past year on January 1 deployed both our navigation platform and Accolade care. 96% of our customers deployed our navigation platform and expert medical opinion and 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 and 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 or within that member base. And so when we think about the targeted opportunities, Steve's last side [indiscernible] said it's the best.

Our target customer that has actually grown PEPM or in the case like PMPM by almost 50% simply through embracing solutions, not all of our trusted partner solutions but a subset of them, along with 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 but we'd expect that, that example applies 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, the ceiling on that growth will continue to improve..

[Operator Instructions] Our next question comes from the line of Ryan Daniels with William Blair..

Thanks for all the detailed information in the PowerPoint deck. I guess maybe, Steve, one for you.

Is platform connected revenues are 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 is I assume every year that a client has those 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 could do with analytics internally to kind of promote those services during points of contact when you're engaging with members to also drive that use?.

Thanks very much for the question, Ryan. The platform connected revenues are an incredibly important part of what we do at Accolade. The entire business, candidly, is focused around this.

If you think back to our Investor Day and we laid out how we think about starting with stratifying populations and then applying what we call True Health actions to them which is a data informed and applying the intelligent platform that we have inside of Accolade to get the right member to the right place efficiently, get them to a primary care or an expert medical opinion 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 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 members who are not only in need of help right now but may be headed towards the [indiscernible] and leverage that [indiscernible] engine in order to get them to 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 on Slide 9 -- on 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 for Accolade..

And Ryan, I think one addition that I would add or put on the pot 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're 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 position in the last 12 months. People have been in the emergency room but haven't seen a primary care position 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 cost..

Our next question comes from the line of Michael Cherny with Leerink Partners..

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, what does that education process look like? And what's some of the feedback and making sure that the new messaging is landing?.

Mike, I appreciate that you try to [indiscernible] that one to Steve. Everyone's trying to get me to stop talking and kick it over to Steve but I'm going to take that one. And Steve, if you want to chime in, you can..

Sorry..

No, don't be sorry at all, don't be sorry at all. I am teasing you. Listen, our relationship with the consulting firms, whether that be Willis Towers [indiscernible] Mercer, Lockton Gallagher, you name it.

It's a really important part of our business, in part because they're critical and strategic consultants to our customers and the work that they do enables us to reach customers and to drive our value to those customers.

We have an entire team built at Accolade entirely around partnering with consultants, actually partnering with them on the future of our business, the focus of our business and also, of course, on educating the field in those consulting organizations around those new capabilities. 5, 7 years ago, we were an efficacy only company.

Today, our capacity is to reach those consultants to partner in different regions with them to actually educate customers and then drive value is a huge part of our business.

Steve, anything you would add?.

The only thing I would, Raj, is the continuing education of the breadth of our platform compared to what might be an efficacy 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 clinical value but also financial value in terms of savings and other opportunities for customers. It's a big part of what we do day to day..

Our next question comes from the line of Richard Close with Canaccord..

Congratulations on a strong fiscal year. I was just curious on the revenue guidance, the 16% to 21%. Obviously, it straddles the preliminary of 20%. But I'm just curious what your thoughts are on the low end which is in the mid-teens. Just what's going into that? I'm sure it has something to do with the usage base expectations through the year.

But just curious what's going into that? And is any of the PPE, is any of that recurring in nature? Or is that just like onetime?.

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 get 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 growth engine which is really what is super 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 the $490 million to $500 million midpoint as 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 this part of the conversation because you also saw us raise the bottom line target from what was previously $10 million to $20 million and now being $15 million to $20 million.

What 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 $0.5 billion of 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..

Our next question comes from the line of Craig Hettenbach with Morgan Stanley..

It's been a noisy start to the year, including the change security breach and so Raj, just curious, just from a macro perspective versus 90 days ago, anything you would highlight in terms of sales cycles and engagement with customers? Like anything there to note?.

Sorry about that, Craig. We had some cell phones. We had some sort of an amber alert in our area and our cell phones are all going crazy. Thanks for the question. This is Raj speaking. First of all, I agree, there's been some [indiscernible] 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 it, it's true not only around GLP-1s, it's true not only around cancer but it's also true around inflationary pressures and customer obsession with return on investment.

Customers are really pushing hard to see the return on their existing investment. And in many respects, why we're so excited about the platform connected revenues when our existing customer base which is now 1,200 strong, is 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 -- 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. The second point on that would be we fundamentally believe as well that customers in this environment are looking at the navigation platforms more so than they were in quarters past and that's reflecting a stronger pipeline..

Our next question comes from the line of Jeff Garro with Stephens..

I really appreciate the helpful information about seasonality of performance guarantee revenue.

But I wanted to ask about seasonality for usage-based fees and where our expectations should be there? And part of the question, just 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..

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 is up and launch, so we think of it as a cohort to customers we launch.

So think of a brand new set of customers launching on year 1, like Raj described, virtually all of our customers have Accolade care and/or Expert Mental opinion attached and in some cases, a trusted partner. And but they're starting from 0 because those are all going to be usage-based fees.

That customer is going to get ramped up and it might take 2 to 3 years to get to what we view as that kind of rational targeted utilization [indiscernible] that Raj was describing. So in year 1, you should see it grow a bit throughout the year after -- into the second half of the year for that first set of customers.

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 the case of PlushCare on the direct-to-consumer or enterprise side you see some impact from flu season and elements like that but it's fairly consistent throughout the year..

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 platform connected revenues.

But today, I think the way you've described it means it's going to be fairly up and to the right like you see on the chart that we displayed in Slide 7..

Jeff, there's one other -- if I think about just the add-on to 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 California Blue Shield where we're just launching, you're also seeing there that [indiscernible] type of cohort effect where we're having opportunity to do outreach work with that health plan to do engagement on a 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 rational peaks of utilization opportunity..

Our next question comes from the line of Ryan MacDonald with Needham & Company..

I wanted to ask about TRICARE and the T-5 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 that there's still tracking to launch and start providing care in January of '25.

So what if any at all sort of revenues are you building into the fiscal '25 guide from that at this point?.

Thanks for the question, Ryan. We continue to build in the growth of the Care demonstration. That's a population we serve exceptionally well. Satisfaction levels are really high and we expect that business to continue to grow. 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 is going to mandate for their -- for the vendors that were selected. We expect that we'll see a lot more color on that over the course of the next 2 to 3 quarters..

Our next question comes from the line of Jess Tassan with Piper Sandler..

And appreciate all the detail. I just -- I 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. Finally -- 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 number [ph]?.

Hi Jeff, this is Steve. I'll grab that one. So what goes into ACV is just B2B contract revenue. So to your last part of your question, it does not include direct-to-consumer revenue but it would include an estimate of 4 or 12 months utilization-based revenues.

To your earlier -- the first part of your question, if you think about the ARR number, we spoke about $86 million. We see conversion of 80% to 85% of that number 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 351.

Importantly, one of the key points we're hoping to drive home here today is 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 on to that, the growth vectors on the platform connected revenues 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 is how we build up the guide to fiscal '25 revenue..

Our next question comes from the line of David Larsen with BTIG..

Congratulations on your success with Blue Shield of California. I think 2 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, are both sort of obviously utilization based.

When we talk about like [indiscernible], for example, or a vendor that you're connecting, 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 Plush and also Expert Medical opinion, please?.

We're going to take this answer, David, first of all, thank you for the question. Our success with Blue Shield of California has been a partnership effort in Blue Shield of California and the team here at Accolade get a ton of credit.

We've partnered really well and the virtual [indiscernible] is something that I think both companies are really proud of. Secondly, as it relates to platform connected revenues, you're correct.

They do include both our expert medical opinion and primary care service and those services or the utilization of the services in our trusted partner ecosystem. Let me give you an example of how we think about a trusted partner ecosystem utilization. We'll take Virta as an example. 9% of most populations, 9% of the American population [indiscernible].

And I'm just going to use this simple math. So you might presume that 9% of a population using Accolade navigation platform in Virta is a candidate for using Virta. Let's say 1/3 of that population is reachable in the first year. That might be a cohort that we convert at -- say, 50% in that first year.

And so we're talking about 1.5% of the 9% that we reached in that first 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 will depend on the service, Dave, with a vendor like Virta might be focused on people who are prediabetic and diabetic with an offering like musculoskeletal, like [indiscernible].

It might be those who are wrestling with musculoskeletal issues that might be a smaller percentage of the population but each have an opportunity to grow each year.

Steve or Jeff?.

I would just add, Dave, to that if you think back to Capital Markets Day last year, I think [indiscernible] Virta remark that when Accolade is present, we're seeing sometimes 2x utilization there.

And so there's 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 procured that solution believes that they have a real need within their population, they want to see that engagement and ultimate completion.

So we've chosen that select set of TPEs and design relationships with them, those partners so that we can share in the revenue when we drive that high-quality engagement with the partners.

So today, it's a very important part of our revenue, still fairly small in terms of the total revenue that Accolade is driving but a very strategically important and growing rapidly. You saw the chart of platform connected revenues and rapid growth rate there, TPEs are a really important part of that growth rate..

Our next question comes from the line of Stanislav with Wells Fargo..

Raj, 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 on how that compares versus the trailing 12 months..

Yes. Stan, I appreciate you asking the question because I need to clarify maybe any perception that might have been in the prepared remarks. 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 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 new business ARR as well as for platform connected revenues.

I think perhaps what you may have been referring to is me speaking to the changing economic conditions and the need to drive profitable growth for companies like ours and the significance of the turn where we're entering fiscal year 2025 with our first full year of adjusted EBITDA profitability.

And that profitable growth along with the strong demand that we're seeing 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 going forward..

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..

We appreciate all of you being here and we look forward to our follow-up conversations in the days ahead..

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