Accolade

Prospectus Summary

PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, including the sections titled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes included elsewhere in this prospectus, before making an investment decision. Our fiscal year ends on the last day of February, and our fiscal quarters end on May 31, August 31, November 30, and the last day of February.

Unless the context otherwise requires, all references in this prospectus to "we," "us," "our," "our company" and "Accolade" refer to Accolade, Inc. and, where appropriate, its consolidated subsidiaries.

Our Mission

We envision a world where every person can live their "healthiest life" — a concept that encompasses physical, emotional, financial, and professional wellness. Our mission is to empower people through expertise, empathy, and technology to make the best decisions for their health and well-being.

Business Overview

We provide personalized, technology-enabled solutions that help people better understand, navigate, and utilize the healthcare system and their workplace benefits. Our customers are primarily employers that deploy Accolade in order to provide employees and their families (our "members") a single place to turn for their health, healthcare, and benefits needs. Our innovative platform combines open, cloud-based intelligent technology with multimodal support from a team of empathetic and knowledgeable Accolade Health Assistants and clinicians (including nurses, physician medical directors, and behavioral health specialists). We leverage our integrated capabilities, connectivity with providers and the broader healthcare ecosystem, and longitudinal data to engage across the entire member population, rather than focusing solely on high-cost claimants or those with chronic conditions. Our goal is to build trusted relationships with our members that ultimately position us to deliver personalized recommendations and interventions. We believe that our platform dramatically improves the member experience, encourages better health outcomes, and lowers costs for both our members and our customers.

The U.S. healthcare system is complex and places significant strain on consumers, who struggle to effectively use their healthcare and benefits, make informed decisions about their health, and navigate the fragmented network of providers and third-party benefit programs. Partly as a result of these challenges, the payers of healthcare, including managed care companies, the government, employers, and consumers, face significant and rising costs. For large employers in particular, the direct costs are substantial: the total annual employer cost for healthcare is estimated at more than $10,000 per employee. Over the past five years, this cost has increased roughly 6% per year and is expected to continue to grow at that rate. Employers also bear indirect costs in the form of absenteeism, decreased productivity, and diminished morale. Despite the significant and growing spend on care, health outcomes are not improving, and misaligned incentives among key constituents thwart meaningful change. A suboptimal consumer experience persists.

We believe the most effective way to improve health outcomes and control cost is to help consumers make better, data-driven healthcare and benefits-related decisions. Based on this belief, we have developed a differentiated platform to support and influence consumer decision-making that is built on a foundation of mission-driven people and purpose-built technology:

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Accolade Health Assistants. Our Accolade Health Assistants develop trusted relationships with our members and serve as their primary and ongoing point of contact for all issues related to healthcare and benefits. Our Accolade Health Assistants are trained in our proprietary engagement approach and leverage our integrated technology platform to provide data-informed, personalized health and benefits support to members in friendly, simple terms.


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Clinicians. Our clinicians include registered nurses, physician medical directors, pharmacists, behavioral health specialists, and women's health specialists. When an Accolade Health Assistant identifies that a member may benefit from clinical support, they bring a nurse into the conversation. Our nurses have deep expertise, with on average more than 16 years of clinical experience across a wide variety of specializations. Our nurses work with our other clinicians to help members demystify their care needs through personalized, evidence-based, and data-driven protocols. Examples of our clinical services include helping members identify high-quality, cost-effective providers, assisting members as they prepare for visits and procedures, supporting members in understanding medication options and identifying prescription conflicts, coordinating with providers to close gaps in care, and providing complex case management to help members manage serious illness; we do not provide medical care or establish patient relationships with our members.


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Technology. Our technology platform was designed to deliver highly personalized member experiences at scale, leveraging data and machine learning to derive actionable insights, optimize our care team's workflows, and accelerate the pace of our innovation. We ingest and link disparate data points to Accolade-generated data to create a 360-degree member view which our Accolade Health Assistants and clinicians access in our purpose-built member CRM tool, InView. Our proprietary artificial intelligence engine informs recommended actions which guide our interactions with members and enhance the self-serve functionality on our member web portal and highly rated mobile application. We seamlessly integrate with the healthcare and benefits ecosystem, including providers and third-party applications (e.g., telemedicine, wellness programs, condition-specific point solutions), positioning us to further increase members' understanding, access, and utilization of these programs. In addition, our secure, open technology platform supports our continuous innovation and the development of additional capabilities to benefit our members.

Developing trusted relationships positions us to positively influence their healthcare and benefits-related decision-making and ultimately deliver on our value proposition. Engagement is therefore paramount to our success. We have consistently achieved and sustained annual engagement rates of greater than 50% across our member population, where engagement rate is defined as the percentage of member families who engaged (meaning they or someone on their behalf had at least one phone- or secure messaging-based "encounter" with an Accolade Health Assistant or clinician) at least once during a given year. Our proactive, long-term approach also encourages deep engagement across our entire member population: among our member families that have engaged with us at least once during a given year, over the last three years we have averaged approximately four encounters per year with member families for whom their employer incurs less than $2,500 in claims spend in a given year and approximately 16 encounters per year with member families for whom their employer spends $50,000 or more in a given year. We achieve these engagement levels through our commitment to a set of core tenets:

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always do right by the member;

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reach every member;


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reinvent member support;


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support the member throughout their healthcare journey;


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predict healthcare needs and proactively intervene to support members; and


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innovate to deliver increasing value to members.

Our relentless focus on member engagement and the delivery of an outstanding member experience has resulted in our 94% average member satisfaction rating and average Net Promoter Score (NPS) of 60 over the past three years. In comparison, in a 2019 study, the median NPS for health insurance companies was 14. Through trusted, ongoing engagement, we can meaningfully influence member decisions and help increase valuable healthcare utilization (e.g., primary care visits, prescription refills) and reduce wasteful healthcare utilization (e.g., unnecessary emergency room visits, hospital readmissions, excessive inpatient stays). We further enhance the member experience by educating members on relevant, available benefits, such as wellness programs and telemedicine. In raising awareness of these benefits and seamlessly integrating them into our platform, we can significantly increase their utilization rates.

Our approach results in real, measurable, actuarially validated savings for our customers, starting with average savings of approximately 4% of total employer healthcare spend during a customer's first year and often increasing to more than 10% per year for our more tenured customers, amounts significantly higher than the fee we charge our employer customers. In a 2018 study by Aon, Accolade's primary offering was shown to reduce claims costs for an employer with more than 10,000 members by 6.5%, or $782 per employee per year, and for an employer with more than 100,000 members it was able to generate a 4.7% reduction in claims costs, or $527 per employee per year, versus similar employer groups not using Accolade. These reductions were generated exclusive of plan design changes, were measured across the entire member population, started in year one, and were sustained over the respective study periods.

Our investments in a scalable technology platform have enabled us to implement a multi-offering strategy that meets the diverse needs of our existing and prospective customers. Buyers of our offerings have varying priorities and appetites for change to their existing health and benefits packages, and we have therefore developed a solutions portfolio that is designed to support a range of integrations for employers of all sizes. Our most comprehensive offering, Accolade Total Health and Benefits, provides fully integrated healthcare navigation and benefits management. Our technology platform has enabled us to unbundle aspects of this comprehensive offering to create two additional standalone offerings: Accolade Total Benefits (focused on member benefits engagement) and Accolade Total Care (focused on guiding members to high-quality, cost-effective providers). We have further leveraged our technology platform to develop add-on offerings, such as Accolade Boost and our Trusted Supplier Program, that target specific challenges faced by our customers.

We currently have 53 customers across many industries, including media, technology, financial services, transportation, energy, and retail, comprising more than 1.5 million members. We principally generate revenue from our customers on a contractually recurring per-member-per-month (PMPM) fee, which provides us with significant revenue visibility. Our typical customer contract length is three years, and we have experienced gross dollar retention for our employer customers of 100% and 95% for the fiscal years ended February 28, 2018 and 2019, respectively. For the fiscal years ended February 28, 2018 and 2019, our total revenue was $76.8 million and $94.8 million, respectively, representing 23% year-over-year growth. For the fiscal years ended February 28, 2018 and 2019, our net losses were $61.3 million and $56.5 million, respectively. For the nine months ended November 30, 2018 and 2019, our total revenue was $59.7 million and $88.1 million, respectively, and we incurred net losses of $49.5 million and $49.2 million, respectively. As of November 30, 2019, our accumulated deficit was $318.7 million.

Industry Challenges

All stakeholders — including consumers, their employers, and providers — face myriad challenges given the increasing complexity, misaligned incentives, and rising costs of the healthcare system.

The Consumer's Healthcare Journey is Increasingly Complex

The consumer's healthcare journey, as depicted below, often starts with frustration during health plan enrollment that extends into provider selection, post-care follow-up, and ongoing care management. Further, many consumers operate from an information deficit or turn to unverified and potentially biased sources to learn about their conditions, which can lead them to seek too much, too little, or the wrong care for their needs.

Misaligned Incentives Result in a Suboptimal Consumer Experience

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Payors: Consumers' healthcare support is generally provided by large health plans whose core competencies are underwriting risk, managing claims, administering benefits, and developing provider networks on behalf of their insured populations. When a consumer turns to their health plan for help understanding administrative processes or how to navigate the healthcare system, the health plans typically default to a call-center approach that does not leverage integrated data, technology, or consumer-facing tools and therefore cannot support a holistic discussion.


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Providers: Providers have traditionally been compensated on a fee-for-service model, which incentivizes episodic care across a large number of patients rather than comprehensive, integrated care. This model has led to narrowly focused, limited, and often insufficient patient interactions, which can have a significant negative impact on the patient's use of the healthcare system. For example, negative patient experiences with a primary care provider have been associated with a higher likelihood of non-urgent use of emergency departments, contributing to inefficient and more expensive care delivery.


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Employers: Employers strive to build comprehensive, attractive benefits packages in order to recruit and retain a talented workforce, as well as to ensure that their employees' overall well-being is maintained so they remain engaged and productive. However, their human resource departments typically handle a wide range of responsibilities of which benefits are

only a portion. As a result, employers are generally not equipped to provide comprehensive advice to help their employees navigate the healthcare system, nor do they employ the resources to provide personalized clinical guidance to help their employees understand treatment and care options.

Employer and Consumer Healthcare Costs Continue to Increase

Approximately 80% of employers with more than 500 employees are self-insured. In 2019, large employer spending on healthcare was estimated at over $10,000 per employee per year. Annual cost increases of employer-sponsored healthcare are on an unsustainable trend, having consistently exceeded the annual rate of inflation, with approximately 6% per year increases over the past few years. This trend is expected to continue.

As costs continue to rise, employers are increasingly focused on managing their healthcare expense, in many cases shifting more of the cost burden to employees in the form of increased premiums, deductibles, and coinsurance. The average premium for family coverage has increased 54% over the last ten years, while the average deductible has more than doubled (both rates significantly outpacing growth in wages and inflation).

Our Value Proposition

Accolade provides consumers a single place to turn for their health, healthcare, and benefits needs. Our innovative platform combines open, cloud-based intelligent technology with multimodal support from a team of empathetic and knowledgeable Accolade Health Assistants and clinicians. Foundational to our success is our ability to effectively engage with our members, which allows us to form trusted relationships and influence members' decisions for the better, ultimately leading to better outcomes and ongoing engagement: our "member flywheel."

The aggregate impact of this deep engagement across a customer's employee population is improved healthcare and benefits awareness, knowledge, and decision-making, a healthier and more engaged workforce, and healthcare cost savings. We become a trusted partner to our customers and gain the opportunity to support them on their population health strategies and benefits procurement. This position allows us to identify additional solutions that may meet our customers' needs, which, when implemented, result in additional opportunities for member engagement and better health outcomes. Thus, our member flywheel drives our "customer flywheel."

Accolade's Member and Customer Flywheels

Member Value Proposition

Our members face structural, clinical, financial, and administrative challenges in managing their health and wellness. Our engagement model simplifies and streamlines the healthcare and benefits experience for our members by making guidance from our Accolade Health Assistants and clinicians available via phone, mobile application, and web portal whenever it is needed.

Frequently, the holistic approach of our empathetic care team will uncover that a simple transactional concern exposes much greater support and care needs. Examples of the types of questions that might prompt our members to initially turn to us include:

Once we establish a connection, our Accolade Health Assistants help to resolve the member's often basic transactional issue, and then expand the conversation as appropriate based on our proprietary, technology-enabled engagement framework, LEARN2 (Listen, Engage, Assess, Resolve, INfluence, ENhance), to grow the value proposition for the member. Expansion in action may look like:

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turning a request for a replacement health plan ID card into a discussion about a member's new diagnosis, including identifying unmet behavioral health and social needs and connecting the member with recommended clinical and non-clinical resources for education and ongoing support;


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expanding a search for an in-network provider into a dialogue about identifying the right provider for the member based on quality and cost data, as well as coordinating care between providers to avoid unnecessary duplication of services;


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migrating a discussion about the details of a bill to a review of options for lowering a member's overall out-of-pocket costs, including through the use of generic medications and lower cost sites of care; and


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evolving a review of benefits into a detailed discussion about different treatment options and their associated cost and then a connection to a nurse so the member can make informed decisions about treatment options based on their preferences.

For a representative interaction between an Accolade Total Health and Benefits member and Accolade, please see the section titled "Business — Representative Member Story."

Customer Value Proposition

We provide dual value for our customers, serving both as a valuable benefit that is well liked by their employees and a tool to help reduce healthcare costs and increase adoption of existing benefits. By engaging repeatedly and meaningfully with members across the spectrum of healthcare spending, our model has demonstrated significant healthcare cost savings for our customers by increasing valuable healthcare utilization and decreasing wasteful utilization.

In a recent study by Aon of Accolade's primary offering's impact on two self-insured employer groups of 10,000+ (Employer A) and 100,000+ (Employer B) members, the results were dramatic: savings of $782 and $527 per employee per year, respectively, compared to similar employer groups not using Accolade, and demonstrated savings significantly greater than the fee we charge our employer customers. The study analyzed data for these two employers against a control group of typical employer members based on similar demographic, geographic, and comorbidity profiles. The study showed improvements in total cost and cost trends resulting from multiple factors, including lowered inpatient, outpatient, and professional medical spend, as well as lower brand-name and specialty pharmacy spend. Savings were generated across the subject employee populations, leading to lower costs across age ranges, comorbidity groups (as defined by number of chronic conditions), and cost distributions. These results were independent of any significant changes to the benefits or plan design of the respective subject employer.

In addition to achieving healthcare cost savings, our platform can also be a valuable tool for promoting member engagement with additional benefits. Through our Trusted Supplier Program, we serve as a strategic partner in helping our customers navigate the complexity of the growing ecosystem of potential benefits to identify and procure high-quality solutions that would be valuable to their employees.

Our Market Opportunity

We believe our market opportunity is substantial and estimate the total addressable market for our current solutions to be approximately $24 billion. Our core market is currently comprised of self-insured employers, inclusive of state and local governments and unions. Based on the estimated number of addressable employees and the PMPM fee opportunity of our current offerings, we believe the self-insured employer market alone represents at least an $11.7 billion addressable market.

We have begun to explore new opportunities in the fully insured market and have recently added our first customers that we believe are indicative of our potential to expand in this market. We estimate that fully insured employers represent an additional $1.7 billion addressable market opportunity. In addition to employer-sponsored plans, we believe our solutions address critical pain points that also exist in government-sponsored programs, specifically Medicare, Medicaid, TRICARE, and those administered by Veterans Affairs. A government agency has recently encouraged this belief by selecting Accolade for a pilot program with a term of up to three years to support its beneficiaries. We estimate that the government-sponsored programs market represents an additional $10.7 billion addressable market opportunity. We intend to grow our addressable market through the introduction of new offerings and expansion into longer-term adjacent opportunities, including with risk-bearing provider organizations and health plans, as well as a direct-to-consumer offering.

Competitive Strengths

Our operational and financial success is based on the following key strengths: