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Accolade Inc (NASDAQ:ACCD)
Q2 2021 Earnings Call
Oct 14, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Accolade second-quarter 2021 earnings results conference call. [Operator instructions] Please be advised that today's conference is being recorded. [Operator instructions] I would now like to hand the conference to your speaker today, Todd Friedman. Please go ahead, sir.

Todd Friedman -- Investor Relations

Thanks, operator. This is Todd Friedman. I joined Accolade last week to lead Investor Relations. I'm looking forward to meeting you in the weeks to come.

With me on the call today are our chief executive officer, Rajeev Singh; and our chief financial officer, Steve Barnes. Shantanu Nundy, our chief medical officer, will join for the question-and-answer portion of the call. 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 in evaluating Accolade's performance. Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliations thereof can be found in the press release that is 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 differ materially from those expressed or implied on this 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. With that, I'd like to turn the call over to our CEO, Rajeev Singh.

Rajeev Singh -- Chief Executive Officer

Thank you, Todd. Hi, everyone, and thank you for joining us to discuss the results of our second quarter for fiscal-year 2021. We're excited to report another positive quarter with strong momentum across a number of core areas of the business. We will get into that detail shortly.

Our fiscal year started in March, at the outset of the pandemic hitting the country. Since then, our services have proven to be even more critical to our customers and prospects, and we've released a number of new capabilities associated with helping our customers manage through the pandemic. In short, given the nature of what we do, our business has thrived during the pandemic in many ways. Given the strength of our results and sales momentum, we are raising our full-year guidance.

I'll turn the call over to Steve to provide more color on the financial results and guidance, and then I'll return to talk about the business. Steve?

Steve Barnes -- Chief Financial Officer

Thanks, Raj. I'm pleased to report on our results for our second quarter of fiscal 2021, which ended August 31, and provide an update to our guidance. Revenue of $36.8 million and adjusted EBITDA loss of $8.7 million for the second quarter of fiscal 2021 were both ahead of our previous guidance, reflecting strong growth across all segments of our business. On the strength of these results and continued momentum with new customer bookings, we are raising our full-year revenue guidance for fiscal 2021 by $1 million, which I'll discuss at the end of my remarks.

I'll spend the next few minutes covering the highlights from the financial statements included in our press release and provide color on a few items. We generated $36.8 million in revenue in the second fiscal quarter, representing 24% year-over-year growth. This is $1.3 million ahead of the top end of our guidance range provided during our last earnings call. Revenue growth was driven primarily by strength in new customer adds, and therefore, members, particularly in the enterprise and mid-market segment.

Adjusted gross margin of 43.3% was roughly flat, compared to 43.8% in the prior-year period, reflecting investments made in new customer launches, including the Defense Health Agency contract, which launched in May. Adjusted operating expenses improved to 67% of revenues in Q2 of fiscal 2021 versus 76% of revenues in the prior-year period. This improvement reflects two key factors. The first is the scale efficiencies we are realizing as we grow our business.

The second is more specific to the current environment as we have carefully managed spend given the uncertainties surrounding the COVID environment. I'll revisit this point about spend during my guidance remarks. Adjusted EBITDA loss in the second quarter of fiscal 2021 was $8.7 million, which compares favorably to $9.6 million in the prior-year second fiscal quarter and was nearly $4 million better than the top of guidance from August. The outperformance in adjusted EBITDA is primarily attributable to higher adjusted gross profit in addition to the prudent management of spend and operating expenses during the COVID pandemic.

Turning to the balance sheet. Cash and cash equivalents at the end of fiscal Q2 totaled $222.1 million with no debt outstanding. Our cash balance reflects $231.2 million of net proceeds from our initial public offering completed in July, net of fees and offering expenses, and the paydown of all outstanding debt during the quarter post our IPO. One item that I'll spend a minute discussing is our accounts receivable balance at the end of fiscal Q2, which increased by approximately $7.7 million over the balance at the end of fiscal Q1.

Since COVID hit, both of our airline customers asked if we would work with them to help them manage their cash needs during the pandemic. We are happy to do so and to provide a payment schedule that met their needs out of good partnership. And in one case, this allowed us to extend the underlying customer contract. I'll note that the payment schedules are designed to keep cash receipts from these customers unchanged within our fiscal year, and both customers are current on their scheduled payments.

Finally, we had approximately 49.3 million shares of common stock outstanding as of August 31. Now turning to guidance. For the fiscal third quarter ending November 30, 2020, we expect revenue in the range of $36 million to $37 million, representing 23% growth over the prior year at the midpoint; and adjusted EBITDA loss in the range of $12 million to $14 million. For the full year ending February 28, 2021, we expect revenue in the range of $159 million to $162 million, a $1 million increase to the range previously provided, representing 20% growth over the prior year at the midpoint; and adjusted EBITDA loss in the range of $32 million to $36 million, unchanged from previous guidance.

I'd like to provide two quick comments about the full-year forecast. Our team has continued to execute very well during the pandemic, and demand for our offerings remains strong. Fiscal year-to-date customer wins and bookings are positive across a variety of industries and product offerings, which Rajeev will cover in more depth. We are raising our full-year revenue guidance to reflect the outperformance this quarter while still maintaining a conservative approach to our COVID-related reserve.

As a reminder, this reserve accounts for potential employment-related impact due to COVID, particularly relating to the recent announcements from our airline customers about expected reductions to their employee headcount, absent further government assistance. Let me expound on that a bit because we appreciate that there is a significant focus on the airlines with respect to our revenue guidance. Our revenue guidance fully considers the airlines' guidance for their planned workforce reductions. If an additional federal assistance program for the airlines is announced, that could have a positive impact on revenue.

But I would caution that we would need to spend time understanding any such bailout in our customers' plans. At the same time, as mentioned earlier in my remarks, we have carefully managed spend given the uncertainties surrounding COVID. As a result, operating expenses in the second fiscal quarter were lower than our guidance as we ramped hiring later than planned. This approach contributed to the outperformance in adjusted EBITDA in the second quarter.

We expect to catch up on that spend in the second half of the fiscal year, thus, we've kept the adjusted EBITDA guidance in line with prior guidance. Our guidance for fiscal 2021 reflects year-over-year revenue growth of about 21%. Over the long term, we expect a faster growth rate than our current fiscal year given the demand we see for our offerings and the value we create for members and customers, which drives customer acquisition and retention, as well as opportunities to grow the business across multiple vectors. I'd like to reiterate that we expect to achieve a top-line growth rate of 25% or more on an annual basis for the foreseeable future beyond fiscal 2021.

With that, I'll now turn it back over to Rajeev.

Rajeev Singh -- Chief Executive Officer

Thank you, Steve. As Steve outlined in detail and I mentioned earlier in the call, our business has performed well through a difficult economic and healthcare crisis in the country. We believe the drivers to that performance are clear. First, all our core services have a fundamental value proposition of helping consumers, whom we refer to as our members, to make better healthcare decisions.

In a time like today, our services could not be more vital. In fiscal Q2, our momentum for new customer acquisition continued. We saw new customer acquisition in every core segment: strategic, enterprise, and middle market. Let me highlight a couple of those wins for you here.

In the strategic account space, the Board of Regents for the University System of Georgia made the decision to deploy Accolade Total Health and Benefits. The USG currently oversees 26 colleges and universities in Georgia. USG was looking for a new solution for their members that would deliver improved healthcare outcomes through provider-quality steerage and evidence-based services. After performing a thorough analysis of the market, they chose Accolade Total Health and Benefits.

In the enterprise segment, the City of Fort Worth joins our family of customers as the second major municipality after the City of Seattle. Additionally, we continue to see traction in our middle market segment, defined as companies with between 500 and 5,000 employees across the country. That traction is fueled by the relationships we're developing with the broker community across the country, as well as the continued success of our joint offering with Humana called Humana Impact with Accolade. Further, we're pleased to report that Humana has also become an Accolade customer this quarter for its own employees.

We expect to roll out our offering to Humana employees and their families in calendar 2021. As we outlined last quarter, we saw wins in every major market segment and across each of our product lines in fiscal Q2. Second, our innovation platform allows us to flex our capabilities to the needs of the market in a way that makes us unique in our industry. In fiscal Q1, the release of Accolade COVID Response Care in May was a direct response to the needs of customers and prospects in essential industries that needed to get their employees back to work safely.

In fiscal Q2, we added more customers to that offering. We expect to see demand for that service continue through the remainder of the year and into next year. In September, we demonstrated this capacity for innovation again with the release of Mental Health Integrated Care with Ginger. The offering is in response to a significant need for our customers and their employees, only made more significant by the impact of the pandemic on challenges like depression and anxiety.

Our integration with Ginger allows us to leverage our strong engagement levels in a proprietary data set to identify high-risk populations wrestling with both physical and mental health challenges and offer them the care that they need when they need it. Moreover, the care that these members then receive is deeply integrated and holistic. The collective Accolade-Ginger care team stays on the same page and coordinates a comprehensive suite of services, inclusive of primary care, EAP and brick-and-mortar options when needed. With Mental Health Integrated Care, we're bringing collaborative care, a model supported by decades of research, to the employer space for the first time.

The clinical and economic case for our solution is clear. People with chronic physical illnesses are twice as likely to suffer from anxiety or depression as they're physically healthy peers. And for certain medical conditions, the rate is even higher. Studies have estimated it can cost three times as much to treat the physical health of a patient with underlying behavioral health issues than it does to treat the same physical health issues in a patient without a behavioral health disorder.

Integrated coordinated care is the answer. Our first customer of this offering, Temple University Health Systems, will launch in the next few weeks, and we look forward to this solution being available to more of our members in the quarters to come, especially in this time of such pronounced needs. Our platform's ability to flex to the varying needs of a changing healthcare landscape is unique and valuable to our customers. In early October, we announced a partnership with Pixel by LabCorp to bring at-home test collection to Accolade members and their families.

Building on our Accolade COVID Response Care solution, this partnership allows us to provide at-home COVID test collection kits to support employers and their teams through the next phase of this pandemic. Through this partnership, we're now able to offer the convenience of at-home test collection instead of having to take a test in a lab or doctor's office or traveling to another testing location. The added bonus is that at-home test collection can be more cost-effective for the employer than on-site testing. Finally, periodically, we will highlight new capabilities that we are delivering to our customers that demonstrate our continued commitment to innovation.

You may recall that a little over a year ago, we acquired a company called MD Insider. In that acquisition, we gained a differentiated data set that has allowed us to bring data-driven quality insights to bear when connecting our members with providers, which we refer to as intelligent provider matching. In early October, we announced an exclusive partnership with the Global Appropriateness Measures Group, a group of experts who have developed a set of appropriate care measures to identify practice patterns across medical specialties to improve health outcomes and reduce costs. We will use these appropriateness measures to augment our intelligent provider matching capabilities.

While the benefits of getting members to high-quality doctors are likely intuitive, I do think a real example can be helpful to demonstrate how this service becomes relevant to our members and ultimately benefits them. Recently, a member who is newly diagnosed with endometrial cancer messaged Accolade asking for help finding an oncologist. She had been diagnosed a month prior but hadn't been able to find and schedule with a quality provider. Of note, she did not trust the one her primary care doctor had originally referred her to.

Our Accolade nurse ran a search. And though many specialists in the area weren't accepting new patients, the nurse was able to identify a high-quality in-network provider close to the member's home. The nurse persisted diligently on the member's behalf to iron out coverage and scheduling issues and engaging directly with the cancer center and educating the intake person on the member's network status, later facilitating and sharing between the member's primary care doctor and the cancer center. Amidst this, the Accolade nurse actually found the member a new PCP because the member was not pleased with her original care, and the cancer center was requiring a PCP visit and pre-appointment blood work.

Of course, the Accolade team also knew that a strong relationship with a trusted primary care provider would be critical to this member's ongoing health and well-being. The member was ultimately seen by the recommended oncologist, thanks to the coordinated efforts of our Accolade health assistant and nurse, 1 month sooner than she would have otherwise, and she's now scheduled for surgery tomorrow. She's been in ongoing contact with the Accolade team as she prepares for her surgery, and we'll, of course, be here for her afterward to support her through her journey of recovery and thereafter. We hold this member in our thoughts as she gets ready for surgery.

Her story is like so many of our members who we've been fortunate to be able to help in their healthcare journey. Whenever we talk to our own employees about our financial results and the momentum across our business, we always relate our success to the real challenges faced by the people we serve. COVID-19 has created significant challenges in both healthcare and the economy, but it has also helped us demonstrate the powerful combination of rich data and human support when it comes to getting a member, in this case, one facing a daunting diagnosis, to the right care as efficiently as possible. The addition of the appropriateness of care data to our algorithms will enrich our output and better position our frontline care teams to comprehensively support our members.

This is how our commitment to innovation plays out. It's the thoughtful application of our technology to the pain points that have riddled our members' care journeys. We're relentless in seeking opportunities to do this and always will be. Our vision for every person to live their healthiest life remains the same and is more important than ever.

I speak for all the employees of Accolade when I say we feel very fortunate to be in a position to help our members and customers when the need is so pronounced. With that, operator, we'd like to open the call up for questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question comes from Sean Wieland with Piper Sandler. Your line is now open.

Sean Wieland -- Piper Sandler -- Analyst

Hi. Thanks, guys. Good afternoon. So I figured I'd start with this, the airline contract changes that you talked about.

What was the extent? You said you extended the underlying contract. Can you give us kind of the nature of that extension? And you referred to some COVID-related reserves. Where does that come into the mix?

Steve Barnes -- Chief Financial Officer

Sean, it's Steve. Why don't I take that one? So first of all, let me speak to the reserve, and then I'll talk to the airline contract extension that I mentioned in the remarks. As we talked about in the prior quarter, obviously, the impact of COVID and given our PMPM revenue model can have an impact on our revenues, we are fortunate that we have a very diversified customer base. And so the airlines really are the area that creates some concern in our book.

And so what we've done is we've modeled essentially a reserve against our revenues for the rest of this fiscal year and, frankly, going forward, based upon the guidance that the airlines have given about their own employment. And we've talked about it in the past, that amounts to somewhere in the range that would take our growth rate up to that normalized 25% growth rate if you were to factor in our revenues essentially without that reserve in it. With respect to the airlines and the accounts receivable and the contract extension that I mentioned in the remarks, both of the airlines, when COVID hit, reached out to us, and we think other important vendors as well, and asked for some assistance around their own cash flows. And so what we did was we offered to move some of those cash flows out of the summer months into the fall.

So we restructured those but only inside of fiscal '21. So we moved some payments out of the summer into the fall, and both airlines are current with those payments. We've received cash from both of them according to the schedule. And then finally, the really important part of this, I think, Sean, was that our partnership with those airlines and the willingness we showed to work with them during the depths of the crisis really rang well with those customers from the standpoint that we expanded some of the services that we provided to them, that we do provide to them on an ongoing basis and, in one case, extended the length of the contract by a year or 18 months.

Sean Wieland -- Piper Sandler -- Analyst

OK. And the increase in receivables, is that entirely due to the two airlines, or are there other clients as well?

Steve Barnes -- Chief Financial Officer

It's the airlines, Sean. As you'll recall, our receivables are typically very low, single-digit DSO kind of range because our customers typically pay us in advance. So the extension you see this quarter, which takes DSOs up into the 25, 26 days' range is attributable to the airlines. And since the August 31 date that you see in there, both of those customers have made payments toward that AR number that you see.

Sean Wieland -- Piper Sandler -- Analyst

All right. And just one more, if I could slide it in is anything -- any update on the rollout of TRICARE?

Rajeev Singh -- Chief Executive Officer

Sean, this is Raj. It's great to talk to you again. In terms of TRICARE, we've now rolled out to the population. The service levels are extremely high.

We've got really strong satisfaction rates and really strong engagement rates. And so we're continuing -- it's early still, Sean, in that we went live in May, to report out on the results as it relates to any of the sorts of performance measures associated with the population, but we're bullish on the early returns and hopefully strong results.

Sean Wieland -- Piper Sandler -- Analyst

All right. That's super. Thank you very much.

Operator

Thank you. Our next question comes from Robert Jones of Goldman Sachs. Your line is now open.

Robert Jones -- Goldman Sachs -- Analyst

Great. Thanks for the questions. Yeah. I guess maybe just to start with guidance and the cadence over the balance of the year, looking at 4Q, it does look like the implied revenue growth would be somewhere in the mid-teens range, which is clearly below where you've been year to date and where you're implying 3Q revenue growth to be.

So just wanted to see if there was any details you could share around expectations for 4Q. Is it related to the savings? Is it related to calendar '21 starts? Or anything else at play that might help explain the back-half cadence from here would be helpful.

Steve Barnes -- Chief Financial Officer

Sure. Bob, this is Steve. What you're seeing there is a couple of things. In terms of raising guidance, we're raising that on the booking strength that we're seeing year to date that Raj spoke about.

So that's the first point. What you're seeing in the back half is us pushing forward that COVID-related reserve from the second, third, and fourth quarter into the third and the fourth quarter. While we're on the topic, part of the revenue beat this quarter is attributable to the fact that our membership continues to remain intact on a net same-store basis through the second quarter and up through now. So we're fortunate to not have seen any net falloff from COVID, but we are pushing that reserve forward into the back half, which does take the growth rate down from where it was in the fourth quarter.

We think that it's smart to do that until we have even further visibility on employment in the customer base, which, again, is really just primarily in the airline, a couple of airlines, segment. Outside of that, on a net basis, we've seen some of our customers grow, which has offset any member losses in the book.

Robert Jones -- Goldman Sachs -- Analyst

Got it. So nothing negative around the ability to achieve savings, it doesn't sound like it's baked into the 4Q number.

Steve Barnes -- Chief Financial Officer

That's right. We still have -- we continue to have visibility around the savings number in the range of what you've seen historically. Obviously, it's been an odd year in terms of utilization. But from where we sit today, we do not see any material change in our PGs and cost savings.

Robert Jones -- Goldman Sachs -- Analyst

Great. I guess just maybe one other one, if I could sneak it in. I know, relative to initial guidance, you don't bake in midyear starts. You shared some examples of wins you've recently had.

Just curious if there were any midyear wins that are now factored into guidance. I know Humana, you mentioned is a Jan 1 start, but any of the other wins you shared or wins that you've had this year are starting midyear, or is it all mostly Jan 1 starts?

Steve Barnes -- Chief Financial Officer

Mostly Jan 1 starts but probably we have had wins during the year that do have off Jan 1 starts. Backing up for a minute, Raj spoke about wins across the market segments: strategic, enterprise, and mid-market. We've also had sales with our Accolade COVID Response Care offering, which is a great example of an offering that can start any time outside of a -- beginning of a benefits plan year. So what you're seeing in our uplifting guidance is some of the impact of off-cycle starts, if you will, but the preponderance of the new wins do begin on January 1.

Robert Jones -- Goldman Sachs -- Analyst

Great. Thanks, Steve. I appreciate it.

Steve Barnes -- Chief Financial Officer

Thanks for the questions, Bob.

Operator

Thank you. Our next question comes from Ricky Goldwasser with Morgan Stanley. Your line is open.

Ricky Goldwasser -- Morgan Stanley -- Analyst

Yeah. Hi. Good afternoon. So one follow-up on Bob's question and then a stand-alone question.

So just thinking about the cost savings in the fourth quarter, I noted you're saying that you haven't seen anything out of the ordinary. But really, when we think about the employees' healthcare utilization coming in lower than planned for the year, we're hearing that across the board. What do you expect with regard to achieving your cost savings? And I know it's not about achieving but exceeding your cost savings and operational targets in the fourth quarter.

Steve Barnes -- Chief Financial Officer

Ricky, it's Steve. The way we think about that, if you step back and think about how those cost savings agreements are structured, we are typically saving against a healthcare trend line, whether it's an industry index or a growth of a particular customer off the baseline. And so our model is designed to do better than the customer would have done without Accolade. So whether it's in a lower spend environment like we saw in the beginning of this year or as it starts to recover, and we're seeing that now as far as utilization goes, we would expect, and our data is indicating, that we would continue to save against what that trend would tell us.

And so it looks to be that we will continue to do better than those customers would have done versus trend, which would result in our earning those cost savings-based performance guarantees.

Ricky Goldwasser -- Morgan Stanley -- Analyst

And then when we think about Ginger, it is, I think, a trusted partner or a preferred partner. Can you maybe walk us through the revenue model, how we should think about that, and the contribution to the top line for those deals that you signed with Ginger?

Rajeev Singh -- Chief Executive Officer

Let me take a start at that and then you can jump in and add any color.

Steve Barnes -- Chief Financial Officer

Sure.

Rajeev Singh -- Chief Executive Officer

Ricky, it's Raj. It's great to chat with you again. If you were to think about the way we've packaged off what we're doing with Mental Health Integrated Care from a revenue perspective, it's important to note that we're going to the customer with a collaborative care model where we're actually targeting segments of the population that might need this service with a greater or more significant need and then driving an integrated care solution for them. And in fact, what we're doing is actually charging an upcharge to that customer.

So they're purchasing Ginger at a rate that's been prenegotiated by Accolade, and then we're charging jointly a higher price point to that customer based on the incremental value that we're providing and then also associating incentives or performance guarantees against that capability. So that's how we're charging for it. And I think we'd expect if you were to look at the price points in the mental health space, we'd expect to be able to charge an upcharge that could range from 20% to 30% of what those charges are and achieve those in terms of our revenue streams. It's early days, Ricky, but we're lucky enough to have signed our first customer almost immediately upon delivering the service and to do so at those kinds of rates, and we expect to continue to be able to do so.

Ricky Goldwasser -- Morgan Stanley -- Analyst

So just to follow up on that one, just to clarify, when you charge an incremental or higher price point, is that for a specific target population was in decline, where you might have a higher PMPM, or is that across the entire base of employees?

Rajeev Singh -- Chief Executive Officer

We're offering the service to the entire base of employees like everything else we offer.

Ricky Goldwasser -- Morgan Stanley -- Analyst

OK. Great. That's really helpful. And just one quick follow-up.

I know, Steve, you talked about the airlines as the delta between your longer-term growth rate of 25%, right, versus actual results. So just to clarify, is that across the entire year, or is it when we think about the fourth quarter, fourth quarter, the growth is in the teens. So the difference between that and 25% will be all airlines. So just whether it's concentrated in the fourth quarter or versus the entire year.

Steve Barnes -- Chief Financial Officer

Sure. And let me clarify a couple of things there. First of all, the reserve that we've put in place is largely to support the impact from the airlines. We also have what we would consider to be a general reserve for item -- for customers that we don't see having a specific impact yet but we think it's smart to do that in the COVID environment.

So call it, the vast majority of that reserve is associated with the airlines. And our point about the 25% growth rate is, if we were to not have that reserve in place, the annual growth rate this year would be in the range of 25% or so.

Ricky Goldwasser -- Morgan Stanley -- Analyst

Thank you.

Steve Barnes -- Chief Financial Officer

Thanks, Ricky.

Operator

Thank you. Our next question comes from Michael Cherny with Bank of America. Your line is now open.

Michael Cherny -- Bank of America Merrill Lynch -- Analyst

Hey. Thank you so much for all the color you've given so far. I want to dive a little bit more into the selling season. You referenced a few pretty signature client wins and obviously going and pitching the value proposition that you have and showing what you've been able to do during COVID.

For any of the customers or, I guess, maybe more prospects that you went out to and said no, whether -- especially the ones that decide not to pick anyone else or who picked someone else, what was some of the reaction as to the why? How much of it was more macro dynamic tied to the recessionary uncertainty versus the value proposition on Accolade? Can you just give us a sense in terms of the win-losses, how the losses or the lack of wins would shake out in this particular selling season?

Rajeev Singh -- Chief Executive Officer

Sure thing, Mike. If you were to think about -- first of all, let me start with -- on a broader context, the market momentum is strong across every market segment. I know you heard that from us already. Mid-market, enterprise segment and strategic accounts all saw new accounts closed.

Our close rates have also been very strong, meaning our competitive positioning in each of the core market segments has also been really strong. But to directly answer your question, to the degree we see a customer or a prospect evaluate the solution and then not do anything, that is oftentimes today really driven by the complexity and the other challenges that they're facing. I think early in the year, there was a small segment of our pipeline that said, look, all we can talk about is COVID, how we're going to deal with COVID and how we can deal with the impact on how we're getting healthcare for our employees, and we can't think about a deployment that might happen on January 1. And so it's less about economic value, Mike.

I'd say those prospects that chose to -- who came down the road, so to speak, albeit a smaller percentage than have ever done so in the past, did so largely based on the complexity of the COVID environment and their need to focus entirely on that particular problem, which in part led to the delivery of the COVID Response Care offering in Q1 of this year.

Michael Cherny -- Bank of America Merrill Lynch -- Analyst

And if I could just ask a bit of an offshoot of Ricky's question, especially since so many of us on the line are still learning more about your business. Clearly, as noted, this is a very weird year from a utilization perspective. You gave some commentary around the at-risk savings-based revenue in terms of your visibility into the fourth quarter. How does the rolling impact change in terms of how you would reset the expectations for the end of year '21, so I guess the 4Q '22 at-risk revenue? And is there any dynamic in terms of what you've learned from this year's utilization experience that would change how you would factor that in for next year's potential targeted savings for your customers?

Steve Barnes -- Chief Financial Officer

Sure. Mike, this is Steve. On that, yes, it is a weird year in terms of the utilization, no doubt. It depends customer by customer how those get set.

But generally speaking, the data from this year will get factored in. And then either a baseline, if it is in a contract that a baseline is getting reset or a contract is a couple of years in the midst of being in order, we will look at that baseline. But in effect, I think what we continue to come back to is, whether it's in a high-cost, high-utilization environment and costs are rising more rapidly or a lower environment like we were in at the beginning of this year, what we see is that the Accolade model, the clinical and type-driven model enabling us to drive costs lower than they would otherwise be given our model, and that's where we get confidence in the earnings on the savings. But no doubt, the data from this year will have to get factored in.

As you know, almost every report is indicating that next year's costs should go up by a fair amount. And we think the utilization of the service will be even more important in environments like that to help manage outcomes and cost.

Michael Cherny -- Bank of America Merrill Lynch -- Analyst

Great. Thanks, Steve.

Steve Barnes -- Chief Financial Officer

Thanks, Mike.

Operator

Thank you. Our next question comes from Jailendra Singh with Credit Suisse.

Jailendra Singh -- Credit Suisse -- Analyst

Hi. Thank you. So just following up on Mike's question earlier about the selling season experience, clearly very unique in several ways. Have you guys seen or come across, like, health insurance companies getting more aggressive compared with last year with respect to rolling out or pushing for their own employee engagement or employee navigation services offering? Just curious about your thoughts there that if you have seen any changes in their approach this year versus last year.

Rajeev Singh -- Chief Executive Officer

Hey, Jailendra. It's Raj. I think, by and large, as we look at the competitive landscape, you really think about it by segment, Jailendra. And in the strategic accounts segment of those large accounts, we've traditionally seen carriers with their own solutions.

We've worked with those very same carriers to implement our own solutions when we win those accounts. And that we continue to see those carrier solutions present in competitive evaluations in that strategic account space where we continue to do well. I think it's fair to say you'd also see that at the high end of the enterprise space. But beyond that -- but in terms of change in the competitive landscape, I'd say none.

In terms of change in win rate and our performance against those types of solutions when we're evaluated competitively, I'd say we continue to perform really well and perhaps even strengthened over the last year.

Jailendra Singh -- Credit Suisse -- Analyst

OK. And then following up on your Ginger integrated partnership on mental health side, and I believe you have similar offering with the PlushCare on the telemedicine side, are there any other areas or specialties you are focused on, which you are likely to explore for similar integrated offering in the future?

Rajeev Singh -- Chief Executive Officer

So, Jailendra, I think the way we've delivered the Mental Health Integrated Care with Ginger is a great example of the way we look at the future as it relates to how we want to deliver a coordinated or collaborative care. And so you'll see us continue to pursue offerings like that one, whether those are our own clinical programs or we're partnering with third parties to deliver that incremental value. Up to now -- you actually mentioned PlushCare, as of today, our most significant telemedicine integration with Teladoc where we've integrated and actually delivered them to a number of different customers, and you'll see us continue to do that moving forward as well.

Jailendra Singh -- Credit Suisse -- Analyst

OK. And last quick clarification on the Humana contract, is that Total Health and Benefits? And is that being rolled out for all Humana, I believe, like, 45,000-plus employees across the country? If that's true, I mean it implies roughly, like, $11 million to $13 million annual revenue. Does that math sound right or will you push me back on any of that?

Rajeev Singh -- Chief Executive Officer

I'll let Steve hit you on the math, Jailendra, and I'll talk to you about the offering and the population. Yes. It's the entire population of Humana, Inc., and we're really excited about that and that it reflects the success of the partnership and their continued bullishness, which mirrors our own as it relates to the value of the relationship. They're deploying something that we call Humana Impact with Accolade, which is the very same offering that we're offering with Humana to their customers.

And so it's very consistent with the offering that the partnership is taking to market. And Steve, I'll let you comment on the financials.

Steve Barnes -- Chief Financial Officer

Sure. Hi, Jailendra. So as Raj said, yes, it's obviously very exciting to have Humana take the offering to their own employee base. Without getting into too much specifics about the contract itself, it is a Total Health and Benefits offering.

We've talked about the pricing for that ranging in the high teens to low-20s PEPM. So you could think of it in that kind of range. And I kind of -- I'll leave it there, but we're really excited to have Humana onboard as an important partner and obviously now as a customer as well.

Rajeev Singh -- Chief Executive Officer

Just a little color commentary on what Steve said, call Humana Impact with Accolade a close derivative of Total Health and Benefits.

Jailendra Singh -- Credit Suisse -- Analyst

Got it. OK. Thanks, guys.

Operator

Thank you. Our next question comes from Ryan Daniels with William Blair. Your line is now open.

Ryan Daniels -- William Blair -- Analyst

Yeah. Good evening, and thanks for the color and for taking the question, guys. Let me continue with Humana. That's a great data point, obviously, that they're now using it for their internal workforce, as well as selling it to ASO accounts and using it for self-insured.

I guess the remaining piece of the puzzle there is Medicare Advantage, which is a huge, fully insured market for them. Is there any progress there or any potential hurdles that would keep you from looking at that as a market opportunity as well going forward?

Rajeev Singh -- Chief Executive Officer

Sean, thanks for the question. I'll maybe speak to the broader context of the relationship as it sits today and then directly address your question about Medicare Advantage. We are actually taking the product to market in their ASO book. We've actually also seen some success in their fully insured book with -- we think we announced it last quarter with Hillsborough County Public Schools.

I'm sorry, Ryan, I think I called you the wrong name. So we're seeing success both in their fully insured book, as well as in their ASO or self-insured book. And that success obviously led directly to them taking on the offering inside for their own employees, and we expect to continue to pursue new opportunities to work together. We think there are a couple of real significant opportunities in front of us.

Amongst them are partnering with them in the TRICARE space where we've already got a foot in the door via our TRICARE pilot, and they, of course, have a significant component of that population from a carrier perspective, and Medicare Advantage. And so to answer your question directly, no, we don't see any sort of impediments to continuing to strengthen the relationship and, over time, finding a path into the Medicare Advantage space.

Ryan Daniels -- William Blair -- Analyst

OK. And Sean is much better looking than me so I view that as a compliment. In regards to -- one quick follow-up also on the COVID response -- rapid response -- or COVID Response Care, how should we think about that from a standpoint of selling it to existing customers for return-to-work programs versus getting new customers and signing them up for that initially? And the reason I asked is, either way, it could potentially create an air pocket. If we look back a year from now, maybe we're in a period where there's a vaccine and the chain has been broken with people getting immunity, whatever it might be, and they no longer need that specific product.

So maybe it's not big enough to impact growth year over year, but is there a plan in place to make sure that you guys can convert the new customers to full-time customers on some of the core products, if and when that ends, and the revenue from customers added on, to sell them other novel solutions to ensure that growth there on the same client basis can offset any of that?

Rajeev Singh -- Chief Executive Officer

It's a great question, Ryan. I appreciate you asking it. I think if you think about our customer acquisition since we released COVID Response Care in May, we've seen more than a handful of customers come on. Those have come on both as stand-alone Accolade COVID Response Care customers and as customers who are purchasing the solution who are already running one of our other landing point offerings.

We've also seen, importantly, customers who purchased COVID Response Care to begin their relationship also purchase -- after some period of time leveraging COVID Response Care, also purchase one of our landing point offerings: Accolade Total Benefits, Accolade Total Care, Accolade Total Health and Benefits. We think one of the fundamental values of the solution Accolade COVID Response Care is the idea that you get an understanding of what a frontline care team can do for you in a situation of need. And to the degree that's a particularly significant need for you right now, demonstrating that capacity gives us a good opportunity to convert those customers. It's too early to tell you what the conversion rate is going to be, Ryan, but we are focused on it, so we definitely have an effort on converting those customers who are not on any of our core platforms over to them over time.

And I think early returns would indicate that we're going to be pretty good about making that happen.

Ryan Daniels -- William Blair -- Analyst

Great. Thank you for the color. Appreciate it.

Operator

Thank you. Our next question comes from Matthew Gillmor with Baird. Your line is now open.

Matthew Gillmor -- Robert W. Baird & Co. -- Analyst

Hey. Thanks for the question. I wanted to follow up on the selling season comments. It sounds like the momentum continues to be very strong.

Can you remind us when the selling season generally concludes for you all? Is it the next month or so? And then I know you don't provide the ACV on a quarterly basis, but on a qualitative perspective, can you just give us some sense for the visibility you have toward whatever your internal targets are?

Rajeev Singh -- Chief Executive Officer

First of all, thank you for the question, Matt. I think the way to think about our traction from a new bookings perspective is we're continuing to see traction across each market segment. And so that traction, in each quarter that we've delivered, we've delivered incremental new customers in each of those market segments. And that the selling season is somewhat different by the market segments that we're selling in.

And so you'll see largely large strategic accounts will be making decisions early in the buying cycle. You'll remember, Matt, that most of our customers in that segment are deploying on January 1 to coincide with their plan year and therefore need time to deploy their solutions. And so you'll see the first six months, maybe extending into nine months, that's the selling season for strategic accounts. You would see that season be roughly approximate for enterprise accounts, and you'd see mid-market accounts who could buy anytime during the year continue to buy through the calendar fourth quarter of the year because the deployment time frames are more compressed and because they tend to be less sort of biased toward January 1 deployments.

So it's sort of a sliding scale associated with selling season: the front end of the year being very biased toward strategic accounts, the back end of the year continuing with middle-market accounts.

Matthew Gillmor -- Robert W. Baird & Co. -- Analyst

Fair enough. And then maybe following up on the airlines discussion, I appreciate it makes all the sense in the world to be really conservative here with the guide. I was curious with the furloughs that have been announced, is that more or less in line with what you had been assuming? And are the furloughed employees that have already been announced, are they keeping their health benefits for now or are they already rolling off? Just curious how that has been working.

Steve Barnes -- Chief Financial Officer

Matt, this is Steve. So on that point, fortunately, we haven't seen really a significant amount of unemployment in the base right now. What you're hearing from us, and particularly the questions earlier around the Q4 growth rate kind of all gets to this, what we're trying to do is maintain a level of conservatism in the midst of the pandemic that we think is really smart to do while you're hearing from us a really strong underlying core growth business. And to come back to your earlier point, while we don't speak to ACV on an intra-year basis, by raising guidance, what you're hearing from us is we're even ahead of where we would have expected to be when we set that initial guidance.

And so we're setting that reserve. It's primarily -- it's hitting the fourth quarter disproportionately, which is what's compressing that growth rate. But what we expect is, if and when those unemployment and/or furloughs happen at the airlines, we expect there to be some take rate that we've modeled to offset the pure unemployment that we are using both from internal models and from guidance we're getting from those customers around their expectations of co-brand furloughs.

Matthew Gillmor -- Robert W. Baird & Co. -- Analyst

Got it. That's helpful. Thank you.

Steve Barnes -- Chief Financial Officer

Thanks.

Operator

Thank you. Our next question comes from Stephanie Davis with SVB Leerink. Your line is now open.

Stephanie Davis -- SVB Leerink -- Analyst

Hey, guys. Thank you for taking my question. So I figured I'd jump on the selling season kind of bandwagon and ask another one in there. You pointed to a number of healthy new wins in the quarter.

Within these wins, are you seeing any change in buying activity post-COVID such as a shift to a different level of offering or a change in pipeline value, or maybe a greater willingness for midyear starts just as a result of the pandemic?

Rajeev Singh -- Chief Executive Officer

Thanks for the question, Stephanie. This is Raj. I think as you look at the year and the entirety of the year, we've seen consistency -- consistently strong demand in each of the quarters we've completed at this point across every market segment. So the answer to the first question, has it changed in terms of demand, I'd say demand has strengthened.

In terms of the customer's buying criteria, and we are seeing customers buying each of the core offerings, I'd say so that ties out to Accolade Total Benefits, Total Care, and Accolade Total Health and Benefits. What has changed during the year is the customers' significant focus around COVID and the management of COVID-19 as it relates to taking care of their employees. That started with a set of clinical programs that we were delivering to our customers and talking to our prospects about that added value to the solution we currently deliver and then added when we delivered Accolade COVID Response Care. Accolade COVID Response Care clearly gave us an offering that could deploy within the year and has deployed within the year for those customers, particularly those in essential industries who had to return their employees to work over the last two or three months.

I think the Accolade Mental Health Integrated Care offering that we just delivered is another example of something that's sort of directly responsive to the needs of the market right now and that we're seeing in Temple University Health System, a deployment in-year of a solution that was impacting a particularly profound need for the customer. And so the flexibility of our technology platform and the flexibility of our capability to deliver new offerings based on customers' needs is actually creating opportunities, to the point of your question, deploy in-year with some of these new solutions.

Stephanie Davis -- SVB Leerink -- Analyst

That makes sense, kind of more of a demand for near-term solutions just given the pandemic.

Rajeev Singh -- Chief Executive Officer

Correct.

Stephanie Davis -- SVB Leerink -- Analyst

Then I have two quick modeling questions for this. The first is what happens to your model if the airlines do get bailed out? Do they then get a big reserve release or do you keep it on the books until we're fully out of the woods for COVID? And the second is if you have any update on customer count or member count.

Steve Barnes -- Chief Financial Officer

Stephanie, it's Steve. So first, on the way that we'll think about the airlines is, if there is an additional bailout, there should be some upside to the model. But we'll have to look and see what that bailout looks like and how it impacts those customers in particular. But essentially, what we will be doing is taking away that reserve and it would hit sometime after that announcement occurs.

We'll need to analyze it, but there should be some upside to the model, and that would impact potentially this year if that bailout hits anytime soon. And then secondly, with respect to customer count, we will wait until end of the year is what we've said. We'll talk about customer count, ACV, and gross dollar retention specifically at the end of the year. But hopefully, what you've heard today in our remarks is that we've had strong wins across segment and across offerings.

So last time we spoke about customer count was at the IPO, in which we said we had 60 customers, and we've grown significantly since then.

Stephanie Davis -- SVB Leerink -- Analyst

Right. That's helpful. Thank you, guys.

Steve Barnes -- Chief Financial Officer

Thanks, Stephanie.

Operator

Thank you. Our next question comes from Hannah Baade with D.A. Davidson. Your line is now open.

Hannah Baade -- D.A. Davidson -- Analyst

Hi. Thanks so much for taking the question. I want to touch on customer rollout in this environment. What's the progression of products that you were seeing most commonly? I recall Johnson Controls launched their COVID response last quarter.

Have you continued to see COVID response as part of an initial land?

Rajeev Singh -- Chief Executive Officer

Hannah, we absolutely have seen it as one of the ways that customers engage with us. So I'd say, particularly in the middle market and enterprise segments, customers who are very focused and oftentimes have constrained benefits departments and need to be very focused on one particular item, particularly one that's as significant as returning their employee to work safely during a pandemic, that Accolade COVID Response Care is a great place for them to start. Maybe a little bit to the point of Ryan's question earlier, once they dig in and land with us on Accolade COVID Response Care, customers see the value of a frontline care team that can help them manage through complex healthcare issues. They see the value of our clinical programs and our capacity to guide people to the right clinical outcome.

And that creates a really strong launch point for them to move from Accolade COVID Response Care to one of our core platform offerings. And we've already seen that happen a couple of times.

Hannah Baade -- D.A. Davidson -- Analyst

Great. And maybe just to follow up on Ginger, what factor drove this relationship to become an integrated partnership as opposed to a solution in the trusted supplier program?

Rajeev Singh -- Chief Executive Officer

Let me turn that call over to -- or let me turn that answer over to our chief medical officer, Shantanu Nundy.

Shantanu Nundy -- Chief FInancial Officer

Yes. Great. That's such an important question. Thanks for the opportunity to comment on that.

I think part of what we're seeing, and I think we're all seeing and feeling on different levels, is the demand environment. Right? I mean, clearly, mental health is a crisis in this country right now and has been a long-standing issue. On the other side, we were seeing a proliferation of new virtual care options. And those have been really promising, right, virtual therapy, virtual psychiatry, a lot more acceptance, and adoption from patients.

But what really was missing sort of as that market matures is that sort of much more whole person comprehensive orientation. Right? We started hearing customers say, well, how does virtual care link to in-person care, what happens -- how does this interplay with the investment that I've already made in EAP, how does this integrate into physical health and to primary care and, most critically, will this provide incremental clinical outcomes and cost savings, right, which particularly is important in this environment that we're in. And so we saw an opportunity to really pursue a deeper type of integration and partnership, where we're bringing our clinical capabilities to bear with Ginger's clinical capabilities to really answer a lot of these core questions to create something that creates incremental value, that creates a much more seamless experience, whether that experience is off-line or online, that's much more comprehensive so they can manage people that have comorbid, say, diabetes and depression. And that really helps to reach those numbers who need it most.

And so those were a large part of the motivation for why we decided to take a bigger step here.

Operator

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Rajeev Singh for closing remarks.

Rajeev Singh -- Chief Executive Officer

We appreciate all of you making time to spend time with us and dig in with us on our fiscal Q2, and we look forward to catching up with you again next quarter. Thanks very much.

Operator

[Operator signoff]

Duration: 61 minutes

Call participants:

Todd Friedman -- Investor Relations

Rajeev Singh -- Chief Executive Officer

Steve Barnes -- Chief Financial Officer

Sean Wieland -- Piper Sandler -- Analyst

Robert Jones -- Goldman Sachs -- Analyst

Ricky Goldwasser -- Morgan Stanley -- Analyst

Michael Cherny -- Bank of America Merrill Lynch -- Analyst

Jailendra Singh -- Credit Suisse -- Analyst

Ryan Daniels -- William Blair -- Analyst

Matthew Gillmor -- Robert W. Baird & Co. -- Analyst

Stephanie Davis -- SVB Leerink -- Analyst

Hannah Baade -- D.A. Davidson -- Analyst

Shantanu Nundy -- Chief FInancial Officer

All earnings call transcripts