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Phreesia Announces First Quarter Fiscal 2024 Results

Phreesia, Inc. (NYSE: PHR) (“Phreesia” or the "Company") announced financial results today for the fiscal first quarter ended April 30, 2023.

"Our team got off to a solid start in fiscal 2024. Across the organization, we made meaningful progress toward achieving our goals of continued growth and a return to profitability, while maintaining our ongoing commitment to optimal patient outcomes," said CEO and Co-Founder Chaim Indig.

Please visit the Phreesia investor relations website at ir.phreesia.com to view the Company's Q1 Fiscal Year 2024 Stakeholder Letter.

Fiscal First Quarter Ended April 30, 2023 Highlights

  • Total revenue was $83.8 million in the quarter as compared to $63.4 million in the same period in the prior year, an increase of 32%.
  • Average number of healthcare services clients ("AHSCs") was 3,309 in the quarter as compared to 2,526 in the same period in the prior year, an increase of 31%.
  • Healthcare services revenue per AHSC was $18,779 in the quarter as compared to $19,193 in the same period in the prior year, a decrease of 2%. The decline from the first quarter of fiscal 2023 to the first quarter of fiscal 2024 was driven primarily by AHSC growth that outpaced payment processing revenue growth. See "Key Metrics" below for additional information.
  • Total revenue per AHSC was $25,338 in the quarter as compared to $25,081 in the same period in the prior year, an increase of 1%. The increase was driven primarily by network solutions revenue growth that outpaced AHSC growth. See "Key Metrics" below for additional information.
  • Net loss was $37.5 million in the quarter compared to $51.2 million in the same period in the prior year.
  • Adjusted EBITDA was negative $13.8 million in the quarter compared to negative $30.6 million in the same period in the prior year.
  • Cash and cash equivalents as of April 30, 2023 was $149.8 million, down $26.9 million from January 31, 2023.

Recent Events

We are party to the Third SVB Facility, which contains certain restrictive covenants including a covenant that limits our ability to retain specified levels of cash in accounts outside of SVB. On March 10, 2023, we obtained consent from SVB to hold up to $165 million of cash in accounts outside SVB until May 15, 2023. On May 8, 2023, we obtained an extension of the consent through September 15, 2023, provided we continue to hold at least $17 million of cash in accounts at SVB. The consent serves to permit us to borrow against the Third SVB Facility once the cash and cash equivalents retained outside of SVB are compliant with the covenant and so long as we remain in compliance with all other covenants under the Third SVB Facility.

We believe that our cash and cash equivalents along with cash generated in the normal course of business, are sufficient to fund our operations for at least the next 12 months.

Fiscal Year 2024 Outlook

For the full fiscal year 2024 ending January 31, 2024, we expect revenue to be between $353 million and $356 million, implying year-over-year growth of 26% to 27%.

We are raising our Adjusted EBITDA outlook for fiscal year 2024 to a range of negative $60 million and negative $55 million from a previous range of negative $65 million to negative $60 million. The change reflects our strong performance in the first quarter.

We have not reconciled our Adjusted EBITDA outlook to GAAP Net income (loss) because we do not provide an outlook for GAAP Net income (loss) due to the uncertainty and potential variability of Other (income) expense, net and (Benefit from) provision for income taxes, which are reconciling items between Adjusted EBITDA and GAAP Net income (loss). Because we cannot reasonably predict such items, a reconciliation of the non-GAAP financial measure outlook to the corresponding GAAP measure is not available without unreasonable effort. We caution, however, that such items could have a significant impact on the calculation of GAAP Net income (loss). For further information regarding the non-GAAP financial measures included in this press release, including a reconciliation of GAAP to non-GAAP financial measures and an explanation of these measures, please see “Non-GAAP financial measures” below.

Fiscal Year 2025 Target

We are maintaining our $500 million revenue target to be achieved by annualizing our highest-revenue quarter in fiscal year 20251 and we continue to expect to reach profitability2 in fiscal year 2025. We also believe our cash and cash equivalents, along with cash generated in the normal course of business, can support our path to our fiscal year 2025 targets.

We believe our platform and diverse revenue streams offer us multiple paths for achieving our targets.

1 For our target revenue, annualized is defined as multiplying the highest-revenue quarter in fiscal year 2025 by four.

2 For the purposes of this statement, we define "profitability" in terms of Adjusted EBITDA.

Available Information

We intend to use our Company website (including our Investor Relations website) as well as our Facebook, Twitter, LinkedIn and Instagram accounts as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.

Forward Looking Statements

This press release includes express or implied statements that are not historical facts and are considered forward-looking within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally relate to future events or our future financial or operating performance and may contain projections of our future results of operations or of our financial information or state other forward-looking information. These statements include, but are not limited to, statements regarding: our future financial and operating performance, including our revenue, Adjusted EBITDA and our ability to reach profitability in fiscal year 2025; our ability to finance our plans to achieve our 2025 targets with our current cash balance and cash generated in the normal course of business; our outlook for fiscal year 2024 (including with respect to Adjusted EBITDA) and fiscal year 2025 targets; and our belief that our platform and revenue streams offer us multiple paths for achieving our targets. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control, including, without limitation, risks associated with: our ability to effectively manage our growth and meet our growth objectives; our focus on the long-term and our investments in growth; the competitive environment in which we operate; our ability to develop and release new products and services; our ability to develop and release successful enhancements, features and modifications to our existing products and services; changes in market conditions and receptivity to our products and services; our ability to maintain the security and availability of our platform; changes in laws and regulations applicable to our business model; our ability to make accurate predictions about our industry and addressable market; the impact of pandemics on our business and economic conditions; our ability to attract, retain and cross-sell to healthcare services clients; our ability to continue to operate effectively with a primarily remote workforce and attract and retain key talent; our ability to realize the intended benefits of our acquisitions and partnerships; the recent high inflationary environment and other general, market, political, economic and business conditions (including as a result of the warfare and/or political and economic instability in Ukraine or elsewhere). The forward-looking statements contained in this press release are also subject to other risks and uncertainties, including those listed or described in our filings with the Securities and Exchange Commission (“SEC”), including in our Annual Report on Form 10-K for the fiscal year ended January 31, 2023 and in our Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2023 that will be filed with the SEC following this press release. The forward-looking statements in this press release speak only as of the date on which the statements are made. We undertake no obligation to update, and expressly disclaim the obligation to update, any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law.

This press release includes certain non-GAAP financial measures as defined by SEC rules. We have provided a reconciliation of those measures to the most directly comparable GAAP measures, with the exception of our Adjusted EBITDA outlook for the reasons described above.

Conference Call Information

We will hold a conference call on Wednesday May 31, 2023, at 5:00 p.m. Eastern Time to review our fiscal 2024 first quarter financial results. To participate in our live conference call and webcast, please dial (888) 350-3437 (or (646) 960-0153 for international participants) using conference code number 4000153 or visit the “Events & Presentations” section of our Investor Relations website at ir.phreesia.com. A replay of the call will be available via webcast for on-demand listening shortly after the completion of the call, at the same web link, and will remain available for approximately 90 days.

ABOUT PHREESIA

Phreesia is the trusted leader in patient activation, giving providers, health plans, life sciences companies and other organizations tools to help patients take a more active role in their care. Founded in 2005, Phreesia enabled more than 120 million patient visits in 2022 – more than 1 in 10 visits across the U.S. – scale that we believe allows us to make meaningful impact. Offering patient-driven digital solutions for intake, outreach, education and more, Phreesia enhances the patient experience, drives efficiency and improves healthcare outcomes. To learn more, visit phreesia.com.

Phreesia, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share data)

 

April 30, 2023

 

January 31, 2023

 

(Unaudited)

 

 

Assets

 

 

 

Current:

 

 

 

Cash and cash equivalents

$

149,767

 

$

176,683

Settlement assets

 

26,539

 

 

22,599

Accounts receivable, net of allowance for doubtful accounts of $1,022 and $1,053 as of April 30, 2023 and January 31, 2023, respectively

 

52,932

 

 

51,394

Deferred contract acquisition costs

 

908

 

 

1,056

Prepaid expenses and other current assets

 

10,002

 

 

10,709

Total current assets

 

240,148

 

 

262,441

Property and equipment, net of accumulated depreciation and amortization of $63,810 and $59,847 as of April 30, 2023 and January 31, 2023, respectively

 

26,228

 

 

21,670

Capitalized internal-use software, net of accumulated amortization of $39,380 and $37,236 as of April 30, 2023 and January 31, 2023, respectively

 

38,152

 

 

35,150

Operating lease right-of-use assets

 

336

 

 

569

Deferred contract acquisition costs

 

1,562

 

 

1,754

Intangible assets, net of accumulated amortization of $2,892 and $2,549 as of April 30, 2023 and January 31, 2023, respectively

 

11,058

 

 

11,401

Deferred tax asset

 

 

 

81

Goodwill

 

33,736

 

 

33,736

Other assets

 

2,632

 

 

3,255

Total Assets

$

353,852

 

$

370,057

Liabilities and Stockholders’ Equity

 

 

 

Current:

 

 

 

Settlement obligations

$

26,539

 

$

22,599

Current portion of finance lease liabilities and other debt

 

6,982

 

 

5,172

Current portion of operating lease liabilities

 

692

 

 

934

Accounts payable

 

7,602

 

 

10,836

Accrued expenses

 

23,284

 

 

21,810

Deferred revenue

 

17,881

 

 

17,688

Total current liabilities

 

82,980

 

 

79,039

Long-term finance lease liabilities and other debt

 

6,689

 

 

2,725

Operating lease liabilities, non-current

 

257

 

 

349

Long-term deferred revenue

 

179

 

 

125

Long-term deferred tax liabilities

 

136

 

 

Total Liabilities

 

90,241

 

 

82,238

Commitments and contingencies

 

 

 

Stockholders’ Equity:

 

 

 

Common stock, $0.01 par value - 500,000,000 shares authorized as of both April 30, 2023 and January 31, 2023; 54,766,872 and 54,187,172 shares issued as of April 30, 2023 and January 31, 2023, respectively

 

548

 

 

542

Additional paid-in capital

 

947,353

 

 

926,957

Accumulated deficit

 

(643,615)

 

 

(606,084)

Treasury stock, at cost, 1,186,619 and 971,236 shares as of April 30, 2023 and January 31, 2023, respectively

 

(40,675)

 

 

(33,596)

Total Stockholders’ Equity

 

263,611

 

 

287,819

Total Liabilities and Stockholders’ Equity

$

353,852

 

$

370,057

Phreesia, Inc.

Consolidated Statements of Operations

(Unaudited)

(in thousands, except share and per share data)

 

Three months ended

April 30,

 

 

2023

 

 

2022

Revenue:

 

 

 

Subscription and related services

$

37,887

 

$

29,101

Payment processing fees

 

24,253

 

 

19,381

Network solutions

 

21,705

 

 

14,872

Total revenues

 

83,845

 

 

63,354

Expenses:

 

 

 

Cost of revenue (excluding depreciation and amortization)

 

14,907

 

 

14,386

Payment processing expense

 

16,090

 

 

12,158

Sales and marketing

 

37,413

 

 

40,031

Research and development

 

26,469

 

 

20,635

General and administrative

 

19,877

 

 

20,855

Depreciation

 

4,504

 

 

4,278

Amortization

 

2,486

 

 

1,604

Total expenses

 

121,746

 

 

113,947

Operating loss

 

(37,901)

 

 

(50,593)

Other expense, net

 

(42)

 

 

(31)

Interest income (expense), net

 

718

 

 

(383)

Total other income (expense), net

 

676

 

 

(414)

Loss before provision for income taxes

 

(37,225)

 

 

(51,007)

Provision for income taxes

 

(306)

 

 

(235)

Net loss

$

(37,531)

 

$

(51,242)

Net loss per share attributable to common stockholders, basic and diluted(1)

$

(0.70)

 

$

(0.99)

Weighted-average common shares outstanding, basic and diluted

 

53,347,709

 

 

51,938,887

(1) Our potential dilutive securities have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.

 

 

 

 

Phreesia, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

 

Three months ended

April 30,

 

 

2023

 

 

2022

Operating activities:

 

 

 

Net loss

$

(37,531)

 

$

(51,242)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

Depreciation and amortization

 

6,990

 

 

5,882

Stock-based compensation expense

 

17,138

 

 

14,151

Amortization of deferred financing costs and debt discount

 

85

 

 

77

Cost of Phreesia hardware purchased by customers

 

416

 

 

277

Deferred contract acquisition costs amortization

 

340

 

 

467

Non-cash operating lease expense

 

233

 

 

289

Deferred taxes

 

217

 

 

224

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

 

(1,538)

 

 

(6,092)

Prepaid expenses and other assets

 

1,152

 

 

(450)

Deferred contract acquisition costs

 

 

 

(106)

Accounts payable

 

(2,983)

 

 

123

Accrued expenses and other liabilities

 

1,822

 

 

1,701

Lease liabilities

 

(247)

 

 

(306)

Deferred revenue

 

247

 

 

1,372

Net cash used in operating activities

 

(13,659)

 

 

(33,633)

Investing activities:

 

 

 

Capitalized internal-use software

 

(4,732)

 

 

(5,239)

Purchases of property and equipment

 

(1,347)

 

 

(1,785)

Net cash used in investing activities

 

(6,079)

 

 

(7,024)

Financing activities:

 

 

 

Proceeds from issuance of common stock upon exercise of stock options

 

249

 

 

709

Treasury stock to satisfy tax withholdings on stock compensation awards

 

(6,950)

 

 

(4,307)

Proceeds from employee stock purchase plan

 

967

 

 

1,214

Finance lease payments

 

(1,444)

 

 

(1,468)

Debt issuance costs and loan facility fee payments

 

 

 

(113)

Net cash used in financing activities

 

(7,178)

 

 

(3,965)

Net decrease in cash and cash equivalents

 

(26,916)

 

 

(44,622)

Cash and cash equivalents – beginning of period

 

176,683

 

 

313,812

Cash and cash equivalents – end of period

$

149,767

 

$

269,190

 

 

 

 

Supplemental information of non-cash investing and financing information:

 

 

 

Property and equipment acquisitions through finance leases

$

7,067

 

$

140

Purchase of property and equipment and capitalized software included in current liabilities

$

3,485

 

$

1,755

Capitalized stock-based compensation

$

337

 

$

348

Issuance of stock to settle liabilities for stock-based compensation

$

5,297

 

$

6,774

Cash paid for:

 

 

 

Interest

$

58

 

$

128

Non-GAAP financial measures

This press release and statements made during the above-referenced webcast may include certain non-GAAP financial measures as defined by SEC rules.

Adjusted EBITDA is a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP. Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income or loss or any other performance measure derived in accordance with GAAP, or as an alternative to cash flows from operating activities as a measure of our liquidity. We define Adjusted EBITDA as net income or loss before interest (income) expense, net, provision for income taxes, depreciation and amortization, and before stock-based compensation expense and other expense, net.

We have provided below a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure. We have presented Adjusted EBITDA in this press release and our Quarterly Report on Form 10-Q to be filed after this press release because it is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget, and to develop short and long-term operational plans. In particular, we believe that the exclusion of the amounts eliminated in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. We have not reconciled our Adjusted EBITDA outlook to GAAP Net income (loss) because we do not provide an outlook for GAAP Net income (loss) due to the uncertainty and potential variability of Other (income) expense, net and (Benefit from) provision for income taxes, which are reconciling items between Adjusted EBITDA and GAAP Net income (loss). Because we cannot reasonably predict such items, a reconciliation of the non-GAAP financial measure outlook to the corresponding GAAP measure is not available without unreasonable effort. We caution, however, that such items could have a significant impact on the calculation of GAAP Net income (loss).

Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Some of these limitations are as follows:

  • Although depreciation and amortization expense are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
  • Adjusted EBITDA does not reflect: (1) changes in, or cash requirements for, our working capital needs; (2) the potentially dilutive impact of non-cash stock-based compensation; (3) tax payments that may represent a reduction in cash available to us; or (4) interest (income) expense, net; and
  • Other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure.

Because of these and other limitations, you should consider Adjusted EBITDA along with other GAAP-based financial performance measures, including various cash flow metrics, net loss, and our GAAP financial results. The following table presents a reconciliation of Adjusted EBITDA to net loss for each of the periods indicated:

Phreesia, Inc.

Adjusted EBITDA

(Unaudited)

 

Three months ended

April 30,

(in thousands)

 

2023

 

 

2022

Net loss

$

(37,531)

 

$

(51,242)

Interest (income) expense, net

 

(718)

 

 

383

Provision for income taxes

 

306

 

 

235

Depreciation and amortization

 

6,990

 

 

5,882

Stock-based compensation expense

 

17,138

 

 

14,151

Other expense, net

 

42

 

 

31

Adjusted EBITDA

$

(13,773)

 

$

(30,560)

Phreesia, Inc.

Reconciliation of GAAP and Adjusted Operating Expenses

(Unaudited)

 

Three months ended

April 30,

(in thousands)

 

2023

 

 

2022

GAAP operating expenses

 

 

 

General and administrative

$

19,877

 

$

20,855

Sales and marketing

 

37,413

 

 

40,031

Research and development

 

26,469

 

 

20,635

Cost of revenue (excluding depreciation and amortization)

 

14,907

 

 

14,386

 

$

98,666

 

$

95,907

Stock compensation included in GAAP operating expenses

 

 

 

General and administrative

$

5,878

 

$

5,128

Sales and marketing

 

6,417

 

 

5,654

Research and development

 

3,878

 

 

2,561

Cost of revenue (excluding depreciation and amortization)

 

965

 

 

808

 

$

17,138

 

$

14,151

Adjusted operating expenses

 

 

 

General and administrative

$

13,999

 

$

15,727

Sales and marketing

 

30,996

 

 

34,377

Research and development

 

22,591

 

 

18,074

Cost of revenue (excluding depreciation and amortization)

 

13,942

 

 

13,578

 

$

81,528

 

$

81,756

Phreesia, Inc.

Key Metrics

(Unaudited)

 

Three months ended

April 30,

 

 

2023

 

 

2022

Key Metrics:

 

 

 

Average number of healthcare services clients ("AHSCs")

 

3,309

 

 

2,526

Healthcare services revenue per AHSC

$

18,779

 

$

19,193

Total revenue per AHSC

$

25,338

 

$

25,081

We remain focused on building secure and reliable products that derive a strong return on investment for our clients and implementing them with speed and ease. This strategy continues to enable us to grow our network of healthcare services clients. The investments we make to grow, strengthen and sustain our network of healthcare services clients lead to growth in all of our revenue categories.

The definitions of our key metrics are presented below.

  • AHSCs. We define AHSCs as the average number of clients that generate subscription and related services or payment processing revenue each month during the applicable period. In cases where we act as a subcontractor providing white-label services to our partner's clients, we treat the contractual relationship as a single healthcare services client. We believe growth in AHSCs is a key indicator of the performance of our business and depends, in part, on our ability to successfully develop and market our Platform to healthcare services organizations that are not yet clients. While growth in AHSCs is an important indicator of expected revenue growth, it also informs our management of the areas of our business that will require further investment to support expected future AHSC growth. For example, as AHSCs increase, we may need to add to our customer support team and invest to maintain effectiveness and performance of our Platform and software for our healthcare services clients and their patients.
  • Healthcare services revenue per AHSC. We define Healthcare services revenue as the sum of subscription and related services revenue and payment processing revenue. We define Healthcare services revenue per AHSC as Healthcare services revenue in a given period divided by AHSCs during that same period. We are focused on continually delivering value to our healthcare services clients and believe that our ability to increase Healthcare services revenue per AHSC is an indicator of the long-term value of the Phreesia platform.
  • Total revenue per AHSC. We define Total revenue per AHSC as Total revenue in a given period divided by AHSCs during that same period. Our healthcare services clients directly generate subscription and related services and payment processing revenue. Additionally, our relationships with healthcare services clients who subscribe to the Phreesia Platform give us the opportunity to engage with life sciences companies, health plans and other payer organizations, patient advocacy, public interest and other not-for-profit organizations who deliver direct communication to patients through our Platform. As a result, we believe that our ability to increase Total revenue per AHSC is an indicator of the long-term value of the Phreesia Platform.

Additional Information

(Unaudited)

 

Three months ended

April 30,

 

 

2023

 

 

2022

Patient payment volume (in millions)

$

1,016

 

$

837

Payment facilitator volume percentage

 

82 %

 

80 % 

  • Patient payment volume. We believe that patient payment volume is an indicator of both the underlying health of our healthcare services clients’ businesses and the continuing shift of healthcare costs to patients. We measure patient payment volume as the total dollar volume of transactions between our healthcare services clients and their patients utilizing our payment platform, including via credit and debit cards that we process as a payment facilitator as well as cash and check payments and credit and debit transactions for which we act as a gateway to other payment processors.
  • Payment facilitator volume percentage. We define payment facilitator volume percentage as the volume of credit and debit card patient payment volume that we process as a payment facilitator as a percentage of total patient payment volume. Payment facilitator volume is a major driver of our payment processing revenue. Our payment facilitator volume percentage could decline slightly over time should we increase our penetration of enterprise customers that are less likely to use Phreesia as a payment facilitator.

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