Phreesia, Inc. Price & Performance (PHR)

Forward looking statements are subject to various risks, uncertainties and other factors that may cause our actual results, performance, or achievements to differ materially from those described in our forward looking statements.

Such risks are described more fully our stakeholder letter and our risk factors included in our SEC filings including in our annual report on Form 10 ks that will be filed with the SEC tomorrow. The forward looking statements made on this call will be based on our current views and expectations and 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 these forward looking statements to reflect events or circumstances after the date of this call or to reflect new information or the occurrence of unanticipated events. We may also refer to certain financial measures not in accordance with Generally Accepted Accounting Principles, such as adjusted EBITDA, and free cash flow in order to provide additional information to investors. These non GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. A reconciliation of GAAP to non GAAP results may be found in our earnings press release and stakeholder letter which were furnished with our Form eight ks filed after the markets closed today with the SEC and may also be found on our Investor Relations website at ir.frisia.com.

I will now turn the call over to our CEO, Jaime. Thank you, Balaji, and good evening, everyone. Thank you for joining Phreesia fourth quarter earnings call.

I want to take a moment to acknowledge that twenty years ago, Evan and I founded Phreesia. Our mission is making care easier every day. Our vision is for every person to be an active participant in Medicare. I'm so proud of what we've accomplished over these years and excited about where we are heading. I want to extend my appreciation to my teammates, our clients, partners and stakeholders who continue to contribute to our success. I am excited about the new products we've introduced over the past several quarters that improve medication adherence and the overall patient and provider experience. We look forward to making these products more widely available to our existing network and new clients. In fiscal twenty twenty five, we achieved another milestone. [indiscernible] is used in approximately fourteen percent of patient visits throughout The United States or approximately $170,000,000 I would like to congratulate and thank the Patricia team for a strong finish to the fifth which is reflected in our earnings press release and stakeholder letter. Let me hand it over to Balaji, to review some of the highlights of the fourth quarter results and review our outlook for fiscal twenty twenty six.

Thank you, Haim. Let me start with a couple of the highlights in our earnings materials regarding the fourth quarter. Q4 revenue was $109,700,000 up 15% year over year. Q4 adjusted EBITDA was $16,400,000 up $19,900,000 year over year with an adjusted EBITDA margin of 15%. Our Q4 average healthcare services clients reached 4,341 an increase 104 from the prior quarter and three seventy nine from the prior year. And Q4 total revenue per AHSE was $25,266 up 5% year over year. Our cash flow In Q4, we maintained positive operating cash flow and free cash flow for the third consecutive quarter. Q4 operating cash flow was positive $16,300,000 up $19,300,000 year over year. Q4 free cash flow was positive at $9,200,000 up $20,100,000 year over year. These improvements reflect strong revenue performance over the period as well as disciplined expense and cash collections management. We expect the magnitude of improvement in free cash flow and operating cash flow on a quarter to quarter basis to vary based on specific timing of invoicing and payments which you can see in working capital along with CapEx.

Cash, was at $84,200,000 on January 31, up $2,500,000 from 10/31/2024. Our fourth quarter reflects continued operating leverage across the company. We are well positioned to continue generating positive free cash flow while investing in long term profitable revenue growth. Transitioning to our financial outlook, for fiscal twenty twenty six, we are maintaining our revenue outlook for fiscal year twenty twenty six at a range of $472,000,000 The revenue range provided for fiscal twenty twenty six assumes no additional revenue on potential future acquisitions completed between now and 01/31/2026. We are maintaining our adjusted EBITDA outlook for fiscal year twenty twenty six at a range of $78,000,000 to $88,000,000 We are reiterating our outlook on AHSC's to reach approximately 4,500 in fiscal 'twenty six and for revenue per AHSE to increase in fiscal twenty twenty six compared to fiscal twenty twenty five. Operator, I think we can now open up the lines for the Q and A session.

We will now begin the question and answer session. And our first question comes from the line of Ann Samuels with J. B. Morgan. Ann? Great.

Congratulations on twenty years. What an accomplishment. So your gross margin once again saw some really nice expansion. And I know gross margin was kind of the first leg of the leverage story, but you're already seeing this really nice leverage on your other expense line. As we think about gross margin moving forward, how much more room is there for expansion? And then just how should we be thinking about contribution it should have to overall leverage?

Yes. Hey, Annie, thanks. On gross margin, I think we've talked about this in the past. Mix at this point is one of the biggest drivers of that. And as you know, payment processing is associated with lower margins and the growth rate is slower. So I think just the growth expectations are higher in the other two revenue lines. Which should contribute to some gross margin expansion. Don't think there's anything really else to call out in terms of that being a driver of operating leverage. Might be better in some quarters than others.

Great. Thanks. And then maybe just one more. You once again saw really strong growth in Network Solutions. Just wondering, should we be thinking about the underlying market conditions for 2026 is similar to 2025 or are there any market factors we should be thinking about in that line? Thanks. [indiscernible] I would say very similar as we head into the year.

Thank you. Thanks. And your next question comes from the line of Jessica Tasson with Piper Sandler. Jessica, please please go ahead.

Hi, guys. Thank you so much for taking the question. I was hoping that that maybe you could talk to us a little bit about postscript engagement. How the product work? What data informs the product? Maybe what does the patient see? And is payment kind of contingency based?

Or is it based on whether the patient picks up the prescription or is it impression based? Thanks.

Yes. Okay. There's a lot in there. I think to answer the last part of that question, you should think about it as impression based. It's It's similar to the other campaigns that we run.

Jess.

And so if you think about it, we're leveraging a lot of the data that we have in our platform be able to remind you about a prescription that was filled. And so that's very valuable to our clients. That's what really drives the product and the value of the customers. But it's both to the life sciences clients, but also to the providers and the patients as well.

Great. Thank you. Great. Your next question comes from the line of Hailindra Singh with Truist Securities. Helendra, please go ahead. Yes. This is Jalandra Singh from Truist Securities. So I want to ask about the total revenue per AHSC metric nice growth of 5% year over year, 7% if you exclude the clearinghouse impact, but it was flat sequentially How meaningful was the impact in fiscal Q4 from the way calendar played out in terms of business days, in terms of how holidays plays out in terms of year over year trends in fiscal Q4, And as we think about fiscal twenty twenty six, clearly, we have one less day in fiscal Q1. But anything else we should keep in mind in terms of that quarterly progression of that metric?

No, great questions there, Jalendra. I think you picked up on the fact that the way the calendar falls and weather really wind up being pretty big factors in our business. And so one thing about the fourth quarter that we point out is Christmas fell earlier in the week. Right on top of a weekend last year in the comp period, whereas the middle of the week this season. So there were sort of a harder comp tougher comp for us. We also had the LA fires and that was obviously very unfortunate and have some clients in that region. And then even just on a comp basis, the year over year, and the weather in the Northeast and in the Southeast was also pretty challenging in January. And I think as we've talked about these are things we're used to. And when we think about modeling internally and sharing our view views externally. We try to build those in and shout out to our to our FP and A team who does a very good job of staying on top of that. So that was largely baked into our expectations for the year, Jalendra. And I think you brought up a good point, which is, yes, a leap year in 2024, it's not a leap year in 2025.

Think you could probably spend some time looking at how the calendar falls in Mondays and Fridays are interesting things to look at year over year. But in the fourth quarter, there was a little bit of a tougher comp for us. There last year.

Okay. And then my quick follow-up on kind of update any progress on the leveraging AI and automation? You guys have talked about one uses being replacing manual workflows and improving productivity internally. But you guys have also talked about leveraging AI and network solutions business in various ways. Just curious any interesting results to share And are you seeing more opportunities internally or are you just more about kind of driving more business in network solutions or from AI side?

Joandra, this is Kai. I'll answer that. Balaji and I were earlier today, we actually got a demonstration of one of our AI applications used internally by our network solutions team We been wanting to show us what this tool they're using for forecasting. And, it was like by only chance, I saw Balaji's jaw drop when he realized what the team has been using it for and how valuable it is. So no, we're seeing its impact in real time in our business. We expect to continue to very thoughtfully implement AI throughout our organization. Where it not only drives real financial impact, but but really improves the outcomes for all of our stakeholders. And we're pretty it would be an understatement for me to say the impact that has happened has been great. We are very we are very excited. Thanks guys.

Thanks.

And your next question comes from the line of Brian Daniels with William Blair. Ryan, please go ahead.

Yes. Good evening, guys. Thanks for taking the question. I'm curious about solutions like appointment readiness. You mentioned that also creates a new opportunity to engage users and then leverage that for network solution sales. So my question is, does a newer product like that need to reach some element of critical mass before you can sell it into the pharma customer base? Or is that something that you could just add to existing programs right away as a different or another touch point for network solutions? We, Brian, we think very early on our product organization thinks a lot about scale and deployment And usually when we're talking about something openly, it's because it's already reached scale where we're able to leverage cross network solutions. And often these things have been in development for sometimes years. [indiscernible] the key requirements of all of our product briefs is [indiscernible] And we're able to achieve that on a very regular basis with a lot of our products, very in a very good clip. And I think that's something that as a result of the investments we've been making in R and D. Okay, great. Thank you. And then if I follow-up, we've seen a lot more announcements, it seems like lately of different NVs inside and even outside of healthcare names like Salesforce rolling out AI agents to do appointment scheduling and matching patients to clinicians and insurance talk to your go to market team about the competitive dynamics or is your installed base and comprehensive offering still kind of winning more of the market?

Relative to some of those solutions?

Thanks.

I would say our close rates anything that's gotten a little bit better as of late. I think lot of those larger entrants have have actually helped us in a lot of ways. Because as people start spending more time looking at it, we end up winning more of those. I think been a rising tide where as the market leader we've been we've been a beneficiary of it. Right? Okay, perfect. Thank you and congrats on the twenty years.

Cheers, mate. Thanks.

Thanks, Ryan.

And your next question comes from the line of Richard Close Canaccord Genuity. Richard, please go ahead.

Yes. Thanks for the questions. First, great results on that breast cancer screening that was that's pretty neat. Just maybe digging in a little bit more on Ryan's question on appointment readiness. Is that something that you charge provider clients to turn on or maybe let them use it like you have done in the past And since you're talking about life science, having another opportunity to engage Can you talk a little bit about like what would be an example of how they are engaging with that offering if it's just their eligibility and deductible and stuff like that? Just to better understand So to answer your question, Richard, we do not currently charge for this product above and beyond what we already charge. It is something of significant value to providers because it just gets their patients ready. It's something that we're able to add more value to patients and providers and the scale and investments that we're making to make our offering significantly more valuable. And a network solution standpoint, there's is broad examples of [indiscernible] I'm not going to go into on this call where there's a lot of prep that needs to go into getting ready for your visit and this allows that education and prep before that patient comes into the office.

So we've seen and we have seen uptick on that that with Network Solutions.

Okay. That's helpful. And then maybe on patient bill pay, an update there. Obviously, the results from the ortho group really impressive. Can you talk a little bit more about the rollout of that? Maybe interest from existing clients, to add that on or what the attach Yes. Richard, it was something we're very excited about. Don't think we're going to share an attachment rate, but I think what we could say is it's very similar to what Haim talked about with appointment readiness and post script engagement, which is this has taken years of development and something we've pushed out into the market Our thesis has been it adds a lot of value from the status quo. And we can generate revenue through additional payment volume through that product which is we think a very differentiated go to market. And it's something we're pushing out to our to all of our base clients. And as you saw in the letter, seeing some pretty good results.

Okay. Thanks. Congrats Thanks. And your next question comes from the line of Brian MacDonald with Needham and Company. Brian, please go ahead. Hi.

Thanks for taking my questions and congrats on quarter.

Maybe within Network Solutions, we're seeing a continued evolution in and change in the advertising landscape for for pharma marketing, life sciences marketing, particularly on social media channels we're seeing sort of more regulations come in limiting the ability to target effectively on some of the major social media platforms. Are you from a go to market perspective on that networking solutions team doing anything to better position yourself to maybe capture more share of spend in the midst of these changes?

Well, maybe just talking about our positioning there, Ryan. Our Freez's platform of personalized health content it's built on very important principles of both privacy and consent.

And so we're trying to with our platform meet the patients where they are with relevant personalized information at those very key moments of their healthcare journey. So for us, that's what differentiates us and leading on privacy and consent. And we think we have a very unique platform to do that. But obviously, yes, there's lots of competition for for those dollars. Lots of dollars.

Okay.

Thank you. And then maybe as you think about the reiterated sort of guidance on sort of the magnitude of AHSCs and the additions that you're expecting for this year. Can you just talk about sort of what you're seeing early days in the year as that gives you sort of confidence in the trajectory of that count? And then what to the extent that you can do to either meet or up or down investments to make sure you're sort of hitting to those targets as we progress through the year? In what is likely again a volatile macro? Thank you.

Yes, sure. I mean, I think we've talked about this for a couple of years now. We did put a lot of capital into the business. We are still spending a fair amount of capital in that area in sales and marketing, which is inclusive of our life sciences network solutions area.

And so, Ryan, when we put those projections out there for fiscal twenty twenty six, The numbers might move around quarter to quarter. We wanted to put something out there that was captured where we thought we'd be for the end of the year and feel pretty comfortable with that today and with our go to market motions and the resources we have.

Think we go to the next caller.

And your next question comes from the line of Jeff Garrow with Stephens. Jeff, go ahead. [indiscernible] Good afternoon. Thanks for taking the questions.

Couple more for me on Network Solutions. First, just want to check-in and see if you could help us understand how far along are you in penetrating all of the the 170,000,000 visits on the network with Network Solutions content And then also want to ask how are you getting better at at generating those monetization moments and maybe even further finding the best and most personalized match for your inventory of Network Solutions content to engage with those individual patient moments? [indiscernible] So Jeff, I think we did share the $170,000,000 visit milestone. I think the very unique part about Phreesia business model is that those visits there's lots of different ways we're bringing value to our clients in those visits. And as Tom talked about, there's certain products that are driving value in some ways to providers. Generate subscription revenue payment processing revenue Others, we are able to also generate network solutions revenue. I don't think you should come away thinking that all $170,000,000 of those will generate revenue from all three lines. It's actually a pretty, I think unique part of our business model. That said, I think you can do some very shortcut math on looking at our network solutions revenue divided by visits, which we provided I think for for mid-five periods now, since it's been public and see that the dollars on a per visit basis continue to tick up and think that will continue to tick up and is incorporated into financial outlook for fiscal twenty twenty six.

And the new products we've introduced in the last couple of quarters will help drive that.

Excellent. I appreciate that. And one more on Network Solutions. Back in mid December, you spoke pretty positively on progress for Network Solutions on the kind of key selling season for pharma advertising. So I want to see if that remains the case here. Several months later and maybe just generally how you feel about visibility there?

Yes, no change. Exactly in the same spot. And I think maintaining our financial outlook so we reflect the same comments we made back in December. Great.

Thanks again for taking the questions and also congrats on the twenty years.

Thank you.

And your next question comes from the line of Daniel Crossley with Citigroup. Daniel, please go ahead. Hi, guys. Thanks for taking the question and congrats on a another strong quarter here.

Has been a lot of macro noise out there right now, whether it's around consumer confidence or what's going to happen with Medicaid, enhanced subsidies on the exchanges or physician payment rates in Medicare. I'm curious if you're seeing any of these macro factors impact your business this year, impact the sales cycle this year, And then I don't know if you have the data readily available, but if you could perhaps size what percent of your visit volume is coming from folks on Medicaid or the exchanges?

So, Daniel, I think the first thing we'd say is obviously, we're monitoring all of these trends and activities pretty closely. Nothing to really call out, but let's just that's as of today and what we know and we'll keep monitoring and let you know if anything changes.

But these are all things we're tracking pretty closely. I think in terms of mix, there's nothing about our the mix of our network. If you thought about it on a payer basis, that would be different than just the broader population. And apologize, I don't know it offhand exactly what percentage of the population is Medicaid, but I don't think you'd see it be very different and that would apply to Medicare or employer sponsored. Coverage. Yes.

Makes sense. Okay.

Okay. And then just on your capital deployment priorities, for fiscal twenty twenty six, you have a really solid cash balance now. You're consistently free cash flow positive. So I'm just curious how you're thinking about the buy versus build dynamic in 2026 and if there's any changes in capital deployment priorities?

No change. I mean, I think we talk a lot about capital allocation And for the last almost six years now we've been public.

Our philosophy has been to allocate capital where we can get good solid, durable growth that's profitable And sometimes that comes organic, sometimes it comes inorganic. Obviously, it's been heavily organic over our history and there's a pretty rigorous process for us to look at things inorganic. And I think it's nice to have the balance sheet that we have and the cash flow that we have to be able to continue to look at both organic and inorganic and and drive that durable profitable growth.

Got it.

And your next question comes from the line of Scott Schoenhaus with KeyBanc Capital Markets. Scott, please go ahead.

Hey, team. Thanks for taking my question. So on the investment letter, you said your after hour service was back online. That's good to hear. But it reminds me that you had two other acquisitions last year.

Are you fully charging for those those platforms now? And how should we think about those tailwinds of all three for fiscal twenty twenty six? Thanks.

Yes. And actually, Scott, it's amazing how time flies, but those all three of those acquisitions were actually in calendar 2023. So fiscal twenty twenty four. So we actually did not do any acquisitions in fiscal twenty twenty five.

And the other two that you're referring to from from fiscal twenty twenty four have contributed to growth. I think we've called out MediFind and [indiscernible] revenue and contributing to growth and that's something when we made those acquisitions, we expected it to to contribute. But I don't think there's anything particularly to call out there. And yes, we're excited to have have the On Call product back out in the market.

Yes. Thanks a lot, G. Thanks for that. Your totally right. Time does fly.

Follow-up on the last question about capital allocation. Would you think about deploying it through other means? Would you think about share repurchases if you see valuations depressed? You're generating cash now and that's a expected to probably accelerate as margins continue to expand here. So just kind of thinking about capital allocation flexibility and optionality here?

Yes.

I think what you should take away is we're always trying to position ourselves to be able to be flexible But look, we're a very growth minded company and trying to drive again that profitable durable growth. And that's where you should think about us prioritizing capital deployment. [indiscernible] the next couple of years.

And your next question comes from the line of Agen Jessica Tassan with Piper Sandler. Jessica, please go ahead.

Hi, guys. Thanks for taking the follow-up. I just wanted to check-in on the network solution side. Can you just remind us when are you able to up sell or maybe resell these contracts throughout the year? Are contracts usually time bound or impression bound? Just Just wondering about the per AHSC solutions revenue over the course of fiscal year? Thanks.

Yes. It's throughout the year. And we sell campaigns for a fixed number of messages that are delivered. And then when we complete those campaigns, we resell them. I don't know if that answers your question, Jess, but that's it's sort of ongoing. But we do do forecasting.

And PC. Yes. And I think Chaim talked about AI being an interesting application there and helping us do that.

Got it. Thank you.

This concludes our question and answer session. Would like to turn the conference back over to Shyam Indig.

Thank you, everyone. The last twenty years has been wonderful. We look forward to years forward and we've just begun this amazing journey. So thanks everyone for joining us on this quarter and we'll talk to you in a couple of months.

You may now disconnect.