Phreesia, Inc. — Form 10-Q Summary
Reporting period: Three months ended April 30, 2021 (the first quarter of fiscal 2022), compared with the three months ended April 30, 2020. Phreesia provides SaaS patient-intake and payment solutions to healthcare providers and patient-engagement services to life sciences companies. Unless otherwise indicated, amounts below are in U.S. dollars.
Financial performance and liquidity
| Metric | Q1 FY2022 | Q1 FY2021 |
|---|---|---|
| Revenue | $48.3 million | $33.4 million |
| Operating loss | $10.7 million | $5.0 million |
| Net loss | $11.0 million; $0.24 per share | $6.1 million; $0.16 per share |
| Adjusted EBITDA | $0.1 million | $1.5 million |
| Cash from operating activities | $(5.5) million | $1.9 million |
| Free cash flow | $(12.4) million | $(1.2) million |
- Revenue grew 45%. Subscription and related services rose 40% to $21.8 million; payment processing fees rose 42% to $16.6 million; life sciences revenue rose 61% to $9.8 million.
- Average provider clients increased to 1,902 from 1,632, and average revenue per provider client rose to $20,222 from $16,735. Patient payment volume was $701 million, up from $454 million.
- Operating expenses increased to $58.9 million from $38.4 million, outpacing revenue growth. Operating margin was approximately negative 22.1%, compared with negative 14.9%. Cost of revenue and payment processing expense together were approximately 37.8% of revenue, versus 34.7% a year earlier.
- Cash and cash equivalents were $450.7 million at April 30, 2021, up from $218.8 million at January 31, 2021. The increase primarily reflected a follow-on stock offering that generated $245.8 million in net proceeds.
- Investing activities used $6.9 million, including $4.0 million for property and equipment and $2.9 million for capitalized software. Total debt and finance lease liabilities were $9.6 million; no borrowings were outstanding under the SVB revolving facility, which had $50 million of availability.
Changes, outlook, and notable matters
- Revenue growth reflected new provider clients, expansion and cross-selling to existing clients, increased patient payment activity, and growth in life sciences marketing programs. Management also cited a reduced impact from COVID-19 compared with the prior-year quarter.
- Higher costs reflected increased headcount, compensation, data-center investment, outside services, and stock-based compensation. Stock-based compensation was $5.8 million, compared with $2.9 million.
- Management expects net losses and negative cash flows to continue for at least the next year, but believes cash, expected operating cash generation, and available borrowing capacity are sufficient for at least 12 months. The filing provides no specific revenue, earnings, or margin guidance.
- COVID-19 may continue to affect provider operations, demand, client renewals, collections, and the company’s ability to sell and implement its solutions. Management expected these effects to diminish as vaccination rates increased, while noting continuing uncertainty.
- Material control issue: Management concluded disclosure controls were not effective at the reasonable-assurance level because of an unremediated material weakness in IT user-access and program-change controls affecting financial reporting. Remediation was ongoing and had not been completed.
- The company reported no legal proceedings it believed would have a material impact on financial condition, results, or cash flows. It recorded $1.3 million of acquisition-related contingent consideration, with a maximum remaining payable amount of $1.5 million.
Key investor verification points
- Track whether revenue growth converts into improved operating results, Adjusted EBITDA, operating cash flow, and free cash flow as investment and compensation costs rise.
- Monitor completion and testing of remediation for the material weakness and any subsequent assessment of disclosure controls and internal control over financial reporting.
- Assess cash consumption, capital spending, finance lease obligations, and the terms and covenant requirements of the $50 million SVB facility.
- Evaluate the sustainability of growth in payment volume and life sciences revenue, and the potential effects of COVID-19, seasonality, client concentration, competition, and provider-client renewal or implementation delays.
- Consider dilution from the April 2021 offering and equity compensation; the offering issued 5.175 million shares, and weighted-average shares outstanding increased to 45.4 million from 37.3 million.