Phreesia, Inc. — Q3 Fiscal 2024 Form 10-Q
Reporting period: Three and nine months ended October 31, 2023; comparisons are to the same periods in 2022. Financial statements are unaudited. Phreesia provides healthcare software for patient access, registration, payments and patient communications.
Key financial results
| Metric | Three months | Nine months |
|---|---|---|
| Revenue | $91.6 million, up 25% | $261.3 million, up 28% |
| Operating loss | $32.0 million, versus $39.8 million | $106.9 million, versus $136.7 million |
| Net loss | $31.9 million, versus $40.2 million | $106.2 million, versus $138.1 million |
| Adjusted EBITDA (non-GAAP) | $(6.6) million, versus $(18.3) million | $(31.9) million, versus $(74.9) million |
| Cash used in operating activities | $6.3 million, versus $20.7 million | $29.3 million, versus $74.2 million |
| Free cash flow (non-GAAP) | $(11.6) million, versus $(27.5) million | $(46.5) million, versus $(93.8) million |
Quarterly revenue comprised subscription and related services of $42.6 million (+29%), payment processing fees of $23.2 million (+18%), and network solutions of $25.8 million (+26%). For the nine months, these categories grew 29%, 21%, and 34%, respectively. Management attributed growth to new clients, expansion and cross-selling, increased payment activity, and greater patient outreach programs.
Operating expenses totaled $123.7 million for the quarter, up from $112.9 million. Research and development rose 26% to $28.5 million, while sales and marketing was nearly flat at $36.5 million. The company reported higher amortization, partly reflecting acquired intangible assets and capitalized software. The filing does not provide a directly stated gross-margin figure.
- Average healthcare services clients rose to 3,688 from 2,982 in the quarter. Quarterly healthcare services revenue per average client was $17,845 versus $17,645; total revenue per average client was $24,842 versus $24,515.
- Patient payment volume was $965 million for the quarter, up from $815 million; 82% was processed under Phreesia’s payment facilitator model.
- Cash and cash equivalents were $103.4 million at October 31, down $73.3 million from January 31. Current assets were $199.2 million and current liabilities $98.4 million.
- Finance lease liabilities and other debt totaled $13.6 million, including $3.5 million outstanding under a software financing agreement at a 10.5% effective rate. No borrowings were outstanding under the SVB revolving facility at quarter-end.
Material changes, outlook and risks
- Phreesia acquired MediFind, Access eForms and ConnectOnCall during the period for total consideration of approximately $60.2 million. The acquisitions added $41.7 million of goodwill; purchase-price allocations were preliminary. Access and MediFind consideration included stock, and ConnectOnCall included deferred seller payments.
- Management stated that cash and cash generated in normal operations were expected to fund operations for at least 12 months, while also warning that net losses and negative cash flows were expected to continue for at least the next year. It may seek additional financing if needed. No specific revenue or earnings guidance is provided in the filing text.
- After quarter-end, on December 4, 2023, the company entered a five-year, $50 million secured revolving credit facility with Capital One and terminated the SVB facility. Capital One borrowings bear interest based on SOFR or a base rate and are subject to financial and liquidity covenants; there was no borrowing under the new facility as of the filing.
- Management reported that the SVB closure did not materially affect operations or financial position and that cash remained available. It identified macroeconomic and geopolitical uncertainty, competition, customer retention and implementation costs, acquisitions and integration, cybersecurity and privacy, healthcare regulation, and reliance on payment processors and other vendors as material risks.
- Management found no goodwill impairment at October 31 despite a market-capitalization decline. It reported no current legal proceeding expected to have a material adverse effect. Disclosure controls were assessed as effective, with no material change in internal control over financial reporting during the quarter.
Investor facts to verify
- Whether revenue growth and client additions translate into improving operating results and positive cash flow, given continuing GAAP losses and cash burn.
- Cash use, acquisition-related payments, and the timing and conditions for access to the Capital One facility, including compliance with its covenants.
- Integration progress and realized benefits from MediFind, Access and ConnectOnCall, alongside preliminary purchase accounting and deferred consideration.
- Trends in patient payment volume, network solutions demand, client retention, and revenue per client; assess seasonality and competitive pressures.
- Developments in data security, privacy and healthcare regulation, and any disruption involving critical third-party vendors or payment processors.