Phreesia, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended January 31, 2023, compared with fiscal 2022. Although the request identifies “2022 Q4,” this filing reports full-year results; the provided text does not give a clear standalone fourth-quarter financial summary. Filed March 23, 2023.
Business context
Phreesia provides a healthcare SaaS platform for patient access, registration, payments and patient communications for healthcare providers, life sciences companies and payers. In FY2023, it served an average of 2,856 healthcare services clients, facilitated visits at more than 2,800 clients, and processed $3.284 billion of patient payments. Revenue comes from subscriptions and related services, payment processing, and network solutions.
Financial performance
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Total revenue | $280.9 million | $213.2 million | +32% |
| Subscription and related services | $129.0 million | $95.5 million | +35% |
| Payment processing fees | $78.4 million | $65.2 million | +20% |
| Network solutions | $73.6 million | $52.5 million | +40% |
| Operating loss | $(176.6) million | $(116.8) million | Loss widened |
| Net loss | $(176.1) million | $(118.2) million | Loss widened |
| Adjusted EBITDA (non-GAAP) | $(92.5) million | $(59.0) million | Loss widened |
| Net cash used in operating activities | $(90.1) million | $(74.7) million | Cash use increased |
| Free cash flow (non-GAAP) | $(116.3) million | $(105.5) million | Cash use increased |
| Cash and cash equivalents at year-end | $176.7 million | $313.8 million | Down $137.1 million |
Net loss per share was $(3.36), versus $(2.37) in FY2022. Total expenses increased to $457.5 million from $330.1 million, with the largest increases in sales and marketing (+42%) and research and development (+75%). Operating margin was approximately negative 63% of revenue, compared with negative 55% in FY2022. The filing does not present a standalone gross-margin figure.
Healthcare services revenue per average client declined 6% to $72,599, and total revenue per average client declined 4% to $98,358. Management attributed the declines primarily to client growth outpacing payment volume and payment-processing revenue growth, with new-client solution mix also affecting healthcare services revenue per client. Average healthcare services clients grew 38% to 2,856. Patient payment volume rose 19% to $3.284 billion; 80% was processed by Phreesia as payment facilitator.
Liquidity, debt and cash flow
At January 31, 2023, current assets were $262.4 million and current liabilities were $79.0 million. The company had $7.9 million of finance lease liabilities and other debt, including $7.7 million of finance leases; it had no borrowings outstanding on its $100 million revolving credit facility. That facility is secured by substantially all assets other than intellectual property and includes financial and cash-location covenants.
After year-end, SVB was closed on March 10, 2023. Phreesia said it moved a substantial portion of its cash to other institutions, had approximately $170 million of cash on March 10, and determined that all cash remained available following government actions protecting SVB depositors. SVB consented to Phreesia holding up to $165 million outside SVB through May 15, 2023. The company said it could not borrow under the revolver until its cash-location covenant was satisfied, and reported no material impact from the SVB events at the time of filing.
FY2023 investing cash use was $26.2 million, including $21.5 million of capitalized internal-use software and $4.7 million of property and equipment purchases. Financing cash use was $20.8 million, primarily reflecting $19.4 million of treasury stock withheld for employee-award taxes and finance-lease payments. Management stated that cash, cash generated in the normal course, and potential borrowing capacity were expected to fund operations for at least 12 months.
Outlook, commentary and risks
- No specific revenue, earnings or margin guidance is provided in the supplied filing text. Management expects employee and compensation growth to moderate in FY2024 and thereafter, following accelerated hiring and investment in FY2022.
- The filing says net losses and negative cash flows are expected to continue for at least the next year. Management plans continued investment in platform development, client growth and operations, with longer-term margin improvement dependent on scale and operating leverage.
- Payment utilization remained dynamic after pandemic-related changes; management expected the environment to remain dynamic in FY2024. Payment processing is material, representing 28% of FY2023 revenue, and depends on transaction volumes, processing partners, card-network fees and compliance.
- Key risks include persistent losses and cash consumption; competition from EHR and practice-management vendors; customer retention, implementation delays and upfront client-acquisition costs; privacy, cybersecurity and healthcare regulatory exposure; and dependence on third-party vendors, processors and hardware suppliers.
- Macroeconomic uncertainty, inflation, interest rates and the Russia-Ukraine conflict could affect clients, costs and vendors. Phreesia also noted operational and cybersecurity risks associated with its fully remote workforce and international contractors.
- The company reported no legal proceedings expected to have a material adverse effect. KPMG issued unqualified opinions on the financial statements and internal control over financial reporting; management and the auditor concluded controls were effective.
Most important facts for investors to verify
- Whether revenue growth can translate into improved operating leverage, given rising expenses and widening GAAP and adjusted losses.
- Whether client growth, payment volume and revenue per client trends improve, and how much growth depends on network-solutions programs.
- Cash burn and available liquidity, including compliance with the SVB facility’s cash-location and other covenants and the current status of borrowing access.
- Payment-processing partner concentration and exposure to card-network fees, settlement obligations and payment-facilitator requirements.
- Potential limits on use of the $493.3 million of U.S. net operating loss carryforwards: the filing says a Section 382 ownership change is more likely than not to have occurred.