Phreesia(PHR) - 2025 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION This section provides the unaudited consolidated financial statements and management's discussion for the periods ended July 31, 2024 Item 1. Financial Statements This section presents Phreesia, Inc.'s unaudited consolidated financial statements for the three and six months ended July 31, 2024 Consolidated Balance Sheets As of July 31, 2024, total assets were $362.2 million, liabilities $110.9 million, and stockholders' equity remained stable Consolidated Balance Sheet Summary (in thousands) | Account | July 31, 2024 (Unaudited) | January 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $81,798 | $87,520 | | Accounts receivable, net | $61,274 | $64,863 | | Total current assets | $180,928 | $195,684 | | Total Assets | $362,235 | $370,326 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $101,999 | $110,119 | | Total Liabilities | $110,900 | $118,877 | | Total Stockholders' Equity | $251,335 | $251,449 | | Total Liabilities and Stockholders' Equity | $362,235 | $370,326 | Consolidated Statements of Operations For the three months ended July 31, 2024, total revenues increased to $102.1 million, significantly reducing the net loss to $18.0 million Consolidated Statements of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended July 31, 2024 | Three Months Ended July 31, 2023 | Six Months Ended July 31, 2024 | Six Months Ended July 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $102,115 | $85,830 | $203,332 | $169,675 | | Operating loss | $(17,222) | $(36,955) | $(36,642) | $(74,856) | | Net loss | $(18,012) | $(36,767) | $(37,734) | $(74,298) | | Net loss per share, basic and diluted | $(0.31) | $(0.68) | $(0.66) | $(1.39) | Consolidated Statements of Comprehensive Loss Comprehensive loss for Q2 2024 was $18.0 million, primarily from net loss with minor foreign currency impacts Comprehensive Loss Summary (in thousands) | Period | Net Loss | Other Comprehensive Loss (net of tax) | Comprehensive Loss | | :--- | :--- | :--- | :--- | | Three Months Ended July 31, 2024 | $(18,012) | $(3) | $(18,015) | | Three Months Ended July 31, 2023 | $(36,767) | — | $(36,767) | | Six Months Ended July 31, 2024 | $(37,734) | $(2) | $(37,736) | | Six Months Ended July 31, 2023 | $(74,298) | — | $(74,298) | Consolidated Statements of Stockholders' Equity Stockholders' equity slightly decreased to $251.3 million due to net losses, partially offset by stock-based compensation and option exercises - For the six months ended July 31, 2024, the accumulated deficit increased from $(743.0) million to $(780.7) million due to net losses, while additional paid-in capital grew from $1,039.4 million to $1,077.0 million, mainly from stock-based compensation and stock issuances[23] Consolidated Statements of Cash Flows Operating activities generated $10.3 million cash for the six months ended July 31, 2024, improving cash flow despite an overall decrease in cash and equivalents Consolidated Statements of Cash Flows Summary (in thousands) | Cash Flow Activity | Six Months Ended July 31, 2024 | Six Months Ended July 31, 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $10,340 | $(22,990) | | Net cash used in investing activities | $(12,849) | $(15,795) | | Net cash used in financing activities | $(3,206) | $(10,221) | | Net decrease in cash and cash equivalents | $(5,722) | $(49,006) | Notes to Unaudited Consolidated Financial Statements The notes detail accounting policies, revenue recognition, and liquidity, confirming sufficient funds for operations for at least the next 12 months - The company's revenue is derived from three primary sources: subscription and related services, payment processing fees, and network solutions for life sciences and payer clients[54] - On June 30, 2023, the company acquired 100% of MediFind for an aggregate consideration of $8.9 million, consisting of cash and stock, intended to expand offerings to consumers[104][105] - Management believes the company's cash and cash equivalents of $81.8 million at July 31, 2024, along with cash from operations and available credit, are sufficient to fund operations for at least the next 12 months, despite a history of net losses[29] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 FY2025 performance, noting 19% revenue growth, reduced net loss, positive Adjusted EBITDA, and cybersecurity incident impacts Q2 FY2025 Financial Highlights | Metric | Three Months Ended July 31, 2024 | Three Months Ended July 31, 2023 | | :--- | :--- | :--- | | Total revenue | $102.1 million | $85.8 million | | Net loss | $(18.0) million | $(36.8) million | | Adjusted EBITDA | $6.5 million | $(11.5) million | | Free cash flow | $3.7 million | $(15.2) million | - The Change Healthcare cybersecurity incident accelerated the wind-down of a relationship with a clearinghouse client, reducing payment processing revenue by approximately $2.0 million in the second quarter[118] - On May 12, 2024, the company identified a cybersecurity incident affecting its ConnectOnCall service, which is separate from its main patient intake platform; the company is working to restore the service and does not believe the incident will have a material impact on overall business operations[119] Key Metrics Key metrics indicate strong client growth to 4,169 AHSCs, though revenue per AHSC slightly decreased due to client growth outpacing payment processing revenue Key Metrics Performance | Metric | Three Months Ended July 31, 2024 | Three Months Ended July 31, 2023 | | :--- | :--- | :--- | | Average number of healthcare services clients (AHSCs) | 4,169 | 3,445 | | Healthcare services revenue per AHSC | $17,729 | $18,268 | | Total revenue per AHSC | $24,494 | $24,914 | Results of Operations Q2 FY2025 total revenue grew 19% year-over-year, driven by subscription and network solutions, while operating expenses decreased, leading to a lower operating loss Revenue by Segment - Three Months Ended July 31 (in thousands) | Revenue Stream | 2024 | 2023 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Subscription and related services | $48,612 | $39,301 | $9,311 | 24% | | Payment processing fees | $25,300 | $23,631 | $1,669 | 7% | | Network solutions | $28,203 | $22,898 | $5,305 | 23% | | Total revenue | $102,115 | $85,830 | $16,285 | 19% | - Sales and marketing expense decreased by $7.1 million (19%) for the three months ended July 31, 2024, primarily due to a $6.2 million decrease in labor costs, including lower stock compensation[146] Liquidity and Capital Resources The company maintains $81.8 million in cash and equivalents, with sufficient liquidity from operations and credit facility to fund needs for at least 12 months - The company has a 5-year, $50 million senior secured asset-based revolving credit facility with Capital One, maturing in December 2028, which provides additional financial flexibility[169] Cash Flow Summary - Six Months Ended July 31 (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $10,340 | $(22,990) | | Net cash used in investing activities | $(12,849) | $(15,795) | | Net cash used in financing activities | $(3,206) | $(10,221) | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rate fluctuations on cash and foreign currency exchange rates, but expects no material financial impact from minor changes - The company's primary market risks are interest rate risk on its cash and cash equivalents and foreign currency exchange risk related to its operations in Canada and India[181] - As of July 31, 2024, the company had no outstanding debt under its Capital One Credit Facility[182] Item 4. Controls and Procedures Disclosure controls and procedures were deemed effective as of July 31, 2024, with no material changes in internal control over financial reporting during the quarter - Management concluded that as of July 31, 2024, the company's disclosure controls and procedures were effective at a reasonable assurance level[184] - No changes in internal control over financial reporting occurred during the quarter ended July 31, 2024, that have materially affected, or are reasonably likely to materially affect, internal controls[185] PART II — OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and other disclosures relevant to the company's operations Item 1. Legal Proceedings The company is not currently involved in any legal proceedings expected to materially adversely affect its business or financial condition - Phreesia is not presently a party to any legal proceedings that would individually or in aggregate have a material adverse effect on its business[188] Item 1A. Risk Factors This section details significant business, data, payments, third-party, and regulatory risks, including cybersecurity threats and healthcare compliance challenges - Key business risks include challenges in managing rapid growth, intense competition from EHR and PM systems, and potential fluctuations in operating results[190][193][194] - The company faces significant risks from privacy concerns and cyber-attacks, as it handles large amounts of sensitive patient data, with the recent incident with its ConnectOnCall service highlighted as an example[194][203] - The company is subject to complex and evolving healthcare laws, including HIPAA, and data privacy regulations like CCPA and GDPR, which could impose significant compliance costs and penalties for non-compliance[219][221][222] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the quarter ended July 31, 2024, that were not previously reported - No unregistered sales of equity securities were made during the quarter that have not been previously disclosed[247] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company's operations Item 5. Other Information Several company executives adopted or modified Rule 10b5-1 trading plans for common stock sales during June and July 2024 - Several executives, including the Chairperson, COO, PAO, and SVP of Life Sciences, adopted or modified Rule 10b5-1 trading plans for the sale of company common stock during June and July 2024[247][248] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate documents and required certifications