Phreesia(PHR) - 2026 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements Phreesia, Inc.'s unaudited consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, are presented with detailed notes for the periods ended July 31, 2025, and January 31, 2025 Consolidated Balance Sheets Consolidated balance sheet highlights show changes in cash, total assets, liabilities, and stockholders' equity between July 31, 2025, and January 31, 2025 Consolidated Balance Sheet Highlights (in thousands) | Metric | July 31, 2025 | January 31, 2025 | | :-------------------------- | :------------ | :--------------- | | Cash and cash equivalents | $98,266 | $84,220 | | Total Assets | $408,629 | $388,415 | | Total Liabilities | $110,642 | $123,607 | | Total Stockholders' Equity | $297,987 | $264,808 | Consolidated Statements of Operations Consolidated statements of operations highlight significant improvements in total revenues, operating loss, and net income (loss) for the three and six months ended July 31, 2025, compared to the prior year Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three months ended July 31, 2025 | Three months ended July 31, 2024 | Six months ended July 31, 2025 | Six months ended July 31, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $117,255 | $102,115 | $233,191 | $203,332 | | Operating loss | $(1,507) | $(17,222) | $(4,794) | $(36,642) | | Net income (loss) | $654 | $(18,012) | $(3,260) | $(37,734) | | Basic Net income (loss) per share | $0.01 | $(0.31) | $(0.06) | $(0.66) | | Diluted Net income (loss) per share | $0.01 | $(0.31) | $(0.06) | $(0.66) | Consolidated Statements of Comprehensive Loss Consolidated statements of comprehensive loss show a significant improvement in net income (loss) and a shift in other comprehensive income (loss) for the three and six months ended July 31, 2025 Consolidated Statements of Comprehensive Loss Highlights (in thousands) | Metric | Three months ended July 31, 2025 | Three months ended July 31, 2024 | Six months ended July 31, 2025 | Six months ended July 31, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $654 | $(18,012) | $(3,260) | $(37,734) | | Other comprehensive (loss) income | $(272) | $(3) | $163 | $(2) | | Comprehensive income (loss) | $382 | $(18,015) | $(3,097) | $(37,736) | Consolidated Statements of Stockholders' Equity Consolidated statements of stockholders' equity detail changes in common stock, additional paid-in capital, accumulated deficit, and comprehensive income (loss) from February 1, 2025, to July 31, 2025 Stockholders' Equity Changes (in thousands) | Metric | Balance, February 1, 2025 | Balance, July 31, 2025 | | :-------------------------- | :------------------------ | :--------------------- | | Common Stock (Amount) | $601 | $611 | | Additional Paid-In Capital | $1,111,274 | $1,147,540 | | Accumulated Deficit | $(801,496) | $(804,756) | | Accumulated other comprehensive income (loss) | $(51) | $112 | | Treasury stock | $(45,520) | $(45,520) | | Total Stockholders' Equity | $264,808 | $297,987 | - Key drivers of the increase in total stockholders' equity include stock-based compensation ($13,960 thousand) for the three months ended July 31, 2025, and net income ($654 thousand) for the three months ended July 31, 2025[30] Consolidated Statements of Cash Flows Consolidated statements of cash flows show significant increases in net cash provided by operating activities and net increase in cash and cash equivalents for the three and six months ended July 31, 2025 Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Three months ended July 31, 2025 | Three months ended July 31, 2024 | Six months ended July 31, 2025 | Six months ended July 31, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $14,835 | $11,061 | $29,685 | $10,340 | | Net cash used in investing activities | $(5,202) | $(7,403) | $(12,594) | $(12,849) | | Net cash used in financing activities | $(2,149) | $(1,381) | $(2,987) | $(3,206) | | Net increase (decrease) in cash and cash equivalents | $7,395 | $2,271 | $14,046 | $(5,722) | Notes to Unaudited Consolidated Financial Statements This section provides detailed notes explaining the company's financial position, performance, and accounting policies for the periods ended July 31, 2025, and January 31, 2025 1. Background and liquidity Phreesia provides SaaS solutions for healthcare, and despite historical net losses, management believes current liquidity is sufficient for the next 12 months - Phreesia offers SaaS-based integrated tools for patient access, registration, and payments, along with communication tools for patient health education and clinical assessments[35] - Management believes current cash and cash equivalents ($98,266 thousand as of July 31, 2025), cash generated from operations, and available borrowing capacity are sufficient to fund operations for at least the next 12 months[37] 2. Basis of presentation Financial statements are prepared under GAAP and SEC rules, consolidating Phreesia and its subsidiaries, with unaudited interim results not indicative of full-year performance - Consolidated financial statements include Phreesia, Inc., its Canadian branch, and consolidated subsidiaries[38] - The company's fiscal year ends on January 31[39] - Unaudited interim consolidated financial statements reflect all necessary adjustments for fair statement, but results for interim periods are not necessarily indicative of results to be expected for the full year[41] 3. Summary of significant accounting policies No material changes to accounting policies since January 31, 2025, with the company using estimates, managing credit risk, and employing derivatives for foreign exchange hedging - No material changes to the company's significant accounting policies since January 31, 2025[42] - The company's financial instruments are subject to concentrations of credit risk, primarily in cash and cash equivalents, accounts receivable, and settlement assets[44] - The company uses derivative financial instruments, specifically foreign currency forward contracts, to manage foreign currency exchange risk related to Canadian Dollar denominated payroll payments[50][51] - New accounting pronouncements (ASU 2023-09, ASU 2024-03, ASU 2025-01, ASU 2025-05) are being evaluated but are not expected to materially impact consolidated financial statements upon adoption[55][56][57][58] 4. Composition of certain financial statement captions This section details key balance sheet accounts, showing decreases in accrued expenses and net property & equipment, alongside increases in accounts receivable and capitalized internal-use software Accrued Expenses (in thousands) | Category | July 31, 2025 | January 31, 2025 | | :-------------------------- | :------------ | :--------------- | | Payroll-related expenses and taxes | $8,842 | $12,016 | | Stock-based compensation liability | $5,516 | $6,135 | | Payment processing fees liability | $6,746 | $6,578 | | Total Accrued Expenses | $34,783 | $37,460 | Property and Equipment, Net (in thousands) | Metric | July 31, 2025 | January 31, 2025 | | :-------------------------- | :------------ | :--------------- | | Total property and equipment, gross | $113,534 | $108,156 | | Less: accumulated depreciation | $(90,765) | $(84,505) | | Property and equipment — net | $22,769 | $23,651 | Intangible Assets, Net (in thousands) | Metric | July 31, 2025 | January 31, 2025 | | :-------------------------- | :------------ | :--------------- | | Total intangible assets, gross | $36,550 | $36,550 | | Less: accumulated amortization | $(10,147) | $(8,407) | | Net carrying value | $26,403 | $28,143 | - Goodwill remained constant at $75,845 thousand as of both July 31, 2025, and January 31, 2025[66][67] Accounts Receivable, Net (in thousands) | Metric | July 31, 2025 | January 31, 2025 | | :-------------------------- | :------------ | :--------------- | | Total accounts receivable, gross | $79,496 | $75,085 | | Less: accounts receivable allowances | $(2,654) | $(1,468) | | Total accounts receivable | $76,842 | $73,617 | 5. Revenue and contract costs Revenue is generated from subscriptions, payment processing, and network solutions, with deferred revenue decreasing and capitalized contract acquisition costs amortized over three years - Revenue is primarily generated from subscription and related services, payment processing fees, and network solutions[72] Revenue from PhreesiaPads and Arrivals Kiosks (in thousands) | Period | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Three months ended July 31, | $1,832 | $2,324 | | Six months ended July 31, | $4,251 | $4,712 | Deferred Revenue Roll-forward (in thousands) | Metric | Amount | | :-------------------------- | :----- | | Balance, January 31, 2025 | $32,877 | | Balance, July 31, 2025 | $26,994 | - Capitalized contract acquisition costs are amortized over a period of benefit estimated to be three years, with amortization expense totaling $352 thousand for the six months ended July 31, 2025[75][76] 6. Finance leases and other debt Total finance lease and other debt decreased, with the company maintaining a software licensing financing agreement and a $50 million Capital One Credit Facility while remaining compliant with covenants Finance Lease Liabilities and Other Debt (in thousands) | Metric | July 31, 2025 | January 31, 2025 | | :-------------------------- | :------------ | :--------------- | | Total finance lease liabilities and other debt | $11,672 | $16,193 | - Outstanding principal and interest under the software licensing financing agreement was $1,278 thousand as of July 31, 2025, with an effective interest rate of 10.5% per annum[80] - The Capital One Credit Facility is a 5-year $50,000 thousand senior secured asset-based revolving credit facility, bearing interest at a rate based on SOFR or a Base Rate (7.4% as of July 31, 2025)[81] - The company was in compliance with all covenants related to the Credit Agreement as of July 31, 2025[83] 7. Stockholders' equity The Board authorized a stock repurchase program in March 2025, with no repurchases made, and accumulated other comprehensive income shifted from a loss to a gain - The Board of Directors authorized a stock repurchase program in March 2025 to repurchase up to 2.5 million shares of common stock[89] - No repurchases were made under the stock repurchase program during the six months ended July 31, 2025[89] Accumulated Other Comprehensive Income (Loss) (in thousands) | Metric | January 31, 2025 | July 31, 2025 | | :-------------------------- | :--------------- | :------------ | | Balance | $(51) | $112 | 8. Equity-based compensation This section details equity award plans and compensation expenses, with significant unrecognized costs for RSUs and PSUs to be recognized over future periods Total Stock-Based Compensation (in thousands) | Period | Three months ended July 31, 2025 | Three months ended July 31, 2024 | Six months ended July 31, 2025 | Six months ended July 31, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total stock-based compensation | $16,550 | $16,763 | $34,107 | $33,951 | - As of July 31, 2025, there was $66,282 thousand of total unrecognized compensation cost related to RSUs, expected to be recognized over a weighted-average term of 2.50 years[101] - As of July 31, 2025, unrecognized compensation cost for PSUs was $25,902 thousand, to be recognized over a weighted average remaining vesting period of 2.0 years[106] - The company provides eligible employees the option to elect to receive incentive compensation in immediately vested restricted stock units (liability awards), which are settled semiannually[109] 9. Fair value measurements Assets measured at fair value primarily include money market mutual funds (Level 1) and foreign currency forward contracts (Level 2), showing an increase in total fair value assets Fair Value of Assets (in thousands) | Asset | July 31, 2025 | January 31, 2025 | Fair Value Hierarchy Level | | :-------------------------- | :------------ | :--------------- | :------------------------- | | Money market mutual funds | $82,076 | $66,588 | Level 1 | | Foreign currency forward contracts | $288 | — | Level 2 | | Total assets | $82,364 | $66,588 | | 10. Leases The company holds operating leases for data centers and offices, finance leases for equipment, and acts as a lessor for PhreesiaPads and Arrivals Kiosks, generating subscription revenue Lease Expense Components (Six months ended July 31, 2025, in thousands) | Lease Type | Cost | | :-------------------------- | :--- | | Total operating lease cost | $488 | | Total finance lease cost | $4,194 | - The company leases PhreesiaPads and Arrivals Kiosks to customers, classified as operating leases, which generated $1,832 thousand in subscription and related services revenue for the three months ended July 31, 2025, and $4,251 thousand for the six months ended July 31, 2025[116][117][118] 11. Commitments and contingencies The company has indemnification obligations and is involved in legal proceedings, including class action lawsuits related to a May 2024 cybersecurity incident, with potential losses currently unestimable - The company has indemnification agreements with customers for intellectual property rights and with its directors and executive officers[119][120] - A cybersecurity incident impacting the ConnectOnCall service occurred on May 12, 2024, leading to 14 consolidated putative class action complaints[123][124] - The company expects to incur legal and professional services expenses for the ConnectOnCall litigation but cannot reasonably estimate a range of possible losses at this time[125][126] - A new non-cancelable purchase commitment to support technology infrastructure was entered into, with total undiscounted payments of $12,242 thousand through July 31, 2027[127] 12. Income taxes The company reported an income tax benefit for the three and six months ended July 31, 2025, primarily from recognizing Canadian deferred tax assets, while maintaining a valuation allowance against U.S. deferred tax assets Income Tax Benefit (Expense) (in thousands) | Period | Three months ended July 31, 2025 | Three months ended July 31, 2024 | Six months ended July 31, 2025 | Six months ended July 31, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax benefit (expense) | $1,217 | $(750) | $482 | $(1,260) | - The effective tax rate for the six months ended July 31, 2025, was 12.9%, compared to negative 3.5% in the prior year[129] - A discrete tax benefit of $2,220 thousand was recorded in the three months ended July 31, 2025, primarily related to recognizing stock-based compensation deferred tax assets for the Canadian branch[130] - The company has recorded a valuation allowance against its U.S. deferred tax assets that are not more likely than not to be realized[131] 13. Net income (loss) per share attributable to common stockholders Basic and diluted EPS significantly improved for both the three and six months ended July 31, 2025, compared to the prior year, reflecting improved net income or reduced net loss Net Income (Loss) Per Share (Basic and Diluted) | Period | Three months ended July 31, 2025 | Three months ended July 31, 2024 | Six months ended July 31, 2025 | Six months ended July 31, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | $0.01 | $(0.31) | $(0.06) | $(0.66) | | Diluted EPS | $0.01 | $(0.31) | $(0.06) | $(0.66) | - Potential dilutive securities (stock options, RSUs, PSUs, liability awards, and ESPP shares) are excluded from diluted net income (loss) per share computation when their effect would be anti-dilutive[134] 14. Related party transactions This section discloses revenue recognized from a pharmaceutical company where a board member also serves, totaling $273 thousand and $461 thousand for the three and six months ended July 31, 2025 Revenue from Related Pharmaceutical Company (in thousands) | Period | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Three months ended July 31, | $273 | $343 | | Six months ended July 31, | $461 | $671 | - Accounts receivable from the pharmaceutical company totaled $116 thousand as of July 31, 2025[136] 15. Segments and geographic information Phreesia operates as a single 'Technology solutions' segment, providing comprehensive software to healthcare organizations, with all segment financial information aligning with consolidated totals - The company operates in a single reportable operating segment, referred to as the Technology solutions segment[137] - The Technology solutions segment provides comprehensive software solutions that improve the operational and financial performance of healthcare organizations and improve health outcomes[138] - Segment revenue, segment profit (loss), and total segment assets are equal to the company's total consolidated revenues, net income (loss), and total assets, respectively[140][144] 16. Derivative instruments and hedging activities The company uses foreign currency forward contracts to hedge Canadian Dollar payroll payments, with most designated as cash flow hedges, expecting to reclassify the net gain into income within 12 months - The company entered into a foreign currency forward contract to hedge Canadian Dollar denominated payroll payments, with a total notional value of 11,500 Canadian Dollars as of July 31, 2025[146][147] - 75% of the forward contract is designated as a cash flow hedging instrument, and the remaining 25% is used as an economic hedge[146] - The company estimates that the entire $208 thousand net gain recorded in accumulated other comprehensive income (loss) related to its foreign currency cash flow hedge will be reclassified into income within the next 12 months[148] 17. Subsequent events Phreesia announced the acquisition of AccessOne for $160 million in cash, expected to close in fiscal year 2026, to expand its healthcare receivables financing solutions - On August 29, 2025, Phreesia entered into a definitive agreement to acquire AccessOne Parent Holdings, Inc. for total cash consideration of $160 million[150] - The AccessOne Acquisition is expected to close during the third quarter or early fourth quarter of the company's 2026 fiscal year, subject to customary closing conditions and regulatory approvals[150] - AccessOne is a market leader in providing financing solutions for healthcare receivables, and its platform is expected to integrate well with Phreesia's existing products[151] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Phreesia's financial condition and results of operations, highlighting key performance, recent developments, and comparing revenue and expense trends for the three and six months ended July 31, 2025, versus 2024 Financial Highlights Key financial highlights demonstrate significant improvements in revenue, net income, Adjusted EBITDA, and cash flows for the three and six months ended July 31, 2025 Financial Highlights (in millions, except per share data) | Metric | Three months ended July 31, 2025 | Three months ended July 31, 2024 | Six months ended July 31, 2025 | Six months ended July 31, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $117.3 | $102.1 | $233.2 | $203.3 | | Net income (loss) | $0.7 | $(18.0) | $(3.3) | $(37.7) | | Adjusted EBITDA | $22.1 | $6.5 | $42.9 | $10.6 | | Net cash provided by operating activities | $14.8 | $11.1 | $29.7 | $10.3 | | Free cash flow | $9.6 | $3.7 | $17.1 | $(2.5) | - Cash and cash equivalents as of July 31, 2025, was $98.3 million, an increase of $14.1 million compared to January 31, 2025[156] Overview Phreesia delivers integrated SaaS solutions to healthcare organizations, with primarily recurring revenue from subscriptions, payment processing, and network solutions, driven by a U.S.-centric direct sales model - Phreesia is a leading provider of comprehensive software solutions that improve the operational and financial performance of healthcare organizations and improve health outcomes by helping patients take a more active role in their care[155] - Revenue is derived from subscription fees, payment processing fees, and fees from life sciences companies and other organizations for direct patient communications[159] - The majority of revenue is derived from recurring subscription fees and re-occurring payment processing fees, providing strong visibility into the business[159] - Sales efforts are primarily focused within the United States, and revenue growth has been primarily organic, reflecting significant additions of new healthcare services clients[162][163] Recent developments and current economic conditions Phreesia is acquiring AccessOne for $160 million to bolster healthcare receivables financing, while acknowledging ongoing macroeconomic and geopolitical uncertainties that could impact future business - On August 29, 2025, Phreesia entered into a definitive agreement to acquire AccessOne Parent Holdings, Inc. for total cash consideration of $160 million, subject to customary adjustments[164] - The AccessOne acquisition is expected to close during the third quarter or early fourth quarter of fiscal year 2026 and will be financed through a combination of cash and a new senior secured bridge loan facility[164][165] - AccessOne is a market leader in providing financing solutions for healthcare receivables, and its platform is expected to integrate well with Phreesia's existing products[166] - Macroeconomic conditions (e.g., interest rates, inflation, economic slowdowns) and geopolitical conflicts (e.g., Russia-Ukraine, Middle East) contribute to volatility and could adversely impact future business results or customer purchasing patterns[168] Key Metrics Key metrics show positive trends, with increases in average healthcare services clients, total revenue per client, patient payment volume, and payment facilitator volume percentage Key Metrics | Metric | Three months ended July 31, 2025 | Three months ended July 31, 2024 | Six months ended July 31, 2025 | Six months ended July 31, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Average number of healthcare services clients (AHSCs) | 4,467 | 4,169 | 4,439 | 4,117 | | Total revenue per AHSC | $26,249 | $24,494 | $52,532 | $49,388 | | Patient payment volume (in millions) | $1,250 | $1,093 | $2,564 | $2,259 | | Payment facilitator volume percentage | 82% | 81% | 82% | 81% | - Total revenue per AHSC increased by 7% for the three months ended July 31, 2025, primarily driven by revenue growth outpacing AHSC growth[171] Components of consolidated statements of operations This section details the company's revenue streams and expense categories, explaining their nature and key drivers within the consolidated statements of operations - Revenue is generated from subscription fees and related services, payment processing fees, and network solutions[173] - Patient payment volume is a key indicator of the underlying health of healthcare services clients' businesses and the continuing shift of healthcare costs to patients[174] - Cost of revenue primarily consists of labor costs, outside services, and infrastructure costs[176] - Amortization primarily represents amortization of capitalized internal-use software related to solutions and acquired intangible assets[182] - The company has established a valuation allowance against its U.S. deferred tax assets due to cumulative pre-tax losses[183] Comparison of results of operations for the three and six months ended July 31, 2025 and 2024 The company experienced robust revenue growth across all segments, with mixed changes in operating expenses, leading to a significant reduction in operating loss and a swing to net income for the quarter Revenue Growth (in thousands) | Revenue Category | Three months ended July 31, 2025 | Three months ended July 31, 2024 | $ Change | % Change | | :-------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Subscription and related services | $53,702 | $48,612 | $5,090 | 10% | | Payment processing fees | $28,392 | $25,300 | $3,092 | 12% | | Network solutions | $35,161 | $28,203 | $6,958 | 25% | | Total revenue | $117,255 | $102,115 | $15,140 | 15% | Key Expense Changes (Three months ended July 31, 2025 vs. 2024, in thousands) | Expense Category | 2025 | 2024 | $ Change | % Change | | :-------------------------- | :--- | :--- | :------- | :------- | | Cost of revenue (excl. D&A) | $17,398 | $16,143 | $1,255 | 8% | | Payment processing expense | $20,243 | $16,668 | $3,575 | 21% | | Sales and marketing | $25,396 | $30,184 | $(4,788) | (16)% | | Research and development | $29,274 | $29,542 | $(268) | (1)% | | General and administrative | $19,042 | $19,497 | $(455) | (2)% | | Depreciation | $3,279 | $3,921 | $(642) | (16)% | | Amortization | $4,130 | $3,382 | $748 | 22% | - Other income (expense), net, swung to an income of $0.3 million for the three months ended July 31, 2025, from an expense of $0.1 million in the prior year[213][214] - Interest income, net, increased to $0.6 million for the three months ended July 31, 2025, from less than $0.1 million in the prior year, primarily due to the timing of interest received[216] - Income tax benefit (expense) was a tax benefit of $1.2 million for the three months ended July 31, 2025, compared to a tax expense of $0.8 million in the prior year, primarily due to a deferred tax benefit[218] Non-GAAP financial measures This section reconciles Adjusted EBITDA and Free Cash Flow, non-GAAP measures demonstrating significant improvements in profitability and liquidity for the three and six months ended July 31, 2025 Adjusted EBITDA Reconciliation (in thousands) | Metric | Three months ended July 31, 2025 | Three months ended July 31, 2024 | Six months ended July 31, 2025 | Six months ended July 31, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $654 | $(18,012) | $(3,260) | $(37,734) | | Adjusted EBITDA | $22,132 | $6,529 | $42,948 | $10,622 | Free Cash Flow Reconciliation (in thousands) | Metric | Three months ended July 31, 2025 | Three months ended July 31, 2024 | Six months ended July 31, 2025 | Six months ended July 31, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $14,835 | $11,061 | $29,685 | $10,340 | | Capitalized internal-use software | $(3,435) | $(2,976) | $(7,323) | $(7,546) | | Purchases of property and equipment | $(1,767) | $(4,427) | $(5,271) | $(5,303) | | Free cash flow | $9,633 | $3,658 | $17,091 | $(2,509) | Liquidity and capital resources The company's cash and cash equivalents increased, supported by strong operating cash flows, with plans to finance the AccessOne acquisition using existing cash and a bridge loan, maintaining sufficient liquidity - Cash and cash equivalents were $98.3 million as of July 31, 2025, an increase from $84.2 million as of January 31, 2025[226] - The company has a $50 million senior secured asset-based revolving credit facility with Capital One, with no outstanding borrowings as of July 31, 2025[229][422] - The AccessOne acquisition will be financed through a combination of cash from the balance sheet and proceeds from a new senior secured bridge loan facility[227] - Management believes existing cash, cash generated from operations, and the Bridge Loan will be sufficient to meet liquidity needs for at least the next 12 months[228] Sources and Uses of Cash (in thousands) | Metric | Three months ended July 31, 2025 | Three months ended July 31, 2024 | Six months ended July 31, 2025 | Six months ended July 31, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $14,835 | $11,061 | $29,685 | $10,340 | | Net cash used in investing activities | $(5,202) | $(7,403) | $(12,594) | $(12,849) | | Net cash used in financing activities | $(2,149) | $(1,381) | $(2,987) | $(3,206) | - A new non-cancelable purchase commitment to support technology infrastructure was entered into, with total undiscounted payments of $12,242 thousand through July 31, 2027[247] Critical accounting policies and estimates The company's financial reporting relies on significant estimates and judgments across various areas, with no material changes to these critical accounting policies reported in the current period - Significant estimates and judgments include revenue recognition, fair value of assets acquired in business combinations, capitalized internal-use software, income taxes, and valuation of stock-based compensation[250] - There have been no significant changes in critical accounting policies and estimates during the six months ended July 31, 2025[251] Item 3. Quantitative and Qualitative Disclosures About Market Risk Phreesia manages interest rate risk through short-maturity cash equivalents and foreign exchange risk in Canada and India using forward contracts, with no material impact expected from minor rate fluctuations - The company is exposed to interest rate risk, but its cash equivalents' short maturity makes their fair value relatively insensitive to interest rate changes[253] - Foreign currency exchange risk primarily stems from operations in Canada and India, particularly changes in the Canadian Dollar and Indian Rupee[255] - The company uses foreign currency forward contracts to hedge a portion of its Canadian Dollar denominated payroll payments, with 75% designated as a cash flow hedge[258] - A 1% increase or decrease in foreign exchange rates between the Canadian Dollar, Indian Rupee, and US Dollar is not believed to have a material effect on results of operations or financial condition[259] Item 4. Controls and Procedures Management confirmed the effectiveness of disclosure controls and procedures as of July 31, 2025, with no material changes to internal control over financial reporting, acknowledging inherent limitations - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective at the reasonable assurance level as of July 31, 2025[261] - There were no changes in internal control over financial reporting during the quarter ended July 31, 2025, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[262] - Management acknowledges that control systems provide only reasonable, not absolute, assurance that objectives are met due to inherent limitations[263] PART II — OTHER INFORMATION Item 1. Legal Proceedings The company is routinely involved in legal matters, with significant proceedings like the ConnectOnCall cybersecurity class actions detailed in Note 11 - The company is involved in legal proceedings from time to time that arise in the normal course of business[122][265] - Routine claims and lawsuits are not expected to have a material adverse effect, except as noted in Note 11, which details the ConnectOnCall cybersecurity incident and related class action lawsuits[122][124][125][126] Item 1A. Risk Factors The company faces broad risks including intense competition, growth management challenges, cybersecurity threats, regulatory compliance, reliance on third parties, and potential stock price volatility - The company operates in a highly competitive industry, requiring continuous development and effective competition against EHR/PM systems, including those leveraging AI technologies[267][271][273] - Privacy concerns, cyber-attacks, and data breaches (e.g., ConnectOnCall incident in 2024) pose significant risks, potentially leading to economic loss, reputational damage, and legal penalties[280][283][284] - The company is subject to numerous complex federal and state healthcare and data privacy/security laws (e.g., HIPAA, CCPA, GDPR), imposing significant compliance costs and risks of fines, penalties, and lawsuits[353][354][355][356][357][358][359][360][361][362][363][364][365][366][367][368][369] - Artificial intelligence presents risks and challenges, including security risks to confidential information, increased regulatory and compliance burdens, and heightened competition[392][393][394][395][396][397][398] - Heavy reliance on third-party contractors, vendors, and partners for critical services (e.g., software development, cloud hosting, payment processing, hardware manufacturing) creates risks of service disruption, quality issues, and increased costs[403][404][405][407][408][410][411][412][413][414][415][416] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity security sales were reported for the quarter ended July 31, 2025, that had not been previously disclosed - There were no sales of unregistered securities during the quarter ended July 31, 2025, that were not previously reported on a Current Report on Form 8-K[441] Item 3. Defaults Upon Senior Securities The company reported no defaults on its senior securities during the period - None[442] Item 4. Mine Safety Disclosures This disclosure item is not applicable to Phreesia's business operations - Not applicable[443] Item 5. Other Information CFO Balaji Gandhi established a Rule 10b5-1 Trading Plan on June 24, 2025, for selling common stock and equity award shares, net of tax obligations, expiring in September 2026 - Balaji Gandhi, the Chief Financial Officer, adopted a Rule 10b5-1 Trading Plan on June 24, 2025, for the sale of common stock[444] - The plan, expiring on September 30, 2026, provides for the sale of up to 36,069 shares of common stock, additional shares from fiscal year 2026 and 2027 bonuses, and 100% of vested 2023 PSUs, all net of tax withholding obligations[444][445] Item 6. Exhibits The report includes various exhibits, such as the AccessOne merger agreement, corporate governance documents, required certifications, and XBRL data files - Exhibit 2.1 includes the Agreement and Plan of Merger, dated August 29, 2025, for the AccessOne acquisition[446] - The report includes certifications of the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2)[446] - Inline XBRL Instance Document and Taxonomy Extension Schema Documents are included as Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, and 104[446] Signatures The Quarterly Report on Form 10-Q was officially signed by the Chief Executive Officer and Chief Financial Officer on September 5, 2025 - The report was signed by Chaim Indig, Chief Executive Officer and Director, and Balaji Gandhi, Chief Financial Officer, on September 5, 2025[451]