Phreesia(US:PHR)2023-09-06 16:00PART I — FINANCIAL INFORMATION Item 1. Financial Statements Presents Phreesia's unaudited consolidated financial statements for periods ended July 31, 2023, along with notes on accounting policies and recent acquisitions Consolidated Balance Sheets | Balance Sheet Item | July 31, 2023 (in thousands) | January 31, 2023 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $127,677 | $176,683 | ▼ $49,006 | | Total current assets | $219,230 | $262,441 | ▼ $43,211 | | Goodwill | $40,611 | $33,736 | ▲ $6,875 | | Total Assets | $340,442 | $370,057 | ▼ $29,615 | | Total current liabilities | $84,869 | $79,039 | ▲ $5,830 | | Total Liabilities | $93,422 | $82,238 | ▲ $11,184 | | Accumulated deficit | $(680,382) | $(606,084) | ▲ $74,298 | | Total Stockholders' Equity | $247,020 | $287,819 | ▼ $40,799 | Consolidated Statements of Operations | Metric (in thousands) | Three Months Ended July 31, 2023 | Three Months Ended July 31, 2022 | YoY Change | | :--- | :--- | :--- | :--- | | Total revenues | $85,830 | $67,867 | +26.5% | | Operating loss | $(36,955) | $(46,335) | +20.2% | | Net loss | $(36,767) | $(46,716) | +21.3% | | Net loss per share | $(0.68) | $(0.89) | +23.6% | | Metric (in thousands) | Six Months Ended July 31, 2023 | Six Months Ended July 31, 2022 | YoY Change | | :--- | :--- | :--- | :--- | | Total revenues | $169,675 | $131,221 | +29.3% | | Operating loss | $(74,856) | $(96,928) | +22.8% | | Net loss | $(74,298) | $(97,958) | +24.2% | | Net loss per share | $(1.39) | $(1.88) | +26.1% | Consolidated Statements of Stockholders' Equity - The accumulated deficit increased by $74.3 million during the first six months of fiscal 2024, from $(606.1) million at January 31, 2023, to $(680.4) million at July 31, 2023, primarily driven by the net loss for the period27 Consolidated Statements of Cash Flows | Cash Flow Activity (in thousands) | Six Months Ended July 31, 2023 | Six Months Ended July 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(22,990) | $(53,476) | | Net cash used in investing activities | $(15,795) | $(12,876) | | Net cash used in financing activities | $(10,221) | $(6,731) | | Net decrease in cash and cash equivalents | $(49,006) | $(73,083) | - Cash used in operating activities decreased significantly year-over-year, from $53.5 million in the first six months of fiscal 2023 to $23.0 million in the same period of fiscal 2024, despite the ongoing net loss. This improvement was mainly due to smaller negative changes in working capital and higher non-cash stock-based compensation expense29 Notes to Unaudited Consolidated Financial Statements - The company has a history of net losses and negative cash flows, which management expects to continue for at least the next year. Operations are primarily funded through proceeds from stock issuances and debt35 - On June 30, 2023, the company acquired MediFind for an aggregate consideration of $8.9 million, consisting of cash and stock, to expand its consumer-facing healthcare offerings128 - Subsequent to the quarter end, on August 11, 2023, the company acquired Access eForms for total consideration of $38.4 million in cash and stock to enhance its capabilities in the acute care market136 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Phreesia's financial performance for the three and six months ended July 31, 2023, highlighting revenue growth, narrowed net loss, and liquidity Financial Highlights | Metric | Three Months Ended July 31, 2023 | Three Months Ended July 31, 2022 | | :--- | :--- | :--- | | Total revenue | $85.8 million | $67.9 million (+26%) | | Net loss | $(36.8) million | $(46.7) million | | Adjusted EBITDA | $(11.5) million | $(26.0) million | | Net cash used in operating activities | $(9.3) million | $(19.8) million | Key Metrics | Key Metric | Three Months Ended July 31, 2023 | Three Months Ended July 31, 2022 | | :--- | :--- | :--- | | Average number of healthcare services clients (AHSCs) | 3,445 | 2,776 | | Healthcare services revenue per AHSC | $18,268 | $18,248 | | Total revenue per AHSC | $24,914 | $24,448 | - Patient payment volume increased by 22% to $989 million for the three months ended July 31, 2023, compared to $811 million in the prior year period, indicating strong underlying activity on the platform154156 Comparison of results of operations | Revenue Stream (in thousands) | Three Months Ended July 31, 2023 | Three Months Ended July 31, 2022 | YoY Change | | :--- | :--- | :--- | :--- | | Subscription and related services | $39,301 | $31,069 | +26% | | Payment processing fees | $23,631 | $19,581 | +21% | | Network solutions | $22,898 | $17,217 | +33% | | Total revenue | $85,830 | $67,867 | +26% | - Research and development expenses increased by 22% to $27.5 million for the quarter, primarily due to a $4.2 million increase in compensation and benefits costs from higher headcount and compensation180 - Sales and marketing expenses decreased by 3% to $37.2 million for the quarter, mainly driven by a $2.0 million decrease in compensation costs due to lower average headcount176 Liquidity and capital resources - As of July 31, 2023, the company had cash and cash equivalents of $127.7 million, a decrease of $49.0 million from January 31, 2023. Management believes existing cash is sufficient to meet needs for at least the next 12 months205141 - Following the closure of Silicon Valley Bank (SVB), the company transferred most of its cash to other institutions. While it has a $100 million credit facility with SVB (now First Citizens), a covenant restricts borrowing while significant cash is held outside the bank. The company obtained a temporary consent extension through November 15, 2023212213 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rate and foreign exchange, mainly affecting interest income on cash and cash equivalents, with minimal variable-rate debt exposure - The company's main market risk exposure is to interest rates, which primarily impacts the interest income earned on its cash and cash equivalents232233 - As of July 31, 2023, the company had no debt outstanding under its variable-rate credit facility, mitigating risk from rising interest expenses234 Item 4. Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of July 31, 2023, with no material changes to internal controls during the quarter - Based on an evaluation as of July 31, 2023, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level237 - No material changes were made to the company's internal control over financial reporting during the quarter ended July 31, 2023238 PART II — OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any legal proceedings that would materially adversely affect its business, operating results, financial condition, or cash flows - As of the filing date, Phreesia is not involved in any legal proceedings that are expected to have a material adverse effect on the company241 Item 1A. Risk Factors This section details numerous risks and uncertainties associated with the company's business, including operational, financial, data security, and regulatory challenges - The company has experienced rapid growth and increasing expenses, and failure to manage this growth effectively could prevent revenue increases and hinder the implementation of its business strategy243 - Phreesia has a history of net losses, including $36.8 million for the quarter, and may not achieve profitability in the future as it continues to invest in its business255 - The company faces significant risks related to privacy and security breaches of its platform, which could lead to economic loss, reputational damage, and legal liability due to the sensitive patient data it handles259 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the quarter ended July 31, 2023, that were not previously reported on a Form 8-K - There were no unregistered sales of equity securities during the quarter ended July 31, 2023, that had not been previously disclosed413 Item 5. Other Information This section discloses that David Linetsky, SVP of Life Sciences, terminated a prior Rule 10b5-1 Trading Plan and adopted a new one on July 19, 2023 - On July 18, 2023, David Linetsky, SVP of Life Sciences, terminated his existing Rule 10b5-1 trading plan and adopted a new one on July 19, 2023, covering the sale of up to 77,473 shares plus additional shares from future vested equity awards416418 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the company's amended certificate of incorporation, equity plan documents, and required certifications