Phreesia Inc Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Anne Samuel - JPMorgan Chase & Co - Analyst : Hi. Congrats on the strong results, and thanks so much for providing the really helpful modeling color for 2026. I was hoping maybe you could just spend a little bit of time discussing how to think about the drivers of that ramp of the revenue growth per provider client just kind of keeping in mind your lower-term revenue target of 20% growth beyond 2025. And with the new clients growing, call it, high single digits next year, it does imply a pretty significant inflection. So I was hoping you could talk about what are the key drivers of that inflection are?

Question: Anne Samuel - JPMorgan Chase & Co - Analyst : That's great. And happening, I think, sooner maybe than I anticipated. Maybe just a follow-up. I was hoping you could provide some more color on the patient bill pay product and maybe how that differs from how your patients are currently transacting with you? Is there any kind of leveraging of carve on file for any of that? Thank you.

Question: Anne Samuel - JPMorgan Chase & Co - Analyst : Will do. Congrats, guys.

Question: Ryan Daniels - William Blair & Co LLC - Analyst : Hey, guys. I'll have my congratulations on the move to free cash flow positive. That's a great milestone. Maybe two questions. I'll start with one for you, Balaji. Really impressive, downward trend in your sales and marketing spend, I think trended down from a peak of $40 million to $30 million now. Is that more of a sustainable level going forward? Or should we start to see that maybe modestly trend up a bit as we continue to drive the growth outlook going forward?

Question: Ryan Daniels - William Blair & Co LLC - Analyst : Okay. Very helpful. And then just a question on the Meditech alliance that you announced in the shareholder letter tonight, maybe two-fold. One, will they actually be a reseller of the Phreesia product? And number two, when will the full product integration be available for the client base? I know that a pretty sizable client base, especially in the acute care market. Thanks, guys.

Question: Ryan Daniels - William Blair & Co LLC - Analyst : Great. And then any comments on the full integration that you mentioned, when that will occur?

Question: Ryan Daniels - William Blair & Co LLC - Analyst : Okay, thanks again, guys. Cheers.

Question: Scott Schoenhaus - KeyBanc Capital Markets - Analyst : Hey, guys. Thanks for taking my questions. Just wanted to poke around the additional color we got on the fiscal '26 target. My understanding was always that the network solutions would grow maybe mid- to high teens as a percentage every year. Is that still the right way to think about it for next year? And what does that really imply on the subscription business, if you could break out some of that color more, I'd appreciate.

Question: Scott Schoenhaus - KeyBanc Capital Markets - Analyst : Yes. That's very helpful, Balaji. And just as a follow-up there. I guess you mentioned about the inorganic opportunities provided by the new cash generation. Anything to call out there in terms of which part of the business you think that there is more attractive in currently market opportunities for M&A? Thanks.

Question: Scott Schoenhaus - KeyBanc Capital Markets - Analyst : I was just taking your free cash generation would help you achieve these targets. So I -- sorry, I read between the lines of saying that as the --

Question: Scott Schoenhaus - KeyBanc Capital Markets - Analyst : Okay. My bad. Thanks.

Question: Jessica Tassan - Piper Sandler & Co - Analyst : Hi, guys. Thanks for taking my questions. So I wanted to understand kind of what changed in your visibility on the average revenue per AHSC. We appreciate the guidance, but just are you guys seeing kind of the size of the pipeline or the magnitude of the opportunities grow? I think you referenced that. Is it new products? Or just what's giving you kind of sufficient confidence to be able to guide to growth in revenue term?

Question: Jessica Tassan - Piper Sandler & Co - Analyst : Yeah. That's really helpful. And then congratulations on the PAM renewal. I was hoping that you guys could just maybe remind us. I think we understand why patient activation is so important. But what is kind of the opportunity to leverage PAM within your existing AHSC install base if at all?

Question: Jessica Tassan - Piper Sandler & Co - Analyst : Great. Thank you.

Question: Jailendra Singh - Truist Securities Inc - Analyst : Thank you. And thanks for taking my questions. I actually want to go back to fiscal '26 metrics color guidance you're giving. A quick clarification. I know it looks like that modeling data is helpful. It looks like Street might be slightly higher on this AHSC count, but you're not trying to talk down the top line growth expectation. You're essentially saying that maybe we are underestimating revenue per AHSC for fiscal '26, might be slightly higher on the total AHSC count. I just want to make sure that the message is clear. It's not a top line talking but just the mix of the two metrics, something you want to give some guidance on, right?

Question: Jailendra Singh - Truist Securities Inc - Analyst : Okay. And then my main question around EBITDA performance and guidance raise this fiscal year. Would you attribute this outperformance to you guys able to find incremental-- like find cost efficiencies and leverage faster than you previously thought? Or are these mental cost efficiencies, which you did not expect at all? Just trying to understand if there's any change to your -- the long-term margin profile in this business, you think about?

Question: Jailendra Singh - Truist Securities Inc - Analyst : Okay. And last one, if I can sneak in here. What was the SDR count at the end of the quarter and any color you can provide as a guidance on that metric bundle the fiscal year?

Question: Glen Santangelo - Jefferies Group LLC - Analyst : Just two quick ones for me. Back to the fiscal '26w outlook on the provider adds, I want of curious, sit here with 5 months left in fiscal '25. How much visibility -- how much forward visibility do you have on those provider adds at this point? Like I know you're working now for deals towards next year. And I'm just kind of curious as to how much visibility you really have in throwing out that forward guidance at this point? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2024 / 9:00PM, PHR.N - Q2 2025 Phreesia Inc Earnings Call

Question: Stephanie Davis - Barclays Capital Inc - Analyst : Hey, guys. Congrats on the quarter. We had really seen you push on the gas pedal and that rev per metric when at its scale for us. So I was hoping you can give us some insight into the balance of how much of it is from new deals of scale that you talked about, which might have a bit longer to flow through? How much of it is that cross-sell of the broader solution suite? And when we think about your client base and the recent off-boarding you had in 1Q, is there any further off-boarding that might make sense if some of the clients aren't at the scale or sophistication it this next AHSC platform?

Question: Stephanie Davis - Barclays Capital Inc - Analyst : Any further off-board and client relationships that might not be able to scale in the statement that you focus are looking to do?

Question: Stephanie Davis - Barclays Capital Inc - Analyst : And you guys have seen a lot of leverage on the sales and marketing front. Should we think about a change in your go-to-market of maybe a more narrow focus or a bit more upmarket focus?

Question: John Ransom - Raymond James Financial Inc - Analyst : Hey, guys. Good evening. A couple for me. If we think about your overall expenses outside of payment, which is variable, what kind of revenue do you think you could support with that level of expense compared to what you have today?

Question: John Ransom - Raymond James Financial Inc - Analyst : No. It's a way to try to understand how much expenses will grow independent of revenue on that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2024 / 9:00PM, PHR.N - Q2 2025 Phreesia Inc Earnings Call

Question: John Ransom - Raymond James Financial Inc - Analyst : Okay. And then secondly, just kind of trying to read between the lines a little bit, and this is a state school reading between the lines, which is always in question. So for you to drive a higher revenue per client, not only do you have to tackle bigger clients, but I'm assuming that you're also targeting clients that have a bigger willingness to write prescriptions so that data flow through to pharma would be more valuable. So are you looking at groups that might be more high prescribers than maybe what you were in the past?

Question: John Ransom - Raymond James Financial Inc - Analyst : Right. So just thinking about your sales and marketing, what has been done to -- I mean the productivity has gone up obviously. I mean you did that experiment where you hired a bunch of people, and you've been on this -- you did this growth experiment. Now you're on this productivity experiment. What have you done to improve the productivity of your sales and marketing team because I mean it's pretty evident in the numbers, but I'm just curious about the specifics.

Question: John Ransom - Raymond James Financial Inc - Analyst : And Chaim, I think last one, you're the only company I followed this completely virtual, but you've had this good return on R&D. How do you keep people in some locations going with developing product at such a pace? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2024 / 9:00PM, PHR.N - Q2 2025 Phreesia Inc Earnings Call

Question: John Ransom - Raymond James Financial Inc - Analyst : Thank you.

Question: Richard Close - Canaccord Genuity Group Inc - Analyst : Great. Thank you for all the information in the letter. On product updates, Ryan took the Meditech. So I guess I'll hit medication adherence. Can you remind us what the revenue model is associated with that offering? Is that being paid for by pharma, this part of network solutions? And if that is the process, is it like a drug by drug that the clients sign up for or go to each pharma company and say, hey, we'll show you all the prescriptions. Just curious how that all works.

Question: Richard Close - Canaccord Genuity Group Inc - Analyst : Okay. That's helpful. And then maybe, Balaji, on the pipeline being the same year over year, you obviously focused -- or stated last quarter, you're focusing in on the shorter paybacks. So I assume some stuff probably fell out of the pipeline just because they were maybe not as broad from a product offering or interested in the broader product offering. Is that fair to say?

Question: Richard Close - Canaccord Genuity Group Inc - Analyst : Okay. And okay, that's helpful. And then final question here is I appreciate the retention comments a couple of questions earlier. Can you just talk to us a little bit about let's say a client decide to switch from one vendor to, let's say, Epic. What's your history in terms of keeping that client on the patient access side. And just curious there.

Question: Richard Close - Canaccord Genuity Group Inc - Analyst : Okay. Thank you. Congraulations.

Question: Daniel Grosslight - Citigroup Inc - Analyst : I wanted to go back to the components of rev for AHSC growth in '26 and beyond. First, I just wanted to confirm that you are still committed to that 20% top line growth of your medium-term targets. And then if I look at your growth algorithm back in the 2018, 2019 time frame, obviously, much of that growth was driven by subscription revenue per provider given the Life Sciences segment at that time was relatively nascent. Fast forward to today, the networks business is your fastest-growing segment. So as we think about rev per AHSC growth in the future, is networks really going to drive the majority of that now? And how does that impact the visibility that you have in achieving those longer-term targets?

Question: Daniel Grosslight - Citigroup Inc - Analyst : Got it. Thank you.

Question: Sean Dodge - RBC Capital Markets - Analyst : You mentioned with respect to the guidance, the variability in that range being associated with network solution selling activity. I guess is there a big seasonal component or cadence in that business or Q3 and Q4 is still the heaviest for that segment? And then just anything you can share on visibility you have at this point into that revenue heading into the back half of this year? Thanks.

Question: Sean Dodge - RBC Capital Markets - Analyst : Okay. Thank you.

Question: Jeff Garrow - Stephens Inc - Analyst : Maybe follow up a little bit on that last one. If you could just give any comments specifically about any impact you've anticipated from it being an election year? I would imagine maybe you guys are an attractive non-media channel for life sciences given the increased spend this fall. But I'm curious to get your comments there.

Question: Jeff Garrow - Stephens Inc - Analyst : Fair enough. One more for me. Just want to see if we could get an update on modified. Curious what's working there in terms of customer adoption within the accretive base? And any early insights on the value realized by clients that are using that service? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2024 / 9:00PM, PHR.N - Q2 2025 Phreesia Inc Earnings Call

Question: Jeff Garrow - Stephens Inc - Analyst : Thank for taking the questions .

Question: Matthew Shea - Needham & Company LLC - Analyst : This is Matt Shea on for Ryan. Congrats on the quarter, guys. I wanted to follow up on the new provider adds to the back half of '25 kind of below that 100-plus per quarter rate. Should we view this as maybe new selling seasonality going forward that new deals might be more first half of the year or first half of the fiscal year weighted going forward? Or is this more of a signal of the shift towards fewer but bigger new clients? I guess just trying to understand if we should expect new provider adds to be linear in FY26 or more front half weighted?

Question: Matthew Shea - Needham & Company LLC - Analyst : Fair enough. Yes, that makes sense. And then just to follow up on the PAM renewal. Just curious, were you guys hit it against any other vendors in that process. And then as we think about the expansionary opportunity, those 4 potential additional models. Does that create a revenue uplift as CMS add you do additional models? Or is that just included in your renewal contract kind of as there's no revenue uplift?

Question: Matthew Shea - Needham & Company LLC - Analyst : Okay, great. Thank you.

Question: Jack Wallace - Guggenheim Partners LLC - Analyst : Congrats on getting to cash flow positive. I wanted to send another question your way about the growth algorithm for next year. I wanted to maybe ask about the same-store sales growth. It sounds like you're adding some bigger deals, you maybe moving up market a little bit. But thinking about the clients you do have, how much additional upselling is contemplated within the algo for next year? Is there any price that we should be considering? And then just kind of the general impact or lack thereof in sunsetting of the initial demo periods?

Question: Jack Wallace - Guggenheim Partners LLC - Analyst : Appreciate that. So maybe another way to ask is the -- at least on the subscription line, you've been hovering around a little higher than third penetrated against your per provider TAM. Should we expect that penetration to go up next year? Or is it really just a function of the larger deals in higher-value deals coming in?

Question: Jack Wallace - Guggenheim Partners LLC - Analyst : Got it. Thank you.

Question: Aaron Kimson - Citizens JMP Securities LLC - Analyst : Thank you. Do you announce the availability of Phreesia on the Oracle health care marketplace at the end of July and an integration with Oracle EHR? You talk about what you've seen from the partnership and integration in the first month and the potential you see for it to help Phreesia line customers going forward?