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What changed in Phreesia, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Phreesia, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+531 added−483 removedSource: 10-K (2023-03-23) vs 10-K (2022-03-31)

Top changes in Phreesia, Inc.'s 2023 10-K

531 paragraphs added · 483 removed · 337 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

97 edited+47 added−64 removed50 unchanged
Biggest changeOur Platform The Phreesia Platform offers our clients the following set of solutions that activate patients in their care: • Our access solution provides a comprehensive appointment scheduling system to provide clients with applications for online appointments, reminders and referral tracking and management. • Our registration solution automates patient self-registration via Phreesia Mobile—either before or at the time of the patient’s visit—or through the use of a purpose-built PhreesiaPad or Arrivals Kiosk for on-site check-in. 6 Table of Contents The solution also includes the Phreesia Dashboard, which healthcare services organization staff use to monitor and manage the intake process. • Our revenue cycle solution provides insurance-verification processes, point-of-sale payments applications and cost estimation presentment tools, which help healthcare services clients maximize the timely collection of patient payments. • Our clinical support solution collects clinical intake and patient reported outcome ("PRO") data for more than 25 specialties, enabling our clients to ask the right clinical questions of the appropriate patients at the right time and gather key data that aligns with their quality-reporting goals.
Biggest changeThe solution also collects clinical intake and PRO data for more than 25 6 Table of Contents specialties, enabling our clients to ask the right clinical questions of the appropriate patients at the right time and gather key data that aligns with their quality-reporting goals. • Our revenue cycle solution provides insurance-verification processes, point-of-sale payments applications, post-visit payment collection and flexible payment options, which help healthcare services clients maximize the timely collection of patient payments. • Our network connect solution provides a channel to our life sciences and payer clients that leverages our large and growing network of over 2,800 healthcare services clients.
We serve an array of healthcare services clients of all sizes across over 25 specialties, ranging from single-specialty practices, including internal and family medicine, urology, dermatology, and orthopedics, to large, multi-specialty groups, health systems as well as regional and national payers and other organizations that provide other types of healthcare-related services.
We serve an array of healthcare services clients of all sizes across over 25 specialties, ranging from single-specialty practices, including internal and family medicine, urology, dermatology, and orthopedics, to large, multi-specialty groups, and health systems as well as regional and national payers and other organizations that provide other types of healthcare-related services.
Our integrated patient scheduling solution gives patients 24/7 access to request or schedule their own in-person or virtual appointments online, either through a link or by responding patient-outreach by their provider. Once patients self-schedule or send an appointment request, their information automatically populates into the Phreesia Appointments Hub for staff to track and manage. • Automated appointment rescheduling.
Our integrated patient scheduling solution gives patients 24/7 access to request or schedule their own in-person or virtual appointments online, either through a link or by responding to patient-outreach by their provider. Once patients self-schedule or send an appointment request, their information automatically populates into the Phreesia Appointments Hub for staff to track and manage. • Automated appointment rescheduling.
We deploy our Platform across a range of modalities, including through patients’ mobile devices (Phreesia Mobile), through a web-based dashboard for healthcare services clients (Phreesia Dashboard) and through our proprietary, self-service intake tablets (PhreesiaPads) and on-site kiosks (Arrivals Kiosks), all of which provide an individualized experience for each patient based on age, gender, appointment type and other clinical and demographic factors.
We deploy our Platform across a range of modalities, including through patients’ mobile devices (Phreesia Mobile), through a web-based dashboard for healthcare services clients (Phreesia Dashboard) and through our self-service intake tablets (PhreesiaPads) and on-site kiosks (Arrivals Kiosks), all of which provide an individualized experience for each patient based on age, gender, appointment type and other clinical and demographic factors.
In addition, HIPAA mandates that HHS conduct periodic compliance audits of HIPAA covered entities and their business associates for compliance. It also tasks HHS with establishing a methodology whereby harmed individuals who were the victims of breaches of unsecured PHI may receive a percentage of the Civil Monetary Penalty fine paid by the violator.
In addition, HIPAA mandates that HHS conduct periodic compliance audits of HIPAA covered entities and their business associates. It also tasks HHS with establishing a methodology whereby harmed individuals who were the victims of breaches of unsecured PHI may receive a percentage of the Civil Monetary Penalty fine paid by the violator.
We intend to continue to proactively grow the business through the following strategies: Expanding our Platform to new healthcare services organizations The market for a technology-powered intake and payment platform in the U.S. healthcare industry is early, large and underserved, and we believe we have a substantial opportunity to grow our client base and market share.
We intend to continue to proactively grow the business through the following strategies: Expanding our Platform to new healthcare services organizations The market for a technology-powered intake and payment platform in the U.S. healthcare industry is large and underserved, and we believe we have a substantial opportunity to grow our client base and market share.
Many states in which we operate and in which our patients reside also have laws that protect the privacy and security of sensitive and personal information, including health information, and are, in many cases, not preempted by HIPAA and may be subject to varying interpretations by courts and government agencies.
Additionally, many states in which we operate and in which our patients reside also have laws that protect the privacy and security of sensitive and personal information, including health information, and are, in many cases, not preempted by HIPAA and may be subject to varying interpretations by courts and government agencies.
Over time, we expect to increase profitability and margins by adding larger new clients to our Platform and by expanding our existing clients with minimal incremental investments in our Platform. Moreover, we continually aim to improve the effectiveness and efficiency of our Platform.
Over time, we expect to increase profitability and margins by adding new clients to our Platform and by expanding our existing clients with minimal incremental investments in our Platform. Moreover, we continually aim to improve the effectiveness and efficiency of our Platform.
Our targeted marketing solutions are unique and compete at the point of care as well as pre- and post-visit across an array of digital devices backed by our commitment to transparency and third-party auditing. We compete on the basis of several factors, including price, quality, transparency and the ability to demonstrate meaningful return on investment.
Our direct marketing solutions are unique and compete at the point of care as well as pre- and post-visit across an array of digital devices backed by our commitment to transparency and third-party auditing. We compete on the basis of several factors, including price, quality, transparency and the ability to demonstrate meaningful return on investment.
Through our history, we have effectively partnered with leading PM and EHR solution providers and will continue to evaluate strategic and innovative investments and partnerships to accelerate growth. We also have acquired products and functionalities that complement our offering. We evaluate many investment, partnership and acquisition opportunities on an ongoing basis.
Through our history, we have effectively contracted with leading PM and EHR solution providers and will continue to evaluate strategic and innovative investments and partnerships to accelerate growth. We also have acquired products and functionalities that complement our offering. We evaluate many investment, partnership and acquisition opportunities on an ongoing basis.
Our logic-driven targeting and delivery of PROs and other questionnaires help healthcare services clients identify and target at-risk patients in need of specific care and reduce errors by avoiding the need to manually gather the information. These PROs enable our healthcare services clients to close gaps in care, identify successful treatments and engage patients in their care.
Our logic-driven delivery of PROs and other questionnaires help healthcare services clients identify at-risk patients in need of specific care and reduce errors by avoiding the need to manually gather the information. These PROs enable our healthcare services clients to close gaps in care, identify successful treatments and engage patients in their care.
Through our SaaS-based technology platform, which we refer to as the Phreesia Platform or our Platform, we offer healthcare services clients a robust suite of integrated solutions that manage patient access, registration, payments and clinical support.
Through our SaaS-based technology platform, which we refer to as the Phreesia Platform or our Platform, we offer healthcare services clients a robust suite of integrated solutions that manage patient access, registration and payments.
Our data and analytics capabilities identify patient populations that align with our life sciences clients’ target audiences.
Our data and analytics capabilities identify patient populations that align with our life sciences clients’ audiences.
We have infrastructure in place with four co-located data centers, and within Microsoft Azure and Amazon Web Service environments, to securely manage and maintain our clients’ patient information. We use external security auditors and industry-leading vendors, such as Sikich, A-LIGN, CORE and Bluefin to ensure we have the controls and procedures in place to protect our clients’ sensitive information.
We have infrastructure in place with three co-located data centers, and within Microsoft Azure and Amazon Web Service environments, to securely manage and maintain our clients’ patient information. We use external security auditors and industry-leading vendors, such as Sikich, A-LIGN, and Bluefin to ensure we have the controls and procedures in place to protect our clients’ sensitive information.
We enable healthcare services clients to streamline operations through automated patient intake and payments that are integrated into existing workflows and PM and EHR systems. By automating the numerous tasks of the intake process, our healthcare services clients have been able to save time on patient check-ins. • Improve cash flow and profitability.
We enable healthcare services clients to streamline operations through automated patient intake and payments that are integrated into existing workflows and PM and EHR 7 Table of Contents systems. By automating the numerous tasks of the intake process, our healthcare services clients have been able to save time on patient check-ins. • Improve cash flow and profitability.
The Phreesia Platform is currently used by a small percentage of ambulatory and acute care organizations, and we plan to continue to expand our direct sales force to win new clients.
The Phreesia Platform is currently used by a small percentage of ambulatory and acute care organizations, and we plan to continue to utilize our direct sales force to win new clients.
In addition, under HIPAA and pursuant to the related contracts with our business associates, we must 16 Table of Contents report breaches of unsecured PHI to our contractual partners following discovery of the breach. Notification must also be made in certain circumstances to affected individuals, federal authorities and others.
In addition, under HIPAA and pursuant to the related contracts with our business associates, we must report breaches of unsecured PHI to our contractual partners following discovery of the breach. Notification must also be made in certain circumstances to affected individuals, federal authorities and others.
Data captured from the patient or generated by the use of our Platform automatically integrates into the PM and EHR systems of healthcare services clients. We currently contract with leading PM and EHR providers that collectively represent the majority of the total PM and EHR market.
Data captured from the patient or generated by the use of our Platform automatically integrates into the PM and EHR systems of healthcare services clients. We currently contract with leading PM and EHR providers that collectively represent the majority of the total 12 Table of Contents PM and EHR market.
We also use the following social media channels as a means of disclosing information about the company, our platform, our planned financial and other announcements and attendance at upcoming investor and industry conferences, and other matters and for complying with our disclosure obligations under Regulation FD: PHREESIA Twitter Account (https://twitter.com/phreesia) PHREESIA Facebook Page (https://www.facebook.com/phreesia/) PHREESIA LinkedIn Page (https://www.linkedin.com/company/phreesia) PHREESIA News Page (https://www.phreesia.com/news/) PHREESIA Life Sciences Twitter Account (https://twitter.com/PhreesiaLifeSci) PHREESIA Life Sciences Facebook Page (https://www.facebook.com/PhreesiaLifeSciences/) PHREESIA Life Sciences LinkedIn Page (https://www.linkedin.com/company/phreesia-life-sciences/) PHREESIA Life Sciences Page (https://lifesciences.phreesia.com) We encourage our investors and others to review the information we make public in these locations as such information could be deemed to be material information.
We also use the following social media channels as a means of disclosing information about the company, our platform, our planned financial and other announcements and attendance at upcoming investor and industry conferences, and other matters and for complying with our disclosure obligations under Regulation FD: PHREESIA Twitter Account (https://twitter.com/phreesia) PHREESIA Facebook Page (https://www.facebook.com/phreesia/) PHREESIA LinkedIn Page (https://www.linkedin.com/company/phreesia) PHREESIA Instagram Account (https://www.instagram.com/phreesia.co) PHREESIA News Page (https://www.phreesia.com/news/) PHREESIA Life Sciences Twitter Account (https://twitter.com/PhreesiaLifeSci) PHREESIA Life Sciences Facebook Page (https://www.facebook.com/PhreesiaLifeSciences/) PHREESIA Life Sciences LinkedIn Page (https://www.linkedin.com/company/phreesia-life-sciences/) PHREESIA Life Sciences Page (https://lifesciences.phreesia.com) INSIGNIA Health website (https://www.insigniahealth.com/) We encourage our investors and others to review the information we make public in these locations as such information could be deemed to be material information.
Extensive research over the past decade suggests that the PAM could be a critical pathway in helping healthcare services clients achieve the goals of reducing costs and improving the health of those they care for. • Improve patient experience. We activate patients through their journey from access to registration to drive higher patient satisfaction, retention and safety.
Extensive research over the past decade suggests that the PAM could be a critical pathway in helping healthcare services clients achieve the goals of reducing costs and improving the health of their patients. • Improve patient experience. We activate patients through their journey from access to registration to drive higher patient satisfaction, retention and safety.
Our Automated appointment rescheduling tool is an automated, text-based solution designed to fill open slots on a healthcare services client's schedule with clinically relevant patients. The tool leverages artificial intelligence and a custom-rules engine to offer earlier appointments for eligible patients as soon as a time slot becomes available. • Referral management.
Our automated appointment rescheduling tool is an automated, text-based solution designed to fill open slots on a healthcare services client's schedule with clinically relevant patients. The tool leverages artificial intelligence and a custom-rules engine to offer earlier appointments for eligible patients as soon as a time slot becomes available. • Patient text messaging.
Based on our ongoing analyses of client marketing campaigns conducted by data analytics companies, we believe patients exposed to a brand campaign using the Phreesia Platform are more likely, on average, to take an action, such as having a prescription filled for that product, than control patients.
Based on our ongoing analyses of client marketing campaigns conducted by data analytics companies, we believe patients exposed to a brand campaign using the Phreesia Platform are more likely, on average, to take an action, such as having a prescription filled for that product, than control patients. • Feedback from patient voice.
Department of Health and Human Services, or HHS, and the local media in cases where a breach affects more than 500 individuals. Breaches affecting fewer than 500 individuals must be reported to HHS on an annual basis.
Department of Health 14 Table of Contents and Human Services, or HHS, and the local media in cases where a breach affects more than 500 individuals. Breaches affecting fewer than 500 individuals must be reported to HHS on an annual basis.
These providers of PM and EHR solutions and our healthcare services clients can leverage our expanding APIs to embed the functionality of the Phreesia Platform for their patients, while controlling the look and feel. 13 Table of Contents • Embedded payments.
These providers of PM and EHR solutions and our healthcare services clients can leverage our expanding APIs to embed the functionality of the Phreesia Platform for their patients, while controlling the look and feel. • Embedded payments.
The payment processing features of our Platform have been designed to operate seamlessly within the workflows of our healthcare services clients, and our revenue cycle solutions can connect directly to payers, to multiple clearinghouses and directly with PM, EHR and other systems. • Scalable at cost.
The payment processing features of our Platform have been designed to operate seamlessly within the workflows of our healthcare services clients, and our revenue cycle solutions can connect directly to those making payments, to multiple clearinghouses and directly with PM, EHR and other systems. • Scalable at cost.
Our dedicated Client Services team is responsible for pre-sales engagement, new client onboarding and implementation, existing client implementation and on-site optimization. Our client services are organized by market specialization, ensuring that our teams provide deep expertise in the markets they 14 Table of Contents support.
Our dedicated Client Services team is responsible for pre-sales engagement, new client onboarding and implementation, existing client implementation and on-site optimization. Our Client Services are organized by market specialization, ensuring that our teams provide deep expertise in the markets they support.
The Phreesia Platform operates as a single, unified, multi-tenant platform that has demonstrated scalability and seamless integration within the operating infrastructure of our healthcare services clients. Our core technology capabilities include: • Robust integration. We integrate our technology into PMs, EHRs and ambulatory and acute system workflows for over 2,000 healthcare services client organizations.
The Phreesia Platform operates as a single, unified, multi-tenant platform that has demonstrated scalability and robust integration within the operating infrastructure of our healthcare services clients. Our core technology capabilities include: • Robust integration. We integrate our technology into PMs, EHRs and ambulatory and acute system workflows for over 2,800 healthcare services clients.
Pursuing opportunistic strategic investments, partnerships and acquisitions Our strong growth has been mostly organic, as we have added healthcare services clients and life sciences companies to our Platform, while also expanding the solutions we offer those clients.
Pursuing opportunistic strategic investments, partnerships and acquisitions Our strong growth has been mostly organic, as we have added healthcare services clients as well as life sciences and payer organizations to our Platform, while also expanding the solutions we offer those clients.
Our Revenue Cycle solutions include: • Point-of-service payments. Our point-of-service payments solution offers self-service options on Phreesia Mobile, on the PhreesiaPad or at an Arrivals Kiosk. Healthcare services client staff can also process time-of-service or post-explanation of benefits payments on the Phreesia Dashboard.
Our point-of-service payments solution offers self-service options on Phreesia Mobile, on the PhreesiaPad or at an Arrivals Kiosk. Healthcare services client staff can also process time-of-service or post-explanation of benefits payments on the Phreesia Dashboard.
We estimate that our target client universe in the ambulatory and hospital markets is approximately 50,000 unique healthcare services clients. As we develop new products and services on the Phreesia Platform and through our recent extension into the payer market, we expect our total addressable market to grow.
We estimate that our target client universe in the ambulatory and hospital markets is approximately 50,000 unique healthcare services clients. As we develop new products and services on the Phreesia Platform, we expect our total addressable market to grow.
Our Phreesia Mobile intake platform allows patients to check in securely and conveniently on their computer or mobile device, either prior to their visit or when they arrive at the office.
Our Registration solutions include: • Mobile and in-office intake modalities . Our Phreesia Mobile intake platform allows patients to check in securely and conveniently on their computer or mobile device, either prior to their visit or when they arrive at the office.
We define a patient visit as an individual, in-person or telehealth visit to a healthcare services provider, which may include multiple encounters by the same patient. Additionally, our Platform processed nearly $2.8 billion in patient payments in fiscal 2022 of which 79% were credit and debit card patient payment volume that we processed as a payment facilitator.
We define a patient visit as an individual, in-person or telehealth visit to a healthcare services provider, which may include multiple encounters by the same patient. Additionally, our Platform processed nearly $3.3 billion in patient payments in fiscal 2023, of which 80% were credit and debit card patient payment volume that we processed as a payment facilitator.
We believe the current addressable market for our Platform and services is approximately $9.0 billion and is derived from: (1) the potential subscription and related services revenue generated from the approximately 1.3 million U.S.-based healthcare services organizations who take medical appointments in ambulatory care settings and who work in hospital settings, (2) consumer-related transaction and payment processing fees, which are based on a percentage of payments that can be processed via the Phreesia Platform and address approximately $93.0 billion of annual out of pocket patient spend in ambulatory healthcare related professional services, and (3) a portion of the $6.0 billion spent by life sciences companies on direct-to-consumer prescription drug marketing.
We believe the current addressable market for our Platform and services is approximately $10.0 billion and is derived from: (1) the potential subscription and related services revenue generated from the approximately 1.5 million U.S.-based healthcare services organizations who take medical appointments in ambulatory care settings and healthcare service providers who work in hospital settings, (2) consumer-related transaction and payment processing fees, which are based on a percentage of payments that can be processed via the Phreesia Platform and address approximately $95.0 billion of annual out of pocket patient spend in ambulatory healthcare related professional services, (3) a portion of the $6.0 billion spent by life sciences companies on direct-to-consumer prescription drug marketing, and (4) a portion of the $1.0 billion spent by health plans on member acquisition and retention.
Our teams have significant experience integrating with various EHR and PM systems, which can help take our healthcare services clients from sale to go-live much quicker than other platforms. Our client-focused operations are structured to provide a seamless process. • Client services.
Subscriber services and support Our operations and support organizations differentiate and enhance our clients’ and patients’ experience. Our teams have significant experience integrating with various EHR and PM systems, which can help take our healthcare services clients from sale to go-live much quicker than other platforms. Our client-focused operations are structured to provide a seamless process. • Client services.
Our life sciences revenue is generated from clients in the pharmaceutical, biotechnology and medical device industries as well as patient advocacy, public interest and other not-for-profit organizations seeking to activate, engage and educate patients about topics critical to their health.
Our network solutions revenue (as described below) is generated from clients in the pharmaceutical, biotechnology, and medical device industries, as well as payers, patient advocacy, public interest and other not-for-profit organizations seeking to activate, engage and educate patients about topics critical to their health.
Our value proposition We are focused on creating a better, more engaging healthcare experience for patients, healthcare services organizations and life sciences companies. We believe our solutions provide a unique value proposition that is differentiated from what is offered by the traditional healthcare system. Value proposition for patients • Improved patient experience .
Our value proposition We are focused on creating a better, more engaging healthcare experience for patients, healthcare services organizations, life sciences companies and payer organizations by activating patients in their care. We believe our solutions provide a unique value proposition that is differentiated from what is offered by the traditional healthcare system.
Our Platform streamlines the patient intake process and provides consumer-centric options for check-in. We pre-populate information from prior visits, minimizing the frustration of repetitive questions during the intake process and streamlining the information for review by a clinician by the time the 7 Table of Contents patient reaches the exam room.
Value proposition for patients • Improved patient experience . Our Platform streamlines the patient intake process and provides consumer-centric options for check-in. We pre-populate information from prior visits, minimizing the frustration of repetitive questions during the intake process and streamlining the information for review by a clinician by the time the patient reaches the exam room.
The Phreesia Platform performs hundreds of thousands of transactions, including eligibility and benefits verifications, payment card processing and email and text messaging, quickly and reliably at a low cost every day. • Secure and private. We securely manage billions of data points for millions of patients using multiple devices.
Our technology is engineered to provide strong reliability and availability. The Phreesia Platform performs hundreds of thousands of transactions, including eligibility and benefits verifications, payment card processing and email and text messaging, quickly and reliably at a low cost every day. • Secure and private. We securely manage billions of data points for millions of patients using multiple devices.
Our website address is http://www.phreesia.com. We do not incorporate the information on or accessible through our website into this report, and you should not consider any information on, or that can be accessed through, our website as part of this report.
We do not incorporate the information on or accessible through our website into this report, and you should not consider any information on, or that can be accessed through, our website as part of this report.
As an innovative leader in the patient intake market, we intend to continue to invest in new value-added offerings for our clients. We have a well-defined technology roadmap to introduce new features and functionality to the Phreesia Platform that activate patients in their care.
As an innovative leader across these segments of healthcare, we intend to continue to invest in new value-added offerings for our clients. We have a well-defined technology roadmap to introduce new features and functionality to the Phreesia Platform that activate patients in their care.
The CCPA creates new individual privacy rights for California consumers (as defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households.
The California Consumer Privacy Act, or CCPA, as amended by the California Privacy Rights Act, or CPRA, creates individual privacy rights for California consumers (as defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households.
KLAS, an independent healthcare information technology research firm, evaluates Phreesia against many of these direct competitors and named Phreesia the top-ranked patient intake management vendor for 2020, 2021 and 2022 based on direct feedback from healthcare organizations across the country.
KLAS, an independent healthcare information technology research firm, evaluates Phreesia against many of these direct competitors and named Phreesia the top-ranked patient intake management vendor for four years in a row, based on direct feedback from healthcare organizations across the country.
Our Platform also provides life sciences companies, patient advocacy, public interest and other not-for-profit organizations with a channel for targeted and direct communication with patients. In fiscal 2022, we facilitated patient visits in over 2,000 healthcare services clients across all 50 states.
Our Platform also provides life sciences companies, health plans and other payer organizations (payers), patient advocacy, public interest and other not-for-profit organizations with a channel for direct communication with patients. In fiscal 2023, we facilitated patient visits in over 2,800 healthcare services clients across all 50 states.
Based on our ongoing analyses of 8 Table of Contents client marketing and education campaigns conducted by data analytics companies, we believe patients exposed to such campaigns using the Phreesia Platform are more likely, on average, to receive a relevant diagnosis, or undergo a preventative health screening, or receive a relevant treatment, than control patients. • Feedback from patient voice.
Based on our ongoing analyses of client marketing and education campaigns conducted by data analytics companies, we believe patients exposed to such campaigns using the Phreesia Platform are more likely, on average, to receive a relevant diagnosis, undergo a preventative health screening, or receive a relevant treatment, than control patients. • Improve brand conversion, treatment, and adherence.
Our streamlined intake and payments offering provides a consumer-friendly experience and activates patients to take control of their care. Through our patient surveys, healthcare services clients are able to conduct outreach to patients within 24 hours of visit and generate real-time feedback that informs and drives improvement efforts. Value proposition for life sciences organizations • Targeted, direct digital marketing.
Our streamlined intake and payments offering provides a consumer-friendly experience and activates patients to take control of their care. Through our patient surveys, healthcare services clients are able to conduct outreach to patients within 24 hours of visit and generate real-time feedback that informs and drives efforts to improve patient experience.
These laws may be similar to or even more protective than HIPAA and other federal privacy laws. For example, the laws of the State of California, in which we operate, are more restrictive than HIPAA. California recently enacted and has proposed companion regulations to the California Consumer Privacy Act, or CCPA.
These laws may be similar to or even more protective than HIPAA and other federal privacy laws. For example, the laws of the State of California, in which we operate, are more restrictive than HIPAA.
Our healthcare services customers are regulated as covered entities under HIPAA. As a service provider who creates, receives, maintains or transmits PHI on behalf of our covered entity customers, Phreesia is a “business associate” as defined under HIPAA.
Many of our customers are regulated as covered entities under HIPAA. As a service provider who creates, receives, maintains or transmits PHI on behalf of our covered entity customers, Phreesia is a “business associate” as defined under HIPAA, and certain HIPAA requirements are directly applicable to business associates.
In addition to a few statutory exceptions and regulatory safe harbors, the U.S. Department of Health and Human Services Office of Inspector General, or OIG, has published safe-harbor regulations that outline categories of activities that are deemed 17 Table of Contents protected from prosecution under the Anti-Kickback Statute provided all applicable criteria are met.
Department of Health and Human Services Office of Inspector General, or OIG, has published safe-harbor regulations that outline categories of activities that are deemed protected from prosecution under the Anti-Kickback Statute provided all applicable criteria are met.
During our fiscal year ended January 31, 2022, Modern Healthcare magazine recognized Phreesia as one of the “Best Places to Work in Healthcare” for the fifth time, and Inc. magazine recognized Phreesia as one of the "Best Led Companies of 2021", optimally positioning us to continue to attract top healthcare and technology talent.
During our fiscal year ended January 31, 2023, Modern Healthcare magazine recognized Phreesia as one of the “Best Places to Work in Healthcare” for the sixth time, and Inc. magazine recognized Phreesia as one of the "Best Led Companies of 2022".
Our sales strategy is focused on expanding our revenue per healthcare services client and we believe there is a significant opportunity to sell new applications as well as add additional healthcare services clients. 9 Table of Contents Continuing to innovate and leverage our Platform to optimize healthcare delivery We believe the depth, scalability and robust capabilities of our Phreesia Platform allow us to address key challenges facing healthcare delivery.
Our sales strategy is focused on expanding our revenue per average healthcare services client ("AHSC") and we believe there is a significant opportunity to sell new applications. Continuing to innovate and leverage our Platform We believe the depth, scalability and robust capabilities of our Phreesia Platform allow us to address key challenges facing providers, payers and life sciences organizations.
We have created an integrated and streamlined system that automates data capture and activates patients before, during and after their interaction with their healthcare services provider.
Phreesia’s mission is to create a better, more engaging healthcare experience. We have created an integrated and streamlined system that automates data capture and activates patients before, during and after their interaction with their healthcare services provider.
U.S. federal contracting laws Our subsidiary, Insignia, as a federal government contractor, is obligated to comply with applicable laws and regulations, including the Federal Acquisition Regulation, ("FAR"), in connection with its performance of its government contracts.
U.S. federal contracting laws Our subsidiary, Insignia, as a federal government contractor, is obligated to comply with applicable laws and regulations, including provisions of the Federal Acquisition Regulation ("FAR") and Section 508 of the Rehabilitation Act of 1973 (29 U.S.C. 794d), as amended by the Workforce Investment Act of 1998 ("Section 508"), in connection with its performance of its government contracts.
Patients receive 24/7 access to book appointments on a practice’s website. Appointment requests populate into the Phreesia Appointments Hub for staff to track and schedule. Patients can confirm their appointment time and date via automated text or email. • Integrated patient scheduling.
Appointment requests populate into the Phreesia Appointments Hub for staff to track and schedule. Patients can confirm their appointment time and date via automated text or email. 10 Table of Contents • Integrated patient scheduling.
We have industry certifications, including HITRUST, PCI-DSS Level 1 Service Provider, Security Organization Control 2, or SOC 2 and PCI Point-to-Point Encryption. As a PCI-DSS Level 1 Service Provider, we are committed to upholding industry security standards to cardholder data.
We have industry certifications, including HITRUST, PCI-DSS Level 1 Service Provider, Systems and Organization Controls 2 ("SOC 2") and PCI Point-to-Point Encryption. As a PCI-DSS Level 1 Service Provider, we are committed to upholding industry security standards to cardholder data. We are committed to protecting the information and privacy of our clients and their patients.
Not only may some of these state laws impose fines and penalties upon violators, but also some state laws, unlike HIPAA, may afford private rights of action to individuals who believe their personal information has been misused.
In certain cases, it may be necessary to modify our planned operations and procedures to comply with these more stringent state laws. Not only may some of these state laws impose fines and penalties upon violators, but also some state laws, unlike HIPAA, may afford private rights of action to individuals who believe their personal information has been misused.
The CCPA requires covered companies to provide certain disclosures to consumers about its data collection, use and sharing practices, and to provide affected California residents with ways to opt-out of certain sales or transfers of personal information. The CCPA has been in effect since January 1, 2020, and the California State Attorney General began enforcement on July 1, 2020.
The CCPA requires covered companies to provide certain disclosures to consumers about its data collection, use and sharing practices, and to provide affected California residents with ways to opt-out of certain sales or transfers of personal information.
We provide life sciences companies with a channel to activate patients by identifying, reaching, educating and communicating with patients when they are most receptive and actively seeking care.
Value proposition for life sciences and payer organizations • Direct communications. We provide life sciences and payer organizations with a channel to activate patients by identifying, reaching, educating and communicating with patients who voluntarily opt in, when they are most receptive and actively seeking care.
Our products and services Our Platform and suite of solutions are specifically designed to cater to the needs of patients, healthcare services clients and life sciences companies while improving healthcare engagement.
Our products and services Our Platform and suite of solutions are specifically designed to cater to the needs of patients, healthcare services clients and life sciences and payer companies while improving healthcare engagement. Our robust analytics suite provides real-time operational, financial and clinical insights across our portfolio of products and services.
This is particularly important in a regulatory environment and industry that continues to evolve. • Consumer-oriented. Through technological innovation, we have continued to ensure our products and services evolve to meet growing and increasingly consumer-centric demands. • Reliable. Our technology is engineered to provide strong reliability and availability.
This is particularly important in a regulatory environment and industry that continues to evolve. • Consumer-oriented. Through technological innovation, we have continued to ensure our products and services evolve to meet growing and increasingly consumer-centric demands. Our technological innovations include enhancements to our user interface, which we believe has improved user experience and satisfaction. • Reliable.
Through our life sciences solutions, we provide services to large and small pharmaceutical, medical device and biotechnology companies.
Through our network connect solutions, we provide services to large and small pharmaceutical, medical device and biotechnology companies as well as payer organizations.
Human Capital Resources As of January 31, 2022, we had 1,701 full-time employees, including 359 in services and support, 762 in sales and marketing, 379 in research and development and 201 in general and administrative. As of January 31, 2022, we had 1,146 full-time employees in the United States and 555 full-time employees internationally.
Human Capital Resources As of January 31, 2023, we had 1,546 full-time employees, including 325 in services and support, 607 in sales and marketing, 445 in research and development and 169 in general and administrative. As of January 31, 2023, we had 1,038 full-time employees in the United States and 538 full-time employees internationally.
We recognize that our ability to execute on our mission of creating a better, more engaging experience depends on our people. We are committed to supporting gender equality in our organization, including through our inclusive culture, board representation, pathways to leadership for women, pay equity and strong family-leave policies.
We are also committed to supporting gender equality in our organization, including through our inclusive culture, board representation, pathways to leadership for women, pay equity and strong family-leave policies.
Payment facilitator volume is a major driver of our payment processing revenue. Patient intake is a complex and time-consuming process involving numerous tasks, including registration, insurance verification, patient questionnaires, patient-reported outcomes, or PROs, payments and scheduling.
Payment facilitator volume is a major driver of our payment processing revenue. Patient intake is a complex and time-consuming process involving numerous tasks, including registration, insurance verification, patient questionnaires, patient-reported outcomes ("PROs"), payments and scheduling. Inefficiencies during the intake process often result in lower satisfaction for patients and healthcare services organizations, wasted time, missed revenue opportunities and diminished health outcomes.
Patients can also choose to pay online on their healthcare services organization’s website or place a card on file. Our Platform also removes the need for difficult payment-related conversations with staff and ensures a level of personal privacy throughout the transaction. • Activation in care.
Our Platform also removes the need for difficult payment-related conversations with staff and ensures a level of personal privacy throughout the transaction. • Activation in care.
Insignia’s obligations under the FAR include, for example, calculating overhead rates in accordance with the accounting procedures and internal controls required under the FAR standards.
Insignia’s obligations under the FAR include, for example, calculating overhead rates in accordance with the accounting procedures and internal controls required under the FAR standards. In addition, Insignia is obligated under Section 508 to ensure its services and products comply with federal accessibility standards.
Since the effective date of the HIPAA Omnibus Final Rule on September 23, 2013, certain HIPAA requirements are also directly applicable to business associates. Violations of HIPAA may result in civil and criminal penalties and a single breach incident can result in violations of multiple standards. We must also comply with HIPAA’s breach notification rule.
Violations of HIPAA may result in civil and criminal penalties and a single breach incident can result in violations of multiple standards. We must also comply with HIPAA’s breach notification rule.
We allow healthcare services clients to ask patients privately about their access to healthy food, safe housing and other social determinants that can have a critical impact on their health.
We enable healthcare services clients to ask patients privately about their access to healthy food, safe housing and other social determinants that can have a critical impact on their health. The gathered information is automatically integrated within PM and EHR systems, giving healthcare services clients key data to better understand patients and connect them to needed services.
This capability helps to reduce face-to-face interactions, decrease phone-call volume and improve patient communication. Registration Our Registration applications facilitate mobile and on-site check-in, create a more complete patient record and increase patient convenience and satisfaction. Our Registration solutions include: • Mobile and in-office intake modalities .
Our patient text messaging product allows healthcare services clients to send and receive text messages from individual patients about their in-person or virtual visits. This capability helps to reduce face-to-face interactions, decrease phone-call volume and improve patient communication. Registration Our Registration applications facilitate mobile and on-site check-in, create a more complete patient record and increase patient convenience and satisfaction.
Our Patient Connect feature enables clients to engage with relevant patients who voluntarily opt in and deliver pertinent, targeted content at the point at which they are actively seeking care. Our tools raise patient awareness and help patients to start the right medical conversations with their providers. • Patient insights.
Our partnerships also provide insights to help clients better understand patient and member needs and perspectives. • Patient and member education and engagement . Our Patient Connect product enables clients to engage with relevant patients who voluntarily opt in and deliver pertinent content at the point at which they are actively seeking care.
In light of the HIPAA Omnibus 15 Table of Contents Final Rule, recent enforcement activity, and statements from HHS, we expect increased federal and state HIPAA privacy and security enforcement efforts. Other federal and state laws restrict the use and protect the privacy and security of personally identifiable information.
In light of the HIPAA Omnibus Final Rule, recent enforcement activity, and statements from HHS, we expect increased federal and state HIPAA privacy and security enforcement efforts. There has been increasing focus on the application of HIPAA and other privacy laws to technology companies.
These forms can be customized by appointment type and can capture electronic signatures and send required forms directly to the PM or EHR system. Revenue cycle We are able to improve key revenue cycle metrics with our payment solutions, increasing time-of-service and post-visit collections as well as improving patient convenience with online payments and card on file.
Revenue cycle We are able to improve key revenue cycle metrics with our payment solutions, increasing time-of-service and post-visit collections as well as improving patient convenience with online payments and card on file. Our Revenue Cycle solutions include: 11 Table of Contents • Point-of-service payments.
Attracting and retaining top talent is a high priority for us, and we look to hire smart, passionate, diverse and driven individuals who want to be a part of our mission. Our strong company culture and investment in long-term career growth for our people is evidenced by the long tenure of many of our team members with our organization.
Our team members are key pillars of our success and fostering and developing their talent is central to our culture. Attracting and retaining top talent is a high priority for us, and we look to hire smart, passionate, diverse and driven individuals who want to be a part of our mission.
Patients are also able to save time by making their appointments using our technology. • Flexible payment options. Our Platform provides patients with flexibility and choice in how they pay for healthcare services. Patients are able to pay upfront or set up an automated payment plan that adheres to our healthcare services clients' financial policies.
We also offer patients a convenient, flexible, secure intake experience that saves time and reduces the confusion and anxiety around payments. Patients are also able to save time by making their appointments using our technology. • Flexible payment options. Our Platform provides patients with flexibility and choice in how they pay for healthcare services.
We target opportunities that enhance the breadth or depth of our ability to activate patients in their care. Our acquisitions to date have all been consistent with this philosophy. In December 2018, we acquired Vital Score, Inc., which expanded our clinical and patient activation offerings and deepened our capabilities in motivational science.
We target opportunities that enhance the breadth or depth of our ability to activate patients in their care. Our acquisitions to date have all been consistent with this philosophy, and we will continue to evaluate growth opportunities that complement our internal initiatives.
Such laws, for example, could include state laws that prohibit unfair privacy and security practices and deceptive statements about privacy and security and laws that place specific requirements on certain types of activities, such as data security and texting.
Such laws, for example, could include state laws that prohibit unfair privacy and security practices and deceptive statements about privacy and security and laws that place specific requirements on certain types of activities, such as data security and texting. 15 Table of Contents In recent years, there have been a number of well publicized data breaches involving the improper use and disclosure of personally identifiable information and PHI.
Our data-driven solutions provide custom, targeted patient outreach based on various demographic, clinical, environmental and social data, allowing our clients to activate patients with clinically relevant medical content to help facilitate conversations with their providers about treatment and prevention options. • Improve brand conversion, treatment, and adherence.
Our data-driven solutions provide direct patient and member outreach based on various demographic, clinical, environmental and social data, allowing our clients to activate patients and members with clinically or demographically relevant health content to help facilitate conversations with their providers about treatment and prevention options or to gain a better understanding of the health insurance products that best fit their individual needs. • Improve diagnosis and uptake of preventative health services.
This model has proven to help large companies continue to scale, while leveraging the benefits of smaller operations. We are committed to providing top-quality services and support, and we have been recognized for high performance in integration, implementation support and overall client satisfaction.
This model has proven to help large companies continue to scale, while leveraging the benefits of smaller operations. We are committed to providing quality services and support, with a focus on integration, implementation support and overall client satisfaction. Regulatory Matters Our business is subject to extensive, complex and rapidly changing federal and state laws and regulations.
We intend to leverage our patient database and patient activation capabilities to eliminate gaps in care and increase care coordination among all key healthcare constituents. By expanding and continuously enhancing the Phreesia Platform, we believe we can drive incremental revenue from existing clients as well as broaden the appeal of our solutions to potential new clients.
By expanding and continuously enhancing 9 Table of Contents the Phreesia Platform, we believe we can drive incremental revenue from existing clients as well as broaden the appeal of the Phreesia Platform to potential new clients.
We believe many direct competitors are focused on the basic aspects of electronic patient intake and are only starting to expand into the multiple adjacencies beyond patient registration such as access and clinical support. Some of our existing and potential service providers, particularly EHR providers, have developed their own patient intake solutions and have become direct competitors.
Our competitive landscape We compete in a dynamic patient intake market with direct and indirect competitors that maintain varying degrees of resources and capabilities. We believe many direct competitors are focused on the basic aspects of electronic patient intake and are only starting to expand into the multiple adjacencies beyond patient registration such as access and clinical support.
We believe our success is due in large part to the continued engagement of our talented and committed team.
Our strong company culture and investment in long-term career growth for our people is evidenced by the long tenure of many of our team members with our organization. We believe our success is due in large part to the continued engagement of our talented and committed team.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe trading price of our common stock has been and may be volatile and subject to wide price fluctuations in response to various factors, including: • market conditions in the broader stock market in general, or in our industry in particular; • the impact of COVID-19 on the economy, our company, our customers, suppliers or employees; • actual or anticipated fluctuations in our quarterly financial reports and results of operations; • changes in the financial projections we provide to the public or our failure to meet these projections; • our ability to satisfy our ongoing capital needs and unanticipated cash requirements; • indebtedness incurred in the future; • introduction of new products and services by us or our competitors; • issuance of new or changed securities analysts’ reports or recommendations; • sales of large blocks of our common stock; • additions or departures of key personnel; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • regulatory developments; • litigation and governmental investigations; • economic and political conditions or events; and • our sale of common stock or other securities in the future.
Biggest changeThe trading price of our common stock has been and may be volatile and subject to wide price fluctuations in response to various factors, including, but not limited to: • market conditions in the broader stock market in general, or in our industry in particular, which create highly variable and unpredictable pricing of equity securities; • actual or anticipated fluctuations in our quarterly financial reports and results of operations; • changes in the financial projections we provide to the public or our failure to meet these projections; • our ability to satisfy our ongoing capital needs and unanticipated cash requirements; • indebtedness incurred in the future; • actual or anticipated developments in our business, our competitors' businesses, or the competitive landscape generally, including introduction of new products and services by us or our competitors; • issuance of new or changed securities analysts’ reports or recommendations; • additions or departures of key personnel; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; 47 • regulatory developments; • litigation and governmental investigations; • the impact of COVID-19 on the economy, our company, our customers, suppliers or employees; • macroeconomic conditions, such as rising interest and inflation rates and economic slowdowns and recessions, and political conditions or events, including those resulting from geopolitical uncertainty and instability or war, such as the ongoing military conflict between Russia and Ukraine; and • our sale of common stock or other securities in the future.
Our success also depends on providing high-quality products and services that healthcare services clients use to improve clinical, financial and operational performance that are used and positively received by patients.
Our success also depends on providing high-quality products and services that healthcare services clients use to improve clinical, financial and operational performance and that are used and positively received by patients.
Our ability to streamline the intake process and critical workflows in order to improve healthcare services organization and staff efficiency and patient engagement to allow for optimal allocation of resources will be critical to our business.
Our ability to streamline the intake process and critical workflows in order to improve healthcare services organization, staff efficiency and patient engagement to allow for optimal allocation of resources will be critical to our business.
We compete on the basis of several factors, including breadth, depth and quality of product and service offerings, ability to deliver clinical, financial and operational performance improvement through the use of products and services, quality and reliability of services, ease of use and convenience, brand recognition, price and the ability to integrate our Platform solutions with various PM and EHR systems and other technology.
We compete on the basis of several factors, including breadth, depth and quality of product and service offerings, ability to deliver clinical, financial and operational performance improvement through the use of products and services, quality and reliability of services, ease of use and convenience, brand recognition, price and the ability to integrate our Platform solutions with various EHR and PM systems and other technology.
Accordingly, new competitors or providers of PM and EHR solutions may emerge that have greater market share, larger client bases, more widely adopted proprietary technologies, greater marketing expertise, greater financial resources and larger sales forces than we have, which could put us at a competitive disadvantage.
Accordingly, new competitors or providers of EHR and PM solutions may emerge that have greater market share, larger client bases, more widely adopted proprietary technologies, greater marketing expertise, greater financial resources and larger sales forces than we have, which could put us at a competitive disadvantage.
Our efforts involve educating our clients and patients about the use, technical capabilities and benefits of our products and services. We do not provide access to the Platform and do not charge fees during this initial sales period.
Our efforts involve educating our clients and patients about the use, technical capabilities and benefits of our products and services. We do not provide access to our Platform and do not charge fees during this initial sales period.
For clients that decide to enter into a contract with us, most of these contracts may provide for a preliminary trial period where a subset of healthcare services locations from the client is granted access to our Platform. Following any such trial period, we aim to increase the number of healthcare services locations within the client that utilize the Platform.
For clients that decide to enter into a contract with us, most of these contracts may provide for a preliminary trial period where a subset of healthcare services locations from the client is granted access to our Platform. Following any such trial period, we aim to increase the number of healthcare services locations within the client that utilize our Platform.
In addition, a court or government agency may take the position that our storage and display of health information exposes us to liability arising out of our intake, storage and display of information or erroneous health information.
In addition, a court or government agency may take the position that our storage and display of health information exposes us to liability arising out of our intake, storage and display of erroneous health information.
Some of these provisions include: • a board of directors divided into three classes serving staggered three-year terms, such that not all members of the board will be elected at one time; • a prohibition on stockholder action through written consent, which requires that all stockholder actions be taken at a meeting of our stockholders; • a requirement that special meetings of stockholders be called only by the board of directors acting pursuant to a resolution approved by the affirmative vote of a majority of the directors then in office; • advance notice requirements for stockholder proposals and nominations for election to our board of directors; 47 • a requirement that no member of our board of directors may be removed from office by our stockholders except for cause and, in addition to any other vote required by law, upon the approval of not less than 75% of all outstanding shares of our voting stock then entitled to vote in the election of directors; • a requirement of approval of not less than 75% of all outstanding shares of our voting stock to amend any bylaws by stockholder action or to amend specific provisions of our certificate of incorporation; and • the authority of the board of directors to issue preferred stock on terms determined by the board of directors without stockholder approval and which preferred stock may include rights superior to the rights of the holders of common stock.
Some of these provisions include: • a board of directors divided into three classes serving staggered three-year terms, such that not all members of the board will be elected at one time; • a prohibition on stockholder action through written consent, which requires that all stockholder actions be taken at a meeting of our stockholders; • a requirement that special meetings of stockholders be called only by the board of directors acting pursuant to a resolution approved by the affirmative vote of a majority of the directors then in office; • advance notice requirements for stockholder proposals and nominations for election to our board of directors; • a requirement that no member of our board of directors may be removed from office by our stockholders except for cause and, in addition to any other vote required by law, upon the approval of not less than 75% of all outstanding shares of our voting stock then entitled to vote in the election of directors; • a requirement of approval of not less than 75% of all outstanding shares of our voting stock to amend any bylaws by stockholder action or to amend specific provisions of our certificate of incorporation; and • the authority of the board of directors to issue preferred stock on terms determined by the board of directors without stockholder approval and which preferred stock may include rights superior to the rights of the holders of common stock.
If additional material weaknesses in our internal control over financial reporting are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results, which could materially and adversely affect our business, results of operations and financial condition, restrict our ability to access the capital markets, require us to expend significant resources to correct the material weakness, subject us to fines, penalties or judgments, harm our reputation or otherwise cause a decline in investor confidence.
If material weaknesses in our internal control over financial reporting are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results, which could materially and adversely affect our business, results of operations and financial condition, restrict our ability to access the capital markets, require us to expend significant resources to correct the material weakness, subject us to fines, penalties or judgments, harm our reputation or otherwise cause a decline in investor confidence.
Our future capital requirements may be significantly different from our current estimates and will depend on many factors, including the need to: • finance unanticipated working capital requirements; • develop or enhance our technological infrastructure and our existing products and services; • fund strategic relationships, including joint ventures and co-investments; • fund additional implementation engagements; • respond to competitive pressures; and • acquire complementary businesses, technologies, products or services.
Our future capital requirements may be significantly different from our current estimates and will depend on many factors, including the need to: • finance unanticipated working capital requirements; • develop or enhance our technological infrastructure and our existing products and services; • fund strategic relationships, including joint ventures and co-investments; • fund additional implementation engagements; • respond to competitive pressures; and 45 • acquire complementary businesses, technologies, products or services.
If any of the following risks are realized, our business, financial condition, operating results and prospects could be materially and adversely affected. In that event, the price of our common stock could decline, perhaps significantly. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.
If any of the following risks are realized, our business, financial condition, operating results and prospects could be materially and adversely affected. In that event, the price of our common stock could decline, perhaps significantly. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business 19 operations.
During the implementation cycle, we expend substantial time, effort and financial resources implementing our service, but 25 accounting principles do not allow us to recognize the resulting revenue until the service has been implemented, at which time we begin recognition of subscription and related implementation revenue over the life of the contract. This could harm our future operating results.
During the implementation cycle, we expend substantial time, effort and financial resources implementing our service, but accounting principles do not allow us to recognize the resulting revenue until the service has been implemented, at which time we begin recognition of subscription and related implementation revenue over the life of the contract. This could harm our future operating results.
The Personal Information Protection and Electronic Documents Act, or PIPEDA, applies in all Canadian provinces except Alberta, British Columbia and Québec, as well as to the transfer of consumer data across provincial borders. PIPEDA imposes stringent consumer data protection obligations, requires privacy breach reporting, and limits the purposes for which organizations may collect, use, and disclose consumer data.
The Personal Information Protection and Electronic Documents Act ("PIPEDA"), applies in all Canadian provinces except Alberta, British Columbia and Québec, as well as to the transfer of consumer data across provincial borders. PIPEDA imposes stringent consumer data protection obligations, requires privacy breach reporting, and limits the purposes for which organizations may collect, use, and disclose consumer data.
If there is a reduction in newly approved drugs, or newly launched drugs are not successful, this could negatively affect the ability of our life sciences clients to deliver relevant, targeted messages to patients who would have otherwise been candidates to receive such drugs, and accordingly may reduce patient opt-in rates.
If there is a reduction in newly approved drugs, or newly launched drugs are not successful, this could negatively affect the ability of our life sciences clients to deliver relevant messages to patients who would have otherwise been candidates to receive such drugs, and accordingly may reduce patient opt-in rates.
Notably, Québec’s Act respecting the protection of personal information in the private sector, or the Private Sector Act, was recently amended by Bill 64, an Act to modernize legislative provisions as regards the protection of personal information, which introduced major amendments to the Private Sector Act, notably, to impose significant and stringent new obligations on Québec businesses while increasing the powers of Quebec’s supervisory authority.
Notably, Québec’s Act respecting the protection of personal information in the private sector, or the Private Sector Act, was amended by Bill 64, an Act to modernize legislative provisions as regards the protection of personal information, which introduced major amendments to the Private Sector Act, notably, to impose significant and stringent new obligations on Québec businesses while increasing the powers of Quebec’s supervisory authority.
If our employees, contractors, vendors, or partners fail to comply with the FCPA and/or foreign anti-bribery laws, we may be subject to penalties or sanctions, and our ability to develop new prospects and retain existing customers could be adversely affected. 41 • Economic sanctions and export controls . Economic and trade sanctions programs that are administered by the U.S.
If our employees, contractors, vendors, or partners fail to comply with the FCPA and/or foreign anti-bribery laws, we may be subject to penalties or sanctions, and our ability to develop new prospects and retain existing customers could be adversely affected. • Economic sanctions and export controls . Economic and trade sanctions programs that are administered by the U.S.
In addition, under the Tax Cuts and Jobs Act of 2017, as amended by The Coronavirus Aid, Relief, and Economic Security ("CARES") Act of 2020, the amount of post 2017 NOLs that we are permitted to utilize in any taxable year is limited to 80% of our taxable income in such year, where taxable income is determined without regard to the NOL deduction itself.
In addition, under the Tax Cuts and Jobs Act of 2017, as amended by The Coronavirus Aid, Relief, and Economic Security Act of 2020, the amount of post 2017 NOLs that we are permitted to utilize in any taxable year is limited to 80% of our taxable income in such year, where taxable income is determined without regard to the NOL deduction itself.
It would be difficult to replace some of our third-party vendors in a timely manner if they were unwilling or unable to provide us with these services in the future, and our business and operations could be adversely affected. If these services fail or are of poor quality, our business, reputation and operating results could be harmed.
It would be difficult to replace some of our third-party contractors and third-party vendors in a timely manner if they were unwilling or unable to provide us with these services in the future, and our business and operations could be adversely affected. If these services fail or are of poor quality, our business, reputation and operating results could be harmed.
Treasury Department’s Office of Foreign Assets Control (OFAC) prohibit or restrict transactions to or from, and dealings with specified countries and territories, their governments, and in certain circumstances, with individuals and entities that are specially designated nationals of those countries, and other sanctioned persons, including narcotics traffickers and terrorists or terrorist organizations.
Treasury Department’s Office of Foreign Assets Control (OFAC) prohibit or restrict transactions to or from, and dealings with specified countries and territories, their governments, and in certain circumstances, with individuals and entities that are located in or nationals of those countries, and other sanctioned persons, including specially designated nationals, narcotics traffickers and terrorists or terrorist organizations.
Certain statements in this Annual Report on Form 10-K are forward-looking statements. See the section of this Annual Report on Form 10-K titled “Special Note Regarding Forward-Looking Statements.” 20 Risks relating to our business and industry We have grown rapidly in recent periods, and as a result, our expenses have continued to increase.
Certain statements in this Annual Report on Form 10-K are forward-looking statements. See the section of this Annual Report on Form 10-K titled “Special Note Regarding Forward-Looking Statements.” Risks relating to our business and industry We have grown rapidly in recent periods, and as a result, our expenses have continued to increase.
If we are unable to obtain adequate financing or financing on terms satisfactory to us, it could have a material adverse effect on our business, financial condition and results of operations. 45 Restrictive covenants in the agreements governing our credit facility may restrict our ability to pursue our business strategies.
If we are unable to obtain adequate financing or financing on terms satisfactory to us, it could have a material adverse effect on our business, financial condition and results of operations. Restrictive covenants in the agreements governing our credit facility may restrict our ability to pursue our business strategies.
Thus, in the event of a significant loss by our processing partners, we may be required to pay-out a large amount of cash in one or two business days following such event and, if we do not have sufficient cash on hand, may be deemed in breach of such contracts.
Thus, in the event of a significant loss by our processing partners, we may be required to pay-out a large amount of cash in one or two business days following such event 42 and, if we do not have sufficient cash on hand, may be deemed in breach of such contracts.
The termination of our registration, including a card network barring us from acting as a payment facilitator, or any changes in card network rules that would impair our registration, could require us to stop providing payment processing services relating to the affected card network, which would adversely affect our ability to conduct our business.
The termination of our registration, including a card network barring us from acting as a payment facilitator, or any changes in card network rules that would impair our registration, could require us to stop providing payment 30 processing services relating to the affected card network, which would adversely affect our ability to conduct our business.
Acquisitions also increase the risk of unforeseen legal liability, including for potential violations of applicable law or industry rules and regulations, arising from prior or ongoing acts or omissions by the acquired businesses which are not discovered by due diligence during the acquisition process.
Acquisitions also increase the risk of unforeseen legal liability, including for potential violations of applicable law or industry rules and regulations, arising from prior or ongoing acts or omissions by the acquired businesses which are 28 not discovered by due diligence during the acquisition process.
A contractual dispute with our processing partners could adversely impact our revenue. Certain contracts may expire or be terminated, 42 and we may not be able to enter into a new payment processor relationship that replicates the associated revenue for a considerable period of time.
A contractual dispute with our processing partners could adversely impact our revenue. Certain contracts may expire or be terminated, and we may not be able to enter into a new payment processor relationship that replicates the associated revenue for a considerable period of time.
Federal and state consumer protection laws are increasingly being applied by the United States Federal Trade Commission and states’ attorneys general to regulate the collection, use, storage and disclosure of personal or 36 personally identifiable information, through websites or otherwise, and to regulate the presentation of website content.
Federal and state consumer protection laws are increasingly being applied by the United States Federal Trade Commission and states’ attorneys general to regulate the collection, use, storage and disclosure of personal or personally identifiable information, through websites or otherwise, and to regulate the presentation of website content.
While we maintain 35 insurance coverage, we cannot be certain that this coverage will prove to be adequate or will continue to be available on acceptable terms, if at all. Even unsuccessful claims could result in substantial costs and diversion of management resources.
While we maintain insurance coverage, we cannot be certain that this coverage will prove to be adequate or will continue to be available on acceptable terms, if at all. Even unsuccessful claims could result in substantial costs and diversion of management resources.
Further, our clients may expect us to comply with more stringent privacy and data security requirements than those imposed by laws, regulations or self-regulatory requirements, and we may be obligated contractually to comply with additional or different standards relating to our handling or protection of data.
Further, our clients may expect us to comply with more stringent privacy, data storage and data security requirements than those imposed by laws, regulations or self-regulatory requirements, and we may be obligated contractually to comply with additional or different standards relating to our handling or protection of data.
If we fail to manage our growth effectively, our revenue may not increase, and we may be unable to implement our business strategy. We have experienced significant growth in recent periods, which puts strain on our business, operations and employees. We anticipate that our operations will continue to rapidly expand.
If we fail to manage our growth effectively, our revenue may not increase, and we may be unable to implement our business strategy. We have experienced significant growth in recent periods, which puts strain on our business, operations and employees. We anticipate that our operations will continue to expand.
If we are unable to hire and 28 develop sufficient numbers of productive direct sales personnel or if new direct sales personnel are unable to achieve desired productivity levels in a reasonable period of time, sales of our services will suffer and our growth will be impeded.
If we are unable to hire and develop sufficient numbers of productive direct sales personnel or if new direct sales personnel are unable to achieve desired productivity levels in a reasonable period of time, sales of our services will suffer and our growth will be impeded.
Our operating expenses may increase substantially in the foreseeable future as we continue to invest to grow our business and build relationships with our clients and partners, develop the Phreesia Platform, develop new solutions and operate as a public company.
Our operating expenses may increase in the foreseeable future as we continue to invest to grow our business and build relationships with our clients and partners, develop the Phreesia Platform, develop new solutions and operate as a public company.
We store and display data for use by healthcare services clients in handling patient intake and engagement, including patient health information. Our clients, their patients, or third parties provide us with most of this data.
We collect, store and display data, including patient health information, for use by healthcare services clients in handling patient intake and engagement. Our clients, their patients, or third parties provide us with most of this data.
As we expect to grow rapidly, our client acquisition costs could outpace revenue growth, and we may be unable to reduce our total operating costs through economies of scale such that we are unable to achieve profitability.
As we expect to grow rapidly, our client acquisition costs could outpace revenue growth, and we may be 24 unable to reduce our total operating costs through economies of scale such that we are unable to achieve profitability.
Cross-border data transfers and other future developments regarding local data residency could increase the cost and complexity of delivering our services in some markets and may lead to governmental enforcement actions, litigation, fines, and penalties or adverse publicity, which could adversely affect our business and financial position could greatly increase our cost of providing our products and services, require significant changes to our operations or even prevent us from offering certain services in specific jurisdictions.
Cross-border data transfers and other future developments regarding local data residency and access could increase the cost and complexity of delivering our services in some markets and may lead to governmental enforcement actions, litigation, fines, and penalties or adverse publicity, which could adversely affect our business and financial position could greatly increase our cost of 37 providing our products and services, require significant changes to our operations or even prevent us from offering certain services in specific jurisdictions.
The termination of our status as a certified service provider, a decision by the card networks to exclude payment facilitators or bar us from serving as such, or any changes in network rules or standards, including interpretation and implementation of the operating rules or standards, that increase the cost of doing business or limit our ability to provide transaction processing services to our clients or partners, could adversely affect our business, financial condition or results of operations.
The termination of our status as a certified service provider, a decision by the card networks to disallow payment facilitators or bar us from serving as such, or any changes in network rules or standards, including interpretation and implementation of the operating rules or standards, that increase the cost of doing business or limit our ability to provide transaction processing services to our clients or partners, could adversely affect our business, financial condition or results of operations.
While we believe we have visibility into the seasonality of our business, our rapid growth rate over the last several years may have made 29 seasonal fluctuations more difficult to detect.
While we believe we have visibility into the seasonality of our business, our rapid growth rate over the last several years may have made seasonal fluctuations more difficult to detect.
These include the Payment Card Industry Data Security Standards ("PCI-DSS") and Security Organization Control 2 ("SOC 2"), with which we are currently compliant, and HITRUST certification, which we currently maintain.
These include the Payment Card Industry Data Security Standards ("PCI-DSS") and AICPA Security Organization Control 2 ("SOC 2"), with which we are currently compliant, and HITRUST certification, which we currently maintain.
We have entered into contracts with third-party vendors to provide critical services relating to our business, including initial software development and cloud hosting.
We have entered into contracts with third-party contractors and vendors to provide critical services relating to our business, including initial software development and cloud hosting.
Further, if we are unable to address the needs of our clients and their patients in a timely fashion or further develop and enhance our solution, or if a client or patient is not satisfied with the quality of work performed by us or with the technical support services rendered, then we could incur additional costs to address the situation or be required to issue credits or refunds for amounts related to unused services, and our profitability may be impaired and clients’ or patients’ dissatisfaction with our solution could damage our ability to expand the number of applications and services purchased by such clients.
Further, if we are unable to address the needs of our clients and their patients in a timely fashion or further develop and enhance the Phreesia Platform, or if a client or patient is not satisfied with the quality of work performed by us or with the technical support services rendered, then we could incur additional costs to address the situation or be required to issue credits or refunds for amounts related to unused services, and our profitability may be impaired and clients’ or patients’ dissatisfaction with the Phreesia Platform could damage our ability to expand the number of applications and services purchased by such clients.
Risks relating to our indebtedness In order to support the growth of our business, we may need to incur additional indebtedness under our current credit facilities or seek capital through new equity or debt financings, which sources of additional capital may not be available to us on acceptable terms or at all.
In order to support the growth of our business, we may need to incur additional indebtedness under our current credit facilities or seek capital through new equity or debt financings, which sources of additional capital may not be available to us on acceptable terms or at all.
We also expect that there will continue to be new or amended laws, regulations, standards and obligations proposed and enacted in various jurisdictions. Most countries around the world have enacted comprehensive privacy and data protection laws that can impact our business.
We also expect that there will continue to be new or amended laws, regulations, standards and obligations proposed and enacted in various jurisdictions. Many countries around the world have enacted comprehensive privacy and data protection laws that can impact our business.
Failure to comply with any of these requirements could result in the limitation, suspension or termination of our services, imposition of significant civil and criminal penalties, including fines, and/or the seizure and/or forfeiture of our assets. Further, our Platform incorporates encryption technology.
Failure to comply with any of these requirements could result in the limitation, suspension or termination of our services, imposition of significant civil and criminal penalties, including fines, and/or the seizure and/or forfeiture of our assets. • Further, our Platform incorporates encryption technology. The U.S.
Our operating results have in the past and may continue to fluctuate significantly and if we fail to meet the 22 expectations of analysts or investors, our stock price and the value of your investment could decline substantially.
Our operating results have in the past and may continue to fluctuate significantly and if we fail to meet the 21 expectations of analysts or investors, our stock price and the value of your investment could decline substantially.
Some of these EHR and PM systems offer, or may begin to offer, services, including patient intake and engagement services, payment processing tools, and targeted patient communication services, in the same or similar manner as we do.
Some of these EHR and PM systems offer, or may begin to offer, services, including patient intake and engagement services, payment processing tools and direct patient communication services, in the same or similar manner as we do.
If we are unable to address the needs of our healthcare services clients or our healthcare services clients are unsatisfied with the quality of our solution or services due to our inability to manage our rapid growth, they may not renew their contracts, seek to cancel or terminate their relationship with us or renew on less favorable terms, any of which could adversely affect our business.
If we are unable to address the needs of our healthcare services clients or our healthcare services clients are unsatisfied with the quality of the Phreesia Platform or our services due to our inability to manage our rapid growth, they may not renew their contracts, seek to cancel or terminate their relationship with us or renew on less favorable terms, any of which could adversely affect our business.
Our market opportunity is also based on the assumption that the strategic approach that our solution enables for our potential clients will be more attractive in creating efficiencies in patient care than competing solutions. If these assumptions prove inaccurate, our business, financial condition and results of operations could be adversely affected.
Our market opportunity is also based on the assumption that the strategic approach that the Phreesia Platform enables for our potential clients will be more attractive in creating efficiencies in patient care than competing solutions. If these assumptions prove inaccurate, our business, financial condition and results of operations could be adversely affected.
In addition, our growth has required and is expected to require significant capital expenditures and may divert financial resources from other projects such as the development of new applications and services. We may also need to make further investments in our technology and automate portions of our solution or services to decrease our costs.
In addition, our growth has required and is expected to require significant capital expenditures and may divert financial resources from other projects such as the development of new applications and services. We may also need to make further investments in our technology and automate portions of the Phreesia Platform or our services to decrease our costs.
If a client or sales partner fails to comply with the applicable requirements of card networks, it could be subject to a variety of fines or penalties that may be levied by card networks.
If a client or sales partner fails to comply with the applicable requirements of card networks, we could be subject to a variety of fines or penalties that may be levied by card networks.
Some of the important factors that could cause our revenues and operating results to fluctuate from quarter to quarter include: • the extent to which our services achieve or maintain market acceptance; • our ability to introduce new services and enhancements to our existing services on a timely basis; • new competitors and the introduction of enhanced products and services from new or existing competitors; • the length of our contracting and implementation cycles; • the financial condition of our current and potential clients; • our ability to integrate our Platform with the systems, utilized by our healthcare services clients, including but not limited to, EHR and PM systems; • changes in client budgets and procurement policies; • amount and timing of our investment in research and development activities and other areas of our business; • technical difficulties or interruptions in our services; • our ability to hire and retain qualified personnel, including the rate of expansion of our sales force; • changes in the regulatory environment related to healthcare; • regulatory compliance costs; • the timing, size and integration success of potential future acquisitions; • unforeseen legal expenses, including litigation and settlement costs; and • buying patterns of our clients and the related seasonality impacts on our business.
Some of the important factors that could cause our revenues and operating results to fluctuate from quarter to quarter include: • the extent to which our products and services achieve or maintain market acceptance; • our ability to introduce new products and services and enhancements to our existing products and services on a timely basis; • new competitors and the introduction of enhanced products and services from new or existing competitors; • the length of our contracting and implementation cycles; • the financial condition of our current and potential clients; • our ability to integrate our Platform with the systems utilized by our healthcare services clients, including but not limited to, EHR and PM systems; • changes in client budgets and procurement policies; • patients' desires to receive communications from Phreesia and/or our partners, and the extent to which they opt-in to such communications; • amount and timing of our investment in research and development activities and other areas of our business; • technical difficulties or interruptions in our services; • our ability to hire and retain qualified personnel, including the rate of expansion of our sales force; • changes in the regulatory environment related to healthcare; • regulatory compliance costs; • the timing, size and integration success of potential future acquisitions; • unforeseen legal expenses, including litigation and settlement costs; and • buying patterns of our clients and the related seasonality impacts on our business.
Although the UK is regarded as a third country under the EU’s GDPR, the European Commission, or EC, has now issued a decision recognizing the UK as providing adequate protection under the EU GDPR and, therefore, transfers of personal data originating in the EU to the UK remain unrestricted.
Although the UK is regarded as a third country under the EU’s GDPR, the European Commission (the “EC”), has now issued a decision recognizing the UK as providing adequate protection under the EU GDPR and, therefore, transfers of personal data originating in the EU to the UK remain unrestricted.
The growth of our life sciences revenue stream is driven, in part, by our ability to grow our network of healthcare services clients and available population of patients to target, our ability to achieve adequate patient opt-in rates, the number of newly approved drugs and the success of newly launched drugs, each of which is impacted by factors outside of our control.
The growth of our revenue stream from life sciences and payer clients is driven, in part, by our ability to grow our network of healthcare services clients and available population of patients to engage, our ability to achieve adequate patient opt-in rates, the number of newly approved drugs and the success of newly launched drugs, each of which is impacted by factors outside of our control.
If we cannot implement our solution for clients or resolve any technical issues in a timely manner, we may incur costs in the form of service credits or other remedial steps and/or lose clients, and our reputation may be harmed. Our clients utilize a variety of data formats, applications and infrastructure and our solution must support our clients’ data formats.
If we cannot implement the Phreesia Platform for clients or resolve any technical issues in a timely manner, we may incur costs in the form of service credits or other remedial steps and/or lose clients, and our reputation may be harmed. 26 Our clients utilize a variety of data formats, applications and infrastructure and the Phreesia Platform must support our clients’ data formats.
If the client implementation process is not executed successfully or if execution is delayed, we could incur significant costs, clients could become dissatisfied and decide not to increase utilization of our solution or not to implement our solution beyond an initial period prior to their term commitment or, in some cases, revenue recognition could be delayed.
If the client implementation process is not executed successfully or if execution is delayed, we could incur significant costs, clients could become dissatisfied and decide not to increase utilization of the Phreesia Platform or not to implement the Phreesia Platform beyond an initial period prior to their term commitment or, in some cases, revenue recognition could be delayed.
Our healthcare services clients often require specific features or functions unique to their organizational structure, which, at a time of significant growth or during periods of high demand, may strain our implementation capacity and hinder our ability to successfully implement our solution to our clients in a timely manner.
Our healthcare services clients often require specific features or functions unique to their organizational structure, which, at a time of significant growth or during periods of high demand, may strain our implementation capacity and hinder our ability to successfully implement the Phreesia Platform to our clients in a timely manner.
If we are unable to recruit and retain qualified healthcare services clients, it would have a material adverse effect on our business and ability to grow and would adversely affect our results of operations.
If we are unable to attract and retain healthcare services clients, it would have a material adverse effect on our business and ability to grow and would adversely affect our results of operations.
If the Federal Forum Provision is found to be unenforceable in an action, we may incur additional costs associated with resolving such an action. The Federal Forum Provision may also impose additional litigation costs on stockholders who assert that the provision is not enforceable or invalid. The Chancery Court or the U.S.
If the Federal Forum Provision is found to be unenforceable in an action, we may incur additional costs associated with resolving such an action. The Federal Forum Provision may also impose additional litigation costs on stockholders who assert that the provision is not enforceable or invalid.
The credit agreement governing the Third SVB Facility contains certain customary restrictive covenants that limit our ability to incur additional indebtedness and liens, merge with other companies or consummate certain changes of control, acquire other companies, engage in new lines of business, make certain investments, pay dividends, create subsidiaries, enter into certain transactions with affiliates, and transfer or dispose of assets as well as financial covenants requiring us to maintain a specified level of recurring revenue growth, a specified maximum funded debt to recurring revenue ratio and a specified amount of minimum liquidity.
The credit agreement governing our credit facility with SVB contains, and any future credit agreements we may enter into may contain, restrictive covenants that limit our ability to incur additional indebtedness and liens, merge with other companies or consummate certain changes of control, acquire other companies, engage in new lines of business, make certain investments, pay dividends, create subsidiaries, enter into certain transactions with affiliates, and transfer or dispose of assets as well as financial covenants requiring us to maintain a specified level of recurring revenue growth, a specified maximum funded debt to recurring revenue ratio and a specified amount of minimum liquidity.
Our use of third-party technologies and open source software exposes us to increased risks, including, but not limited to, risks associated with the integration of new technology into our solutions, the diversion of our resources from development of our own proprietary technology and our 33 inability to generate revenue from licensed technology sufficient to offset associated acquisition and maintenance costs.
Our use of third-party technologies and open source software exposes us to increased risks, including, but not limited to, risks associated with the integration of new technology into the Phreesia Platform, the diversion of our resources from development of our own proprietary technology and our inability to generate revenue from licensed technology sufficient to offset associated acquisition and 32 maintenance costs.
We expect to derive a significant portion of our revenue from renewal of existing clients’ contracts and sales of additional applications and services to existing clients. As part of our growth strategy, we have recently focused on expanding our services amongst current clients.
We depend on our existing clients’ satisfaction with our products and services. We expect to derive a significant portion of our revenue from renewal of existing clients’ contracts and sales of additional applications and services to existing clients. As part of our growth strategy, we have recently focused on expanding our services amongst current clients.
As of January 31, 2022, we had U.S. federal and state net operating loss carryforwards, or NOLs, of $332.5 million due to prior period losses, which, subject to the following discussion, are generally available to be carried forward to offset a portion of our future taxable income, if any, until such NOLs are used or expire.
As of January 31, 2023, we had U.S. federal and state net operating loss carryforwards, or NOLs, of $493.3 million due to prior period losses, which, subject to the following discussion, are generally available to be carried forward to offset a portion of our future taxable income, if any, until such NOLs are used or expire.
In addition, certain of our products depend on maintaining our data and analytics platform, which is populated with data disclosed to us by healthcare services clients, life sciences companies and their respective patients and other partners with their consent.
For example, certain of our products depend on maintaining our data and analytics platform, which is populated with data disclosed to us by healthcare services clients, life sciences companies and their respective patients and other partners with their consent.
A breach of any of these covenants could result in a default under the loan agreement, which could cause all of the outstanding indebtedness under our credit facility to become immediately due and payable and terminate all commitments to extend further credit.
A breach of any of any such covenants could result in a default under the applicable loan agreement, which could cause all of the outstanding indebtedness under such credit facility to become immediately due and payable and terminate all commitments to extend further credit.
We have developed partnerships with primary credit card processors in the United States to facilitate payment processing, and we are registered with Visa, MasterCard, American Express, Discover and other card networks as service providers for acquiring member institutions. These card networks set the operating rules and standards with which we must comply.
We have developed partnerships with primary credit card processors in the United States to facilitate payment processing, and we are registered with Visa, MasterCard, American Express, Discover and other card networks as a service provider (payment facilitator or the equivalent) for acquiring member institutions. These card networks set the operating rules and standards with which we must comply.
Further, although the route, length and impact of any military action are highly unpredictable, individuals located in these areas have been and could continue to be forced to evacuate or voluntarily choose to relocate, making them unavailable to provide services, such as software engineering, to support our business.
Further, although the length and impact of the continuing conflict are highly unpredictable, individuals located in these areas have been and could continue to be forced to evacuate or voluntarily choose to relocate, making them unavailable to provide services, such as software engineering, to support our business.
In addition, market volatility and economic uncertainty remain widespread, making it potentially very difficult for our clients and us to accurately forecast and plan future business activities.
In addition, market volatility, the high inflationary environment and economic uncertainty remain widespread, making it potentially very difficult for our clients and us to accurately forecast and plan future business activities.
A key element of how we manage our growth is our ability to scale our capabilities and satisfactorily implement our solution for our clients’ needs.
A key element of how we manage our growth is our ability to scale our capabilities and satisfactorily implement the Phreesia Platform for our clients’ needs.
We collect, process and store significant amounts of sensitive, confidential and proprietary information, including personally identifiable information, such as payment data and protected health information, of patients received in connection with the utilization of our Platform by patients of our healthcare services clients and life sciences clients.
We collect, process and store significant amounts of sensitive, confidential and proprietary information, including personally identifiable information, such as payment data and protected health information, of patients received in connection with the utilization of our Platform.
Department of Health and Human Services, ("HHS"), Office of Civil Rights, may impose civil penalties on a Business Associate for a failure to comply with any HIPAA requirement. The U.S. Department of Justice is responsible for criminal prosecutions under HIPAA. A Business Associate can also face criminal penalties for HIPAA violations.
Department of Health and Human Services, ("HHS"), Office for Civil Rights, may impose civil penalties on a Business Associate for a failure to comply with HIPAA requirements. The U.S. Department of Justice is responsible for criminal prosecutions under HIPAA.
In addition, the loss or dissatisfaction of any client could substantially harm our brand and reputation, inhibit widespread adoption of our solution and impair our ability to attract new clients. 26 Factors that may affect our client satisfaction and our ability to sell additional applications and services include, but are not limited to, the following: • the price, performance and functionality of our Platform; • patient acceptance and adoption of services and utilization of our payment processing tools; • the availability, price, performance and functionality of competing solutions; • our ability to develop and sell complimentary applications and services; • the stability, performance and security of our hosting infrastructure and hosting services; • changes in healthcare laws, regulations or trends; • the business environment of our clients including healthcare staffing shortages and headcount reductions by our clients and • our ability to maintain and enhance our reputation and brand recognition.
Factors that may affect our client satisfaction and our ability to sell additional applications and services include, but are not limited to, the following: • the price, performance and functionality of our Platform; • patient acceptance and adoption of services and utilization of our payment processing tools; • the availability, price, performance and functionality of competing solutions; • our ability to develop and sell complimentary applications and services; • the stability, performance and security of our hosting infrastructure and hosting services; • changes in healthcare laws, regulations or trends; • the business environment of our clients including healthcare staffing shortages and headcount reductions by our clients; and • our ability to maintain and enhance our reputation and brand recognition.
The principal assumptions relating to our market opportunity include the number of healthcare services organizations currently taking appointments, the amount of annual out of pocket consumer spend for healthcare-related services, and the amount of annual spend by life sciences companies on digital patient engagement at the point of care.
The principal assumptions relating to our market opportunity include the number of healthcare services organizations currently taking appointments, the amount of annual out of pocket consumer spend for healthcare-related services, and the amount of annual spend by life sciences and payer companies on direct communications with patients at the point of care.
Risks relating to our dependence on third parties We rely on our third-party vendors and partners to execute our business strategy. Replacing them could be difficult and disruptive to our business. If we are unsuccessful in forming or maintaining such relationships on terms favorable to us, our business may not succeed.
Risks relating to our dependence on third parties 41 We rely on our third-party contractors, vendors and partners, including some outside of the United States, to execute our business strategy. Replacing them could be difficult and disruptive to our business. If we are unsuccessful in forming or maintaining such relationships on terms favorable to us, our business may not succeed.
We may be subject to state laws requiring notification of affected individuals and state regulators in the event of a breach of personal information, which is a broader class of information than the health information protected by the Health Insurance Portability and Accountability Act of 1996.
We may be subject to state laws requiring notification of affected individuals and state regulators in the event of a breach of personal information, which is a broader class of information than the health information protected by 22 HIPAA.
We have experienced net losses in the past and we may not achieve profitability in the future. We have incurred significant operating losses since our inception. For the years ended January 31, 2022 and January 31, 2021, we had net losses of $118.2 million and $27.3 million, respectively, and losses from operations of $116.8 million and $25.7 million, respectively.
We have experienced net losses in the past and we may not achieve profitability in the future. We have incurred significant operating losses since our inception. For the years ended January 31, 2023 and January 31, 2022, we had net losses of $176.1 million and $118.2 million, respectively, and losses from operations of $176.6 million and $116.8 million, respectively.
Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future and the success of an investment in shares of our common stock will depend upon any future appreciation in its value.
We currently intend to invest our future earnings, if any, to fund our growth. Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future and the success of an investment in shares of our common stock will depend upon any future appreciation in its value.
For the year ended January 31, 2022 our net cash used in operating activities was $74.7 million. As of January 31, 2022, we had $313.8 million of cash and cash equivalents, which are held for working capital purposes.
For the year ended January 31, 2023 our net cash used in operating activities was $90.1 million. As of January 31, 2023, we had $176.7 million of cash and cash equivalents, which are held for working capital purposes.
In addition, the continued military incursion of Russia into Ukraine could impact macroeconomic conditions, give rise to regional instability, increase the threat of cyberwarfare and result in heightened economic sanctions from the U.S. and the international community in a manner that adversely affects us and our third-party contractors that have employees and consultants located in Russia and Ukraine.
For example, the continued Russian invasion of Ukraine has, and may continue to, impact macroeconomic conditions, give rise to regional instability, increase the threat of cyberwarfare and result in heightened economic sanctions from the U.S. and the international community in a manner that adversely affects us and our third-party contractors that have employees and consultants located in Russia and Ukraine.
Our risk management policies and procedures may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk. We operate in a rapidly changing industry. Accordingly, our risk management policies and procedures may not be fully effective to identify, monitor and manage all risks our business encounters.
We operate in a rapidly changing industry. Accordingly, our risk management policies and procedures may not be fully effective to identify, monitor and manage all risks our business encounters.
These projects carry risks, such as cost overruns, delays in delivery, performance problems and lack of acceptance by our clients. Our success is dependent upon continued ability to maintain a network of qualified healthcare services clients.
These projects carry risks, such as cost overruns, delays in delivery, performance problems and lack of acceptance by our clients. The success of our business and growth strategy depend upon our continued ability to maintain and expand a network of healthcare services clients.
Determination by a court or regulatory agency that our services violate the TCPA could subject us to civil penalties, could invalidate all or portions of some of our client contracts, could require us to change or terminate some portions of our business, could require us to refund portions of our services fees, and could have an adverse effect on our business.
Determination by a court or regulatory agency that our services did not comply also invalidate all or portions of some of our client contracts, could require us to change or terminate some portions of our business, could require us to refund portions of our services fees, and could have an adverse effect on our business.

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Item 2. Properties

Properties — owned and leased real estate

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Item 2. Properties Our principal properties include 16,120 square feet of office space at 434 Fayetteville Street, Raleigh, NC 27601, which we lease for our corporate headquarters. We also lease 4,322 square feet at 1 Hines Road, Suite 110, Kanata Ontario K2K 3C7. Each of these leases expires in 2023.
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Item 2. Properties We are a fully remote company and no longer maintain physical corporate offices. Our employees work remotely, from home or at shared co-working office spaces. We believe these arrangements support our current needs. During the year ended January 31, 2023, we ceased using our office spaces in Raleigh, North Carolina and Kanata, Ontario.
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Each of these leases expires during the year ended January 31, 2024. We maintain a mailing address at 1521 Concord Pike, Suite 301, PMB 221, Wilmington, DE 19803.
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For purposes of compliance with applicable requirements of the Securities Act and the Exchange Act, stockholder communications required to be sent to our principal executive offices may be directed to the email address set forth in our proxy materials and/or identified on our investor relations website.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition or cash flows. Item 4. Mine Safety Disclosures Not applicable. 49 PART II
Biggest changeWe are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition or cash flows. Item 4. Mine Safety Disclosures Not applicable. 51 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSuch returns are based on historical results and are not intended to suggest future performance. We added the S&P 1500 Composite Software and Services Index to the graph this year to compare the total return on our stock to a peer group of similar companies. The comparisons shown in the graph below are based upon historical data.
Biggest changeSuch returns are based on historical results and are not intended to suggest future performance. The comparisons shown in the graph below are based upon historical data.
The following graph shows a comparison from July 18, 2019, the date on which our common stock first began trading the NYSE, through January 31, 2022 of the cumulative total stockholder return on our common stock, the NYSE Composite Index, S&P 500, and the S&P 1500 Composite Software and Services Index, each of which assumes an initial investment of $100 and reinvestment of all dividends.
The following graph shows a comparison from July 18, 2019, the date on which our common stock first began trading the NYSE, through January 31, 2023 of the cumulative total stockholder return on our common stock, the NYSE Composite Index, S&P 500, and the S&P 1500 Composite Software and Services Index, each of which assumes an initial investment of $100 and reinvestment of all dividends.
We caution that the stock price performance shown in the graph below is not necessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock. 50 Stockholders We had approximately 49 stockholders of record as of March 25, 2022; however, because many of our outstanding shares are held in accounts with brokers and other institutions, we believe we have more beneficial owners.
We caution that the stock price performance shown in the graph below is not necessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock. 52 Stockholders We had approximately 49 stockholders of record as of March 17, 2023; however, because many of our outstanding shares are held in accounts with brokers and other institutions, we believe we have more beneficial owners.
Issuer Purchases of Equity Securities Not applicable. Use of Proceeds from Sales of Registered Securities Not applicable. Item 6. Reserved Not applicable. 51
Issuer Purchases of Equity Securities Not applicable. Use of Proceeds from Sales of Registered Securities Not applicable. Item 6. Reserved Not applicable. 53

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeDuring the fiscal year ended January 31, 2021, cash used in investing activities was $25.1 million, principally resulting from capital expenditures, the bulk of which consists of hardware used by clients and the purchase of data center equipment of $11.2 million, capitalized internal-use software costs of $7.3 million and $6.5 million used for the acquisition of QueueDr, net of cash acquired.
Biggest changeThe change in net cash used in operating activities was driven primarily by higher employee compensation costs, primarily due to higher average employee headcount as well as an increase in compensation costs for existing employees, and higher outside services costs, partially offset by an increase in cash received from customers driven by higher revenues as well as higher interest income on money market mutual funds we held during the year ended January 31, 2023. 65 Investing activities During the fiscal year ended January 31, 2023, net cash used in investing activities was $26.2 million, principally resulting from capital expenditures, the majority of which consisted of $21.5 million of cash paid for capitalized internal-use software, as well as $4.7 million of purchases of property and equipment, including hardware used by clients and data center equipment.
Other (expense) income, net Our other expense and income line items consist of the following: • Other (expense) income, net . Other (expense) income, net consists of foreign currency-related losses and gains and other miscellaneous (expense) income. • Interest income . Interest income consists of interest earned on our cash and cash equivalent balances.
Other income (expense), net Our other income and expense line items consist of the following: • Other (expense) income, net . Other (expense) income, net consists of foreign currency-related losses and gains and other miscellaneous (expense) income. • Interest income . Interest income consists of interest earned on our cash and cash equivalent balances. • Interest expense .
Some of these limitations are as follows: • Although depreciation and amortization expense are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; • Adjusted EBITDA does not reflect: (1) changes in, or cash requirements for, our working capital needs; (2) the potentially dilutive impact of non-cash stock-based compensation; (3) tax payments that may represent a reduction in cash available to us; or (4) interest expense (income), net; and • Other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure.
Some of these limitations are as follows: • Although depreciation and amortization expense are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; • Adjusted EBITDA does not reflect: (1) changes in, or cash requirements for, our working capital needs; (2) the potentially dilutive impact of non-cash stock-based compensation; (3) tax payments that may represent a reduction in cash available to us; or (4) interest (income) expense, net; and • Other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure.
Investing activities During the fiscal year ended January 31, 2022, cash used in investing activities was $65.2 million, principally resulting from $34.4 million of net cash paid for the acquisition of Insignia, $18.4 million of purchases of property and equipment, principally driven by the purchase of data center equipment, as well as $12.4 million of cash paid for capitalized internal-use software.
During the fiscal year ended January 31, 2022, net cash used in investing activities was $65.2 million, principally resulting from $34.4 million of net cash paid for the acquisition of Insignia, $18.4 million of purchases of property and equipment, principally driven by the purchase of data center equipment, as well as $12.4 million of cash paid for capitalized internal-use software.
Financing activities During the fiscal year ended January 31, 2022, net cash provided by financing activities was $235.0 million, primarily consisting of $245.8 million in proceeds from the April 2021 offering of our common stock, net of underwriters' discounts and commissions, and $6.9 million in proceeds from our equity compensation plans, partially offset by $9.0 million used for treasury stock to satisfy tax withholdings on stock compensation awards, $5.3 million used for principal payments on finance leases and financing arrangements and $3.3 million used for payments of acquisition-related liabilities.
During the fiscal year ended January 31, 2022, cash provided by financing activities was $235.0 million, primarily consisting of $245.8 million in proceeds from the April 2021 offering of our common stock, net of underwriters' discounts and commissions, and $6.9 million in proceeds from our equity compensation plans, partially offset by $9.0 million used for treasury stock to satisfy tax withholdings on stock compensation awards, $5.3 million used for principal payments on finance leases and financing arrangements and $3.3 million used for payments of acquisition-related liabilities.
Material Cash Requirements Our material cash requirements relate to leases, financing arrangements and contractual purchase commitments and human capital. Refer to Note 4 - Composition of certain financial statement accounts in Part II - Item 8 of this Annual Report on Form 10-K for additional information on accrued payroll related liabilities.
Material Cash Requirements Our material cash requirements relate to leases, financing arrangements, contractual purchase commitments and human capital. Refer to Note 4 - Composition of certain financial statement accounts in Part II - Item 8 of this Annual Report on Form 10-K for additional information on accrued payroll related liabilities.
For a reconciliation of Adjusted EBITDA to net loss and free cash flow to cash (used in) provided by operating activities, and for more information as to how we define and calculate such measures, see the section below titled “Non-GAAP financial measures.” Overview We are a leading provider of comprehensive software solutions that improve the operational and financial performance of healthcare organizations by activating patients in their care to optimize patient health outcomes.
For a reconciliation of Adjusted EBITDA to net loss and a reconciliation of free cash flow to net cash used in operating activities, and for more information as to how we define and calculate such measures, see the section below titled “Non-GAAP financial measures.” Overview We are a leading provider of comprehensive software solutions that improve the operational and financial performance of healthcare organizations by activating patients in their care to optimize patient health outcomes.
We recognize payment processing fees collected from customers as revenue on a gross basis because, as the merchant of record, we control the services before delivery to the customer, we are primarily responsible for the delivery of the services to our customers, we have latitude in establishing pricing with respect to the customer and other terms of service, we have 65 sole discretion in selecting the third party to perform the settlement, and we assume the credit risk for the transaction processed.
We recognize payment processing fees collected from customers as revenue on a gross basis because, as the merchant of record, we control the services before delivery to the customer, we are primarily responsible for the delivery of the services to our customers, we have latitude in establishing pricing with respect to the customer and other terms of service, we have sole discretion in selecting the third-party to perform the settlement, and we assume the credit risk for the transaction processed.
When determining the transaction price, we assume the products will be transferred to the customer based on the terms of the existing contract and our assumption does not take into consideration the possibility of a contract being canceled, renewed, or modified. We occasionally provide credits to customers representing adjustments to the transaction price.
When determining the transaction price, we assume the products will be transferred to the customer based on the terms of the existing contract and our assumption does not take into consideration the possibility of a contract being canceled, renewed, or modified. 67 We occasionally provide credits to customers representing adjustments to the transaction price.
Our subscription and related services revenue includes certain fees from clients for professional services associated with implementation services. 64 In determining whether professional services for implementation are distinct, we consider the following factors for each professional services agreement: availability of the services from other vendors, the nature of the professional services and the complexity of interfaces created between systems.
Our subscription and related services revenue includes certain fees from clients for professional services associated with implementation services. In determining whether professional services for implementation are distinct, we consider the following factors for each professional services agreement: availability of the services from other vendors, the nature of the professional services and the complexity of interfaces created between systems.
We capitalize the costs during the development of the project, when it is determined that it is probable that the project will be completed, and the software will be used as intended. Costs related to preliminary project activities, post-implementation activities, training and maintenance are expensed as incurred.
We capitalize the costs during the development of the project, when it is determined that it 68 is probable that the project will be completed, and the software will be used as intended. Costs related to preliminary project activities, post-implementation activities, training and maintenance are expensed as incurred.
To the extent we charge in an alternative manner with larger enterprise healthcare services clients, we expect that such a pricing model will recur and, combined with our per healthcare services client subscription fees, will increase as a percentage of our total revenue. 56 In addition, we receive certain fees from healthcare services clients for professional services associated with our implementation services as well as travel and expense reimbursements, shipping and handling fees, sales of hardware (PhreesiaPads and Arrivals Kiosks), on-site support and training. • Payment processing fees.
To the extent we charge in an alternative manner with larger enterprise healthcare services clients, we expect that such a pricing model will recur and, combined with our per healthcare services client subscription fees, will increase as a percentage of our total revenue. 58 In addition, we receive certain fees from healthcare services clients for professional services associated with our implementation services as well as travel and expense reimbursements, shipping and handling fees, sales of hardware (PhreesiaPads and Arrivals Kiosks), on-site support and training. • Payment processing fees.
We serve an array of healthcare services clients of all sizes across over 25 specialties, ranging from single-specialty practices, including internal and family medicine, urology, dermatology, and orthopedics, to large, multi-specialty 52 groups, health systems as well as regional and national payers and other organizations that provide other types of healthcare-related services.
We serve an array of healthcare services clients of all sizes across over 25 specialties, ranging from single-specialty practices, including internal and family medicine, urology, dermatology, and orthopedics, to large, multi-specialty 54 groups, and health systems as well as regional and national payers and other organizations that provide other types of healthcare-related services.
We define Adjusted EBITDA as net income or loss before interest expense (income), net, provision for income taxes, depreciation and 60 amortization, and before stock-based compensation expense, change in fair value of contingent consideration liabilities and other expense (income), net. We have provided below a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure.
We define Adjusted EBITDA as net income or loss before interest (income) expense, net, provision for income taxes, depreciation and 62 amortization, and before stock-based compensation expense, change in fair value of contingent consideration liabilities and other expense, net. We have provided below a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure.
Provision for income taxes Based upon our cumulative pre-tax losses in recent years and available evidence, we have determined that it is more likely than not that certain deferred tax assets as of January 31, 2022 will not be realized in the near term.
Provision for income taxes Based upon our cumulative pre-tax losses in recent years and available evidence, we have determined that it is more likely than not that certain deferred tax assets as of January 31, 2023 will not be realized in the near term.
We believe that there will not be significant changes to our estimates of variable consideration as of January 31, 2022. Principal vs Agent Considerations As part of our revenue recognition process, we evaluate whether we are the principal or agent for the performance obligations in our contracts with customers.
We believe that there will not be significant changes to our estimates of variable consideration as of January 31, 2023. Principal vs Agent Considerations As part of our revenue recognition process, we evaluate whether we are the principal or agent for the performance obligations in our contracts with customers.
Depreciation Depreciation represents depreciation expense for PhreesiaPads and Arrivals Kiosks, data center and other computer hardware, purchased computer software, furniture and fixtures and leasehold improvements. 57 Amortization Amortization primarily represents amortization of our capitalized internal-use software related to the Phreesia Platform as well as amortization of acquired intangible assets.
Depreciation Depreciation represents depreciation expense for PhreesiaPads and Arrivals Kiosks, data center and other computer hardware, purchased computer software, furniture and fixtures and leasehold improvements. 59 Amortization Amortization primarily represents amortization of our capitalized internal-use software related to the Phreesia Platform as well as amortization of acquired intangible assets.
Provision for income taxes relates primarily to utilization of Canadian net operating loss carryforwards and state income taxes. Non-GAAP financial measures Adjusted EBITDA is a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP.
Provision for income taxes relates primarily to change in Canadian net operating loss carryforwards and state income taxes. Non-GAAP financial measures Adjusted EBITDA is a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP.
Accordingly, substantially all of our revenue from historical periods has come from the United States, and our current strategy is to continue to focus substantially all of our sales efforts within the United States. Our revenue growth has been primarily organic and reflects our significant addition of new healthcare services clients and increased revenue from existing clients.
Accordingly, substantially all of our revenue from historical periods has come from the United States, and our current strategy is to continue to focus substantially all of our sales efforts within the United States. Our revenue growth has been primarily organic and reflects our significant addition of new healthcare services clients.
Please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended January 31, 2021 for a comparison of the year ended January 31, 2021 to the year ended January 31, 2020.
Please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended January 31, 2022 for a comparison of the year ended January 31, 2022 to the year ended January 31, 2021.
Through our SaaS-based technology platform, which we refer to as the Phreesia Platform or our Platform, we offer healthcare services clients a robust suite of integrated solutions that manage patient access, registration, payments and clinical support.
Through our SaaS-based technology platform, which we refer to as the Phreesia Platform or our Platform, we offer healthcare services clients a robust suite of integrated solutions that manage patient access, registration and payments.
We believe growth in the number of healthcare services clients is a key indicator of the performance of our business and depends, in part, on our ability to successfully develop and market our Platform to healthcare services organizations that are not yet clients.
We believe growth in AHSCs is a key indicator of the performance of our business and depends, in part, on our ability to successfully develop and market our Platform to healthcare services organizations that are not yet clients.
We measure patient payment volume as the total dollar volume of transactions between our healthcare services clients and their patients utilizing our payment platform, including via credit and debit cards that we process as a payment facilitator as well as cash and check payments and credit and debit transactions for which Phreesia acts as a gateway to other payment processors. • Payment facilitator volume percentage .
We measure patient payment volume as the total dollar volume of transactions between our healthcare services clients and their patients utilizing our payment platform, including via credit and debit cards that we process as a payment facilitator as well as cash and check payments and credit and debit transactions for which we act as a gateway to other payment processors. • Payment facilitator volume percentage .
We recognize interest and penalties related to uncertain tax positions in income tax expense. There was no outstanding balance for unrecognized tax benefits as of January 31, 2022.
We recognize interest and penalties related to uncertain tax positions in income tax expense. There was no outstanding balance for unrecognized tax benefits as of January 31, 2023.
Our demand generation team develops content and identifies prospects that our sales development team researches and qualifies to generate high-grade, actionable sales leads.
Our demand generation team develops content and identifies prospects that our sales development team researches and qualifies to generate high-grade, actionable sales programs.
Credit and debit patient payment volume processed through our payment facilitator model represented 79% and 81% of our patient payment volume in fiscal 2022 and 2021, respectively. The remainder of our patient payment volume is composed of credit and debit transactions for which Phreesia acts as a gateway to another payment processor, and cash and check transactions.
Credit and debit patient payment volume processed through our payment facilitator model represented 80% and 79% of our patient payment volume in fiscal 2023 and 2022, respectively. The remainder of our patient payment volume is composed of credit and debit transactions for which Phreesia acts as a gateway to another payment processor, and cash and check transactions.
References to fiscal 2022, 2021, and 2020 refer to the fiscal years ended January 31, 2022, 2021, and 2020, respectively. Basis of Presentation This management's discussion and analysis discusses our financial condition and results of operations for the years ended January 31, 2022 and 2021.
References to fiscal 2023 and 2022 refer to the fiscal years ended January 31, 2023 and 2022, respectively. Basis of Presentation This management's discussion and analysis discusses our financial condition and results of operations for the years ended January 31, 2023 and 2022.
Stock-based compensation for market-based performance stock units ("PSUs") We recognize the grant-date fair value of stock-based awards issued as compensation expense on a straight-line basis over the requisite service period, which is generally the vesting period of the award. We granted market-based PSUs during fiscal 2022.
Stock-based compensation for market-based performance stock units ("PSUs") We recognize the grant-date fair value of stock-based awards issued as compensation expense on a straight-line basis over the requisite service period, which is generally the vesting period of the award.
ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in the interim periods, disclosure, and transition. We have accumulated U.S. federal and state net operating loss carryforwards of approximately $332.5 million, and $199.1 million as of January 31, 2022 and 2021, respectively. These carryforwards will begin to expire in 2025.
ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in the interim periods, disclosure, and transition. We have accumulated U.S. federal and state net operating loss carryforwards of approximately $493.3 million, and $332.5 million as of January 31, 2023 and 2022, respectively. These carryforwards will begin to expire in 2025.
As evidenced in industry survey reports from KLAS, we have been recognized as a leader based on our integration capabilities with healthcare services client organizations, the broad adoption of our patient intake functionalities, our response to the COVID-19 pandemic and by overall client satisfaction.
As evidenced in industry survey reports from KLAS, we have been recognized as a leader based on our integration capabilities with healthcare services client organizations, the broad adoption of our patient intake functionalities and by overall client satisfaction.
However, as we do not typically transfer our performance obligations on a standalone basis, but rather we transfer bundles of performance obligations, we use an adjusted market assessment approach to estimate the price a customer would be willing to pay for our performance obligations using historical price information as priced in previous bundled contracts, our cost structure and our expectations for profit margins.
However, as we do not typically transfer our performance obligations on a standalone basis, but rather we transfer bundles of performance obligations, we use an adjusted market assessment approach to estimate the price a customer would be willing to pay for our performance obligations using historical price information as priced in previous bundled contracts.
Consequently, we have established a valuation allowance against our net deferred tax assets totaling approximately $97.3 million and $54.6 million as of January 31, 2022 and 2021, respectively, to recognize only the portion of the deferred tax asset that is more likely than not to be realized.
Consequently, we have established a valuation allowance against our net deferred tax assets totaling approximately $143.1 million and $97.3 million as of January 31, 2023 and 2022, respectively, to recognize only the portion of our deferred tax asset that is more likely than not to be realized.
As of January 31, 2022, we have U.S. net operating loss carryforwards of approximately $332.5 million. We have completed a Section 382 study and, as a result of the analysis, it is more likely than not that we have experienced an "ownership change".
As of January 31, 2023, we have U.S. net operating loss carryforwards of approximately $493.3 million. We have completed a Section 382 study and, as a result of the analysis, it is more likely than not that we have experienced an "ownership change".
During the fiscal year ended January 31, 2022, cash used in operating activities was $74.7 million, as our cash paid to employees and suppliers exceeded our cash received from customers.
During the fiscal year ended January 31, 2022, net cash used in operating activities was $74.7 million, as our cash paid to employees and suppliers exceeded our cash received from customers in connection with our normal operations.
Our life sciences revenue is generated from clients in the pharmaceutical, biotechnology and medical device industries as well as patient advocacy, public interest and other not-for-profit organizations seeking to activate, engage and educate patients about topics critical to their health.
Our network solutions revenue (as described below) is generated from clients in the pharmaceutical, biotechnology, and medical device industries, as well as payers, patient advocacy, public interest and other not-for-profit organizations seeking to activate, engage and educate patients about topics critical to their health.
Our Platform also provides life sciences companies, patient advocacy, public interest and other not-for-profit organizations with a channel for targeted and direct communication with patients.
Our Platform also provides life sciences companies, health plans and other payer organizations (payers), patient advocacy, public interest and other not-for-profit organizations with a channel for direct communication with patients.
Our subscription and related services revenue from health services organizations increased $26.5 million to $95.5 million for fiscal 2022, as compared to $69.0 million for fiscal 2021, primarily due to new health services clients added in fiscal 2022 as well as expansion of and cross-selling to existing health services clients. • Payment processing fees.
Our subscription and related services revenue from healthcare services organizations increased $33.5 million to $129.0 million for fiscal 2023, as compared to $95.5 million for fiscal 2022, primarily due to new healthcare services clients added in fiscal 2023 as well as expansion of and cross-selling to existing healthcare services clients. • Payment processing fees.
While growth in the number of healthcare services clients is an important indicator of expected revenue growth, it also informs our management of the areas of our business that will require further investment to support expected future healthcare services client growth.
While growth in AHSCs is an important indicator of expected revenue growth, it also informs our management of the areas of our business that will require further investment to support expected future AHSC growth.
As of January 31, 2022, our foreign branch had net operating loss carryforwards of approximately $1.9 million, which may be available to offset future income tax liabilities and will expire beginning in 2030.
As of January 31, 2023, our foreign branch had net operating loss carryforwards of approximately $0.7 million, which may be available to offset future income tax liabilities and will expire beginning in 2034.
Stock compensation incurred related to sales and marketing expense was $12.5 million and $3.5 million for fiscal 2022 and fiscal 2021, respectively.
Stock compensation incurred related to sales and marketing expense was $22.2 million and $12.5 million for fiscal 2023 and fiscal 2022, respectively.
The increase resulted primarily from an increase in patient payments processed through the Phreesia Platform driven by an increase in patient visits over the prior year.
The increase resulted primarily from an increase in payment processing fees revenue and patient payments processed through the Phreesia Platform, each driven by an increase in patient visits over the prior year.
On the basis of this evaluation, we have recorded valuation allowances of $97.3 million and $54.6 million as of January 31, 2022 and 2021.
On the basis of this evaluation, we have recorded valuation allowances of $143.1 million and $97.3 million as of January 31, 2023 and 2022.
We define payment facilitator volume percentage as the volume of credit and debit card patient payment volume that we process as a payment facilitator as a percentage of total patient payment volume. Payment facilitator volume is a major driver of our payment processing revenue.
We define payment facilitator volume percentage as the volume of credit and debit card patient payment volume that we process as a payment facilitator as a percentage of total patient payment volume.
To the extent that we change the manner in which we develop and test new features and functionalities related to our solutions, assess the ongoing value of capitalized assets or determine the estimated useful lives over which the costs are amortized, the amount of internal-use software development costs we capitalize and amortize could change in future periods. 66 Income taxes An asset and liability approach is used for financial accounting and reporting of current and deferred income taxes.
To the extent that we change the manner in which we develop and test new features and functionalities related to our solutions, assess the ongoing value of capitalized assets or determine the estimated useful lives over which the costs are amortized, the amount of internal-use software development costs we capitalize and amortize could change in future periods.
The following table presents a reconciliation of Adjusted EBITDA to net loss for each of the periods indicated: For the fiscal years ended January 31, (in thousands) 2022 2021 Net loss $ (118,161) $ (27,292) Interest expense (income), net 1,084 1,573 Provision for income taxes 182 49 Depreciation and amortization 21,302 15,908 Stock-based compensation expense 36,234 13,489 Change in fair value of contingent consideration liabilities 258 71 Other expense (income), net 78 (1) Adjusted EBITDA $ (59,023) $ 3,797 We calculate free cash flow as net cash (used in) provided by operating activities less capitalized internal-use software development costs and purchases of property and equipment.
The following table presents a reconciliation of Adjusted EBITDA to net loss for each of the periods indicated: For the fiscal years ended January 31, (in thousands) 2023 2022 Net loss $ (176,146) $ (118,161) Interest (income) expense, net (1,064) 1,084 Provision for income taxes 483 182 Depreciation and amortization 25,304 21,302 Stock-based compensation expense 58,775 36,234 Change in fair value of contingent consideration liabilities — 258 Other expense, net 175 78 Adjusted EBITDA $ (92,473) $ (59,023) We calculate free cash flow as net cash used in operating activities less capitalized internal-use software development costs and purchases of property and equipment.
During the fiscal year ended January 31, 2021, cash provided by operating activities was $2.9 million, as our cash received from customers exceeded our cash paid to employees and suppliers in connection with our normal operations.
During the fiscal year ended January 31, 2023, net cash used in operating activities was $90.1 million, as our cash paid to employees and suppliers exceeded our cash received from customers in connection with our normal operations.
Deferred income tax assets and liabilities are computed for temporary differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future.
Income taxes An asset and liability approach is used for financial accounting and reporting of current and deferred income taxes. Deferred income tax assets and liabilities are computed for temporary differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future.
The increase was primarily attributable to higher data center depreciation. Amortization Fiscal years ended January 31, (in thousands) 2022 2021 $ Change % Change Amortization $ 6,317 $ 6,138 $ 179 3 % Amortization expense increased $0.2 million to $6.3 million for fiscal 2022, as compared to $6.1 million for fiscal 2021.
The increase was primarily attributable to higher data center and computer equipment depreciation. Amortization Fiscal years ended January 31, (in thousands) 2023 2022 $ Change % Change Amortization $ 7,316 $ 6,317 $ 999 16 % Amortization expense increased $1.0 million to $7.3 million for fiscal 2023, as compared to $6.3 million for fiscal 2022.
Financial Highlights Fiscal 2022 • Total revenue increased 43% to $213.2 million in fiscal 2022, compared with $148.7 million in fiscal 2021. • Net loss was $118.2 million in fiscal 2022, compared with $27.3 million in fiscal 2021. • Adjusted EBITDA was negative $59.0 million in fiscal 2022, compared with positive $3.8 million in fiscal 2021. • Cash used in operating activities was $74.7 million in fiscal 2022, compared with cash provided by operating activities of $2.9 million in fiscal 2021. • Free cash flow was negative $105.5 million in fiscal 2022 compared with negative $15.7 million in fiscal 2021. • Cash and cash equivalents was $313.8 million as of January 31, 2022, compared with $218.8 million as of January 31, 2021.
Financial Highlights Fiscal 2023 • Total revenue increased 32% to $280.9 million in fiscal 2023 compared with $213.2 million in fiscal 2022. • Net loss was $176.1 million in fiscal 2023 compared with $118.2 million in fiscal 2022. • Adjusted EBITDA was negative $92.5 million in fiscal 2023 compared with negative $59.0 million in fiscal 2022. • Cash used in operating activities was $90.1 million in fiscal 2023 compared with cash used in operating activities of $74.7 million in fiscal 2022. • Free cash flow was negative $116.3 million in fiscal 2023 compared with negative $105.5 million in fiscal 2022. • Cash and cash equivalents was $176.7 million as of January 31, 2023 compared with $313.8 million as of January 31, 2022.
Interest income has not been material to our operations to date. • Interest expense . Interest expense consists primarily of the interest incurred on our financing obligations as well as amortization of discounts and deferred financing costs.
Interest expense consists primarily of the interest incurred on our financing obligations as well as amortization of discounts and deferred financing costs.
For example, as the number of healthcare services clients increases, we may need to add to our customer support team and invest to maintain effectiveness and performance of our Platform and software for our healthcare services clients and their patients. • Average revenue per healthcare services client.
For example, as AHSCs increase, we may need to add to our customer support team and invest to maintain effectiveness and performance of our Platform and software for our healthcare services clients and their patients. • Healthcare services revenue per AHSC. We define Healthcare services revenue as the sum of subscription and related services revenue and payment processing revenue.
Investments in Growth During the fiscal year ended January 31, 2022, we accelerated hiring and overall investments across all areas of Phreesia to prepare for our anticipated growth in clients and use of our platform. In fiscal 2023 and thereafter, we expect growth in our team and compensation to moderate.
Investments in Growth During the fiscal year ended January 31, 2022, we accelerated hiring and overall investments across all areas of Phreesia to prepare for our anticipated growth in clients and use of our platform. Results for the fiscal year ended January 31, 2023 reflect a full year run rate of expenditures related to those investments.
We estimate the fair value of the PSUs using a Monte Carlo Simulation model which projects TSR for Phreesia and each member of the peer group over a performance period of approximately three years.
PSUs granted during fiscal 2023, 2022 and 2021 vest in a maximum of 220%, 200% and 200% of the number of PSUs originally granted, respectively. We estimate the fair value of the PSUs using a Monte Carlo Simulation model which projects TSR for Phreesia and each member of the peer group over a performance period of approximately three years.
We derive revenue from (i) subscription fees from healthcare services clients for access to the Phreesia Platform and related professional services fees, (ii) payment processing fees based on levels of patient payment volume processed through the Phreesia Platform and (iii) fees from life sciences companies to deliver marketing content to patients using the Phreesia Platform.
We derive revenue from (i) subscription fees from healthcare services clients for access to the Phreesia Platform and related professional services fees, (ii) payment processing fees based on levels of patient payment volume processed through the Phreesia Platform and (iii) fees from life sciences and payer clients for delivering direct communications to help activate, engage and educate patients about topics critical to their health using the Phreesia Platform.
Revenue recognition We account for revenue from contracts with clients by applying the requirements of Topic 606, which includes the following steps: • Identification of the contract, or contracts, with a client. • Identification of the performance obligations in a contract. • Determination of the transaction price. • Allocation of the transaction price to the performance obligations in the contract. • Recognition of revenue when, or as, performance obligations are satisfied.
Revenue recognition We account for revenue from contracts with clients by applying the requirements of Topic 606, which includes the following steps: • Identification of the contract, or contracts, with a client • Identification of the performance obligations in a contract • Determination of the transaction price 66 • Allocation of the transaction price to the performance obligations in the contract • Recognition of revenue when, or as, performance obligations are satisfied Revenues are recognized when control of these services is transferred to our clients, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.
Stock compensation incurred related to general and administrative expense was $15.7 million and $7.4 million in fiscal 2022 and fiscal 2021, respectively. 59 Depreciation Fiscal years ended January 31, (in thousands) 2022 2021 $ Change % Change Depreciation $ 14,985 $ 9,770 $ 5,215 53 % Depreciation expense increased $5.2 million to $15.0 million for fiscal 2022, as compared to $9.8 million for fiscal 2021.
Stock compensation incurred related to general and administrative expense was $21.2 million and $15.7 million in fiscal 2023 and fiscal 2022, respectively. 61 Depreciation Fiscal years ended January 31, (in thousands) 2023 2022 $ Change % Change Depreciation $ 17,988 $ 14,985 $ 3,003 20 % Depreciation expense increased $3.0 million to $18.0 million for fiscal 2023, as compared to $15.0 million for fiscal 2022.
We define healthcare services clients as the average number of healthcare services client organizations that generate revenue each month during the applicable period. In cases where we act as a subcontractor providing white-label services to our partner's clients, we treat the contractual relationship as a single healthcare services client.
In cases where we act as a subcontractor providing white-label services to our partner's clients, we treat the contractual relationship as a single healthcare services client.
The increase resulted primarily from a $19.8 million increase in total compensation costs driven by higher compensation for existing employees and increased headcount, a $6.3 million increase in outside services costs, as well as higher software costs. Stock compensation incurred related to research and development expense was $6.0 million and $2.0 million in fiscal 2022 and fiscal 2021, respectively.
The increase resulted primarily from a $6.8 million increase in employee compensation costs driven by higher compensation for existing employees and higher average headcount, as well as a $2.5 million increase in outside services costs and a $1.2 million increase in software costs, each driven by growth in revenue. 60 Stock compensation incurred related to cost of revenue was $3.7 million and $2.1 million for fiscal 2023 and fiscal 2022, respectively.
Our revenue from life science clients for digital marketing increased $22.8 million to $52.5 million for fiscal 2022, as compared to $29.7 million for fiscal 2021 due to an increase in new digital marketing solutions programs and deeper patient outreach among the existing programs.
Our revenue from life science and payer clients increased $21.0 million to $73.6 million for fiscal 2023, as compared to $52.5 million for fiscal 2022 due to an increase in new activation, engagement and education programs and deeper patient outreach among the existing programs.
Provision for income taxes Fiscal years ended January 31, (in thousands) 2022 2021 $ Change % Change Provision for income taxes $ (182) $ (49) $ (133) 271 % Provision for income taxes increased by $0.1 million to $0.2 million for fiscal 2022, as compared to less than $0.1 million for fiscal 2021.
Provision for income taxes Fiscal years ended January 31, (in thousands) 2023 2022 $ Change % Change Provision for income taxes $ (483) $ (182) $ (301) 165 % Provision for income taxes increased by $0.3 million to $0.5 million for fiscal 2023, as compared to $0.2 million for fiscal 2022.
Sales and marketing Fiscal years ended January 31, (in thousands) 2022 2021 $ Change % Change Sales and marketing $ 106,421 $ 42,972 $ 63,449 148 % Sales and marketing expense increased $63.4 million to $106.4 million for fiscal 2022, as compared to $43.0 million for fiscal 2021.
Sales and marketing Fiscal years ended January 31, (in thousands) 2023 2022 $ Change % Change Sales and marketing $ 151,263 $ 106,421 $ 44,842 42 % Sales and marketing expense increased $44.8 million to $151.3 million for fiscal 2023, as compared to $106.4 million for fiscal 2022.
We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by our business that can be used for strategic opportunities, including investing in our business, making strategic investments, partnerships and acquisitions and strengthening our financial position. 61 The following table presents a reconciliation of free cash flow from net cash provided by operating activities, the most directly comparable GAAP financial measure, for each of the periods indicated: For the fiscal years ended January 31, (in thousands) 2022 2021 Net cash (used in) provided by operating activities $ (74,710) $ 2,890 Less: Capitalized internal-use software (12,385) (7,334) Purchases of property and equipment (18,420) (11,241) Free cash flow $ (105,515) $ (15,685) Liquidity and capital resources On October 23, 2020, we completed a follow-on offering of our common stock, in which we issued and sold 5,750,000 shares of common stock at an issuance price of $32.00 per share resulting in net proceeds of $174,800, after deducting underwriting discounts and commissions, and before deducting third-party offering costs of $290.
We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by our business that can be used for strategic opportunities, including investing in our business, making strategic investments, partnerships and acquisitions and strengthening our financial position. 63 The following table presents a reconciliation of free cash flow from net cash used in operating activities, the most directly comparable GAAP financial measure, for each of the periods indicated: For the fiscal years ended January 31, (in thousands) 2023 2022 Net cash used in operating activities $ (90,123) $ (74,710) Less: Capitalized internal-use software (21,471) (12,385) Purchases of property and equipment (4,732) (18,420) Free cash flow $ (116,326) $ (105,515) Liquidity and capital resources In April 2021, we completed a follow-on offering of our common stock.
Recent accounting pronouncements There are no recently issued accounting pronouncements that we have not yet adopted that will materially impact our consolidated financial statements. See Note 3 to our Consolidated financial statements of this Annual Report on Form 10-K for a discussion of recent accounting pronouncements.
See Note 3 to our Consolidated financial statements of this Annual Report on Form 10-K for a discussion of recent accounting pronouncements.
Utilization trends have been dynamic through the pandemic, diverging from our pre-pandemic seasonality. We expect the environment to remain dynamic through fiscal year 2023. • Life sciences. We generate revenue from the sale of digital marketing solutions to life sciences companies.
Utilization trends have been dynamic through the pandemic, diverging from our pre-pandemic seasonality. We expect the environment to remain dynamic through fiscal year 2024. • Network solutions. We generate revenue from life sciences and payer clients for delivering direct communications to patients.
Cost of revenue (excluding depreciation and amortization) Fiscal years ended January 31, (in thousands) 2022 2021 $ Change % Change Cost of revenue (excluding depreciation and amortization) $ 42,669 $ 23,461 $ 19,208 82 % Cost of revenue (excluding depreciation and amortization) increased $19.2 million to $42.7 million for fiscal 2022, as compared to $23.5 million for fiscal 2021.
Cost of revenue (excluding depreciation and amortization) Fiscal years ended January 31, (in thousands) 2023 2022 $ Change % Change Cost of revenue (excluding depreciation and amortization) $ 58,944 $ 42,669 $ 16,275 38 % Cost of revenue (excluding depreciation and amortization) increased $16.3 million to $58.9 million for fiscal 2023, as compared to $42.7 million for fiscal 2022.
On April 12, 2021, we completed a follow-on offering of our common stock. In connection with this offering, we issued and sold 5,175,000 shares of common stock at an issuance price of $50.00 per share resulting in net proceeds of $245,813, after deducting underwriting discounts and commissions.
In connection with this offering, we issued and sold 5,175,000 shares of common stock at an issuance price of $50.00 per share resulting in net proceeds of $245,813, after deducting underwriting discounts and commissions. As of January 31, 2023 and 2022, we had cash and cash equivalents of $176.7 million and $313.8 million, respectively.
General and administrative Fiscal years ended January 31, (in thousands) 2022 2021 $ Change % Change General and administrative $ 68,674 $ 40,460 $ 28,214 70 % General and administrative expense increased $28.2 million to $68.7 million for fiscal 2022, as compared to $40.5 million for fiscal 2021.
General and administrative Fiscal years ended January 31, (in thousands) 2023 2022 $ Change % Change General and administrative $ 80,384 $ 68,674 $ 11,710 17 % General and administrative expense increased $11.7 million to $80.4 million for fiscal 2023, as compared to $68.7 million for fiscal 2022.
Payment processing expense Fiscal years ended January 31, (in thousands) 2022 2021 $ Change % Change Payment processing expense $ 38,719 $ 28,925 $ 9,794 34 % Payment processing expense increased $9.8 million to $38.7 million in fiscal 2022, as compared to $28.9 million for fiscal 2021.
Payment processing expense Fiscal years ended January 31, (in thousands) 2023 2022 $ Change % Change Payment processing expense $ 50,323 $ 38,719 $ 11,604 30 % Payment processing expense increased $11.6 million to $50.3 million in fiscal 2023, as compared to $38.7 million for fiscal 2022.
The increase was primarily attributable to a $54.1 million increase in total compensation and benefits costs driven by higher compensation for existing employees and increased headcount, a $6.4 million increase in third-party marketing and advertising costs, as well as higher software expenses.
The increase was primarily attributable to a $37.6 million increase in total compensation costs driven by higher compensation for existing employees and higher average headcount, as well as a $3.8 million increase in outside services costs, a $1.5 million increase in travel and entertainment costs and $1.3 million increase in software costs.
Research and development Fiscal years ended January 31, (in thousands) 2022 2021 $ Change % Change Research and development $ 52,265 $ 22,622 $ 29,643 131 % Research and development expense increased $29.6 million to $52.3 million for fiscal 2022, as compared to $22.6 million for fiscal 2021.
Research and development Fiscal years ended January 31, (in thousands) 2023 2022 $ Change % Change Research and development $ 91,244 $ 52,265 $ 38,979 75 % Research and development expense increased $39.0 million to $91.2 million for fiscal 2023, as compared to $52.3 million for fiscal 2022.
As we expand our healthcare services client base, we increase the number of new patients we can reach to deliver targeted marketing content on behalf of our life sciences clients.
As we expand our healthcare services client base, we increase the number of new patients we can reach to deliver our direct communications that help activate, engage and educate patients about topics critical to their health on behalf of life sciences and payer clients.
This coefficient is used to project the performance of our stock against our peers to estimate projected performance under the plan. 67 • Expected volatility: The expected volatility is based on historical volatilities of peer companies within our industry which were commensurate with the simulation term assumption.
This coefficient is used to project the performance of our stock against our peers to estimate projected performance under the plan. • Expected volatility: For PSUs granted during the year ended January 31, 2023, the expected volatility is based on the historical volatility of our stock price over a term commensurate with the simulation term assumption.
Interest (expense) income, net Fiscal years ended January 31, (in thousands) 2022 2021 $ Change % Change Interest (expense) income, net $ (1,084) $ (1,573) $ 489 (31 %) Interest expense, net decreased $0.5 million to $1.1 million for fiscal 2022, as compared to $1.6 million for fiscal 2021.
Interest income (expense), net Fiscal years ended January 31, (in thousands) 2023 2022 $ Change % Change Interest income (expense), net $ 1,064 $ (1,084) $ 2,148 (198 %) Interest income (expense), net changed by $2.1 million to $1.1 million of income for fiscal 2023, as compared to $1.1 million of expense for fiscal 2022.
We anticipate that our payment facilitator volume percentage will decline slightly over time as we increase our penetration of larger health systems that are less likely to use Phreesia as a payment facilitator. 55 Results of operations The following tables set forth our results of operations for the periods presented and as a percentage of revenue for those periods: For the fiscal years ended January 31, For the fiscal years ended January 31, (in thousands) 2022 2021 2022 2021 Revenue Subscription and related services $ 95,514 $ 69,042 45 % 46 % Payment processing fees 65,201 49,900 31 % 34 % Life sciences 52,518 29,735 25 % 20 % Total revenue 213,233 148,677 100 % 100 % Expenses Cost of revenue (excluding depreciation and amortization) 42,669 23,461 20 % 16 % Payment processing expense 38,719 28,925 18 % 19 % Sales and marketing 106,421 42,972 50 % 29 % Research and development 52,265 22,622 25 % 15 % General and administrative 68,674 40,460 32 % 27 % Depreciation 14,985 9,770 7 % 7 % Amortization 6,317 6,138 3 % 4 % Total expenses 330,050 174,348 155 % 117 % Operating loss (116,817) (25,671) (55) % (17) % Other (expense) income, net (78) 1 — % — % Interest (expense) income, net (1,084) (1,573) (1) % (1) % Total other (expense) income, net (1,162) (1,572) (1) % (1) % Net loss before provision for income taxes (117,979) (27,243) (55) % (18) % Provision for income taxes (182) (49) — % — % Net loss $ (118,161) $ (27,292) (55) % (18) % Components of statements of operations Revenue We generate revenue primarily from providing an integrated SaaS-based software and payment platform for the healthcare industry.
Payment facilitator volume is a major driver of our payment processing revenue. 57 Results of operations The following tables set forth our results of operations for the periods presented and as a percentage of revenue for those periods: For the fiscal years ended January 31, For the fiscal years ended January 31, (in thousands) 2023 2022 2023 2022 Revenue Subscription and related services $ 128,975 $ 95,514 46 % 45 % Payment processing fees 78,368 65,201 28 % 31 % Network solutions 73,567 52,518 26 % 25 % Total revenue 280,910 213,233 100 % 100 % Expenses Cost of revenue (excluding depreciation and amortization) 58,944 42,669 21 % 20 % Payment processing expense 50,323 38,719 18 % 18 % Sales and marketing 151,263 106,421 54 % 50 % Research and development 91,244 52,265 32 % 25 % General and administrative 80,384 68,674 29 % 32 % Depreciation 17,988 14,985 6 % 7 % Amortization 7,316 6,317 3 % 3 % Total expenses 457,462 330,050 163 % 155 % Operating loss (176,552) (116,817) (63) % (55) % Other expense, net (175) (78) — % — % Interest income (expense), net 1,064 (1,084) — % (1) % Total other income (expense), net 889 (1,162) — % (1) % Loss before provision for income taxes (175,663) (117,979) (63) % (55) % Provision for income taxes (483) (182) — % — % Net loss $ (176,146) $ (118,161) (63) % (55) % Components of statements of operations Revenue We generate revenue primarily from providing an integrated SaaS-based software and payment platform for the healthcare industry.
We believe that our existing cash and cash equivalents, along with our available financial resources from our credit facility, will be sufficient to meet our needs for at least the next 12 months.
Cash and cash equivalents consist of money market funds and cash on deposit. We believe that our existing cash and cash equivalents, along with cash generated in the normal course of business, will be sufficient to meet our needs for at least the next 12 months.
We derive revenue from subscription fees and related services generated from our healthcare services clients for access to the Phreesia Platform, payment processing fees based on the levels of patient payment volume processed through the Phreesia Platform, and from digital marketing revenue from life sciences companies to reach, educate and communicate with patients when they are most receptive and actively seeking care.
We derive revenue from subscription fees and related services generated from our healthcare services clients for access to the Phreesia Platform, payment processing fees based on the levels of patient payment volume processed through the Phreesia Platform, and from fees from life sciences and payer clients for delivering direct communications to help activate, engage and educate patients about topics critical to their health using the Phreesia Platform.
For the fiscal years ended January 31, Change 2022 2021 Amount % Key Metrics: Healthcare services clients (average over period) 2,074 1,711 363 21 % Average revenue per healthcare services client $ 77,478 $ 69,499 $ 7,979 11 % Phreesia remains focused on building secure and reliable products that derive a strong return on investment for our clients and implementing them with speed and ease.
For the fiscal years ended January 31, Change 2023 2022 Amount % Key Metrics: Average healthcare services clients ("AHSCs") 2,856 2,074 782 38 % Healthcare services revenue per AHSC $ 72,599 $ 77,478 $ (4,879) (6) % Total revenue per AHSC $ 98,358 $ 102,812 $ (4,454) (4) % We remain focused on building secure and reliable products that derive a strong return on investment for our clients and implementing them with speed and ease.
Our revenue from patient payments processed through the Phreesia Platform increased $15.3 million to $65.2 million for fiscal 2022, as compared to $49.9 million for fiscal 2021, due to the addition of more healthcare services clients, expansion of existing healthcare services clients, as well as the reduced impact of COVID-19, which had decreased patient visits in fiscal 2021. • Life sciences.
Our revenue from patient payments processed through the Phreesia Platform increased $13.2 million to $78.4 million for fiscal 2023, as compared to $65.2 million for fiscal 2022, due to the addition of more healthcare services clients, which drove increases in patient visits and patient payments processed through the Phreesia Platform. • Network solutions.
The increase resulted primarily from a $17.8 million increase in total compensation and benefits costs driven by higher compensation for existing employees and increased headcount to support our growth as a public company, a $4.2 million increase in outside services costs, as well as a $2.4 million increase in software costs and higher costs for non-income based taxes, recruiting and equipment.
The increase resulted primarily from a $26.8 million increase in total compensation costs driven by higher compensation for existing employees and higher average headcount, as well as a $6.8 million increase in outside services costs and higher software expenses.
During the fiscal year ended January 31, 2021, net cash provided by financing activities was $150.7 million, consisting of $174.8 million in proceeds from the October 2020 offering of our common stock, net of underwriters' discounts and commissions, $4.4 million in proceeds from the issuance of common stock upon the exercise of stock options as well as $2.0 million in proceeds from an insurance financing arrangement, partially offset by $20.7 million used to repay the outstanding principal balance of the Second SVB Facility, $5.0 million used for treasury stock to satisfy tax withholdings on stock compensation awards, $4.3 million used for principal payments on finance leases and financing arrangements, $0.4 million used for debt and equity issuance and offering costs and $0.2 million for loan facility fee payments.
Financing activities During the fiscal year ended January 31, 2023, net cash used in financing activities was $20.8 million, primarily consisting of $19.4 million used for treasury stock to satisfy tax withholdings on stock compensation awards and $5.9 million used for principal payments on finance leases and financing arrangements, partially offset by $4.9 million in proceeds from our equity compensation plans.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe have entered into foreign currency forward contracts as economic hedges to minimize those fluctuations. We have not designated our foreign currency forward contracts as hedges as defined in GAAP. To date, foreign currency transaction gains and losses have not been material to our financial statements. As of January 31, 2022, no foreign currency forward contracts remained outstanding. 68
Biggest changeTo date, foreign currency transaction gains and losses have not been material to our financial statements. 70
Interest rate risk Our cash and cash equivalents consist primarily of money market accounts and cash on deposit. The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. Because our cash equivalents have a short maturity, our portfolio’s fair value is relatively insensitive to interest rate changes.
Interest rate risk As of January 31, 2023, our cash and cash equivalents consisted primarily of money market funds and cash on deposit. The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. Because our cash equivalents have a short maturity, our portfolio’s fair value is relatively insensitive to interest rate changes.
We do not believe that an increase or decrease in interest rates of 100 basis points would have a material effect on our operating results or financial condition. In future periods, we will continue to evaluate our investment policy in order to ensure that we continue to meet our overall objectives.
We do not believe that an increase or decrease in interest rates of 100 basis points would have a material effect on our financial condition. Changes in interest rates impact the amount of interest income we record on our cash equivalents.
Added
In future periods, we will continue to evaluate our investment policy in order to ensure that we continue to meet our overall objectives. As of January 31, 2023, we had no debt outstanding under the Third SVB Facility.
Added
See Note 17 - Subsequent Event and Note 6 - Finance Leases and Other Debt within Item 8 - Financial Statements and Supplementary Data for additional information regarding the Third SVB Facility, the closure of SVB and its impact on the Third SVB Facility.
Added
Although we had no debt outstanding under the Third SVB Facility as of January 31, 2023, changes in interest rates would affect interest expense if we borrow against the Third SVB Facility in the future. Additionally, changes in interest rates will impact the discount rate and resulting interest expense for any new finance leases.

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