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What changed in Phreesia, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Phreesia, Inc.'s 2023 and 2024 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 2024 report.

+463 added−479 removedSource: 10-K (2024-03-15) vs 10-K (2023-03-23)

Top changes in Phreesia, Inc.'s 2024 10-K

463 paragraphs added · 479 removed · 360 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

106 edited+26 added−29 removed59 unchanged
Biggest changeWe 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.
Biggest changeWe believe our current addressable market is approximately $10.0 billion and is derived from: (1) the potential $6.3 billion of subscription and related services revenue generated from the approximately 1.4 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) the estimated potential $2.3 billion of consumer-related transaction and payment processing fees, which are based on a percentage of payments that we process through our platform and address approximately $95.0 billion of annual out of pocket patient spend in ambulatory healthcare related professional services, (3) an estimated potential $1.9 billion in Network solutions revenue, based on projections of direct-to-consumer point-of-care marketing spend and other digital, direct-to-consumer life sciences marketing spend.
Our data and analytics capabilities identify patient populations that align with our life sciences clients’ audiences.
Our data and analytics capabilities identify patient populations that align with our life sciences clients’ audiences.
The federal False Claims Act also permits a private individual acting as a “whistleblower” to bring actions on behalf of the federal government alleging violations of the federal False Claims Act and to share in any monetary recovery; • HIPAA, which created new federal criminal statutes that prohibit a person from knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false, fictitious, or fraudulent statements or representations in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters; similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH and their respective implementing regulations, including the Final Omnibus Rule published in January 2013, which impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates, independent contractors or agents of covered entities, that perform services for them that involve the creation, maintenance, receipt, use, or disclosure of, individually identifiable health information relating to the privacy, security and transmission of individually identifiable health information.
The federal False Claims Act also permits a private individual acting as a “whistleblower” to bring actions on behalf of the federal government alleging violations of the federal False Claims Act and to share in any monetary recovery; • HIPAA, which created new federal criminal statutes that prohibit a person from knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public 16 Table of Contents or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false, fictitious, or fraudulent statements or representations in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters; similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH and their respective implementing regulations, including the Final Omnibus Rule published in January 2013, which impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates, independent contractors or agents of covered entities, that perform services for them that involve the creation, maintenance, receipt, use, or disclosure of, individually identifiable health information relating to the privacy, security and transmission of individually identifiable health 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 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’ 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.
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.
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, accessibility and satisfaction. • Reliable.
While any information we maintain in our role as a business associate may be exempt from the CCPA, other records and information we maintain may be subject to the CCPA. Additionally, we expect that there will continue to be new proposed and amended laws, regulations and industry standards concerning privacy, data protection and information security in the U.S.
While any information we maintain in our role as a business associate may be exempt from the CCPA, other records and information we maintain may be subject to the CCPA. We expect that there will continue to be new proposed and amended laws, regulations and industry standards concerning privacy, data protection and information security in the U.S.
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 payment processing features 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.
We consider our relationship with our employees to be good, and we have not experienced any work stoppages. Talent and Culture: The success and continued evolution of our company has been due in large part to the talent and engagement of the entire Phreesia team.
We consider our relationship with our employees to be good, and we have not experienced any work stoppages. Talent and Culture: The success and continued evolution of our company has been due in large part to the talent and engagement of our entire team.
Moreover, the government may assert that a claim including items 16 Table of Contents or services resulting from a violation of the Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act or federal civil monetary penalty laws; • the federal civil and criminal false claims laws and civil monetary penalty laws, such as the federal False Claims Act, which impose criminal and civil penalties and authorize civil whistleblower or qui tam actions, against individuals or entities for, among other things: knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent; knowingly making, using or causing to be made or used, a false statement of record material to a false or fraudulent claim or obligation to pay or transmit money or property to the federal government or knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay money to the federal government.
Moreover, the government may assert that a claim including items or services resulting from a violation of the Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act or federal civil monetary penalty laws; • the federal civil and criminal false claims laws and civil monetary penalty laws, such as the federal False Claims Act, which impose criminal and civil penalties and authorize civil whistleblower or qui tam actions, against individuals or entities for, among other things: knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent; knowingly making, using or causing to be made or used, a false statement of record material to a false or fraudulent claim or obligation to pay or transmit money or property to the federal government or knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay money to the federal government.
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.
We also use the following social media channels as a means of disclosing information about the company, our solutions, 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/) MEDIFIND website (https://www.medifind.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 primarily protect our intellectual property through a combination of trademarks, trade secrets and other contractual rights, including confidentiality, non-disclosure and assignment-of-invention agreements with our employees, independent contractors, consultants and companies with which we conduct business. However, these intellectual property rights and procedures may not prevent others from creating a competitive SaaS platform or otherwise competing with us.
We primarily protect our intellectual property through a combination of trademarks, trade secrets and other contractual rights, including confidentiality, non-disclosure and assignment-of-invention agreements with our employees, independent contractors, consultants and companies with which we conduct business. However, these intellectual property rights and procedures may not prevent others from creating a competitive SaaS solution or otherwise competing with us.
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.
We deploy our solutions 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.
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.
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 solutions. Our client-focused operations are structured to provide a seamless process. • Client services.
State and foreign 17 Table of Contents laws, including for example the European Union General Data Protection Regulation, which became effective May 2018 also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
State and foreign laws, including for example the European Union General Data Protection Regulation, which became effective May 2018 also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
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.
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 15 Table of Contents with its performance of its government contracts.
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.
Our 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. • Appointment reminders.
Patients can also update their clinical and demographic information, take a photo to store in their patient record, capture images of their driver’s license and insurance card, sign forms and policies and pay copays and outstanding balances—all from the privacy and ease of their own device. • Registration for virtual visits .
Patients can also update their clinical and demographic information, take a photo to store in their patient record, capture images of their driver’s license and insurance card, sign forms and policies and pay copays and outstanding balances—all from the privacy and ease of their own device. 10 Table of Contents • Registration for virtual visits .
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.
These providers of PM and EHR solutions and our healthcare services clients can leverage our expanding APIs to embed the functionality of our solutions for their patients, while controlling the look and feel. • Embedded payments.
Our solutions are highly customizable and scalable to any size healthcare service organization and can seamlessly integrate within a client’s workflows and leading Practice Management, or PM, and Electronic Health Record, or EHR, systems. Our Platform additionally allows for secure time-of-service and post-explanation of benefits integrated payments.
Our solutions are highly customizable and scalable to any size healthcare service organization and can seamlessly integrate within a client’s workflows and leading Practice Management, or PM, and Electronic Health Record, or EHR, systems. Our solutions additionally allow for secure time-of-service and post-explanation of benefits integrated payments.
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.
We intend to continue to proactively grow the business through the following strategies: Expanding our solutions to new healthcare services organizations The market for a technology-powered intake and payment solution 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.
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.
We have industry 12 Table of Contents 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.
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.
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.
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.
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, we expect our total addressable market to grow.
Patients may sign a financial policy that gives authorization to store their payment card on a secure platform, thus automatically collecting payments once claims are adjudicated.
Patients may sign a financial policy that gives authorization to store their payment card on our secure solution, thus automatically collecting payments once claims are adjudicated.
Each plan is configured according to the healthcare services client’s financial policies and managed automatically. • Online payments. Our online payments application allows practices to add a custom payment button to their website or send email reminders that direct patients to an online payment page. • Card on file and payment assurance.
Each plan is configured according to the healthcare services client’s financial policies and managed automatically. • Online payments. We allow practices to add a custom payment button to their website or send email reminders that direct patients to an online payment page. • Card on file and payment assurance.
In addition, through Phreesia University (Phreesia’s in-house training program), events, client conferences and webinars, we help our healthcare services clients optimize their businesses and, as a result, support client retention. 13 Table of Contents We also sell products and services to life sciences and payer organizations as well as advertising agencies through our direct sales and marketing teams.
In addition, through Phreesia University (Phreesia’s in-house training program), events, client conferences and webinars, we help our healthcare services clients optimize their businesses and, as a result, support client retention. We also sell products and services to life sciences and payer organizations, healthcare advertising agencies and advocacy groups as well as advertising agencies through our direct sales and marketing teams.
Enhancing our margins through continued strategic growth Our business model is based on developing and deploying new, value-added applications for our clients that increase revenue and enhance our attractive client unit economics. We have invested significantly and expect to continue investing significantly to create a comprehensive, scalable technology platform that allows us to gain operating leverage and enhance margins.
Enhancing our margins through continued strategic growth Our business model is based on developing and deploying new, value-added applications for our clients that increase revenue and enhance our attractive client unit economics. We have invested significantly and expect to continue investing significantly to create a comprehensive, scalable suite of solutions that allow us to gain operating leverage and enhance margins.
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 technology is engineered to provide strong reliability and availability. We process hundreds of thousands of transactions, including eligibility and benefits verification, 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 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 give 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.
Some of our existing and potential service providers, particularly EHR providers, have developed their own patient intake solutions and have become direct competitors. The Phreesia Platform is 8 Table of Contents integrated with a majority of the leading EHR systems.
Some of our existing and potential service providers, particularly EHR providers, have 8 Table of Contents developed their own patient intake solutions and have become direct competitors. Our solutions integrate with a majority of the leading EHR systems.
With the ability to support over 25 different medical specialties and existing agreements with leading PM and EHR providers, the Phreesia Platform is able to serve a large portion of the U.S. ambulatory and acute care market.
With the ability to support over 25 different medical specialties and existing agreements with leading PM and EHR providers, we are able to serve a large portion of the U.S. ambulatory and acute care market.
The SEC maintains an Internet website at https://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
The SEC maintains an Internet website at https:// 18 Table of Contents www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
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.
Based on our ongoing analyses of client marketing and education campaigns conducted by data analytics companies, we believe patients exposed to our campaigns are more likely, on average, to receive a relevant diagnosis, undergo a preventive health screening, or receive a relevant treatment, than control patients. • Improve brand conversion, treatment, and adherence.
We have developed a robust and scalable SaaS-based platform that allows us to iterate on existing technology and develop new solutions quickly and efficiently to meet the needs of our clients. Our unique architecture also allows new integrated applications to be quickly deployed to clients and allows real-time integration without expensive and difficult-to-manage VPN tunnels.
Our robust and scalable SaaS-based solution allows us to iterate on existing technology and develop new solutions quickly and efficiently to meet the needs of our clients. Our unique architecture also allows new integrated applications to be quickly deployed to clients and allows real-time integration without expensive and difficult-to-manage VPN tunnels.
Our workflows leverage our proprietary logic to guide patients through a tailored list of questions, allowing them to efficiently enter and verify their demographics, insurance data and clinical information. • Consent management. Our automated consent forms streamline the process of collecting consents by ensuring that each patient receives the right forms.
Our workflows cover over 25 specialties leveraging our proprietary logic to guide patients through a tailored list of questions, allowing them to efficiently enter and verify their demographics, insurance data and clinical information. • Consent management. We streamline the process of collecting consents by ensuring that each patient receives the right forms.
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.
Data captured from the patient or generated by the use of our solutions automatically integrate 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.
The 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 also collect clinical intake and 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. • Our revenue cycle solutions provide 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 solutions provide a channel to our life sciences and payer clients that leverages our large and growing network of over 3,900 healthcare services clients.
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.
Over time, we expect to increase profitability and margins by adding new clients and by expanding our existing clients with minimal incremental investment. Moreover, we continually aim to improve effectiveness and efficiency.
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.
Our solutions streamline 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.
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.
Our streamlined intake and payments offering provides a consumer-friendly experience and activates patients to take control of their care. Additionally, after obtaining patient consent, we enable healthcare services clients to conduct outreach within 24 hours of visit and generate real-time feedback that informs and drives efforts to improve patient experience.
Our registration for virtual visits offering supports healthcare services clients as they continue to shift visits to telehealth by allowing them to perform all the necessary intake tasks for each virtual visit, including gathering consents, at scale. Intake for telehealth also provides patients with information about how their telehealth visit will work. • Specialty-specific workflows .
We support healthcare services clients offering telehealth by allowing them to perform all the necessary intake tasks for each virtual visit, including gathering consents, at scale. Intake for telehealth also provides patients with information about how their telehealth visit will work. • Specialty-specific workflows .
Our direct sales force executes on these qualified sales leads, partnering with client services to ensure prospects are educated on the breadth of our capabilities and demonstrable value proposition, with the goal of attracting and retaining clients and expanding their use of our Platform over time. Most of our Platform solutions are contracted pursuant to annual, auto-renewing agreements.
Our sales force executes on these qualified sales leads, partnering with sales enablement and client services to ensure prospects are educated on the breadth of our capabilities and demonstrable value proposition, with the goal of attracting and retaining clients and expanding their use of our solutions over time.
Various federal and state agencies have discretion to issue regulations and interpret and enforce healthcare laws. While we routinely evaluate our legal positions under applicable healthcare laws and regulations, these regulations can vary significantly from jurisdiction to jurisdiction, and interpretation and enforcement of existing laws and regulations can be uncertain or may change periodically.
While we routinely evaluate our legal positions under applicable healthcare laws and regulations, these regulations can vary significantly from jurisdiction to jurisdiction, and interpretation and enforcement of existing laws and regulations can be uncertain or may change periodically.
We employ strong recruiting practices that actively seek out and engage underrepresented groups. We strive to make career paths, career development opportunities and mentorships available to all employees. Additionally, we cultivate opportunities for diverse voices to be heard and supported.
Diversity and Inclusiveness: We are committed to hiring, developing and supporting a diverse and inclusive workplace. We employ strong recruiting practices that actively seek out and engage underrepresented groups. We strive to make career paths, career development opportunities and mentorships available to all employees. Additionally, we cultivate opportunities for diverse voices to be heard and supported.
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.
Pursuing opportunistic strategic investments, partnerships and acquisitions Our strong growth has included significant organic growth as we have added healthcare services and life sciences clients, while also expanding the solutions we offer those clients.
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.
Based on our ongoing analyses of client marketing campaigns conducted by data analytics companies, we believe patients exposed to a brand campaign using our solutions are more likely, on average, to take an action, such as initiating treatment, continuing treatment, or having a prescription filled for that product, than control patients. • Learn about patient cohorts.
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 value proposition We are focused on providing healthcare services organizations, life sciences companies and payer organizations the tools to help patients take a more active role in their care. 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 .
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.
Throughout 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. Phreesia has also acquired products and functionalities that 9 Table of Contents expand our suite of solutions. We evaluate many investment, partnership and acquisition opportunities on an ongoing basis.
Patients are able to pay upfront or set up an automated payment plan that adheres to our healthcare services clients' financial policies. Patients can also choose to pay online on their healthcare services organization’s website or place a card on file.
Patients are able to pay upfront or set up an automated payment plan that adheres to our healthcare services clients' financial policies. Patients can also choose to pay online on their healthcare services organization’s website or place a card on file, removing the need for difficult payment-related conversations with staff. • Activation in care.
For example, we have a strategic relationship with Rayden, pursuant to which Rayden’s India-based personnel exclusively support our business through various functions, including, but not limited to, finance and accounting, sales and marketing, customer operations, product management and support, and research and development. None of our employees are represented by labor unions or covered by collective bargaining agreements.
(“Rayden”), pursuant to which approximately 1,000 Rayden India-based personnel supported our business through various functions, including, but not limited to, customer operations, research and development, product management and support, sales and marketing, and finance and accounting. None of our employees are represented by labor unions or covered by collective bargaining agreements.
We enable our healthcare services clients to increase collections and reduce costs. Based on client feedback received and our internal analysis, we believe that our flexible patient payment options, including card on file, have led to an increase in time-of-service collections for the majority of our healthcare services clients.
Based on client feedback received and our internal analysis, we believe that our flexible patient payment options, including card on file, have led to an increase in time-of-service collections for the majority of our healthcare services clients. Our automated eligibility and benefits verification solution also reduces the number of denied claims.
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.
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. Phreesia’s mission is to make care easier every day.
Phreesians can voluntarily join an ERG to network, discuss and exchange ideas and enhance their professional development. We recognize that our ability to execute on our mission of creating a better, more engaging experience depends on our people.
Phreesians can voluntarily join an ERG to network, discuss and exchange ideas and enhance their professional development. We recognize that our ability to execute on our mission of making care easier every day depends on our people.
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.
Our dedicated Client Services team is responsible for pre-sales engagement, new client onboarding and implementation, existing client implementation and on-site optimization. Client Services is organized by market specialization, ensuring that our team provides deep expertise in the markets they support. In addition, our implementation teams have extensive knowledge of the PM and EHR systems that our healthcare services clients use.
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.
By expanding and continuously enhancing our solutions, we believe we can drive incremental revenue from existing clients as well as broaden our appeal to potential new clients.
Finally, there are state and foreign laws governing the privacy and security of health information, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Finally, there are state and foreign laws governing the privacy and security of health information, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. Intellectual property Our continued growth and success depend, in part, on our ability to protect our intellectual property and proprietary technology.
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.
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: • Point-of-service payments. We offer self-service payment options on Phreesia Mobile, on the PhreesiaPad or at an Arrivals Kiosk.
Our sales typically involve competitive processes, and sales cycles have, on average, varied in duration from three months to six months, depending on the size of the potential client.
Most of our healthcare services customer contracts are structured as annual, auto-renewing agreements. Our sales typically involve competitive processes, and sales cycles have, on average, varied in duration from three months to six months, depending on the size of the potential client.
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.
In recent years, the FTC has paid increased attention to privacy and data security matters, and we expect them to continue to do so in the future. 14 Table of Contents 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.
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.
We enable healthcare services clients to ask patients confidentially about their access to healthy food, safe housing and other social determinants that can have a critical impact on their health, to help healthcare services clients better understand patients and connect them to needed services.
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 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. Additionally, as of January 1, 2023, California has a new state agency that is vested with authority to implement and enforce the CCPA.
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.
Value proposition for life sciences and payer organizations • Direct communications. We provide life sciences and payer organizations with a channel to engage healthcare consumers who have voluntarily opted in for such communications, when they are most receptive and actively seeking care.
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 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.
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.
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.
Corporate Information We are a fully remote company and no longer maintain our principal executive offices. Our mailing address is 1521 Concord Pike, Suite 301, PMB 221, Wilmington, DE 19803, and our telephone number is (888) 654-7473. Our website address is http://www.phreesia.com.
Our mailing address is 1521 Concord Pike, Suite 301, PMB 221, Wilmington, DE 19803, and our telephone number is (888) 654-7473. Our website address is http://www.phreesia.com.
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.
Our solutions have 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 3,900 healthcare services clients.
Item 1. Business 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.
Item 1. Business Overview We are a leading provider of comprehensive software solutions that improve the operational and financial performance of healthcare organizations and improve health outcomes by helping patients take a more active role in their care. Our solutions include SaaS-based integrated tools that manage patient access, registration and payments.
It identifies and screens patients for common behavioral and mental health conditions, including depression, anxiety and substance abuse, using questionnaires such as PHQ-2 and PHQ-9. • Social determinants of health screening.
We identify and screens patients for common behavioral and mental health conditions, including depression, anxiety and substance abuse. • Social determinants of health screening.
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.
Registration Our Registration applications facilitate mobile and on-site check-in, create a more complete patient record and increase patient convenience and satisfaction. These solutions include: • Mobile and in-office intake modalities . We allow 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 intend to leverage our patient database and patient activation capabilities to eliminate gaps in care and increase care coordination among all key healthcare constituents.
We have a well-defined technology roadmap to introduce new features and functionality to our products. We intend to leverage our network and patient activation capabilities to eliminate gaps in care and increase care coordination among all key healthcare constituents.
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.
Human Capital Resources 17 Table of Contents As of January 31, 2024, we had 1,438 full-time employees, including 512 in sales and marketing, 473 in research and development, 294 in services and support and 159 in general and administrative. As of January 31, 2024, we had 946 full-time employees in the United States and 492 full-time employees internationally.
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.
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. We published our fourth Phreesia Gender Equality Report in 2023 based on the framework provided by the Bloomberg Gender Equality Index which has included Phreesia in January 2021, 2022, and 2023.
We are a "Business Associate" as defined under the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information and Technology for Economic ad Clinical Health Act ("HITECH Act") and their implementing regulations, collectively referred to as HIPAA, and sign business associate agreements that govern our uses and disclosures of protected health information on behalf of our covered entity clients that engage us to provide our software solutions.
To the extent we work as a third-party for our healthcare provider partners, we are a "Business Associate" as defined under the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information and Technology for Economic ad Clinical Health Act ("HITECH Act") and their implementing regulations, collectively referred to as HIPAA.
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.
Our data-driven solutions provide life sciences and payer organizations the ability to reach specific populations 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. • Speed diagnosis and increase uptake of preventive health services.
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".
During our fiscal year ended January 31, 2024, Modern Healthcare magazine recognized Phreesia as one of the “Best Places to Work in Healthcare” for the seventh time, and Phreesia was named to the list of "The Top 100 Software Companies of 2023" by the Software Report, our second year in a row on the list.
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.
We enable healthcare services clients to streamline operations through automated patient intake, automated answering services and payments that are integrated into existing 7 Table of Contents workflows and PM and EHR systems.
Maintaining the integrity of our Platform is critical to our business, our clients and the patients they treat. We continue to enhance and evolve our security program. Privacy and security Privacy and security are our top priorities. We maintain a comprehensive security program designed to safeguard the confidentiality, integrity and availability of our clients’ data.
Maintaining the integrity of our solutions is critical to our business, our clients and the patients they treat. As our product offerings increase and become more robust, we continue to enhance and evolve our security program. Privacy and security Privacy and security are our top priorities.
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 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. Various federal and state agencies have discretion to issue regulations and interpret and enforce healthcare laws.
Phreesia has also had representation on the Software Report's Top 50 Women Leaders in SaaS for the past five years. All of these achievements optimally position us to continue to attract top healthcare and technology talent. Diversity and Inclusiveness: We are committed to hiring, developing and supporting a diverse and inclusive workplace.
Additionally, Phreesia was named as one of 2023 Achievers 50 "Most Engaged Workplaces". Phreesia has also had representation on the Software Report's Top 50 Women Leaders in SaaS for the past six years. All of these achievements optimally position us to continue to attract top healthcare and technology talent.
We believe we are well-positioned to benefit from a number of prevailing industry tailwinds across our patient access, registration, revenue cycle and network connect solution areas.
Our growth strategies The success of our business depends on acquiring new clients and increasing utilization among our existing clients, which in turn drives growth across our solutions. We believe we are well-positioned to benefit from a number of prevailing industry tailwinds across our patient access, registration, revenue cycle and Network solution areas.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe 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.
Biggest changeThe Credit Agreement governing our Capital One Credit Facility contains various restrictive covenants that limit our ability to take certain actions, including, but not limited to, our ability to grant or incur liens, dispose of assets, incur additional indebtedness, make certain investments, restricted payments (including dividends), and restricted debt payments, enter into certain transactions with affiliates, and enter into certain mergers and acquisitions.
While we have risk mitigation efforts in place, the realization of any these risks could adversely affect our product development, operations, business and/or financial results and may require us to shift some of our development activities to other jurisdictions and/or third-party contractors, which may result in significant disruption, including delays in releases of new versions or updates of our software and incurrence of additional costs.
While we have risk mitigation efforts in place, the realization of any of these risks could adversely affect our product development, operations, business and/or financial results and may require us to shift some of our development activities to other jurisdictions and/or third-party contractors, which may result in significant disruption, including delays in releases of new versions or updates of our software and incurrence of additional costs.
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.
A breach 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.
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.
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; 49 • 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.
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 solutions; • 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.
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.
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 providing our products and services, require significant changes to our operations or even prevent us from offering certain services in specific jurisdictions.
Further, the security systems in place at our employees’ homes may be less secure than those used in our offices, and while we have implemented technical and administrative safeguards to help protect our systems as our employees and service providers work from home, we may be subject to increased cybersecurity risk, which could expose us to risks of data or financial loss and could disrupt our business operations.
Further, the security systems in place at our employees’ homes may be less secure than those used in our offices, 23 and while we have implemented technical and administrative safeguards to help protect our systems as our employees and service providers work from home, we may be subject to increased cybersecurity risk, which could expose us to risks of data or financial loss and could disrupt our business operations.
Non-compliance with applicable FDA requirements can result in, among other things, public warning letters, fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, failure of the FDA to grant marketing approvals, withdrawal of marketing approvals, a recommendation by the FDA to disallow us from entering into government contracts and criminal prosecutions.
Non-compliance with applicable FDA requirements can result in, among other things, public warning 40 letters, fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, failure of the FDA to grant marketing approvals, withdrawal of marketing approvals, a recommendation by the FDA to disallow us from entering into government contracts and criminal prosecutions.
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.
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 Ukraine.
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.
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.
Though it is difficult to determine what, if any, harm may directly result from any specific interruption or attack, any failure to maintain performance, reliability, security and availability of our products, or failure to prevent software bugs, to the satisfaction of our clients or the health and safety of their patients, such events may harm our reputation and our ability to retain existing clients, and negatively affect our clients and their patients.
Though it is difficult to determine what, if any, harm may directly result from any specific interruption or attack, any failure to maintain performance, 22 reliability, security and availability of our products, or failure to prevent software bugs, to the satisfaction of our clients or the health and safety of their patients, such events may harm our reputation and our ability to retain existing clients, and negatively affect our clients and their patients.
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.
Risks relating to our dependence on third parties 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.
Interruption or failure of our information technology and communications systems could impair our ability to effectively deliver our products and services, which could cause us to lose clients and harm our operating results. 33 Our business depends on the continuing operation of our technology infrastructure and systems. Proprietary software development is time-consuming, expensive and complex, and may involve unforeseen difficulties.
Interruption or failure of our information technology and communications systems could impair our ability to effectively deliver our products and services, which could cause us to lose clients and harm our operating results. Our business depends on the continuing operation of our technology infrastructure and systems. Proprietary software development is time-consuming, expensive and complex, and may involve unforeseen difficulties.
If our third-party suppliers fail to deliver the required quantities of materials on a timely basis and at commercially reasonable prices, and we are unable to find one or more replacement suppliers capable of production at a substantially equivalent cost in substantially equivalent volumes and quality on a timely basis, the supply of our products to clients and the development of any future products will be delayed, limited or prevented, which could have material adverse effect on our business, financial condition and results of operations. 43 We rely on Internet infrastructure, bandwidth providers, data center providers, other third parties and our own systems for providing services to our clients, and any failure or interruption in the services provided by these third parties or our own systems could expose us to litigation and negatively impact our relationships with clients, adversely affecting our brand and our business.
If our third-party suppliers fail to deliver the required quantities of materials on a timely basis and at commercially reasonable prices, and we are unable to find one or more replacement suppliers capable of production at a substantially equivalent cost in substantially equivalent volumes and quality on a timely basis, the supply of our products to clients and the development of any future products will be delayed, limited or prevented, which could have material adverse effect on our business, financial condition and results of operations. 44 We rely on Internet infrastructure, bandwidth providers, data center providers, other third parties and our own systems for providing services to our clients, and any failure or interruption in the services provided by these third parties or our own systems could expose us to litigation and negatively impact our relationships with clients, adversely affecting our brand and our business.
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.
Our market opportunity is also based on the assumption that the strategic approach that Phreesia 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.
Failing to comply with those requirements could leave our Company subject to claims, litigation, lawsuits and, ultimately, substantial fines and penalties. The healthcare regulatory and political framework is uncertain and evolving. 38 Healthcare laws and regulations are rapidly evolving and may change significantly in the future, which could adversely affect our financial condition and results of operations.
Failing to comply with those requirements could leave our Company subject to claims, litigation, lawsuits and, ultimately, substantial fines and penalties. The healthcare regulatory and political framework is uncertain and evolving. Healthcare laws and regulations are rapidly evolving and may change significantly in the future, which could adversely affect our financial condition and results of operations.
Achieving and sustaining compliance requires us to implement controls across our entire organization which may prove costly and challenging to monitor and enforce. 39 The risk of our being found in violation of healthcare laws and regulations is increased by the fact that their provisions are sometimes complex and open to a variety of interpretations.
Achieving and sustaining compliance requires us to implement controls across our entire organization which may prove costly and challenging to monitor and enforce. The risk of our being found in violation of healthcare laws and regulations is increased by the fact that their provisions are sometimes complex and open to a variety of interpretations.
If we cannot adapt to rapidly evolving industry standards and technology and increasingly sophisticated 20 and varied healthcare services organization and patient needs, our existing technology could become undesirable, obsolete or harm our reputation. We believe demand for our products and services has been driven in large part by increasing patient responsibility, engagement and consumerism.
If we cannot adapt to rapidly evolving industry standards and technology and increasingly sophisticated and varied healthcare services organization and patient needs, our existing technology could become undesirable, obsolete or harm our reputation. We believe demand for our products and services has been driven in large part by increasing patient responsibility, engagement and consumerism.
We may, over time, increase our investment in protecting our intellectual property through additional trademark, patent and other intellectual property filings that could be expensive and time-consuming. Effective trademark, trade-secret and copyright protection is expensive to develop and maintain, both in terms of initial and ongoing registration requirements and the costs of defending our rights.
We may, over time, increase our investment in protecting our intellectual property through additional trademark, patent and other intellectual 31 property filings that could be expensive and time-consuming. Effective trademark, trade-secret and copyright protection is expensive to develop and maintain, both in terms of initial and ongoing registration requirements and the costs of defending our rights.
If providers of EHR or PM solutions amend, terminate or fail to perform their obligations under their agreements with us, we may need to seek other ways of integrating our Platform with the EHR and PM systems of our healthcare services clients, which could be costly and time consuming, and could adversely affect our business results.
If providers of EHR or PM solutions amend, terminate or fail to perform their obligations under their agreements with us, we may need to seek other ways of integrating our solutions with the EHR and PM systems of our healthcare services clients, which could be costly and time consuming, and could adversely affect our business results.
Violations of the FCPA can also result in violations of other U.S. laws, including anti-money laundering, mail and wire fraud, and conspiracy laws. There are severe penalties for violating the FCPA. In addition, the Company may also be subject to other non-U.S. anti-corruption or anti-bribery laws, such as the U.K. Bribery Act 2010.
Violations of the FCPA can also result in violations of other U.S. laws, including anti-money laundering, mail and wire fraud, and conspiracy laws. There are severe penalties for violating the FCPA. The Company may also be subject to other non-U.S. anti-corruption or anti-bribery laws, such as the U.K. Bribery Act 2010.
If we fail to comply with the applicable requirements of card networks, they could seek to fine us, suspend us or terminate our payment facilitator status. If our clients or sales partners incur fines or penalties that we cannot collect from them, we may have to bear the cost of such fines or penalties.
If we fail to comply with the applicable requirements of card networks, they could seek to fine us, suspend 30 us or terminate our payment facilitator status. If our clients or sales partners incur fines or penalties that we cannot collect from them, we may have to bear the cost of such fines or penalties.
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.
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.
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.
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.
If we are subject to investigation or litigation related to an alleged violation of HIPAA, then we may elect to resolve the matter through a settlement. Such settlement could require payment of a civil penalty or damages, corrective action and/or monitoring of our business by a third party.
If we are subject to 35 investigation or litigation related to an alleged violation of HIPAA, then we may elect to resolve the matter through a settlement. Such settlement could require payment of a civil penalty or damages, corrective action and/or monitoring of our business by a third party.
This lack of clarity on future UK laws and regulations and their interaction with EU laws and regulations could add legal risk, uncertainty, complexity and cost to our handling of EU personal 36 information and our privacy and data security compliance programs and could require us to implement different compliance measures for the UK and the EU.
This lack of clarity on future UK laws and regulations and their interaction with EU laws and regulations could add legal risk, uncertainty, complexity and cost to our handling of EU personal information and our privacy and data security compliance programs and could require us to implement different compliance measures for the UK and the EU.
Accordingly, we may find it necessary or desirable to fundamentally change our business activities and practices or to expend significant resources to modify our software or Platform and otherwise adapt to these changes. We are also subject to self-regulatory standards and industry certifications that may legally or contractually apply to us.
Accordingly, we may find it necessary or desirable to fundamentally change our business activities and practices or to expend significant resources to modify our software and otherwise adapt to these changes. We are also subject to self-regulatory standards and industry certifications that may legally or contractually apply to us.
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.
Further, our clients may expect us to comply with more stringent privacy, data storage and data security requirements than those imposed by laws, 38 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.
The FCC, FTC, a state attorney general or other regulator, or a court, however, may disagree with our interpretation of these 40 laws and conclude that we are not in compliance and impose damages, civil penalties and other consequences upon us for noncompliance.
The FCC, FTC, a state attorney general or other regulator, or a court, however, may disagree with our interpretation of these laws and conclude that we are not in compliance and impose damages, civil penalties and other consequences upon us for noncompliance.
These contracts are typically structured as commercial and technical agreements, pursuant to which we integrate certain of our Platform solutions into the EHR and PM systems that are utilized by many of our clients, for agreed payments or provision of services to such providers of EHR and PM solutions.
These contracts are typically structured as commercial and technical agreements, pursuant to which we integrate certain of our solutions into the EHR and PM systems that are utilized by many of our clients, for agreed payments or provision of services to such providers of EHR and PM solutions.
In addition, while the Delaware Supreme Court and other states courts have upheld the validity of federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court, there is uncertainty as to whether other courts 50 will enforce our Federal Forum Provision.
In addition, while the Delaware Supreme Court and other states courts have upheld the validity of federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court, there is uncertainty as to whether other courts will enforce our Federal Forum Provision.
If we require a third-party license, it may not be available on reasonable terms or at all, and we may have to pay substantial royalties, upfront fees or grant cross-licenses to intellectual property rights for our products and services.
If we require a third-party license, it may not be 33 available on reasonable terms or at all, and we may have to pay substantial royalties, upfront fees or grant cross-licenses to intellectual property rights for our products and services.
In addition, we obtain a portion of the data that we use from government entities, public records and our partners for specific partner engagements. We believe that we have all rights necessary to use the data that is incorporated into our products and services.
In addition, we obtain a portion of the data that we use from government entities, public records and our partners for specific partner engagements. We believe that we have all rights necessary to use the data that is 32 incorporated into our products and services.
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.
Our operating results have in the past and may continue to fluctuate significantly and if we fail to meet the expectations of analysts or investors, our stock price and the value of your investment could decline substantially.
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.
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.
For example, in March 2010, the Patient Protection and Affordable Care Act ("ACA") was adopted, which is a healthcare reform measure that provides healthcare insurance for millions of Americans.
For example, in 2010, the Patient Protection and Affordable Care Act ("ACA") was adopted, which is a healthcare reform measure that provides healthcare insurance for millions of Americans.
We attempt to limit by contract our liability for damages and to require that our clients assume responsibility for medical care and approve key system rules, protocols and data.
We attempt to limit by contract our liability for damages and to require that our clients assume responsibility for medical care and 34 approve key system rules, protocols and data.
In addition, widespread investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all.
Widespread investor concerns regarding the U.S. or international financial systems could also result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all.
Some of our new-client set-up projects are complex and require a lengthy delay and significant implementation work, including to educate prospective clients about the uses and benefits of our Platform. Each customer’s situation is different, and unanticipated difficulties and delays may arise as a result of failure by us or by the client to meet our respective implementation responsibilities.
Some of our new-client set-up projects are complex and require a lengthy delay and significant implementation work, including to educate prospective clients about the uses and benefits of our solutions. Each customer’s situation is different, and unanticipated difficulties and delays may arise as a result of failure by us or by the client to meet our respective implementation responsibilities.
These factors could involve financial institutions or financial services industry companies with which we have financial or business relationships, but could also include factors involving financial markets or the financial services industry generally.
These 47 factors could involve financial institutions or financial services industry companies with which we have financial or business relationships, but could also include factors involving financial markets or the financial services industry generally.
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.
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 20 integrate our solutions with various EHR and PM systems and other technology.
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.
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 solutions, 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 solutions could damage our ability to expand the number of applications and services purchased by such clients.
It is unclear at this time what the costs of compliance with the final rules will be, and what additional risks there may be to our business. In addition, we are subject to various other laws and regulations, including, among others, anti-kickback laws, antitrust laws and the privacy and data protection laws described below.
It is unclear at this time what the costs of compliance with the Final Rule will be, and what additional risks there may be to our business. In addition, we are subject to various other laws and regulations, including, among others, anti-kickback laws, antitrust laws and the privacy and data protection laws described below.
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.
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 solutions. Following any such trial period, we aim to increase the number of healthcare services locations within the client that utilize our solutions.
Any unscheduled interruption in our service would result in an immediate loss of revenue. Frequent or persistent system failures that result in the unavailability of our Platform or slower response times could reduce our clients’ ability to access our Platform, impair our delivery of our products and services and harm the perception of our Platform as reliable, trustworthy and consistent.
Any unscheduled interruption in our service would result in an immediate loss of revenue. Frequent or persistent system failures that result in the unavailability of our solutions or slower response times could reduce our clients’ ability to access our solutions, impair our delivery of our products and services and harm the perception of our solutions as reliable, trustworthy and consistent.
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.
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 Capital One Credit Facility may restrict our ability to pursue our business strategies.
Privacy and data security concerns, whether valid or not valid, may inhibit retention of our Platform or services by existing clients or adoption of our Platform or services by new clients.
Privacy and data security concerns, whether valid or not valid, may inhibit retention of services by existing clients or adoption of our services by new clients.
Future laws, regulations, standards, obligations amendments, and changes in the interpretation of existing laws, regulations, standards and obligations could impair our or our clients’ ability to collect, use or disclose information relating to consumers, which could decrease demand for our Platform, increase our costs and impair our ability to maintain and grow our client base and increase our revenue.
Future laws, regulations, standards, obligations amendments, and changes in the interpretation of existing laws, regulations, standards and obligations could impair our or our clients’ ability to collect, use or disclose information relating to consumers, which could decrease demand for our solutions, increase our costs and impair our ability to maintain and grow our client base and increase our revenue.
Any of these circumstances could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations. 44 Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.
Any of these circumstances could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations. 45 Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.
Also, some of our products and services rely on technologies and software developed by or licensed from third parties. Any disruption or disturbance in such third-party products or services, which we have experienced in the past, could interrupt the operation of our Platform.
Also, some of our products and services rely on technologies and software developed by or licensed from third parties. Any disruption or disturbance in such third-party products or services, which we have experienced in the past, could interrupt the operation of our solutions.
Our systems and operations are vulnerable to damage or interruption from natural disasters or man-made problems, such as earthquakes, floods, fires, political unrest, acts of terrorism, armed conflict or war (such as the current Russian invasion of Ukraine), power loss, break-ins, hardware or software failures, telecommunications failures, computer viruses or other attempts to harm our systems and similar events.
Our systems and operations are vulnerable to damage or interruption from natural disasters or man-made problems, such as earthquakes, floods, fires, political unrest, acts of terrorism, armed conflict or war (such as the current Russian invasion of Ukraine and the conflict in the Middle East), power loss, break-ins, hardware or software failures, telecommunications failures, computer viruses or other attempts to harm our systems and similar events.
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.
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 solutions 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, the extent to which they opt-in to such communications, and our ability to deliver a consistent volume of 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; 21 • the timing, size and integration success of recent and 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.
The 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.
The 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; • regulatory developments; • litigation and governmental investigations; 48 • the impact of public health concerns 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 the conflict in the Middle East; and • our sale of common stock or other securities in the future.
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.
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 new solutions and operate as a public company.
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.
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 solutions.
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.
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 solutions and do not charge fees during this initial sales period.
Our ability to form and maintain these agreements in order to facilitate the integration of our Platform into the EHR and PM systems used by our healthcare services clients and their patients is important to the success of our business.
Our ability to form and maintain these agreements in order to facilitate the integration of our solutions into the EHR and PM systems used by our healthcare services clients and their patients is important to the success of 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.
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 solutions 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.
We also rely on third-party providers to enable automated eligibility and benefits verification through our Platform, and we outsource certain of our software development and design, quality assurance and operations activities to third-party contractors that have employees and consultants in international locations that may be subject to political and economic instability, including India, Russia and Ukraine.
We also rely on third-party providers to enable automated eligibility and benefits verification through our solutions, and we outsource certain of our software development and design, quality assurance and operations activities to third-party contractors that have employees and consultants in international locations that may be subject to political and economic instability, including India and Ukraine.
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 we cannot implement our solutions 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 we must support our clients’ data formats.
Our clients and patients depend on our support services to resolve any technical issues relating to the Phreesia Platform and our services, and we may be unable to respond quickly enough to accommodate short-term increases in demand for support services, particularly as we increase the size of our client bases (including healthcare services clients and the number of patients that they serve).
Our clients and patients depend on our support services to resolve any technical issues relating to our solutions and our services, and we may be unable to respond quickly enough to accommodate short-term increases in demand for support services, particularly as we increase the size of our client bases (including healthcare services clients and the number of patients that they serve).
The final rules are intended to clarify and operationalize provisions of the 21st Century Cures Act ("Cures Act"), regarding interoperability and “information blocking,” and create significant new requirements for health care industry participants.
The Final Rules is intended to clarify and operationalize provisions of the 21st Century Cures Act ("Cures Act"), regarding interoperability and “information blocking,” and create significant new requirements for health care industry participants.
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.
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 solutions or our services to decrease our costs.
If the number of patients utilizing our payment systems, or the aggregate amounts paid by such patients directly to our healthcare services clients through the Phreesia Platform, were to be reduced by a material amount, such decrease would lead to a decrease in our revenue, which could harm our business, financial condition and results of operations.
If the number of patients utilizing our payment systems, or the aggregate amounts paid by such patients directly to our healthcare services clients through our solutions, were to be reduced by a material amount, such decrease would lead to a decrease in our revenue, which could harm our business, financial condition and results of operations.
In addition, volatility or lack of performance in our stock price may affect our ability to attract replacement should key personnel depart. We may make future acquisitions and investments which may be difficult to integrate, divert management resources, result in unanticipated costs or dilute our stockholders.
In addition, volatility or lack of performance in our stock price may affect our ability to attract replacement should key personnel depart. We have made, and may in the future make, acquisitions and investments which may be difficult to integrate, divert management resources, result in unanticipated costs or dilute our stockholders.
Following a ruling from the Court of Justice of the EU, in Data Protection Commissioner v Facebook Ireland Limited and Maximillian Schrems, Case C-311/18 ("Schrems II"), companies relying on standard contractual clauses to govern transfers of personal data to third countries (in particular the United States) will need to assess whether the data importer can ensure sufficient guarantees for safeguarding the personal data under GDPR.
Following a ruling from the Court of Justice of the EU, in Data Protection Commissioner v Facebook Ireland Limited and Maximillian Schrems, Case C-311/18 ("Schrems II"), companies relying on SCCs to govern transfers of personal data to third countries (in particular the United States) will need to assess whether the data importer can ensure sufficient guarantees for safeguarding the personal data under GDPR.
Numerous complex federal and state laws and regulations govern the collection, use, disclosure, storage and transmission of personally identifiable information, including protected health information. State laws may be even more restrictive and not preempted by HIPAA, and may be subject to varying interpretations by the courts and government agencies.
Numerous complex federal and state laws and regulations govern the collection, use, disclosure, storage and transmission of personally identifiable information, including protected health information. State laws may be even more restrictive and not preempted by HIPAA,(as defined below), and may be subject to varying interpretations by the courts and government agencies.
We or the providers of EHR and PM solutions with which we contract may terminate or seek to amend our agreements in order to incorporate new final rules promulgated on March 9, 2020 by the HHS, ONC, and CMS, which are further described above and are aimed at supporting seamless and secure access, exchange, and use of EHI by increasing innovation and competition by giving patients and their healthcare service providers secure access to health information and new tools, allowing for more choice in care and treatment.
We or the providers of EHR and PM solutions with which we contract may terminate or seek to amend our agreements in order to incorporate the Final Rules promulgated in 2020 by the HHS, ONC, and CMS, which is further described above and is aimed at supporting seamless and secure access, exchange, and use of EHI by increasing innovation and competition by giving patients and their healthcare service providers secure access to health information and new tools, allowing for more choice in care and treatment.
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.
As of January 31, 2023, we had U.S. federal and state net operating loss carryforwards ("NOLs") of $599.0 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.
We enter into agreements with our healthcare services clients, under which a significant portion of our fees are variable, including fees which are dependent upon the number of add-on features to the Phreesia Platform subscribed for by our clients and the number of patients utilizing our payment processing tools.
We enter into agreements with our healthcare services clients, under which a significant portion of our fees are variable, including fees which are dependent upon the number of add-on features subscribed for by our clients and the number of patients utilizing our payment processing tools.
If our existing clients do not recognize or acknowledge the benefits of our Platform or our Platform does not drive patient engagement, then the market for our products and services might develop more slowly than we expect, which could adversely affect our operating results.
If our existing clients do not recognize or acknowledge the benefits of our solutions or our solutions do not drive patient engagement, then the market for our products and services might develop more slowly than we expect, which could adversely affect our operating results.
Our success also depends on the ability of our Platform to increase patient engagement, and our ability to demonstrate the value of our Platform to healthcare services clients, patients and life sciences companies.
Our success also depends on the ability of our solutions to increase patient engagement, and our ability to demonstrate the value of our solutions to healthcare services clients, patients and life sciences companies.
We typically enter into annual contracts with our clients, which have a stated initial term of one year and automatically renew for one-year subsequent terms. Most of our clients have no obligation to renew their subscriptions for our Platform solution after the initial term expires.
We typically enter into annual contracts with our clients, which have a stated initial term of one year and automatically renew for one-year subsequent terms. Most of our clients have no obligation to renew their subscriptions for our solutions after the initial term expires.
If our Platform does not currently support a client’s required data format or appropriately integrate with clients’ systems, then we must configure our Platform to do so, which could increase our expenses. Additionally, we do not control our clients’ implementation schedules.
If we do not currently support a client’s required data format or appropriately integrate with clients’ systems, then we must configure our solutions to do so, which could increase our expenses. Additionally, we do not control our clients’ implementation schedules.
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.
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 inability to generate revenue from licensed technology sufficient to offset associated acquisition and maintenance costs.
The final rule implementing the Durbin Amendment established standards for assessing whether debit card interchange fees received by debit card issuers were reasonable and proportional to the costs incurred by issuers for electronic debit transactions, and it established a maximum permissible interchange fee that an issuer may receive for an electronic debit transaction, limiting the fee revenue to debit card issuers and payment processors.
The original regulations implementing the Durbin Amendment established standards for assessing whether debit card interchange fees received by debit card issuers were reasonable and proportional to the costs incurred by issuers for electronic debit transactions, and it established a maximum permissible interchange fee that an issuer may receive for an electronic debit transaction, limiting the fee revenue to debit card issuers and payment processors.
We rely on third-party suppliers and contract manufacturers for the materials and components used to operate our Phreesia Platform and product offerings, and to manufacture and assemble our hardware, including the PhreesiaPad and our on-site kiosks, which we refer to as Arrivals Kiosks.
We rely on third-party suppliers and contract manufacturers for the materials and components used to operate our solutions and product offerings, and to manufacture and assemble our hardware, including the PhreesiaPad and our on-site kiosks, which we refer to as Arrivals Kiosks.
Due to the particular nature of certain services we provide or the manner in which we provide them, we may be subject to additional government regulation and foreign government regulation. While our Platform is primarily subject to government regulations pertaining to healthcare, certain aspects of our Platform may require us to comply with regulatory schema from other areas.
Due to the particular nature of certain services we provide or the manner in which we provide them, we may be subject to additional government regulation and foreign government regulation. While our solutions are primarily subject to government regulations pertaining to healthcare, certain aspects of our solutions may require us to comply with regulatory schema from other areas.
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.
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 solutions incorporate encryption technology. The U.S.
Our dependence on Rayden, DataArt and other third-party contractors to support key functions of our business creates numerous risks, in particular, the risk that we may not maintain service quality, control or effective management with respect to these operations.
Our dependence on third-party contractors to support key functions of our business creates numerous risks, in particular, the risk that we may not maintain service quality, control or effective management with respect to these operations.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 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.
Biggest changeItem 2. Properties We are a fully remote company and do not 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. We maintain a mailing address at 1521 Concord Pike, Suite 301, PMB 221, Wilmington, DE 19803.
Removed
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.

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. 51 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. 52 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe 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.
Biggest changeStockholders We had approximately 42 stockholders of record as of March 15, 2024; however, because many of our outstanding shares are held in accounts with brokers and other institutions, we believe we have more beneficial owners.
This number of holders of record also does not include stockholders whose shares may be held in trust by other entities. Dividend Policy We have never declared or paid any cash dividends on our common stock.
This number of holders of record also does not include stockholders whose shares may be held in trust by other entities. 53 Dividend Policy We have never declared or paid any cash dividends on our common stock.
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.
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, 2024 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.
Additionally, our ability to pay dividends on our common stock is limited by restrictions under the terms of the Third SVB Facility. Securities Authorized for Issuance Under Equity Compensation Plans Information about our equity compensation plans in Item 12 of Part III of this Annual Report on Form 10-K is incorporated herein by reference. Recent Sales of Unregistered Securities None.
Additionally, our ability to pay dividends on our common stock is limited by restrictions under the terms of the Capital One Credit Facility. Securities Authorized for Issuance Under Equity Compensation Plans Information about our equity compensation plans in Item 12 of Part III of this Annual Report on Form 10-K is incorporated herein by reference.
Such 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.
Such 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. 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.
Issuer Purchases of Equity Securities Not applicable. Use of Proceeds from Sales of Registered Securities Not applicable. Item 6. Reserved Not applicable. 53
Recent Sales of Unregistered Securities There were no sales of unregistered securities during the fiscal year ended January 31, 2024 that were not previously reported on a Current Report on Form 8-K. Issuer Purchases of Equity Securities Not applicable. Use of Proceeds from Sales of Registered Securities Not applicable. Item 6. Reserved Not applicable. 54

Item 7. Management's Discussion & Analysis

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

101 edited+34 added−48 removed48 unchanged
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.
Biggest changeThe change in net cash used in operating activities was driven primarily by an increase in cash received from customers driven by higher revenues, higher interest income on money market mutual funds we held during the year ended January 31, 2024 and lower employee compensation costs, primarily due to lower average employee headcount, partially offset by higher outside services costs and acquisition-related costs.
Payment processing expense Payment processing expense consists primarily of interchange fees set by payment card networks and that are ultimately paid to the card-issuing financial institution, assessment fees paid to payment card networks, and fees paid to third-party payment processors and gateways.
Payment processing expense Payment processing expense consists primarily of interchange fees set by payment card networks that are ultimately paid to the card-issuing financial institution, assessment fees paid to payment card networks, and fees paid to third-party payment processors and gateways.
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.
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 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.
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.
However, as we do not typically transfer our performance obligations on a standalone basis, but rather we transfer bundles of performance 68 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.
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.
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.
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.
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.
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.
During the fiscal year ended January 31, 2023, cash provided by 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.
We continue to collect information and reevaluate these estimates and assumptions quarterly and record any adjustments to our preliminary estimates to goodwill provided that we are within the measurement period.
We continue to collect information and reevaluate these estimates and assumptions quarterly and record any adjustments to our estimates to goodwill provided that we are within the measurement period.
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 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 55 of healthcare-related services.
Cost of revenue (excluding depreciation and amortization) Our cost of revenue primarily consists of personnel costs, including salaries, stock-based compensation, benefits and bonuses for implementation and technical support, and infrastructure costs to operate our Platform such as hosting fees and fees paid to various third-party providers for access to their technology, as well as costs to verify insurance eligibility and benefits.
Cost of revenue (excluding depreciation and amortization) Our cost of revenue (excluding depreciation and amortization) primarily consists of personnel costs, including salaries, stock-based compensation, benefits and bonuses for implementation and technical support, and infrastructure costs to operate our solutions such as hosting fees and fees paid to various third-party providers for access to their technology, as well as costs to verify insurance eligibility and benefits.
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.
PSUs granted during fiscal 2024, 2023 and 2022 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.
Payment processing expense may increase as a percentage of payment processing revenue if card networks raise pricing for interchange and assessment fees or if we reduce pricing to our clients. Sales and marketing Sales and marketing expense consists primarily of personnel costs, including salaries, stock-based compensation, commissions, bonuses and benefits costs for our sales and marketing personnel.
Payment processing expense may increase as a percentage of payment processing revenue if card networks raise pricing for interchange and assessment fees or if we reduce pricing to our clients. Sales and marketing Sales and marketing expense consists primarily of personnel costs, including salaries, stock-based compensation, benefits, bonuses and commission costs for our sales and marketing personnel.
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.
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, 2024 and 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.
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.
We believe that there will not be significant changes to our estimates of variable consideration as of January 31, 2024. 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.
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.
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, 2023 for a comparison of the year ended January 31, 2023 to the year ended January 31, 2022.
General and administrative expense also includes software costs to support our finance, legal and human resources operations, insurance costs as well as fees to third-party providers for accounting, legal and consulting services, costs for various non income-based taxes and allocated overhead.
General and administrative expense also includes software costs to support our finance, legal and human resources operations, insurance costs as well as fees to third-party providers for accounting, legal and consulting services, costs for various non income-based taxes and software costs.
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 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 solutions to healthcare services organizations that are not yet clients.
We believe the areas in which we apply the most critical judgements when determining revenue recognition relate to the identification of distinct performance obligations, the assessment of the standalone selling price (“SSP”) for each performance obligation identified, the determination of the amount of variable consideration to include in the transaction price of our contracts with customers and the determination of whether we are the principal or the agent for certain performance obligations.
We believe the areas in which we apply significant judgements when determining revenue recognition relate to the identification of distinct performance obligations, the assessment of the standalone selling price (“SSP”) for each performance obligation identified, the determination of the amount of variable consideration to include in the transaction price of our contracts with customers and the determination of whether we are the principal or the agent for certain performance obligations.
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.
Material Cash Requirements Our material cash requirements relate to human capital, contractual purchase commitments, payments on deferred consideration liabilities, leases and financing arrangements. 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 and deferred consideration liabilities.
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.
References to fiscal 2024 and 2023 refer to the fiscal years ended January 31, 2024 and 2023, respectively. Basis of Presentation This management's discussion and analysis discusses our financial condition and results of operations for the years ended January 31, 2024 and 2023.
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.
For example, as AHSCs increase, we may need to add to our customer support team and invest to maintain effectiveness and performance of our solutions 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.
We define Healthcare services revenue per AHSC as healthcare services revenue in a given period divided by AHSCs during that same period. We are focused on continually delivering value to our healthcare services clients and believe that our ability to increase healthcare services revenue per AHSC is an indicator of the long-term value of the Phreesia Platform.
We define Healthcare services revenue per AHSC as healthcare services revenue in a given period divided by AHSCs during that same period. We are focused on 57 continually delivering value to our healthcare services clients and believe that our ability to increase healthcare services revenue per AHSC is an indicator of the long-term value of our solutions.
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.
We derive revenue from (i) subscription fees from healthcare services clients for access to our solutions and related professional services fees, (ii) payment processing fees based on levels of patient payment volume processed through our solutions 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 our solutions.
Capitalized internal-use software We capitalize certain costs incurred for the development of computer software for internal use pursuant to ASC Topic 350-40, Intangibles—Goodwill and Other—Internal use software. These costs relate to the development of our Phreesia Platform.
Capitalized internal-use software We capitalize certain costs incurred for the development of computer software for internal use pursuant to ASC Topic 350-40, Intangibles—Goodwill and Other—Internal use software. These costs relate to the development of our solutions.
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.
Credit and debit patient payment volume processed through our payment facilitator model represented 82% and 80% of our patient payment volume in fiscal 2024 and 2023, 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.
We generate revenue from payment processing fees based on the number of transactions and the levels of patient payment volume processed through the Phreesia Platform. Payment processing fees are generally calculated as a percentage of the total transaction dollar value processed and/or a fee per transaction.
We generate revenue from payment processing fees based on the number of transactions and the levels of patient payment volume processed through our solutions. Payment processing fees are generally calculated as a percentage of the total transaction dollar value processed and/or a fee per transaction.
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.
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 substantially all of our deferred tax assets as of January 31, 2024 will not be realized in the near term.
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.
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 and improve health outcomes by helping patients take a more active role in their care.
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.
We generate revenue from life sciences and payer clients for delivering direct communications to patients. 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.
Recent geopolitical uncertainty resulting, in part, from military conflict between Russia and Ukraine as well as other macro-economic conditions, such as the impact of pandemics, increased interest rates, inflation in the cost of goods, services and labor, or a recession or an economic slowdown in the U.S. or internationally have contributed to significant volatility and decline in global financial markets during fiscal 2023.
Recent geopolitical uncertainty resulting, in part, from military conflict between Russia and Ukraine and the conflict in the Middle East, as well as other macro-economic conditions, such as the impact of pandemics, increased interest rates, inflation in the cost of goods, services and labor, or a recession or an economic slowdown in the U.S. or internationally have contributed to significant volatility and declines in global financial markets.
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.
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. Amortization Amortization primarily represents amortization of our capitalized internal-use software related to our solutions as well as amortization of acquired intangible assets.
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.
We derive revenue from subscription fees and related services generated from our healthcare services clients for access to our solutions, payment processing fees based on the levels of patient payment volume we process, 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.
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.
The increase resulted primarily from the increase in payment processing fees revenue and patient payments processed through our solutions, each driven by an increase in patient visits over the prior year.
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.
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. 64 Because of these and other limitations, you should consider Adjusted EBITDA along with other GAAP-based financial performance measures, including various cash flow metrics, net loss, and our GAAP financial results.
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.
Our subscription and related services revenue from healthcare services organizations increased $36.5 million to $165.4 million for fiscal 2024, as compared to $129.0 million for fiscal 2023, primarily due to new healthcare services clients added in fiscal 2024 as well as expansion of and cross-selling to existing healthcare services clients. • Payment processing fees.
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.
During the fiscal year ended January 31, 2024, net cash used in operating activities was $32.4 million, as our cash paid to employees and suppliers exceeded our cash received from customers in connection with our normal operations.
We granted market-based PSUs during fiscal 2021, 2022 and 2023. 69 PSUs vest in between 0% and 220% of the number of PSUs originally granted based on our total stockholder return ("TSR"), relative to a peer group of companies on the Russell 3000 stock index.
Stock-based compensation for market-based performance stock units ("PSUs") We granted market-based PSUs during fiscal 2022, 2023 and 2024. PSUs vest in between 0% and 220% of the number of PSUs originally granted based on our total stockholder return ("TSR"), relative to a peer group of companies on the Russell 3000 stock index.
Research and development Research and development expense consists of costs to develop our products and services that do not meet the criteria for capitalization as internal-use software. These costs consist primarily of personnel costs, including salaries, stock-based compensation, benefits and bonuses for our development personnel.
Research and development Research and development expense consists of costs to develop our products and services that do not meet the criteria for capitalization as internal-use software. These costs consist primarily of personnel costs, including salaries, stock-based compensation and benefits for our development personnel. Research and development expense also includes third-party partner fees and third-party consulting fees.
The primary uses of cash for operating activities are for payroll, payments to suppliers and employees, payments for operating leases, as well as cash paid for interest on our finance leases and other borrowings and cash paid for various sales, property and income taxes.
The primary uses of cash for operating activities are for payroll, payments to suppliers, payments for operating leases, as well as cash paid for interest on our finance leases and other financings and cash paid for various taxes.
Our direct sales force executes on these qualified sales leads, partnering with client services to ensure prospects are educated on the breadth of our capabilities and demonstrable value proposition, with the goal of attracting and retaining clients and expanding their use of our Platform over time. Most of our Platform solutions are contracted pursuant to annual, auto-renewing agreements.
Our sales force executes on these qualified sales leads, partnering with sales enablement and client services to ensure prospects are educated on the breadth of our capabilities and demonstrable value proposition, with the goal of attracting and retaining clients and expanding their use of our solutions over time.
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.
Our revenue from patient payments processed through our solutions increased $16.2 million to $94.6 million for fiscal 2024, as compared to $78.4 million for fiscal 2023, due to the addition of new healthcare services clients, which drove increases in patient visits and patient payments processed through our platform. • Network solutions.
Our total revenue consists of the following: • Subscription and related services. We primarily generate subscription fees from our healthcare services clients based on the number of healthcare services clients that subscribe to and utilize the Phreesia Platform.
Our total revenues consist of the following: • Subscription and related services. We primarily generate subscription fees from our healthcare services clients based on the number of healthcare services clients that subscribe to and utilize our solutions.
Our healthcare services clients directly generate subscription and related services and payment processing revenue. Additionally, our relationships with healthcare services clients who subscribe to the Phreesia Platform give us the opportunity to engage with life sciences companies, health plans and other payer organizations, patient advocacy, public interest and other not-for-profit organizations who deliver direct communication to patients through our Platform.
Additionally, our relationships with healthcare services clients who subscribe to our technology give us the opportunity to engage with life sciences companies, health plans and other payer organizations, patient advocacy, public interest and other not-for-profit organizations who deliver direct communication to patients through our solutions.
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.
We define Adjusted EBITDA as net income or loss before interest income (expense), net, provision for income taxes, depreciation and amortization, and before stock-based compensation expense, loss on extinguishment of debt and other income (expense) net. We have provided below a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure.
Healthcare services revenue per AHSC was $72,599 for the year ended January 31, 2023 compared to $77,478 for the year ended January 31, 2022, a decrease of $4,879. The decline was primarily driven by AHSC growth significantly outpacing payment processing volume and payment processing revenue growth.
Healthcare services revenue per AHSC was $72,215 for the year ended January 31, 2024 compared to $72,599 for the year ended January 31, 2023, a decrease of $384. The decline was primarily driven by AHSC growth significantly outpacing growth in payment processing volume and payment processing revenue. • Total Revenue per AHSC.
Stock compensation incurred related to sales and marketing expense was $22.2 million and $12.5 million for fiscal 2023 and fiscal 2022, respectively.
Stock compensation incurred related to sales and marketing expense was $26.0 million and $22.2 million for fiscal 2024 and fiscal 2023, respectively.
Stock compensation incurred related to research and development expense was $11.8 million and $6.0 million in fiscal 2023 and fiscal 2022, respectively.
Stock compensation incurred related to research and development expense was $17.4 million and $11.8 million in fiscal 2024 and fiscal 2023, respectively.
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.
Our revenue from life science and payer clients increased $22.7 million to $96.3 million for fiscal 2024, as compared to $73.6 million for fiscal 2023 due to an increase in engagement, education programs and deeper patient outreach among the existing programs.
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.
The increase in provision for income taxes relates primarily to an increase in Canadian income tax expense. Non-GAAP financial measures Adjusted EBITDA is a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP.
As a result, we believe that our ability to increase Total revenue per AHSC is an indicator of the long-term value of the Phreesia Platform. Total revenue per AHSC was $98,358 for the year ended January 31, 2023 compared to $102,812 for the year ended January 31, 2022, 56 a decrease of $4,454.
As a result, we believe that our ability to increase Total revenue per AHSC is an indicator of the long-term value of our solutions. Total revenue per AHSC was $98,944 for the year ended January 31, 2024 compared to $98,358 for the year ended January 31, 2023, an increase of $586.
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.
Financial Highlights Fiscal 2024 • Total revenue increased 27% to $356.3 million in fiscal 2024 compared with $280.9 million in fiscal 2023. • Net loss was $136.9 million in fiscal 2024 compared with $176.1 million in fiscal 2023. • Adjusted EBITDA was negative $35.4 million in fiscal 2024 compared with negative $92.5 million in fiscal 2023. • Cash used in operating activities was $32.4 million in fiscal 2024 compared with cash used in operating activities of $90.1 million in fiscal 2023. • Free cash flow was negative $57.5 million in fiscal 2024 compared with negative $116.3 million in fiscal 2023. • Cash and cash equivalents was $87.5 million as of January 31, 2024 compared with $176.7 million as of January 31, 2023.
Other expense, net is comprised primarily of foreign exchange losses.
Other income (expense) is comprised primarily of foreign exchange gains and losses.
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 .
Other income (expense), net Our other income and expense line items consist of the following: 60 • Other income (expense), net . Other income (expense), net consists of foreign currency-related gains and losses and other miscellaneous income (expense). • Loss on extinguishment of debt.
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.
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) 2024 2023 Net loss $ (136,885) $ (176,146) Interest income, net (2,211) (1,064) Provision for income taxes 1,543 483 Depreciation and amortization 29,487 25,304 Stock-based compensation expense 71,613 58,775 Loss on extinguishment of debt 1,118 — Other (income) expense, net (44) 175 Adjusted EBITDA $ (35,379) $ (92,473) 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.
The Third SVB Facility includes financial covenants including, but not 64 limited to requiring us to maintain a minimum Adjusted Quick Ratio and limiting the amount of cash and cash equivalents we hold outside SVB, each as defined in the Third SVB Facility.
The Capital One Credit Facility includes financial covenants including, but not limited to requiring us to maintain minimum Consolidated EBITDA, minimum Liquidity, a minimum Consolidated Fixed Charge Coverage Ratio and limiting the amount of cash and cash equivalents we hold outside Capital One, each as defined in the Credit Agreement.
Refer to Note 6 - Finance leases and other debt, Note 10 - Leases and Note 11 - Commitments and contingencies in Part II - Item 8 of this Annual Report on Form 10-K for additional information on cash requirements for leases, financing arrangements and contractual purchase commitments.
Refer to Note 6 - Finance leases and other debt, Note 10 - Leases and Note 11 - Commitments and contingencies in Part II - Item 8 of this Annual Report on Form 10-K for additional information on cash requirements for leases, financing arrangements and contractual purchase commitments. 67 Critical accounting policies and estimates The preparation of the consolidated financial statements in conformity with GAAP requires us to make certain estimates and assumptions.
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.
Stock compensation incurred related to general and administrative expense was $23.7 million and $21.2 million in fiscal 2024 and fiscal 2023, respectively. 62 Depreciation Fiscal years ended January 31, (in thousands) 2024 2023 $ Change % Change Depreciation $ 17,584 $ 17,988 $ (404) (2 %) Depreciation expense decreased $0.4 million to $17.6 million for fiscal 2024, as compared to $18.0 million for fiscal 2023.
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.
Interest income, net Fiscal years ended January 31, (in thousands) 2024 2023 $ Change % Change Interest income, net $ 2,211 $ 1,064 $ 1,147 108 % Interest income, net increased by $1.1 million to $2.2 million for fiscal 2024, as compared to $1.1 million for fiscal 2023.
In future periods, if we conclude we have future taxable income sufficient to realize the deferred tax assets, we may reduce or eliminate the valuation allowance.
Consequently, we have established a valuation allowance against our deferred tax assets that are not more likely than not to be realized. In future periods, if we conclude we have future taxable income sufficient to realize the deferred tax assets, we may reduce or eliminate the valuation allowance.
While none of these factors individually has had a material impact on our business to date, it is difficult to predict the potential impact these factors may have on our future business results, and each could adversely impact our business operations, financial performance and results of operations. 55 Key Metrics We regularly review the following key metrics to measure our performance, identify trends affecting our business, formulate financial projections, make strategic business decisions and assess working capital needs.
While none of these factors individually has had a material impact on our business to date, it is difficult to predict the potential impact these factors may have on our future business results, and each could adversely impact our business operations, financial performance and results of operations.
New healthcare services clients are defined as clients that go live in the applicable period and existing healthcare services clients are defined as clients that go live in any period before the applicable period.
Our revenue growth has been primarily organic and reflects our significant addition of new healthcare services clients. New healthcare services clients are defined as clients that go live in the applicable period and existing healthcare services clients are defined as clients that go live in any period before the applicable period.
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.
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.
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.
Sales and marketing Fiscal years ended January 31, (in thousands) 2024 2023 $ Change % Change Sales and marketing $ 147,008 $ 151,263 $ (4,255) (3 %) Sales and marketing expense decreased $4.3 million to $147.0 million for fiscal 2024, as compared to $151.3 million for fiscal 2023.
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.
Payment facilitator volume is a major driver of our payment processing revenue. 58 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) 2024 2023 2024 2023 Revenue Subscription and related services $ 165,436 $ 128,975 46 % 46 % Payment processing fees 94,610 78,368 27 % 28 % Network solutions 96,253 73,567 27 % 26 % Total revenues 356,299 280,910 100 % 100 % Expenses Cost of revenue (excluding depreciation and amortization) 61,025 58,944 17 % 21 % Payment processing expense 62,986 50,323 18 % 18 % Sales and marketing 147,008 151,263 41 % 54 % Research and development 112,346 91,244 32 % 32 % General and administrative 79,926 80,384 22 % 29 % Depreciation 17,584 17,988 5 % 6 % Amortization 11,903 7,316 3 % 3 % Total expenses 492,778 457,462 138 % 163 % Operating loss (136,479) (176,552) (38) % (63) % Other income (expense), net 44 (175) — % — % Loss on extinguishment of debt (1,118) — — % — % Interest income, net 2,211 1,064 1 % — % Total other income, net 1,137 889 — % — % Loss before provision for income taxes (135,342) (175,663) (38) % (63) % Provision for income taxes (1,543) (483) — % — % Net loss $ (136,885) $ (176,146) (38) % (63) % Components of statements of operations Revenue We generate revenue primarily from providing an integrated SaaS-based software and payment platform for the healthcare industry.
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.
Cost of revenue (excluding depreciation and amortization) Fiscal years ended January 31, (in thousands) 2024 2023 $ Change % Change Cost of revenue (excluding depreciation and amortization) $ 61,025 $ 58,944 $ 2,081 4 % Cost of revenue (excluding depreciation and amortization) increased $2.1 million to $61.0 million for fiscal 2024, as compared to $58.9 million for fiscal 2023.
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.
Research and development Fiscal years ended January 31, (in thousands) 2024 2023 $ Change % Change Research and development $ 112,346 $ 91,244 $ 21,102 23 % Research and development expense increased $21.1 million to $112.3 million for fiscal 2024, as compared to $91.2 million for fiscal 2023.
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.
Since our inception, we have focused substantially all of our sales efforts within the United States. 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.
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.
Payment processing expense Fiscal years ended January 31, (in thousands) 2024 2023 $ Change % Change Payment processing expense $ 62,986 $ 50,323 $ 12,663 25 % Payment processing expense increased $12.7 million to $63.0 million for fiscal 2024, as compared to $50.3 million for fiscal 2023.
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.
Financing activities During the fiscal year ended January 31, 2024, net cash used in financing activities was $17.1 million, primarily consisting of $12.2 million used for treasury stock to satisfy tax withholdings on stock compensation awards, $7.4 million used for principal payments on finance leases and financing arrangements, $2.1 million used for debt issuance costs, facility fees and debt extinguishment costs, and $1.3 million used for principal payments of acquisition-related liabilities, partially offset by $4.2 million in proceeds from our equity compensation plans and $1.7 million constructive financing related to our software financing arrangement.
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.
The decrease was primarily attributable to lower computer equipment depreciation. Amortization Fiscal years ended January 31, (in thousands) 2024 2023 $ Change % Change Amortization $ 11,903 $ 7,316 $ 4,587 63 % Amortization expense increased $4.6 million to $11.9 million for fiscal 2024, as compared to $7.3 million for fiscal 2023.
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.
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.
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 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. Recent accounting pronouncements In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2023-07, Segment Reporting.
The following table summarizes our sources and uses of cash for each of the periods presented: Fiscal years ended January 31, (in thousands) 2023 2022 Net cash used in operating activities $ (90,123) $ (74,710) Net cash used in investing activities (26,203) (65,228) Net cash (used in) provided by financing activities (20,803) 234,969 Net (decrease) increase in cash and cash equivalents $ (137,129) $ 95,031 Operating activities The primary sources of cash from operating activities are cash received from our customers and interest earned on our money market mutual funds.
See Note 16 - Acquisitions of this Annual Report on Form 10-K for additional information regarding the acquisition of ConnectOnCall. 66 The following table summarizes our sources and uses of cash for each of the periods presented: Fiscal years ended January 31, (in thousands) 2024 2023 Net cash used in operating activities $ (32,378) $ (90,123) Net cash used in investing activities (39,670) (26,203) Net cash used in financing activities (17,115) (20,803) Net decrease in cash and cash equivalents $ (89,163) $ (137,129) Operating activities The primary sources of cash from operating activities are cash received from our customers and interest earned on our money market mutual funds.
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 - Summary of significant accounting policies in Part II - Item 8 of this Annual Report on Form 10-K for a discussion of recent accounting pronouncements.
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.
The increase resulted primarily from a $6.1 million increase in outside services and other third-party costs driven by growth in revenue and a $0.9 million increase in employee stock compensation costs, partially offset by a $4.7 million decrease in employee salary and benefits costs driven by lower headcount. 61 Stock compensation incurred related to cost of revenue was $4.6 million and $3.7 million for fiscal 2024 and fiscal 2023, respectively.
For PSUs granted during the fiscal years ended January 31, 2022 and 2021, the expected volatility was based on historical volatilities of peer companies within our industry which were commensurate with the simulation term assumption. Recent accounting pronouncements There are no recently issued accounting pronouncements that we have not yet adopted that will materially impact our consolidated financial statements.
For PSUs granted during the fiscal year ended January 31, 2022, the expected volatility was based on historical volatilities of peer companies within our industry which were commensurate with the simulation term assumption.
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.
General and administrative Fiscal years ended January 31, (in thousands) 2024 2023 $ Change % Change General and administrative $ 79,926 $ 80,384 $ (458) (1 %) General and administrative expense decreased $0.5 million to $79.9 million for fiscal 2024, as compared to $80.4 million for fiscal 2023.
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.
We define AHSCs as the average number of clients that generate subscription and related services or payment processing 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.
Research and development expense also includes third-party partner fees and third-party consulting fees, offset by any internal-use software development cost capitalized during the same period. General and administrative General and administrative expense consists primarily of personnel costs, including salaries, stock-based compensation, bonuses and benefits for our executive, finance, legal, security, human resources, information technology and other administrative personnel.
General and administrative General and administrative expense consists primarily of personnel costs, including salaries, stock-based compensation and benefits for our executive, finance, legal, security, human resources, information technology and other administrative personnel.
The increase was primarily driven by higher amortization of acquired intangible assets. Other expense, net Fiscal years ended January 31, (in thousands) 2023 2022 $ Change % Change Other expense, net $ (175) $ (78) $ (97) 124 % Other expense, net increased by $0.1 million to $0.2 million for fiscal 2023 as compared to $0.1 million for fiscal 2022.
Other income (expense), net Fiscal years ended January 31, (in thousands) 2024 2023 $ Change % Change Other income (expense), net $ 44 $ (175) $ 219 (125 %) Other income (expense), net was income of less than $0.1 million for fiscal 2024 as compared to expense of $0.2 million for fiscal 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−2 removed2 unchanged
Biggest changeForeign currency exchange risk We have foreign currency risks related to our expenses denominated in Canadian dollars, which are subject to fluctuations due to changes in foreign currency exchange rates. Additionally, fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our statements of operations.
Biggest changeAdditionally, changes in interest rates will impact the discount rate and resulting interest expense for any new finance leases or financing arrangements. Foreign currency exchange risk We have foreign currency risks related to our expenses denominated in Canadian dollars, which are subject to fluctuations due to changes in foreign currency exchange rates.
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.
Interest rate risk As of January 31, 2024, 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.
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.
In future periods, we will continue to evaluate our investment policy in order to ensure that we continue to meet our overall objectives. Although we had no debt outstanding under the Capital One Credit Facility as of January 31, 2024, changes in interest rates would affect interest expense if we borrow against the Capital One Credit Facility in the future.
To date, foreign currency transaction gains and losses have not been material to our financial statements. 70
Fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our statements of operations. To date, foreign currency transaction gains and losses have not been material to our consolidated financial statements. 71
Removed
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.
Removed
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.

Other PHR 10-K year-over-year comparisons