Q1 2025 Phreesia Inc Earnings Call
Speaker Change: [music].
Okay.
Operator: Good evening, ladies and gentlemen, and welcome to the Phreesia fiscal first quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. We will provide instructions for the question and answer session to follow. First, I would like to introduce Balaji Phreesia's Chief Financial Officer, Mr. Gandhi. You may begin.
Speaker Change: Good evening, ladies and gentlemen, and welcome to the <unk> first quarter 2025 earnings conference call. At this time, all participants are in a listen only mode.
Speaker Change: Instructions for the question and answer session to follow first I would like to introduce philosophy.
Speaker Change: Freeze, yes, Chief Financial Officer, Mr. <unk>, you may begin.
Speaker Change: Thank you operator.
Balaji Gandhi: Good evening, and welcome to Phreesia's earnings conference call for the fiscal first quarter of 2025, which ended on April 30th, 2024. Joining me on today's call is Chaim Indig, our Chief Executive Officer.
Speaker Change: Good evening and welcome to Fridges earnings Conference call for the fiscal first quarter of 2025, which ended on April 30 of 2024.
Speaker Change: Joining me on today's call.
Speaker Change: As Jaime <unk>, our Chief Executive Officer.
Speaker Change: A more complete discussion of our results can be found in our earnings press release and in our related form 8-K submission to the SEC, including our quarterly stakeholder letter both issued after the market closed today.
Balaji Gandhi: A more complete discussion of our results can be found in our earnings press release and in our related Form 8K submission to the SEC, including our quarterly stakeholder letter, both issued after the market closes. These documents are available on the Investor Relations section of our website at ir.phreesia.com. As a reminder, today's call is being recorded, and a replay will be available on our investor relations website at ir.
Speaker Change: These documents are available on the Investor Relations section of our website at IR Dot Dot com.
Speaker Change: As a reminder, today's call is being recorded and a replay will be available on our Investor Relations website at IR <unk> com following the conclusion of the call.
Balaji Gandhi: Following the conclusion of this call, we may make forward-looking statements, including statements regarding trends, our anticipated growth, strategies, Predictions about our Industry, and the Anticipated Performance of our Business, including our outlook regarding future financial results. Forward-looking statements are subject to various risks, uncertainties, and other factors that may cause our actual results. Unknown Attendee, Balaji Gandhi, Chaim Indig, Phreesia, Inc.
Balaji Gandhi: Such risks are described more fully in our earnings press release, our stakeholder letter, and our risk factors included in our SEC filing, including in our quarterly report on Form 10-Q that will be filed with the SEC. The forward-looking statements made on this call will be based on our current views and expectations and speak only as of the date on which the statements are made. We undertake no obligation to update and expressly disclaim the obligation to update these forward-looking statements to reflect events or circumstances after the date of this call or to reflect new information or the occurrence of unanticipated events.
Speaker Change: During today's call we may make forward looking statements, including statements regarding trends, our anticipated growth strategies predictions about our industry.
Speaker Change: And the anticipated performance of our business <unk>.
Speaker Change: Including our outlook regarding future financial results.
Speaker Change: Forward looking statements are subject to various risks uncertainties and other factors that may cause our actual results performance or achievements to differ materially from those described in our forward looking statements.
Speaker Change: Such risks are described more fully in our earnings press release, our stakeholder letter.
Speaker Change: Our risk factors included in our SEC filings, including in our quarterly report on Form 10-Q will be filed with the SEC tomorrow.
Speaker Change: The forward looking statements made on this call will be based on our current views and expectations.
Speak only as of the date on which the statements are made we undertake no obligation to update and expressly disclaim any obligation to update these forward looking statements to reflect events or circumstances. After the date of this call or to reflect new information or the occurrence of unanticipated events.
Speaker Change: We may also refer to certain financial measures not in accordance with generally accepted accounting principles.
Balaji Gandhi: We may also refer to certain financial measures not in accordance with generally accepted accounting principles, such as adjusted EBITDA, in order to provide additional information to investors. These non-GAAP measures should be considered in addition to, and not as a substitute for, or in isolation from, our GAAP. A reconciliation of GAAP to non-GAAP results may be found in our earnings release and stakeholder letter, which were provided. Form 8K, filed after the market closed today, with the SEC, and may also be found on our investor relations website at ir.phreesia.com. I will now turn the call over to our CEO, Chaim Indig.
Speaker Change: Such as adjusted EBITDA.
Speaker Change: Order to provide additional information to investors.
Speaker Change: These non-GAAP measures should be considered.
Speaker Change: Dishing to and not as a substitute for or in isolation from our GAAP results are.
Speaker Change: A reconciliation of GAAP to non-GAAP results may be found in our earnings release.
Speaker Change: And stakeholder letter, which were furnished with form 8-K filed after the market's close today.
Speaker Change: With the SEC and May also be found on our Investor Relations website at IR Dot Freesia Dot com.
Speaker Change: I will now turn the call over to our CEO Jaime <expletive>.
Jaime: Thank you <unk> and good evening everyone.
Chaim Indig: Thank you, Balaji, and good evening, everyone. Thank you for participating in our first quarter hearing. Our stakeholder letter and earnings release were published about an hour ago. Let me start the call with a couple of highlights. The first quarter marked a very important milestone in our evolution as we returned to profitability. However, this most recent quarter does not represent a finish line.
Speaker Change: Thank you for participating in our first quarter earnings call for <unk>.
Speaker Change: Take all their letter and earnings release were published about an hour ago, Let me start the call with a couple of highlights.
Jaime: First quarter marks a very important milestone in our evolution as we return to profitability.
Jaime: This most recent quarter does not represent a finish line. We believe it represents an important milestone and freezes journey and I would like to acknowledge my teammates.
Chaim Indig: We believe it represents an important milestone in Phreesia's journey, and I would like to acknowledge my teammates, our clients, and our shareholders for their support throughout this stage of our journey. I look forward to the next set of milestones. Looking ahead, we have a large, diverse, and growing network of patients and providers we believe enjoy increased value from our solutions. I'm most excited about the opportunities that our network and our experienced and dedicated team give us to broaden and deepen the value we bring our clients. We now turn it back over to Balaji.
Jaime: Clients and our shareholders for their support throughout through this stage of our journey.
Jaime: Look forward to the next set of milestones looking.
Jaime: Looking ahead, we have a large diverse and growing network of patients and providers. We believe enjoy increased value from our solutions I'm. Most excited about the opportunities that our network and our experienced and dedicated team give us to broaden and deepen the value we bring our clients.
Speaker Change: Let me now turn it back over to <unk>.
Balaji Gandhi: Thanks, Chaim, and good evening, everyone. Let me hit on a couple of the highlights in our letter regarding the first quarter and our updated outlook for fiscal year 2025. Q1 revenue was up 21% at $101.2 million, and adjusted EBITDA returned positive for the first time in three years to 4.1 million. Our average health care services client increased by 103 from the prior quarter. The total revenue per AHSC was $24,900. First quarter revenue was negatively impacted by roughly $1.7 million in our payment processing due to an accelerated winding down of a relationship we have with a clearing house, who contracted with Phreesia to act as their merchant processor for patient payment.
Speaker Change: Thanks, Shawn and good evening everyone.
Balaji Gandhi: The details behind what drove the accelerated winding down of this relationship can be found in our stakeholder list. The upshot is that the cyber attack on Change Healthcare and subsequent outages accelerated the winding down of our relationship because Change Healthcare has not re-enabled a solution that was used by our clients. The client relationship represents approximately $8 million of annual revenue and will impact our fiscal 2025 results. Moving on to our updated financial outlook for fiscal 2025.
Speaker Change: Let me hit on a couple of the highlights in our letter regarding the first quarter and our updated outlook for fiscal year 2025 Q.
Speaker Change: Q1 revenue was up 21%.
Speaker Change: $101 2 million.
Speaker Change: Adjusted EBITDA returned to positive for the first time in three years to $4 1 million.
Speaker Change: Our average healthcare services clients increased by 103 from the prior quarter.
Speaker Change: Total revenue per HFC was $24900.
Speaker Change: First quarter revenue was negatively impacted by roughly $1 7 million in our payment processing line due to an accelerated wind down of our relationship we have with a clearinghouse client who contracted with Frazier to act as their merchant processor for patient payments.
Speaker Change: The details behind what drove the accelerated wind down of this relationship can be found in our stakeholder letter.
Speaker Change: The upshot is that the cyber attack on change healthcare and subsequent out of outages accelerated the wind down of our relationship because change healthcare has not re enabled a solution that was used by our clients.
Speaker Change: The client relationship represents approximately $8 million of annual revenue.
Speaker Change: And will impact our fiscal 2025 results.
Speaker Change: Moving to our updated financial outlook for fiscal 2025, we.
Balaji Gandhi: We are updating our revenue outlook to a range of $416 million to $426 million from a previous range of $424 million to $434 million. That's an $8 million reduction from the top and bottom ends of the range, which incorporates the accelerated wind-down of our clearinghouse client relationship. As a reminder, this revenue is in the payment process. We're also updating our adjusted EBITDA outlook for fiscal year 2025 to a range of $21 million to $26 million from a previous range of $12 million to $20 million.
Balaji Gandhi: That's a $6 million increase at the top end of the range and a $9 million increase at the bottom end of the range. We continue to see solid operating leverage in the business. Cash was at $80 million on April 30th. We're near the level it was in Q2 of Fiscal 21, when we were last profitable. Operating cash flow for Q1 was just under break-even at negative $721,000. We believe we're well positioned to start generating free cash flow in the second half of this fiscal year.
Speaker Change: We are updating our revenue outlook.
Speaker Change: To a range of $416 million to $426 million.
From a previous range of 424 million to $434 million.
Speaker Change: That's an $8 million reduction from the top and bottom end of the range, which incorporates the accelerated wind down of our clearinghouse client relationship.
Speaker Change: As a reminder, this revenue is in the payment processing line.
Speaker Change: We're also updating our adjusted EBITDA outlook for fiscal year 2025 to a range of 21 million to $26 million from.
From a previous range of 12 million to $20 million.
Speaker Change: It's a $6 million increase at the top end of the range and a $9 million increase at the bottom end of the range. We continue to see solid operating leverage in the business.
Speaker Change: Cash was at $80 million on April 30th.
Speaker Change: Or near the level. It was in Q2 of fiscal 'twenty, one when we were last profitable.
Speaker Change: Operating cash flow for Q1 was just under breakeven at negative 721000.
Speaker Change: We believe we're well positioned to start generating free cash flow in the second half of this fiscal year.
Balaji Gandhi: As a reminder, we have no borrowings on a revolving credit facility, which we believe gives us lots of flexibility over the next couple of years. Our internal discounted cash flow analyses reflect more value from investing in shorter payback investments that accelerate profitability. Our views on the best path to driving value for shareholders over the near-term and long-term have been reinforced in conversations with many Phreesia shareholders over the past few. Operator, I think we can now open up the lines for Q&A.
Speaker Change: As a reminder, we have no borrowings on our revolving credit facility, which we believe gives us lots of flexibility over the next couple of years.
Speaker Change: Our internal discounted cash flow analysis reflect more value from investing in shorter payback investments that accelerate profitability.
Speaker Change: Our views on the best path to driving value for shareholders over the near term and long term have been reinforced in conversations with many freezers shareholders over the past few quarters.
Speaker Change: Operator, I think we can now open up the lines for Q&A.
Speaker Change: Thank you the floor is now open for questions, we have dialed in and we'd like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue. If you would like to withdraw your question simply press Star one again.
Operator: Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you're called upon to ask your question and are listening via the loudspeaker on your device, please pick up your handset to ensure that your phone is not on mute when asking your question.
Speaker Change: Called upon to ask you a question and are listening via loud speaker on your device. Please pick up your handset to ensure that your phone is not on mute when asking your question.
Operator: We do request that for today's session, in the interest of time, that you please limit yourself to one question and return for a follow-up. And again, let's press star 1 to join the queue. Your first question comes from the line of Anne Samuel of J.P. Morgan. Your line is open.
Speaker Change: We do request for today's session in the interest of time that you. Please limit yourself to one question and re queue for a follow up.
Speaker Change: And again, that's press star one to join the queue.
Speaker Change: And your first question comes from the line of Anne Samuel of Jpmorgan. Your line is open.
Anne Elizabeth Samuel: Hey guys, thanks for taking the question. I guess, you know, maybe in light of, you know, what's happened with change and ascension recently, and, you know, you mentioned in your letter that the on-call service had been cyber attacked. I was hoping maybe you could just, you know, kind of discuss, you know, investments in cybersecurity. Is it something that we should be kind of expecting to come up in the P&L? And maybe, you know, just concerns that things like this might be more prevalent, and then, you know, kind of along those lines, just any financial impact from the ascension attack.
Anne Elizabeth Samuel: Hey, guys. Thanks for taking the question I guess, you know maybe in light of what's happened with with change and Ascension recently and you know you mentioned in your letter.
Speaker Change: The alcohol service had been cyber attack I was hoping maybe you can just kind of just Scott you know investments in cyber security is it something that we should be kind of expecting a line in the P&L.
Anne Elizabeth Samuel: Thank you.
Speaker Change: And maybe you know just concerns that things like this might be more prevalent and then kind of along those lines just any financial impact.
Speaker Change: From the Ascension.
Thank you.
Andy: Sure. Thanks for the question Andy So first of all.
Balaji Gandhi: Sure. Thanks for the question, Annie. So, first of all, we actually called this out in the last quarter's letter, Annie, just in terms of our investments in this area. We take this pretty seriously, you know, on behalf of our clients and patients, etc. But I also think, you know, it goes without saying, this is pretty unprecedented and some of the stuff that's going on in the industry. In fact, I was just telling Chaim, I was reading an article before this call about the, like, downstream effects of other providers who aren't even the ones being attacked. But, you know, Chaim, I don't know if you want to add anything specifically about sort of, you know, how we've planned around this.
Speaker Change: We actually call this out in the last quarters letter.
Speaker Change: Andy just in terms of our investments in this area, we take this pretty seriously.
Speaker Change: On behalf of our clients and patients et cetera, but I.
Speaker Change: I also I think it goes without saying this is pretty unprecedented and some of the stuff that's going on in the industry. In fact, I was just telling I'm I was reading an article before this call about b like sort of the downstream effects of other providers, who arent, even the ones being attacked.
Speaker Change: Hi, I don't know if you want to add anything specifically about sort of how we how we planned around this we have been ramping up our investments for years in this space and obviously we.
Chaim Indig: We've been ramping up our investments for years in this space, and obviously, we continue to expect to ramp up, and I think that's built into our forward-looking plans. But it's something we take not just internally, seriously, as a company; we take it because a good portion of Phreesia's patients are also patients, and we provide our data to the system, including our families. This means a lot to us personally. And, you know, I should probably go.
Speaker Change: We continue to expect the ramp up and I think thats built into our forward looking plans.
Speaker Change: But it's something we take.
Speaker Change: Internally seriously is as a company we take it because a good portion of freezes.
Speaker Change: Also patients and we provide our data to the system, including our families which means a lot to us personally.
Balaji Gandhi: And, you know, I should probably point this out, too. I think for several quarters now, we've talked about G&A expenses and how we've spent a lot of capital to build the infrastructure of being a public company of this size. And I think just having gone through some of the stuff in the past few weeks, we've got some great subject matter experts that weren't here at the company three or four years ago, and outside advisors have really helped us get through this. So that's part of the G&A.
Speaker Change: And I should probably point this out to I think for several quarters now we've talked about G&A expense and how we spent a lot of capital to build the infrastructure of being a public company of this size and I think just having gone through some of the stuff in the past few weeks.
Speaker Change: Got some great subject matter experts that werent here the company three or four years ago.
Speaker Change: And outside advisers, who really helped us get through this so that's part of that G&A expense that we have.
Speaker Change: Your next question comes from the line of Ryan Daniels of William Blair. Your line is open.
Operator: Your next question comes from the line of Ryan Daniels from William Blair. Your line is open.
Speaker Change: Yeah, Hey, guys. Thanks for taking the questions and this is Jared Haase on for Ryan maybe I'll just ask one on the clearinghouse client wind down it sounded like that was a relationship that you had decided to walk away from and then that wind down was just accelerated due to change. So I guess number one just could you run through sort of the thinking for why you were planning on walking away from that.
Jared Hassan: Yeah, hey guys, thanks for taking the questions. And this is Jared Hassan for Ryan.
Speaker Change: <unk> and then number two could you just discuss how you're thinking about sort of any risk in the model from other client contracts or client relationships that might have a connection to change in some way.
Balaji Gandhi: Sure. This was, Jared, a unique situation. And so the client is a clearinghouse, and I think I wouldn't characterize it that way as we walked away. I think the way to think about it is that they were looking – and we put this in the letter – to consolidate to one vendor. But the things they wanted in that, which included print statements, were just not something that we were going to do for a lot of reasons, including the economic profile of that.
Jared Hassan: Maybe I'll just ask one on the clearinghouse client wind down. It sounded like that was a relationship that you had decided to walk away from, and then that wind down was just accelerated due to change. So I guess number one, just could you run through sort of the thinking for why you were planning on walking away from that relationship? And then, number two, could you just discuss how you're thinking about, you know, sort of any risk in the model from other client contracts or client relationships that might have a connection to change in some way? Thanks. Unknown Speaker Sure, this was
Speaker Change: Sure. This was Jared a unique situation and so that the client is a clearinghouse and I think I wouldn't characterize it as we walked away I think the way to think about it is they were looking and we put this in the letter they were looking to consolidate to one vendor.
Speaker Change: The things they wanted and that which included print statements. We're just not something that we were going to do for a lot of reasons, including the economic profile of that so it was sort of mutually agreed to wind it down and I think as we also said in the letter that was planned to be later in this sort of this crisis sort of accelerated all of that.
Balaji Gandhi: So it was sort of mutually agreed to wind it down. And I think, as we also said in the letter, that was planned to be later, and this crisis sort of accelerated all that. And really nothing, again, comes to mind. I think about our last conference call; we spent a lot of time talking about change. And I think every day we're still – I mean, we're only three months out from that – seeing impacts. So we can't sit here and say there's no impact, but as we sit here today, there's nothing that comes to mind like that.
Speaker Change: And really nothing again comes to mind I think about our last conference call. We spent a lot of time talking about change and I think every day. We are still I mean, we're only three months out from that we're still seeing impacts. So we can't sit here and say, there's no impact, but as we sit here today, there's nothing that comes to mind like this.
Speaker Change: Your next question comes from the line of.
Operator: Your next question comes from the line of... Jailendra Singh of True Securities. Your line is open.
Speaker Change: Jill Indra King of <unk> Securities. Your line is open.
Jailendra P. Singh: Thank you and thanks for taking my question. First, a quick clarification. Balaji and Chaim, was this decision still TBD when you gave fiscal 25 guidance in mid-March about, you know, timing on this clearinghouse client? It was still, like, being determined.
Speaker Change: Thank you and thanks for taking my question first a quick clarification.
Speaker Change: Hi did you like.
Speaker Change: Once this decision is still TBD when you give fiscal <unk> guidance in mid March about.
Speaker Change: Timing on this cleaning house and it was to select being determined can you clarify on can I find that and my main question is lag help us better understand the drivers behind.
Jailendra P. Singh: Can you clarify on that? And my main question is, like, help us better understand the drivers behind, you know, beating and increasing compared to your prior outlook on EBITDA, and if the strong start to your focus on returning to profitability changes your views on how you think about the margin progression longer term? Sure.
Speaker Change: And beat an increase compared to your broad outlook on EBITDA and the strong start we are focused on returning to profitability changes your views. How you think about the margin progression of longer term.
Speaker Change: Sure that is two questions, but we'll try to hit them.
Balaji Gandhi: Sure. That's two questions, but we'll try to answer them.
Speaker Change: I think it was a fluid situation heading into fiscal 'twenty five in terms of that relationship with that client, but I think we want to be clear that that was going to work with them in cooperation with them and these wind downs take a lot of work a lot of people and a lot of time. So that was not really envisioned to be in fiscal 'twenty five at all and certainly.
Balaji Gandhi: I think it was a fluid situation heading into Fiscal 25 in terms of that relationship with that client, but I think we want to be clear that that was – we were going to work with them in cooperation with them, and these wind-downs take a lot of work, a lot of people, and a lot of time, so that was not really envisioned to be in Fiscal 25 at all and certainly not be over a matter of, you know, months So that was – but that was something we were planning.
Speaker Change: Not be over a matter of months.
Speaker Change: So that was but that was something we were planning for.
Balaji Gandhi: And then second, in terms of, you know, margin profile, et cetera, I think you should take away from our comments here that we've been headed in this direction for some time, but we're sort of putting the foot on the gas a little bit more. And to us, we just think that's the right thing to do, cost of capital, interest rates, what have you. We do still prioritize growth, and we think we know that's important because that also helps drive profitability, but I think you should take away that we're probably being
Speaker Change: And then second in terms of.
Speaker Change: Margin profile et cetera, I think you should take away from our comments here that we've been headed in this direction for some time, but we're sort of putting the foot on the gas a little bit more and to US. We just think that that's the right thing to do cost of capital interest rates. What have you we do still prioritize growth.
Speaker Change: We know that's important because that also helps drive profitability, but I think you should take away that we're probably.
Speaker Change: Being a little bit more aggressive on that.
Speaker Change: Your next question comes from comes from the law.
Operator: Your next question comes from the line of Jessica Tassan of Piper Sandler. Your line is open.
Speaker Change: <unk> <unk> percent of Piper Sandler Your line is open.
Jessica Elizabeth Tassan: Hi. Thanks so much for taking the questions. I was just hoping you could maybe speak a little bit about the provider end market in light of the change disruption, just given the fact that providers obviously have payments delayed or aren't seeing payments at all. Has their willingness to deploy the Phreesia solution changed, either for better or for worse? Thanks.
Hi, Thanks, so much for taking my questions.
Speaker Change: I was just hoping you could maybe speak a little bit about the yen the provider end market in light of the change disruption just given the fact that providers, obviously have payments delayed or arent being payments at all has their willingness to deploy the free desperation.
Speaker Change: At changed.
Speaker Change: Neither better alright. Thanks.
Speaker Change: I think thanks.
Chaim Indig: I think, thanks for the question. Um, well, I think the market's been pretty receptive to what we're doing. I don't think there was a period of a couple months where the prioritization was making sure that they could have claims filed. But the vast majority of our providers, providers, and prospects are filing claims now. So I don't, we don't really see this backing up the market tremendously. I think that there is a general view that there needs to be continuous investment in technology to drive efficiency and produce better margins for a lot of these providers.
Speaker Change: Thanks for the question.
Speaker Change: Yes.
Speaker Change: Well I think it's the marketing pretty receptive to what we're doing I don't think I think there was a period of a couple of months, where the prioritization was making sure that they can have claims filed but the vast majority of our provider.
Speaker Change: <unk> and prospects are filing claims now so I don't we don't really see this backing up the market tremendously I think that there is a.
Speaker Change: General view that there needs to be continuous investment in technology to drive.
Speaker Change: Efficiency.
Speaker Change: And.
Speaker Change: And produce better margins for a lot of these providers. So we've seen the end market.
Chaim Indig: So we've seen the end market is still pretty good for us, but I wouldn't say it's not without challenges, but I think the team has done a phenomenal job of continuously winning accounts and growing our share of the market.
Speaker Change: Pretty good for us.
Speaker Change: But I wouldn't say, it's it's not without challenges, but I think the team has done a phenomenal job of continuously winning accounts.
Speaker Change: And.
Speaker Change: Growing our share of the market.
Speaker Change: Your next question comes from the line of Stephanie Davis of Barclays. Your line is open.
Operator: Your next question comes from the line of Stephanie Davis of Barclays. Your line is open.
Anna: Hey, guys. This is Anna <unk> on for Stephanie. Thank you for taking our questions.
Unknown Attendee: Hey guys, this is Anna Krasinski on behalf of Stephanie. Thank you for taking our questions. I was hoping you would talk a bit about what your strategy is around accelerating growth in revenue per client and whether this is going to be more of a cross-selling of existing products with clients or more into the new cohort.
Can you talk a bit about what your strategy is around accelerating growth and revenue per client and Glen Kimura cross sales of existing products per client or more into the new cohort.
Speaker Change: Sure. Thanks Ana.
Balaji Gandhi: Sure. Thanks, Anna.
Speaker Change: So the way to think about it I think we've been talking about this for the past few quarters. There is growing the network and then there is the three different revenue lines on how we generate revenue off of it I think you should take away that network solutions will absolutely be the single biggest driver of how the total revenue per client growth I think.
Balaji Gandhi: So, the way to think about it, and I think we've been talking about this for the past few quarters, there's growing the network, and then there's the three different revenue lines on how we generate revenue off of it. I think you should take away that network solutions will absolutely be the single biggest driver of how total revenue per client grows. I think, you know, we've talked a lot about payments. You don't really create that much more with payments.
Speaker Change: We've talked a lot about payments you don't really create that much more in payments that comes from new client growth.
Balaji Gandhi: It comes from new client growth. I think a lot of the products that we have currently, but also the ones we're going to introduce, do have prices associated with some of them, and there will be revenue, but I think that will certainly lag behind network solutions. So, I think the short answer and takeaway is that network solutions should be the driver.
I think a lot of the products that we have currently but also the ones we're going to introduce.
Speaker Change: Do you have price associated with some of them and there will be revenue, but I think that will be certainly lagged behind network solution. So I think the short answer and takeaways network solution should be the driver of that.
Your next question comes from the line of Scott.
Operator: Your next question comes from Linda Scott. Schoenhaus of Key Bank. Your line is open.
Speaker Change: Sure House of Keybanc. Your line is open.
Scott Anthony Schoenhaus: Hey, team. I wanted to ask about this product update on metafined appointment requests. This is live, I'm assuming, and what are you seeing in terms of the traction for booking appointments for specialty providers, and how does this fit in with your broader approach to targeting new provider clients? Thanks.
Jim: Hey, Jim I wanted to ask you about this product update on <unk> appointment requests. This is live and Im assuming and what are you seeing in terms of the traction for booking appointments for specialty providers and how does this.
Jim: Fit in with your broader approach.
Speaker Change: On new provider targeting new provider clients. Thanks.
Speaker Change: Look.
Chaim Indig: Look, so far, adoption has been very, very well received. It's still early days, and we'll give more updates in the coming quarters, but we expect, you know, when we talk to a lot of specialists, their biggest, the biggest thing we've been hearing for years is that the right specialists want the right types of patients to be able to make appointments with them because they want to deliver the right type of care to them.
Speaker Change: So far the adoption has been very very well received it's still early days and we'll give more updates on.
Speaker Change: In the coming quarters, but we expect.
Speaker Change: We talked to a lot of specialists. They are biggest the basin. We've been hearing for years is they want the right specialist want the right types of patients to be able to make appointments with them because they wanted to deliver the right type of care to them and so we do see this as being any just a massive value driver across the spectrum of specialists.
Chaim Indig: And so we do see this as being just a massive value driver across the spectrum of specialists that we both support today, and we think it's going to be a very large driver in helping us win clients in the future. But early traction has been really good. I've been more than pleasantly surprised with a lot of the data I've been seeing from the MediFind team. And we've been investing in, and we've been increasing our investment in that.
Speaker Change: We both support today, and we think it's going to be a very large driver in helping us win clients in the future.
Speaker Change: But early traction has been really good.
Speaker Change: Ben.
Ben: More than pleasantly surprised with a lot of the data I've been seeing from the <unk>.
Ben: And we've been investing we've been increasing our investment in that.
Speaker Change: Your next question comes from the line of Richard close of Canaccord security.
Operator: Your next question comes from Richard Close of Canada Court Security. Yeah, your line is open.
Speaker Change: Your line is open.
Richard Collamer Close: Great. Thanks for the question congratulations.
Richard Collamer Close: Great. Thanks for the question. Congratulations.
Richard Collamer Close: Network, which you just mentioned <unk> continues to outperform our expectations in the commentaries from commentary from some other companies has been pretty favorable in terms of the demand environment. So I'm curious.
Chaim Indig: Network, which you just mentioned, Balaji, continues to outperform our expectations, and the comments from some other companies have been pretty favorable in terms of the demand and environment. So, I'm curious about your guys' thoughts looking forward to network solutions, just commentary on the market. And then, as a follow-up with respect to the Medifine campaign, which caught my eye, and I'm curious if this is a channel, an opportunity for network revenue growth, and if so, does it expand the budget you're going after with the pharma companies?
Speaker Change: Your guys' thoughts looking forward on network solutions, just commentary on the market and then as a follow up with respect to the meta Fi Metaphyte campaign caught my eye.
Speaker Change: And I'm curious if this is the channel.
Speaker Change: An opportunity for network revenue growth and if so does that expand the budget you are going after with the pharma companies.
Balaji Gandhi: Richard, I'll answer some of it and if I miss anything Balaji will jump in as he usually does. I would, I'll answer your second question first and yes we think Medi-Find has the potential to be a very very positive offering to our Network Solutions clients and so we are, we do expect and plan on monetizing the product over a long period of time also with Network Solutions and I think you should expect to see us continue investing in that space and look that Network Solutions team has been getting great feedback from our clients because we've been delivering very strong ROIs at significant scale with both broad disease states but also no very specific patient populations where they you know delivering the right message at the right time to them drives a phenomenal outcome and so we we expect Network Solutions to be a big driver for the organization but also a huge driver of returns for our clients.
Speaker Change: Hey, Richard.
Richard Collamer Close: I'll answer some of it and if I Miss anything realize you will jump in as he usually does I would I'll answer your second question first and yes, we think <unk>.
Speaker Change: <unk>.
Speaker Change: This has the potential to be a very very.
Speaker Change: Positive offering to our network solutions clients and so we are we do expect and plan on monetizing the product over a long period of time.
Speaker Change: Also with network solutions and I think.
Speaker Change: You should expect to see us continue investing in that space.
Speaker Change: And looked at network solutions team has been getting great feedback from our clients because we've been delivering very strong rois at significant scale.
Speaker Change: With both broad disease states, but also very specific patient populations, where they are delivering the right message at the right time to them drives a phenomenal outcome and so we expect network solutions to be a big driver for the organization, but also the huge draw.
Speaker Change: River of returns for our clients.
Balaji Gandhi: And Richard, I think the only comment I'd add is on network solutions as it relates to the year. Just remember that it's not linear, and there's business that gets sold, you know, through the year as well. We're very bullish about that space, and I think that should be clear from all of our comments, but you do have to be a little bit careful how you model it in terms of how it flows through the year.
Speaker Change: And Richard I think the only comment I would add is on network solutions as it relates to the year.
Just to remember that it is not linear and there is business that gets sold through the year as well.
Speaker Change: We're very bullish about that space I think that should be clear from all of our comments, but you do have to be a little bit careful how you model. It in terms of how it flows through the year.
Speaker Change: Your next question comes from the line of Ryan Macdonald Needham Your line is open.
Operator: Your next question comes from the line of Ryan MacDonald of Needham. Your line is open.
Ryan Michael MacDonald: Hi, Thanks for taking my questions maybe just.
Ryan Michael MacDonald: Thanks for taking my questions. Maybe just first on the payments business, can you just talk about the health of that business as the client wind down and what sort of you're seeing in terms of growth there, what expectations you have for growth? And then quick for Balaji on gross margins, first quarter in over a year with gross margins over 80%. Just curious how you're thinking about that gross margin line and how sustainable maybe these 80% plus levels are as we go through the rest of the year. Thanks.
Speaker Change: First on the payments business can you just talk about the health of that business ex the client wind down and what sort of youre seeing in terms of growth there or what your expectations for growth and then quick from <unk> on gross margins first quarter I think.
Speaker Change: And over a year with gross margins over 80% just curious how youre thinking about that gross margin line and how sustainable maybe these 80% plus levels are as we go through the rest of the year.
Brian: Yeah sure Thanks, Brian.
Balaji Gandhi: Yeah, sure. Thanks, Ryan.
So I think I think on the first part of it the payments, it's probably the part of our business that has been the easiest to probably follow outside of probably the COVID-19.
Balaji Gandhi: So, I think, you know, on the first part of it, the payments, it's probably the part of our business that has been the easiest to probably follow outside of probably the COVID period there, where we saw utilization go down for, you know, eight weeks or so pretty sharply, and then we had sort of a rebound the following fiscal year. But if you just follow it, I mean, the volume tends to track seasonality in the first part of the year being stronger. It lags subscription because, you know, we have an attachment rate of around 80%. And that's sort of just been the rhythm of it.
Brian: Period, there, where we saw utilization go down for eight weeks or so pretty sharply and then we had sort of the rebound the following fiscal year, but if you just follow I mean, the volume tends to track with seasonality in the first part of the year being stronger.
Brian: <unk> subscription because of we have we have an attachment rate of around 80%.
Balaji Gandhi: I think in the first quarter, we obviously highlighted the $1.7 million impact. But if you actually add that back to payments, it would be pretty consistent with every other first quarter we've had as a public company. And then on the second question, yours was around gross margins, is that right? So, on gross margins, look, we're doing well. I think this was a topic on the last call, and I think, you know, to be over that, you know, percentage that you cited at 80 percent is pretty good.
Brian: And that's sort of just been the cadence of it I think in the first quarter. We obviously highlighted the $1 $7 million impact if you actually add that back to payments it would be pretty consistent with every other first quarter we've had.
Brian: As a public company.
Brian: And then on the second question Europe is growing our gross margins alright.
Brian: Some of these areas on gross margins look we're doing well I think this was a topic on the last call and I think to be over that percentage that you cited.
Brian: 80% is pretty good it's the highest around the highest we've been we're always looking for opportunities.
Balaji Gandhi: It's the highest, you know, around the highest we've been. We're always looking for opportunities to be as efficient as we can and drive that margin, but I think if you sort of modeled it there, you should be able to comfortably get to the revenue and EBITDA outlook. Your next question comes from Jeff Garro of Stevens. Your line is open.
Brian: To be as efficient as we can.
Brian: And drive that margin, but I think if you sort of modeled it there you should be able to comfortably get to the the revenue and EBITDA outlook that we have.
Brian: Okay.
Speaker Change: Your next question comes from the line of Jeff Garro of Stephens. Your line is open.
Operator: Your next question comes from Jeff Garro of Stevens. Your line is open.
Jeffrey Robert Garro: Yes. Good afternoon. Thanks for taking the questions was hoping you could give some further comments on the mix and quality of health care services clients that youre, adding with that lovely now at around 100 net adds per quarter.
Jeffrey Robert Garro: I mean, Jeff I think it's nothing different than what we've seen in the past.
Jeffrey Robert Garro: I mean, Jeff, I think, you know, it's nothing different from what we've seen in the past, at least I'd say the past four to six quarters. We have, you know, large enterprise clients, you know, we have midsize, we have small.
Speaker Change: So to say the past four to six quarters.
Speaker Change: We have large enterprise clients.
We are mid size, we have small I think the biggest sort of filter to put on on these numbers like 103 is the payback period.
Balaji Gandhi: I think the biggest sort of filter to put on these numbers, like the 103, is the payback period. And so what we're running these through today is just a shorter payback. And what does that mean?
Speaker Change: So what we're running these through today is just a shorter payback.
Speaker Change: And what does that mean it means well if theyre in a promo period, we expect them to convert we would like them to attach repayments and we would like to be able to show content.
Balaji Gandhi: Well, if they're in a promotion period, we expect them to convert. We would like them to associate payments with payments, and we would like to be able to show content for our farmers.
Speaker Change: For our pharma clients.
Speaker Change: Your next question comes from the line of Erin Wilson of citizens JMP. Your line is open.
Operator: Your next question comes from the line of Aaron Kimson of Citizens JMP. Your line is open.
Great. Thanks for the question can we get an update on where youre at with freezer, India. Since its launch in January and that investors should think about the margin effect of that organization as being a component of the increased FY 'twenty five EBITDA guide or something that will provide more of a margin benefit.
Aaron Jacob Kimson: Great, thanks for the question. Can you give an update on where you're at with Phreesia India since its launch in January and if investors should think about the margin effect of that organization as being a component of the increased FY25 EBITDA guide or something that will provide more of a margin benefit in FY26 and beyond?
Speaker Change: Slide 26 and beyond.
Balaji Gandhi: That was really just a legal sort of transaction that took place, and we wanted to get in front of that and share that with everyone. Financially, the expenses were already running through our P&L, so there's really no change to the profile of the business, and that's frankly one of the reasons we've been able to get a lot of operating leverage from all the folks and resources over there, but nothing really to call out in terms of post-close. Your next question comes from the line of Daniel Grosslight of City. Your line is open.
Speaker Change: That was really just a.
Speaker Change: More of a legal sort of transaction that took place and we wanted to get in front of that and share that with everyone.
Speaker Change: Financially the expenses were already running through our P&L, So theres really no.
Speaker Change: Change to the profile of the business and that's frankly, one of the reasons, we've been able to get a lot of operating leverage.
Speaker Change: The folks in resources over there, but nothing really to call out in terms of post close.
Speaker Change: Your next question comes from the line of Daniel.
Speaker Change: <unk> of Citi. Your line is open.
Speaker Change: Hey, guys. Thanks for taking the question.
Daniel R. Grosslight: Hey, guys.
Daniel: You saw a bit of a take rate degradation this quarter and payments how are you thinking about pricing.
Daniel: And should we expect more degradation. This year are you comfortable now with with how pricing is shaped up.
Daniel: We're always visiting us and we've been I think Daniel we've talked about this too as we think about it as the profit dollar.
Balaji Gandhi: We're always looking at this, and I think, Daniel, we've talked about this, too, is we think about it as the profit dollar, the gross profit dollar from a dollar of payment volume that crosses. So as long as we can continue to grow profitable payment dollars, we will experiment with different offerings on price. I think we've touched the 2.8 range before, if you went back a couple of years. If you modeled around 2.8%, you'd probably be safe, but it might be higher in some quarters, might be in the 2.8s and 3.0s. And your next question comes from the line of Jack Wallace.
Daniel: Gross profit dollar from a dollar of payment volume and crosses so as long as we can continue to grow profitable payment dollars.
Daniel: We'll experiment with different offerings on price.
Daniel: We've touched the two eight range before if you went back a couple of years.
Daniel: If you modeled around two 8% you'd probably be safe, but it might be higher and some quarters it might be the two eight in other quarters.
Speaker Change: And your next question comes from the line of Jack Wallace of Guggenheim. Your line is open.
Operator: And your next question comes from the line of Jack Wallace of Guggenheim. Your line is open. Hi.
Mitchell: Hi, This is Mitchell on for Jack Thanks for taking my question could.
Mitchell: Could you. Please elaborate on the shorter payback investments you referenced and just how that differs from maybe what your focus was 12 months ago or so.
Speaker Change: Yes, and it was probably going back more than more than 12 months. So theres really two ways to think about it one is just like the profitability that we can generate.
Jack Dawson Wallace: Yeah, I'm probably going back more than 12 months, so there are really two ways to think about it. One is just like the profitability that, you know, we can generate from a specific opportunity. All the opportunities have profit associated with them, but we're definitely optimizing for more of that today. But I think another sort of way to think about it is if there are other products that we could upsell to that same client, we sort of are looking at underwriting it as trying to do that sooner. And is that client, is that a better fit for the products we have and not really willing to maybe wait a longer period?
Speaker Change: On a different a specific opportunity all of the opportunities have profit associated with them.
Speaker Change: We're definitely optimizing for more of that today, but I think another.
Speaker Change: The way to think about it is.
Speaker Change: If there's other products that we could upsell.
To that same client, we sort of are looking at underwriting. It is trying to do that sooner and does that client is that a better fit for the products we have.
Speaker Change: And not really willing to maybe wait a longer period of time.
Speaker Change: As there are no further questions. This concludes our Q&A session I will now turn the conference back over to <unk> for some closing remarks.
Chaim Indig: As there are no further questions, this concludes our Q&A session. I will now turn the conference back over to Chaim Indig for some closing remarks.
Chaim Indig: Thank you everyone for joining the call, and I want to thank again my teammates, and I look forward to seeing everyone over the summer and talking again in about 90 days. Have a great summer, everyone. Thank you.
Speaker Change: Thanks, everyone for joining the call and I want to thank again, my teammates and I look forward to seeing everyone over the summer.
Talking again in about 90 days have a great summer everyone. Thank you.
This concludes today's call you may now disconnect.
Operator: This concludes today's call. You may now disconnect.
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