Q3 2025 Phreesia Inc Earnings Call

Much of it drops to the bottom line, but some of it can be reinvested in other areas that fuel future growth. So we are absolutely doing both as you pointed out.

Speaker Change: Thank you.

Speaker Change: And your next question comes from the line of Sean Dodge with RBC capital markets. Your line is open.

Sean Dodge: Yes, thanks, good afternoon.

Sean Dodge: Maybe just going back to the comments around continuing to drive higher revenue per HFC. If we think about sales and marketing expense is there any updates you can give us on.

Sean Dodge: Or are you are you continuing to change the mix in how those dollars are being spent or are you continuing to allocate more towards cross selling in network solutions and away from new clients and then any quantification you can give around how much reallocating our shifting you've done there over the last year or so how how much of each of those buckets changed.

Sean Dodge: Yeah.

Speaker Change: Yes, Sean I think it sort of relates to <unk> question, it's continuous and so we're always looking at the returns and the paybacks, we're getting on how we're going to market.

Speaker Change: In both the.

Speaker Change: Health care services part of the market and on the life Sciences side, and I think I don't think it would be appropriate.

Use a percentage because frankly it also changes from time to time, but it is continuous and I think if you look at the dollar amount. It's actually this quarter. It happened to be literally the same amount of money spent on sales and marketing in the fourth and the third quarter compared to the second quarter.

Speaker Change: And it's been running in that sort of range for for a couple of years now so I think thats. What you should take away is the go to market is always reflecting trying to get the types of returns that I think our outlook communicates.

Speaker Change: And your next question comes from the line of Scott <unk> with Keybanc capital markets. Your line is open.

Speaker Change: Hi team Thanks for taking my question.

Speaker Change: <unk> I guess this question is for you you know the recent acquisition I guess parent everything where the acquisitions you did this past year access. These forums connect on call are you fully monetizing them now can you give us an update there and then maybe your strategy on how you think of subscription revenue <unk>.

Speaker Change: Her provider client in the coming quarters. Thanks.

Speaker Change: Yeah, I mean, none of those acquisitions.

Had enough time, where we could ever say that we're fully monetizing them.

Obviously, we did three last year.

Speaker Change: So there's a lot of activity going on in different parts of the organization.

Speaker Change: In product management in the go to market.

Speaker Change: So still a lot of work to do but I think I think we would all say that we're pleased with the progress so far.

Speaker Change: So we've had on those acquisitions on on subscription.

Thats, not something where we're going to talk specifically Scott I think what we've really tried to anchor everyone around us total revenue per client we have these different revenue streams.

Speaker Change: And that number I think you see in our letter the commentary around we expect that number to be up this year versus last and next year versus this year. I think you can now even with our revenue outlook and our HFC outlook you could even back into how much we think at this point.

Speaker Change: Revenue per client might go up and I think thats, probably the most constructive way to think about the business.

Speaker Change: Thanks, a lot.

Speaker Change: Sure.

Speaker Change: And your next question comes from the line of Jessica <unk> with Piper Sandler Your line is open.

Speaker Change: Hi, guys. Thanks, so much for taking my question and congrats on the quarter and the strong guide.

Speaker Change: I was hoping you could talk a little bit just about the network solutions selling season in fiscal 'twenty, five and maybe what drove some of the strength in fiscal <unk> any specific tailwind related to part D. And then I'm, hoping you can describe some of the feedback you've heard from your pharma customers regarding the appointment of RFK to lead HHS. How are you and your customers kind of thinking about and delayed.

Speaker Change: Adding between marketing and education.

Kind of an important distinction.

Jeff: Alright, you got a lot in there Jeff.

Speaker Change: I think probably three or four questions.

Speaker Change: Why don't we do this why don't we start with just the selling season and I think as we've talked about there is a lot of activity this time of year.

Speaker Change: At this point in the year I think what we can tell you is we're probably slightly ahead of where we are versus last year in terms of how much visibility we have into the outlook. We just shared for fiscal 'twenty six so on that front slightly better.

Speaker Change: And so I think our in terms of our outlook for the.

Speaker Change: The rest of this year I think it's sort of pretty.

Speaker Change: Pretty much as we expected.

Speaker Change: And then maybe repeat your second question.

Speaker Change: Yes, Jeff how are you thinking about the appointment of RFK to lead HHS and are you in your pharma customers kind of thinking about delineating between pharma marketing in pharma education and thanks I appreciate you addressing.

Speaker Change: Sure.

Speaker Change: So first of all I think I think we should probably be clear that it is.

Speaker Change: Presumptive nominee.

Speaker Change: <unk>.

Speaker Change: For HHS Secretary and what we're aware of is the perspective that the presumptive nominee has that reasonable television viewers.

Speaker Change: <unk>, whether certain TV channels have it dependent on advertising and how that might influence their coverage of health issues.

Speaker Change: And for freezer, just as a reminder, everybody freezes platform a personalized health content is built on the principles of privacy and consent, we need patients with relevant personalized and accurate health information and key moments when theyre in a health care state of mind, which we think improves outcomes and have certainly have some data to substantiate that.

So thats really I think just how we would look at that topic at this point.

Speaker Change: Perfect. Thank you.

And your next question comes from the line of Ryan Macdonald with Needham Your line is open.

Hey, this is Matt Shea on for Ryan Thanks for taking the question and congrats on the nice quarter here.

Speaker Change: I wanted to double click on <unk> good to hear about the traction with the number of manufacturing clients go online campaign.

Speaker Change: It's just about some of the mechanics around the campaigns. How long are these campaigns typically in any color on the ROI of these campaigns or how that's trended so far versus expectations and then how does that kind of building a pipeline for incremental partners from here.

Speaker Change: Yes, Matt on the specifically on the on the modified campaigns, it's not something I think we have readily available now I'm happy to follow up with you on that on that topic.

Speaker Change: That's something we have now.

Speaker Change: And your next question comes from the line of Jeff Garro with Stephens. Your line is open.

Hey, good afternoon, guys. Thanks for taking the question wanted to ask a little bit more on the FY 'twenty six outlet, Ken and on the profitability. There. It seems to imply very strong incremental EBITDA margins equivalent if not better to to your gross margin percentage.

Wanted to ask if <unk>.

Speaker Change: Incremental gross margins on roughly flat operating expenses is the right framework to think about the FY 'twenty six EBITDA outlook.

Identified some incremental operating expense efficiencies. Thanks.

Speaker Change: Yes, so I think Jeff what Youre asking is how much of the EBITDA improvement is from.

Speaker Change: Gross margin versus below the gross margin line.

Speaker Change: Maybe.

Speaker Change: Yeah, Okay, Okay yeah.

Speaker Change: And I think we talked about.

Speaker Change: The gross margin that we've been running for several quarters now, we frontloaded and made significant investments in cost of revenue several years ago. We continue to get very nice operating leverage out of that line, but we've also been running at the gross margin. We've had for several quarters. So I think the takeaway should be.

Speaker Change: Certainly maybe opportunity for a little bit there, but it's really the expense lines.

Speaker Change: Getting more operating leverage out of the expense lines below that and really growth is probably the biggest driver of revenue growth as the biggest drivers of that EBITDA.

Speaker Change: And your next question comes from the line of Daniel <unk> with Citi. Your line is open.

Speaker Change: Hi, guys. Thanks for taking my question and congrats on the strong quarter here.

Speaker Change: I wanted to just ask about the pipeline again, I guess more broadly speaking.

Speaker Change: In terms of total LTV of customers I think last quarter, you mentioned that in the first half total trans out transaction value is about 20% larger than the first half of last fiscal year. I was hoping you can provide an update now that we're a little bit later in the selling season on how things are trending for the second half of the year. Thank you.

Speaker Change: Yeah. Good question Danielle.

Speaker Change: We can say that it's been consistent the total value and just so we're clear from what we said last time and a repeating now as it is.

Speaker Change: The total dollar value associated with an average health care services client.

Contract and that means all three revenue lines those are trending around that same clip of about 20% bigger than at this time last year.

Speaker Change: Thank you.

And your next question comes from the line of Jared Haas with William Blair. Your line is open.

Speaker Change: Yes, hi, good evening. This is Jared on for Ryan Daniels. Thanks for taking the questions allows you maybe I just wanted to follow up from an earlier question on the network solutions side, and I think you mentioned, having a little bit.

Speaker Change: A little bit better visibility at this point with pharma customers on that network solutions business. Just wanted to clarify Im curious is there anything in particular, that's driving that I assume that that would mean sort of budgets are getting finalized a little bit earlier in the cycle.

Speaker Change: Do you think that's I guess, a macro trend across the board for pharma or do you think there is something unique to freeze or maybe the platform is I guess moving up in priority relative to other tactics.

Speaker Change: Yes, and let me clarify one thing.

Speaker Change: What we meant was that the visibility we have at this year at this time this year.

Speaker Change: The outlook revenue outlook, we provided for next year. So we are comparing to where we were a year ago. So it's a very frequent specific comment.

Speaker Change: And Jared I think I'd callout, our team I mean, I think it's it's our product team.

Speaker Change: It's just our life sciences team generally.

Speaker Change: Is driven that outcome.

Speaker Change: So, it's obviously grown quite a bit in that area and I think we've got more product out and we talked about some of that letter.

Speaker Change: And your next question comes from the line of William Jellison with D. A Davidson your line is open.

William Jellison: Hey, good afternoon. Thanks for taking my question I wanted to ask specifically about the subscription business and just get an update from you on what we're seeing with respect to important drivers of that line like gross retention price cross sell.

William Jellison: And volume on a per HSA basis.

Speaker Change: Yes, So first let me clarify.

Speaker Change: Just a revenue stream so it's not a business for us.

And I think a lot of the commentary.

Speaker Change: We make about it is when we think about go to market and we think about clients.

Speaker Change: And the right type of clients. It really does relate to all three revenue lines, William and so everything we do is that sort of framework to it. So obviously there are subscription.

Speaker Change: Metrics around this but that's not really how we're trying to optimize the business and that's not really how our products are designed so I don't think that would be helpful. But.

Speaker Change: It's one of the one of the revenue lines, we have that contributes to that.

Speaker Change: Yes.

Speaker Change: As a reminder, it is star one if you would like to ask a question.

Speaker Change: And your next question comes from the line of Richard close with Canaccord Genuity. Your line is open.

Richard Close: Yes, congratulations thanks for the questions.

Richard Close: Maybe a follow up on the fiscal 'twenty five guidance.

Richard Close: The midpoint came down a little bit and I think last quarter. You had mentioned the wider range was based on.

Speaker Change: Work to be done.

Speaker Change: To close the year out on network solutions. So.

Speaker Change: Just maybe a little bit.

Speaker Change: Color on why the mid points moving down a little bit.

Speaker Change: I guess, it's a little surprising since the EBITDA moved up so much in networks.

Speaker Change: Higher margin so any help there would be great.

Speaker Change: Yes, Richard I think.

Speaker Change: In General one thing we've tried to do is have our guidance philosophy that throughout the fiscal year. When we have more visibility we share. It with you I think we had lots of conversations with folks coming out of the second quarter in September and I think the expectations that.

Speaker Change: People have a pretty aligned with this <unk>.

Speaker Change: Our revised guidance.

Speaker Change: We talked a little bit about the selling environment fueling.

Slightly better in terms of the visibility we have we shared for next year I don't really think there's anything else to read into that and I think the expectations are fairly lumpy.

Speaker Change: Okay. Thanks.

Speaker Change: Thanks Richard.

Speaker Change: And that concludes our question and answer session I will now turn the conference back over to Jaime for closing remarks.

Speaker Change: Just wanted to thank everyone for joining us for <unk> second earnings call.

Speaker Change: I wish everyone happy holidays, Merry Christmas happy New years.

Speaker Change: Happy Hanukkah.

Speaker Change: And ladies and gentlemen, this concludes today's call and we thank you for your participation you may now disconnect.

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