Q4 2025 Phreesia Inc Earnings Call
Speaker Change: Good evening, ladies and gentlemen, and welcome to the Freesia's fourth quarter fiscal 2025 earnings conference call.
Speaker Change: And the anticipated performance of our business, 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 annual report on Form 10-K that will be filed with the SEC tomorrow.
Speaker Change: The forward looking statements made on this call we 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 any obligation to update these forward looking statements to reflect events or circumstances. After the date of this call.
Speaker Change: To reflect new information or the occurrence of unanticipated events.
We may also refer to certain financial measures not in accordance with generally accepted accounting principles.
Speaker Change: Such as adjusted EBITDA and free cash flow.
Speaker Change: Order to provide additional information to investors.
Speaker Change: non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results.
A reconciliation of GAAP to non-GAAP results may be found in our earnings press release, and stakeholder letter, which were furnished with our form 8-K filed after the market closed today with the SEC and May also be found on our Investor Relations website at IR Dot freeze your dot com.
Speaker Change: I will now turn the call over to our CEO Jaime Thanks.
Speaker Change: Thank you velocity and good evening, everyone. Thank you for joining <unk> fourth quarter earnings call.
Speaker Change: I wanted to take a moment to acknowledge.
Speaker Change: That 20 years ago, and then are nice delegates region.
Speaker Change: Our mission is making care easier every day.
Speaker Change: Vision is for every person to be an active participant in their care.
Speaker Change: So proud of what we've accomplished over these years and excited about where we are heading.
Speaker Change: I wanted to extend my appreciation to my teammates our clients partners and stakeholders, who continued to contribute to our success.
Speaker Change: I am excited about the new products, we've introduced over the past several quarters and improve medication adherence and the overall patient and provider experience.
Speaker Change: We look forward to make these products more widely available to our existing network.
Speaker Change: Yes.
Speaker Change: In fiscal 2025, we achieved another milestone.
Speaker Change: For Egypt platform was used in approximately 14% of patient visits.
Speaker Change: The United States or approximately $170 million.
Speaker Change: I would like to congratulate and thank the team for a strong finish to the fiscal year, which is reflected in our earnings press release, which stakeholder letter.
Speaker Change: Let me hand, it over to velocity reviewing some of the highlights of the fourth quarter results and review our outlook for fiscal 2026.
Speaker Change: Thank you hi, let.
Let me start with a couple of the highlights in our earnings materials regarding the fourth quarter.
Q4 revenue was.
Speaker Change: It was $109 7 million.
Speaker Change: Up 15% year over year.
Speaker Change: Q4, adjusted EBITDA was.
Speaker Change: It was $16 4 million.
Speaker Change: Up $19 $9 million year over year.
Speaker Change: On an adjusted EBITDA margin of 15%.
Speaker Change: Our Q4 average healthcare services clients.
Speaker Change: Reached 4341 and increased 104 from the prior quarter and 379 from the prior year.
Speaker Change: In Q4 total revenue per AA, Jesse was $25266 up 5% year over year.
Speaker Change: Our cash flow and cash position continue to improve in Q4, we maintain positive operating cash flow and free cash flow.
Speaker Change: For the third consecutive quarter.
Speaker Change: Q4, operating cash flow was positive $16 3 million up $19 $3 million year over year.
Speaker Change: Q4 free cash flow was positive at $9 2 million up $20 $1 million year over year.
Speaker Change: These improvements reflect strong revenue performance over the period as well as disciplined expense and cash collections management.
Speaker Change: We expect the magnitude of improvement in free cash flow and operating cash flow on a quarter to quarter to quarter basis to vary based on specific timing of invoicing and payments, which you can see in working capital along with Capex.
Speaker Change: Cash was at $84 $2 million on January 31 up.
Up to $5 million from October 31, 2024.
Speaker Change: Our fourth quarter reflects continued operating leverage across the company.
Speaker Change: We are well positioned to continue generating positive free cash flow, while investing in long term profitable revenue growth.
Transitioning to our financial outlook for fiscal 2026.
Speaker Change: We are maintaining our revenue outlook for fiscal year 2026 at a range of 472 million to $482 million.
Speaker Change: The revenue range provided for fiscal 2026 assumes no additional revenue from potential future acquisitions completed between now and January 31 2026.
Speaker Change: We are maintaining our adjusted EBITDA outlook.
Speaker Change: For fiscal year 2026 at a range of $78 million to $88 million.
Speaker Change: We are reiterating our outlook on hfcs to reach approximately 4500 in fiscal 'twenty six and for revenue.
Speaker Change: <unk> to increase in fiscal 2026 compared to fiscal 2025.
Speaker Change: Operator, I think we can now open up the lines for the Q&A session.
Speaker Change: We will now begin the question and answer session. If you would like to ask a question. During this time seems a press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star one again.
Speaker Change: At this time I'm entirely to assemble our roster.
Speaker Change: And our first question comes from the lineup Anne Samuel with Jpmorgan.
Speaker Change: Go ahead.
Anne Samuel: Great Congratulations on 20 years, but an accomplishment.
Anne Samuel: So your gross margin once again task.
Anne Samuel: Really nice expansion and I know gross margin was kind of the first leg of the leverage story, but you're already seeing a really nice leverage on your other expense line.
Anne Samuel: As we think about gross margin moving forward.
Anne Samuel: Much more room is there for expansion and then just how should we be thinking about the contribution that you'd have to overall leverage.
Speaker Change: Yeah, Hey, any thanks.
Speaker Change: The on gross margin I think we've talked about this in the past mix.
Speaker Change: <unk> at this point is one of the biggest drivers of that and as you know payment processing is.
Speaker Change: It is associated with lower margins and the growth rate is slower. So I think just the growth expectations are higher than the other two revenue lines.
Speaker Change: Which should contribute to some growth gross margin expansion.
Speaker Change: Theres anything really else too.
Speaker Change: All out in terms of that being a driver of operating leverage might be better in some quarters than others.
Speaker Change: Great. Thanks, and then maybe just one more you you once against a really strong strong growth in network solutions and just wondering how should we be thinking about the underlying market conditions for our 2020 is similar to 2025 or are there any market factors, we should be thinking about thanks.
Speaker Change: No I would say very similar.
Speaker Change: As we head into the year.
Speaker Change: Great. Thank you.
Speaker Change: Thanks.
Speaker Change: And your next question comes from the line of Jessica <unk> with Piper Sandler Jessica Li. Please go ahead.
Speaker Change: Hi, guys. Thank you so much for taking the question.
Speaker Change: I was hoping that maybe you could talk to us a little bit about postscript engagement.
Speaker Change: The product work what data informs the product and maybe what does the patient fee and it came in kind of contingency based.
Speaker Change: Or is it.
Speaker Change: You know based on whether the patient takes up the prescription or is it <unk>.
Speaker Change: Thanks.
Speaker Change: Yes, Okay, there's a lot in there.
Speaker Change: I think.
Speaker Change: To answer the last part of that question you should think about it is impression based.
Speaker Change: It's similar to the other campaigns that we run.
Speaker Change: Yes.
And so if you think about it we're leveraging.
Speaker Change: Lot of the data that we have in our platform to be able to remind you about a prescription that was helpful.
Speaker Change: And so that's very valuable to our clients and that's sort of that's what really drives the product and the value to the customers, but it is both through our life sciences clients, but also to the providers and the.
Speaker Change: Patients as well.
Speaker Change: Great. Thank you.
Speaker Change: Great.
Speaker Change: And your next question comes from the line of Thailand, Trusting way choice Securities Atlanta travel. Please go ahead.
Singh: Yes. This is <unk> Singh from <unk> Securities.
Singh: So I want to ask about the total revenue, but just see metric nice growth of 5% year over year, 7%. If you exclude the cleaning house impact, but it was flat sequentially, how meaningful was the impact in fiscal Q4 from.
Singh: Calendar are paid out in terms of business days in terms of how holidays plays out in terms of trends in fiscal Q4, and as we think about fiscal 'twenty clearly we have one less day in fiscal Q1, but anything else, we should keep in mind in terms of the quarterly progression of that metric.
Singh: No.
Indra: Great questions agile Indra.
Indra: Thank you picked up on the fact that the way the calendar falls and weather really wind up being pretty big factors in our business and so one thing about the fourth quarter that we pointed out.
Indra: Is Christmas.
Indra: Fell earlier in the week.
Indra: On top of a weekend last year in the comp period, whereas in the middle of the week.
Indra: This season, so there were sort of.
Indra: The harder comp tougher comp for us.
Indra: We also had the fires and that was obviously very unfortunate.
And have some clients in that region.
Indra: Then even just on a comp basis the year over year.
Indra: The weather in the northeast and in.
Indra: The southeast which was also a pretty challenging in January and I think as we've talked about these are things we're used to and when we think about.
Indra: Modeling internally.
Indra: <unk> our views externally, we try to build those in and shot out to our to our <unk> team, who does a very good job of staying on top of that so that was largely baked into our expectations for the year, Jill Indra and I think you brought up a good point, which is it was a leap year in 'twenty for its I believe youre at 25, I think you could probably spent some time.
And looking at how the calendar falls in Mondays and Fridays.
Indra: Our interesting things to look at year over year.
Indra: But in the fourth quarter, there was a little bit of a tougher comp for us last year.
Indra: Okay, and then my quick follow up on.
Kind of just update on any progress.
Indra: The leveraging AI and automation that you guys have talked about one usage being replacing manual workflows in improving productivity and Donny, but you guys have also talked about leveraging AI and network solution business in various ways. Just curious any interesting results this year.
Indra: And how do you see more opportunities in Dundee order yet this is more about kind of driving motor business in network solutions from AI side.
Indra: Hi.
Scott: So Andrew this is Scott.
Scott: Well I'll answer that <unk>.
Speaker Change: Earlier today, we actually got a demonstration of one of our AI.
Speaker Change: Patients use internally by our network solutions team.
Speaker Change: They've been wanting to show us with this tool they're using for forecasting.
Speaker Change: It was.
Speaker Change: By all accounts <unk> jaw drops.
Speaker Change: He realized what.
<unk> has been using it for and how valuable. It is so we're seeing its impact in real time in our business and we expect to continue to very thoughtfully implemented.
Speaker Change: Throughout our organization.
Speaker Change: Were it not only drives real financial impact, but really improves the outcomes.
Speaker Change: Or are all of our stakeholders and we're pretty.
Speaker Change: It would be an understatement for me to say the impact that has happened and it's been great. We're very we are very excited.
Thanks, guys.
Speaker Change: Thanks.
And your next question comes from the line of Ryan Daniels with William Blair Ryan. Please go ahead.
Ryan Daniels: Yeah. Good evening guys. Thanks for taking the question.
Speaker Change: I am curious about solutions like appointment readiness you mentioned.
Speaker Change: That also creates a new opportunity to engage users and then leverage that for network solutions sales.
Speaker Change: My question is a newer product like that need to reach some element of critical mass before you can sell it into the pharma customer base or is that something that you could just add to existing programs right away is a deferment or another touch point for network solutions.
Speaker Change: Ryan We think very early on in our product organization thinks a lot about scale and deployment and when usually when we're talking about something will be really it's because it's already reach scale, where we're able to leverage it across network solutions.
Speaker Change: And often these things have been in development for sometimes years.
Speaker Change: So from.
Speaker Change: From the early stages with key requirements of all of our product groups as its scale and we're able to achieve that on a very regular basis with a lot of our products.
In a very good clip.
Speaker Change: That's something.
Speaker Change: As a result of the investments we've been making in R&D.
Speaker Change: Okay, Alright, Thank you and then if I can.
Speaker Change: We've seen a lot more announcements it seems like lately are different and these inside and even outside of healthcare names like Salesforce rolling out AI agents to do.
Speaker Change: Appointment scheduling and matching patients to clinicians and insurance verification and are you seeing any changes when you talk to your go to market team about the competitive dynamics or is your installed base and comprehensive offering still kind of winning more of the market.
Speaker Change: Relative to some of those solutions.
I would say our close rates that anything has gotten a little bit better as of late I think a lot of those larger entrants.
Speaker Change: We have actually helped us in a lot of ways.
Speaker Change: Because as people will start spending more time looking at it.
Speaker Change: We ended up winning more of those so I think it's been.
In a rising tide, where as the market leader, we've been we've been a beneficiary of it right.
Speaker Change: Okay perfect. Thank you and congrats on the 20 years.
Sure. Thanks, Craig.
And your next question comes from the line of Richard close with Canaccord Genuity. Please go ahead.
Richard Close: Yes, thanks for the questions first great results on the breast cancer screening.
For debate.
Speaker Change: Just maybe digging in a little bit more on Ryan's question on are pouring our appointment readiness is that something that you charge provider clients to turn on or.
Maybe let them use it like you have.
Speaker Change: Don in the past and since Youre talking about life science.
Speaker Change: Having another opportunity to engage.
Speaker Change: Can you talk a little bit about what would be an example of how they are engaging.
Speaker Change: With that offering if it's just.
Speaker Change: Their eligibility and deductible and stuff like that just to better understand.
Richard Close: So to answer your question Richard.
Speaker Change: Tom.
Speaker Change: We do not currently charged for this product.
Speaker Change: Above and beyond what we already charge.
Speaker Change: It is something of significant value to providers.
Speaker Change: Because it just gets their patients ready.
Speaker Change: And it's something that we're able to add more value to patients and providers.
Speaker Change: And the scale and the investments that we're making to make our offering significantly more valuable and from a network solution standpoint.
There is there is broad examples of.
Speaker Change: I'm not going to go into on this call where there is a lot of prep that needs to go into.
Speaker Change: Getting ready for your visit and this allows that education and prep before that patient comes into the office.
So we've seen and we have seen an uptick.
On that ups on that with network solutions.
Okay.
Helpful and then maybe I am patient Bill pay.
Speaker Change: An update there obviously the results from the Ortho group really impressive.
Speaker Change: Can you talk a little bit more about the rollout of that.
Speaker Change: Maybe interest from existing clients.
Speaker Change: To add that on or what the attachment rate is with new clients.
Richard Close: Yes, Richard was something we're very excited about I don't think we're going to share an attachment rate, but I think what we could say is it's very similar to what I've talked about.
Speaker Change: With appointment readiness in postscript engagement, which is.
Speaker Change: This has taken years of development and something we've pushed out into the market.
Speaker Change: Our thesis has been it adds a lot of value from the status quo.
Speaker Change: Can generate revenue through additional payment volume through that product, which is we think a very differentiated.
Speaker Change: Go to market and it's something we're pushing out to our to all of our based clients and as you saw on the letter seeing some pretty good results.
Speaker Change: Okay. Thanks Congrats.
Speaker Change: Thanks.
Ryan Macdonald: And your next question comes from the line of Ryan Macdonald with Needham <unk> Company, Brian. Please go ahead.
Speaker Change: Alright, Thanks for taking my questions and congrats on a nice quarter, maybe within network solutions, we're seeing a continued evolution you'll see change.
Speaker Change: Advertising landscape for farmer marketing life Sciences market.
Speaker Change: Particularly in social media channels as we are seeing sort of more regulations come in limiting the ability to target.
Effectively on some of the major social media platforms are you from a go to market perspective on that networking solutions team doing anything to better position yourself to maybe capture more share of spend in the mix for these changes.
Well.
Speaker Change: Just talking about.
Our positioning there Ryan.
Speaker Change: <unk> platform.
I felt that it is built on very important principles of both privacy and consent.
Speaker Change: And so we're trying to with our platform meet the patients.
Speaker Change: Where they are with relevant personalized information.
Speaker Change: At those very key moments of their health care journey, so for us that's what differentiates us in leading on privacy and consent.
And we think we have a very unique platform to do that.
Obviously, yes, there's lots of competition for those dollars so that's $1.
Speaker Change: Got it.
Speaker Change: Okay. Thank you and then maybe as you think about.
Speaker Change: The reiterated guidance on sort of a magnitude as hfcs and the additions that you are expecting for this year can you just talk about sort of what you're seeing early days in the year is that gives you sort of confidence in the trajectory of that count and then.
Speaker Change: What to the extent that you can do to either meter upward gallon investments to make sure youre sort of getting to those targets as we progress year on year.
Speaker Change: It is likely again, a volatile macro thank you.
Speaker Change: Yes, sure I mean I think.
Speaker Change: We've talked about this for.
Speaker Change: For a couple of years now.
Speaker Change: A lot of capital in this business we are.
Speaker Change: Still spending.
A fair amount of capital in that area in sales and marketing which is inclusive.
Speaker Change: Art.
Speaker Change: <unk> network solutions area.
Speaker Change: And so Ryan when we split those.
Projections out there for fiscal 'twenty six.
Speaker Change: The numbers might move around quarter to quarter, we wanted to put something out there that was.
Speaker Change: Captured where we thought we'd be for the end of the year and feel pretty comfortable with that today and with our go to market motions and the resources we have.
Yeah.
Speaker Change: I think we go to the next caller.
Speaker Change: And your next question comes from the line of Jeff Garro with Stephens, Jeff. Please go ahead.
Jeff Garro: Yeah. Good afternoon, thanks for taking the questions a couple.
Speaker Change: Couple more from me on network solutions.
Speaker Change: First just wanted to check in and see if you could help us understand how far along are you in penetrating all of the the 170 million visits on the network with network solutions content and then also wanted to ask how are you getting better at and generating those monetization moments.
And maybe even further finding the best and most personalized match for your inventory of network solutions content to engage with those individual patient moments.
Speaker Change: Yes.
Speaker Change: So Jeff I think we did share the 170 million visit milestone, but I think the very unique part about <unk> business model is that those visits there's lots of different ways, we're bringing value to our.
Speaker Change: Our clients in.
Speaker Change: Those visits and the time talked about there is certain products that are driving value in some ways to providers can generate subscription revenue for our payment processing revenue others. We are able to also generate network solutions revenue. So I don't think you should come away thinking that.
Speaker Change: All $170 million of those.
Speaker Change: We'll generate revenue from all three lines, it's actually a pretty I think unique.
Speaker Change: Part of our business model that said I think you can do some very short cut math on looking at our network solutions revenue divided by visits which we've provided I think four for refi periods now since we've been public and see that the dollars on a per visit basis continue to tick up and we think that will continue to tick up in.
Speaker Change: Is incorporated into our financial outlook for fiscal 'twenty six.
New products, we've introduced in the last couple of quarters will help drive that.
Speaker Change: Excellent I appreciate that.
Speaker Change: One more on network solutions.
Speaker Change: Back in mid December you spoke pretty positively on progress for network solutions on the kind of key selling season for pharma advertising. So wanted to see if that remains the case here. Several months later and maybe just generally how you feel about visibility there.
Speaker Change: Yes, no change exactly in the same spot and I think maintaining our financial outlook. So we reflect the same same comments, we made back in December.
Speaker Change: Great. Thanks, again for taking the questions and also congrats on the 20 years.
Speaker Change: Thank you.
Speaker Change: And your next question comes from the line from the line of Danielle <unk> with Citigroup. Daniel Please go ahead.
Speaker Change: Hi, guys. Thanks for taking the question and congrats on another strong quarter here.
Speaker Change: There's been a lot lots of macro noise out there right now whether it's around consumer confidence or what's going to happen with Medicaid enhanced subsidies on the exchanges or physician payment rates and Medicare.
Speaker Change: Curious if youre seeing any of these macro factors impact your business. This year impact that sales cycle. This year and then I don't know if you have this data readily available, but if you could perhaps size what percent of your visit volume is coming from folks on Medicaid or the exchanges.
Speaker Change: So.
Daniel: So Daniel I think the first thing.
Speaker Change: We would say is obviously we are monitoring all of these trends and activity is pretty closely.
Nothing to really call out, but let's just step as of today and what we know and we will keep monitoring and let you know if anything changes but these.
Speaker Change: These are these are all things, we're tracking pretty closely.
Speaker Change: I think in terms of mix.
Speaker Change: There's nothing about our the mix of our network have you thought about it on a payer basis there'll be different than just the broader population and apologize don't know offhand exactly what percentage of the population is Medicaid, but I don't think you'd see would be very different and that would apply to Medicare or employer employer sponsored.
Speaker Change: Coverage, yeah makes sense okay. Okay.
Speaker Change: And then just on your capital deployment priorities for fiscal 2060 has really solid cash balance now youre consistently free cash flow positive. So I'm just curious how you're thinking about that.
Speaker Change: The buy versus.
Speaker Change: Builds dynamic in 2006, and if theres any changes in and capital deployment priorities.
Speaker Change: No change I mean, I think we talk a lot about capital allocation and for the last almost six years now we've been public.
Our philosophy has been to allocate capital, where we can get good solid durable growth that's profitable.
Speaker Change: And sometimes that comes organic sometimes it comes in organic obviously, it's been heavily organic over our history and there is a pretty.
Speaker Change: A rigorous process for for us to look at things that organic.
Speaker Change: And I think it's nice to have the balance sheet that we have and the cash flow we have.
Speaker Change: To be able to continue to look at both organic and inorganic in and get drive durable profitable growth.
Speaker Change: Got it thank you.
Speaker Change: And your next question comes from the line of Scott <unk> with Keybanc capital markets. Scott. Please go ahead.
Scott: Hey team. Thanks for taking my question. So on the investment letter you said, you're after our service was back on line.
Scott: Good to hear but it reminds me that you had two other acquisition last year.
Speaker Change: Are you fully charging for those.
Speaker Change: Those platforms now and how should we think about those tailwind of all three.
Speaker Change: For fiscal 'twenty six.
Speaker Change: Yes, and actually Scott, it's amazing how time flies, but those all three of those acquisitions, we're actually in calendar 'twenty three so fiscal 'twenty stores. So we actually did not do any acquisitions in fiscal 'twenty five.
Speaker Change: And the other two that you are referring to from from fiscal 'twenty. Four have contributed to growth I think we've called out many find and access driving.
Speaker Change: Revenue in contributing to growth and that's something when we made those acquisitions, we expected it to.
Speaker Change: To contribute but I don't think theres anything.
Speaker Change: Particularly.
Speaker Change: To call out there.
Speaker Change: Yes.
Speaker Change: We're excited to have.
Speaker Change: The oncall product back out in the market.
Speaker Change: Yeah. Thanks, Rajeev, thanks for that Youre totally right time does fly.
Follow up on the last question about capital allocation would you think about deploying it through other means would you think about share repurchases. If you see valuations depressed.
You are generating cash now and that's expected to probably accelerate as margins continue to expand here. So just kind of thinking about capital allocation flexibility and optionality here.
Speaker Change: Yeah, I think what you should take away.
Speaker Change: As we're always trying to position ourselves.
Speaker Change: To be able to be flexible.
But look we're we're very growth minded company and try to drive again that profitable durable growth.
Speaker Change: And Thats, where we should think about is prioritizing capital deployment.
Speaker Change: And.
Speaker Change: Certainly the next couple of years.
Speaker Change: Thanks.
Speaker Change: And your next question comes from the line of again, Jessica <unk> with Piper Sandler Jessica. Please go ahead.
Speaker Change: Hi, guys. Thanks for taking the follow up I just wanted to say.
Speaker Change: On the network solutions side can you just remind us when are you able to upsell or may be resolving contacts throughout the year and our contracts easily time bound or impression down just wondering about deeper.
All right, ladies and gentlemen, you answered the question.
Speaker Change: Yes. Thanks.
Speaker Change: Yes, it's throughout the year.
Speaker Change: And we sell campaigns for fixed number of messages that are delivered.
Speaker Change: And then when we complete those campaigns, we resell them I don't know if that answers your question Jessica.
Speaker Change: It sort of.
Speaker Change: Going but we do do forecasting.
Speaker Change: Yes, and I think <unk> talked about AI being an interesting.
Speaker Change: The application, there and helping us do that.
Speaker Change: Got it thank you.
Speaker Change: Yes.
This concludes our question and answer session I would like to turn the conference back over to shame A&D.
Speaker Change: Thank you everyone.
Speaker Change: The last three years has been wonderful we look forward to.
Speaker Change: The years forward.
Speaker Change: Just begun this amazing journey. So thanks, everyone for joining us in this quarter.
Talk to you in a couple of months.
Speaker Change: This concludes today's conference call you may now disconnect.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].