• Revenue: $106.8 million, up 17% year-over-year.
• Adjusted EBITDA: $9.8 million, up $16.4 million year-over-year, with a margin of 9%.
• Operating Cash Flow: Positive at $5.8 million, up $12.1 million year-over-year.
• Free Cash Flow: Positive at $1.6 million, up $13.2 million year-over-year.
• Cash: $82 million as of October 31, with no borrowings on a $50 million credit facility.
• Average Health Care Services Clients (AHSCs): Increased by 68 from the prior quarter.
• Total Revenue per AHSC: $25,207, up 1% year-over-year and 3% over the previous quarter.
• Fiscal 2025 Revenue Outlook: Narrowed to $418 million to $420 million.
• Fiscal 2025 Adjusted EBITDA Outlook: Raised to $34 million to $36 million.
• Fiscal 2026 Revenue Outlook: Expected to be $472 million to $482 million, a 13% to 15% increase from fiscal 2025.
• Fiscal 2026 Adjusted EBITDA Outlook: Expected to be $78 million to $88 million, a 129% to 144% increase from fiscal 2025.

• Warning! GuruFocus has detected 3 Warning Signs with PHR.

Release Date: December 09, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Phreesia Inc (NYSE:PHR) reported a 17% year-over-year increase in revenue for the third quarter, reaching $106.8 million.
• The company achieved a positive adjusted EBITDA of $9.8 million, marking a significant improvement of $16.4 million year-over-year.
• Phreesia Inc (NYSE:PHR) completed its second consecutive quarter of positive operating cash flow and free cash flow, with operating cash flow at $5.8 million and free cash flow at $1.6 million.
• The company has no borrowings on its $50 million credit facility, maintaining a strong cash position of $82 million as of October 31.
• Phreesia Inc (NYSE:PHR) raised its adjusted EBITDA outlook for fiscal year 2025 to a range of $34 million to $36 million, up from the previous range of $26 million to $31 million.

Negative Points

• The wind down of a clearinghouse client relationship reduced third quarter total revenue growth by 1% and total revenue per AHSC growth by 2%.
• The midpoint of the fiscal 2025 revenue guidance was slightly lowered, indicating potential challenges in achieving higher revenue targets.
• Despite positive cash flow, the improvement in free cash flow is expected to fluctuate on a quarter-to-quarter basis due to timing of invoicing and payments.
• Phreesia Inc (NYSE:PHR) is still in the process of fully monetizing recent acquisitions, indicating that these investments have not yet reached their full potential.
• The company faces ongoing risks and uncertainties that could impact future financial results, as highlighted in their forward-looking statements.

Q & A Highlights

Q: How did Phreesia balance the goal of doubling EBITDA margin in fiscal '26 with reinvesting in the business to drive top-line growth? A: Balaji Gandhi, Chief Financial Officer, explained that Phreesia has been exercising expense discipline for over two years, which allows for both profitability and reinvestment in growth. The company focuses on being good stewards of capital, which enables them to reinvest in areas that fuel future growth while maintaining expense discipline.

Q: Is Phreesia changing the mix of sales and marketing expenses to focus more on cross-selling and network solutions? A: Balaji Gandhi noted that Phreesia continuously evaluates the returns on sales and marketing investments. The spending has remained consistent, reflecting efforts to optimize returns across both healthcare services and Life Sciences markets. The approach is dynamic and adjusts based on market conditions.

Q: Are the recent acquisitions like Access, ConnectOnCall, and others fully monetized, and what is the strategy for subscription revenue per provider client? A: Balaji Gandhi stated that these acquisitions are not yet fully monetized, as they require time for integration and optimization. The focus is on total revenue per client rather than specific subscription metrics, aiming for overall growth in client revenue.

Q: How is Phreesia's network solutions selling season performing, and what impact does the appointment of RFK to lead HHS have on pharma marketing and education? A: Balaji Gandhi mentioned that the selling season is slightly ahead compared to last year, with good visibility into fiscal '26. Regarding RFK's appointment, Phreesia emphasizes its platform's focus on privacy and consent, providing personalized health content to improve outcomes, which aligns with regulatory expectations.

Q: What is the outlook for fiscal '26 EBITDA, and how does it relate to gross margin and operating expenses? A: Balaji Gandhi explained that the improvement in EBITDA is driven by revenue growth and operating leverage rather than significant changes in gross margin. The company has been achieving consistent gross margins and focuses on optimizing expenses below the gross margin line to drive profitability.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.