Title

Presentation

Phreesia, Inc. beats earnings expectations. Reported EPS is $0.05, expectations were $0.02.

Operator: Good evening, ladies and gentlemen, and welcome to Phreesia First Quarter Fiscal 2027 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 Gandhi, Phreesia’s Chief Financial Officer. Mr. Gandy, you may begin.

Balaji Gandhi: Thank you, operator. Good evening, and welcome to Prisa’s Earnings Conference Call for the First Quarter of Fiscal 2027, which ended on April 30, 2026. Joining me on today’s call is Jim Indig, our Chief Executive Officer. 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 markets closed today. These documents are available on the Investor Relations section of our website at ir.friga.com. As a reminder, today’s call is being recorded, and a replay will be available on our Investor Relations website at ir.freta.com following the conclusion of the call. During today’s call, we may make forward-looking statements, including statements regarding trends, our anticipated growth, our strategies, predictions about our industry, and the anticipated performance of our business, including our outlook and visibility regarding future financial results.

Forward-looking statements are subject to various risks and uncertainties and other factors that may cause our actual results, performance or achievements to differ materially from those described in our forward-looking statements. Such risks are described more fully in our earnings press release, our stakeholder letter and our risk factors included in our SEC filings, including in our quarterly report on Form 10-Q that will be filed with the SEC tomorrow. 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.

We may also refer to certain financial measures not in accordance with generally accepted accounting principles, such as adjusted EBITDA and free cash flow 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 results. A reconciliation of GAAP to non-GAAP results may be found in our earnings release and stakeholder letter, which were furnished with our Form 8-K after the markets closed today with the SEC and may also be found on our Investor Relations website at ir.fresia.com. I will now turn the call over to our CEO, Chaim Indig.

Chaim Indig: Good evening, and thank you all for joining our first quarter fiscal 2027 earnings call. Before I hand it out to Balaji to provide some highlights on our financial results and outlook, I want to take a moment to recognize the people make for you what it is. Our team has shown up with real commitment, not just this quarter but through a sustained period of transformation that required a lot of grids, a lot of trust and difficult decisions. I am both grateful for the people who are on the team and excited about what we’re building together. We’ve done serious foundational work over the last few years. on our infrastructure, our security, our operational discipline, and it’s paying off. We believe we are a unique company in our space due to our scale, experience and profitability.

We believe we have a unique opportunity to tap into these strengths to play our best game over the next several years. The key factors are shaping our positive outlook. First, we’re always striving to set the pace on patient intake by offering what we see as the most differentiated solution in our targeted markets and by making sure our clients feel that difference. That means continuing to bring front-end solutions that improve provider test flow and enable meaningful patient and provider engagement on behalf of our network solution clients. Second, we’re prioritizing bringing Access One’s financing solution to more of our base clients and integrating Axis 1 into our pay network flow. We believe this can improve cash flow for our health care provider clients and unlock a new level of quiet loyalty and retention.

And third, AI is fundamentally changing what’s possible for us at scale in ways that I expect will show up clearly in our near-term and long-term results. I’m excited about what our team can accomplish together by leveraging our client relationships, our capital and our ideas. I’ll now turn the call over to Balaji.

Balaji Gandhi: Thank you, Jim. Let me start with a few highlights from our first quarter fiscal 2027 results, and then I’ll move into our outlook for the full fiscal year 2027. For the first quarter of fiscal year 2027, revenue was $130.9 million, up 13% year-over-year. Year-over-year growth was led by Payment Solutions at 40% and followed by Network Solutions at 15%. The 40% year-over-year Payment Solutions growth reflects the fact that the prior year period included no contribution from Access One as the acquisition closed in our fourth quarter of fiscal year 2026. Adjusted EBITDA was $30.5 million compared to $20.8 million in the same period in the prior year. representing an adjusted EBITDA margin of 23%. First quarter average healthcare services clients, or AHSC, reached 4,700, an increase of 50 from the prior quarter and an increase from 297 or 7% year-over-year.

These results were in line with our expectations. First quarter total revenue per HIC was $27,811 and up 6% year-over-year. Net income was $3 million in the quarter compared to a net loss of $3.9 million in the same period in the prior year, representing our third consecutive quarter of positive net income. We are also introducing 2 new metrics this quarter, total managed payments and Payment Solutions revenue rate. Total managed payments combines our legacy patient payment volume with Access One’s managed portfolio of cardholder receivables, giving investors a single view of the scale of our payments ecosystem. Payment Solutions revenue rate consists of our total Payment Solutions revenue divided by total managed payments, demonstrating how changes in volume and portfolio size translate into revenue.

Total managed payments were $1.786 billion in the first quarter of fiscal 2027, and our Payment Solutions revenue rate was 2.3%. For more information on these metrics, please refer to our earnings press release and stakeholder letter. Now turning to the balance sheet and cash flow updates. On March 13, we completed the refinancing of our bridge loan. We repaid all outstanding indebtedness under the bridge loan using $92 million of borrowings from a new 5-year $275 million senior secured revolving credit facility with Capital One, maturing on March 13, 2031. The unused borrowing capacity is available for working capital, capital expenditures, acquisitions and general corporate purposes. Cash, cash equivalents and restricted cash as of April 30, 2026, were $76.4 million compared to $73.8 million at January 31, 2026.

At April 30, 2026, $1.7 million of our restricted cash was included with other long-term assets. We ended the first quarter with $84 million of borrowings outstanding on our new Capital One credit facility, reflecting an $8 million paydown during the quarter. Net cash provided by operating activities was $23.9 million in the quarter, an improvement of $9.1 million year-over-year. Free cash flow was $16.4 million, an improvement of $8.9 million year-over-year. We expect that quarter-to-quarter operating cash flow and free cash flow performance will fluctuate based on a variety of factors, including the specific timing of invoicing and payments, which you can see in working capital, along with CapEx. Additionally, on April 30, we expanded Access One’s securitization facility with PNC Bank and extended the term through April 2029.

This development reinforces our investment thesis behind the Access 1 acquisition in 2 key ways. First, we increased the facility limit from $200 million to $300 million. giving us greater capacity to offer Access ONE solutions to our clients. Second, the amendment also expanded our ability to offer upfront funding to noninvestment-grade clients. Many of Frigo’s clients are not investment grade, and we are excited to offer them financing solutions that drive cash flow improvement. Now transitioning to our financial outlook for fiscal year 2027. Our fiscal 2027 outlook is unchanged from what we provided in March. We’re maintaining our revenue outlook for fiscal year 2027, we expect revenue to be in the range of $510 million to $520 million. As we noted last quarter, Network Solutions clients are committing lower spend levels for the second half of fiscal 2027 than we had anticipated last December.

Certain clients are committing fewer dollars due to brand-specific dynamics, including the impact of regulatory policies. Though we do not believe these developments are signaling a structural shift in demand for Africa solutions. There is now more variability in our internal network solutions revenue forecasting, particularly in the second half of each fiscal year. Our visibility into revenue across other parts of the business is generally consistent with our views in March 2026. The revenue range provided for fiscal 2027 assumes approximately $37 million of contribution from Access One and no additional revenue from potential future acquisitions completed between now and January 31, 2027. We are maintaining our adjusted EBITDA outlook for fiscal 2017 and we expect adjusted EBITDA to be in the range of $125 million to $135 million in addition to our continued belief in the operating leverage embedded within our model, — we have more recently identified opportunities to reduce our reliance on manual processes across Fresia, including through the adoption of artificial intelligence.

In May 2026, subsequent to quarter end, we implemented a restructuring plan, intended to reduce operating expenses and better align our cost structure with our current business priorities. The plan is expected to result in meaningful annualized run rate expense savings which were reflected in our adjusted EBITDA outlook provided on March 30, 2026. We are maintaining our expectations for AHSC growth in the mid-single-digit percentage range and we’re maintaining our outlook for total revenue per AHSC to grow in the low single-digit percentage range for fiscal 2021. We I would like to join him in recognizing the significant contributions from everyone at Phreesia to our solid financial profile. Operator, I think we can now open up the lines for the Q&A session.

Operator: [Operator Instructions] Your first question comes from the line of Sean Dodge with BMO Capital Markets. Please go ahead.

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Sean Dodge: Maybe just on Access One, Balaji, you said the new agreement with PMC, there’s 2 dimensions to it. You can — you expanded the size of the facility, but now you can also offer to other types of providers. How should we think about like what that means kind of incrementally or quantitatively for the excess 1 opportunity over the next couple of years, the cross-selling into free base, like how meaningfully can that start to contribute? And then as you sell into these other types of providers or the economics of those different than what like a typical legacy Access — on client would be? .

Balaji Gandhi: Yes. Thanks, Sean. There’s a lot in there. I’ll try to hit on all those. So first of all, just stepping back, this is an area that Phreesia has been thinking about entering for many, many years. And I think 1 of the areas why we’re interested is because of our base of clients that are in a lot of these medical specialties and are noninvestment grade. So this was definitely an important milestone to get to. And we think there’s other sources of capital as we continue to penetrate this part of the market. Probably a little bit early to talk about like how the economics might differ. But at the end of the day, I think we just keep pointing to some of the prepared remarks and what’s in the letter, which is we’re trying to drive cash flow improvement for these health care providers.

And this just gives us more capital and opens up the addressable market into our base, which we have a long history of working with a lot of these clients. So there’s a lot of trust built there as well. .

Operator: Your next question comes from the line of Stan Berenstein with Wells Fargo.

Stanislav Berenshteyn: Just wanted to maybe ask more holistically, obviously, your growth engine is shifting a bit away from subscription towards payments and network. Can you just maybe talk about what changes are you making to your sales and marketing teams to kind of pivot and drive growth in other areas of your business? And how is the go-to-market different from where it was a year ago?

Balaji Gandhi: Yes. Thanks, Dan. So I think 1 important way to think about all this is region has always been a product-led growth organization. So it does always start with the product. And I think if you think about on the provider part of this, there’s the software that we implement and the clients benefit from. I think you’re referring to the monetization of it, which is clearly shifting — we have been talking about this for, I think, at least 2 years of this philosophy of better, faster and cheaper in terms of the software for our provider clients this is deliberately moderating subscription pricing to keep retention strong, drive the downstream economics in Payments and Network Solutions. So you’re seeing some sequential moves generally, what you’d expect with that strategy in the sequential change in subscription revenue.

In terms of the go-to-market, it’s still very product-oriented. So — we build a lot of new capabilities. Our team implements them. And our sales motion is very much still trying to get those products in the hands of the providers to drive value. It’s just the monetization that is shift.

Operator: Your next question comes from the line of Scott Schoenhaus with KeyBanc.

Scott Schoenhaus: I guess my question will be on the Network Solutions. You mentioned in the investor letter, about seeing some strength with the newly launched provider product. Maybe we could touch more on that, what’s basically embedded in your guidance? I know you’re talking about continued caution around the back half set up. But you can dive deeper on what you’re seeing on the new Provider Connect side of things.

Balaji Gandhi: Sure. Thanks, Scott. I think there’s 2 different threads here on all things network solutions. I think — we spent a lot of time both this quarter and last quarter talking about what’s happening in fiscal ’27 as it relates to the demand and end markets. I think way down below that underneath is this new area that we’re pretty excited about, that we just launched earlier this fiscal year, working from a base of 0 in fiscal ’20. . We’re very excited about it. We’ve had a lot of wins and a lot of momentum. There is some contribution from that built into our fiscal 2017 guidance. But really, I think the way to think about it is it gives us a runway for fiscal ’28, ’29, ’30, where we’re not just relying on the patient Connect side of things, but on a provider connecting things. So the team did an excellent job of getting that launched, and I think there’s a lot of good momentum there.

Operator: Your next question comes from the line of Brian Ken kilo with Jefferies. Please go ahead.

Brian Tanquilut: Maybe just a quick question. It looks like labor cost efficiency efficiencies and RN sales and marketing in Q1 showed up even before the restructuring. So — was there any risk that happened in Q1? And then after this, how do we think about the ability for Parisian to drive margin expansion going forward as you grow revenues? And are there more cost efficiency opportunities longer term?

Balaji Gandhi: Yes. Let me just sort of make sure I understood that. So I think 1 question you’re talking about is was there anything in Q1 that contributed to margin improvement, any changes that were happening. And then two, I think you’re asking more forward-looking. So in terms of like just stepping back, I mean, I think as many of you on the call can probably appreciate. We put a lot of capital to work into the business 4 or 5 years ago. And I think we’ve had a lot of these calls talking about operating leverage. And so we’re constantly looking at areas to drive efficiency, but we also made that upfront investment that we thought we’d get years of productivity from. So that’s really, I think, Brian, the answer on your first part of the question, nothing to call out of the ordinary.

Obviously, the announcement we made in May was a little — was different, which is why it was called out and presented the way it was. But I think Q1, nothing to call out. Going forward, I think our outlook — financial outlook assumes continued improvement throughout the year on margins. I don’t think we’re going to talk beyond that. But to get to the place we are, we feel very good where we have a lot of optionality and paths to kind of driving more growth in the business and having pretty good margins.

Operator: Your next question comes from the line of Jared Hass with William Blair. Please go ahead.

Jared Haase: Yes. In the letter, you also talked about some investments in clinical integrations to sort of better support the oncology or the other specialty providers so I just wanted to hear a little bit more, I guess, just number one, where you’re seeing the biggest opportunity for investment for that specific segment of the market. And then I’d love to hear a little bit about — I think you sort of flagged the you need workflows associated with those types of providers. So where does Phreesia kind of fit into that and where there might be some differentiation to help address those challenges? .

Ryan Daniels: Yes. Thanks, Jared. So I mean, this is something we do call out from time to time in our letters because when you think about the flywheel of the business and what we talked about in the go-to-market motion and how we monetize products, our alignment with the right specialties is really valuable to our network solutions team as they offer products like Patient Connect and Provider Connect. So we can drive a lot of value for the providers. We can drive a lot of value for the various brands that we work with. I think Targa’s — I think we sort of created this category I think in Jim’s opening remarks, we talked about just how patient intake has evolved. — as Frisia has been throughout its 20-plus year history. So I think what you should think about is just we’re constantly kind of the pace car and setting the standard there.

And when we work with a lot of these specialties, I think we can really differentiate how information is collected and integrated across the systems.

Operator: Your next question comes from the line of Ryan MacDonald with Needham.

Ryan MacDonald: Maybe 2 on the Networking Solutions business. I realize you didn’t change any of the guidance on the top line for the full year, but just curious how conversations are evolving as you’re heading into the back half of the year about potential sort of unlocking the incremental budget on the Patient Connect side. And on provider can, given it’s such a new solution in the marketplace, what opportunities are you potentially seeing to be included into some of that late year innovation spend on newer solutions in the market that could create some potential upside ?

Balaji Gandhi: Yes. Thanks, Ryan. You got a lot in there. I think on — in terms of the second half of the year, I mean, I think it sort of speaks for itself. There’s we had our last earnings call for the fiscal year end on March 30, so not a lot of time has passed. I don’t think we have really anything worth sharing here, which is obviously why we maintain the revenue guidance for the year. So we’ll provide updates as the year goes by. I think we will know incrementally some more in September when we report the fiscal second quarter, but nothing really to call out since March. I think you asked some questions about new product and innovation. And I think what you should really just think about is we’re constantly trying to have a lot of value where we can deliver the right kind of messages to patients to impact their outcomes.

On the provider side, there’s a lot of friction in the providers. So we’re not creating products that are like inventing problems. We hear a lot of feedback from our clients, and we’re just trying to build products that address some real needs. And again, we’re fortunate enough to have different ways of monetizing those products.

Operator: Your next question comes from the line of Jeff Garro with Stephens.

Jeffrey Garro: Yes. Good afternoon. Thanks for taking I’ll ask another 1 on the product side, and I’ll try to kind of lump in provider connect with voice AI. Curious to get an update on voice AI specifically and then just to tie it back to that provider on product, the general momentum trying to create more engagement with providers as you release more kind of features and functionality and software products that pertain more to them versus the patient or more administrative staff.

Balaji Gandhi: Yes. So in terms of just products, I mean, look, there’s a lot of work and effort similar to Access, I think entering space has been something people at Fresh been working on for many, many years. So we’re very excited to get this launched and get it off the ground. There — I think you should assume we’re always thinking about other opportunities to engage with the provider directly, Jeff. But I think right now, if we can be successful in provider Connect, I think it will be — translate very well financially and 1 more importantly for our clients. .

Operator: Your next question comes from the line of Daniel Grosslight with Citi. Please go ahead.

Daniel Grosslight: Network Solutions was a bit stronger than we expected this quarter. I know there’s a lot of variability coming into the second half of the year. But I’m curious if this quarter outperformed your expectations? Or was it roughly in line with what you were — what’s in your internal model? And then also, I guess, related to that curious on how GLPs are performing relative to your expectations. I think last quarter, you had kind of called it out as a bit of a bad guide, but not as much as other factors. But given we’ve ramped up a bit on the oral side, would love to get an update on how GLPs are performing too. .

Balaji Gandhi: Yes. So first, with the quarter on Network Solutions, very much in line with what we had a shout out to a lot of folks at Frisia and the team in terms of, I think, Daniel, we’ve talked to you about this. There’s a lot of different moving parts into how we run these campaigns and how they’re paced — we don’t — we’re not trying to optimize things for a quarter, yet we’re a public company, and there’s the realities of we want to set expectations that we can deliver on. So all that considered was very much in line. As far as the second question, I mean, I don’t think we want to get into specific things about clients or specific programs. I think just the commentary we made about generally the demand environment and generally, how we see things for the year applies for a lot of different areas. I don’t if you want to give any specific stuff.

Operator: Your next question comes from the line of GilendraSingh with Truth Securities.

Jailendra Singh: I wanted to touch on the subscription business this quarter, and I understand a tough year-over-year comp, but I’m still struggling to figure out why there was a 6% sequential decline in subscription business. And related to that, given where you’re starting the year for this business, do you still expect subscription business to grow low single digit because that will imply some pickup from Q1 trends. Could you give us comfort around subscription business and where you expect that?

Balaji Gandhi: Sure. Thanks, Glenda. So all of this sort of thinking in the different revenue lines is reflected in how we built up our fiscal ’27 outlook. And so we’re not going to get into revenue by revenue outlook and we provide outlook for the whole business, and that’s — we think that actually works against how we run the business. What we can tell you is that the strategy is embedded in the numbers. We feel good about where total revenue per AHSC is headed for the year. And as far as your comment about like sort of where we sort of started in the first quarter, it’s very much part of the way we sort of see the year playing out. And we have, again, we’re fortunate enough to have different paths getting to that outlook, which is $510 million to $520 million for the year.

Operator: Your next question comes from the line of Steven Valiquette with Mizuho Securities.

Steven Valiquette: So most of my good questions have been asked already. It’s kind of more of a housekeeping 1 also on the subscription and related services revenue. Can you just remind us — you mentioned the nonrecurring revenue in the fiscal first quarter of last year. But for the rest of the quarters, are there any other nonrecurring revenues, either up or down that we need to think about? Or do you have more lean comparisons quarterly for the rest of this year versus the quarter last year? .

Balaji Gandhi: Yes. Thanks, Steve. There’s — I mean, we called that out last year, and obviously, it impacts this year from year-over-year comp. There’s always like a couple of million bucks in the related services component. It was just more pronounced last year and impact of the comps this year. But there’s nothing else. I think if you looked over our 28 quarters of being public. I think we’ve called out related services 3x. So I don’t think there’s anything to think about the rest of the year.

Operator: Your next question comes from the line of Jessica Tassan with Piper Sandler. .

Jessica Tassan: So I appreciate the revenue mix shift to networking payments on a per ASC basis, but I’m just curious whether you think about the current subscription revenue per AHS — does that kind of reflect the floor? Or yes, does that reflect the floor on kind of how AHSC perceives the value of their subscription products? Or should we expect kind of that there may be continual moderation? .

Balaji Gandhi: Yes. Thanks, Jess. I’m going to repeat 3 words that we say a lot better, faster, cheaper. We think that’s just the way — that’s where the puck is headed. We felt that way for several years. And so it does make it very hard to translate what a subscription dollar per client meets to the value the client is getting. We want to make sure they’re getting a lot of value for it. But for us, we sort of flip it around internally and don’t think about it as different business lines and just think about the total dollars that can come in. So I think we’re providing an outlook for the year. I think we try to be as helpful as we can around the modeling — so I don’t want to put ourselves to commit to like whether there’s a floor or ceiling, but we’re not optimizing for that revenue line specifically. And generally, this is trending in a direction we’ve expected. .

Operator: Your next question comes from the line of Ryan Halsted with RBC.

Ryan Halsted: Obviously strong growth in the Payment Solutions business. Any color you can provide just around sort of the broader environment and how you’re seeing that translate to this business, specifically around utilization trends, just generally more cost burden being borne by consumers and whether you’re seeing that as a driver as well as greater out-of-pocket or lack of insurance? Just any other color around some of the experience you’re seeing in that segment and the results you had for the quarter.

Balaji Gandhi: Yes. Thanks, Ryan. I would say all of the above. I mean a lot of the points you made are really what we’re seeing, what I is very interested in getting deeper into this space. I think it really does start with cash flow, though. And the ability for a health care provider, I think as many of you know, to be able to just convert cash in their business, huge amount of labor expenses a lot of supplies, et cetera, is a big deal. And so that’s a huge value prop. I think the shift in terms of more dollars being borne by the patient. That’s been happening for years and it continues. So again, you can almost say like the consumer is like sort of a bigger payer category in general. .

Operator: Your next question comes from the line of Richard Close with Canaccord Genuity. Richard.

Richard Close: Maybe on subscription, as it relates to HSE, you reiterated AHS see growth in the mid-single digits. Can you talk a little bit about that number on a gross versus net basis. Just trying to get a sense of maybe churn that’s going on? And your thoughts on excess 1, how much maybe that helps the potential churn going forward?

Balaji Gandhi: Yes. Thanks, Richard. Look, you — I mean I think we’ve shared the net number. You’ve got a lot of data over time. It’s interesting. One thing to take away is that it’s an average, right, the A and AOC — and we’re pretty encouraged by the team’s start to the year with 50 average clients in the way — if you read our footnotes and stuff, how we calculate that, that’s very encouraging with a lot of our go-to-market motions. And so I think that’s a net number. So we added more than we lost, and the net of it is $50 million I think on your second part of your question yes, we think the value proposition with Access 1 and now being able to even extend that reach into our base clients can absolutely be something that can strengthen the relationship we have with them and strengthen retention.

Operator: Your next question comes from the line of Gene Mannheimer from Freedom Capital Markets.

Gene Mannheimer: Just on the note on the Access One, you’ve owned it for 6 months now. How would you raise that transaction in terms of meeting expectations? I know it’s early days. And the second part of the question would be — can you quantify for us the savings you expect from the restructuring plan that you implemented this month?

Balaji Gandhi: Thanks, Gene. It’s big. The savings generated are baked into our outlook for the year, we’re not going to break out a specific contribution from that, but it’s something we planned for. On Access 1, I mean, just maybe just take a step back. They operate 2 complementary programs, funded receivables that represent roughly 40% of the portfolio. And then an unfunded portion that’s about 60%, where providers retain the receivables, and we are in the servicing fee that composition and strategy continues to evolve. But I’d say, generally, in front of even this expansion of our relationship with PNC, we’re pretty pleased. This was the largest acquisition Price’s ever done. There’s a lot of work to be done. But I think where we are right now, we’re pretty pleased to be here with a lot of the milestones that we’ve hit.

Operator: There are no further questions at this time. I will now turn the call over to Hy Mendig, CEO, for closing remarks. Please go ahead. .

Chaim Indig: Thanks, everyone, for joining the call today. Thank you, Balaji, for doing a wonderful job of answering questions, and everyone on the Free team for a very good strong quarter. We’ll talk to you again in 90 days.

Operator: This concludes today’s call. Thank you for attending. You may now disconnect.

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