Release Date: May 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Phreesia Inc (PHR, Financial) returned to profitability in the first quarter of fiscal 2025.
- Q1 revenue increased by 21% to $101.2 million.
- Adjusted EBITDA turned positive for the first time in three years, reaching $4.1 million.
- The company saw an increase of 103 average healthcare services clients from the prior quarter.
- Phreesia Inc (PHR) expects to start generating free cash flow in the second half of the fiscal year.
Negative Points
- First-quarter revenue was negatively impacted by $1.7 million due to the accelerated wind down of a relationship with a clearinghouse client.
- The cyber attack on Change Healthcare and subsequent outages accelerated the wind down of a client relationship, impacting fiscal 2025 results.
- The company reduced its revenue outlook for fiscal 2025 by $8 million due to the wind down of the clearinghouse client relationship.
- Operating cash flow for Q1 was just under breakeven at negative $721,000.
- There are ongoing concerns about cybersecurity investments and potential future attacks impacting operations.
Q & A Highlights
Q: Can you discuss investments in cybersecurity and any financial impact from the Ascension attack?
A: Balaji Gandhi (CFO) explained that Phreesia takes cybersecurity seriously and has been ramping up investments in this area for years. Chaim Indig (CEO) added that they continue to expect increased investments in cybersecurity, which is built into their forward-looking plans. They emphasized the importance of protecting client and patient data, including their own families' data.
Q: Could you explain the reasoning behind the Clearinghouse client wind down and any risks from other client contracts?
A: Balaji Gandhi (CFO) clarified that the wind down was mutually agreed upon as the client wanted to consolidate to one vendor, which included services Phreesia was not willing to provide. He noted that the wind down was accelerated due to external factors but does not foresee similar risks with other client contracts.
Q: How did the decision on the Clearinghouse client impact your fiscal '25 guidance, and what are the drivers behind the EBITDA outlook increase?
A: Chaim Indig (CEO) mentioned that the wind down was not initially planned for fiscal '25, and the accelerated timeline was unexpected. Regarding EBITDA, he noted that Phreesia has been focusing on profitability and is being more aggressive in driving margin improvements while still prioritizing growth.
Q: Has the willingness of providers to deploy Phreesia solutions changed due to the Change Healthcare disruption?
A: Balaji Gandhi (CFO) stated that the provider market remains receptive to Phreesia's solutions. While there were short-term disruptions, the overall demand for technology to drive efficiency and better margins remains strong.
Q: What is your strategy for accelerating growth in revenue per client?
A: Balaji Gandhi (CFO) emphasized that network solutions will be the primary driver of revenue growth per client. While payments and other products contribute, network solutions are expected to lead the growth trajectory.
Q: Can you elaborate on the MediFind appointment requests and its impact on your strategy?
A: Chaim Indig (CEO) noted that the adoption of MediFind has been well received and is expected to drive significant value for specialists by matching the right patients with the right providers. This is seen as a major value driver for winning future clients.
Q: What are your thoughts on the demand environment for Network solutions and the potential of MediFind for network revenue growth?
A: Chaim Indig (CEO) and Balaji Gandhi (CFO) expressed optimism about the demand for Network solutions, highlighting strong ROI for clients. They also see MediFind as a significant opportunity for network revenue growth and plan to continue investing in this area.
Q: Can you discuss the health of the payments business and expectations for growth? Also, how sustainable are the current gross margin levels?
A: Balaji Gandhi (CFO) explained that the payments business is tracking well, with seasonal variations. Despite a $1.7 million impact in Q1, the business remains consistent. Regarding gross margins, he noted that they are performing well and should remain stable, supporting the revenue and EBITDA outlook.
Q: Can you comment on the mix and quality of healthcare services clients being added?
A: Balaji Gandhi (CFO) mentioned that the mix includes large, midsize, and small enterprise clients. The focus is on shorter payback periods and ensuring clients convert and attach with payments, contributing to overall growth.
Q: How should investors think about the margin effect of Phreesia's recent organizational changes?
A: Balaji Gandhi (CFO) clarified that the organizational changes were primarily legal and did not significantly alter the financial profile. The expenses were already accounted for, contributing to the operating leverage seen in recent results.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
