Phreesia, Inc. 2027 Q2 Earnings Call

Thank you, operator. Good evening, and welcome to Phreesia's earnings conference call for the second quarter of fiscal 2027, which ended on July 31st of 2026. Joining me on today's call is Chaim 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.phreesia.com. As a reminder, today's call is being recorded, and a replay will be available on our investor relations website at ir.phreesia.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, 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 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 filed after the close today with the SEC and may also be found on our investor relations website at ir.phreesia.com. I will now turn the call over to our CEO, Chaim Indig.

Thank you, Balaji, and good evening, everyone. Thank you for joining our second quarter fiscal year 2027 earnings call. We delivered a solid fiscal second quarter with revenue growth and profitability expansion in line with our expectations. We generated positive operating and free cash flow again this quarter, which together with available cash allowed us to reduce debt principal by over $23 million while maintaining a healthy cash balance. Balaji will cover the results and our outlook. We believe we are uniquely positioned in the market through our diverse set of product offerings to drive meaningful value to every patient visit in the U.S. AccessOne is an important extension of our value proposition because healthcare consumers are bearing a greater share of the ever-growing cost of healthcare.

We've heard from our clients and many other providers across the country that the need for a humane and predictable financing solution for healthcare consumers has never been greater. ProviderConnect, our newest network solutions offering, also extends our value proposition and addressable market. Momentum for this new product continues to build. In the GLP-1 category, a four-month study showed a 4% incremental lift in new-to-brand prescriptions versus a matched control group and more than 1,000 new patient starts. I am proud of our team's commitment to our mission and values. Now I'll turn it over to Balaji to walk through Q2 results and our fiscal 2027 outlook.

Thank you, Chaim. Let me begin with a review of our second quarter financial performance, and we'll then dive into our outlook for fiscal year 2027. Revenue for the second quarter was $129.5 million, an increase of 10% year-over-year. On a sequential basis, total revenue declined approximately 1% from the first quarter, driven primarily by our legacy payment processing revenue. As a reminder, given the seasonality in our payment processing business associated with the reset of health plan deductibles, payment processing revenue is typically highest during the first fiscal quarter of each year. We ended the quarter with average healthcare services clients of 4,744, an increase of 36 from the prior quarter and 277 from the prior year. Client additions in the quarter were in line with our expectations and consistent with our full-year outlook for AHSC growth in the mid-single digit percentage range.

Total revenue per AHSC was $27,289, up 4% year-over-year. On a sequential basis, total revenue per AHSC declined approximately 2%, reflecting the payment processing seasonality I just described, along with continued growth in our client base. Moving on to profitability. Adjusted EBITDA was $32.9 million, an increase of $10.8 million year-over-year, with an Adjusted EBITDA margin of 25%. Net income was $1.9 million compared to net income of $700,000 in the prior year period, representing our fifth consecutive quarter of positive net income. Total managed payments were $1.626 billion in the quarter, and our payment solutions revenue rate was 2.4%. Now turning to the balance sheet and cash flow updates. We ended the quarter with $74.6 million in cash equivalents, and restricted cash. This compares to $76.4 million in the prior quarter.

We delivered our ninth consecutive quarter with positive operating cash flow and free cash flow. Operating cash flow was $18.3 million, up $3.5 million year-over-year. Free cash flow was $13.8 million, up $4.2 million year-over-year. This cash flow, together with available cash, allowed us to reduce debt principal by over $23 million while maintaining a healthy cash balance. We expect that the magnitude of improvement on a quarter-to-quarter basis to vary based on specific timing of invoicing and payments, which you can see in working capital along with CapEx. Our second quarter results demonstrate our team's focus on growing our network, expanding our offerings, driving operating leverage, and strengthening our balance sheet. I'd like to acknowledge the entire Phreesia team for their contributions.

Transitioning to our outlook for fiscal 2027, we are maintaining our revenue outlook for fiscal 2027 at a range of $510 million to $520 million. The revenue range provided for fiscal 2027 assumes approximately $37 million of contribution from AccessOne and no additional revenue from potential future acquisitions completed between now and January 31, 2027. We are maintaining our Adjusted EBITDA outlook for fiscal 2027 at a range of $125 million to $135 million. The restructuring plan we implemented in May is expected to result in meaningful annualized run rate expense savings, which were reflected in the outlook we provided on March 30 and reaffirmed on May 27. We are maintaining our expectation for AHSC growth in the mid-single-digit percentage range and for total revenue per AHSC growth in the low single-digit percentage range in fiscal 2027.

Operator, I think we can now open up the lines for the Q&A session.

Thanks. Yeah. Thanks, Sean. This is Balaji.