Phreesia, Inc.

Good morning, ladies and gentlemen, and welcome to the Freesia fiscal fourth quarter and full year 2020 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. I would now like to introduce Balaji Gandhi, Vice President, Investor Relations for Freesia. Mr. Gandhi, you may begin.

Thank you, Operator. Good morning and welcome to Freesia's Earnings Conference Call for the fourth quarter and full fiscal year 2020, which ended on January 31, 2020. Participating on today's call from Freesia are Chief Executive Officer and Co-Founder Chaim Indig, Chief Financial Officer Tom Altier, and Senior Vice President, Life Sciences, David Linetsky. Following prepared remarks from Chaim and Tom, we will conduct a Q&A session. Complete disclosure of our results can be found in our earnings press release issued yesterday evening, as well as in our related Form 8K submission to the SEC, both of which are available in the investor relations section of our website at ir.freesia.com. As a reminder, today's call is being recorded and a replay will be available following the conclusion of the call. During today's call, we will make forward-looking statements pursuant to the Safe Harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act, including statements relating to the expected performance of our business, future financial results, our strategy, our partnerships, expected launches of products and services, long-term growth, and overall future prospects. These statements are subject to known and unknown risks and uncertainties Thank you for joining us. to update them, except as required by applicable law. We will also refer to certain financial measures not in accordance with generally accepted accounting principles 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 supplemental materials Thank you, Balaji. Good morning, everyone. We know this is a very challenging time for everyone listening in, and we hope you are all managing through this as well as possible.

I want to point out that we are participating on today's call from four different locations, so we appreciate your patience with us. We'd like to acknowledge all of the healthcare provider organizations and medical professionals on the front line of the COVID-19 pandemic for their bravery and dedication. Our CFO, Tom Altier, will begin today's call by reviewing our fiscal 2020 fourth quarter and four-year results. Tom?

Thank you, Chaim. Let's start with our fiscal fourth quarter 2020 results. Revenue was $32.8 million, up 24% year over year. Provider revenue, which combines our subscription and payments revenue, was $26.8 million, up 22% year over year, with the following contributing factors to growth. The average number of provider clients was 1,603, up 4% year-over-year, and our average revenue per provider client was 16,708, up 18% year-over-year. Life Sciences revenue was an even $6 million, up 33% year-over-year, and our adjusted EBITDA was $1.3 million, up over $900,000 year-over-year. Let's turn to the full fiscal year. Revenue was $124.8 million, up 25% year-over-year, and provider revenue was $102.9 million, up 27% year-over-year, with the following contributing factors to growth. The average number of provider clients was 1,571, up 5% year-over-year, and the average revenue per provider client was $65,486, up 21% year-over-year. Life Sciences revenue was $21.9 million, up 15% year-over-year, and adjusted EBITDA was $4.8 million, up $1.3 million year-over-year. Cash flow from operations was $826,000, representing a $3 million improvement year-over-year, and our first year ever with positive cash flow from operations. We ended fiscal 2020 with just over $90 million in cash on the balance sheet. We had $20 million of outstanding borrowings under our credit facility, and we have a $25 million revolving line of credit, which is undrawn. We're extremely proud of our entire team for delivering these results, and we would like to particularly acknowledge our provider and life sciences sales team and our implementation teams for their strong push into the end of the fiscal year. There is additional detail in our fiscal fourth quarter and full year 2020 results in our earnings press release and Form 10-K, and we encourage you to review them and follow up with any questions. I will now turn the call back over to Chaim.

Thank you, Tom. Now, turning to the current state of Freesia in light of the ongoing pandemic, and the related federal, state and local guidelines that are affecting all of us. We'd like for you to come away from today's call with a solid understanding of the following three topics. First, the current state of Freesia's operations, including our team's overall health, safety and engagement. Second, how we are currently engaging our clients. And third, how we are preparing for near-term uncertainty and long-term growth. Let's start with the current state of our operations and team. The week of March 1st, we restricted all non-essential travel and soon after that, employees in our New York City, Raleigh, North Carolina, and Ottawa, Ontario offices began working remotely. We took steps to ensure our team had access to the required resources to adapt to professional and personal challenges associated with this transition, which is a significant undertaking across our organization. I am very proud of our team's resilience, during such a challenging time. I'd like to acknowledge our human resources and IT services team for making the transition as soon as possible for our entire team. Moving on to how we are responding for our clients. Freesia's mission is to create a better, more engaging healthcare experience. It has been amazing to watch our entire team embody our mission in mobilizing for our clients in the wake of the pandemic. Let me share a few specific examples. Back in February, our provider clients began asking Freesia to bring the same automation we bring to their patient intake process into their COVID-19 screening process in order to triage at-risk patients and avoid putting their office staff at risk of infection. In February, we quickly deployed our COVID-19 screening module based on CDC guidelines. The module allows providers to identify patients with COVID-19 risk factors before they arrive for their appointment or upon arrival at their visit and alerts patients and staff to take appropriate action based on patient responses. We've been updating the module as CDC guidelines change and have been able to change the screener multiple times per week across our client organization. We have screened 2.5 million patients on our COVID-19 screening module. Many of our provider clients also began to talk to us about bringing the automation our platform delivers for in-person visits to virtual visits. A virtual visit is similar to an in-person visit. Patients need to check in for a virtual visit, and Freesia's platform collects patient information, processes payments, and seamlessly integrates with most electronic health records and practice management systems. In March, we introduced Freesia Intake for Telehealth. Patients pre-register ahead of the visit using Freesia Mobile, which includes education about how the visit will work. Just before the appointment, patients receive specific instructions and information for the session, such as a link to enter the virtual waiting room. We work alongside many telehealth vendors, including Microsoft Teams, Zoom, Amwell, InTouch Health, and doxy.me. We have made the decision to include Intake for Telehealth as part of our base registration offering at no additional cost to clients. We are preparing for a future that is less reliant on the physical waiting room. You can find additional information on all of our COVID-19 response initiatives and product offerings and sign up for updates on the Frasier website. I'd like to acknowledge our product management and engineering and marketing teams for their effort to bring these important offerings to our clients in a matter of just weeks. Let me take a moment to highlight a new client, Memorial Health Systems, a nonprofit health system serving Ohio and West Virginia. We went live with Memorial in November 2019 in seven of its locations. Over the past several months, through the COVID-19 pandemic, We have accelerated our rollout of the Freesia platform across the rest of Memorial's outpatient service site, provider clinics, and hospitals. Approximately half of the rollout of Memorial will be completed virtually by our team. The health system is leveraging Freesia's now generally available bidirectional discrete integration with Meditech to capture demographic and payment information from patients during intake. The data is automatically sent to staff in real time so they can more fully understand the patient's individual status. Memorial is currently using Freesia's COVID-19 screening module to screen patients for self-reported risk factors, including symptoms and exposure. To date, Memorial Health System has screened roughly 19,000 patients. To minimize exposure during inpatient visits, Memorial is using Freesia's zero contact intake. which supports no waiting room workflows, including mobile check-in from patients' homes or cars. That solution is live in two emergency department locations, one urgent care clinic and Memorial's clinic for patients with COVID-19. Memorial is also using Freesia Intake for telehealth. Memorial is a good example of how Freesia has continued to deliver for clients in this more challenging work environment. Let me now address the pandemic's impact on Freesia and how we are preparing for a lot of near-term uncertainty and long-term growth. We believe the steps we are taking are the right thing to do for our clients, for our employees, and for our investors. As we disclosed in our 8K filed with the SEC on April 6, our business relies in part on the growth and success of our clients, and certain revenues are driven by patient engagement. If the number of patient visits to our provider client locations decline, it will reduce our subscription-related services, payment processing, and life sciences revenue streams. For the week ending March 28, 2020, Regis provider clients experienced a 55% decline in patient visits compared to the week ending March 7, 2020, as non-essential and elective visits were canceled or rescheduled. The decline will directly impact our patient payment, processing, and life sciences revenue for the fiscal quarter ending April 30, 2020. The future impact of COVID-19 on patient visit trends is difficult to predict, but we believe that patient visits could continue to slow during the pandemic. Despite the decline in total patient visits, Frigia's provider clients are experiencing a significant increase in telehealth visits. as providers increasingly shift away from in-person visits and towards virtual care. We believe our intake for telehealth offering is helping our clients engage with the patients virtually for certain non-urgent, non-procedure-oriented visits. Our subscription and related services revenue will be negatively impacted by current travel restrictions and our provider office closures in the wake of COVID-19 because of disruptions to sales processes, client implementations and the loss of clients. At this time, we cannot predict the extent to which COVID-19 will negatively impact our business as the situation remains in flux. Many of our investors have asked us how we are positioning ourselves for the long term. Evan and I have led Freesia for 15 years through several economic cycles. Tom has seen even more cycles as a CFO over the course of his career. Here are the priorities we are focused on. First, take care of our team. We believe it's important to support our employees' health and welfare to the best of our abilities. Second, maintain a solid liquidity position. We are comfortable navigating the current environment with our current balance sheets. Third, maintain our critical value to clients. Making our coronavirus screener zero contact intake and intake for telehealth widely and rapidly available are examples of how we are delivering value for our clients. Before we move on to questions, I would like to address our current view on guidance for our fiscal 2021, ending January 31, 2021. We do not know how long federal, state, and local guidelines and restrictions related to the pandemic will stay in place. Our clients are currently restricted from seeing patients for elective treatments, but the impact on visits from new guidelines has extended beyond elective treatment. Once restrictions begin to loosen and be removed, we do not know what the pace of recovery will be. For these reasons, we will not be providing guidance for fiscal 2021. That concludes our pre-prepared remarks. Operator, we can now open up the call for questions.

Thank you. At this time, we will be conducting our question and answer session. In order to ask a question, please press star then the number one on your telephone keypad. In order to allow for as many questions as possible, we ask that you please limit your questions to one question with one related follow-up. Your first question comes from the line of Anne Samuel with J.P. Morgan. Anne, your line is open.

Hi, guys. Thanks so much for all of the really helpful callers. I was hoping you could maybe speak to what you're seeing in the software business around selling. Are decisions still being made? Are you having to sell differently in this environment? What's going on there?

Thanks for the question. We have been able to do some selling, but I must say the entire market has been impacted. It's impacted sales to our current clients. It's impacted sales to our prospects. That being said, we have been able to convert some of those opportunities. What we've really focused our sales team on in the near term, though, is really helping our clients and educating them around COVID-19 screener and intake for telehealth and our zero contact workflow applications. And frankly, what we've seen is that, and we continue to believe, is our sales organization is a huge strategic asset. that will remain a strategic asset once the country comes out of this.

That's really helpful. And then, you know, maybe, you know, obviously it's really difficult at this point to predict what the recovery is going to look like, but are you expecting to see some pent-up demand within your practices once they start reopening? And, you know, maybe, you know, expect to see it kind of on a, you know, a rolling regional basis? And how are your providers preparing for that pent-up demand if they're expecting it.

So there was like three questions, Annie. Do you mind repeating that just so I can get them all down? I don't have Balaji sitting right next to me. Sure. Yeah, I mean it's really just – Write it all out and tell me what to say.

Are you expecting pent-up demand from procedures that are being deferred and how are your providers preparing to address that?

So first I'll say I'm not an epidemiologist, nor do I have a crystal ball. And if I did, I'd probably be doing a lot better things with that crystal ball. But what I will say is I think that, and I'm going to defer quickly after I answer the question to David Linetsky, who's on the line. I think that People go to the doctor's office and visit their doctors because they need to, right? So there is, you know, they need their wellness visits. They need to get their cancers treated. They need to understand why they have a weird lesion growing on their skin. And so my general belief is we don't go to doctor's office as a society because it's a fun thing to do. We go because we need to. These doctors want to treat their patients, and so we've been working closely with them so they could turn back on their offices while keeping themselves, their staff, and their patients safe in a zero contact workflow. I do believe the workflow of the practice is going to change both in the near and long term. Thank you so much for joining us. A paper with the Commonwealth Fund and Harvard University we co-authored. And what we did is we used visit data from the Freesia platform. And that paper is now available on our website, and it includes detailed patient visit trends through April. And I wanted to introduce David Linetsky, our SVP of Life Sciences, to join today's call because he is the co-author of the paper. And his team worked closely with the Commonwealth Fund and Harvard to teams to publish the paper. We really wanted to contribute Preachers Network data to the research publication in order to support and advocate for our clients and our patients. So I'll sort of defer any questions around trends that we're seeing and provider practices to David at that point.

Great. Thanks very much.

Did I answer your question? Thanks, Annie. I hope you're healthy and safe. Great.

I am. Thank you. You as well.

Our next question comes from the line of Ryan Daniels with William Blair. Ryan, your line is open.

Yeah, thanks for the details, and I hope you guys are all doing well. Chaim, question for you on the core business. If we think about the move to telehealth, what's the like-for-like revenue capture for one of those visits versus a typical office visit?

Thanks, Ryan. That's a great question. So today, An office-based visit is still, I think, for most payers, and I'm not an expert, I know what the team has educated me about and what our providers have educated us about. Right now, most of our providers, especially with Medicare and a lot of the forward-thinking plans, are allowed to get reimbursed for a like-for-like in-office visit. That being said, a large portion of a provider, especially in the specialty space, Their revenue comes from procedures and other ancillary services. Obviously, most of those services cannot be done or provided over telehealth. So you're able to see visit volumes at a certain level. Visit charges are often comparable. But it's the ancillary services, I think, that will be impacted with telehealth.

Okay. That's helpful. And then maybe a more philosophical question. As you think about your product offering, I know there's some challenges in the sales environment with travel restrictions and a focus on COVID-19, but as offices think about preparing to reopen and what consumers will want to see before they're comfortable going in, it seems like the virtual waiting room, the ability to check in in your car and wait to say, hey, come in and go into room eight immediately versus sitting in a waiting room with a bunch of sick people is going to be very attractive. So I'm curious internally what you think this could do is a potential silver lining longer term for the growth in your business and client additions. Thank you.

I want to be really careful because I don't think there's any silver lining to a pandemic other than hopefully bringing our country closer together and making everyone know that the impact that healthcare workers are having on our society and how necessary they are. I would say that The traditional waiting room, as we've known it, is not going to exist for some time. I don't think people want to sit in a waiting room with other potentially sick people. And I don't think providers want that. And I also don't think they want to put their staff at risk with unnecessary exposure. I think that we're in a unique position to provide solutions to keep staff, patients, and providers safe. And That was where we prioritized all of our resources. How do we make sure that we continue to allow doctors to treat their patients and staff to be able to be employed in that environment? And if we could keep doing the right thing over and over again, this is a company that I think a lot of people will continue to be excited to be part of. And most importantly, me and everyone else. So it's really nice that we've been able to to do our part. And where possible, you know, we're always talking with our providers and understanding how we could just continuously improve, whether that's on the product or whether that's with implementation.

Your next question comes from the line of Sean Whelan with Piper Sandler. Sean, your line is open.

Thank you. Good morning. On the adoption of intake for telehealth, can you give us a sense of what percentage of your client base has adopted this so far? How many will adopt it? And what specialties are most receptive, in your view, to transitioning to telehealth?

So I don't think we're... So, Sean, I think that's a great question. I... I think I understood, which is what type of adoption are we seeing in telehealth? Is that correct? That's what you're looking for?

Well, yeah. I mean, specifically of your intake, but I'm trying to get a sense of where are the pockets within specialties that seem to be quite receptive to transitioning their business to telehealth?

So what I'll do is I'm going to pass it over to David. I think he'll give some visibility based on the data we published, which should provide some color to that. And I think that's a We're seeing it broadly. What I will say is I think we are seeing it broadly adopted. But David, do you want to jump in and answer?

Sure. Sean, good question. You know, the report we published along with Harvard and Commonwealth Fund does highlight the really rapid uptake of telehealth. We're now seeing about 30% of all visit volume transition over to telehealth, which has been really impressive. We did not specifically report on uptake within certain specialties, although we are planning on doing a follow-up report about that. I think that it's safe to say we certainly do see a lot of variability between different specialties. Some have had a very easy time transitioning. As an example, behavioral health was just a natural transition in many ways to that virtual model, whereas other procedure-based specialties are going to have a tougher time transitioning their visits over. They're able to do consultations, but obviously procedures can't be done that way.

All right, and I have not had a chance to go through that report that was published late last night, but maybe, you know, can you call out some of the key findings that are in that report?

Yeah, absolutely. You know, overall, what we were talking about was the really rapid drop in visit volumes that all the practices in our network and I think all practices nationally experienced in mid-March. You know, immediately following the declaration of a national emergency, we started to see practices cancel all non-essential visits and appointments. We saw, you know, starting on or about March 15th, and for the next two weeks, really rapid declines in visit volume. We saw those drop by about 55%. But over the last few weeks, since the week of March 22nd through last week, those visit volumes have stayed low, but those declines have stopped. So they've been relatively stable for the last few weeks at those lower levels. That was really the main finding. We found that that same pattern in declines in visits was mirrored across the country in all regions, although the declines were greatest in New England and the mid-Atlantic states, which I don't think will be surprising to anybody. We also saw that the number of in-office visits dropped even more steeply. They got down to nearly 70% decline. You know, that delta there was really made up for in the adoption of telehealth, which brought overall visits down to about 55% as we had disclosed a couple of weeks ago. And again, we saw a very, very rapid uptake of telehealth. If you look back at the beginning of March, virtually none of our visits were via telehealth, you know, less than 1%. And starting on about March 15th, Over the next two weeks, we saw incredibly rapid growth there, and we're now running at about 30% of our visit volume happening through some sort of telehealth platform. Again, those declines in visit volume, we also reported on those across various specialties. The declines were generally larger among the surgical and procedural specialties and smaller in other specialties like primary care and OBGYN, oncology, and behavioral health. but some that were, you know, really severely impacted, ophthalmology, otolaryngology, and dermatology. We saw, you know, very steep declines into the flying. That's super helpful. Thanks for that. No problem. Yeah, thank you.

Your next question comes from the line of Jamie Stockton with Wells Fargo. Jamie, your line is open.

Thanks. Good morning. I guess maybe my first question, and this is a little bit of a follow-up to what Sean was asking, but if we think about the 55% decline in visits, including some benefit from higher telehealth visits, is there a way to bucket that between, hey, elective procedures have been put on hold, and as a result of that, there are visits that are not happening that once elective procedures start back up should start to happen again versus people just not wanting to go to a doctor's office because they don't want to risk getting infected by someone else who might be there because they have COVID-19. I guess I sense that a number of states will start to green light elective procedures at some point in the next, let's say, month or so. but maybe that won't completely change people's behavior around more discretionary visits. Is there a way for us to think about how to bucket that 55%?

I'll let David sort of answer some of the color on that where we can.

Jamie, that's a really good question. I think it's very difficult to tease apart those factors right now. We know for sure that both are contributing. You know, non-essential visits, we saw mass cancellation of those visits by many practices. We know also that patients are trying to social distance, are trying to stay home, and are not necessarily wanting to go to the doctor's office if they don't need to. So there's certainly a combination of both. In this report that we published, we did not do that type of analysis, and I think that would be a difficult one to do quantitatively. It's something that we'll certainly take as a follow-up. but we anecdotally we have heard from many of our clients and you know I worked very closely with Dr. Hilary Hatch here and I know that she has done a tremendous amount of outreach to our practices and what she has been hearing both from from primary care practices and from specialty care practices is that they they are really really serious about treating their patients they want to be treating as many patients as possible and they really look forward to being able to do that Again, and so they are thinking about how they will fill their schedules as quickly as possible, how they can do active outreach to patients that are in need of care, that, you know, chronically ill patients that have been skipping care during the pandemic, as well as people that, you know, deferred elective procedures. So they are really thinking about how to come out of this as quickly as possible once conditions on the ground allow for it.

Okay. And then maybe my other question, just on the life sciences business, Historically, my understanding is you guys haven't, let's say, used all of your intake encounters to conduct a campaign. And so while you've seen a huge decline in the number of encounters, potentially you could be increasing the percentage of encounters that involve some sort of campaign. or at least that's my sense. Can you just talk about that dynamic? Should we think about the life sciences business as being directly impacted by the decline in visit volume or is there some mitigating factor which is that maybe historically you haven't been using every single encounter as an opportunity to do a campaign? That'd be great.

Yeah, excellent question.

I'll let David take it.

That's a great question. I think the answer is yes. We certainly are impacted by a decreased number of visits. We are very, very thoughtful about how we engage with patients. The most important thing for us is to always be delivering the most relevant and impactful content to a patient to make sure that we are driving a positive outcome. We continue to focus on that. One of the things that has been really incredible to watch over these last few weeks is how well our patient engagement platform has adapted to the new ways of working, to these new workflows. So, you know, as Chaim mentioned, all of those tasks that have to happen in advance of a visit are the same, whether that visit is a virtual visit via telemedicine or whether it is an in-person visit. And our ability to engage patients for either type of visit is the same. So we've been really effective in that environment, which has been nice. In terms of using a higher percentage of our patients, I think we continue to stick to what we think are the right criteria for every single campaign and to deliver to the most relevant patients. And in some instances where we're not using all of available patients that meet those criteria were able to adjust pacing accordingly. Okay, thank you.

Your next question comes from the line of Matthew Gilmore with Baird. Matthew, your line is open.

Hey, thanks for the question. I wanted to ask about the implementation processes and whatever backlog may have been created by the pandemic. It sounds like you had a good selling season in the fourth quarter, and I guess I presume you know implementations have been put on hold so can you give us some sense for sort of what got implemented in the fourth quarter versus what's on hold and hopefully will get implemented later this year?

That's a great question Matt and so I would not say our implementations have been put on hold I think certain implementations have rather because the practice is in the middle of dealing with the pandemic or they don't have the resources available because they've had to furlough some of those resources. And this just can't be done at this point. But we also have other implementations where we've done virtual implementations and the team in Memorial is a great example of that where we actually sped up a lot of the implementation remotely and more than half of the implementation was done without our people on the ground. and they work hand in hand with the team at Memorial to accelerate it, to get it in place more broadly, faster. So I think we've seen both some acceleration and we've seen some slowdown. Net-net, I would say the team is just our organization that does our implementations and everyone that supports them has just done a phenomenal job at just being wildly and readily available. I know of some of the teams that to just fit into schedules they were pulling overnight to make sure that they were able to support our clients to get them live, keep their practices safe. And so it's just been amazing to watch and I'm really thankful.

Got it. And then follow up on intake for telehealth. I was just trying to understand how differentiated that would be sort of in this environment. So if you're not using a freesia intake process for telehealth, what would those practices be doing? And is that sort of more cumbersome versus the traditional in-person intake process?

I think what we're seeing isn't just cumbersome. We're seeing higher no-show rates when they don't use us tied to their telehealth. That's anecdotal. what we're hearing early on because it obviously is pretty quick turnaround on it. We're seeing a lot more manual work at a significant level and we're seeing a lot less data and information and frankly patient responsibility captured. So it's sort of across the board in all the buckets and a lot of the work in the short term is also just being transferred to the providers who are just typing it in because they just didn't have a lot of it. So what we're seeing is that all those things that have to happen in person still have to happen out of the office. You still need consents. You still need your information updated. You still need your co-pays collected. You still need your clinical histories done. And you still need to remind people to show up and tell them, give them instructions what to do when they do show up. And so the choice is either throw bodies at it skip doing it, or use Freesia. And that's generally the way we've seen it. And also, it's a platform that our providers know and are comfortable with, and it gives them scale and automation. It's been really helpful. We've got 1.2 million people doing it.

Okay, great. Thanks a lot.

Your next question comes from the line of Donald Hooker with KeyBank. Donald, your line is open.

Great. Thank you. Good morning to everyone as well. In terms of when I think about your P&L and your capital spending, you know, plenty of balance sheet liquidity, of course, but can you give us a sense as to, you know, kind of the different line items, what's discretionary, what's not, how much sort of I'll let Tom jump in and talk about that. Yeah, we've got a significant amount of flexibility in the P&L. Pretty much

up and down the income statement with the exception possibly of payment processing revenue, which is directly tied, payment processing expenses directly tied to our payment processing revenue. But sales and marketing, implementation, development, all can flex as the situation develops here. Also on the CapEx side with pads, we've got some flexibility there as well. And as you said, you've got plenty of capital.

And let me be clear, Tom and I have been through multiple cycles. I've been running Reju with Evan for 15 years, and we've definitely lived through more than one cycle. And Tom, at this time as CFO, has been through many, many cycles. So from our standpoint, we think we've started already taking the necessary appropriate actions around hiring, where we've frozen all non-critical roles in the near term. And we're really taking a hard stance on what are the necessary expenditures just in the near term.

Super. Thanks for that discussion. And then maybe one other sort of different question. I hear a lot of anecdotes in the press of sort of Pretty substantial financial hardships by physician practices all around the country. What are you seeing in terms of maybe physician practices closing or looking to be acquired by larger health systems? Are you seeing any sort of pressure on your price points? Are there needs for maybe some temporary concessions? Or how are you managing some of the struggles that I'm certainly hearing about among physician groups?

So first and foremost, I do think physician groups and health systems across the country are struggling. And it's not limited to any one type or size or region. We're seeing large health systems being materially impacted all the way through to the board doc practice that serves underserved communities. And we are, first off, we're trying to work with them where possible and offer a deferral program. broadly speaking across all of our client base. And we think that that's just important and frankly the right thing to do. And where necessary, we're having to do forgiveness to just make sure that they're able to keep seeing patients, which is a priority. But I don't think anyone that we're talking to is talking about throwing in the towel. I think what their number one priority is how do they serve their patients in this really challenging environment. And I don't think that I also don't think that the health systems are saying, hey, we're doing great either. So this is broadly across the board.

That's fair. Thank you for that. Thanks, Ray.

Your next question comes from the line of John Ransom with Raymond James. John, your line is open.

Hi, good morning, everybody. I hope everybody's doing well. My question is, If you look at the doctors who have a subscription model versus a per-visit model, they're probably holding in a little better, and I'm thinking mostly of concierge-type physicians. Do you see any risk with your user base, at least on the primary care side, moving more to subscription-based type pricing and cutting out some of what you guys are able to add? Or do you think that that really doesn't change in all this?

John, that's a really interesting question. I don't see anyone talking about changing their business model right now. I think what was working before is still generally working. What they really want to do is just get back to treating their patients in a scalable, meaningful way. But we aren't hearing anyone, at least I'm not, saying that they're interested in changing their business model. And I think those that are doing are probably just as worried about the longer-term economic impact of large-scale unemployment, which could happen.

Right. A couple other ones, and this is where I ask you to play Nostradamus, but if somebody put a gun to your head and said, okay, when things normalize and we're sometime in 2021 and things are normalized, what What would you guess the percent of visits would permanently shift to a telehealth type of situation versus returning to in-office? You had to guess.

You're going to make me advocate for gun control there. I don't want any gun control. So, you know, I think that what I don't know what the answer is in terms of what are the material, like how much visit volume are we going to see in telehealth? But I know it's here to stay, broadly speaking, and not just from niche providers. I think what we're seeing and hearing from providers is this is now here to stay and a portion of our patient flow can now be seen this way. But I think what the big question marks are, what is reimbursement going to look like outside of this crisis? What are license levels going to be? What license levels and state regulations are going to be allowed post-crisis? What type of visits post-crisis will be better served with telehealth versus not? And what's really interesting about this is we're getting massive public health data that basically says, is this work or does it not work in large scale? So I think a lot of, you know, can you do... Wellness Visit Well This Way, or can you do a checkup visit? Can you do a pre-surgical screen this way? And I think we're going to end up finding out a lot of information because of this, which hopefully will benefit our society as a whole in being able to provide more effective care at where people need it at a cost-effective manner. But I think of telehealth as opening up a satellite location to serve more patients. So it's just amazing that for years people used to tell me that providers don't embrace technology, and they are. What I believe very strongly is that providers will embrace things that help them help their patients. And what this study that we put out with Harvard and the Commonwealth Fund has shown is that that reigns true. Providers will embrace technology. very quickly if they believe it will help them treat their patients most effectively. And it's just, it really is wonderful to see.

Sure. And so my last question for you is, you know, perfect world, you know, if 100% of your revenue was software licensed versus the payment, the innovative payment model you've built, In theory, you'd have a more resilient revenue stream. Is this something you guys are thinking about? Maybe in the future we tilt the economics a little bit more to the permanent software license and maybe a little less toward the payment? Or do you think the current structure will survive intact?

I'm not prepared to change our business model because of the pandemic. I hope we as a nation learn to better prepare and manage through this. but I would also say that people are broadly seeing that just because you have subscription dollars doesn't mean that you always receive them. There's a lot of SaaS businesses that sell to the restaurant industry where it's a subscription and they're just not getting paid. So I think having some level of flexibility also aligns us well with our clients and that's an important thing. and James is frankly very stable.

Thanks. Well, it's just interesting. I mean, obviously nobody's pro forma has ever contemplated 50 to 70 percent declines in volume. So it's not something, the word black swan is not even beginning to describe, you know, the level. Nobody ever saw something like this coming. So, you know, from our standpoint, just the survivability and getting to the other side of the chasm is really just the key question. So,

I like to think about it as a black lake. We're in a black lake right now.

All right. Thanks so much. Cheers.

Your next question comes from the line of Stephanie Davis-Demko with SVP. Stephanie, your line is open.

Hey, guys. Thank you for taking my question. Given many of these telehealth platforms like Amwell have their own embedded payment tech, Is the revenue model for the telehealth product any different than your core solution? And how should we think about the revenue streams in comparison?

We have a fair number of clients running us in conjunction with Amwell and integrated to it. So we think about it very similarly. Just like a lot of EMRs often have payment integrations to them, we still often, more often than not, win the payments business for that. So I just think of this as Just some level of overlap, but generally speaking, it's been fairly consistent across the board.

Got it. And then with that in mind, and in light of the Commonwealth Fund publication, is that marginal visit volume recovery in April reflecting greater usage of telehealth? Or would that all be upside from that down 50% trend as your patients shift to intake for telehealth?

That's a great question. I think that it's a little early to point to single one or two percentage changes over the last couple of weeks and call it a move towards recovery. I think some of that could be statistical noise. We have seen those be relatively stable changes. I think in-office visits and telehealth will both ultimately, if and when recovery happens, they'll both contribute. It's hard to say in advance which will be the driving factor first. But certainly, we have seen that in-office visits would have dropped much more significantly than overall visits, so telehealth has really helped bridge that gap.

Understood. Thank you, guys.

Your next question comes from the line of Sean Dodge with RBC Capital Markets. Sean, your line is open.

Thanks. Good morning. Maybe going back to the implementations for a moment, Chaim, you mentioned with Memorial being able to accelerate the rollout, they're using more virtual processes. What was it about Memorial that allowed you to accelerate there and not others? Is it just up to the willingness and resources of the specific clients or is there something else mechanically or physically constraining other sites or other practices to continue their rollouts over the course of this?

That's a great question. It's mostly tied to the capacity, willingness, and just general needs of the client themselves. We also prioritize any organizations that were going to be receiving frontline COVID patients. So we prioritize in our implementation any of the COVID screening sites above anyone else. We prioritize sort of car screening above other types of screenings. With the whole thesis is, you know, if you do right and you take care of The providers and their staff and the patients, that's always the right northern star. So that's how we thought about it, and that's how we'll continue to think through it. But Memorial made a point of making this a Tier 1 priority, and we supported them through that. And we will support all of our clients. Memorial was just a good example, and they reached out wanting to talk about what they did with us to help other organizations.

Okay, that's helpful. And then on the hardware, the pads and kiosks you put into the clinics, your supply chains for all of that, I'd imagine at least some of the components that go into it are sourced from some of the geographies affected by all this. Has there been any disruption in supply chains? How much inventory do you have on hand? Is there any reasons to be concerned there at all?

We were watching those levels pretty closely at the beginning of the year. We try to keep a couple months of buffer at a minimum in the U.S. at our manufacturing facility of all of our components. We did have to do some work rounds, but today we feel pretty comfortable with it. But I'll also say that, frankly, we see the use of the hardware going down. We think over time this is accelerating. moved to mobile at a much faster rate than we would have even predicted, and the use of hardware diminishing even more so. So I think that's also driven for the less of an issue on supply chain.

Okay. Thank you again.

At this time, we have time for one last question. Your final question comes from the line of Sean Willant with Piper Sandler. Sean, your line is open.

Hi. Thanks for squeezing in the follow-up. So I understand we're uncertain about the full year and the lack of guidance. That makes sense. But with a week left in the quarter, is there anything you can tell us to get us to be a little bit more precise on our Q1 estimates?

I'm trying to think. I wish Balaji was in the room, Sean. I'd do anything for you. You're awesome. Balaji can't unmute himself fast enough.

I did unmute myself. And Sean, the good news is we report our first quarter results right around the corner. So stay tuned.

Got it. Thanks for the question.

Sean, I will say that looking at the data, you can sort of see when it started to impact us. And that's why we also tried to publish the information just so we could give as much visibility also to all of our stakeholders while advocating aggressively for our providers and their patients.

Okay.

Thank you very much. Cheers, mate. Be safe. On that note, I'd like to thank everyone for their support, and I hope everyone and their families stays healthy and, you know, Thank you very much and thinking about everyone. Cheers.