Phreesia, Inc.

Good morning, ladies and gentlemen, and welcome to the Freesia Fiscal Second Quarter 2023 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, Senior 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 fiscal second quarter of 2023, which ended on July 31st of 2022. Joining me on today's call are Haim Indig, our chief executive officer and co-founder, and Randy Rasmussen, our chief financial officer. A complete discussion of our results can be found in our earnings press release and in our related Form 8K 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.freesia.com. As a reminder, today's call is being recorded, and a replay will be available on our investor relations website at ir.freesia.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 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 included in our quarterly report on Form 10-Q that will be filed with the SEC tomorrow. Our 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 these 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 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 8K, filed after the markets closed today with the SEC, and may also be found on our investor relations website at ir.freesia.com. I will now turn the call over to our CEO, Hyman Diggs.

Thank you Balaji and good evening everyone. Thank you for participating in our second quarter earnings call. In case you didn't spend the last 30 minutes reading all of our earnings material cover to cover, let me share some key highlights and additional commentary. Revenue in the second quarter was $68 million, up 33% year over year. I want to thank the team for putting up our sixth consecutive quarter of over 30% revenue growth. In the quarter, our average number of healthcare services clients was 2,776. We added 250 average healthcare services clients sequentially, establishing a new freezer record for the fourth straight quarter. This represents 40% year-over-year growth. Healthcare services revenue, which is the combination of subscription and related services, and payment processing revenue was up 29% year-over-year in the second quarter. On a per-average healthcare services client basis, subscription and related services revenue remained in the $11,000 range in the second quarter, reflecting both our land and expand go-to-market motion and the significant growth in average healthcare services clients. Payment processing revenue grew 20% year-over-year in the second quarter after having grown 38% year-over-year in the last year's second quarter. In last year's second quarter stakeholder letter, we attributed the 38% growth to catch-up utilization from the reopening during the pandemic. Frisia now impacts more than 1 out of 10 patient visits in the United States every day, helping patients become more activated in their health and achieving better health outcomes. The size of our network and the strong execution by our team helped fuel growth in life sciences revenue of 46% year over year, which was on top of the 95% year over year growth in the last year's second quarter. Moving on to our outlook for the rest of the fiscal year, we now expect revenue for fiscal 2023 to be in the range of $273 million to $275 million, tightening our previous range of $271 million to $275 million. We expect average healthcare services clients to increase by at least 200 in the fiscal third quarter as our investments from the last couple of years continue to fuel our growth. The operating leverage we began to see in the first quarter gained momentum in the second quarter, and we expect to return to adjusted EBITDA profitable in fiscal 2025. Based on our strong performance, we've taken up the adjusted EBITDA outlook for the fiscal year to a range of negative $109 million to negative $106 million from our previous range of negative $126 million to negative $122 million. We remain comfortable with our ability to finance our fiscal year 2025 growth plan and expect to end fiscal 2023 with $165 million to $170 million in cash and cash equivalents. We believe our investments over the last couple years are helping us keep our product best in class, build more amazing new products, expand our relationship with existing clients, and grow our network with new clients. We believe our capital allocation strategy sets us up to deliver on our financial targets for fiscal 2025 and beyond. We continue to focus on driving shareholder value.