Phreesia, Inc.

Good evening, ladies and gentlemen, and welcome to the Freesia Fiscal Fourth 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 evening, and welcome to Freesia's Earnings Conference Call for the Fiscal Fourth Quarter of 2023, which ended on January 31st of 2023. Joining me on today's call is Haim Indig, our Chief Executive 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 our Investor Relations 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, including in our annual report on Form 10-K 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 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 both 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, Haim Indyk.

Thank you, Balaji, and good evening, everyone. Thank you for participating in our fourth quarter earnings call. Before we jump into some highlights of the quarter and Q&A, I'd like to talk about our CFO transition, which we also announced in an 8K filed after the markets closed. Balaji Gandhi will take over as our CFO this Friday, March 24th. Many of you on the call know Balaji. He's been a part of our executive team over our entire existence as a public company. He's become a trusted peer to our executive team and board of directors, in terms of planning and communicating Freesia's strategy. He brings over two decades of knowledge and background in the healthcare space as an investment analyst and industry executive, including the past four years with Freesia. He has been invaluable to us in his previous role, and we are excited about the contributions he will make as CFO. Let me also thank our outgoing CFO, Randy Rasmussen. When Randy joined us in 2019, we had a small finance organization for a company with about 500 employees and $150 million of revenue. Randy helped build a great finance organization and implemented processes, systems, and controls that we believe are important for a public company to be able to deliver durable and profitable growth over time. Now, moving on to our results. Our stakeholder letter and earnings release came out about an hour ago. but let me start the call by sharing a few key highlights of the material we released. Revenue in the third quarter was $77 million, up 32% year-over-year. That's our eighth consecutive quarter of over 30% year-over-year revenue growth. Thank you and congratulations to the entire Freesia team. A fantastic job. In the quarter, our average number of healthcare services clients was 3,140, up 36% year-over-year. we added 158 average healthcare services clients from the third quarter to the fourth quarter. Healthcare services revenue, which is the combination of subscription and related services and payment processing revenue, was up 31% year-over-year in the fourth quarter. Total revenue per average healthcare services client, a new key metric beginning this quarter, was $24,390, down 3% year-over-year and 1% The decline is primarily driven by our average healthcare services client growth outpacing revenue growth in subscription and related services and payment processing. Subscription and related services revenue grew 35% year over year. Payment processing revenue grew 23% year over year. And network solutions revenue was up 36% year over year. Moving on to our outlook for fiscal 24, which ends January 31st, 2024. We expect revenue for fiscal 2024 to be in the range of $353 million to $356 million and find growth of 26 to 27% over our just reported fiscal 2023 revenue. We expect adjusted EBITDA to be in the range of negative 65 to negative $60 million, showing continued improvement on our path to profitability. We expect to see a sequential quarter increase in average healthcare services clients in the first quarter of fiscal 2024 that is similar to the 158th sequential increase we saw in the fourth quarter of fiscal 2023. We also expect subscription and related services revenue per average healthcare services client to remain roughly in line with our fiscal fourth quarter results. We continue to see solid operating leverage, and we expect a return to adjusted EBITDA profitability in fiscal year 2025, while reaching $500 million in annualized revenue during fiscal 2025. We remain comfortable with our ability to finance our fiscal year 2025 targets with our cash positions. We believe our capital allocation strategy sets us up to deliver on our financial targets for fiscal 2025 and beyond. Operator, we think we can now open it up to Q&A.