Phreesia, Inc.

Good evening, ladies and gentlemen, and welcome to the Frisia's fourth quarter fiscal 2025 earnings conference call. At this time, all participants are in listen-only mode. We will provide instruction for the question and answer session to follow. First, I would like to introduce Palachi Gandhi, Frisia's chief financial officer. Mr. Gandhi, you may begin.

Thank you, operator. Good evening, and welcome to Frisia's earnings conference call for the fourth quarter of fiscal 2025. which ended on January 31st of 2025. Joining me on today's call is Haim 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 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 this 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 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. The reconciliation of GAAP to non-GAAP results may be found in our earnings press 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 joining Frisia's fourth quarter earnings call. I want to take a moment to acknowledge that 20 years ago, Evan and I founded Frisia. Our mission is making care easier every day. Our vision is for every person to be an active participant in their care. I'm so proud of what we've accomplished over these years and excited about where we are heading. I want to extend my appreciation to my teammates, our clients, partners, and stakeholders who continue to contribute to our success. I am excited about the new products we've introduced over the past several quarters that improve medication adherence and the overall patient and provider experience. We look forward to making these products more widely available to our existing network and new clients. In fiscal 2025, we achieved another milestone. The Frisia platform was used in approximately 14% of patient visits across the United States for approximately $170 million. I would like to congratulate and thank the Frisia team for a strong finish to the fiscal year, which is reflected in our earnings press release and stakeholder letter. Let me hand it over to Balaji to review some of the highlights of the fourth quarter results and review our outlook for fiscal 2026.

Thank you, Haim. Let me start with a couple of the highlights in our earnings materials regarding the fourth quarter. Q4 revenue was $109.7 million, up 15% year over year. Q4 adjusted EBITDA was $16.4 million, up $19.9 million year over year, with an adjusted EBITDA margin of 15%. Our Q4 average healthcare services clients reached $4,341, an increase of $104 from the prior quarter and $379 from the prior year. And Q4 total revenue per AHSC was $25,266, up 5% year-over-year. Our cash flow and cash position continue to improve. In Q4, we maintained positive operating cash flow and free cash flow for the third consecutive quarter. Q4 operating cash flow was positive $16.3 million of $19.3 million year-over-year. Q4 free cash flow was positive at $9.2 million of $20.1 million year-over-year. These improvements reflect strong revenue performance over the period as well as disciplined expense and cash collections management. We expect a magnitude of improvement in free cash flow and operating cash flow 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. Cash was at $84.2 million on January 31st, up $2.5 million from October 31st, 2024. Our fourth quarter reflects continued operating leverage across the company. We are well positioned to continue generating positive free cash flow while investing in long-term profitable revenue growth. Transitioning to our financial outlook for fiscal 2026, we are maintaining our revenue outlook for fiscal year 2026 at a range of $472 million to $482 million. The revenue range provided for fiscal 2026 assumes no additional revenue of potential future acquisitions completed between now and January 31st, 2026. We are maintaining our adjusted EBITDA outlook for fiscal year 2026 at a range of $78 million to $88 million. We are reiterating our outlook on AHSCs to reach approximately 4,500 in fiscal 2026 and for revenue per AHSC to increase in fiscal 2026 compared to fiscal 2025. Operator, I think we can now open up the lines for the Q&A session.

We will now begin the question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, we will postpone entirely to assemble our roster. And our first question comes from the lineup, Ann Samuel with J.P. Morgan. Ann, please go ahead.

Great. Congratulations on 20 years. What an accomplishment. So your gross margin, once again, saw some really nice expansion. And I know gross margin was kind of the first leg of the leverage story, but you're already seeing this really nice leverage on your other expense line. As we think about gross margin moving forward, how much more room is there for expansion? And then just how should we be thinking about the contribution it should have to overall leverage?

Yeah. Hey, Annie, thanks. On gross margin, I think we've talked about this in the past. Mix at this point is one of the biggest drivers of that. And as you know, payment processing is associated with lower margins and the growth rate is slower. So I think just the growth expectations are higher in the other two revenue lines, which should contribute to some growth, gross margin expansion. I don't think there's anything really else to call out in terms of that being a driver of operating leverage might be better in some quarters than others.

Great, thanks. And then maybe just one more. You know, you once again saw really strong growth in network solutions. And just wondering, you know, should we be thinking about the underlying market conditions for 2026 as similar to 2025, or are there any market factors we should be thinking about in that line? Thanks.

No, I would say very similar as we head into the year.

Great, thank you.

Thanks. And your next question comes from the line of Jessica Tassen with Piper Sandler. Jessica, please go ahead.

Hi, guys. Thank you so much for taking the question. I was hoping that maybe you could talk to us a little bit about post-script engagement. How does the product work? What data informs the product? Maybe what does the patient see? And is payment kind of contingency-based, or is it... based on whether the patient picks up the prescription or is it impression-based? Thanks.

Yeah, okay, there's a lot in there. I think to answer the last part of that question, you should think about it as impression-based. It's similar to the other campaigns that we run, Jess. And so if you think about it, we're leveraging a lot of the data that we have in our platform to be able to remind you about a prescription that was filled. And so that's very valuable to our clients. And that's sort of, you know, that's what really drives the product and the value to the customers. But it's, you know, both to the life sciences clients, but also to the providers and the patients as well.

Great. Thank you.

Great. And your next question comes from the line of Highlander SYNC with True Securities. Highlander, please go ahead.

Yeah, this is Jalen Rasing from True Securities. So I want to ask about the total revenue per AHSC metric. Nice growth of 5% year over year, 7% if you exclude the clearinghouse impact, but it was flat sequentially. How meaningful was the impact in fiscal Q4 from the way calendar played out in terms of business days, in terms of how holidays plays out in terms of year over year trends in fiscal Q4? And as we think about fiscal 26, clearly we have one less day in fiscal Q1. But anything else we should keep in mind in terms of that quarterly progression of that metric?

No, great questions there, Jalendra. I think you picked up on the fact that the way the calendar falls and weather really wind up being pretty big factors in our business. And so one thing about the fourth quarter that we point out is uh christmas um fell earlier in the week um right on top of a weekend last year in the comp period whereas the middle of the week um this season so they were sort of you know a harder comp uh tougher comp for us uh we also had the la fires and that was you know obviously very unfortunate um and and have some clients in in that region uh and then even just a comp basis uh the year over year And the weather in the Northeast and in the Southeast was also pretty challenging in January. And I think as we've talked about, these are things we're used to. And when we think about modeling internally and sharing our views externally, we try to build those in. And shout out to our FP&A team, who does a very good job of staying on top of that. So that was largely baked into our expectations for the year, Jalindra. And I think you brought up a good point, which is, yeah, it was a leap year in 24. It's not a leap year in 25. I think you could probably spend some time looking at how the calendar falls, and Mondays and Fridays are interesting things to look at year over year. But in the fourth quarter, there was a little bit of a tougher comp for us here last year.

Okay. And then my quick follow-up on kind of just update on any progress. on the leveraging AI and automation. You guys have talked about one usage being replacing manual workflows and improving productivity internally, but you guys have also talked about leveraging AI in network solution business in various ways. Just curious, any interesting results to share, and are you seeing more opportunities internally, or are you at this more about kind of driving more business in network solutions from AI side?

Zalindra, this is Clive. I'll answer that. Balaji and I were earlier today, we actually got a demonstration of one of our AI applications used internally by our network solutions team. They've been wanting to show us what this tool they're using for forecasting. And it was like, by all accounts, I saw Balaji's jaw drop when he realized what the team had been using it for and how valuable it is. So, no, we're seeing its impact in real time in our business, and we expect to continue to very thoughtfully implement AI throughout our organization, where it not only drives real financial impact, but really improves the outcomes for all of our stakeholders. And we're pretty – it would be an understatement for me to say the impact that has happened has been great. We're very – we are – Very excited.

Thanks, guys.

Thanks. And your next question comes from the line of Ryan Daniels with William Blair. Ryan, please go ahead.

Yeah, good evening, guys. Thanks for taking the question. I'm curious about solutions like appointment readiness. You mentioned that also creates a new opportunity to engage users and then leverage that for network solution sales. So my question is, does a newer product like that need to reach some element of critical mass before you can sell it into the pharma customer base? Or is that something that you could just add to existing programs right away? Is it different or another touch point for network solutions?

We, Ryan, we think very early on, our product organization thinks a lot about scale and deployment. and when usually when we're talking about something openly it's because it's already reached scale where we're able to leverage it across network solutions and often these things have been in development for sometimes years so no we from the early stages the key requirements of all of our product briefs is is scale and we're able to achieve that on a very regular basis with a lot of our products very you know in a very good clip and and i think that's something as a result of the investments we've been making in R&D.

Okay, perfect. Thank you. And then, if I follow up, we've seen a lot more announcements, it seems like, lately of different entities inside and even outside of healthcare, names like Salesforce rolling out AI agents to do appointment scheduling and matching patients to clinicians and insurance verification. Are you seeing any changes when you talk to your go-to-market team about the competitive dynamics, or is your install-based and comprehensive offering still kind of winning more of the market relative to some of those solutions? Thanks.

I would say at close rates, they think I've gotten a little bit better as of late. I think a lot of those larger entrants have actually helped us in a lot of ways because as people start spending more time looking at it, you know, we end up winning more of those. So I think it's been a rising tide where, as the market leader, we've been a beneficiary of it, right?

Okay, perfect. Thank you, and congrats on the 20 years.

Cheers, man. Thanks, Ryan.

And your next question comes from the line of Richard Close with Canaccord Genuity. Richard, please go ahead.

Yes, thanks for the questions. First, great results on that breast cancer screening. That's pretty neat. Just maybe digging in a little bit more on Ryan's question on appointment readiness. Is that something that you charge provider clients to turn on or maybe let them use it like you have done in the past? Since you're talking about life science, having another opportunity to engage, can you talk a little bit about what would be an example of how they are engaging with that offering if it's just their eligibility and deductible and stuff like that, just to better understand?

To answer your question, Richard, We do not currently charge for this product above and beyond what we already charge. It is something of significant value to providers because it just gets their patients ready. And it's something that where we're able to add more value to patients and providers and the scale and investments that we're making just make our offering significantly more valuable. from a network solution standpoint, there's broad examples of, that I'm not gonna go into on this call, where there's a lot of prep that needs to go into getting ready for your visit, and this allows that education and prep before that patient comes into the office. So we've seen, and we have seen uptick on that with network solutions.

Okay, that's helpful. And then maybe on patient bill pay, an update there. Obviously, the results from the ortho group, really impressive. Can you talk a little bit more about the rollout of that? Maybe interest from existing clients to add that on or what the attachment rate is with new clients?

Yeah, Richard, something we're very excited about. I don't think we're going to share an attachment rate, but I think what we could say is it's very similar to what Haim talked about with appointment readiness and post-grant engagement, which is this has taken years of development and something we've pushed out into the market. Our thesis has been it adds a lot of value from the status quo, and we can generate revenue through additional payment volume through that product. which is, we think, a very differentiated go-to-market, and it's something we're pushing out to all of our base clients, and as you saw in the letter, seeing some pretty good results.

Okay, thanks. Congrats.

Thanks. And your next question comes from the line of Ryan McDonald with Needham & Company. Ryan, please go ahead.

All right, thanks for taking my questions. Maybe within network solutions, we're seeing a continued evolution and change in the advertising landscape for pharma marketing, life sciences marketing, particularly in social media channels as we're seeing more regulations come in, limiting the ability to target effectively on some of the major social media platforms. Are you, from a go-to-market perspective on that networking solution, doing anything to better position yourself to maybe capture more share of spend in the midst of these changes?

Well, maybe just talking about our positioning there, Ryan, our free just platform of personalized health content, it's built on very important principles of both privacy and consent. And so we're trying to, with our platform, meet the patients where they are with relevant, personalized information at those very key moments of their healthcare journey. So for us, that's what differentiates us and leading on privacy and consent. And we think we have a very unique platform to do that. But obviously, yeah, there's lots of competition for those dollars, lots of dollars.

Okay, thank you. And then maybe as you think about the reiterated sort of guidance on sort of the magnitude of AHSCs and the additions that you're expecting for this year, can you just talk about sort of what you're seeing early days in the year as that gives you sort of confidence in the trajectory of that count? And then, you know, what to the extent that you can do to either meter up or down investments to make sure you're sort of, you know, hitting to those targets as we progress through the year? in what is likely, again, a volatile macro. Thank you.

Yeah, sure. I mean, I think, you know, we've talked about this for a couple of years now. We did put a lot of capital into the business. We are still spending, you know, a fair amount of capital in that area of sales and marketing, which is inclusive of our life sciences network solutions area. And so, Ryan, you know, when we put those – projections out there for fiscal 26. You know, the numbers might move around quarter to quarter. We wanted to put something out there that was captured where we thought we'd be for the end of the year and feel pretty comfortable with that today and with our go-to-market motions and the resources we have. I think we go to the next caller.

And your next question comes from the line of Jeff Garrow with Stephens. Jeff, please go ahead.

Yeah, good afternoon. Thanks for taking the questions. A couple more for me on network solutions. First, just want to check in and see if you could help us understand how far along are you in penetrating all of the 170 million visits on the network with network solutions content? And then also want to ask, how are you getting better at at generating those monetization moments and maybe even further finding the best and most personalized match for your inventory of network solutions contents to engage with those individual patient moments?

Yeah, so Jeff, I think You know, we did share the 170 million visit milestone, but I think the very unique part about Frigia's business model is that those visits, there's lots of different ways we're bringing value to our clients in those visits. And as Haim talked about, there's, you know, certain products that are driving value in some ways to providers, generate subscription revenue or payment processing revenue. Others, we are able to also generate network solutions revenue. So I don't think you should come away thinking that all 170 million of those will generate revenue from all three lines. It's actually a pretty, I think, unique part of our business model. That said, I think you can do some very shortcut math on looking at our network solutions revenue divided by visits, which we've provided, I think, for maybe five periods now since we've been public and see that the dollars on a per visit basis continue to tick up. And we think that will continue to tick up and is incorporated into our financial outlook for fiscal 26. And the new products we've introduced in the last couple of quarters will help drive that.

Excellent. I appreciate that. And one more on network solutions. Back in mid-December, you spoke pretty positively on progress for network solutions on the kind of key selling season for pharma advertising. So I want to see if that remains the case here several months later and maybe just generally how you feel about visibility there.

Yeah, no change. Exactly in the same spot. And I think maintaining our financial outlook so we reflect the same comments we made back in December.

Great, thanks again for taking the questions and also congrats on the 20 years.

Thank you. And your next question comes from the line of Daniel Crosslight with CD Group. Daniel, please go ahead.

Hi, guys. Thanks for taking the question and congrats on another strong quarter here. There's been a lot of macro noise out there right now, whether it's around consumer confidence or what's going to happen with Medicaid, enhanced subsidies on the exchanges or physician payment rates in Medicare. I'm curious if you're seeing any of these macro factors impact your business this year, impact the sales cycle this year. And then I don't know if you have this data readily available, but if you could perhaps size what percent of your visit volume is coming from folks on Medicaid or the exchanges. Thanks.

So, Daniel, I think the first thing we'd say is Obviously, we're monitoring all of these trends and activities pretty closely. Nothing to really call out, but, you know, just as of today and what we know, and we'll keep monitoring and let you know if anything changes. But these are all things we're tracking pretty closely. I think in terms of mix, there's nothing about the mix of our network, if you thought about it on a payer basis, that would be different than just the broader population. And, you know, I apologize, I don't know offhand exactly what percentage of the population is Medicaid, but I don't think you'd see it be very different and that would apply to Medicare or employer-sponsored coverage.

Yep, makes sense. Okay, okay. And then just on your capital deployment priorities for fiscal 26, you have a really solid cash balance now. You're consistently free cash flow positive. So I'm just curious how you're thinking about the buy versus decline. build dynamic in 26 and if there's any changes in capital deployment priorities?

No change. I mean, I think we talk a lot about capital allocation and, you know, for the last, you know, almost six years now we've been public. Our philosophy has been to allocate capital where we can get good, solid, durable growth that's profitable. And sometimes that comes organic. Sometimes it comes in organic. Obviously, it's been heavily organic over our history and there's a pretty rigorous process for us to look at things inorganic. And I think it's nice to have the balance sheet that we have and the cash flow that we have to be able to continue to look at both organic and inorganic and drive that durable, profitable growth. Got it. Thank you.

And your next question comes from the line of Scott Schoenhaus with KeyBank Capital Markets. Scott, please go ahead.

Hey, team. Thanks for taking my question. So on the investment letter, you said your after-hours service was back online. That's good to hear. But it reminds me that you had two other acquisitions last year. Are you fully charging for those platforms now? And how should we think about those tailwinds of all three for fiscal 26? Thanks.

Yeah. And actually, Scott, it's amazing how time flies. But all three of those acquisitions were actually in calendar 23, so fiscal 24. So we actually did not do any acquisitions in fiscal 25. And the other two that you're referring to from fiscal 24 have contributed to growth. I think we've called out MediFind and Access driving revenue and contributing to growth. And that's something when we made those acquisitions, we expected it to contribute. But I don't think there's anything, you know, particularly, you know, to call out there. And yeah, we're excited to have the on-call product back out in the market.

Yeah, thanks, Balaji. Thanks for that. You're totally right. Time does fly. Follow-up on the last question about capital allocation. Would you think about deploying it through other means? Would you think about share repurchases if you see valuations depressed? You know, you're generating cash now, and that's expected to probably accelerate as margins continue to expand here. So just kind of thinking about capital allocation flexibility and optionality here?

Yeah, I think what you should take away is we're always trying to position ourselves to be able to be flexible. But look, we're a very growth-minded company and trying to drive, again, that profitable, durable growth. And that's where you should think about us prioritizing capital deployment in certainly the next couple of years. Thanks.

And your next question comes from the line of, again, Jessica Tasson with Piper Sandler. Jessica, please go ahead.

Hi, guys. Thanks for taking the follow-up. I just wanted to check in. On the Network Solutions side, can you just remind us when are you able to upsell or maybe resell these contracts throughout the year? Are contracts usually time-bound or impression-bound? Just wondering about the per AHSC Network Solutions revenue over the course of the fiscal year. Thanks.

Yeah, it's throughout the year, and we sell campaigns for a fixed number of messages that are delivered, and then when we complete those campaigns, we resell them. I don't know if that answers your question, Jess, but it's sort of ongoing. But we do do forecasting and piecing. Yeah, and I think Chaim talked about AI being an interesting application there and helping us do that.

Got it. Thank you.

This concludes our question and answer session. I would like to turn the conference back over to Shyam Indig.

Thank you, everyone. The last 20 years has been wonderful. We look forward to the years forward, and we know we've just begun this amazing journey. So thanks, everyone, for joining us on this quarter, and we'll talk to you in a couple months.

This concludes today's conference call. You may now disconnect.