Good morning, ladies and gentlemen and welcome to the Phreesia Second Quarter 2021 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 Phreesia. Mr. Gandhi, you may begin.

Thank you, operator. Good morning and welcome to Phreesia’s earnings conference call for the second quarter of fiscal year 2021, which ended on July 31st, 2020. Participating on today’s call from Phreesia are Chief Executive Officer and Co-Founder, Chaim Indig and Chief Financial Officer, Tom Altier. Following prepared remarks from Chaim and Tom, we will conduct a Q&A session. A complete disclosure of our results can be found in our earnings press release issued yesterday evening, as well as in our related Form 8-K submission to the SEC, both of which 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 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, overall future prospects, and the impact of the COVID-19 pandemic on our business. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those projected or implied during this call, in particular those described in our Risk Factors included in our Form 10-Q, which will be filed with the SEC later today. You should not rely on our forward-looking statements as predictions of future events. All forward-looking statements that we make on this call are based on assumptions and beliefs as of today and we undertake no obligation 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 press release and supplemental materials, which were furnished through our Form 8-K filed after the market closed on September 8th 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. Good morning everyone. As fall approaches, we hope that everyone's families are safe and healthy. Once again, participating on today's call from three different locations, so we appreciate your patience with us. Our second quarter results demonstrate the agility, depth, and overall commitment of our entire organization in a very challenging environment. I'm proud of Phreesia's ability to serve our clients, take care of our team, and further our mission of creating a better, more engaging healthcare experience as our communities grapple with the current pandemic. For the fiscal second quarter, total revenue was $35 million, up 14% year-over-year. The average number of provider clients was 1,668, up 7% year-over-year. Average revenue per provider client was 17,360, up 5% year-over-year. Adjusted EBITDA was $1.2 million, up approximately $400,000 year-over-year. The pandemic has forced healthcare providers across the country to rethink every aspect of their day-to-day operations. Phreesia's network gives providers tools they need to keep their patients and staff safe while operating reliably and efficiently. I would like to highlight two new Phreesia's clients; AdventHealth and Health First. AdventHealth begin a client in mid-March. We worked closely with the Advent team to accelerate the rollout in order to help Advent's scale and reduce exposure between patients and staff during in-person visits. In order to move rapidly, we supplemented the rollout team with our sales development representatives, also known as SDRs. Our teams took nearly 1,000 of Advent's ambulatory practices live. We also took 44 Advent acute care hospitals live over the first 90 days, all of this work was done remotely by both teams. This is a very complex and well-coordinated rollouts. Phreesia's network and APIs are now embedded into Advent's consumer-facing ecosystem. Next, I'd like to talk about Health First, a fully integrated delivery network in…

Thank you, Chaim and good morning, everyone. I'll review the income statement, balance sheet, and cash flows for the fiscal second quarter, including some considerations for the rest of the fiscal year. First revenue, total revenue was $35 million, up 14% year-over-year. Subscription and related service revenue was $17.1 million in the quarter, up 22% year-over-year, primarily due to new provider clients added during the quarter, expansion and cross-selling of existing provider clients and higher related services revenue. Payment processing fee revenue was $11.8 million in the quarter, up 1% year-over-year. While, many healthcare providers have reopened and trends are improving, patient visits for the quarter continued to be below their pre-COVID-19 levels. Payment processing volume across the Phreesia network was only slightly higher in the fiscal second quarter compared to the first quarter. This is because visits were significantly higher in the first half of the fiscal first quarter, which took place prior to March 13th when the United States declared a national emergency with respect to COVID-19. Life Science revenue was $6.1 million in the quarter, up 18% year-over-year. Provider revenue which combines revenue from subscription and related services and payment processing fees was $29 million, up 13% year-over-year. The two drivers of the 13% provider revenue growth were average provider client growth up 7% year-over-year and average revenue per provider client up 5% year-over-year. Life Science revenue was $6.1 million, up 18% year-over-year. Our Life Sciences revenue is based largely on the delivery of messages at a contracted price per message to targeted patients and our team was successful in delivering more messages than in the prior year period. Moving on to expenses, I will review several expense line items on an adjusted non-GAAP basis, which excludes stock-based compensation expense for each line item. Please note that…

Thank you. At this time, we will be conducting our question-and-answer session. [Operator Instructions] Your first question comes from the line of Anne Samuel with JPMorgan. Anne, your line is open.

Hi, guys. Congrats on a nice quarter. As we think about provider client growth, how should we be thinking about the length of your sales cycle? And is there still any lingering carryover from COVID disruption that happened in March and April and that might kind of still be impacting that number as we look forward?

Morning Anne. Thanks for that question. I think one of the things to think about is in this -- in our Q2 quarter, one of the -- one of our pressing strategic imperatives was getting as many people live as fast as possible. So, we really pulled forward as many of our clients go live as we could. And the reason we did that is we and our clients felt very strongly that Phreesia was helping keep their patients and staff safe using zero contact. So, -- and I think we reiterated a little bit earlier that we actually moved a lot of our SDRs into implementation, so that we could accelerate as many of the go lives as possible.

Okay, that makes sense. And then I guess, on Life Sciences, that was obviously once again, really strong growth. Were there any shifts or unusual items in that? And then looking out at the next quarter, you're up against a really difficult compare because you had such a great quarter last year. How should we think about lapping that?

I think our Life Sciences' team has done just a phenomenal job. What we're seeing now is the investment we've been making over the last 12 to 18 months in building up that team and investing in data science and new product offerings. And so -- but I do think it was a pretty hard comp last year and we're doing it in a very challenging environments. But I know that teams working as many hours as are possible in the day to make sure that we're able to deliver very relevant messages to the right patients, so that they can get the care they need from their providers.

Great. Thanks, guys.

Thanks Anne.

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

Yes guys. Good morning. Thanks for taking the question. Sounds like a very positive data point when you speak to the hiring in the outlook for growth. Can you give us a little bit more detail on number one, key focus areas for hiring? And number two, the SDR reps, are they moving back into the sales position at this point? Or are they still somewhat deployed in other areas? Thanks.

Good morning Ryan. Thanks for those questions. All right, I'll try to get all of them. So, we're hiring across the board, we have -- whether it's engineering and finance or whether it's career [ph] program which supports implementation, our SDRs, our client success, and our tech support team. So, across the organization, we're hiring. And we've seen a ramp up, and we're doing it in a remote world. From an SDR standpoint, we did start moving them all -- a lot of them back at the tail end of last quarter. So, we should hopefully, over the next two quarters, see the output of that ramp happen. I think we ended the last quarter at 59 SDRs and this morning, I think we have a little over 70 -- I'm on say 71 SDRs as of this morning. So, that sales motion is ramping up and those people have moved back from implementation and the other rule say they had in the organization back to being SDRs if they if they wanted.

Okay, perfect. Very helpful. And then as a follow-up just on the in-patient space, seems like a lot of systems are really starting to make more active investments in things like virtual waiting rooms and digital check-ins and patient navigation through the system. Are you seeing that in your book of business, too? I know you announced some large partnerships where it's both their in-patient and out-patient units, but are you starting to see a little bit of uptick in the in-patient market as well? Thanks, guys.

So, I can't comment as the broader market, but what I can say is that, in the -- for us, the acute in-patient space is an area that we've been meaningfully investing for in and for the last couple years and I still think it's very early to articulate what that market looks like. But what I do know is that hospitals want to have a common front door with their ambulatory groups. They also want to streamline how they intake patients and provide a better, more thoughtful patient and consumer experience. And especially during this time period, they'd also like to make it zero contact. And so we had seen, with a lot of our current clients, a fair bit of interest.

Great, thanks for the color and stay safe guys. Thank you.

Sure. You too.

Question comes from line of Stephanie Davis with SVB Leerink. Stephanie, your line is open.

Thank you. And thank you for taking my question, guys. Good quarter. Given the growth in telemedicine access that you guys have participated in, which likely capture some appointments that would have been skipped pre-pandemic. Is it possible that a return in volume could actually be more than 100% of your prior volume as you're still only 9% off right now from prior levels and telemedicine business [Indiscernible]?

Stephanie, I don't have a crystal ball and I don't know what the future holds. But I do think we're actually -- we said we are not guiding, but what I would say is that, look, telemedicine is a new way for patients to be able to have access to care. And if it allows people, especially with social determinants of health that aren't able to access care, either from a specialist or a primary care provider where they would have not been -- had access, that's a great thing. I don't know what's going to happen in 12 to 24 months in terms of care and access, but I do know that providers want to provide care to patients that need it. And I do think that telemedicine allows them the ability to reach patients in a way that they wouldn't have otherwise. That being said, there's only so many hours in the day. And when we talk to providers, they're working full long days today and they were pre-pandemic, and they are as much as they can now. And so I think there's -- I do caution is that there is only so many hours in that day for them to be seeing patients.

And instead some upper levels and -- region. So, one more follow-up on volume. I know you've talked about this before during the IPO, but what sort of impact you normally see from flu season? And how do we think about the puts and take of a weak flu season or a non-existent flu season?

If we -- because of the makeup of our network, I think flu has less of an impact and it probably would have if we were overly weighted to primary care or urgent care. I think it's bad when people get sick, generally speaking, and so I hope that flu season is low, especially considering we're also grappling with a pandemic. And I think that generally -- you see, like when we talk to our pediatric groups, because they're -- they see a little bit more sick visits than most just because they see kids, they're seeing slightly lower sick volume. But on the grand scheme of sort of volume for us, it's in the low single-digits. I don't think -- I wouldn't say it's materially moves the needle one way or the other.

All right. That's helpful. Thank you guys.

Thanks Stephanie.

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

Hey, good morning. Just wanted to prod a little bit on this hospital opportunity. I think we all know what it is you do for physician offices on the intake side? What's exactly different about what you do at the hospital level? And how long did it take you to build up the capabilities? And what additional capabilities, if any, do you need to continue to kind of roll forward in that new TAM?

So, that's a great question, John, I don't want to go into very long specifics on what we're doing. But if you think about it, the value proposition areas, people wait in line when they go to the hospital to check in to go to either for the service or for the urgent care that they need in an emergency room or for their surgeries or to give birth and they still have lots of paperwork to fill out. They still have to give all their information. And right now, the constraint is the registrar. And so a lot of that initial experience that they have at a hospital still sitting in the "waiting room" and/or telling a patient where and when they need to go somewhere. And we're building and deploying those capabilities. So, if you think about a hospital with maybe multiple entrances, with different access points, it's streamlining those access points so that patients are able to intake faster into the facilities and be directed on where to go, providing a significantly better experience with often better economics because you need less staffing. And frankly, in a COVID environment, it's safer because it's done with no contact.

Okay and how many people do have? I know you've got to deal with R1, but do you have dedicated marketing people for the hospital sector yet? Are you just -- are you kind of taking these referrals then from R1?

No, we -- so -- I bet is not with R1, either was Memorial.

Okay.

We do have dedicated people working on the -- in the EQ market for us.

Okay. All right. Thanks so much.

Thanks.

I'm sorry.

[Operator Instructions] Your next question comes from line of Donald Hooker with KeyBanc. Donald, your line is open.

Great, good morning. Good morning everyone. I would just -- maybe for Chaim, just maybe high level perspective on some of the operating environment. If we look ahead and there's hypothetically, a big second wave of COVID-19. What would you have learned from this first wave that would make the second way perhaps a little different?

That's interesting question. Our number one priority is keeping our staff -- everyone safe, its staff, it's our providers, its patients. And you know whether it's first wave, second wave, third wave, I just think COVID-19 is here with us today, and we don't have the vaccine. So, we're treating it as if we're in the -- we're still in the main way. We're not -- most of our people are not traveling, the vast majority of our implementations are remote. And it's only being done in absolutely necessary condition. So, what -- the way we're treating the environment right now is that we're still in that first wave. And we're being very cautious, and we've kept all of our offices closed and we intend to remain virtual going forward.

Okay. And maybe just my follow-up would be in terms of the new provider ads, client ads in the quarter which look great. And you comment on that briefly, you may not have an answer to this, but were there any sort of pockets of demand? That's such an unusual environment, were there any sort of areas that drove that year-over-year growth? Or if not or if it was more just broad based?

I think what we really did is we just really looked at everyone that was in a queue to go live. And we just did everything possible to get them live as fast as possible, because it just made a meaningful impact to their organizations and to their patients. And we heard it and we heard it in the KLAS analysis, we heard it from our practices, I've gotten just a ton of emails, and so of -- what we've been able to do to help these practices just open back up. So, I'm just really proud of the organization for mobilizing and prioritizing, keeping people safe. And it's something that I think it aligns with our mission and it's something I'm really proud of, personally.

Great. Thank you. Thank you for that comment. Thank you.

Your question comes from the line of Sean Wieland - Piper Sandler. Sean, your line is open.

Thank you very much. Good morning. Maybe -- could you call out what the acute care revenue was in the quarter or maybe number of clients that you've got live on that now?

We don't disclose that today and we'll let you know when we do. How many clients live or revenue number, but it's still pretty early and it's pretty small.

Okay. Some 10% safe to say?

Yes, that's correction, Sean.

Okay. How about on the same-store sales growth is up with obviously volumes being down, wanted to get a little bit more insight as the primary drivers of the same-store sales growth? For example, zero client intake, what percentage of clients have that today? And maybe what are some of the other key drivers of that same-store sales growth?

I don't have the numbers handy. I can get back to you on what percentage are running some version of zero contact. But I think what we've seen from a same-store sales is that it's a mixture of expands. It's a mixture of cross-sell and up-sell and it's also a mixture of making sure that we're providing all the necessary workflows to these practices to make sure that they're able to do what they need to do to see patients. But I'd say it's mostly driven by expansion.

Expansion number of providers at the client that's using it.

Correct. So, that's the number one driver.

Okay, that's helpful. Thanks.

Tom, if you could?

Yes, that's that again, that's Sean, expansion -- driver

Okay. All right. And Tom, what's the hiring ramp that you're talking about? Could you maybe quantify that on the impact to OpEx?

Well, we're, as we said in the first quarter, we are -- we've started hiring again and expect to ramp up pretty aggressively in the second half here as Chaim mentioned before, in all areas of the business, particularly in the early career program.

Okay. Thanks so much.

Your next question comes from the light of Glen Santangelo of Guggenheim. Glen, your line is open.

Yes, thanks for taking the question. Hey, Chaim, I also want to follow-up on the in-patient side, I get it that the revenues are small today. But I was really trying to understand maybe how the economic arrangements work with these customers and how that may be different from physicians to help us think about the how the impact of an AdventHealth or First Health [ph], for example, might change or augment the growth algorithm. How should we think about those financial relationships?

That's great question. But I don't want to share our pricing model for Q -- for competitive reasons. But I'm assuming you understand that, eventually, I'm sure Balaji will have a slide next time we tell that.

Okay, maybe if I could have a follow-up on an earlier question about the sale cycle. I think in the past, you said it takes about 90 days to bring a physician online after you sell them, and if we sort of think about maybe April, May, and June being sort of the height of the pandemic, is it reasonable to think that as we look out to this next quarter that we may see the impact of maybe slower results in the height of the pandemic play out in this next fiscal quarter? I understand you don't want to give guidance, but I'm just trying to think about how the sales cycle may have impacted 2Q versus what we should be expecting and 3Q?

I think that's fair to say, and I think that's a good call left. I think the -- this next quarter, we're going to see a lot of those practices that we probably would have taken live already live. And our priority is making sure that we're servicing and setting up the next couple quarters beyond that. Definitely, we're seeing growth in this quarter.

Okay. Thank you.

Thanks Glen.

Your next question comes from a line of Daniel Grosslight with Citi. Daniel, your line is open.

Hi, guys. Thanks for thanks for taking the question. I want to kind of follow-up on Glen's question there on the sales cycle, because you have that 90 day implementation on getting a provider aboard and then, 90 days from that to really kind of generating revenue here. So, I guess, as we look at the providers that you signed during the most difficult time period, which will show up the next couple of quarters, how does the entry point in terms of pricing compare to that of those who you sold pre-pandemic?

That's a great question. We're not, obviously, for competitive reasons, going to talk about the pricing. But our core priority is always making sure that we align with the needs of our providers and our Life Sciences companies and make sure that they could treat and care for patients the way they need to and want to, but at this time and probably in the future, we will talk about sort of promotions and pricing. But it's good question.

Okay. Okay. And then maybe just a little bit of a higher level, it seems like the data that you put out with Commonwealth as utilization kind of plateauing at around 9% below the pre-COVID baseline. How does this compare to what you were expecting heading into the quarter? And I understand you're not giving guidance here, but at a high level, what are your expectations for healthcare utilization for the rest of the year and what signposts do you think you'll need to be able to really provide fiscal year guidance?

This is -- I think, what's really important is I don't know what to expect, right. And we sort of -- we do multiple scenarios all throughout our planning process to think through the highs and the lows. We didn't know, going into Q2 that we would see the growth that we did, right, to come back. So -- and I would argue that neither did a lot of our providers. So, I think, from a monthly basis or even a weekly basis, as we look at this utilization levels, I think we're continuously finding different movements throughout the United States. And I would also argue that it's not I don't necessarily just think about it as 9%, I think different specialties are coming back in different way, at different parts of the country. And as we see spikes in different communities, it impacts patients and it impacts providers. So, I don't want to look into that crystal ball and sort of hope that I could tell you what it would look like. I have no idea?

Got it. Thanks guys.

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

Thanks. Good morning. Chaim maybe on the value proposition going back to your comments around the strengthening Phreesia has seen in that post-pandemic, if we take a step back and assume volumes in payments at some point returned to normal, does -- or I guess how does the enhancements you've made you've seen change your view on the potential long-term growth trajectory for the company? Do come out of the pandemic better than you went in and how much better?

We -- I feel like we went into the pandemic like in great shape and I think we will come out of this pandemic, in great shape, relatively speaking. I think the real change is going to be the healthcare system and to patients and how and the strength of the provider and health system community because they had a lot of pain and a lot of people lost lives and got really sick. So, my -- and still are. So, I would think about look our -- I don't think going into this, we would have thought as Phreesia is one of our propositions is helping keep patients and providers safe. And I think that is a value proposition that will remain and it's one that we sell on today that people get Phreesia for today. It doesn't replace our really significant ROI on labor and cash flow efficiency and the ability to collect data, where they wouldn't have otherwise or the ability to have a better patient experience and staff experience. So, I think it's just supplements. And I think it accelerated a lot of products that we started working on. And it changes the nature of intake. So, I think all of those are just good. I can't imagine. I don't want to pontificate as to what the world would have looked like, or what it will look like, I know that -- what I do know today is that we are, we're in good shape moving forward and I'm very optimistic about our opportunity moving forward.

Okay, that's great. Thanks. And then maybe one on the cash collections, it looks like DSOs were down a little sequentially, but up still a fair amount year-on-year. Is there something changing about revenue mix that's driving that or is that related to the deferral program you all had mentioned offering to some of your clients earlier on in the year?

Yes, that's correct, Sean. The deferral program had some impact on cash collections.

Okay. Is there any bookends you can put around the maybe the proportion of clients or number of clients that are taking part in that?

Between a quarter and a third, I think took advantage of it.

Got it. Thank you.

Your next question comes from the line of David Larsen with Verity. David, your line is open.

Hey, can you talk a little bit about the growth rate in the revenue per provider? It looks like the number of providers that you have in the platform grew nicely 7% year-over-year, that's sort of in line with last year. Why would the revenue per provider growth rate slow to like 5% from 23%? Is there something about the pandemic that is making it harder to sell like a whole portfolio of modules or is that steady -- is that a good number to use going forward, 5%?

I'll let Tom give more info. But on a high level, I think what you're also seeing is the pressure on payments.

Okay.

That's part of the revenue mix and the provider client. Tom, you want to--?

You got to think about that 1% growth in payment volume and payment revenue and the impact on that.

Okay. That explains it, obviously. And then, with Advent and Health First, did I hear that you deployed the acute care solution to all four of the Health First hospitals and I think Advent has 50 hospitals if we think that like each hospital has a lobby and registrars within each of their facilities. I mean, has the in-patient solution been -- or is it the plan to deploy it across the networks have those IDNs.

So, at Advent, I think we've been public that we're alive in 44 of those hospital facilities. So, that's the in-patient. And I think we're in the process -- when -- Tom could correct me if I'm wrong, we're in the process of going live with the Health First acute facilities, so I think there's four of them in Florida.

That's correct. Yes.

Okay. And then without getting too granular, hospitals are typically larger business entities than our physician practices substantially. We're talking about like $500 million in net revenue per facility compared to a couple million for a physician practice. Just any thoughts around that would be very helpful. I mean, why would the hospital revenue be significantly higher than your typical physician office?

I don't think we're commenting on where the hospital revenue would be, but I will say that, yes, the revenue tends to be higher, but they do on average less intakes, right. So, thankfully, less -- more people go to ambulatory visits than they do to acute visits, right? So, you -- a lot of it's not just based on the absolute revenue of the organization, it's based on, what is it that we're doing for them? And what does that volume look like? You're not checking -- when you go to an ICU, you're not checking in every day.

One-third of denials happen because of inaccurate patient registration. So, I imagine that there's going to be a significant improvement in bad debt after they deploy Phreesia, are you doing any sort of analytics around that to show the value that you're bringing to these facilities?

We -- it's safe to say that we think generally as an organization, that when we -- in the early days, and moving forward when we deploy out a solution, we're continuously looking to be able to validate and articulate our return on investment for our clients and we try to do it as quickly as possible. So, what I can say is that it's something that where we've looked at. And as we further talk about our acute solution, I'm sure -- to the marketplace, I'm sure we'll be articulating where we think the ROI was.

Thank you.

Thanks David.

And we do have time for one more question. Our final question comes from the line of John Ransom with Raymond James. John, your line is open.

All right, just going back to payments revenue, how is that trending toward the end of the quarter versus the beginning of the quarter and maybe you could give us a peek at how it's trending this quarter just for modeling purposes how to think about that? Thanks.

The -- it improved during the quarter John.

And John this is Balaji. I think the Commonwealth data is a valuable tool without us really having to -- you could sort of look at the volume data there. And obviously, can't really talk to beyond that. But I think the Commonwealth data goes through early mid-August. So, that's pretty instructive.

Okay. Thank you.

This concludes our question-and-answer session. I will now turn the call back over to Chaim Indig for closing remarks.

I want to thank everyone for joining us today. And I hope that your families, yourself, and your organizations are all staying safe. And hopefully we don't see a spike in COVID-19 in the second half of this year, because I'd like everyone to be healthy and safe. Cheers everyone. Hope to see you again soon.

Ladies and gentlemen, this concludes today's conference call. On behalf of Phreesia, thank you for participating. You may now disconnect.