Good evening, ladies and gentlemen. Welcome to the Phreesia's Fiscal Fourth Quarter 2024 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, Phreesia's Chief Financial Officer. Mr. Gandhi, you may begin.

Thank you, operator. Good evening, and welcome to Phreesia's earnings conference call for the fiscal fourth quarter of 2024, which ended on January 31, 2024. Joining me on today's call is Chaim 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 8-K 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.phreesia.com. As a reminder, today's call is being recorded and a replay will be available on our Investor Relations website at ir.phreesia.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 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 quarterly 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 furnished with our Form 8-K filed after the market closed today 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, and good evening, everyone. Thank you for participating in our fourth quarter earnings call. Our stakeholder letter and earnings release were published about an hour ago. Let me start the call with a couple of highlights. I am very pleased with our fourth quarter and fiscal year performance both financially and operationally. Phreesia is in a new era that extends our impact beyond patient intake. Our growing set of solutions expands our capabilities outside of the point of care, while still aligning with our mission to make care easier every day. In fiscal 2024, we facilitated more than 150 million patient visits, approximately 25% more than fiscal 2023. For the fourth quarter, total revenue was $95 million, up 24% year-over-year. Adjusted EBITDA was negative $3.5 million, a $14 million improvement year-over-year. Before I turn it to Balaji to discuss our fiscal 2025 outlook, I would like to thank my Phreesia colleagues for their hard work and commitment to our mission. I'd also like to thank our clients and investors for their continued support. We are all very proud of the work we do and are excited to continue to deliver growth while returning to profitability in fiscal 2025. Let me now hand it over to Balaji.

Thanks, Chaim, and good evening, everyone. We provided our initial outlook for fiscal 2025 when we released our fiscal third quarter results on December 5 last year. Today, we are maintaining our revenue outlook for fiscal year 2025 at $424 million to $434 million. We are also updating our adjusted EBITDA outlook for fiscal year 2025 to a new range of $12 million to $20 million from a previous range of $10 million to $20 million. Our updated outlook reflects our ongoing focus on improving efficiency and operating leverage. We are also providing a forecast for the number of average healthcare services clients or AHSCs we expect to add in the first quarter of fiscal 2025. We expect to see AHSCs increase by at least 100 in the first quarter compared to the fourth quarter as we prioritize AHSC prospects that we believe can drive profitable revenue growth across subscription and related services, payment processing, and network solutions. It is worth noting that our forecast for AHSC growth in the first quarter was incorporated into our fiscal 2025 revenue outlook, which we provided back in December and we are now maintaining. One final note. We believe, that our current cash and cash equivalents balance, along with cash generated in the normal course of business, give us sufficient flexibility to reach our outlook for fiscal 2025 and to plan for continued profitable growth in fiscal 2026. Operator, I think we can now open it up to Q&A.

The floor is now open for your questions. [Operator Instructions] [Audio Gap] The next question comes from the line of Ryan Daniels with William Blair.

Balaji, I want to ask you a question about the 100 average client adds. It seems very deliberate in your language about prioritizing prospects that can drive profitable growth. Can you dive into that? Is that really more of a focus on certain specialties that can add more growth and things like network solutions or have higher billing prospects, a better payment processing sales? Just any color there as that stood out to me?

Sure, Ryan. And, I apologize for the, I think we had some technical difficulty on the first question. So whoever that was dialing in, maybe come back into the queue. And Ryan, on your question, I think this goes back to some comments we made last quarter in our letter. And I think you're hitting on some of the points, which is, it's revenue, it's profitability, but it's also payback and the return we get. So, we feel really good about the clients that we're adding currently and expect to in the future in terms of the type of revenue and the type of profit we expect to generate off them. And that's really probably all we'd say at this point.

And then a quick follow-up for you. Anything we should consider with the profitability cadence in Q1 given number one, some of the noise would change? And then number two, I noticed you had an all employee event probably have some cost associated with that. I don't know if it's enough to move the needle, but any of those two things can have an impact?

So I think the event that we talked about was a Q4 event. So those costs were largely in the fourth quarter. In terms of change, I think we can maybe talk a little bit more about that if anyone answers the question. But I think in terms of guidance or the outlook and the cadence, nothing really to call out, Ryan. I think we'd call out though there is seasonality around payments, which are stronger, which has an impact on margin. That's nothing new this year versus previous years.

Our next question comes from the line of Richard Close with Canaccord Genuity.

Maybe just go down the change path a little bit farther. I noticed in the letter you talked about security investments. And just curious what you're doing there? How you're helping clients with security? And maybe just discuss your high level thoughts on change, the change hack and any impacts, positive, negative, that you see?

Yes. So I think thanks for the question, Richard. This is Chaim. I'll try to break down the question a little bit and then we'll try to answer some of the commentary around change. In the letter, we reference our investment security and I think that's really wanting to call out to all of our stakeholders that we, over the last couple of years, have been dramatically increasing our internal spend, both as an absolute dollar and as a percentage in security and compliance. And we think it is really important. We take our role as a steward of data and unbelievably seriously. But also to be fair, we know how much our clients depend on our service, and we expect to keep increasing that investment and it's baked into our R&D number and Balaji, I'm sure can talk more about that. But we did think it was really important as we have over the last couple of years significantly increased that investment level. And then in terms of change, look, let's start with it's been pretty terrible for a lot of our clients. Like, there's really no sugarcoating that a major part of the healthcare infrastructure was attacked, and it's pretty terrible. And we're doing everything we can to help our clients. We're just collect dollars and making sure that they can keep running their businesses as they were. And from what we can tell, almost all of them still are, although it's really putting strain on them. And in terms of how we work with change, they were one of our clearinghouses. So we, as part of our service, provide eligibility and benefit checks as part of a lot of our services. And we've been working with change as one of our clearinghouses for years. And to call out our team, over the last couple of weeks really quickly when they identified it started moving to our backup and alternate clearing houses to move the vast majority of our volume. They did that above and beyond normally what they do. It was a ton of work. I can't thank them enough. I know it made a big difference to our clients so that it really didn't disrupt their business. But look, this is a -- this was a pretty big attack on American -- on the American healthcare infrastructure and I think it's pretty shitty.

Our next question comes from the line of Anne Samuel with JPMorgan.

You called out in your letter that payment processing was helped in some part by better utilization. And I was just wondering if maybe you could touch on what kind of utilization you're embedding within your full year forecast for the year?

I think this is something we've talked about a lot on these calls is the swing factors. The biggest swing factors on payment processing is things like weather, things like where different days on the calendar fall in a given quarter, and that's how we sort of model it. We model it with years of history on experience like that. Obviously, weather can play a role, which is not as predictable, but that's sort of it. I don't think we sort of talk about like specific patterns and usage, utilization of services as being as big as bank factor.

And then maybe just one more. I was hoping you could touch on your postscript engagement product, how that works? And is there are you partnering with the pharmacies maybe to measure follow through? Or is there an opportunity to do that?

We'll not get through, I'm very excited about this product. I was jumping right to the end, Anne. This is a product that's been worked on for quite some time, really excited about it. I know the team is too. And this is, at its simplest form, when you get a script from the provider, it just makes so much sense to be able to get a reminder to fill it. Filling your prescription is just so important at every stage. If your doctor thinks that you need to be on a therapy, they should nudge you as many as much as possible to fill that therapy and answer any of your questions. And frankly, also know why and if you're not doing it, so they can better inform you as to why it's important. And so we've been working on this product for some time. It was developed all in-house, early indications are the response has been phenomenal, the impact to patients has been is looking very tremendous, and we're pretty excited about it. And early on, I don't think we're talking about who we're partnering about with it, but I'm personally pretty excited about it. It's a really nice valuable add on to our patients and providers.

Our next question comes from the line of John Ransom with Raymond James.

So it looks like you guys are kind of settling into a nice groove with g and a leverage and the like. As we think about your company, let's just think 5 years out and assume because it's easy math that you can grow your top-line 20% for the foreseeable future. How should we think about the concurrent growth in G&A and marketing and R&D that would accompany a theoretical kind of 5 year 20%?

Yes. John, this is Balaji. So first of all, I mean, I know you're trying to project out, but we're really formally talking about fiscal 2025. But let me we can try to be helpful. I think we made some pretty specific comments about G&A, where we did a lot of analysis on public company costs and we felt that to be a world class public company and have all the right processes and procedures and people in place. We're going to have to make some investments, we could choose to delay them, we chose not to. So, we feel pretty good about where we're running now to support a larger organization. But there's obviously the cost of things go up every year, but, it's not like there's an order of magnitude increase in the resources we need.

No. And I think you've seen that operating leverage happen for years now.

Yes. Right. As the dollar amount of real change.

Then let's give you a question that you might answer. The FT&R hiring season is coming up. How do we think about, you you've had some different thoughts about how quickly or how not quickly you grow that FT&R for us. So maybe talk about your goals for hiring and kind of your learnings of productivity as you try to ramp that up a couple of years ago?

Well, I think there was a couple of things around the ramp up on our SDR team that were really important. One, you ramped it up a lot quicker also acknowledging that we really had been out of the SDR market for about because of COVID for over a year. So some of it was just filling in a lot of hiring that we because we really didn't hire any net new STRs during COVID, just sort of during the peak pandemic period. So that was some of it, John. So we're we were really sort of the running season. But the productivity of our SDR team not only just keeps like, frankly, we're liking the productivity improvement. It keeps improving. But I think how we hire and also how we, qualify and drive opportunities into the provider organization, now I think we have not just SDRs, but we have a lot of other tools at our disposal, which have been also proven to be very effective. Right now, we're pretty happy with the cadence that we see on the provider sales organization and the SDR organization on landing and expanding our provider footprint. And it's been, I've been really excited and proud of that team. They've been executing very well and driving really good returns for all of us.

Balaji, you want to add a number to that financer or just keep it qualitative?

Keep it qualitative. I think your dog liked it.

That's my neighbor's dog. He's an annoying poodle, but that's okay. We'll figure out. I'll let go on mute now.

Our next question comes from the line of Jessica Tassan with Piper Sandler.

I was hoping you could maybe talk a little bit about what we see on medifind.com today. We see, obviously, providers by specialty clinical trials that are open for enrollment and drugs suitable for a particular condition. Curious to know, how much, how many of those items are you monetizing today, if any at all, and just the extent to which you've integrated the site with the intake management platform?

That's a great question, Jess and thanks for asking about MediFind. The integration effort is very much well on its way. We're booking appointments, thousands of appointments every day now or every and it's going very well, and they're being done in real time. So from a technology integration, I think that's on track. From a monetization effort, I think we were very, we've been very specific on that we're going to take it pretty slow in the monetization. We are monetizing. I'd say the vast majority of the traffic to the site still is not monetized. But we expect that to change over the coming.

Sorry, did you say you expect that to change over the coming years or is that an FY '25 event?

Overcoming years. Balaji is nodding its head on years. Years, yes.

And my follow-up is just, on postscript engagement, is that the kind of first time that you all have monetized the, I guess, post visit inventory? And I'm curious to know, I think you said it launched in the fourth quarter. Is that like revenue generating in the fourth quarter or just sales commence in 4Q?

I'm pretty sure it was revenue generating in Q1.

That sounds right. We can follow-up with you.

We can follow-up with you on that, if I don't get the notes right now from the team, who I'm sure someone's going to send me a note. And we have had other products in the post script engagement area. I think this is probably the most robust, and this is built off the learnings of a lot of the previous products that we've had in the space. Let me and to confirm that is correct, it's a it's Q1. It's really in Q1 that we started to, revenue on it.

Our next question comes from the line of Daniel Grosslight with Citi.

I want to touch on ConnectOnCall a little bit. So you added, I believe, 120 clients from them through the acquisition. Have you been able to cross sell some of the core Phreesia products to those clients? And then have you been able to make any of the cross sells the other way to your kind of core, free to clients on ConnectOnCall?

So, well, first, the core product, I think we've rebranded as PhreesiaOnCall. So I think that's already happened. So expect us to keep referring to this PhreesiaOnCall. I think we've had, I think it's so early. I don't know that I'd comment that I know the team is having, early success with cross sell, upselling, the old, ConnectOnCall client base. But to be fair, we frankly shared a lot of clients. And that Delta was mostly, clients that we didn't share. And so I'm sure that I know that the team is out there speaking with them and trying to cross sell, upsell where possible, where it's the right fit. And I know we're still in the early days of rolling out PhreesiaOnCall to our client base. And the response from our clients, our provider clients on PhreesiaOnCall has been, it's been amazing. If we had an expectation set on the value proposition, it's the early indications are this is it's far exceeded even my expectations and it's a beautiful product.

Yes. And then on cash flow, there was a bit of a step up in CapEx this quarter sequentially to around $7.9 million. Is that the right run rate that we should be thinking about for 2025?

I mean, I think there is some fluctuation quarter-to-quarter. I don't think you'd be wrong if you just run rate of that number. But there will be quarters where it's a little less or little higher. But in the high 20s, Daniel, it's 1, for the year.

Our next question comes from the line of Glen Santangelo with Jefferies.

Just two quick ones for me. I appreciate the 1Q provider add number that you gave us. And it's obvious that you're looking to add profitable growth. And so I'm kind of curious to get your take on where we are from a penetration perspective and how incrementally harder is it getting to add these profitable providers? And so just for those and trying to take a little bit of a longer term view, I just want to get a sense for where you think we're at? And then maybe I'll give you my follow-up right now. Maybe just following up on John's question, it's been an interesting 2 to 3 years at the company. You were very profitable, then you were very unprofitable, and now you're back to sort of profitability. As you look over the next couple of few years, obviously, you made great gains on the efficiency side. You see any major investments on the horizon or do you feel like the infrastructure is at a pretty good place to continue to be able to leverage and grow? And I'll stop there.

Well, Glen, that was a lot of questions for my brain to process really quickly and I just want to write them down.

I'm sorry.

It's okay. Let me start and try to answer as many of these as I can. There's like 7 questions. Balaji thinks it's funny. So let's start with I still think we are making a lot of investments, right? Like I and look, we have, we're spending a lot on R&D. We're spending a lot on our sales marketing organization. We're doing is we're spending less continuously as a percentage. But I would say, look, even looking back to when we went public, we spent significantly more today than we did then. It's a dollar amount. And we're able to put out phenomenal products that add a phenomenal amount of value to our clients, of all different kinds of clients, our life sciences clients, on our provider clients, and frankly, more and more, the consumer itself. And so my view is, yes, we will keep making investments because ultimately we're a growth company and we have a growth mindset. I think all we're excited to do is just return back to profitability. It's frankly a much more comfortable place for us. But we're still making investments and to answer your first question, is it harder to win clients? I think it's always hard to win clients in an environment that like healthcare. Like, where margins are tight and, expectations are high and there's just a lot of noise. And frankly, I think the reason we've been successful at it is the team. And the team builds great product and sells great product and does a phenomenal job of implementing and supporting our clients. Our customers, I appreciate the value we bring them. So I don't take the job lightly, but I think we've been pretty good at it for going on almost 19 years.

Yes. And Glen, I was just going to add, I think it relates to John's question too. I think we've tried to be pretty consistent about growth and profitability mattering, they both go together. And just some numbers to throw out at you, we actually have increased expenses, operating expenses by 13% if you look 2 years ago in the Q4 to today. So, to Chaim's point, we've invested a lot, but what's really important is that the revenue has grown 64% over that same period. So, that's going to be important, continue to grow, but also getting operating leverage and being profitable in the future. So, hopefully that's helpful.

Next question comes from Sean Dodge with RBC Capital Markets.

This is Thomas Kelliher on for Sean. Congrats on a nice quarter and thanks for taking the question. Just a quick modeling one here and kind of a follow-up on an earlier question. But how should we think about the EBITDA cadence kind of heading into fiscal '25 and then over the course of the year? I know you mentioned a little seasonality on the payment side, but any other particular cost or efficiency actions creating some variability that we need to be thinking about? Or should we expect this to be pretty linear?

Definitely not linear for the one of the reasons I think you brought up, there's seasonality on payments. I think the other thing to keep in mind is, and we've mentioned this in the past too, but we've seen a lot of operating leverage over the past 8 or 9 quarters, and it's not going to be as much this year, just if you sort of look at the outlook we provided for revenue and EBITDA. So, it will improve throughout the year, but 1Q has lower margin associated with more payment revenue. And then, you just start sort of dropping incremental margin down as revenue grows. So, look, we can happy to talk to you about your model, but we're not providing quarterly guidance. But feel free to follow-up.

It comes from the line of Jack Wallace with Guggenheim Securities.

Wanted to ask about the growth algorithm going forward, particularly as you target more profitable customers thinking about the growth in revenue per customer and how much of that should we be thinking about coming from legacy, but maybe underpenetrated products versus some of the newer products you've rolled out both in R&D as well as some of your tuck in M&A deals?

Maybe I can start and Chaim can talk about the acquisitions a little bit more. Look, one number, Jack, to look at is for the full year fiscal 2024, total revenue per client was up, ticked up a little bit, which was a sign of sort of things to come. I think what we can say is, it should be up more in fiscal '25 over '24 than it was in '24 over '23. And that's a combination of everything. I mean, it's the base, it's new clients that we think can be profitable as well. And then, Chaim, in terms of the products or the new the acquisition thing you want to add?

Look, I think the adoption of the different products we have has been going very well. I think our CSM team has been doing a great job. And a lot of that's the testament to these products adding a ton of value to our clients, very, very quickly. And I think our go-to-market, which is fairly differentiated and being able to get them into the hands of clients very easily and a lot of that is based on the work of our technology organization just making the products very easy to turn on. So thanking everyone, but it's so far, we see a lot of our products for all different clients being adopted. Our newer acquisitions, but also some of those are and some of the products that we've been working on for years and we had in our bag for many, many years. So I think all-in-all, the team is just doing a very good job around adoption. I'm pretty proud of that.

And then as we're thinking about, sources of gross margin expansion, how should we think about mix shift versus some of those products getting to scale? And then lastly, we can take a third in there, wondering if we can get an SDR count. Thank you.

Yes. So, first of all, on the gross margins, I think we've talked about this. Not a ton of opportunity there relative to the other three lines. We still see over time, there may be a little bit of opportunity, but if you were sort of modeling 2025, we feel really good about where those gross margins have gotten to and a lot of the leverage we've gotten. And I would focus more on the other three line items as a source of operating leverage for this year. Jack, I will come back with the SDR account for you. Let me just grab that number for you. So we can go to the next question.

And our next question comes from the line of Joe Vruwink with Baird.

One on network solutions, just when you look at maybe standing of later stage clinical activity at some of the customers that you help in that business or even just the propensity to spend here at year end with marketing decisions. Are you starting to get maybe the sense that the backdrop for new campaigns and just the broader macro that business might face into fiscal 2025 and beyond, Do you think that might actually be a better environment because it's obviously been pretty challenging here over the last 18 months or so?

I don't think -- that's a fair question. I think it's too early to tell how the year will play out, but I think the team is doing a great job. I feel really good about sort of the execution and the way the pipeline looks. But generally speaking, I think there's a lot of months in a year. And I guess having done this for so many years now, I'd say whenever I thought it's going to get easier, I'm usually wrong. And whenever I think it's going to get harder, often wrong on that, too. So I would say, like, what we -- we hire great people. We provide great returns on our network to our clients. And we try to make sure that the right patients see the right messages all the time that drive a phenomenal amount of value for those patients. And to keep doing that, I think we have the opportunity to keep growing our Network Solutions revenue for years to come.

Okay. That's great. And then I wanted to dig in a bit more too just what it means to prioritize customer prospects that drive profitable growth. I guess, in practice, that kind of sounds to me like you're expecting your gross retention to move higher over time? Is that the right way to think of it? So as the average tenure in the installed base is maturing and moving higher, that obviously bears a favorable revenue mix implication. It definitely factors into things like customer acquisition costs, is that kind of what you see happening for Phreesia over the next few years at this point?

Yes, sure. So Joe, absolutely retention is something we are very religious about. So absolutely focusing on profitable growth and profitable customers, we expect to have an impact on retention. Number two, though, is payback. So I think that's really the thing, you underwrite a certain amount of time that you think you can get revenue and how much revenue you can get. And so that's the other thing that's sort of changed. But those 2 things influence revenue growth and profitability growth. Is that helpful?

Yes. No, that's great. I'll leave it there.

Great. And the SDR count for January 31 was 107. We can go to the next question.

And the next question comes from Jailendra Singh from Truist Securities.

A few clarifications, if I can. With respect to the quarterly provider add of at least 100 in Q1, is that a good quarterly run rate to use as we model this to the year? Or is -- specific to Q1?

Yes. I mean, Jailendra, I know you're getting more familiar with us. We have in historical periods, given that next quarter number. We do have a decent amount of visibility, and we'll keep sharing that with you as the year goes out. So we don't want to give you a specific number. But I think it's a fair like sort of watermark to think about. Just know that we've got revenue guidance. So whatever you sort of model in for client growth, it's going to have a different revenue per client.

Okay. And then I want to go back to Change Healthcare issues. I think -- thanks for all the color about that you were -- you guys were able to switch to other clearing houses pretty quickly without much disruption for providers. But have you seen, just in general, any impact on utilization trends at your providers, basically because your payment processing and your Network Solutions business is exposed to utilization trends. So any impact on that? And related to that, a lot of providers across the country are kind of disrupted by this kind of -- is that impacting in any way the sales cycle in terms of your -- their willingness to work with you to roll out new solutions as they are dealing with this Change Healthcare issues. Just curious like -- maybe if you can go beyond just clearing house switch impact from Change Healthcare.

So from what we can say, we haven't seen providers not seeing any significantly utilization changes at our provider groups. And I think I say this all the time. Most of our providers, first and foremost, want to treat their patients. So we haven't seen any change in utilization patterns that I know of, and I would probably hear about it if we did. From a -- what's the other...

Selling environment, I think?

Selling environment? No, I don't think you've seen a material change to the selling environment. But obviously, if this goes on for months and months and months, it's just going to be pretty shitty.

Yes. That's fair. And then last one, I know, maybe Balaji, maybe you might not want to give any color there. But just in terms of like as we think about 3 segments for modeling purpose, any directional guidance you want to provide in terms of how should we think about the growth for each segment in fiscal '25 compared to your overall for fiscal '25 on for your compared to your overall revenue guidance for the year, any individual segment guidance?

Yes. So and I want to be clear about the terminology here, Jailendra, these are not segments, they're revenue lines, but I think that's the spirit of your question is more around where the revenue lines, right?

Yes.

Yes. So obviously, there's costs that are spread across all different areas of the company, and we're able to have 3 different revenue lines. And I think we've been consistent about the past, in fiscal 2025 is no different, is payment processing lags, so that will be the slowest growth rate of the 3, with an outlook range of 20% to 22%. I think it's safe to say that the subscription and related services and Network Solutions revenue lines would outpace payment processing.

Our next question comes from the line of Stephanie Davis with Barclays.

Hello from Miami. I had more questions on the profitable client growth. So when looking at the 100 ads for 1Q, is that a question of you being choosier with the pipeline this quarter certainly pursuing a subset of the opportunity historically cultivated? Then as you kind of refocus on this and rebuild the pipeline, your client growth can pick up to closer to prior levels? Or is this something where we should think -- or it takes more time to ramp up an AHSC that's more profitable, maybe there's more cross-sell?

So first of all, I mean, I think one thing that's important to note is many of these clients, this is months in the making, right? And if you think about our go-to-market strategy. So this was something that we went about over the past couple of years. And really starting to look at the returns, and obviously, the environment changed last year and look at the returns we're getting. So this is sort of now you're seeing the output of that shift. And I think we're constantly looking at that and looking at obviously, cost of capital is different. I think to Jailendra's question, we'll keep you updated as things go, but I don't think they're going to dramatically change. We feel pretty good about the [indiscernible] we made last year that led to the clients we added this past quarter and then the 100 plus that we expect to get in 1Q. But I think this relates to, I think, Joe's question earlier, too, think about it as we're trying to drive lots of good client retention. We're trying to drive revenue per client. We're trying to drive profitability. And so that's -- for the next quarter, that's 100 plus. If it's higher or if it's lower, it will be through the lens of those metrics that I just talked about.

Helpful. And for the SDR count, just to clarify -- I forgot my question, did you say 107?

Correct.

On the [indiscernible] provider...

Yes.

That's just on our provider organization.

That's right.

Does that comp to the 175 last quarter, so a 40% decline?

He's locating his notes.

Yes, hold on. It comes to 139 last quarter.

A lot of those which is the [indiscernible] number, right?

So is there -- did this spur a layoff as you had this new focus on kind of a certain subset of your clients? Or is there any opportunity to remap your SDRs that maybe historically had a less profitable channel assignment down market?

Were they -- are those SDRs have graduated to other roles in the organization.

And there's general attrition in that role as well.

Our next question comes from the line of Scott Schoenhaus with KeyBanc.

So Chaim, you seem pretty happy and you're executing on your go-to-market strategy. Your team is rapidly building out solutions, helping the needs of clients. Just want to follow up on the Change Healthcare. Over the last 3 weeks, have you guys been able to deploy new solutions for your clients to help mitigate the Change Healthcare issue? And then also on the payment side, wondering if you're seeing any unusual activity over the last 3 weeks?

So I don't think I should answer your question, Scott, around have we been able to deploy new solutions, I'd say they've mostly been new solutions to our clients, but some of our newer products has started to get more adoption if they use some of the Change products for payment collections on the back end. And we've just prioritized making sure those clients get access to those products as soon as possible just so they could keep operating their business. But all in all, I wouldn't say we built new products just for helping these clients, it's mostly been accelerating rollout of certain products that have been built or being built for often years. And what was the other question? Scott, what was the other question? Change in payment?

Just on the payment side, have you seen any behavior changes, I guess, over the last 3 weeks on the payment side?

No.

No. Nothing to call out. [Indiscernible]...

Our next question comes from the line of Jeff Garro with Stephens.

I want to ask about Network Solutions revenue in that business. And my rough math says Network Solutions revenue per visit was up about 5% in FY '24. So I want to see if you would call out any key driver among mix, pricing or adoption to drive that per visit growth. And also to put a strategic lens on it. Any comments on what the runway is for Network Solutions to continue to create additional value for your life science partners?

So we think it was a mixture of all -- I would say probably a mixture of all of the above, Jeff, that drove continued success and a lot of that was investment in product and execution of team and thoughtful use of the network. We do expect our life sciences clients to be a driver of our success moving growth moving forward.

Yes. And Jeff, I think you could actually go back to one of your earlier questions, I wish I could remember who asked it. But I think I really talked about just the power of the network being bigger and thus providing the right relevant content to the right patient, and we have a lot more opportunities to do that. And a lot more brands and I think we put in our slide deck, we're working with over 90 brands today.

Appreciate that. Great to see the additional value being driven across a bigger base of visits on the network. And maybe to follow up a little further on this [indiscernible]. You've given the SDR count and talked about the kind of priorities there. But maybe you could talk a little bit more about your investment in sales and marketing in Network Solutions. Is there incremental investment there? And how should we think about the ability to work with more brands and create and drive cross-selling of more products?

That -- our life sciences go-to-market team is -- they're rock stars. And we expect to keep investing in them. And they have -- frankly, they work hard, they're fun, and we expect them to continue to be a growing part of our organization, but we also expect to keep getting significant leverage off those organizations, both our provider and our life sciences teams. We're proud of them. They're doing really well.

And Jeff, I mean, let me just point out that, that team, the revenue associated with that area was sub-$20 million the first year when we went public, and our entire sales and marketing expense that year was $32 million. So I mean, the investments have been made. To Chaim's point, we'll continue to do that, but significant ones have been made.

Our next question comes from the line of Ryan MacDonald with Needham & Company.

As we think about the focus on more profitable prospects, is there any portfolio management going on where you're looking to proactively churn unprofitable customers. And as we think about the Phreesia Fest sort of event, is this sort of like a -- would you consider as kind of like a sales kickoff where you can kind of restrategize the go-to-market motion to try to drive and deliver larger initial lands or better cross-sell motion in the effort to drive more profitable growth?

So I'll start with Phreesia Fest. And then I'm going to remind -- then I'm going to ask you about the first question because I've already forgotten it. So Phreesia Fest was into sales kickoff. It was our first all-company meeting we've done in 7 years. And it was just really important to bring the team together just because the company has changed so much in the last 7 years and a lot of teams that work collaboratively with each other didn't get a chance to meet each other very often. As we're -- as I should remind all of our stakeholders, we're a fully-virtual company. So this is -- and it was a significant investment, but it also allowed us to really talk about our mission, vision and what our values were, along with talking about moving beyond intake. And so yes, we talked about the go-to-market motion, but we also celebrate our engineering team and we celebrate our Network Solutions organization and we celebrate our support team that's on the front line. So this isn't just about our go-to-market motion. This is about our organization and the people that make it valuable and make it all happen. And your first question was portfolio management, I think we're always doing that. We think about capital allocation regularly as an organization, where we continue to invest and where we were we doubled down on that investment even or triple down and other areas where we pull back a little bit and try to drive better returns from the investments that we've already made. And I don't think our view is pruning clients, I think our view is really making sure that clients that we do have get the most value out of being Phreesia clients.

Helpful. And maybe just a follow-up. I wanted to ask about PAM. Obviously, it's a longer-term opportunity here. But given the inclusion of the MIPS calculation this year, just curious how you're going about sort of trying to get that in the hands of more physicians to sort of really start to drive that greater usage to create more maybe opportunities for 2026 and beyond.

So just for everyone's edification, the PAM is the patient activation measure, and it's a performance measure that we are the owner of the license. From a go-to-market motion, there's a whole team that's really working with our provider clients in getting it live and on. We're performing to hundreds of thousands of PAMs on a regular basis. I think we have a lot of clients that have already put up their hands, we're always adding more. And that body of work is still in its early stages. And I'm getting to know now we already have over 1 million unique patients that have done a PAM. So we feel good that the body of work and the data that we're going to start producing will help further the -- our view and generally in the walk community skew that -- driving activation drives better outcomes. All across the board.

Yes. And Ryan, in addition to the MIPS program that you mentioned, we have spent a lot of time with the kidney care community, the Kidney Care Choices program, and we're -- help them drive a lot of great results, we think.

Our next question comes from the line of Aaron Kimson with Citizens JMP.

I'm sure you guys saw that general catalyst announced its intent to buy [indiscernible] in Northeast Ohio in January, with the thesis of kind of building modern tech-enabled health care delivery platforms at scale. So Chaim, I'm wondering if you could share your thoughts on nonprofit network slipping before profit over time and the opportunities and risks you see there for Phreesia. And then secondly, from a patient care perspective, and as someone, frankly, who was born in that health care system and grew up in it, I'm curious how you think about the potential of these types of transactions to drive better patient outcomes?

All right. So I'm going to tread carefully on this because I tend not to publicly give a lot of issues. But I would say that whether it's a health system is nonprofit, by tax [indiscernible] or for profit, I think they still have to be able to provide great care and they do often and not, frankly, do it at a loss make, right? So that they could keep operating the business. And what we're really talking about the difference between for-profit and nonprofit is the tax status. But we have -- if you look at ambulatory care across the country, there's unbelievably dedicated professionals that operate in a for-profit manner that deliver care across the manner, and there's nonprofits. And I think America's health care system is able to support both nonprofit and for-profit care delivery systems. And there's -- like -- we have clients in the for-profit space that are just doing amazing work for their clients -- into their patients. So I actually think it has more to do with the organization than its tax status.

There are no further questions. I will now turn the call back over to our team for closing remarks.

All right. I want to thank everyone for listening and supporting Phreesia, and we look forward to seeing all of you in the coming months. And I hope everyone has a really nice spring, and I'll talk to all -- Balaji and [indiscernible] -- talk to you soon.

Thank you.