Phreesia, Inc 10-Q for FY2021 Q3

Phreesia, Inc. (PHR)

10-Q 2020-12-09 For: 2020-10-31

Added on April 04, 2026

About this 10-Q

Phreesia, Inc filed this 10-Q on December 9, 2020, covering the quarter ended October 31, 2020 (FY2021 Q3).

Headline figures

Quarter ended October 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $38.46M; up 17.1% from $32.84M a year earlier
Net loss: $6.71M; compared with a net loss of $2.44M a year earlier

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Delaware						20-2275479
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

434 Fayetteville St, Suite 1400 Raleigh, NC						27601
(Address of principal executive offices)						(Zip Code)



PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited):
	Balance Sheets as of October 31, 2020 and January 31, 2020	7
	Statements of Operations for the Three and Nine Months Ended October 31, 2020 and 2019	7
	Statements of Redeemable Preferred Stock and Stockholders’ Equity (Deficit) for the Three and Nine Months Ended October 31, 2020 and 2019	8
	Statements of Cash Flows for the Nine Months Ended October 31, 2020 and 2019	9
	Notes to Unaudited Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 4.	Controls and Procedures	44
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	76
Item 6.	Exhibits	78
	Signatures	80


	October 31, 2020		January 31, 2020
	(unaudited)
Assets
Current:
Cash and cash equivalents	$	254,118	$	90,315
Settlement assets	12,267		12,368
Accounts receivable, net of allowances	27,594		21,978
Deferred contract acquisition costs	1,708		1,720
Prepaid expenses and other current assets	6,825		5,157
Total current assets	302,512		131,538
Property and equipment, net of accumulated depreciation and amortization of $42,665 and $35,551	19,160		14,487
Capitalized internal-use software, net of accumulated amortization of $23,907 and $19,554	9,986		8,735
Operating lease right-of-use assets (1)	3,192		—
Deferred contract acquisition costs	1,227		1,594
Intangible assets, net of accumulated amortization of $450 and $271	1,020		1,199
Deferred tax asset	496		775
Goodwill	250		250
Other assets	207		180
Total assets	$	338,050	$	158,758
Liabilities and Stockholders’ Equity
Current:
Settlement obligations	$	12,267	$	12,368
Current portion of debt and finance lease liabilities	4,722		2,324
Current portion of operating lease liabilities (1)	1,288		—
Accounts payable	4,215		6,017
Accrued expenses	12,662		9,243
Deferred revenue	6,623		5,401
Total current liabilities	41,777		35,353
Long-term debt and finance lease liabilities	24,439		21,540
Operating lease liabilities, noncurrent (1)	2,158		—
Total liabilities	68,374		56,893
Commitments and contingencies (Note 12)
Stockholders’ Equity:
Common stock, $0.01 par value - 500,000,000 shares authorized as of October 31, 2020 and January 31, 2020, respectively; 44,039,563 and 36,610,763 shares issued and outstanding as of October 31, 2020 and January 31, 2020, respectively	440		366
Additional paid-in capital	573,786		386,383
Accumulated deficit	(303,681)		(284,485)
Treasury stock	(869)		(399)
Total Stockholders’ Equity	269,676		101,865
Total Liabilities and Stockholders’ Equity	$	338,050	$	158,758
(1) Figures as of October 31, 2020 reflect the Company's February 1, 2020 adoption of Accounting Standards Codification No. 842, Leases (ASC 842). For additional details, see Note 3(c), "Summary of significant accounting policies — Impact of recently adopted accounting pronouncements."


	Three months ended October 31,				Nine months ended October 31,
	2020		2019		2020		2019
Revenue:
Subscription and related services	$	17,468	$	14,606	$	50,196	$	41,292
Payment processing fees	12,917		11,559		36,452		34,781
Life sciences	8,079		6,678		20,221		15,895
Total revenues	38,464		32,843		106,869		91,968
Expenses:
Cost of revenue (excluding depreciation and amortization)	6,472		4,388		16,477		12,594
Payment processing expense	7,530		6,902		21,125		20,952
Sales and marketing	10,481		8,348		30,013		24,170
Research and development	5,732		4,774		16,267		13,762
General and administrative	10,370		7,184		28,721		20,849
Depreciation	2,447		2,153		7,125		6,444
Amortization	1,546		1,325		4,531		3,823
Total expenses	44,578		35,074		124,259		102,594
Operating loss	(6,114)		(2,231)		(17,390)		(10,626)
Other income (expense)	62		77		(229)		(740)
Change in fair value of warrant liability	—		—		—		(3,307)
Interest income (expense)	(467)		(219)		(1,206)		(1,769)
Total other income (expense)	(405)		(142)		(1,435)		(5,816)
Loss before provision for income taxes	(6,519)		(2,373)		(18,825)		(16,442)
Provision for income taxes	(194)		(64)		(371)		(183)
Net loss	$	(6,713)	$	(2,437)	$	(19,196)	$	(16,625)
Preferred stock dividend paid	—		—		—		(14,955)
Accretion of redeemable preferred stock	—		—		—		(56,175)
Net loss attributable to common stockholders, basic and diluted	$	(6,713)	$	(2,437)	$	(19,196)	$	(87,755)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.17)	$	(0.07)	$	(0.51)	$	(5.85)
Weighted-average common shares outstanding, basic and diluted	38,511,370		35,790,951		37,855,503		15,007,247


	Redeemable Preferred Stock														Stockholders' Equity (Deficit)
	Series A			Series B			Junior Preferred			Redeemable Preferred					Common Stock
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amounts		Total		Shares	Amount		APIC		Accumulated Deficit			Treasury stock		Total
Balance, February 1, 2019	13,674,365	$	79,311	9,197,142	$	51,872	32,746,041	$	32,746	42,560,530	$	42,561	$	206,490	1,994,721	$	20	—			(210,994)		$	—	$	(210,974)
Net loss	—	—		—	—		—	—		—	—		—		—	—		—			(6,695)		—		(6,695)
Stock-based compensation expense	—	—		—	—		—	—		—	—		—		—	—		599			—		—		599
Exercise of stock options	—	—		—	—		—	—		—	—		—		29,798	—		37			—		—		37
Issuance of common stock warrants	—	—		—	—		—	—		—	—		—		—	—		833			—		—		833
Accretion of redeemable preferred stock	—	5,196		—	2,667		—	—		—	—		7,863		—	—		(1,469)			(6,394)		—		(7,863)
Balance, April 30, 2019	13,674,365	$	84,507	9,197,142	$	54,539	32,746,041	$	32,746	42,560,530	$	42,561	$	214,353	2,024,519	$	20	$	—		$	(224,083)	$	—	$	(224,063)
Net loss	—	—		—	—		—	—		—	—		—		—	—		—			(7,493)		—		(7,493)
Stock-based compensation expense	—	—		—	—		—	—		—	—		—		—	—		1,467			—		—		1,467
Exercise of stock options	—	—		—	—		—	—		—	—		—		22,038	—		41			—		—		41
Accretion of redeemable preferred stock	—	27,510		—	20,802		—	—		—	—		48,312		—	—		(1,508)			(46,804)		—		(48,312)
Payment of preferred stock dividends	—	—		—	—		—	—		—	—		—		—	—		(14,955)			—		—		(14,955)
Issuance of common stock in initial public offering, net of issuance costs of $6,084	—	—		—	—		—	—		—	—		—		7,812,500	78		124,619			—		—		124,698
Conversion of preferred stock into common stock and cancellation of redeemable preferred stock	(13,674,365)	(112,017)		(9,197,142)	(75,341)		(32,746,041)	(32,746)		(42,560,530)	(42,561)		(262,665)		25,311,535	253		262,412			—		—		262,665
Conversion and exercise of preferred stock warrants into common stock	—	—		—	—		—	—		—	—		—		588,763	6		8,799			—		—		8,805
Balance, July 31, 2019	—	$	—	—	$	—	—	$	—	—	$	—	$	—	35,759,355	$	357	$	380,875		$	(278,380)	$	—	$	102,853
Net loss	—	—		—	—		—	—		—	—		—		—	—		—			(2,437)		—		(2,437)
Stock-based compensation expense	—	—		—	—		—	—		—	—		—		—	—		1,766			—		—		1,766
Exercise of stock options	—	—		—	—		—	—		—	—		—		59,679	1		365			—		—		366
Cashless exercise of common stock warrants	—	—		—	—		—	—		—	—		—		53,023	1		1			—		—		2
Deferred offering costs	—	—		—	—		—	—		—	—		—		—	—		(56)			—		—		(56)
Balance, October 31, 2019	—	$	—	—	$	—	—	$	—	—	$	—	$	—	35,872,057	$	359	$	382,951		$	(280,817)	$	—	$	102,494


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


PHREESIA, INC.
(Exact name of registrant as specified in its charter)


	Stockholders' Equity (Deficit)
	Common Stock						Accumulated
	Shares	Amount		APIC		Deficit			Treasury stock		Total

Balance, February 1, 2020	36,610,763	$	366	$	386,383		$	(284,485)	$	(399)	$	101,865
Net loss	—	—		—			(6,112)		—		(6,112)
Stock-based compensation expense	—	—		2,872			—		—		2,872
Exercise of stock options and vesting of restricted stock units	988,678	10		1,727			—		—		1,737
Treasury stock from vesting of restricted stock units	—	—		—			—		(447)		(447)
Balance, April 30, 2020	37,599,441	$	376	$	390,982		$	(290,597)	$	(846)	$	99,915
Net loss	—	—		—			(6,371)		—		(6,371)
Stock-based compensation expense	—	—		3,428			—		—		3,428
Exercise of stock options and vesting of restricted stock units	283,396	3		735			—		—		738
Treasury stock from vesting of restricted stock units	—	—		—			—		(23)		(23)
Balance, July 31, 2020	37,882,837	$	379	$	395,145		$	(296,968)	$	(869)	$	97,687
Net loss	—	—		—			(6,713)		—		(6,713)
Stock-based compensation expense	—	—		3,316			—		—		3,316
Exercise of stock options and vesting of restricted stock units	406,726	4		872			—		—		876
Issuance of common stock in secondary public offering, net of issuance costs of $290	5,750,000	57		174,453			—		—		174,510

Balance, October 31, 2020	44,039,563	$	440	$	573,786		$	(303,681)	$	(869)	$	269,676


	Nine months ended October 31,
	2020		2019
Cash used in operating activities:
Net loss	$	(19,196)	$	(16,625)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	11,656		10,267
Stock-based compensation expense	9,616		3,832
Change in fair value of warrants liability	—		3,307
Amortization of debt discount	318		412
Loss on extinguishment of debt	—		1,073
Cost of hardware purchased by customers	604		512
Deferred contract acquisition costs amortization	2,280		1,465
Non-cash operating lease expense	1,228		—
Deferred tax asset	279		—
Changes in operating assets and liabilities
Accounts receivable	(5,616)		(3,899)
Prepaid expenses and other assets	(1,940)		(2,943)
Deferred contract acquisition costs	(1,901)		(1,414)
Accounts payable	(2,300)		1,629
Accrued expenses and other liabilities	3,982		3,098
Lease liability	(1,419)		—
Deferred revenue	1,222		(1,162)
Net cash used in operating activities	(1,187)		(448)
Cash used in investing activities:
Capitalized internal-use software	(4,663)		(4,329)
Purchase of property and equipment	(6,440)		(4,826)
Net cash used in investing activities	(11,103)		(9,155)
Cash provided by financing activities:
Proceeds from issuance of common stock in equity offerings, net of underwriters' discounts and commissions	174,800		130,781
Payment of preferred stock dividends	—		(14,955)
Proceeds from issuance of common stock upon exercise of stock options	3,351		445
Treasury stock to recover tax withholdings on stock compensation awards	(869)		—
Payment of offering costs	(226)		(5,944)
Proceeds from revolving line of credit	—		9,876
Payments of revolving line of credit	—		(17,676)
Proceeds from term loan	—		20,000
Repayment of term loan and loan payable	—		(21,042)
Insurance financing arrangement	2,009		—
Principal portion of finance lease payments	(1,797)		(1,624)
Principal payments on financing arrangements	(881)		—
Debt extinguishment costs	—		(300)


Debt issuance costs	(69)		(112)
Loan facility fee payment	(225)		—
Net cash provided by financing activities	176,093		99,449
Net increase in cash and cash equivalents	163,803		89,846
Cash and cash equivalents – beginning of period	90,315		1,543
Cash and cash equivalents – end of period	$	254,118	$	91,389

Supplemental information of non-cash investing and financing information:
Right-of-use assets recorded in exchange for operating lease liabilities (1)	$	4,420	$	—
Property and equipment acquisitions through finance leases	$	6,050	$	1,738
Capitalized software acquired through vendor financing	$	174	$	—
Purchase of property and equipment and capitalized software included in accounts payable	$	1,681	$	546
Issuance of warrants related to debt	$	—	$	833
Cashless transfer of term loan and related accrued fees into increase in debt balance	$	20,257	$	—
Cashless transfer of lender fees through increase in debt balance	$	406	$	—
Deferred offering costs included in accounts payable and accrued liabilities	$	64	$	—
Cashless exercise of common stock warrants	$	—	$	2,521
Cash payments for:
Interest	$	1,047	$	1,834

(1) Includes $2,741 initial right of use asset recorded upon adoption of ASC 842.


	October 31, 2020		January 31, 2020
Payroll-related expenses and taxes	$	7,846	$	5,032
Payment processing fees liability	2,634		2,738
Other	2,182		1,473
Total	$	12,662	$	9,243


	Useful Life
	(years)	October 31, 2020		January 31, 2020
PhreesiaPads and Arrivals Stations	3	$	29,857	$	26,389
Computer equipment	3	25,990		18,394
Computer software	3	3,010		2,297
Hardware development	3	1,024		1,024
Furniture and fixtures	7	743		743
Leasehold improvements	2	1,201		1,191
Total property and equipment		$	61,825	$	50,038
Less accumulated depreciation and amortization		(42,665)		(35,551)
Property and equipment — net		$	19,160	$	14,487


	October 31, 2020
2021 (Remaining three months)	$	60
Fiscal Years Ending January 31,
2022	238
2023	238
2024	224
2025 - thereafter	260
Total	$	1,020


	October 31, 2020		January 31, 2020
Billed	$	26,000	$	22,245
Unbilled	2,344		676
Total accounts receivable, gross	$	28,344	$	22,921
Less accounts receivable allowances	(750)		(943)
Total accounts receivable	$	27,594	$	21,978



FORM 10-Q


	Contract liabilities (deferred revenue)
January 31, 2020	$	5,401
Revenue recognized that was included in deferred revenue at the beginning of the period	(5,004)
Revenue recognized that was not included in deferred revenue at the beginning of the period	(1,168)
Increases due to invoicing prior to satisfaction of performance obligations	7,394
October 31, 2020	$	6,623


	Total		Debt		Finance Leases
Fiscal 2021 (remaining three months)	$	1,509	$	845	$	664
Fiscal year ending January 31:
2022	4,050		1,077		2,973
2023	2,442		184		2,258
2024	1,290		40		1,250
2025	21,190		20,728		462
Total long-term debt and finance lease maturities	$	30,481	$	22,874	$	7,607


	Number of options	Weighted- average exercise price		Weighted- average remaining contractual life (in years)	Aggregate Intrinsic value
Outstanding — January 31, 2020	5,516,452	$	3.80
Granted in nine months ended October 31, 2020	—	$	—
Exercised	(1,610,207)	$	2.08
Forfeited and expired	(54,083)	$	7.31
Outstanding and expected to vest — October 31, 2020	3,852,162	$	4.46	6.03	$	125,217
Exercisable — October 31, 2020	2,625,365	$	3.12	5.09	$	88,856
Amount vested in nine months ended October 31, 2020	476,680	$	5.52


	October 31, 2020
Balance, January 31, 2020	$	943
Bad debt expense	396
Write-offs and adjustments	(589)
Balance, October 31, 2020	$	750


	October 31, 2020		January 31, 2020
Prepaid software and business systems	1,994		$	1,611
Prepaid PhreesiaPads	394		645
Prepaid data center expenses	350		751
Prepaid insurance	1,969		1,259
Other prepaid expenses and other current assets	2,118		891
Total prepaid and other current assets	$	6,825	$	5,157


	Contract assets (unbilled accounts receivable)
January 31, 2020	$	676
Amount transferred to receivables from beginning balance of contract assets	(676)
Contract asset additions, net of reclassification to receivables	2,344
October 31, 2020	$	2,344


Beginning balance, January 31, 2020	$	3,314
Additions to deferred contract acquisition costs	1,901
Amortization of deferred contract acquisition costs	(2,280)
Ending balance, October 31, 2020	2,935

Deferred contract acquisition costs, current (to be amortized in next 12 months)	1,708
Deferred contract acquisition costs, non-current	1,227
Total deferred contract acquisition costs	$	2,935


	October 31, 2020		January 31, 2020
Revolving credit facility	$	20,663	$	—
Term loan	—		20,000
Finance leases	7,607		3,612
Other debt	2,146		808
Accrued interest and payments	65		381
Total debt and finance lease liabilities, before original issue discount	30,481		24,801
Less deferred financing costs and original issue discount	(1,320)		(937)
Debt and finance lease liabilities	29,161		23,864
Less - current portion of debt and finance lease liabilities	(4,722)		(2,324)
Long term debt and finance lease liabilities	$	24,439	$	21,540


			Restricted stock units
Outstanding, February 1, 2020			1,447,418
Granted in nine months ended October 31, 2020			701,392
Vested			(76,915)
Forfeited and expired			(93,915)
Outstanding, October 31, 2020			1,977,980


	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of October 31, 2020

Money market mutual funds	$	237,499	$	—	$	—	$	237,499
Foreign currency derivative contracts	$	—	$	34	$	—	$	34
Total assets	$	237,499	$	34	$	—	$	237,533


	October 31, 2020
Operating leases:
Lease right-of-use assets	$	3,192
Lease liabilities, current	$	1,288
Lease liabilities, noncurrent	2,158
Total operating lease liabilities	$	3,446

Finance leases:
Property and equipment, at cost	$	17,078
Accumulated depreciation	(9,555)
Property and equipment, net	$	7,523
Lease liabilities (included in Current portion of debt and finance leases)	$	3,018
Lease liabilities, noncurrent (included in Long-term debt and finance leases)	4,589
Total finance lease liabilities	$	7,607


	October 31, 2020
Operating leases:
Operating lease cost	$	1,300
Variable lease cost	191
Total operating lease cost	$	1,491
Finance leases:
Amortization of right-of-use assets	$	2,278
Interest on lease liabilities	236
Total finance lease cost	$	2,514


	October 31, 2020
	Operating		Finance
Maturity of lease liabilities
Fiscal 2021 (remaining three months)	$	434	$	850
Fiscal year ending January 31,
2022	1,228		3,139
2023	1,142		2,352
2024	758		1,290
2025	$	52	$	472
Total future minimum lease payments	$	3,614	$	8,103
Less: interest	(168)		(496)
Present value of lease liabilities	$	3,446	$	7,607


	October 31, 2020
Supplemental cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash used for operating leases	$	1,234
Operating cash used for finance leases	236
Financing cash used for finance leases	1,797
Total	$	3,267

Right-of-use assets obtained in exchange for lease liabilities:
Operating	$	4,420
Finance	6,050
Total	$	10,470


	As of October 31,
	2020	2019
Stock options to purchase common stock and restricted stock units	5,830,142	6,645,106
Warrants to purchase common stock	75,137	228,178
	5,905,279	6,873,284


	Three months ended October 31,
(in thousands)	2020		2019		$ Change		% Change
Subscription and related services	$	17,468	$	14,606	$	2,862	20	%
Payment processing fees	12,917		11,559		1,358		12	%
Life sciences	8,079		6,678		1,401		21	%
Total revenue	$	38,464	$	32,843	$	5,621	17	%


	Three months ended October 31,				Nine months ended October 31,
(in thousands, unaudited)	2020		2019		2020		2019
Net loss	$	(6,713)	$	(2,437)	$	(19,196)	$	(16,625)
Interest (income) expense	467		219		1,206		1,769
Depreciation and amortization	3,993		3,478		11,656		10,267
Stock-based compensation expense	3,316		1,766		9,616		3,832
Change in fair value warrant liability	—		—		—		3,307
Provision for income taxes	194		64		371		183
Other (income) expense	(62)		(77)		229		740
Adjusted EBITDA	$	1,195	$	3,013	$	3,882	$	3,473


	Payments due by period
(in thousands)	Total		Less than 1 year		1-3 years		4-5 years		More than 5 years
Long-term debt obligations	$	22,874	$	845	$	1,261	$	20,768	$	—
Interest on long-term debt	4,583		947		1,869		1,767		—
Finance lease obligations	8,103		850		5,491		1,762		—
Operating lease obligations	3,614		434		2,370		810		—
Purchase obligations	1,174		1,174		—		—		—
Total	$	40,348	$	4,250	$	10,991	$	25,107	$	—


Exhibit Number						Description
3.1						Seventh Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-38977) filed with the Securities and Exchange Commission on September 10, 2019)

3.2						Amended and Restated By-laws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-38977) filed with the Securities and Exchange Commission on September 10, 2019)

3.3						Amendment No. 1 to Amended and Restated By-laws of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-38977) filed with the Securities and Exchange Commission on June 1, 2020)

31.1						Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2						Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1+						Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2+						Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS						Inline XBRL Instance Document

101.SCH						Inline XBRL Taxonomy Extension Schema Document

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


#			Indicates a management contract or any compensatory plan, contract or arrangement.
+			This certification will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent specifically incorporated by reference into such filing.