Good morning, everyone. Welcome to the JP Morgan Healthcare Conference. My name is Annie Samuel, and I cover healthcare technology and distribution here at JP Morgan. We're thrilled to have Phreesia presenting this morning. With us are CEO and Founder, Chaim Indig, and CFO, Balaji Gandhi. They'll do a brief presentation, and then afterwards, we'll open it up for Q&A. So if you have a question, please, raise your hand, and we'll make sure to get you a mic. So with that, let me turn it over to Chaim.
Thanks for having us. Good morning, everyone, and Happy New Year. I'm Chaim Indig. I'm the co-founder of Phreesia. I'd like to spend a few minutes providing an overview of the company, our products, and how we operate the business. Our CFO, Balaji Gandhi, who's here with me, will also talk about our financial profile, results, and capital allocation philosophy. We founded Phreesia in 2015. We knew that being able to activate the patient and the healthcare consumer at the moment they were about to visit their provider would be valuable. From the onset, we believe that if we engage the consumer in their healthcare, in their healthcare at the point of care, we would be able to activate them. We have a focus on building products that activate consumers at the point of care. Our initial suite of products focused on patient i ntake.
We continue to expand our offerings to engage and activate beyond intake. A patient who plays an active role in their care drives better clinical and financial outcomes. In every other vertical, the front end is always different than the back end, whether it's financial services, retail, or travel. There have always been scaled front-end vendors who are differentiated from back-end vendors. We are the dominant front-end platform in healthcare. To do what we do repeatedly and reliably, you have to drive high levels of self-service. For our clients, the vast majority of patients are fully self-service. This has allowed us to consistently move more tasks to the patient. That virtuous cycle has continuously deepened our moat of value to our clients. We came up with the name Patient Intake to describe what we were doing years ago, and now we are moving beyond that.
We automate registration, patient payments across a broad array of systems, as well as different provider types. We are a scaled payment facilitator, offering an array of payment tools, including automation of patient payment plans and charity care. We also offer an attractive platform for personalized communication between providers, their staff, and patients. These capabilities include the number one website to find a specialist, MediFind.com. If you or your loved ones are looking for a specialist, MediFind is the most trusted place to find one. Our consumer audience is far more diverse than it was even a few years ago. We are an attractive platform for virtually any type of healthcare content you could think of. The communications we facilitate are made with security, privacy, and consent in mind. Today, we manage 10% of all patient visits in the country.
We have invested significantly to reach our current size, and it's enabled us to go well beyond patient intake. Balaji will talk about these investments. One of the capabilities we now have through these investments is booking millions of appointments a year. We're helping providers collect important and required data from patients to comply and compete in fee-for-service and value-based care. This includes data to measure patient activation using PAM, the gold standard of measuring patient activation. PAM measures a patient's knowledge about medication and preventative health, their skills to maintain lifestyle change and participate in care decisions, and their confidence in communicating with their doctor and following up. The PAM performance measure is a new MIPS quality measure for 2024, and it is available to providers as part of their existing Phreesia offering.
Providers can earn 7-10 points towards MIPS when PAM is submitted, in addition to their six quality measures. As another example of our work extending beyond intake, Phreesia does the heavy lifting to collect the necessary data for PAM throughout the year and gives a provider a file when it's time to report to CMS. We also invest in an internal go-to-market. This is an important and unique asset we have developed and nurtured over nearly a decade. We control the go-to-market from prospecting, qualifying leads, all the way through to closing opportunities, implementation, and expanding existing relationships. We measure our results and make adjustments how we allocate resources continually. There are 1.2 million people working the front end of healthcare delivery, which consumes roughly $37 billion in annual spend.
Though we have grown significantly over the past few years, we still believe we are in the early innings. We have a long way to go, more visits to impact and more ways of impacting them to improve health outcomes and patient experience, and more opportunities to grow revenue and grow it profitably. We are fortunate to have multiple ways to have an impact on healthcare consumers, providers, life sciences companies, and payers. It requires a lot of focus and discipline. We are excited about the next five years will look like. Let me hand it over to Balaji to discuss our financials.
Thank you, Chaim. Good morning, everyone. So let me briefly just discuss our revenue model before getting into our results and general financial outlook. So if you think about our business, and I think Chaim pointed this out, we're fortunate to have three distinct ways of generating revenue off the network we built over all these years. And the first is subscription. And so we charge providers a subscription fee for all the tools, the software tools that we provide. This helps them be more efficient, generates a lot of productivity, and generally improves the overall patient experience. Those software tools and the subscriptions that we sell are typically sold, not always, but on a per provider per month basis. And they're also typically one-year contracts.
We think that's a great way to go -to -market, and some of the comments that Chaim made speak to that. Second, payment processing. So that is transactional revenue. It represents us having embedded payments as part of our platform, and we make a percentage fee on every transaction. And right now, we're running close to $4 billion annually in payment volume on our network. And I think the simple math sort of to do for you there is that $4 billion of volume translates into about $100 million of revenue to Phreesia. Finally, Network S olutions, and this is a really important part of our business.
It's... We monetize that through delivering personalized messages that are delivered on behalf of various brands that we work with, and we get permission from patients before we show them personalized content. The messages are typically part of campaigns with upwards of 80 different life sciences brands that we work with. Those are the three revenue lines of our business. Typically, and I think this is, you know, it's what's very important to recognize is, we make money all three ways. It's really an important part of our business model to appreciate that, because in healthcare, there's lots of companies that can monetize in one way from a provider or another way from life sciences, for example, and we have this benefit of being able to do it three ways.
And I think if you think about our business, five years ago, we were probably in this room or one of the other rooms here, presenting for the first time, soon before our IPO. And as a company, we were generating $100 million of revenue, and on average, a client, we were generating revenue of about $67,000. And so you fast-forward today, we've made a whole bunch of investments, which, you know, I'll speak to as well. And in our third quarter that we just reported last month, that average revenue per client was just over $99,000.
And our revenue has gone from $100 million to, you know, our outlook for this year and the quarter that we're about to wrap up in a few weeks is $353 million-$356 million. Over to the right, you see the EBITDA number, and obviously, we've incurred lots of losses, and I'm gonna show it on a quarterly basis as well, based on our third quarter results. So now let's shift to something that I think Chaim, myself, and the rest of the team are very excited about, which is we front-loaded a lot of investment to be able to become a much larger company. I mean, you can see all the sort of stats on there, clients, revenue per client, what have you.
Now we're at this unique position as we enter fiscal 2025, where we get to both still grow at a pretty healthy rate. Our outlook for next year implies 20%-22% revenue growth, but get back to profitability. I think we're all very excited about that at Phreesia. You may have seen in our third quarter earnings report, we talked about EBITDA, adjusted EBITDA, guidance of $10 million-$20 million of EBITDA, and we were profitable in fiscal 2021, so this will be sort of a return to that year. And I think in terms of the investments, I'll just sort of give you one example, and there's lots of them, because we invested across the company.
But Life S ciences and within the N etwork S olutions area, I talked about the revenue of the entire company being $100 million five years ago. That Network S olutions revenue line is almost that today. And so that doesn't happen just from network growth. It also happens from investing in the infrastructure, and a great example is data and AI. So we can then be able to deliver the right personalized message to a consumer when they're engaging with our platform. And so now we do that millions of times more than we did, and we're able to do it in a much more tactical and strategic way than we did before. And so the revenue in that area grew because of all these investments.
Then just to sort of wrap up here, on the financials, I talked a little bit about our outlook for the year. Very excited to get back to profitability. Another important thing to point out, we have $103 million of cash on our balance sheet as of October 31st. No long-term debt, and I think as we sort of assess, you know, the environment we're in, and, you know, a company that's growing 20% and about to get back to profitability, we think that's a pretty healthy balance sheet to have, and we feel pretty good about that as well. So with that-
Yeah.
21%.
Maybe I'll kick it off with the first question, and then if you do have a question, please, raise your hand, and we'll be sure to get you a mic. But, you know, Baj, you touched a little bit on this in your presentation, but you guys have been a public company for now almost five years, which feels like the last five years have flown by. A lot has happened since that time. You know, can you provide some color now on how the opportunity ahead of you looks different, you know, than it did five years ago when we were sitting here?
She asked you.
We should...
We can, we can tag team this one. Well, this is something we've talked about internally a lot. So we went public in 2019. And just some of the things that have happened, that if you said, you know, we were at this conference in 2019, you're gonna go public. There's gonna be this pandemic. Then all of your, you know, people that are trying to, like, chase after you and do what you're doing and eat your lunch, are gonna be able to get capital for free. They're gonna be able to try to hire all your people away from you and pay them more money for a while.
And then, as that sort of settling out, then inflation kicks in, and then you have to pay all your people a lot more than you thought. And then you have all your cash sitting in a bank that basically disappears. So we didn't count on any of those things. Anything else, Chaim?
No, no. Along the way, we're gonna keep building and growing our network continuously.
But I guess maybe, you know, kind of rather than looking backwards, looking forward, like, as you look out over the next five years, like, how does that look different than when you were thinking about the business, say, you know, kind of five years ago? Does it look different?
I'm more excited now than I was five years ago. I think our capability... First off, our, the breadth of our capabilities is significantly more than it was years ago. The scope of what we're able to accomplish, the types of clients we have, you know, the fact that we-- Like, I remember on the IPO, I'd get asked, you know, what our footprint looks like with oncologists or in behavioral health, and it was nominal. Now it's significant, right? I think about, you know, when we went public, you know, being able to handle acute settings. Now we have hundreds of acute settings, right? Our ability to go beyond intake, right?
So people used to ask us all the time, like: "Yeah, but what else is there beyond intake?" And we would always talk about how big intake was. Now we talk about how, like, not only how big intake is, but all the things we're doing with that same platform. So I often give examples of this, but if we weren't seeing all these patients, we couldn't get all those activation scores. And those scores are unbelievably valuable at changing outcomes for patients, and it's clinically proven, and it's amazing. If we didn't have the footprint we have, being able to help drive the consent levels that we have been able to for a lot of our value-based care clients, would not be there, right?
So it's, we just sort of look at the capabilities that we've built out and then, say the least about MediFind. We've been talking for years about being able to help people find the right doctor. We've all had that happen, right? So someone in your family gets ill or needs a specialist, and you want to find the best specialist possible for them. And so you don't want to find someone that's pay to play. You want to find the best. So we've been looking for the ability to do that and building out the underlying platform, and we were really lucky to have gotten to know the team at MediFind, and when it became available, we were able to move onto, had the resources to move quickly, and over the last six months since we've acquired the platform, we've fully integrated it.
So now you could go from not just finding a doctor, but booking an appointment. So our Phreesia Network is being lit up, and we're booking a phenomenal amount of appointments very quickly. That, if you go to Google, it's the number one site to find a specialist in the country, which is pretty amazing to have those capabilities. And our providers are just so excited about it. Our patient, the consumer response, has been incredible. This is what people are looking for. They're not looking to, what's the What is the best, the doctor that's willing to pay the most to, you know, to get top rank? It's who is the most appropriate physician to see for a rare cancer, who is... If I have a problem with my esophagus, you know, like, who should I see in my, like, what's the best doc?
That's what people want. Then, like, there's the ability, and we've been looking at the space around, and to us, it's very tied to the consumer after-hours answering services. Like, it is crazy to us, and we've been looking at the space for years. It's crazy that almost every single provider in the country pays someone to answer their phone calls after hours, to write down a message and then send them a page. It is insane. These are the same, like, like, when I try to describe to people that a part of the healthcare system is, so a lot of these answering services, they're the same people that actually answer phones for plumbers and for funeral homes, right? Like, literally, they call up, you leave a message, and then they call the doctor and relay the message.
If you ask most doctors, it's not if they hate their answering service, it's to the degree they hate their answering service. So for us, being able to automate that interaction with the patient is just unbelievably exciting. And then we're talking about beyond the visit, right? So after you get a script, right, we have capabilities now that we're actually helping you and reminding you and giving you information to fill the script, which is, the outcomes to that are just incredible. So we're—like, if I think about today, where we are-
I'm more excited today because, you know, we have, like, a broad bench of folks that have been with us a long time. The company's scaled significantly, and our capabilities have. And I just think, like, that's where you want to be in this environment. You want to be able to do more for your clients and do it faster and better.
So maybe, you know, kind of following up on that. I mean, I think, you know, you invested so much in scale, and I think that people understand the investments but don't appreciate the scale. You know, it's hard for me now to kind of check in with a doctor and not interact with, with Phreesia. You know, a lot of the physicians that I interact with now use it, whereas, you know, kind of five years ago, everyone was wondering, like, "Is this an iPad? Is this like a check kiosk at the doctor?" Nobody really understood it. So, maybe competitively, you know, that's something that we always kind of used to talk about. How has the competitive landscape changed? Because it used to be, you know, that you were the leader.
There were a lot of kind of really, really small players out there, but you have gotten bigger. And so curious, you know, has scale helped you competitively? You know, are, you know, the conversations easier now with prospective clients because they know who you are? You know, what does the landscape look like now?
I think for us, competitively, we don't think about a competitor or one. Like, look, at the end of the day, we compete for a payment processing business. We compete with now we're competing with, you know, replacing answering services. We're competing with how you find a doctor on the internet. So we, like our team, which is, it's a phenomenal team, they build, like, all these different matrices and value propositions, and as we look at opportunities come in, what's really nice now is when we call, people know who we are. And they don't really question whether we're the market leader. Really, the questions that we often get is: Oh, like, I didn't know you did that. Wow, that's pretty amazing! And so...
There is lower risk to picking Phreesia, but we've also made massive investments in being able to implement properly. Having done this for a long time, with, like, most of the same... The average tenure of the senior team is north of a decade, right? Like, and so one of the things we all saw was the meaningful use bump, right? Where there was a lot of... Like, a lot of people got EHRs, 'cause they had to, and then a lot of them didn't get them implemented properly.
One of the big investments we made, which was very controversial, and I remember when we did it, was, if we're gonna go get lots of clients really quickly, we gotta make sure that we implement them really well, we support them really well, and we provide great service all along, so that they're- we're in a position to continuously have that trust to get them more products. We did that, and that was a very, very big, significant bet, which frankly, we believe has paid off, even though it was high risk.
Maybe just one more from me before I open it up. You know, you recently announced that you're kind of shifting your investment strategy a little bit, focusing more on profitability. And so I was just hoping, you know, you can talk about, you know, what went into that decision process, you know, kind of why you think that now is the right time to really focus on profitability?
Well, I think what's really important is, we were profitable.
Right.
And we liked it, right? And so, I think the biggest part of the decision was, we all just really, as a team and as a board, like, we're all like, we could stretch this out, but, like, we keep getting the questions around, can they, or do they wanna be? And the reality was, we all really wanted to be. Making these investments was highly uncomfortable for us, right? I wouldn't say we love risk, right? And so, you know, given the opportunity and, you know, we went to the team, like, all throughout the company, we said, "This is important to us." And when we asked our employees, when we asked like, our leadership team, it was a resounding yes. And so we just made a lot of really...
Like, we just worked as an organization, and it really is, it's evident in a lot of our numbers, which is it's not that we've cut, as much as we really haven't grown expenses in how long?
Almost two years.
Two years. So we just grew our revenue, and which is, to me, like, that's the best way, right? Like, let's just figure out how to drive significant operating leverage with what we got. And culturally, I think, because a lot of our team views themselves as owners of the company, it was actually a... I don't want to say it was easy, but it was a very natural thing to do. Being profitable is something we all really want, and we expect to be there in short order.
And, you know, Annie, the two years of very little, if you looked at, like, GAAP expenses on our P&L, doesn't look like it changes, but make no mistake, there was a lot of work going on behind the scenes. And I think what may have been clear on this last quarter we reported, is that externally, people got to finally see that, oh, there are parts of the company that they thought they could generate revenue from further out, that they decided to not invest as much in or add as much investment to, but there was a lot of profit actually in the rest of the company. So that was probably part of it, too.
As we think about that kind of part that you maybe had been planning to invest in for the longer term growth, where should we see that show up in the P&L? Because you had kind of said before, like, as we think about your profitability trajectory, we would start to see G&A, you know, show the leverage first, but I would imagine now we might see it in other areas of the P&L, because you're not gonna be kind of investing in that growth.
Yeah. I mean, look, it's still G&A. It's still, still number one.
Okay.
You don't need, you know, you don't need two of everything in G&A. So it holds. I would say sales and marketing and R&D will be... If you just start comping the quarters in fiscal 2025 against the quarters in fiscal 2024, sales and marketing and R&D will contribute more next year than they have this year.
But that's reflected in our outlook.
Okay. Great question.
Well, I wanna congratulate you on your business because it, I think probably all of us in this room have probably used one of your systems at some point in time. So, my question to you is: What are the true barriers to entry to be competitive with you? Because I don't really see a lot of competitors myself, as a consumer, so there must be, and what are they?
So, years ago, I used to get in trouble from our private investors, 'cause I'd explain how complicated it was to do Phreesia, right? Because... and so then I spent most of my time making it sound really simple, right? And as a business, what we do is technically very hard, right? And, you know, Balaji often talks about the significant investments we make, but I want to imagine every single person in this room, this minute, checking into a doctor's office, because, frankly, we do more than this in... probably 10 seconds, right? Today, right? And all of you are checking in with different insurance for different reasons at different places. You're checking in, and your different providers have different systems, often multiple systems we have to interact with. You have to pay different amounts. We have to ask you questions around your health.
We have to ask you patient-reported outcomes, and then we've got to make sure in real time, as we pull that information, we've got to make sure that it goes back into the appropriate systems discreetly. And that's just really hard to do because along the way, if you answer yes or no, or to one question, we've got to ask you a different question. So what we've done is we haven't built templates, we've built a logic-based platform that manages transactions, that interfaces with patients in real time. And it, and we do it all in the cloud. And that's complex, and it's hard, but the other part of it is we have to make it really fast, and we have to make it very user-friendly. And then we've got to make it in all different types of languages.
And then we've got to make it in multiple modalities for the various types of patients that exist. And then along the way, we have to continuously, and this—we often talk about this, we have to keep building that moat. So it doesn't mean—like, the goal is not to get you to check in, right? Like, people often view that the thing we do is check you in or get you to pay. The real value proposition is transferring work to the consumer. So we need to ask and have you answer a lot of questions so that your visit is a better visit, your outcomes improve.
And that's sort of the hard part, because the trick is to get lots of people to use it in real time, and then get more and more information to be delivered, and then continuously have the ability to change those questions. And the more we've done that, it's become a virtuous cycle. And then we've got to do it cost effectively, because providers don't have the resources to spend, or they don't want to, on... spend a lot of money on this. So for a lot of what we do is just doing it at scale cost effectively, and it just becomes a flywheel.
Thank you.
You know, as we, you kind of think about your growth algorithm, you've kind of gone back to the, you know, 20% revenue growth, you know, longer-term 20% EBITDA margins. And, you know, a big part of your kind of outsized growth over the last couple of years has just been this really exceptional new logo growth. But, you know, if I kind of go back to, like, the IPO, it was always like a land and expand story. So is the, you know, land and expand still important? And as we think about that, you know, kind of 20% revenue growth, how do we think about the composition of, you know, the land versus the expand?
I'm sure there are some Phreesians watching the webcast, and they would lose their mind if they even knew that you thought that landing and expanding wasn't important, right? It is core to how we think about the business. It's, you get a client, show them significant ROI across all the different parts, whether it's on the provider side or on the life sciences side, right? And then show them value, demonstrate that value using data and information, expand how we work with them, and then get them using more of our products, and it's just a flywheel. That's how we've executed for years. It's the only way we know how to execute. Would you agree? It's in the— I wouldn't say it's part of the algorithm; it is the algorithm.
And as you think, you know, going forward, Annie, the ways in which we can expand a relationship are just so different now to all the points I made. So we've now got a much bigger network, multiple ways to be able to grow within those relationships, and, we'll just keep trying to be prescriptive about what that growth look like, you know, looks like. We know we keep getting the question from people, but, I think we have a great business, and the last thing we want to do is optimize for one type of growth versus the other.
As we think about that expand, you know, it, it used to be kind of that you would add, you know, the expand was add providers or add, you know, modules. You know, how penetrated, I mean, it feels like it's low, right? Is your existing base in terms of like, number of products you have now? Is it, is the, you know, kind of expanding coming from you adding new products, or is it going to be kind of adopting the existing products that you have? Like, how do we think about what the trajectory of some of these new clients you have is going to look like?
Yes. All are product. So we have products that are early in their life cycle, and we expect those to be adopted. We have products coming out throughout the year. I'm sure we will, you know, our marketing team and our IR team will let everyone know as we release these products. They'll be in our stakeholder letters. And some of them are being deployed today, I'm sure. Right? And then some of it's expanding footprint, but we have-- and then some of them are, are changes to the current products we have. So, you know, MediFind, we've been lighting up the ability to book an appointment in real time.
Right? And we are super excited about it, and we expect Phreesia On-Call to be a big growth engine of lighting up our network over the next year or two.
You know, maybe to that point, you know, you've done a combination of building out your own products and doing acquisitions. So how do you think about, you know, build versus buy?
We actually do build, buy, and rent. So one of the other things we often think about is, like, are these our capabilities that horizontal, like, horizontal vendors provide, like payments, right? So we are a payment facilitator, but the back-end pipes come from another company. We did the same with texting, right? So we provided all the underlying platform tools and how we integrate it, but we're not— We didn't build up hooks into the telcos. So our product management organization and our executive sponsors will go through and be like: "Is this a capability that we are best to build, buy or rent?" And often they're on our roadmap for... Like, some of these are, been on our roadmap for north of a decade, right?
The nice thing about doing this for almost 20 years is I get the ability to watch the cycles, right? And we see, you know, we not only see the capabilities that are coming, some of the things we look at are these cost-effective things that we could roll out, to that point I made earlier. Is this a cost-effective thing for us to roll out to our network, right? I wouldn't want to have a capability that we couldn't turn on to most folks without charging a fortune, right? And, or providing an experience that is to be expected. And I also wouldn't want to think about a world where we're not continuously moving the job to the consumer.
Moving everything to the consumer is wildly important to the way we think about it, because that's where most of the value and efficiency comes when people adopt technology, right? You think about financial services, you think about retail. It's when you move the job of the task to the consumer. That's where you get most of the economic value proposition. And that's really how we think about, you know, our place, and it's almost always a different. They're always a different set of companies on the consumer front end than they are on the back end.
Maybe I'll ask one about the L ife S ciences business. You know, you have had exceptional growth in that space. And it's a little bit different, I think, than maybe what we've seen in the industry, right? Like, eMarketer has taken down their forecast for next year, like, others in the space have seen some challenges. So can you talk about why your business is different, why your business is outperforming? You know, I think one thing that you had always talked about is, like, you're replacing, like, the pamphlets in the office. So it's a little bit different than adding this, like, incremental, huge marketing campaign. But maybe you could talk about, you know, why you're kind of bucking the trend.
I think there's a couple reasons. One, I think the dollars are so large that, you know, we were starting at a much smaller place. Two, the team has done a phenomenal job. We have an amazing organization that is able to not just understand the pain points of the life sciences company, but also make sure that their campaigns are taken live. ROIs are clearly demonstrated. They're very responsive in how we do what we do. But frankly, we're able to reach populations and that are very important and hard to get to, and show demonstrable returns for those investments. And we're able to do it at scale, and I think that that's a pretty important thing when we...
And we live outside the advertising ecosystem, so we don't, we're not dependent on cookies or changes to, you know, programmatic. Like, we own the entire value proposition from soup to nuts, and all of our, the patients that get messages have to consent into it, right? And we're able to show that patients actually want to get these messages, and the outcomes aren't just financially good for the Life S ciences, but they're really good health outcomes. You know, we've been able to show vaccine rates going up significantly, people staying on treatment, going on treatment, people understanding the treatments that they're getting at a higher level. These are all outcomes that the folks in this building care about, right?
The reason we do what we do is because we do care about improving these outcomes, and being able to do it in a financial zone that's successful is important.
You know, maybe I'll ask one final question, if there's no more in the room. You know, as we think about 2024, what are you most excited about?
Look, I have lots. I'm excited about lots of things. Like, I kind of like to not, I like to be profitable again, pretty soon. To be fair, is that I-
You looked at Balaji .
I'm like, I think I'm allowed to say it. Like, he's not going to kick me. But no, it'd be... This is like, I, you know, it was a nice little adventure being unprofitable, but I'm good.
Great!
Thank you. Thanks, JPMorgan.
Well, thank you guys so much, and thanks to everyone for attending.
Thanks, Annie.