Good evening, ladies and gentlemen, and welcome to the Phreesia first quarter fiscal 2027 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 first quarter of fiscal 2027, which ended on April 30th of 2026. 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 and visibility regarding future financial results. Forward-looking statements are subject to various risks and uncertainties and other factors that may cause our actual results, performance, or achievements to differ materially from those described in our forward-looking statements. Such risks are described more fully in our earnings press release, our stakeholder letter, and our risk factors included in our SEC filings, including in our quarterly report on Form 10-Q that will be filed with the SEC tomorrow. The forward-looking statements made on this call will be based on our current views and expectations and speak only as of the date on which the statements are made.
We undertake no obligation to update and expressly disclaim the obligation to update these forward-looking statements to reflect events or circumstances after the date of this call or to reflect new information or the occurrence of unanticipated events. We may also refer to certain financial measures not in accordance with generally accepted accounting principles, such as Adjusted EBITDA and free cash flow, in order to provide additional information to investors. These non-GAAP measures should be considered in addition to and not as a substitute for or an 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 after the markets 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.
Good evening. Thank you all for joining our first quarter fiscal 2027 earnings call. Before I hand it off to Balaji to provide some highlights on our financial results and outlook, I want to take a moment to recognize the people who make Phreesia what it is. Our team has shown up with real commitment, not just this quarter, but through a sustained period of transformation that required a lot of grit, a lot of trust, and difficult decisions. I am both grateful for the people who are on the team and excited about what we're building together. We've done serious foundational work over the last few years on our infrastructure, our security, our operational discipline, and it's paying off. We believe we are a unique company in our space due to our scale, experience, and profitability.
We believe we have a unique opportunity to tap into these strengths to play our best game over the next several years. Three key factors are shaping our positive outlook. First, we're always striving to set the pace on patient intake by offering what we see as the most differentiated solution in our targeted markets and by making sure our clients feel that difference. That means continuing to bring front-end solutions that improve provider cash flow and enable meaningful patient and provider engagement on behalf of our network solution clients. Second, we're prioritizing bringing AccessOne's financing solution to more of our base clients and integrating AccessOne into our payment workflow. We believe this can improve cash flow for our healthcare provider clients and unlock a new level of client loyalty and retention.
Third, AI is fundamentally changing what's possible for us at scale in ways that I expect will show up clearly in our near-term and long-term results. I am excited about what our team can accomplish together by leveraging our client relationships, our capital, and our ideas. I'll now turn the call over to Balaji.
Thank you, Chaim. Let me start with a few highlights from our first quarter fiscal year 2027 results, and then I'll move into our outlook for the full fiscal year 2027. For the first quarter of fiscal year 2027, revenue was $130.9 million, up 13% year-over-year. Year-over-year growth was led by payment solutions at 40%, followed by network solutions at 15%. The 40% year-over-year payment solutions growth reflects the fact that the prior year period included no contribution from AccessOne as the acquisition closed in our fourth quarter of fiscal year 2026. Adjusted EBITDA was $30.5 million compared to $20.8 million in the same period in the prior year, representing an Adjusted EBITDA margin of 23%. First quarter Average Healthcare Services Clients, or AHSCs, reached 4,708, an increase of 50 from the prior quarter and an increase from 297 or 7% year-over-year.
These results were in line with our expectations. First quarter total revenue per AHSC was $27,811, up 6% year-over-year. Net income was $3 million in the quarter compared to a net loss of $3.9 million in the same period in the prior year, representing our third consecutive quarter of positive net income. We are also introducing two new metrics this quarter, total managed payments and payment solutions revenue rate. Total managed payments combines our legacy patient payment volume with AccessOne's managed portfolio of cardholder receivables, giving investors a single view of the scale of our payments ecosystem. Payment solutions revenue rate consists of our total payment solutions revenue divided by total managed payments, demonstrating how changes in volume and portfolio size translate into revenue. Total managed payments were $1.786 billion in the first quarter of fiscal 2027, and our payment solutions revenue rate was 2.3%.
For more information on these metrics, please refer to our earnings press release and stakeholder letter. Now turning to the balance sheet and cash flow updates. On March 13th, we completed the refinancing of our bridge loan. We repaid all outstanding indebtedness under the bridge loan using $92 million of borrowings from a new 5-year, $275 million senior secured revolving credit facility with Capital One, maturing on March 13th, 2031. The unused borrowing capacity is available for working capital expenditures, acquisitions, and general corporate purposes. Cash, cash equivalents, and restricted cash as of April 30th, 2026 were $76.4 million, compared to $73.8 million at January 31, 2026. At April 30th, 2026, $1.7 million of our restricted cash was included with other long-term assets.
We ended the first quarter with $84 million of borrowings outstanding on our new Capital One credit facility, reflecting an $8 million pay down during the quarter. Net cash provided by operating activities was $23.9 million in the quarter, an improvement of $9.1 million year-over-year. Free cash flow was $16.4 million, an improvement of $8.9 million year-over-year. We expect that quarter-to-quarter operating cash flow and free cash flow performance will fluctuate based on a variety of factors, including the specific timing of invoicing and payments, which you can see in working capital along with CapEx. Additionally, on April 30th, we expanded AccessOne's securitization facility with PNC Bank and extended the term through April 2029. This development reinforces our investment thesis behind the AccessOne acquisition in two key ways.
First, we increased the facility limit from $200 million to $300 million, giving us greater capacity to offer AccessOne solutions to our clients. Second, the amendment also expanded our ability to offer upfront funding to non-investment grade clients. Many of Phreesia's clients are non-investment grade, and we are excited to offer them financing solutions that drive cash flow improvement. Transitioning to our financial outlook for fiscal year 2027. Our fiscal 2027 outlook is unchanged from what we provided in March. We're maintaining our revenue outlook for fiscal year 2027. We expect revenue to be in the range of $510 million-$520 million. As we noted last quarter, network solutions clients are committing lower spend levels for the second half of fiscal 2027 than we had anticipated last December. Certain clients are committing fewer dollars due to brand specific dynamics, including the impact of regulatory policies.
Though we do not believe these developments are signaling a structural shift in demand for Phreesia's solutions, there is now more variability in our internal network solutions revenue forecasting, particularly in the second half of each fiscal year. Our visibility into revenue across other parts of the business is generally consistent with our views in March 2026. The revenue range provided for fiscal 2027 assumes approximately $37 million of contribution from AccessOne and no additional revenue from potential future acquisitions completed between now and January 31, 2027. We are maintaining our Adjusted EBITDA outlook for fiscal 2027. We expect Adjusted EBITDA to be in the range of $125 million to $135 million. In addition to our continued belief in the operating leverage embedded within our model, we have more recently identified opportunities to reduce our reliance on manual processes across Phreesia, including through the adoption of artificial intelligence.
In May 2026, subsequent to quarter end, we implemented a restructuring plan intended to reduce operating expenses and better align our cost structure with our current business priorities. The plan is expected to result in meaningful annualized run rate expense savings, which were reflected in our Adjusted EBITDA outlook provided on March 30, 2026. We are maintaining our expectations for AHSC growth in the mid-single digit percentage range, and we're maintaining our outlook for total revenue per AHSC to grow in the low single digit percentage range for fiscal 2027. I would like to join Chaim in recognizing the significant contributions from everyone at Phreesia to our solid financial profile. Operator, I think we can now open up the lines for the Q&A session.
We will now begin the question and answer session. Please limit yourself to one question. If you would like to ask a follow-up, please rejoin the queue after your question has been fielded. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Your first question comes from the line of Sean Dodge with BMO Capital Markets. Sean, your line is open. Please go ahead.
Good afternoon. Maybe just on AccessOne. Balaji, you said the new agreement with PNC, there's two dimensions to it. You expanded the size of the facility, but now you can also offer to other types of providers. How should we think about what that means incrementally or quantitatively for the AccessOne opportunity over the next couple of years? The cross-sell into Phreesia's base, how quickly, how meaningfully can that start to contribute? As you sell into these other types of providers, are the economics of those different than what a typical legacy AccessOne client would be?
Thanks, Sean. There's a lot in there. I'll try to hit on all those. First of all, just stepping back, this is an area that Phreesia has been thinking about entering for many, many years, and I think one of the areas why we're interested is because of our base of clients that are in a lot of the medical specialties and are non-investment grade. This was definitely an important milestone to get to, and we think there's other sources of capital as we continue to penetrate this part of the market.
Probably a little bit early to talk about how the economics might differ, but at the end of the day, I think we just keep pointing to some of the prepared remarks and what's in the letter, which is we're trying to drive cash flow improvement for these healthcare providers, and this just gives us more capital and opens up the addressable market into our base, which we have a long history with working with a lot of these clients, so there's a lot of trust built there as well.
Your next question comes from the line of Stan Berenstein with Wells Fargo. Stan, your line is open. Please go ahead.
Yes, hi, thanks for taking my questions. I just want to maybe ask more holistically, obviously, your growth engine is shifting a bit away from subscriptions towards payments and network. Can you just maybe talk about what changes are you making to your sales and marketing teams to pivot and drive growth in other areas of your business? How is the go-to-market different from where it was a year ago? Thank you.
Yeah, thanks, Stan. I think one important way to think about all this is Phreesia has always been a product-led growth organization, so it does always start with the product. I think if you think about on the provider part of this, there's the software that we implement and the clients benefit from. I think you're referring to the monetization of it, which is clearly shifting. We have been talking about this for, I think, at least two years, of this philosophy of better, faster, and cheaper in terms of the software for our provider clients. This is deliberately moderating subscription pricing to keep retention strong, drive the downstream economics in payments and network solutions. You're seeing some sequential moves in generally what you'd expect with that strategy in the sequential change in subscription revenue. In terms of the go-to-market, it's still very product-oriented.
We build a lot of new capabilities, our team implements them, and our sales motion is very much still trying to get those products in the hands of the providers to drive value. It's just the monetization that has shifted.
Your next question comes from the line of Scott Schoenhaus with KeyBank. Scott, your line is open. Please go ahead.
Hey, thanks guys for taking my question. I guess my question will be on the network solutions. You mentioned in the investor letter about seeing some strength with the newly launched ProviderConnect. Maybe we could touch more on that. What's basically embedded in your guidance? I know you're talking about continued caution around the back half setup, but maybe dive deeper in what you're seeing on the new ProviderConnect side of things. Thanks.
Sure. Thanks, Scott. I think there's two different threads here on all things network solutions. I think we've spent a lot of time, both this quarter and last quarter, talking about what's happening in fiscal 2027 as it relates to the demand and end markets. I think way down below that, underneath, is this new area that we're pretty excited about that we just launched earlier this fiscal year, working from a base of zero in fiscal 2026. We're very excited about it. We've had a lot of wins and a lot of momentum. There is some contribution from that built into our fiscal 2027 guidance. Really, I think the way to think about it is it gives us a runway for fiscal 2028, 2029, 2030, where we're not just relying on the PatientConnect side of things, but on the ProviderConnect side of things.
The team did an excellent job of getting that launched, and I think there's a lot of good momentum there.
Your next question comes from the line of Brian Kanikaloo with Jefferies. Brian, your line is open. Please go ahead.
Hey, good afternoon, guys. Maybe just a quick question. It looks like labor cost efficiencies in overall sales and marketing in Q1 showed up even before the restructuring. Was there any rift that happened in Q1? After this, how do we think about the ability for Phreesia to drive margin expansion going forward as you grow revenues, and are there more cost efficiency opportunities longer term? Thanks.
Yeah. Let me just make sure I understood that. I think one question you're talking about is was there anything in Q1 that contributed to margin improvement, any changes that were happening? Two, I think you're asking more forward-looking. In terms of just stepping back, I think as many of you on the call can probably appreciate, we put a lot of capital and work into the business four or five years ago. I think we've had a lot of these calls talking about operating leverage, we're constantly looking at areas to drive efficiency. We also made that upfront investment that we thought we'd get years of productivity from. That's really, I think, Brian, the answer on your first part of the question, nothing to call out out of the ordinary.
The announcement we made in May was different, which is why it was called out and presented the way it was. I think Q1, nothing to call out. Going forward, I think our financial outlook assumes continued improvement throughout the year on margins. I don't think we're going to talk beyond that, but to get to the place we are, we feel very good where we have a lot of optionality and paths to driving more growth in the business, and having pretty good margins.
Your next question comes from the line of Jared Haase with William Blair. Jared, your line is open. Please go ahead.
Yeah. Hey, guys. Thanks for taking the questions. In the letter, you also talked about some investments in clinical integrations to better support the oncology or other specialty providers. I just wanted to hear a little bit more, I guess, just number 1, where you're seeing the biggest opportunity for investment for that specific segment of the market. Then, I'd love to hear a little bit about, I think you sort of flagged the unique workflows associated with those types of providers. Where does Phreesia fit into that and where there might be some differentiation to help address those challenges? Thanks.
Yeah. Thanks, Jared. This is something we do call out from time to time in our letters because when you think about the flywheel of the business and what we talked about in the go-to-market motion and how we monetize products, our alignment with the right specialties is really valuable to our network solutions team as they offer products like PatientConnect and ProviderConnect. We can drive a lot of value for the providers. We can drive a lot of value for the various brands that we work with. I think we sort of created this category. I think in Chaim's opening remarks, he talked about just how patient intake has evolved as Phreesia has been throughout its 20-plus-year history. I think what you should think about is just we're constantly kind of the pace car and setting the standard there.
When we work with a lot of these specialties, I think we can really differentiate how information is collected and integrated across the systems.
Your next question comes from the line of Ryan MacDonald with Needham. Ryan, your line is open. Please go ahead.
Hi. Thanks for taking my question. Maybe two on the networking solutions business. I realize you didn't change any of the guidance on the top line for the full year, but just curious how conversations are evolving as you're heading into the back half of the year about potential unlocking of incremental budget on the PatientConnect side. On ProviderConnect, given it's such a new solution in the marketplace, what opportunities are you potentially seeing to be included into some of that late year innovation spend on newer solutions in the market that could create some potential upside? Thanks.
Thanks, Ryan. You got a lot in there. I think in terms of the second half of the year, I think it sort of speaks for itself. We had our last earnings call for the fiscal year-end on March 30th, so not a lot of time has passed. I don't think we have really anything worth sharing here, which is obviously why we maintain the revenue guidance for the year. We'll provide updates as the year goes by. I think we will know incrementally some more in September when we report the fiscal second quarter, but nothing really to call out since March.
I think you asked some questions about new product and innovation, and I think what you should really just think about is we're constantly trying to drive a lot of value where we can deliver the right kind of messages to patients to impact their outcomes. On the provider side, there's a lot of friction in the providers. We're not creating products that are inventing problems. We hear a lot of feedback from our clients, and we're just trying to build products that address some real needs. Again, we're fortunate enough to have different ways of monetizing those products.
Your next question comes from the line of Jeff Garro with Stephens. Jeff, your line is open. Please go ahead.
Yeah. Good afternoon. Thanks for taking the questions. I'll ask another one on the product side, and I'll try to kind of lump in ProviderConnect with Phreesia VoiceAI. Curious to get an update on Phreesia VoiceAI specifically, and then just to tie it back to that ProviderConnect product, the general momentum trying to create more engagement with providers as you release more kind of features and functionality and software products that pertain more to them versus a patient or more administrative staff. Thanks.
In terms of just products, look, there's a lot of work and effort similar to AccessOne, I think entering the HCP space has been something people at Phreesia have been working on for many, many years. We're very excited to get this launched and get it off the ground. I think you should assume we're always thinking about other opportunities to engage with the provider directly, Jeff. I think right now, if we can be successful with ProviderConnect, I think it'll translate very well financially and more importantly for our clients.
Your next question comes from the line of Daniel Grosslight with Citi. Daniel, your line is open. Please go ahead.
Hi guys. Thanks for taking the question. Network solutions was a bit stronger than we expected this quarter. I know there's a lot of variability coming into the second half of the year, but I'm curious if this quarter outperformed your expectations or was it roughly in line with what's in your internal model? Also, I guess related to that, curious on how GLPs are performing relative to your expectations. I think last quarter you kind of called it out as a bit of a bad guy, but not as much as other factors. Given we've ramped up a bit on the oral side, would love to get an update on how GLPs are performing too.
Yeah. First with the quarter on network solutions, very much in line with what we had. Shout out to a lot of folks at Phreesia on the team in terms of, I think, Daniel, we've talked to you about this. There's a lot of different moving parts into how we run these campaigns and how they're paced. We're not trying to optimize things for a quarter, yet we're a public company and there's the realities of we want to set expectations that we can deliver on. All that considered was very much in line. As far as the second question, I don't think we want to get into specific things about clients or specific programs.
I think just the commentary we made about generally the demand environment and generally how we see things for the year applies for a lot of different areas, and I don't think we want to get into specific stuff.
Your next question comes from the line of Jailendra Singh with Truist Securities. Jailendra, your line is open. Please go ahead.
Thank you, and thanks for taking my question. I want to touch on the subscription business this quarter, and I understand the tough year-over-year comps, but I'm still struggling to figure out why there was a 6% sequential decline in subscription business. Related to that, given where you're starting the year for this business, do you still expect subscription business to grow low single digits? That would imply some pickup from Q1 trends. Could you give us your comfort around subscription business and where you expect that?
Sure. Thanks, Jailendra. All of this sort of thinking and the different revenue lines is reflected in how we built up our fiscal 2027 outlook. We're not going to get into revenue by revenue outlook, we provide outlook for the whole business. We think that actually works against how we run the business. What we can tell you is that the strategy is embedded in the numbers. We feel good about where total revenue per AHSC is headed for the year. As far as your comment about where we sort of started in the first quarter, it's very much part of the way we see the year playing out. Again, we're fortunate enough to have different paths of getting to that outlook, which is $510 million-$520 million for the year.
Your next question comes from the line of Steven Valiquette with Mizuho Securities. Steven, your line is open. Please go ahead.
Yeah, thanks. Good afternoon. Most of my good questions have been asked already, so kind of more of a housekeeping one. Also on the subscription and related services revenue, can you just remind us, you mentioned the non-recurring revenue in the fiscal first quarter of last year, but for the rest of the quarters, are there any other non-recurring revenues either up or down that we need to think about, or do you have more clean comparisons quarterly for the rest of this year versus the quarters last year? Thanks.
Thanks, Steve. We called that out last year, and obviously it impacts this year from a year-over-year comp. There's always a couple of million dollars in the related services component. It was just more pronounced last year and impacted the comps this year, there's nothing else. I think if you looked over our 28 quarters of being public, I think we've called out related services three times. I don't think there's anything to think about the rest of the year.
Your next question comes from the line of Jessica Tassan with Piper Sandler. Jessica, your line is open. Please go ahead.
Hi guys. Thanks for the question. I appreciate the revenue mix shift to network and payments on a per AHSC basis, I'm just curious whether you think about the current subscription revenue per AHSC, does that reflect the floor on kind of how AHSCs perceive the value of their subscription products, or should we expect that there may be continual moderation? Thanks.
Thanks, Jessica. I'm going to repeat three words that we say a lot: better, faster, cheaper. We think that's where the puck is headed. We felt that way for several years. It does make it very hard to translate what a subscription $ per client means to the value the client's getting. We want to make sure they're getting a lot of value for it. For us, we sort of flip it around internally and don't think about them as different business lines and just think about the total $ that can come in. I think we're providing an outlook for the year. I think we try to be as helpful as we can around the modeling. I don't want to commit to whether there's a floor or a ceiling, we're not optimizing for that revenue line specifically.
Generally, this is trending in a direction we've expected.
Your next question comes from the line of Ryan Halstead with RBC. Ryan, your line is open. Please go ahead.
Thanks. Good afternoon. Thanks for taking the question. Obviously, strong growth in the payment solutions business. Any color you can provide just around sort of the broader environment and how you're seeing that translate to this business, specifically around utilization trends, just generally more cost burden being borne by consumers and whether you're seeing that as a driver, as well as greater out-of-pocket or lack of insurance. Just any other color around some of the experience you're seeing in that segment and the results you had for the quarter. Thanks.
Yeah. Thanks, Ryan. I would say all of the above. A lot of the points you made are really what we're seeing, what got us very interested in getting deeper into this space. I think it really does start with cash flow, though. The ability for a healthcare provider, I think as many of you know, to be able to just convert cash in their business, huge amount of labor expenses, a lot of supplies, et cetera, is a big deal. That's a huge value prop. I think the shift in terms of more dollars being borne by the patient, that's been happening for years, and it continues. Again, you could almost say the consumer is sort of a bigger payer category in general.
Your next question comes from the line of Richard Close with Canaccord Genuity. Richard, your line is open. Please go ahead.
Yeah, thanks for the question. Maybe on subscription as it relates to AHSC. You reiterated AHSC growth in the mid-single digits. Can you talk a little bit about that number on a gross versus net basis? Just trying to get a sense of maybe churn that's going on, and your thoughts on AccessOne, how much maybe that helps stem potential churn going forward.
Yeah. Thanks, Richard. Look, I think we've shared the net number. You've got a lot of data over time. It's interesting. One thing to take away is that it's an average, right? The A in AHSC. We're pretty encouraged by the team's start to the year with 50 average clients in the way, if you read our footnotes and stuff, how we calculate that. That's very encouraging with a lot of our go-to-market motions. I think that's a net number. We added more than we lost, and the net of it is 50. I think on your second part of your question, yes, we think the value proposition with AccessOne and now being able to even extend that reach into our base clients can absolutely be something that can strengthen the relationships we have with them and strengthen retention.
Your next question comes from the line of Gene Mannheimer from Freedom Capital Markets. Gene, your line is open. Please go ahead.
Thanks for taking the questions. Just on the note of AccessOne, you've owned it for six months now. How would you rate that transaction in terms of meeting expectations? I know it's early days. The second part of the question would be, can you quantify for us the savings you expect from the restructuring plan that you implemented this month? Thank you.
Thanks, Gene. The savings generated are baked into our outlook for the year. We're not going to break out a specific contribution from that, but it's something we'd planned for. On AccessOne, maybe just take a step back. They operate two complementary programs, funded receivables that represent roughly 40% of the portfolio, and then an unfunded portion that's about 60%, where providers retain the receivables and we earn a servicing fee. That composition and strategy continues to evolve, but I'd say generally, in front of even this expansion of our relationship with PNC, we're pretty pleased. This was the largest acquisition Phreesia's ever done. There's a lot of work to be done. I think where we are right now, we're pretty pleased to be here with a lot of the milestones that we've hit.
There are no further questions at this time. I will now turn the call over to Chaim Indig, CEO, for closing remarks. Please go ahead.
Thanks everyone for joining the call today. Thank you, Balaji, for doing a wonderful job answering questions, and everyone on the Phreesia team for a very good, strong quarter. We'll talk to you again in 90 days. Cheers, everyone.
This concludes today's call. Thank you for attending. You may now disconnect.