Good evening, ladies and gentlemen, welcome to the Phreesia fiscal fourth quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. We will provide instructions for the question-and-answer session to follow. First, I would like to introduce Balaji Gandhi, Senior Vice President, Investor Relations for Phreesia. Mr. Gandhi, you may begin. Thank you, operator. Good evening, and welcome to Phreesia's earnings conference call for the fiscal fourth quarter of 2023, which ended on January 31st of 2023. Joining me on today's call is Chaim Indig, our Chief Executive Officer. A 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 our investor relations 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 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 annual 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 both furnished with our Form 8-K filed 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. Thank you, Balaji, and good evening, everyone. Thank you for participating in our fourth quarter earnings call. Before we jump into some highlights of the quarter and Q&A, I'd like to talk about our CFO transition, which we also announced in an 8-K filed after the markets closed. Balaji Gandhi will take over as our CFO this Friday, March 24th. Many of you on the call know Balaji. He's been a part of our executive team over our entire existence as a public company. He's become a trusted peer to our executive team and board of directors in terms of planning and communicating Phreesia's strategy. He brings over two decades of knowledge and background in the healthcare space as an investment analyst and industry executive, including the past four years with Phreesia. He has been invaluable to us in his previous role, and we are excited about the contributions he will make as CFO. Let me also thank our outgoing CFO, Randy Rasmussen. When Randy joined us in 2019, we had a small finance organization for a company with about 500 employees and $150 million of revenue. Randy helped build a great finance organization and implemented processes, systems, and controls that we believe are important for a public company to be able to deliver durable and profitable growth over time. Now, moving on to our results. Our stakeholder letter and earnings release came out about an hour ago, but let me start the call by sharing a few key highlights of the material we released. Revenue in the third quarter was $77 million, up 32% year-over-year. That's our eighth consecutive quarter of over 30% year-over-year revenue growth. Thank you and congratulations to the entire Phreesia team. A fantastic job. In the quarter, our average number of healthcare services clients was 3,140, up 36% year-over-year. We added 158 average healthcare services clients from the third quarter to the fourth quarter. Healthcare services revenue, which is the combination of Subscription and related services and Payment processing revenue, was up 31% year-over-year in the fourth quarter. Total revenue per average healthcare services client, a new key metric beginning this quarter, was $24,390, down 3% year-over-year and 1% sequentially. The decline is primarily driven by our average healthcare services client growth outpacing revenue growth in Subscription and related services and Payment processing. Subscription and related services revenue grew 35% year-over-year. Payment processing revenue grew 23% year-over-year, and Network solutions revenue was up 36% year-over-year. Moving on to our outlook for fiscal 2024, which ends January 31st, 2024. We expect revenue for fiscal 2024 to be in the range of $353 million-$356 million, implying growth of 26%-27% over our just reported fiscal 2023 revenue. We expect adjusted EBITDA to be in the range of -$65 million to -$60 million, showing continued improvement on our path to profitability. We expect to see a sequential quarter increase in average healthcare services clients in the first quarter of fiscal 2024 that is similar to the 158 sequential increase we saw in the fourth quarter of fiscal 2023. We also expect subscription and related services revenue per average healthcare services client to remain roughly in line with our fiscal fourth quarter results. We continue to see solid operating leverage. We expect to return to adjusted EBITDA profitability in fiscal year 2025, while reaching $500 million in annualized revenue during fiscal 2025. We remain comfortable with our ability to finance our fiscal year 2025 targets with our cash position. We believe our capital allocation strategy sets us up to deliver on our financial targets for fiscal 2025 and beyond. Operator, we think we can now open it up to Q&A. Thank you. At this time, if you do have a question, please send those by pressing star one on your telephone keypad. We do ask that you please initially limit yourself to one question with one follow-up. We'll hear first today from Anne Samuel with J.P. Morgan. Hi, congrats on a great quarter. Congratulations, Balaji, on the very exciting news. You know, maybe my first question is on Network solutions. You know, you saw really strong growth in this segment once again, I was wondering if perhaps you could discuss a little bit about how we should be thinking about underlying market growth in that segment and, you know, how you expect to grow relative to that. Then, you know, you've seen some relative insulation versus some of your peers in the space that have seen some pressure from pharma advertising budgets. Just wondering if you could speak to, you know, why maybe you're more insulated versus others? Hey, Annie. I'll let Balaji say, you know, thank you first, I guess. Yes. Thanks, Annie. I guess your question, if I heard it correctly, is why are we doing well on Network Solutions? Yeah. Why, you know, why relative versus others? Also just, you know, kind of thinking long term, how do we think about maybe what the underlying market growth rate is for that segment? Look, I think the tone has shifted in the market. First and foremost, I think from what we see, like our clients are really focused on ROI, tried and tested tactics and platforms that could deliver like clear scaled ROI that meaningfully help patients understand their therapies and understand, you know, different treatment pathways and understand different things that are important to their care. That's been, you know, first and foremost, that's probably what we've seen in, through the market, and we do those things, right? The other reason is, frankly, we've got a great team, and they're doing really well. I think the reason we're doing really well is because of the team and how, you know, they've been out in front working with clients and making sure they understand the value. You know, frankly, on behalf of everyone, I just wanna give them a thank you. Everyone on life scientist and our payer teams have just done a great job. Thank you to all of them. I know they're listening. That's helpful color. Then, you know, in your letter, you spoke about completing your first enrollment period in the payer space. Since you're kind of new to the payer space and we haven't seen as much from there, I was hoping you could maybe talk a little bit about how MemberConnect helped with that and what it looked like for you. It looked okay. You know, it's still early days. I don't think we're prepared to talk much about it. I think we're still learning. I was really, it did a little bit better than we thought it would. I'm proud of the team. It was hard. We had to do things a little bit. I don't think we've automated a lot of our solutions yet, but I think we're working pretty hard on building a lot of products around it. I think everyone's was pretty excited about our first year doing it. Annie, I just add, you know, two things. one, it is still early and we're still learning. Two, you'll remember we did, you know, we raised the guidance into the fourth quarter, you know, knowing what we knew about the enrollment period back then in December. Some of that, you know, opportunity is already in the results. Everyone at Phreesia is pretty proud of for the work that they're doing. It's fun. Great. We'll hear next today from Ryan Daniels with William Blair. Yeah, good evening. thanks for taking the questions. This is Jared on for Ryan. I'll first echo the congrats to Balaji on the transition here. I did actually wanna ask a follow-up on the point around ROI related to the life sciences offering. In the letter, it looks like one of the drivers of upside that you mentioned was taking programs live earlier than expected. I'm sort of curious, was that just a one-off trend this cycle? Do you think that, you know, that's kinda due to clients realizing that strong ROI from the platform and kinda getting their budgets in order for the year so that they can kinda be on channel, so to speak, for more time each year? No, I would actually say, look, we were able to So the way our fiscal year runs, it runs till the end of January. There was a lot of people that worked into the holiday season to make sure that programs transitioned seamlessly this year, and, you know, thank you all for making sure that those programs ran seamlessly, and our new programs went live as soon as possible. It was really about a strong January and the seamless transition, and the team just did. Like, I cannot, on behalf of everyone at Phreesia, they really crushed it into that year. That's and allowed us to we ran pretty well in January, which helped us significantly. I don't know if that answers your question, Jared. Yeah. Yeah, that's helpful. Certainly nice to hear about the strong execution. you know, I guess just as a follow-up. It was just pure execution. Absolutely. Amazing on all for the whole team. Got it. Got it. Yeah. Just one quick follow-up from us then. I guess thinking about the fiscal 2024 guidance here, you know, given the strong client count growth that you saw last fiscal year, is it fair to assume the 2024 outlook is being driven by a greater mix of land and expand growth versus new in-year sales? Really just trying to triangulate any thoughts on if there's anything we should be thinking about relative to the visibility that you have into this guidance at this point in the year, maybe relative to prior years. Yeah. Jared, you know, we obviously gave a little bit of color into the first quarter, which, you know, if you take that for what it is, it's about the same amount of adds that we had in the fourth quarter. You would probably conclude that the growth would look about the same for the mix on growth, from client adds versus revenue per client. In terms of the latter three quarters, we're not really talking about it. We have some visibility, but we'll just try to update you as you go. I don't think I would, you know, where we, you know, we would agree with any, you know, the where you were going as far as some kind of inversion between the contribution. For now, it's probably still gonna be more skewed to client growth versus revenue growth. Okay, great. Thanks for the color. From Piper Sandler, we'll move next to Jessica Tassan. Hi. Thank you guys so much. Sorry about that. Thank you guys so much for taking the question. Congratulations, Balaji. That's awesome. We wanted to focus a little bit on, we saw you facilitated 120 million plus visits in FY 2023, up about 20% year-over-year. You grew healthcare services clients a little faster than that. Just is there anything for us to conclude on the kind of divergence of those two growth rates? Yeah. It's actually probably worth an explanation. The actual math you need to do is from the. You know, it's not like actually a clean year- over- year. We had talked about eclipsing 100 million visits as of the end of September 2021. You know, I mean, you can't actually get, you know, get to the growth to line it up perfectly. I would say that, you know, that I don't think there's anything you should read into the difference between visit growth or client growth. They're probably about the same way, I mean, in terms of mix of clients size. Yeah. Yeah. It's pretty awesome, isn't it? Yeah. $120 million is quite a few. I know. I'm proud of everyone. It's a lot. Yeah. Just maybe a quick follow-up. I was hoping you guys could kind of talk to us a little bit about the social determinants of health screening tool, and whether or not you're getting paid for that currently. If you are getting paid, are the payers sponsoring that outreach? Does the revenue show up in Network Solutions? Thanks. We provide those social determinants of health modules, and everything we do around those set of questions right now, we don't that's just part of what people get as part of the package. We don't charge extra for it. Just philosophically, we tend to not to believe that that's something that we've thought about monetizing. We think it's just the right thing to do. We try to do the right thing as an organization to help clients help their patients. No, we today don't make any money from payer clients on social determinants of health. It's really just about making sure that we identify the issues that the caregivers can and providers can help them. Awesome. Thank you, guys. We'll hear next from Joe Vruwink with Baird. Great. Thanks, congrats, Balaji. In just reflecting on EBITDA performance over the last 12 months, actual results, I think, ended up being almost $60 million better than the preliminary guidance. I definitely appreciate it's probably not the pragmatic thing out of the gates to invest the type of productivity per employee that ended up being seen over the last year. I'm just wondering kind of in that context, how you might handicap or kind of scenario plan around the forecast that was provided today, you know, any puts and takes or thoughts on kind of the upward trajectory and productivity, continuing on a quarterly basis. Yeah. And thanks, Joe. You know, I think the biggest difference between a year ago at this time when we laid out the EBITDA outlook versus today, and I think we talked about this maybe on the last call. I mean, there were a lot of other unknowns out there. One was we were, you know, we were coming off of that big step-up in inflation, and we talked about that, and wages went up. And that was that big step up in terms of expenses, and you saw the drop in EBITDA. You know, to be frank, I think, you know, maybe speaking for Chaim too, I, you know, and our exec team, I don't think we knew whether we were in the 7th inning of that or the 9th inning of that. That was baked into our expectations. I think we've also talked about the situation in Ukraine at that time, that, you know, it would've been mid, late March of 2022. Those are two factors that were very different. Beyond that, I think, you know, I think we've been pretty open about talking about productivity, and revenue per employee and, you know, metrics like that. I think everything else is sort of headed in the right direction, but those are two differences between last year and this year. I also think that we have a culture of ownership at the company, and all of our people are shareholders. I think when we try really hard to articulate to them what we have to do, which is be thoughtful about the money we spend, and they took all of them took it seriously. A lot of the material improvements are thanks to them and, you know, everyone on the team for being just really good stewards of capital. It can't just be on, you know, leadership. It went all the way through the organization, and I think that's why we did a lot better, too. Okay. That's great. Then, you know, anytime a new metric is debuted, you kinda ask why. So I think the interpretation here is the contribution from the Network business certainly seems like it's gonna be a tailwind for a while. I guess maybe related to this, do you think you're coming up on a point in time where Phreesia will be less of a client ad story? You know, I'm not saying that goes away, but maybe more of a net retention story, and there's gonna be maybe more of a growth contributor to that side of the growth algorithm? I don't think we're ready to say that yet. We still have a lot of growth left in growing the network in the near term. I do think, Joe, that the takeaway from this. Well, I think one of the things we concluded, and I don't know if you probably weren't following this back then, but when we went public, you know, we had this key metric, which was, you know, the healthcare services revenue, which back then was called provider revenue for client. If you really think about it is sort of like more of a jigsaw puzzle and, you know, that was putting together the Subscription and related services and the Payment processing. You could calculate. What happened, we noticed that the investment community started to break that down and look at subscription per client, look at payment per client. We just sort of like, you know, added this third component to it. Now you can look at total and you can look at Network Solutions. The intention isn't to introduce something new, it's to just sort of, like, step back and look at the entire picture and break it up any way you want. In any given quarter, one of those can contribute more than the other. Does that make sense? Yep, it does. I'll leave it there. Thank you. From Jefferies, we'll move next to Glen Santangelo. Yeah. Thanks for taking my questions. I just have two quick ones. You know, Chaim, I first wanted to, you know, just talk to you about the top line here. I mean, essentially, you know, if we use your guidance for revenue this year, it almost seems like you need to grow faster in fiscal 2025 to get to your fiscal 2025, you know, goals of $500 million run rate. By default, you're effectively given two years of guidance here. I wanna get a sense from you on where we are with respect to the penetration of automated check-in within the business more broadly. I guess what sort of gives you that comfort that, you know, the growth rate that you're currently enjoying, you know, is sustainable for another 8 quarters? All right. Look, I think it's we got a lot of work to do to get to where we need to be, I don't think it's gonna be easy, I think we're still in the very early innings of, you know, building out our business. I'm pretty excited about it. I think, I'll ask Balaji to answer this, I think, you know, if you look back, we've been public for a bunch of quarters now, during that time we've had acceleration, gone down a bit, we re-accelerated up. Like, how many times have we done that, Balaji? Like I, you know, if you look back, it's been like 3 or 4 times, Glenn, where you've had, you know, sequential quarter growth, you know, vary on a total revenue basis. I think the reason, even if you take out some of the distortion from COVID with Payments, the biggest reason is it sort of relates to the earlier question that Joe asked about the 3 revenue streams. Again, there's a little bit of seasonality around Network Solutions. There's seasonality around Payments. I think when you're sort of thinking about growth rates on an annual basis or CAGRs, you can kinda get, you know, lose sight of how our business operates. Again, there's quarters where we've grown, you know, 36%, there's quarter where we've grown 27%. You know, this is where we're setting, you know, setting things up for annual guidance for this year. Okay. Well, Balaji, maybe if I could just sort of follow up on the profitability side, right? You know, the annual guidance this year, I mean, on the EBITDA side, almost assumes like no leverage, you know, from the EBITDA number you reported in this fiscal fourth quarter, I mean a little bit, right? Again, back to that theme of providing two-year guidance, right? If you're assuming you're gonna be profitable in, you know, by the end of fiscal 2025, that assumes a very healthy ramp in fiscal 2025. You know, I just wanted to get a sense, you know, I understand the differences that played out in fiscal 2023 maybe to, you know, the original expectation, the uncertainty in the environment. Is there anything as we think about, you know, sort of this 2-year stack here that would load more expenses in the first year versus the second year? Or because it seems like the way you have it positioned, it's not, you know, anywhere close to being straight lines. Thanks. Yeah. I think I've heard Chaim say, you know, life isn't linear. It's not. I think this also relates to an earlier question, which is around like maybe last year's EBITDA or EBITDA guidance and how we entered the year and this year. You know, I think we talked earlier about what's different from last year. What's the same is it's early in the year, you know. We're what, five, six weeks into our fiscal year, and we look at a lot of different investments that we're gonna make. Some of them are short-term, some of them are long-term, and we calibrate, you know, as we go. We've got a sort of a view of how we think things will play out. So where we talk about that in March is gonna be different than, you know, July, October, December, Glen. Some of that we'll just share with you as we go through the year. That said, I don't think you should expect it to be linear because we'll calibrate on the expense side, and then there's the other earlier point about revenue mix having sort of a different profitability. If it's a seasonally strong payments quarter, for example, we're gonna have, you know, lower EBITDA. Okay, thanks. Appreciate the comments. We'll hear next from Sean Dodge with RBC Capital Markets. Yep. Thanks, good afternoon. Maybe just going back to the new metric for a moment, the total revenue for AHSC. You're at $24,400 as of Q4. Can you give us some sense of what the fully penetrated opportunity would be right now on a per provider basis? I think before you said something like $31 and a half thousand per provider for subscriptions. You know, how do we kind of frame that in our mind if we add in payments and now what the Network Services opportunity on a per provider basis could be over time, of course? Yeah, Sean, I don't wanna do the math in the top of my head, but it's pretty simple. I mean, all these numbers are like. Again, just think about it like a jigsaw puzzle. The total TAM is $10 billion, right? The 31.5 thousand I think that you mentioned, that's what you said, right? On a quarterly basis. That's right. Yep. That's subscription and related services. I think, you know, on one hand you could say there's a universe of 50,000 clients, and there's about $10 billion of total addressable market. I, you know, again, I don't wanna screw up my zeros, but it's $10 billion divided by 50,000, and then $126,000 is what we talked about from subscription. Then you can, you can do the math. It's $2 billion on Network Services divided by Network Solutions divided by divided by 50,000 clients. Does that make sense? Yes. Yep, that makes sense. I guess kind of related to this. In Q4, I know you said you added a bigger mix of larger clients. What's the attachment rate been like with Payment processing in those larger clients? You know, I guess how does that compare to what it has been historically for you all? I know from the last call it sounded like you've been having some increased success there. Yeah. It's still lower than our average. The team's, you know, plugging away. They're doing a good job of winning some deals in it. I think we've been fairly happy with, we're still tracking, but it's a long slog. No, we're winning payment volume, obviously nowhere close to what we do in, you know, the average, but we're winning payment volume in the enterprise accounts. I think it's evident in the numbers. Okay. All right. Great. Thanks again. Thank you. We'll move now to Daniel Grosslight with Citi. Hi, guys. Thanks for taking the question, and I'll add my congrats to to Balaji here. You know, you mentioned in the shareholder letter that patient processing volume tends to grow in line with network growth. If we look at payment fees per provider, this quarter, it fell about 10% year-over-year. Can you help kind of square those two comments? As we look at 2024, should we expect payment fees per provider client to return to a more normalized growth, or do you think there's still gonna be some degradation in that metric? Just so we're clear, so you're looking at payment fee, revenue divided by client, correct? I'm looking at the volume per client. I mean, it's directly correlated with processing fees. My, yeah, my numbers were on a volume per client basis. Yeah. You're just so again, so we're clear, you're comparing about a 262 thousand compared to 298 thousand. Is that right? Yep, that's right. Yeah. Yeah, that might be something we have to follow up with you on. I do see your point. I mean, it's, you know, it's obviously the same quarter in terms of seasonality. I mean, I don't know, Chaim, if anything off the top of your head. No, I just think it's, what you might see is a mix of client types. Okay See any massive variability in it. Anyway. Okay. You know, as I, as I look at the, you know, last couple of quarters, the it was and it, this actually would make sense. It was down 16 year-over-year last quarter, and 17 year-over-year the one before that. I think one thing we have talked about, and in our letters, Daniel, is we had that unusual sort of, you know, volumes were down, you know, from COVID, and then spiked up. We were working off some of those tougher comps, on a per client basis. Mm-hmm. Anyway, maybe we can follow up with you on that, but nothing comes to mind. Yeah, yeah, that sounds good. For 2024, I assume it's more normalized across the board. That's really. Yeah, we should be fairly normalized by 2024. ... a 2023 and 2022 dynamic. Okay. Yes. On R&D this quarter, a bit of a pickup. Can you just talk a little bit about product development and how we should think about R&D and capitalized software for 2024? Look, I'll talk about the first part, and then Balaji can talk about capitalized software because I don't really know that much about it. Look, we invest in product. Products make huge gains for our clients. They drive significant value for all of our shareholders, and we see a lot of efficiency gains when we invest in product. Also, it's new products to build and new markets to go after, and we're pretty excited about some of the things that the team is doing. We've always led, as a product-first, product-driven organization, and I expect that to continue. Obviously, the growth in R&D will start to mitigate over, you know, and we see that mitigating in the near term. Whereas we start getting a lot of operating leverage off some of the newer investments and the people, you know, that we've brought on board who are just so impressive on our R&D team. Yeah. Daniel, are you trying to just look for, like, the trend on spend? Yeah, exactly. Yeah. I mean, you know, you can see it's sort of been growing proportionately with R&D expense on the, on the P&L. you know, so I think, you know, you've sort of found this, more of this, you know, range that we've been at on a quarterly basis, and I don't, I don't think it'll. It, it will increase to Chaim's point, but it'll increase probably at a similar rate to R&D expense, and that's all in the context of still getting operating leverage, you know, on EBITDA, et cetera. You could probably, you know, ratchet it up a little bit, based on what your R&D expense is. Yep. Makes sense. Thanks, guys. We'll hear now from Stephanie Davis with Barclays. Hey, guys. Thanks for taking my question. Balaji, congratulations on the new seat. First one's for you. Phreesia is a very different organization from when you first joined. When you look at your new title and this kind of next leg of growth, how would you think of your top priorities for this new role? Well, you know, I think, you know, I've had, almost four years here, and I think part of it is, you know, we've done a lot of things, obviously, in the last four years. We've raised, you know, we raised a lot of capital, and we're trying to be opportunistic about that. Had to make a lot of decisions about, you know, how we, you know, how we put that money to work, what kind of returns we get. I think, you know, that's been a lot of different people at Phreesia have been involved in these things. I think continuing to just make sure we're focused on cost of capital, returns on capital, because, you know, I think we've talked about this on some of these calls. What we did was, pretty controversial, but the reason we felt comfortable doing it was because we had a lot of, you know, rigor behind it. I think, you know, again, we've got a really good finance team that helps us make some of these decisions and so continuing. It's actually, in some ways, more of the same, don't mess with, you know, a good thing on that front. Understood. This is, probably a little bit ironic given it's coming from an Barclays securities analyst, but with the world blowing up, you are seeing private market valuations rationalizing pretty quickly. With that in mind, how committed are you to organically developing some of these new platform solutions like RevCycle versus maybe looking at a buy in order to accelerate the expansion? We've looked. Obviously, we've acquired some things that where we thought the capabilities were like, made more sense for us to acquire than to build. We've done that in the past. We believe that, you know, we wanna be both good stewards of capital, but also we wanna buy really great things, not just good deals, right? I don't necessarily think. I know some people believe valuations have sort of come in line on the private side. I don't. I think that there's still a lot of expectation setting, resetting that needs to happen there, probably more than has happened to date, Stephanie. Look, we've looked at things. We will continue to look at things. I, you know, frankly, as an organization, we also feel pretty good that we're good at building things, and we're good at, you know, getting clients to get our software and to use our network, and we deliver phenomenal value. The things that we care about are things that drive phenomenal value to our clients, and we'll just keep doing that. If there's things that add value to the clients and add great returns to our shareholders, then we'll look at them. I don't know, we'll be thoughtful. It gets back to my earlier point, you know, around just capital allocation returns because, you know, I think. You know, we've done some acquisitions and it's just sort of lined up the right way for us. We'll have to see. I mean, you'll have to let us know what, how quickly things change. There's a lot of crap out there. Yeah. Hopefully soon. Hopefully there's a lot of change soon. All right. Thanks, guys. From Canaccord Genuity, we'll hear next from Richard Close. Great. Thanks for the questions. Congratulations to both of you. Maybe diving in on Life Sciences a little bit more into Annie's question, just maybe if you could provide some details on the growth there in terms of maybe getting greater wallet share from existing customers versus new pharma clients coming on board to the platform? Look, it's been a couple things. It's been greater wallet share on the brands we work with. It's been more brands of the pharmaceutical customers and clients that and life sciences companies that I previously worked with, expanding our footprint. It's winning new clients that we haven't worked with before that, or we've worked with and they've been at a previous company or they, you know, the agency that we work with has had great success with us with some clients, now they recommend us for other clients. I think a lot of our growth has been driven by just delivering. You know, it's a pretty small world. Doing what you say you're gonna do and doing it really well over and over again has been a big part of our success in treating clients really well. We try really hard and, you know, the team has been great at it. It's been all of the above. You know, Balaji's gonna pull up a stat. He's got a good stat here. Richard, you know, from time to time, we do update some of this stuff in our deck. I would, I would look at it. I'm looking at slide 9 of our investor deck, and that's, we work with more than 80 brands. If you know, look back at that number was about in the 40s when we went public in 2019. The last time we updated this deck, it was over 70 brands. You know. The answer is more. More, yeah. Okay. Maybe, just, you know, as you're out talking to potential clients, even existing clients, and getting feedback from your sales team, you know, I guess any perspectives you can share with us in terms of, like, what's the mindset of healthcare providers right now? Has, you know, has anything meaningfully changed maybe over the last year? What are the pain points? Is it the same or any update there would be helpful? Look, I think they're tired. They're working hard. It's hard to pay people what they need to. They're, they're still having staff turnover. I think they feel like their organizations are fairly understaffed often. And they don't have a ton of money. Look, our view is they're looking for solutions that drive a phenomenal amount of value pretty quickly, and they just don't wanna take a lot of risk. I think that's where we've been having a lot of success is they could look to their right, and they could look to their left, and they could find other people that use Phreesia. They get a phenomenal amount of value for it. Frankly, a lot of them have used it at their doctors. You know, we give them the ability to get great value with no risk. That's really, really important in this market. I, you know, I feel for our healthcare providers right now. The last four years has been a rough go. It's been a really rough go, and I'm just really honored that we get to work with so many great ones that just need to, they're in it to treat patients. That's why you go to medical school. You wanna make a difference. All right. Thanks. We'll hear now from John Ransom with Raymond James. Hey there. I guess I have to congratulate Balaji or you guys will be mad. Congratulations, Balaji. I hope dinner was good at [Chou'Heim]. Just thinking about your upcoming hiring cycle for your SDRs, you know, last year obviously was the big experiment of stepping on the gas. What are we thinking about this year in terms of additions? Thanks. It's, I feel like, you know, becoming an SDR at Phreesia is like a job that they probably wouldn't hire me if I was graduating college. That team is amazing, with more experience than they've ever had. They're doing really well. We're really investing in them, and I think they're staying in their seats longer. That's by design because we actually wanna get them deeper into Phreesia, and it's been very successful. The team behind our. We've created new roles around it. You know, we now talk about not just the SDR team, but also the where they graduate to an ISR team, and the ISRs are just rocking it out right now. They're the, you know, the future of the organization, so we're pretty excited about it. Wouldn't you agree, Balaji? Yeah. I'm surprised we got this long in the call without somebody asking the number, but it's 177 for the quarter. John, it's, you know, it's been tracking sort of in that range for 3, you know, 3 quarters now. You know, I think we've You know what we're talking about doing in terms of expenses and operating leverage. I would also point out, and I have in a lot of meetings, just as a side note, we use SDRs in all parts of our go-to-market organization, not just our provider market. You know, we have SDRs in our life sciences organization, in our payer organization. All of them have been doing just phenomenal work. My other question is, I mean, if we go back to the roots of the company, starting with, you know, smaller doctor offices. Let's say somebody's been with you for 4, 5, 6 years, I mean, do you hit a plateau with that client? I would assume, I mean, they can only see so many patients, you can only do so many things for them. How do you think about the long-term growth with some of your more mature kind of legacy clients? Or is that just kind of the foundation that you build new customers off of? Well, look, some of our oldest clients are using our newest products too. I was in a meeting where I was like, "Why have I heard about that client, John?" It turned out it was one of the first clients we ever had, and they're still using us, and they just changed their name. Now they're using some of our new beta products, which are pretty exciting and which hopefully we'll talk about in the coming years. You know, our best clients are the ones that often have been with us the longest, and they've seen what happens when Phreesia comes out with new products and the wins they get with it. I don't know. We're pretty. I wouldn't say our old clients are stuck there. We expect our CSM organization, they've just been phenomenal getting those clients to try and use our newer products, which is the whole thesis. Wouldn't you also say? Well, that was my sneaky way. I was hoping you'd slip up and tell us what some of those were, but you didn't take the bait. Oh. So, um- Oh, no. Balaji's been trained. I'm not allowed to say anything. I think there's another, I think there's another angle there is, some of those older clients have actually become consolidators in the market, right? That is true. I mean, private equity roll-up of some specialists that started with smaller Phreesia. They have. Like, we also had some of those smaller clients have been bought by health systems, and it turns out that, you know, those health systems use Phreesia now because of those smaller clients. You know, I think that was a long time ago that that was our core focus. Yeah. Well, I understand. Now, my last question is, you know, it's been a couple of years, I'm probably losing track of time, since you announced you were going into the hospital market. I know your thesis at the time was, we can save on data entry. What have been the learnings as you've expanded your reach into the hospital market, and how do you think about that opportunity now versus when you started? Thanks. We kind of think about it the same. I think the hospital market's pretty big. We've been rolling out a lot of hospitals over the years, Obviously, there's different segmentation. We've had a lot of success in children's hospitals and community hospitals, regional hospitals, tertiary hospitals, acute hospitals. Like, it's sort of funny, John. You see one hospital, you've seen one hospital, then you go to another one, they all have different systems, and they're all... We've been able to add just a ton of value to them, and we're building out new, very specific workflows that if you asked me 3 years ago that we'd be building, I didn't even know some of those workflows existed. They're very laborious and hard for these hospitals to do. You know, that's really, it's coming from the team and both our implementation organization, our CSM organizations, but also our product organizations just working in tandem. I think we still have years of work to just continuously automate and move work to the patient and just create a better healthcare experience with better outcomes. We're starting to talk a lot more about outcomes than we ever have. Great. Thanks so much. We'll hear now from Scott Schoenhaus with KeyBanc. Hey, Chaim and Balaji. Congrats, Balaji, on the new role. Well, well deserved. Wanted to touch upon the strong, you know, another 150 adds in new clients this upcoming quarter. I think it speaks volumes of the quick ROI offered to your provider clients. Was wondering if you could give us the average conversion timeframe from a promotional client to paying client for your subscription services. Just as a reminder, you're including client count for providers that are using payment processing but are still on the free trial promotional software service, correct? Correct. That is correct. You have to pay us to be counted in that healthcare services client count. Yeah, Scott, we're not sharing the conversion rate there, but, you know, we've shared retention rates on client retention on an aggregate basis for four years from 2019 through 2022. We can tell you it hasn't really changed much from the 90%-ish client retention rate. We've, you know, a big, you know, chunk of our go-to-market over that last few years has been the promo. Yeah. Yeah. I just wanted to follow up on that last call with the sales and SCR investments commentary. I think last quarter you mentioned you're gonna keep sales and marketing expenses relatively flattish, which we actually saw this quarter. Should we continue to expect that this will continue to drive most of the operating leverage in fiscal 2024? Well, I think, and I don't think this has changed, the, you know, sort of, stack rank, G&A is still at the top of the list. Sales and marketing being second, getting some gross margin improvement third, and R&D, you know, going up as an investment area, and maybe holding about flat on a% of revenue. That's sort of how I think. Perfect. Thank you. From JMP Securities, we'll hear next from Joe Goodwin. Great. Thank you so much for taking my questions, and congrats, Balaji, on the CFO role. I guess you have a number of new vectors of growth coming into the model, you know, like and the referral management, which continue to mature. I guess, can you talk about how these newer items are influencing your guidance methodology? Maybe, Balaji, how guidance methodology may change now that you're in the CFO seat? I don't think anything will change. I think what we're trying to, you know, be intentional about is, you know, you see the total opportunity in terms of subscription dollars, you know, you can see the sort of areas we focus on, patient access being some of the new stuff, I think, that you mentioned, but also some, you know, some newer things in registration and revenue cycle. Every, you know, different quarters are gonna have, you know, different monetization of that. We have a lot of the promos that we've talked about. I don't think you're gonna see anything different. Our, our intent isn't to really, like, you know, mask anything. It's just, you know, it's a business that has different ways of driving growth over time and trying to keep it simple for everyone. Got it. Okay. Thank you. I know you don't, you know, disclose the net retention rate, but I guess, you know, maybe qualitatively, you know, if we think about what that was in FY 2023, you know, is it improving from when we still had visibility into those metrics? Any commentary there? Well, again, this is one of those things where, you know, point in time matters. We look at those metrics, and they move around quarter-to-quarter. I think two examples I can give you of that are if we've got a quarter where we've got, you know, year-over-year, we've got expansion in a client, then it's gonna speak favorably to that. If we had a quarter where we added a lot of net new and smaller clients, that's it's not gonna look as good. I think that's, you know, probably just not a place we wanna go in terms of your question specifically. Again, client retention and gross revenue retention are something we've disclosed. Got it. Okay. Thank you. Congrats again. Thanks. We'll move now to Ryan MacDonald with Needham. Hi. Thanks for taking my questions, and congrats, Balaji. Maybe first starting on MemberConnect, I understand it's early in the process and sort of the monetization and maturation of the offering, but as you got through the first enrollment period, can you talk about, you know, how you're measuring whether it's ROI or conversion rates on the leads and referrals that you're generating and how you might be able to use that for the upcoming enrollment period as we get into 2023 here to sort of expand and grow that offering? Thanks. I think it's probably still too early for us to give color on that, but I'm sure the team will start putting out promotional material, and when they do, we'll let them lead with it as opposed to anything else. You could probably, you know, there's a payer website, and there's information there, so just, you know, if you look at that, you'll probably get a sense of how we're going to market there. Okay. Then maybe as a follow-up for you, Balaji, I just wanted to make sure, and I got this down in sort of a clarification on the state of the cash balance. In the press release, I think you said on the recent events that at the end of it, you believe enough cash generated will be sufficient for at least the next 12 months. Then in the fiscal 25 targets, you say it'll be enough to support you along your path to hitting your targets. Do you still feel confident in your ability to sort of reach your breakeven targets in 2025 with the cash on the balance sheet? Just wanna make sure I have that clarification right, and some of the wording on the press release. Thanks. Yes, I'm glad you asked. Yeah. Yes, we feel comfortable with our cash balance to take us to our targets, in 2025. I, you know, I think that was worded I'll just say sort of from a, from a SEC regulatory and accounting and audit perspective, it was worded that way, but we still feel very comfortable with the comments we made. Excellent. Thanks again. From Guggenheim, we'll move to Jack Wallace. Hey, thanks for taking my questions. Balaji, congratulations on the new role, and to you both, thanks for the kind words on the last public call. Yeah, first off, just wanna ask about the, your commercial team looking back over the last year-plus, you added a lot of bodies. Obviously, you've added, quite a bit of clients. Thinking about, you know, just how the team is settling in and their, you know, comfort levels and, you know, cross-training now to be able to sell more of the full stack versus, say, where we were a year or even a few quarters ago. Thank you. I don't know if I understand. Yeah. What was the question? Yeah. Sorry, Jack. It's like a really good statement. Like, I still lost. What's the question again? Just, yeah, asking about the state of the commercial team now in terms of, you know, their comfort level and cross-selling and upselling versus you being more focused on the land expansion, just given the average tenure of the team today versus, say, a couple quarters ago or even a year ago. Yeah. I think, well, first off, obviously, there's been more people in the seats longer, and that's frankly just good for us. We obviously ramped up a ton of people over the last couple of years, now a lot of those folks are in their seats a lot longer, and obviously, they're doing a lot better. I, you know, to clarify, the people that upsell and expand are a very different team. Frankly, my heart goes out to that team 'cause they're amazing and they keep getting just crushing it on the provider side. Our net new team is different, and they're also obviously, based on the number, doing phenomenal. Those are two separate teams, and they're frankly doing really well, and I think all of us have high expectations for that team to just keep doing well. Yeah, that's helpful. Moving to the expense side, just wondering if there were any investments or projects to call out that you could be either lumpy in nature or hitting at certain parts of the year. On a related note, if there's any opportunistic hiring going on given the state of the technology market. Thinking specifically within R&D. Thank you. Look, I think we're always thoughtful about how we hire. I think we've communicated that we expect headcount to remain, you know, up or down around these levels, about 10%. I don't think we're going, you know, meshuggeneh crazy on this, on hiring. We're being thoughtful about it. Look, I think there's always been a lot of talent, but it doesn't matter the economic cycle. Having done this for 18 years, like, good people are just hard to find in good times or bad. Like, you hold on to your great talent, you know, with, like, every bit you can, even when times are tough, right? I think I don't know that it's any easier hiring people now than it used to be, but I think what we see is it's probably easier. We're not getting poached as much as we used to, you know, with promises of, you know, grandeur. How's that? You know, I think people feel pretty good about the place they are at Phreesia. Yeah, that's really helpful. I was going to ask about the retention comment, appreciate it. Thanks again, you know, congrats on a great quarter and great outlook. Thank you. Thanks. Our next question will be from Robert Simmons with D.A. Davidson. Hey, thanks for taking our questions, and let me add my congratulations to Balaji. Good to see [Optum] folk doing well. On the payments business, the gross margin there has been pressured for about a year, a year plus. What are your expectations there? Do you expect it to stabilize around current levels, or do you think it's gonna start getting back to the previous gross margin levels we used to see? Yeah. I mean, it's headed back there. I think we've been talking about this sort of on this journey. I think just wanna be a little bit careful because there's different ways of calculating that number. I think if you just step back, no matter how you calculate it in terms of, you know, looking at interchange, looking at subscription and Network solutions versus payments, et cetera, it was, you know, sort of a 500-plus, you know, basis point headwind for through that period we were investing, and we've been steadily working our way back. I think the gross margins will be, you know, a few hundred basis points higher when we are at break even on an adjusted EBITDA basis. I think, you know, as we talked about earlier, mix sort of matters in terms of, you know, how it improves between now and then. I think that just to remember one thing is that when before the company went through this investment cycle, so think like, you know, fiscal 20, I don't think you should expect, you know, the gross margin levels there because we just really weren't scaled for 3,000 plus clients that we have today. You know, within a few hundred basis points of that. Got it. That's very helpful. In the letter you talked about PAM and also about rewarding providers. Can you just give us kind of an example to kind of bring that to life? What would be an example of a rewarding a provider in that context? Sure. Yeah, sure. I mean, I think the most straightforward one is the one in the letter, the KCC Model, the Kidney Care Choices Model. It is a performance measure. If you wanna participate in that value-based care program with CMS, you know, you have to measure PAM twice and, you know, you are measured on that, and your payments are, you know, are based on how you perform against a bunch of quality measures of which PAM is one. If you know, if you care to, you can, you know, you can read some of the rulemaking around how the payments work from between CMS and the KCC Model. Got it. Thank you very much. Great. At this time, I'd like to turn things back to Mr. Chaim Indig for any closing remarks. I just wanna thank everyone for joining the call. Really excited about the new year. I just wanna thank our team for another great year. We look forward to the one ahead. Talk to you all in a couple of months, right? All right. Bye-bye. That does conclude today's conference. Again, thank you all for joining us. You may now disconnect.