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For additional details, see Note 3(c), "Summary of significant accounting policies — Impact of recently adopted accounting pronouncements."Includes $2,741 initial right of use asset recorded upon adoption of ASC 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-38977
PHREESIA, INC.
(Exact name of registrant as specified in its charter)

Delaware20-2275479
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
432 Park Avenue South, 12th Floor
New York, NY
10016
(Address of principal executive offices)(Zip Code)
(888) 654-7473
(Registrant’s telephone number, including area code)

 Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading
Symbol
 Name of each exchange
on which registered
Common Stock, par value $0.01 per share PHR The New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
1

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ☒
As of September 4, 2020, 37,972,741 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.
2

PHREESIA, INC.
FORM 10-Q
For the Quarter Ended July 31, 2020
TABLE OF CONTENTS
 
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.



3

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “appears,” “shall,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
 
our future financial performance, including our revenue, costs of revenue and operating expenses and cash
flows;
the rapidly evolving industry and the market for technology-enabled services in healthcare in the United States being relatively immature and unproven;
our reliance on a limited number of clients for a substantial portion of our revenue;
our anticipated growth and growth strategies and our ability to effectively manage that growth;
our ability to achieve and grow profitability;
the sufficiency of our cash, cash equivalents and investments to meet our liquidity needs;
potentially competing with our customers or partners;
our existing clients not renewing their existing contracts with us, renewing at lower fee levels or declining to purchase additional applications from us;
failure to adequately expand our direct sales force impeding our growth;
our ability to recover the significant upfront costs in our customer relationships;
our ability to determine the size of our target market;
liability arising from our collection, use, disclosure, or storage of sensitive data collected from or about patients;
consolidation in the healthcare industry resulting in loss of clients;
the uncertainty of the regulatory and political framework;
the impact of the COVID-19 pandemic on our business and our ability to attract, retain and cross-sell to
healthcare provider clients;
our ability to obtain, maintain and enforce intellectual property for our technology and products;
our inability to protect the confidentiality of our trade secrets impacting the value of our technology;
our reliance on third-party vendors, manufacturers and partners to execute our business strategy;
our inability to implement our solutions for clients resulting in loss of clients and reputation;
our dependency on our key personnel, and our ability to attract, hire, integrate, and retain key personnel;
the possibility that we may become subject to future litigation;
our future indebtedness and contractual obligations;
our expectations regarding trends in our key metrics and revenue from subscription fees from our provider clients, payment processing fees and fees charged to our life science clients by delivering targeted messages to patients; and
increased expense associated with being a public company.
other risks and uncertainties, including those listed under the caption “Risk Factors.”

4

All forward-looking statements are based on information and estimates available to the Company at the time of this Quarterly Report on Form 10-Q and are not guarantees of future financial performance. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law.
The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties, and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. You should not rely upon forward-looking statements as predictions of future events.

WHERE YOU CAN FIND MORE INFORMATION
Investors and others should note that we announce material financial information to our investors using our investor relations website, press releases, SEC filings and public conference calls and webcasts. We also use the following social media channels as a means of disclosing information about the company, our platform, our planned financial and other announcements and attendance at upcoming investor and industry conferences, and other matters and for complying with our disclosure obligations under Regulation FD:
PHREESIA Twitter Account (https://twitter.com/phreesia)
PHREESIA Company Blog (https://www.phreesia.com/blog/)
PHREESIA Facebook Page (https://www.facebook.com/Phreesia/)
PHREESIA LinkedIn Page (https://www.linkedin.com/company/phreesia/)
PHREESIA Instagram Page (https://www.instagram.com/phreesiacareers)
The information we post through these social media channels may be deemed material. Accordingly, investors should monitor these accounts and the blog, in addition to following our press releases, SEC filings and public conference calls and webcasts. This list may be updated from time to time. The information we post through these channels is not a part of this quarterly report on Form 10-Q. These channels may be updated from time to time on Phreesia’s investor relations website.

5


PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Phreesia, Inc.
Balance Sheets
(in thousands, except share and per share data)
July 31, 2020January 31, 2020
(unaudited)
Assets
Current:
Cash and cash equivalents$84,199 $90,315 
Settlement assets10,717 12,368 
Accounts receivable, net of allowances22,972 21,978 
Deferred contract acquisition costs1,684 1,720 
Prepaid expenses and other current assets8,378 5,157 
Total current assets127,950 131,538 
Property and equipment, net of accumulated depreciation and amortization of $40,219 and $35,551
17,070 14,487 
Capitalized internal-use software, net of accumulated amortization of $22,420 and $19,554
9,501 8,735 
Operating lease right-of-use assets (1)2,406  
Deferred contract acquisition costs1,256 1,594 
Intangible assets, net of accumulated amortization of $390 and $271
1,080 1,199 
Deferred tax asset666 775 
Goodwill250 250 
Other assets108 180 
Total assets$160,287 $158,758 
Liabilities and Stockholders’ Equity
Current:
Settlement obligations$10,717 $12,368 
Current portion of debt and finance lease liabilities4,939 2,324 
Current portion of operating lease liabilities (1)1,221  
Accounts payable5,103 6,017 
Accrued expenses9,838 9,243 
Deferred revenue6,257 5,401 
Total current liabilities38,075 35,353 
Long-term debt and finance lease liabilities23,131 21,540 
Operating lease liabilities, noncurrent (1)1,394  
Total liabilities62,600 56,893 
Commitments and contingencies (Note 12)
Stockholders’ Equity:
Common stock, $0.01 par value - 500,000,000 shares authorized as of July 31, 2020 and January 31, 2020, respectively; 37,882,837 and 36,610,763 shares issued and outstanding as of July 31, 2020 and January 31, 2020, respectively
379 366 
Additional paid-in capital395,145 386,383 
Accumulated deficit(296,968)(284,485)
Treasury stock(869)(399)
Total Stockholders’ Equity97,687 101,865 
Total Liabilities and Stockholders’ Equity$160,287 $158,758 
(1) Figures as of July 31, 2020 reflect the Company's February 1, 2020 adoption of Accounting Standards Update ("ASU") No. 2016-02, Leases. For additional details, see Note 3(c), "Summary of significant accounting policies — Impact of recently adopted accounting pronouncements."
See notes to unaudited Financial Statements
6

Phreesia, Inc.
Unaudited Statements of Operations
(in thousands, except share and per share data)
 
Three months ended July 31,Six months ended July 31,
2020201920202019
Revenue:
Subscription and related services$17,129 $14,004 $32,728 $26,686 
Payment processing fees11,828 11,665 23,535 23,222 
Life sciences6,052 5,148 12,142 9,218 
Total revenues35,009 30,817 68,405 59,126 
Expenses:
Cost of revenue (excluding depreciation and amortization)5,271 4,210 10,005 8,206 
Payment processing expense6,747 7,101 13,595 14,050 
Sales and marketing10,098 8,120 19,532 15,822 
Research and development5,530 4,690 10,535 8,989 
General and administrative9,631 7,421 18,351 13,665 
Depreciation2,410 2,136 4,678 4,291 
Amortization1,632 1,279 2,985 2,498 
Total expenses41,319 34,957 79,681 67,521 
Operating loss(6,310)(4,140)(11,276)(8,395)
Other income (expense)424 327 (291)(818)
Change in fair value of warrant liability (2,884) (3,307)
Interest income (expense)(419)(745)(739)(1,549)
Total other income (expense)5 (3,302)(1,030)(5,674)
Loss before provision for income taxes(6,305)(7,442)(12,306)(14,069)
Provision for income taxes(66)(51)(177)(119)
Net loss$(6,371)$(7,493)$(12,483)$(14,188)
Preferred stock dividend paid (14,955) (14,955)
Accretion of redeemable preferred stock (48,312) (56,175)
Net loss attributable to common stockholders, basic and diluted$(6,371)$(70,760)$(12,483)$(85,318)
Net loss per share attributable to common stockholders, basic and diluted$(0.17)$(10.42)$(0.33)$(19.20)
Weighted-average common shares outstanding, basic and diluted37,735,155 6,793,363 37,523,966 4,443,155 
See notes to unaudited Financial Statements



7

Phreesia, Inc.
Unaudited statements of redeemable preferred stock and stockholders’ equity (deficit)
(in thousands, except share and per share data)
 Redeemable Preferred StockStockholders' Equity (Deficit)
 Series ASeries BJunior PreferredRedeemable
Preferred
 Common Stock Accumulated
 SharesAmountSharesAmountSharesAmountSharesAmountsTotalSharesAmountAPICDeficitTreasury stockTotal
Balance, February 1, 201913,674,365 $79,311 9,197,142 $51,872 32,746,041 $32,746 42,560,530 $42,561 $206,490 1,994,721 $20  (210,994)$ $(210,974)
Net loss            (6,695) (6,695)
Stock-based compensation expense           599   599 
Exercise of stock options         29,798  37   37 
Issuance of common stock warrants           833   833 
Accretion of redeemable preferred stock 5,196  2,667     7,863   (1,469)(6,394) (7,863)
Balance, April 30, 201913,674,365 $84,507 9,197,142 $54,539 32,746,041 $32,746 42,560,530 $42,561 $214,353 2,024,519 $20 $ $(224,083)$ $(224,063)
Net loss            (7,493) (7,493)
Stock-based compensation expense           1,467   1,467 
Exercise of stock options         22,038  41   41 
Accretion of redeemable preferred stock 27,510  20,802     48,312   (1,508)(46,804) (48,312)
Payment of preferred stock dividends           (14,955)  (14,955)
Issuance of common stock in initial public offering, net of issuance costs of $6,084
         7,812,500 78 124,619   124,698 
Conversion of preferred stock into common stock and cancellation of redeemable preferred stock(13,674,365)(112,017)(9,197,142)(75,341)(32,746,041)(32,746)(42,560,530)(42,561)(262,665)25,311,535 253 262,412   262,665 
Conversion and exercise of preferred stock warrants into common stock         588,763 6 8,799   8,805 
Balance, July 31, 2019 $  $  $  $ $ 35,759,355 $357 $380,875 $(278,380)$ $102,853 
Balance, February 1, 2020 $  $  $  $ $ 36,610,763 $366 $386,383 $(284,485)$(399)$101,865 
Net loss            (6,112) (6,112)
Stock-based compensation expense           2,872   2,872 
Exercise of stock options and vesting of restricted stock units         988,678 10 1,727   1,737 
Treasury stock from vesting of restricted stock units             (447)(447)
Balance, April 30, 2020 $  $  $  $ $ 37,599,441 $376 $390,982 $(290,597)$(846)$99,915 
Net loss            (6,371) (6,371)
Stock-based compensation expense           3,428   3,428 
Exercise of stock options and vesting of restricted stock units         283,396 3 735   738 
Treasury stock from vesting of restricted stock units             (23)(23)
Balance, July 31, 2020 $  $  $ $ $ $ 37,882,837 $379 $395,145 $(296,968)$(869)$97,687 
See notes to unaudited Financial Statements


8

Phreesia, Inc.
Unaudited statements of cash flows
(in thousands, except share and per share data)
 
 Six months ended July 31,
 20202019
Cash flows from operating activities:
Net loss$(12,483)$(14,188)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization7,663 6,789 
Stock-based compensation expense6,300 2,067 
Change in fair value of warrants liability 3,307 
Amortization of debt discount245 265 
Loss on extinguishment of debt 1,073 
Cost of hardware purchased by customers439 319 
Deferred contract acquisition costs amortization1,775 974 
Non-cash operating lease expense777  
Deferred tax asset109  
Changes in operating assets and liabilities
Accounts receivable(994)(679)
Prepaid expenses and other assets(2,892)(3,657)
Deferred contract acquisition costs(1,401)(858)
Accounts payable(1,275)4,548 
Accrued expenses and other liabilities1,116 3,330 
Lease liability(755) 
Deferred revenue856 (705)
Net cash (used in) provided by operating activities(520)2,585 
Cash flows used in investing activities:
Capitalized internal-use software(2,737)(2,878)
Purchase of property and equipment(4,659)(2,754)
Net cash used in investing activities(7,396)(5,632)
Cash flows from financing activities:
Proceeds from IPO, net of underwriters' discounts and commissions 130,781 
Proceeds from revolving line of credit 9,876 
Payments of revolving line of credit (17,676)
Proceeds from term loan 20,000 
Repayment of term loan (1,042)
Repayment of loan payable (20,000)
Payment of preferred stock dividends (14,955)
Insurance financing arrangement2,009  
Principal portion of finance lease payments(1,301)(1,164)
Principal payments on financing arrangements(220) 
Debt extinguishment costs (300)
Debt issuance costs(69)(112)
Proceeds from issuance of common stock upon exercise of stock options2,475 78 
Purchase of treasury stock(869) 


9

Payment of offering costs (3,930)
Loan facility fee payment(225) 
Net cash provided by financing activities1,800 101,556 
Net (decrease) increase in cash and cash equivalents(6,116)98,509 
Cash and cash equivalents – beginning of period90,315 1,543 
Cash and cash equivalents – end of period$84,199 $100,051 
Supplemental information of non-cash investing and financing information:
Right-of-use assets recorded in exchange for operating lease liabilities (1)$3,183 $ 
Property and equipment acquisitions through finance leases$3,657 $1,510 
Capitalized software acquired through vendor financing$174 $ 
Deferred issuance costs included in accounts payable and accrued expenses$ $1,958 
Purchase of property and equipment and capitalized software included in accounts payable$1,358 $699 
Issuance of warrants related to debt$ $833 
Cashless transfer of term loan and related accrued fees into increase in debt balance$20,257 $ 
Cashless transfer of lender fees through increase in debt balance$406 $