Leases

9 Months Ended

Oct. 31, 2020

Leases [Abstract]

Leases

Leases

(a) Phreesia as Lessee

The Company leases office premises in New York, North Carolina, and Ottawa, and data center space in Virginia under operating leases which expire on various dates through March 2024. Certain of these arrangements have escalating rent payment provisions or optional renewal clauses. The table below only considers lease obligations through the renewal date as the Company is not reasonably certain to elect the option to extend its leases beyond the option date. No arrangements contain residual value guarantees or restrictions imposed on the leases. We are also committed to pay a portion of the actual operating expenses under certain of these lease agreements. These operating expenses are not included in the table below.

The operating right-of-use assets were calculated as the present value of operating lease liabilities, less the amount of unamortized tenant improvement allowance and deferred rent. The discount rate used was the Company’s incremental borrowing rate given that the implicit rate to each lease was not readily determinable.

The Company also entered into various finance lease arrangements of computer equipment. These agreements are typically for two to three years and are secured by the underlying equipment.

Supplemental balance sheet information related to operating and finance leases as of October 31, 2020 was as follows:

	October 31, 2020
Operating leases:
Lease right-of-use assets	$	3,192
Lease liabilities, current	$	1,288
Lease liabilities, noncurrent	2,158
Total operating lease liabilities	$	3,446
Finance leases:
Property and equipment, at cost	$	17,078
Accumulated depreciation	(9,555)
Property and equipment, net	$	7,523
Lease liabilities (included in Current portion of debt and finance leases)	$	3,018
Lease liabilities, noncurrent (included in Long-term debt and finance leases)	4,589
Total finance lease liabilities	$	7,607

For office leases and leased equipment, the Company has elected the practical expedient to not separate lease and non-lease components, and as such, the variable lease cost primarily represents variable payments such as common area maintenance, utilities and equipment maintenance.

As of October 31, 2020, for operating leases, the weighted-average remaining lease term is 2.7 years and the weighted-average discount rate is 3.5%. As of October 31, 2020, for finance leases, the weighted-average remaining lease term is 2.8 years, and the weighted-average discount rate is 4.9%.

The components of lease expense for the nine months ended October 31, 2020 were as follows:

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

The following represents a schedule of maturing lease commitments for operating and finance leases as of October 31, 2020:

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

Future minimum lease payments under non-cancelable operating leases as of January 31, 2020 under ASC 840 were as follows:

	January 31, 2020
	Operating
Fiscal year ending January 31,
2021	$	1,824
2022	819
2023	464
2024	277
	$	3,384

Other supplemental cash flow information for the nine months ended October 31, 2020 was as follows:

	October 31, 2020
Supplemental cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash used for operating leases	$	1,234
Operating cash used for finance leases	236
Financing cash used for finance leases	1,797
Total	$	3,267
Right-of-use assets obtained in exchange for lease liabilities:
Operating	$	4,420
Finance	6,050
Total	$	10,470

An initial right-of-use asset of $2,741 for operating leases was recognized as a non-cash asset addition in connection with the adoption of ASC 842. Cash paid for amounts included in the present value of operating lease liabilities was $1,234 during the nine months ended October 31, 2020 and is included in cash (used in) provided by operating activities.

(b) Phreesia as Lessor

In connection with the patient intake and registration process, Phreesia offers its customers the ability to lease PhreesiaPads and Arrival Stations along with their monthly subscription. These rentals fall under the guidance of ASC 842. The Company elected the practical expedient to not separate lease and non-lease components. More specifically, all contractual hardware maintenance is included with the hardware lease components. The leases

contain no variable lease payments, no options to extend the lease that are reasonably certain to be exercised, and do not give the lessee an option to purchase the hardware at the end of the lease term. Additionally, the lease term does not represent a major part of the remaining economic life of the assets, and the present value of the lease payments does not equal or exceed substantially all of the fair value of the assets. As a result, all leased hardware in the SaaS arrangements are classified as operating leases.

During the three and nine months ended October 31, 2020, the Company recognized $1,593 and $4,732, respectively, in subscription and related services revenue related to the leasing of PhreesiaPads and Arrival Stations.

Future lease payments receivable under operating leases were immaterial as of October 31, 2020, except for those with terms less than one year.

Leases

Leases

(a) Phreesia as Lessee

The Company leases office premises in New York, North Carolina, and Ottawa, and data center space in Virginia under operating leases which expire on various dates through March 2024. Certain of these arrangements have escalating rent payment provisions or optional renewal clauses. The table below only considers lease obligations through the renewal date as the Company is not reasonably certain to elect the option to extend its leases beyond the option date. No arrangements contain residual value guarantees or restrictions imposed on the leases. We are also committed to pay a portion of the actual operating expenses under certain of these lease agreements. These operating expenses are not included in the table below.

The operating right-of-use assets were calculated as the present value of operating lease liabilities, less the amount of unamortized tenant improvement allowance and deferred rent. The discount rate used was the Company’s incremental borrowing rate given that the implicit rate to each lease was not readily determinable.

The Company also entered into various finance lease arrangements of computer equipment. These agreements are typically for two to three years and are secured by the underlying equipment.

Supplemental balance sheet information related to operating and finance leases as of October 31, 2020 was as follows:

	October 31, 2020
Operating leases:
Lease right-of-use assets	$	3,192
Lease liabilities, current	$	1,288
Lease liabilities, noncurrent	2,158
Total operating lease liabilities	$	3,446
Finance leases:
Property and equipment, at cost	$	17,078
Accumulated depreciation	(9,555)
Property and equipment, net	$	7,523
Lease liabilities (included in Current portion of debt and finance leases)	$	3,018
Lease liabilities, noncurrent (included in Long-term debt and finance leases)	4,589
Total finance lease liabilities	$	7,607

For office leases and leased equipment, the Company has elected the practical expedient to not separate lease and non-lease components, and as such, the variable lease cost primarily represents variable payments such as common area maintenance, utilities and equipment maintenance.

As of October 31, 2020, for operating leases, the weighted-average remaining lease term is 2.7 years and the weighted-average discount rate is 3.5%. As of October 31, 2020, for finance leases, the weighted-average remaining lease term is 2.8 years, and the weighted-average discount rate is 4.9%.

The components of lease expense for the nine months ended October 31, 2020 were as follows:

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

The following represents a schedule of maturing lease commitments for operating and finance leases as of October 31, 2020:

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

Future minimum lease payments under non-cancelable operating leases as of January 31, 2020 under ASC 840 were as follows:

	January 31, 2020
	Operating
Fiscal year ending January 31,
2021	$	1,824
2022	819
2023	464
2024	277
	$	3,384

Other supplemental cash flow information for the nine months ended October 31, 2020 was as follows:

	October 31, 2020
Supplemental cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash used for operating leases	$	1,234
Operating cash used for finance leases	236
Financing cash used for finance leases	1,797
Total	$	3,267
Right-of-use assets obtained in exchange for lease liabilities:
Operating	$	4,420
Finance	6,050
Total	$	10,470

An initial right-of-use asset of $2,741 for operating leases was recognized as a non-cash asset addition in connection with the adoption of ASC 842. Cash paid for amounts included in the present value of operating lease liabilities was $1,234 during the nine months ended October 31, 2020 and is included in cash (used in) provided by operating activities.

(b) Phreesia as Lessor

In connection with the patient intake and registration process, Phreesia offers its customers the ability to lease PhreesiaPads and Arrival Stations along with their monthly subscription. These rentals fall under the guidance of ASC 842. The Company elected the practical expedient to not separate lease and non-lease components. More specifically, all contractual hardware maintenance is included with the hardware lease components. The leases

contain no variable lease payments, no options to extend the lease that are reasonably certain to be exercised, and do not give the lessee an option to purchase the hardware at the end of the lease term. Additionally, the lease term does not represent a major part of the remaining economic life of the assets, and the present value of the lease payments does not equal or exceed substantially all of the fair value of the assets. As a result, all leased hardware in the SaaS arrangements are classified as operating leases.

During the three and nine months ended October 31, 2020, the Company recognized $1,593 and $4,732, respectively, in subscription and related services revenue related to the leasing of PhreesiaPads and Arrival Stations.

Future lease payments receivable under operating leases were immaterial as of October 31, 2020, except for those with terms less than one year.

Leases

Leases

(a) Phreesia as Lessee

The Company leases office premises in New York, North Carolina, and Ottawa, and data center space in Virginia under operating leases which expire on various dates through March 2024. Certain of these arrangements have escalating rent payment provisions or optional renewal clauses. The table below only considers lease obligations through the renewal date as the Company is not reasonably certain to elect the option to extend its leases beyond the option date. No arrangements contain residual value guarantees or restrictions imposed on the leases. We are also committed to pay a portion of the actual operating expenses under certain of these lease agreements. These operating expenses are not included in the table below.

The operating right-of-use assets were calculated as the present value of operating lease liabilities, less the amount of unamortized tenant improvement allowance and deferred rent. The discount rate used was the Company’s incremental borrowing rate given that the implicit rate to each lease was not readily determinable.

The Company also entered into various finance lease arrangements of computer equipment. These agreements are typically for two to three years and are secured by the underlying equipment.

Supplemental balance sheet information related to operating and finance leases as of October 31, 2020 was as follows:

	October 31, 2020
Operating leases:
Lease right-of-use assets	$	3,192
Lease liabilities, current	$	1,288
Lease liabilities, noncurrent	2,158
Total operating lease liabilities	$	3,446
Finance leases:
Property and equipment, at cost	$	17,078
Accumulated depreciation	(9,555)
Property and equipment, net	$	7,523
Lease liabilities (included in Current portion of debt and finance leases)	$	3,018
Lease liabilities, noncurrent (included in Long-term debt and finance leases)	4,589
Total finance lease liabilities	$	7,607

For office leases and leased equipment, the Company has elected the practical expedient to not separate lease and non-lease components, and as such, the variable lease cost primarily represents variable payments such as common area maintenance, utilities and equipment maintenance.

As of October 31, 2020, for operating leases, the weighted-average remaining lease term is 2.7 years and the weighted-average discount rate is 3.5%. As of October 31, 2020, for finance leases, the weighted-average remaining lease term is 2.8 years, and the weighted-average discount rate is 4.9%.

The components of lease expense for the nine months ended October 31, 2020 were as follows:

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

The following represents a schedule of maturing lease commitments for operating and finance leases as of October 31, 2020:

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

Future minimum lease payments under non-cancelable operating leases as of January 31, 2020 under ASC 840 were as follows:

	January 31, 2020
	Operating
Fiscal year ending January 31,
2021	$	1,824
2022	819
2023	464
2024	277
	$	3,384

Other supplemental cash flow information for the nine months ended October 31, 2020 was as follows:

	October 31, 2020
Supplemental cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash used for operating leases	$	1,234
Operating cash used for finance leases	236
Financing cash used for finance leases	1,797
Total	$	3,267
Right-of-use assets obtained in exchange for lease liabilities:
Operating	$	4,420
Finance	6,050
Total	$	10,470

An initial right-of-use asset of $2,741 for operating leases was recognized as a non-cash asset addition in connection with the adoption of ASC 842. Cash paid for amounts included in the present value of operating lease liabilities was $1,234 during the nine months ended October 31, 2020 and is included in cash (used in) provided by operating activities.

(b) Phreesia as Lessor

In connection with the patient intake and registration process, Phreesia offers its customers the ability to lease PhreesiaPads and Arrival Stations along with their monthly subscription. These rentals fall under the guidance of ASC 842. The Company elected the practical expedient to not separate lease and non-lease components. More specifically, all contractual hardware maintenance is included with the hardware lease components. The leases

contain no variable lease payments, no options to extend the lease that are reasonably certain to be exercised, and do not give the lessee an option to purchase the hardware at the end of the lease term. Additionally, the lease term does not represent a major part of the remaining economic life of the assets, and the present value of the lease payments does not equal or exceed substantially all of the fair value of the assets. As a result, all leased hardware in the SaaS arrangements are classified as operating leases.

During the three and nine months ended October 31, 2020, the Company recognized $1,593 and $4,732, respectively, in subscription and related services revenue related to the leasing of PhreesiaPads and Arrival Stations.

Future lease payments receivable under operating leases were immaterial as of October 31, 2020, except for those with terms less than one year.