0001412408-21-000080.txt : 20210902 0001412408-21-000080.hdr.sgml : 20210902 20210902160707 ACCESSION NUMBER: 0001412408-21-000080 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 83 CONFORMED PERIOD OF REPORT: 20210731 FILED AS OF DATE: 20210902 DATE AS OF CHANGE: 20210902 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Phreesia, Inc. CENTRAL INDEX KEY: 0001412408 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-38977 FILM NUMBER: 211233303 BUSINESS ADDRESS: STREET 1: 434 FAYETTEVILLE ST. STREET 2: SUITE 1400 CITY: RALEIGH STATE: NC ZIP: 27601 BUSINESS PHONE: 646-747-9959 MAIL ADDRESS: STREET 1: 434 FAYETTEVILLE ST. STREET 2: SUITE 1400 CITY: RALEIGH STATE: NC ZIP: 27601 FORMER COMPANY: FORMER CONFORMED NAME: Phreesia Inc DATE OF NAME CHANGE: 20070914 10-Q 1 phr-20210731.htm 10-Q phr-20210731
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2021
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.)
434 Fayetteville St, Suite 1400
Raleigh, NC
27601
(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
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.   ☐
1

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 August 27, 2021, 50,875,523 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, 2021
TABLE OF CONTENTS
 
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.




3

Summary of Material Risks Associated with our Business


Our business is subject to numerous risks and uncertainties that you should be aware of in evaluating our business. These risks and uncertainties include, but are not limited to, the following:

Business or economic disruptions or global health concerns have and may continue to seriously harm our business and increase our costs and expenses.
We have grown rapidly in recent periods, and if we fail to manage our growth effectively, our expenses could increase more than expected, our revenue may not increase and we may be unable to implement our business strategy.
We have identified a material weakness in our internal controls over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements to our consolidated financial statements or cause us to fail to meet our period reporting obligations.
We have experienced net losses in the past and we may not achieve profitability in the future.
We may face intense competition, including with our partners, as we grow, which could limit our ability to maintain or expand market share within our industry and could adversely impact our business.
Privacy concerns or security breaches relating to our Platform could result in economic loss, damage to our reputation, deterring users from using our products, and our exposure to legal penalties and liability.
We are subject to data privacy and security laws and regulations governing our collection, use, disclosure, or storage of personally identifiable information, including protected health information and payment card data, which may impose restrictions on us and our operations and subject us to penalties if we are unable to fully comply with such laws.
As a result of our variable sales and implementation cycles, we may be unable to recognize revenue to offset expenditures, which could result in fluctuations in our quarterly results of operations or otherwise harm our future operating results.
We typically incur upfront costs in our client relationships, and if we are unable to develop or grow these relationships over time, we are unlikely to recover these costs and our operating results may suffer.
We depend on our senior management team and certain key employees, and the loss of one or more of our executive officers or key employees or an inability to attract and retain highly skilled employees could adversely affect our business.
The healthcare industry is rapidly evolving and the market for technology-enabled services that empower healthcare consumers is relatively immature and unproven. If we are not successful in promoting the benefits of our Platform, our growth may be limited.

The summary risk factors described above should be read together with the text of the full risk factors below and in the other information set forth in this Quarterly Report on Form 10-Q, including our consolidated financial statements and the related notes, as well as in other documents that we file with the U.S. Securities and Exchange Commission, (the "SEC"). If any such risks and uncertainties actually occur, our business, prospects, financial condition and results of operations could be materially and adversely affected. The risks summarized above or described in full below are not the only risks that we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial may also materially adversely affect our business, prospects, financial condition and results of operations.

4

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 and may contain projections of our future results of operations or of our financial information or state other forward-looking information. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words.

Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. 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;
our potential competition 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;
our 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 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 sciences clients by delivering targeted messages to patients;
increased expense associated with being a public company;
5

our ability to realize the intended benefits of our acquisitions; and
other risks and uncertainties, including those listed under the caption “Risk Factors.”
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. We have based our forward-looking statements primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors, including, without limitation, those described in the section titled “Risk Factors” in this Quarterly Report on Form 10-Q.
Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on 10-Q. We cannot assure you that the results, events and circumstances reflected in these forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

These forward-looking statements contained in this Quarterly Report on Form 10-Q 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, 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. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements.

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 and web channels as a means of disclosing information about the company, our platform, our planned financial and other announcements, 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 Facebook Page (https://www.facebook.com/phreesia/)
PHREESIA LinkedIn Page (https://www.linkedin.com/company/phreesia)
PHREESIA News Page (https://www.phreesia.com/news/)

The information we post through these channels may be deemed material. Accordingly, investors should monitor these accounts and our News page, 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.

6


PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Phreesia, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
July 31, 2021January 31, 2021
(Unaudited)
Assets
Current:
Cash and cash equivalents$439,854 $218,781 
Settlement assets15,503 15,488 
Accounts receivable, net of allowance for doubtful accounts of $632 and $699 as of July 31, 2021 and January 31, 2021, respectively
30,356 29,052 
Deferred contract acquisition costs1,817 1,693 
Prepaid expenses and other current assets6,161 7,254 
Total current assets493,691 272,268 
Property and equipment, net of accumulated depreciation and amortization of $47,124 and $40,148 as of July 31, 2021 and January 31, 2021, respectively
26,868 26,660 
Capitalized internal-use software, net of accumulated amortization of $28,451 and $25,476 as of July 31, 2021 and January 31, 2021, respectively
12,299 10,476 
Operating lease right-of-use assets2,252 2,654 
Deferred contract acquisition costs2,513 1,248 
Intangible assets, net of accumulated amortization of $780 and $525 as of July 31, 2021 and January 31, 2021, respectively
2,470 2,725 
Deferred tax asset379 658 
Goodwill8,211 8,307 
Other assets2,543 1,670 
Total assets$551,226 $326,666 
Liabilities and Stockholders’ Equity
Current:
Settlement obligations$15,503 $15,488 
Current portion of finance lease liabilities and other debt4,494 4,864 
Current portion of operating lease liabilities1,133 1,087 
Accounts payable5,483 4,389 
Accrued expenses18,101 18,324 
Deferred revenue12,938 10,838 
Total current liabilities57,652 54,990 
Long-term finance lease liabilities and other debt5,598 6,471 
Operating lease liabilities, non-current1,412 1,899 
Total liabilities64,662 63,360 
Commitments and contingencies (Note 11)
Stockholders’ Equity:
Common stock, $0.01 par value - 500,000,000 shares authorized as of both July 31, 2021 and January 31, 2021; 50,892,126 and 44,880,883 shares issued as of July 31, 2021 and January 31, 2021, respectively
509 449 
Additional paid-in capital840,287 579,599 
Accumulated deficit(347,144)(311,777)
Treasury stock, at cost, 135,918 and 99,520 shares at July 31, 2021 and January 31, 2021, respectively
(7,088)(4,965)
Total Stockholders’ Equity486,564 263,306 
Total Liabilities and Stockholders’ Equity$551,226 $326,666 
See notes to Unaudited Consolidated Financial Statements
7

Phreesia, Inc.
Unaudited Consolidated Statements of Operations
(in thousands, except share and per share data)
Three months ended
July 31,
Six months ended
July 31,
2021202020212020
Revenue:
Subscription and related services$22,885 $17,129 $44,704 $32,728 
Payment processing fees16,306 11,828 32,950 23,535 
Life sciences11,816 6,052 21,644 12,142 
Total revenues51,007 35,009 99,298 68,405 
Expenses:
Cost of revenue (excluding depreciation and amortization)10,032 5,271 18,566 10,005 
Payment processing expense9,648 6,747 19,373 13,595 
Sales and marketing22,167 10,098 37,179 19,532 
Research and development11,443 5,530 19,497 10,535 
General and administrative16,244 9,631 28,915 18,351 
Depreciation3,701 2,410 6,998 4,678 
Amortization1,580 1,632 3,231 2,985 
Total expenses74,815 41,319 133,759 79,681 
Operating loss(23,808)(6,310)(34,461)(11,276)
Other (expense) income, net(90)424 (24)(291)
Interest (expense) income, net(207)(419)(445)(739)
Total other (expense) income, net(297)5 (469)(1,030)
Loss before provision for income taxes(24,105)(6,305)(34,930)(12,306)
Provision for income taxes(288)(66)(437)(177)
Net loss$(24,393)$(6,371)$(35,367)$(12,483)
Net loss per share attributable to common stockholders, basic and diluted$(0.48)$(0.17)$(0.73)$(0.33)
Weighted-average common shares outstanding, basic and diluted50,577,614 37,735,155 48,287,305 37,523,966 
See notes to Unaudited Consolidated Financial Statements



8

Phreesia, Inc.
Unaudited Consolidated Statements of Stockholders’ Equity
(in thousands, except share and per share data)
 Common Stock  
 SharesAmountAPICAccumulated DeficitTreasury stockTotal
Balance, February 1, 202036,610,763 $366 $386,383 $(284,485)$(399)$101,865 
Net loss— — — (6,112)— (6,112)
Stock-based compensation— — 2,872 — — 2,872 
Exercise of stock options and vesting of restricted stock units988,678 10 1,727 — — 1,737 
Treasury stock from vesting of restricted stock units - satisfaction of tax withholdings— — — — (447)(447)
Balance, April 30, 202037,599,441 $376 $390,982 $(290,597)$(846)$99,915 
Net loss— — — (6,371)— (6,371)
Stock-based compensation— — 3,428 — — 3,428 
Exercise of stock options and vesting of restricted stock units283,396 3 735 — — 738 
Treasury stock from vesting of restricted stock units - satisfaction of tax withholdings— — — — (23)(23)
Balance, July 31, 202037,882,837 $379 $395,145 $(296,968)$(869)$97,687 
Balance, February 1, 202144,880,883 $449 $579,599 $(311,777)$(4,965)$263,306 
Net loss— — — (10,974)— (10,974)
Stock-based compensation— — 5,774 — — 5,774 
Exercise of stock options and vesting of restricted stock units214,346 2 498 — — 500 
Treasury stock from vesting of restricted stock units - satisfaction of tax withholdings— — — — (1,145)(1,145)
Issuance of common stock in follow-on public offering, net5,175,000 52 245,761 — — 245,813 
Balance, April 30, 202150,270,229 $503 $831,632 $(322,751)$(6,110)$503,274 
Net loss— — — (24,393)— (24,393)
Stock-based compensation— — 7,355 — — 7,355 
Exercise of stock options and vesting of restricted stock units621,897 6 1,300 — — 1,306 
Treasury stock from vesting of restricted stock units - satisfaction of tax withholdings— — — — (978)(978)
Balance, July 31, 202150,892,126 $509 $840,287 $(347,144)$(7,088)$486,564 

See notes to Unaudited Consolidated Financial Statements



9

Phreesia, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
 Six months ended
July 31,
 20212020
Operating activities:
Net loss$(35,367)$(12,483)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization10,229 7,663 
Stock-based compensation expense13,047 6,300 
Amortization of deferred financing costs and debt discount144 245 
Cost of Phreesia hardware purchased by customers273 439 
Deferred contract acquisition costs amortization1,152 1,775 
Non-cash operating lease expense483 777 
Change in fair value of contingent consideration liabilities209  
Deferred tax asset279 109 
Changes in operating assets and liabilities:
Accounts receivable(1,304)(994)
Prepaid expenses and other assets(1,037)(2,892)
Deferred contract acquisition costs(2,541)(1,401)
Accounts payable950 (1,275)
Accrued expenses and other liabilities(275)1,116 
Lease liability(544)(755)
Deferred revenue2,100 856 
Net cash used in operating activities(12,202)(520)
Investing activities:
Capitalized internal-use software(5,023)(2,737)
Purchase of property and equipment(5,030)(4,659)
Net cash used in investing activities(10,053)(7,396)
Financing activities:
Proceeds from issuance of common stock in equity offerings, net of underwriters' discounts and commissions245,813  
Proceeds from issuance of common stock upon exercise of stock options2,678 2,475 
Treasury stock to satisfy tax withholdings on stock compensation awards(1,960)(869)
Proceeds from employee stock purchase plan295  
Insurance financing agreement 2,009 
Finance lease payments(2,100)(1,301)
Principal payments on financing agreements(873)(220)
Debt issuance costs (69)
Loan facility fee payment(125)(225)
Payment of contingent consideration for acquisitions(400) 
Net cash provided by financing activities243,328 1,800 
Net increase (decrease) in cash and cash equivalents221,073 (6,116)
Cash and cash equivalents – beginning of period218,781 90,315 
Cash and cash equivalents – end of period$439,854 $84,199 


10

Supplemental information of non-cash investing and financing information:
Right-of-use assets obtained in exchange for operating lease liabilities$81 $3,183 
Property and equipment acquisitions through finance leases$1,980 $3,657 
Capitalized software acquired through vendor financing$ $174 
Cashless transfer of term loan and related accrued fees into increase in debt balance$ $20,257 
Cashless transfer of lender fees through increase in debt balance$ $406 
Purchase of property and equipment and capitalized software included in accounts payable$3,503 $1,358 
Capitalized stock-based compensation$82 $ 
Cash payments for: 
Interest$365 $833 
See notes to Unaudited Consolidated Financial Statements



11

Phreesia, Inc.
Notes to Unaudited Consolidated Financial Statements
(in thousands, except share and per share data)

1. Background and liquidity
(a) Background
Phreesia, Inc. (the "Company") is a leading provider of comprehensive software solutions that transform the healthcare experience by engaging patients in their care and enabling healthcare provider organizations to optimize operational efficiency, improve profitability and enhance clinical care and safety. Through the SaaS-based Phreesia Platform (the "Phreesia Platform" or "Platform"), the Company offers healthcare provider organizations a robust suite of solutions to manage the patient intake process and a leading payments solution for secure processing of patient payments. The Company’s Platform also provides life sciences companies with an engagement channel for targeted and direct communication with patients. In connection with the patient intake and registration process, Phreesia offers its provider customers the ability to lease tablets ("PhreesiaPads") and on-site kiosks ("Arrivals Kiosks") along with their monthly subscription. The Company was formed in May 2005, and has offices in Raleigh, North Carolina and Ottawa, Canada. The Company completed an initial public offering in July 2019.
(b) Follow-on equity offering

On April 12, 2021, the Company closed a follow-on public offering in which the Company issued and sold 5,175,000 shares of its common stock at a public offering price of $50.00 per share, resulting in net proceeds of $245,813 after deducting underwriting discounts and offering expenses.

(c) Liquidity
Since the Company commenced operations, it has not generated sufficient revenue to meet its operating expenses and has continued to incur significant net losses. To date, the Company has primarily relied upon the proceeds from issuances of common stock, debt and preferred stock to fund its operations as well as sales of Company products and services in the normal course of business. Management believes that net losses and negative cash flows will continue for at least the next year.
Management believes that the Company’s cash and cash equivalents at July 31, 2021, along with cash generated in the normal course of business, and available borrowing capacity under its Second Amended and Restated Loan and Security Agreement with Silicon Valley Bank (the "Second SVB Facility") (Note 6), are sufficient to fund its operations for at least the next 12 months. The Company will seek to obtain additional financing, if needed, to successfully implement its long-term strategy.
 
2. Basis of presentation
(a) Consolidated financial statements
The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP") and include the accounts of Phreesia, Inc., its branch operation in Canada and its subsidiaries (collectively, the "Company").

(b) Fiscal year
The Company’s fiscal year ends on January 31. References to fiscal 2022 and 2021 refer to the fiscal years ending on January 31, 2022 and January 31, 2021, respectively.

(c) Unaudited interim financial statements
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and applicable rules and regulations of the SEC regarding interim financial reporting. In the opinion of management, the accompanying unaudited interim consolidated financial statements reflect all adjustments, which include normal recurring adjustments, necessary for the fair statement of the Company’s interim financial position as of July 31, 2021 and the results of its operations, changes in its stockholders' equity and its cash flows for the periods ended July 31, 2021 and 2020. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP


12

have been condensed or omitted pursuant to such rules and regulations. The results for the interim periods are not necessarily indicative of results to be expected for the full year, any other interim periods, or any future year or period. The Company’s management believes that the disclosures herein are adequate to make the information presented not misleading when read in conjunction with the audited financial statements and accompanying notes for the fiscal year ended January 31, 2021.
3. Summary of significant accounting policies
The Company’s significant accounting policies are disclosed in the audited financial statements for the fiscal year ended January 31, 2021. Since the date of those audited financial statements, there have been no material changes to the Company’s significant accounting policies, including the status of recent accounting pronouncements, other than those detailed below.

(a) Use of estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and assumptions on historical experience, known trends and events and various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments. Although management believes its estimates and assumptions are reasonable under the circumstances at the time they are made, they are based upon information available at the time they are made. Management evaluates the estimates and assumptions on an ongoing basis and, if necessary, makes adjustments. Actual results could differ from those estimates made under different assumptions or circumstances. The most significant assumptions and estimates relate to the allowance for doubtful accounts, capitalized internal-use software, the determination of the useful lives of property and equipment, the fair value of securities underlying stock-based compensation, the fair value of identifiable assets and liabilities in a business acquisition, and the realization of deferred tax assets.

(b) Concentrations of credit risk
Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable and settlement assets. The Company’s cash and cash equivalents are held by established financial institutions. The Company does not require collateral from its customers and generally requires payment within 30 to 60 days of billing. Settlement assets are amounts due from well-established payment processing companies and normally take one or two business days to settle which mitigates the associated risk of concentration. The Company utilizes one third-party payment processor.
The Company’s customers are primarily physician’s offices located in the United States and pharmaceutical companies. The Company did not have any individual customers that represented more than 10% of total revenues for both the three and six months ended July 31, 2021 and 2020. As of July 31, 2021, we had receivables from one entity that accounted for at least 10% of total accounts receivable.

(c) Risks and uncertainties

Risks Related to the COVID-19 Pandemic
In March 2020, the World Health Organization declared the ongoing outbreak of a novel strain of coronavirus ("COVID-19") a pandemic and the United States declared a national emergency with respect to COVID-19. There continues to be uncertainty as to the extent to which the global COVID-19 pandemic may adversely impact our business operations, financial performance, and results of operations at this time. As more individuals are vaccinated, we expect these impacts to be diminished. However, as the pandemic progresses, including through the emergence of new variants and rules regarding immunization, we may experience stricter protocols.

(d) New accounting pronouncements
Impact of recently adopted accounting pronouncements
During the three and six months ended July 31, 2021, the Company did not adopt any accounting pronouncements that materially impacted the Company's financial statements.


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Recent accounting pronouncements not yet adopted
There are no recently issued accounting pronouncements the Company has not yet adopted that will materially impact the Company's financial statements.
4. Composition of certain financial statement captions
(a) Accrued expenses
Accrued expenses as of July 31, 2021 and January 31, 2021 are as follows:
 July 31, 2021January 31, 2021
Payroll-related expenses and taxes$7,337 $8,946 
Payment processing fees liability3,139 2,853 
Other7,625 6,525 
Total$18,101 $18,324 

(b) Property and equipment
Property and equipment as of July 31, 2021 and January 31, 2021 are as follows:
 
Useful Life
 (years)July 31, 2021January 31, 2021
PhreesiaPads and Arrivals Kiosks3$26,072 $25,837 
Computer equipment340,366 33,558 
Computer software
3 to 5
5,248 5,105 
Hardware development31,024 1,024 
Furniture and fixtures7539 539 
Leasehold improvements2743 745 
Total property and equipment$73,992 $66,808 
Less accumulated depreciation(47,124)(40,148)
Property and equipment — net$26,868 $26,660 
Depreciation expense related to property and equipment amounted to $3,701 and $2,410 for the three months ended July 31, 2021 and 2020, respectively. Depreciation expense related to property and equipment amounted to $6,998 and $4,678 for the six months ended July 31, 2021 and 2020, respectively.
Assets acquired under finance leases included in computer equipment were $21,897 and $19,933 as of July 31, 2021 and January 31, 2021, respectively. Accumulated amortization of assets under finance leases was $12,742 and $10,389 as of July 31, 2021 and January 31, 2021, respectively.

(c) Capitalized internal use software
For the three months ended July 31, 2021 and 2020, the Company capitalized $2,526 and $1,876, respectively, of costs related to the Phreesia Platform. For the six months ended July 31, 2021 and 2020, the Company capitalized $4,798 and $3,632, respectively, of costs related to the Phreesia Platform.
During the three months ended July 31, 2021 and 2020, amortization expense related to capitalized internal-use software was $1,452 and $1,573, respectively. During the six months ended July 31, 2021 and 2020, amortization expense related to capitalized internal-use software was $2,975 and $2,866, respectively.



14

(d) Intangible assets and goodwill
The following presents the details of intangible assets as of July 31, 2021 and January 31, 2021:
Useful Life
 (years)July 31, 2021January 31, 2021
Acquired technology5$1,410 $1,410 
Customer relationship101,840 1,840 
Total intangible assets, gross carrying value$3,250 $3,250 
Less accumulated amortization(780)(525)
Net carrying value$2,470 $2,725 
The remaining useful life for acquired technology in years is 4.0 and 4.4 as of July 31, 2021 and January 31, 2021, respectively. The remaining useful life for customer relationships in years is 7.3 and 7.7 as of July 31, 2021 and January 31, 2021, respectively.
Amortization expense associated with intangible assets amounted to $128 and $60 for the three months ended July 31, 2021 and 2020, respectively. Amortization expense associated with intangible assets amounted to $256 and $119 for the six months ended July 31, 2021 and 2020.
The estimated amortization expense for intangible assets for the next five years and thereafter is as follows as of July 31, 2021:
July 31, 2021
2022 (Remaining six months)$254 
Fiscal Years Ending January 31,
2023508 
2024494 
2025410 
2026 - thereafter804 
Total$2,470 


There were no significant changes to the Company's goodwill balance during the six months ended July 31, 2021. The Company did not record any impairments of goodwill during the three and six months ended July 31, 2021 or 2020. Goodwill was $8,211 as of July 31, 2021 and $8,307 as of January 31, 2021.
(e) Accounts receivable
Accounts receivable as of July 31, 2021 and January 31, 2021 are as follows:
 
 July 31, 2021January 31, 2021
Billed$30,436 $28,464 
Unbilled552 1,287 
Total accounts receivable, gross$30,988 $29,751 
Less accounts receivable allowances(632)(699)
Total accounts receivable$30,356 $29,052 

Activity in our allowance for doubtful accounts was as follows for the six months ended July 31, 2021:
 July 31, 2021
Balance, January 31, 2021
$699 
Bad debt expense17 
Write-offs and adjustments(84)
Balance, July 31, 2021
$632 

The Company’s allowance for doubtful accounts represents the current estimate of expected future losses based on prior bad debt experience as well as considerations for specific customers as applicable. The Company's accounts


15

receivable are considered past due when they are outstanding past the due date listed on the invoice to the customer. The Company writes off accounts receivable and removes the associated allowance for doubtful accounts when the Company deems the receivables to be uncollectible.

(f) Prepaid and other current assets
Prepaid and other current assets as of July 31, 2021 and January 31, 2021 are as follows:
 
 July 31, 2021January 31, 2021
Prepaid software and business systems$2,136 $2,322 
Prepaid data center expenses2,074 1,211 
Prepaid insurance 1,311 
Other prepaid expenses and other current assets1,951 2,410 
Total prepaid and other current assets$6,161 $7,254 
(g) Cloud computing implementation costs
The Company enters into cloud computing service contracts to support our sales and marketing, product development and administrative activities. Subsequent to the adoption of ASU 2018-15, we capitalize certain implementation costs for cloud computing arrangements that meet the definition of a service contract. We include these capitalized implementation costs within Other assets on our consolidated balance sheets. Once placed in service, we amortize these costs over the remaining subscription term to the same expense line as the related cloud subscription. Capitalized implementation costs for cloud computing arrangements accounted for as service contracts were $1,382 as of July 31, 2021. Accumulated amortization of capitalized implementation costs for these arrangements was $61 as of July 31, 2021.

(h) Other (expense) income, net

Other (expense) income, net for the three and six months ended July 31, 2021 was expense of $90 and $24, respectively. Other (expense) income, net was income of $424 for the three months ended July 31, 2020 and expense of $291 for the six months ended July 31, 2020. For all periods presented, other (expense) income, net was composed primarily of foreign exchange losses and gains.
5. Revenue and Contract Costs
The Company generates revenue primarily from providing an integrated SaaS-based software and payment platform for the healthcare industry. The Company derives revenue from subscription fees and related services generated from the Company’s provider customers for access to the Phreesia Platform, payment processing fees based on patient payment volume, and digital patient engagement revenue from life sciences companies to reach, educate and communicate with patients when they are most receptive and actively seeking care.
The amount of subscription and related services revenue recorded pursuant to adoption of Accounting Standards Codification No. 842, Leases (ASC 842) for the leasing of the Company’s PhreesiaPads and Arrivals Kiosks was $1,579 and $1,585 for the three months ended July 31, 2021 and 2020, respectively. The amount of subscription and related services revenue recorded pursuant to ASC 842 for the leasing of the Company's PhreesiaPads and Arrivals Kiosks was $3,223 and $3,139 for the six months ended July 31, 2021 and 2020, respectively.














16

Contract balances
The following table represents a roll-forward of contract assets:
Contract assets (unbilled accounts receivable)
January 31, 2021$1,287 
Amount transferred to receivables from beginning balance of contract assets(1,196)
Contract asset additions, net of reclassification to receivables461 
July 31, 2021$552 

The following table represents a roll-forward of deferred revenue:
Deferred revenue
January 31, 2021$10,838 
Revenue recognized that was included in deferred revenue at the beginning of the period(9,933)
Revenue recognized that was not included in deferred revenue at the beginning of the period(9,715)
Increases due to invoicing prior to satisfaction of performance obligations21,748 
July 31, 2021$12,938 

Cost to obtain a contract
The Company capitalizes certain incremental costs to obtain customer contracts and amortizes these costs over a period of benefit that the Company has estimated to be three to five years. The Company determined the period of benefit by taking into consideration its customer contracts, its technology and other factors. Amortization expense is included in sales and marketing expenses in the accompanying statements of operations and totaled $577 and $1,250 for the three months ended July 31, 2021 and 2020, respectively. Amortization expense totaled $1,152 and $1,775 for the six months ended July 31, 2021 and 2020, respectively. The Company periodically reviews these deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit. There were no impairment losses recorded during the periods presented.
 
The following table represents a roll forward of deferred contract acquisition costs:
Beginning balance, January 31, 2021$2,941 
Additions to deferred contract acquisition costs2,541 
Amortization of deferred contract acquisition costs(1,152)
Ending balance, July 31, 20214,330 
Deferred contract acquisition costs, current (to be amortized in next 12 months)1,817 
Deferred contract acquisition costs, non-current2,513 
Total deferred contract acquisition costs$4,330 



17

6. Finance Leases and Other Debt
As of July 31, 2021 and January 31, 2021, the Company had the following outstanding finance lease liabilities and other debt:
 
July 31, 2021January 31, 2021
Finance leases$9,623 $9,702 
Financing arrangements433 1,533 
Accrued interest and payments36 100 
Total finance lease liabilities and other debt10,092 11,335 
Less - current portion of finance lease liabilities and other debt(4,494)(4,864)
Long term finance lease liabilities and other debt$5,598 $6,471 

(a) Financing Agreements

On July 21, 2020, the Company entered into an insurance premium financing agreement in order to finance its premium payments for directors' and officers' insurance. As of July 31, 2021 and January 31, 2021, there was no outstanding principal amount under the agreement and $673, respectively. The agreement bore interest at 2.6% per annum. The balance of the financing agreement was paid off during the first quarter of fiscal 2022, and there was no balance outstanding as of July 31, 2021.

On April 10, 2020, the Company entered into a vendor financing agreement with a principal amount of $174 to finance the acquisition of certain internal use software licenses. As of July 31, 2021 and January 31, 2021, the outstanding principal balance of the financing agreement was $89 and $133, respectively. Interest accrues at an annual rate of 2.94%. The remaining annual payments are $46 in May 2022 and May 2023, which includes principal and interest.

On November 2, 2018, the Company entered into a vendor financing agreement with a principal amount of $1,256 to finance the acquisition of certain internal use software licenses. As of July 31, 2021 and January 31, 2021, the outstanding principal balance of the financing agreement was $344 and $504, respectively. Interest accrues at an annual rate of 9.83%. The remaining annual payments are $183 in November 2021 and June 2022, which includes principal and interest.
(b) Finance Leases

See Note 10 - Leases for more information regarding finance leases.
(c) Second Amended and Restated Loan and Security Agreement

On May 5, 2020 (the "Second SVB Effective Date"), the Company entered into the Second SVB Facility with Silicon Valley Bank. The Second SVB Facility modified the First Amended and Restated Loan and Security Agreement, dated February 28, 2019 (the "First SVB Facility"). The Second SVB Facility provides for a revolving credit facility with an initial borrowing capacity of $50,000. The borrowing capacity may be increased to $65,000 at the sole discretion of Silicon Valley Bank. Upon entering into the Second SVB Facility, the Company borrowed $20,663 against the revolving credit facility. The Company used the proceeds from its initial revolving credit borrowing to repay all amounts due under the First SVB Facility term loan.

Borrowings under the Second SVB Facility are payable five years from the Effective Date, which is May 5, 2025 (the "Maturity Date"). Borrowings under the Second SVB Facility bear interest, which is payable monthly, at a floating rate equal to the greater of the Wall Street Journal Prime Rate or 4.5%. The interest rate will decrease by 0.5% upon reaching a defined level of Adjusted EBITDA as defined in the Second SVB Facility. For the three months ended July 31, 2021, the interest rate on the Second SVB Facility was 4.5%. In addition to principal and interest due under the revolving credit facility, the Company is required to pay an annual commitment fee of $125 per year. The Second SVB Facility was paid off in late December 2020. The Company has $50,000 of availability as of July 31, 2021.

In the event that the Company terminates the Second SVB Facility prior to the Maturity Date, the Company will be required to pay a termination fee based on the length of time between termination and maturity. The Company will not be required to pay a termination fee if terminated after the fourth anniversary of the Second SVB Effective Date.


18


Any Company obligations under the Second SVB Facility are secured by a first priority security interest in substantially all of its assets, other than intellectual property. The Second SVB Facility includes a financial covenant that requires the Company to achieve certain profitability and liquidity thresholds. The financial covenant will not be effective if the Company maintains certain levels of liquidity as defined. The Company was in compliance with all covenants related to the Second SVB Facility as of July 31, 2021.

The Second SVB Facility contains events of default, including, without limitation, events of default upon: (i) failure to make payment pursuant to the terms of the agreement; (ii) violation of covenants; (iii) material adverse changes to the Company’s business; (iv) attachment or levy on the Company’s assets or judicial restraint on its business; (v) insolvency; (vi) significant judgments, orders or decrees for payments by the Company not covered by insurance; (vii) incorrectness of representations and warranties; (viii) incurrence of subordinated debt; (ix) revocation of governmental approvals necessary for the Company to conduct its business; and (x) failure by the Company to maintain a valid and perfected lien on the collateral securing the borrowing.

As of July 31, 2021, there is no debt outstanding related to the Second SVB Facility. As a result, the Company presented all unamortized deferred costs within other assets as of July 31, 2021. The Company is amortizing the remaining unamortized costs over the remaining term of the Second SVB Facility.
Maturities of finance leases and other debt, in each of the next five years and thereafter are as follows:
 TotalFinance LeasesOther Debt
2022 (Remaining six months)$2,247 $2,081 $166 
Fiscal year ending January 31:
20234,109 3,851 258 
20242,961 2,916 45 
2025620 620  
2026155 155  
Total long-term debt and finance lease maturities$10,092 $9,623 $469 
The components of interest (expense) income, net are as follows:
Three months ended
July 31,
Six months ended
July 31,
 2021202020212020
Interest expense (1)
$(226)$(421)$(484)$(833)
Interest income19 2 39 94 
Interest (expense) income, net$(207)$(419)$(445)$(739)
(1) Includes amortization of deferred financing costs and original issue discount.
7. Stockholders' Equity
(a) Common stock
The Company closed an IPO on July 22, 2019 and filed an Amended and Restated Certificate of Incorporation authorizing the issuance of up to 500,000,000 shares of common stock, par value $0.01 per share.
On April 12, 2021, the Company completed a follow-on offering of its Common Stock. In connection with this offering, the Company issued and sold 5,175,000 shares of common stock at an issuance price of $50.00 per share resulting in net proceeds of $245,813, after deducting underwriting discounts and commissions.
(b) Treasury stock
The Company's equity based compensation plan allows for the grant of non-vested stock options, restricted stock units ("RSUs") and market-based performance-based stock units ("PSUs") to its employees pursuant to the terms of its stock option and incentive plans (See Note 8). Under the provision of the plans, for RSU and PSU awards, unless otherwise elected, participants fulfill their related income tax withholding obligation by having shares withheld at the time of vesting. On the date of vesting of the RSU or PSU, the Company divides the participant's income tax obligation in dollars by the closing price of its common stock and withholds the resulting number of vested shares. The shares withheld are then transferred to the Company's treasury stock at cost.



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8. Equity-based compensation
(a) Equity award plans
In January 2018, the Board of Directors adopted the Company’s 2018 Stock Option Plan (as amended), which provided for the issuance of options to purchase up to 3,048,490 shares of the Company’s common stock to officers, directors, employees, and consultants. The option exercise price per share is determined by the Board of Directors based on the estimated fair value of the Company’s common stock.
In June 2019, the Board of Directors adopted the Company’s 2019 Stock Option and Incentive Plan (the "2019 Plan"), which replaced the 2018 Stock Option Plan upon the completion of the IPO. The 2019 Plan allows the Compensation Committee to make equity-based incentive awards including stock options, RSUs and PSUs to the Company’s officers, employees, directors, and consultants. The initial reserve for the issuance of awards under this plan was 2,139,683 shares of common stock. The initial number of shares reserved and available for issuance automatically increased on February 1, 2020 and automatically increases each February 1 thereafter by 5% of the number of shares of common stock outstanding on the immediately preceding January 31 (or such lesser number of shares determined by the Compensation Committee).
In June 2019, the Board of Directors also adopted the Company’s 2019 Employee Stock Purchase Plan (the "ESPP"), which became effective immediately prior to the effectiveness of the registration statement for the Company’s initial public offering. The total shares of common stock initially reserved under the ESPP is limited to 855,873 shares.

As of July 31, 2021, there are 3,934,798 shares available for future grant pursuant to the 2019 Plan after factoring in the automatic increase which occurs on February 1 of each fiscal year, as well as an additional 821,023 shares available for future grant pursuant to the ESPP. During the second quarter of Fiscal 2022, the Company activated its ESPP. The first offering period for the ESPP is from July 1, 2021 through December 31, 2021. The ESPP allows eligible employees to purchase shares of the Company’s common stock at a 15% discount through payroll deductions.

(b) Summary of stock-based compensation

The following table sets forth stock-based compensation by type of award:

Three months ended
July 31,
Six months ended
July 31,
 2021202020212020
RSUs$6,072 $2,569 $10,842 $4,842 
Stock options632 859 1,150 1,458 
PSUs551  1,037  
ESPP100  100  
Total stock based compensation$7,355 $3,428 $13,129 $6,300 

The following table sets forth the presentation of stock-based compensation in our financial statements:


Three months ended
July 31,
Six months ended
July 31,
 2021202020212020
Stock-based compensation expense per consolidated statements of operations(1)
$7,273 $3,428 $13,047 $6,300 
Capitalized as internal-use software82  82  
Total stock based compensation(2)
$7,355 $3,428 $13,129 $6,300 
(1)For the six months ended July 31, 2021 and 2020, stock-based compensation expense included in the Company's consolidated statements of cash flows is consistent with these amounts.
(2)Stock-based compensation included in the Company's consolidated statements of stockholders' equity is consistent with these amounts.



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(c) Stock options
Options granted under the equity award plans have a maximum term of ten years and vest over a period determined by the Board of Directors (generally four years from the date of grant or the commencement of the grantee’s employment with the Company). Options generally vest 25% at the one-year anniversary of the grant date, after which point they generally vest pro rata on a monthly basis.

Stock option activity for the six months ended July 31, 2021 is as follows:
Number of
options
Weighted-
average
exercise price
Weighted-
average
remaining
contractual life
(in years)
Aggregate Intrinsic
value
Outstanding — January 31, 20213,211,354 $4.67 
Granted in six months ended July 31, 2021
 $ 
Exercised(689,623)$2.62 
Forfeited and expired(33,735)$6.47 
Outstanding and expected to vest — July 31, 2021
2,487,996 $5.21 8.30$237,225 
Exercisable — July 31, 2021
1,815,941 $4.27 7.42$157,087 
Amount vested in six months ended July 31, 2021
190,999 $6.27 
The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company’s estimated stock price at the time of exercise and the exercise price, multiplied by the number of related in-the-money options) that would have been received by the option holders had they exercised their options at the end of the period. This amount changes based on the market value of the Company’s common stock. The total intrinsic value of options exercised for the six months ended July 31, 2021 and 2020 (based on the difference between the Company’s estimated stock price on the exercise date and the respective exercise price, multiplied by the number of options exercised), was $36,832 and $32,060, respectively.
As of July 31, 2021, there is $2,699 of total unrecognized compensation cost related to stock options issued to employees that is expected to be recognized over a weighted-average term of 1.37 years.
For the three and six months ended July 31, 2021, stock-based compensation expense for stock options includes $92 and $180, respectively, related to the modification of stock options.
The Company has not recognized and does not expect to recognize in the foreseeable future, any tax benefit related to employee stock-based compensation expense.
(d) Restricted stock units
The Company has issued restricted stock units to employees and directors that vest based on a time-based condition. For RSUs granted prior to January 2021, pursuant to a time-based condition, 10% of the restricted stock units vest after one year, 20% vest after two years, 30% vest after three years and 40% vest after four years. The restricted stock units expire seven years from the grant date. During the three months ended July 31, 2021, the Company modified the vesting of RSUs granted subsequent to January 1, 2021 for employees other than its named executive officers listed in its most recent proxy statement ("NEOs") and other members of our executive management team. Pursuant to the modified vesting schedule, RSUs granted after January 1, 2021 for employees other than NEOs and other members of its executive management team vest 6.25% each quarter over four years based on service.
The Company issued 697,071 time-based restricted stock units during the six months ended July 31, 2021. These time-based restricted stock units vest 6.25% each quarter over four years based on service.


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Restricted stock unit activity for the six months ended July 31, 2021 are as follows:

  Restricted stock units
Unvested, February 1, 20202,053,038 
Granted in three months ended July 31, 2021
697,071 
Vested(148,063)
Forfeited and expired (70,292)
Unvested, July 31, 2021
2,531,754 

As of July 31, 2021, there is $75,404 of total unrecognized compensation cost related to RSU awards that is expected to be recognized over a weighted-average term of 2.89 years. For the three and six months ended July 31, 2021, stock-based compensation expense includes $143 and $298, respectively, related to the modification of restricted stock units.

(e) Market-based restricted stock units (PSUs)

The Company grants PSUs to certain members of our management team. PSUs vest from two to three years from the grant date upon satisfaction of both time-based requirements and market targets based on Phreesia's total shareholder return ("TSR") relative to the TSR of each member of the Russell 3000 Index (the "Peer Group"). Depending on the percentage level at which the market-based condition is satisfied, the number of shares vesting could be between 0% and 200% of the number of PSUs originally granted. To earn the target number of PSUs (which represents 100% of the number of PSUs granted), the Company must perform at the 60th percentile, with the maximum number of PSUs earned if the Company performed at least at the 90th percentile. If Phreesia's TSR for the performance period is negative, the maximum number of PSUs that can be earned will be capped at 100%.

The Company estimated the fair value of the PSUs using a Monte Carlo Simulation model which projected TSR for Phreesia and each member of the Peer Group over the performance period. The Company recognizes the grant date fair value of PSUs as compensation expense over the vesting period.
Market-based PSU activity for the six months ended July 31, 2021 are as follows:

  Performance stock units
Outstanding, February 1, 202070,806 
Granted in six months ended July 31, 2021
9,664 
Vested 
Forfeited and expired  
Outstanding, July 31, 2021
80,470 
As of July 31, 2021, unrecognized compensation cost related to PSUs was $5,370, to be recognized on a straight-line basis over 2.5 years, subject to the participants' continued employment with the Company.
(f) Employee stock purchase plan
The ESPP is a compensatory plan because it provides participants with terms that are more favorable than those offered to other holders of the Company's common stock. Employees purchase shares at the lesser of (1) 85% of the closing stock price on the first day of the offering period or (2) 85% of the closing stock price on the last day of the offering period. The ESPP is structured as a qualified employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986.
The fair value of shares granted under the ESPP during the six months ended July 31, 2021 was estimated using a Black-Scholes pricing model with the following assumptions:


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Six Months Ended
July 31, 2021
Risk-free interest rate
0.05 %
Expected dividends
none
Expected term (in years)
0.50
Volatility
52.5 %
As of July 31, 2021, unrecognized compensation cost related to the ESPP was $510. The unrecognized compensation cost is expected to be recognized over the next five months.

9. Fair Value Measurements

The following table presents information about the Company's assets and liabilities that are measured at fair value as of July 31, 2021 and indicates the classification of each item within the fair value hierarchy (in thousands):

 Quoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Balance as of July 31, 2021
 
Money market mutual funds$197,561 $ $ $197,561 
Total assets$197,561 $ $ $197,561 
Acquisition related contingent consideration liabilities$ $ $(1,100)$(1,100)
Total liabilities$ $ $(1,100)$(1,100)

The following table presents information about the Company's assets and liabilities that are measured at fair value as of January 31, 2021 and indicates the classification of each item within the fair value hierarchy (in thousands):

 Quoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Balance as of January 31, 2021
 
Money market mutual funds$197,522 $ $ $