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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 October 31, 2023
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.)
1521 Concord Pike
Suite 301 PMB 221
Wilmington, DE1
19803
(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.:
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 December 1, 2023, 55,634,942 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.
1 Phreesia, Inc. is a fully remote company and no longer maintains its principal executive office. The address listed here is the mailing address that we maintain. For purposes of compliance with applicable requirements of the Securities Act of 1933, as amended, and Securities Exchange Act of 1934, as amended, stockholder communications required to be sent to our principal executive offices should be directed to the email address set forth in our proxy materials and/or identified on our investor relations website.
2

PHREESIA, INC.
FORM 10-Q
For the Quarter Ended October 31, 2023
TABLE OF CONTENTS
 
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
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:

We have grown rapidly in recent periods, and as a result, our expenses have continued to increase. If we fail to manage our growth effectively, our revenue may not increase, and we may be unable to implement our business strategy.
We operate in a highly competitive industry, and if we are not able to compete effectively, including with the electronic health records ("EHR") and practice management ("PM") systems with which we integrate, our business and results of operations will be harmed.
We have experienced net losses in the past and we may not achieve profitability in the future.
Privacy concerns or security breaches or incidents relating to our SaaS-based technology platform (the "Phreesia Platform" or 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.
Business or economic disruptions or global health concerns have harmed and may continue to harm our business and increase our costs and expenses.
We typically incur significant 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.
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 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.
We have made, and in the future, may make acquisitions and investments which may be difficult to integrate, divert management resources, result in unanticipated costs or dilute our stockholders.
We are subject to health care laws and 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, require us to change our business practices and put in place additional compliance mechanisms, and subject us to fines, penalties, lawsuits, adverse publicity, reputational harm, loss of customer trust or government enforcement actions if we are unable to fully comply with such laws.
We rely on our third-party contractors, vendors and partners, including some outside of the United States, to execute our business strategy. Replacing them could be difficult and disruptive to our business. If we are unsuccessful in forming or maintaining such relationships on terms favorable to us, our business may not succeed.

The summary risk factors described above should be read together with the text of the full risk factors below in the section titled "Risk Factors" 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 express or implied statements that are not historical facts and are considered 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. Forward-looking statements 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, cash flows, costs of revenue and operating expenses;
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 maintain our direct sales force, impeding our growth;
our ability to recover the significant upfront costs in our customer relationships;
liability arising from our collection, use, disclosure, or storage of sensitive data collected from or about patients;
our reliance on third-party vendors, manufacturers and partners such as Rayden Design Studio Private Limited (“Rayden”) and DataArt Solutions, Inc. ("DataArt") to execute our business strategy;
consolidation in the healthcare industry resulting in loss of clients;
the uncertainty and ongoing flux of the regulatory and political framework;
our ability to determine the size of our target market;
the impact of pandemics or epidemics, market volatility, including the recent high inflationary and high interest rate environment, bank failures and measures taken in response thereto, economic slowdowns and recessions, and other global financial, economic and political events on our business and our ability to attract, retain and cross-sell to healthcare services clients;
our ability to obtain, maintain and enforce intellectual property for our technology and products;
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, including as a result of being a fully remote company;
the possibility that we may become subject to future litigation;
our future indebtedness and contractual obligations;
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our expectations regarding trends in our key metrics and revenue from subscription fees from our healthcare services clients, payment processing fees and fees charged to our life sciences and payer clients for delivering direct communications to help activate, engage and educate patients about topics critical to their health;
the intended benefits of our acquisitions, including that of Comsort, Inc., d/b/a MediFind ("MediFind") on June 30, 2023, Access eForms, LLC ("Access") on August 11, 2023 and ConnectOnCall.com, LLC (“ConnectOnCall”) on October 3, 2023; and
other risks and uncertainties, including those listed under the section titled "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 Form 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.

The 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 products and services, 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 Instagram Account (https://www.instagram.com/phreesia.co)
PHREESIA News Page (https://www.phreesia.com/news/)
PHREESIA Life Sciences Twitter Account (https://twitter.com/PhreesiaLifeSci)
PHREESIA Life Sciences Facebook Page (https://www.facebook.com/PhreesiaLifeSciences/)
PHREESIA Life Sciences LinkedIn Page (https://www.linkedin.com/company/phreesia-life-sciences/)
PHREESIA Life Sciences Page (https://lifesciences.phreesia.com)
INSIGNIA Health website (https://www.insigniahealth.com/)
MEDIFIND website (https://www.medifind.com/)
ACCESS EFORMS website (https://accessefm.com/)
CONNECTONCALL website (https://wwww.connectoncall.com/)

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.
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PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Phreesia, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
October 31, 2023January 31, 2023
(Unaudited)
Assets
Current:
Cash and cash equivalents$103,366 $176,683 
Settlement assets24,083 22,599 
Accounts receivable, net of allowance for doubtful accounts of $1,556 and $1,053 as of October 31, 2023 and January 31, 2023, respectively
57,439 51,394 
Deferred contract acquisition costs777 1,056 
Prepaid expenses and other current assets13,575 10,709 
Total current assets199,240 262,441 
Property and equipment, net of accumulated depreciation and amortization of $72,516 and $59,847 as of October 31, 2023 and January 31, 2023, respectively
19,899 21,670 
Capitalized internal-use software, net of accumulated amortization of $43,744 and $37,236 as of October 31, 2023 and January 31, 2023, respectively
44,257 35,150 
Operating lease right-of-use assets431 569 
Deferred contract acquisition costs1,178 1,754 
Intangible assets, net of accumulated amortization of $4,044 and $2,549 as of October 31, 2023 and January 31, 2023, respectively
32,506 11,401 
Deferred tax asset 81 
Goodwill75,468 33,736 
Other assets1,668 3,255 
Total Assets$374,647 $370,057 
Liabilities and Stockholders’ Equity
Current:
Settlement obligations$24,083 $22,599 
Current portion of finance lease liabilities and other debt6,753 5,172 
Current portion of operating lease liabilities571 934 
Accounts payable10,904 10,836 
Accrued expenses28,290 21,810 
Deferred revenue22,034 17,688 
Other current liabilities5,790  
Total current liabilities98,425 79,039 
Long-term finance lease liabilities and other debt6,845 2,725 
Operating lease liabilities, non-current174 349 
Long-term deferred revenue97 125 
Long-term deferred tax liabilities222  
Other long-term liabilities4,286  
Total Liabilities110,049 82,238 
Commitments and contingencies (Note 11)
Stockholders’ Equity:
Common stock, $0.01 par value - 500,000,000 shares authorized as of both October 31, 2023 and January 31, 2023; 56,964,279 and 54,187,172 shares issued as of October 31, 2023 and January 31, 2023, respectively
570 542 
Additional paid-in capital1,021,870 926,957 
Accumulated deficit(712,323)(606,084)
Treasury stock, at cost, 1,355,169 and 971,236 shares as of October 31, 2023 and January 31, 2023, respectively
(45,519)(33,596)
Total Stockholders’ Equity264,598 287,819 
Total Liabilities and Stockholders’ Equity$374,647 $370,057 
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
October 31,
Nine months ended
October 31,
2023202220232022
Revenue:
Subscription and related services$42,595 $32,992 $119,783 $93,162 
Payment processing fees23,218 19,626 71,102 58,588 
Network solutions25,806 20,485 70,409 52,574 
Total revenues91,619 73,103 261,294 204,324 
Expenses:
Cost of revenue (excluding depreciation and amortization)15,529 14,562 44,885 43,821 
Payment processing expense15,410 12,770 47,352 37,482 
Sales and marketing36,478 36,631 111,135 115,003 
Research and development28,544 22,669 82,484 65,846 
General and administrative20,240 19,600 61,105 60,528 
Depreciation4,483 4,865 13,231 13,363 
Amortization2,980 1,817 8,003 5,020 
Total expenses123,664 112,914 368,195 341,063 
Operating loss(32,045)(39,811)(106,901)(136,739)
Other expense, net(47)(211)(39)(204)
Interest income (expense), net523 61 2,027 (528)
Total other income (expense), net476 (150)1,988 (732)
Loss before provision for income taxes(31,569)(39,961)(104,913)(137,471)
Provision for income taxes(372)(206)(1,326)(654)
Net loss$(31,941)$(40,167)$(106,239)$(138,125)
Net loss per share attributable to common stockholders, basic and diluted$(0.58)$(0.76)$(1.96)$(2.64)
Weighted-average common shares outstanding, basic and diluted55,251,074 52,606,400 54,139,555 52,294,026 
See notes to unaudited consolidated financial statements



8

Phreesia, Inc.
Unaudited Consolidated Statements of Stockholders’ Equity
(in thousands, except share data)
Common Stock
SharesAmountAPICAccumulated DeficitTreasury stockTotal
Balance, February 1, 202252,095,964 $521 $860,657 $(429,938)$(13,960)$417,280 
Net loss— — — (51,242)— (51,242)
Stock-based compensation— — 12,594 — — 12,594 
Exercise of stock options and vesting of restricted stock units326,624 4 544 — — 548 
Issuance of stock for share-settled bonus awards233,135 2 6,772 — — 6,774 
Treasury stock from vesting of restricted stock units - satisfaction of tax withholdings— — — — (4,735)(4,735)
Balance, April 30, 202252,655,723 $527 $880,567 $(481,180)$(18,695)$381,219 
Net loss— — — (46,716)— (46,716)
Stock-based compensation— — 13,236 — — 13,236 
Exercise of stock options and release of restricted stock units321,148 3 422 — — 425 
Issuance of common stock for employee stock purchase plan95,967 1 2,039 2,040 
Treasury stock from vesting of restricted stock units - satisfaction of tax withholdings— — — — (1,740)(1,740)
Balance, July 31, 202253,072,838 $531 $896,264 $(527,896)$(20,435)$348,464 
Net loss— — — (40,167)— (40,167)
Stock-based compensation— — 13,129 — — 13,129 
Exercise of stock options and vesting of restricted stock units253,720 2 96 — — 98 
Issuance of stock for share-settled bonus awards69,796 1 2,037 — — 2,038 
Treasury stock from vesting of restricted stock units - satisfaction of tax withholdings— — — — (3,217)(3,217)
Balance, October 31, 202253,396,354 $534 $911,526 $(568,063)$(23,652)$320,345 


9

Common Stock
SharesAmountAPICAccumulated DeficitTreasury stockTotal
Balance, February 1, 202354,187,172 $542 $926,957 $(606,084)$(33,596)$287,819 
Net loss— — — (37,531)— (37,531)
Stock-based compensation— — 14,950 — — 14,950 
Exercise of stock options and vesting of restricted stock units404,012 4 151 — — 155 
Issuance of stock for share-settled bonus awards175,688 2 5,295 — — 5,297 
Treasury stock from vesting of restricted stock units - satisfaction of tax withholdings— — — — (7,079)(7,079)
Balance, April 30, 202354,766,872 $548 $947,353 $(643,615)$(40,675)$263,611 
Net loss— — — (36,767)— (36,767)
Stock-based compensation— — 16,747 — — 16,747 
Exercise of stock options and release of restricted stock units374,128 3 423 — — 426 
Issuance of stock for share-settled bonus awards2,886 — 86 — — 86 
Issuance of common stock for employee stock purchase plan70,123 1 1,837 — — 1,838 
Issuance of common stock as consideration in business combinations150,786 2 4,674 — — 4,676 
Treasury stock from vesting of restricted stock units - satisfaction of tax withholdings— — — — (3,597)(3,597)
Balance, July 31, 202355,364,795 $554 $971,120 $(680,382)$(44,272)$247,020 
Net loss— — — (31,941)— (31,941)
Stock-based compensation— — 16,452 — — 16,452 
Exercise of stock options and vesting of restricted stock units342,270 3 246 — — 249 
Issuance of stock for share-settled bonus awards160,778 2 3,418 — — 3,420 
Issuance of common stock as consideration in business combinations1,096,436 11 30,634 — — 30,645 
Treasury stock from vesting of restricted stock units - satisfaction of tax withholdings— — — — (1,247)(1,247)
Balance, October 31, 202356,964,279 $570 $1,021,870 $(712,323)$(45,519)$264,598 

See notes to unaudited consolidated financial statements


10

Phreesia, Inc.
Unaudited Consolidated Statements of Cash Flows
(in thousands)
 Nine months ended
October 31,
 20232022
Operating activities:
Net loss$(106,239)$(138,125)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization21,234 18,383 
Stock-based compensation expense53,749 43,491 
Amortization of deferred financing costs and debt discount253 227 
Cost of Phreesia hardware purchased by customers1,232 939 
Deferred contract acquisition costs amortization855 1,318 
Non-cash operating lease expense484 1,543 
Deferred taxes181 515 
Changes in operating assets and liabilities:
Accounts receivable(3,361)(4,094)
Prepaid expenses and other assets(761)(802)
Deferred contract acquisition costs (356)
Accounts payable(1,226)4,411 
Accrued expenses and other liabilities6,530 1,931 
Lease liabilities(884)(981)
Deferred revenue(1,347)(2,624)
Net cash used in operating activities(29,300)(74,224)
Investing activities:
Acquisitions, net of cash acquired(14,279) 
Capitalized internal-use software(13,889)(15,576)
Purchases of property and equipment(3,344)(4,028)
Net cash used in investing activities(31,512)(19,604)
Financing activities:
Proceeds from issuance of common stock upon exercise of stock options925 1,225 
Treasury stock to satisfy tax withholdings on stock compensation awards(12,176)(9,523)
Proceeds from employee stock purchase plan2,782 2,832 
Finance lease payments(5,156)(4,316)
Constructive financing1,688  
Principal payments on financing agreements(318)(216)
Debt issuance costs and loan facility fee payments(250)(397)
Net cash used in financing activities(12,505)(10,395)
Net decrease in cash and cash equivalents(73,317)(104,223)
Cash and cash equivalents – beginning of period176,683 313,812 
Cash and cash equivalents – end of period$103,366 $209,589 


11

Supplemental information of non-cash investing and financing information:
Operating lease assets acquired in exchange for operating lease liabilities$346 $ 
Property and equipment acquisitions through finance leases$7,438 $526 
Purchase of property and equipment and capitalized software included in current liabilities$2,911 $3,354 
Capitalized stock-based compensation$1,023 $1,036 
Issuance of stock to settle liabilities for stock-based compensation$10,641 $10,852 
Issuance of stock as consideration in business combinations$35,321 $ 
Deferred consideration liabilities payable in business combinations$10,294 $ 
Capitalized software acquired through vendor financing$2,047 $ 
Cash paid for: 
Interest$649 $647 
See notes to unaudited consolidated financial statements



12

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 improve the operational and financial performance of healthcare organizations by activating patients in their care to optimize patient health outcomes. Through the SaaS-based technology platform (the "Phreesia Platform" or "Platform"), the Company offers healthcare services clients a robust suite of integrated solutions that manage patient access, registration and payments. The Company’s Platform also provides life sciences companies, health plans and other payer organizations (payers), patient advocacy, public interest and other not-for-profit organizations with a channel for direct communication with patients. In connection with the patient intake and registration process, Phreesia offers its healthcare services clients the ability to lease tablets ("PhreesiaPads") and on-site kiosks ("Arrivals Kiosks") along with their monthly subscription. The Company was formed in May 2005.
(b) 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.
As of October 31, 2023, the Company was party to the Second Amended and Restated Loan and Security Agreement with Silicon Valley Bank (“SVB”), as amended by the First Loan Modification Agreement (the “Third SVB Facility”), which contained certain restrictive covenants including a covenant that limited the Company's ability to retain specified levels of cash in accounts outside of SVB. On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation. On March 27, 2023, SVB was acquired by First Citizens Bank. Prior to these events, on March 9, 2023, we transferred a substantial portion of our cash and cash equivalents from SVB to other financial institutions.
Between March 10, 2023 and November 6, 2023, the Company obtained a series of consents from SVB to, among other things, hold cash and cash equivalents outside of SVB through December 31, 2023 in excess of the limit stipulated in the Third SVB Facility. The consents also served to permit the Company to borrow against the Third SVB Facility upon returning sufficient cash and cash equivalents to its SVB accounts to comply with the covenant described above, and maintaining compliance with all other covenants under the Third SVB Facility. The SVB developments noted above did not materially impact the Company's financial position or its operations as of and for the period ended October 31, 2023. The Company has determined that all of its cash and cash equivalents continue to be available for use by the Company.
On December 4, 2023, the Company entered into a credit agreement with Capital One N.A. containing a senior secured asset-based revolving credit facility with an available borrowing capacity of up to $50.0 million (the “Capital One Credit Facility”). On December 4, 2023, the Company also terminated the Third SVB Facility. See Note 16 - Subsequent events for additional information regarding the Capital One Credit Facility and the termination of the Third SVB Facility.
The Company may 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 ("GAAP") and regulations of the Securities and Exchange Commission ("SEC") regarding quarterly financial reporting and include the accounts of Phreesia, Inc., its branch operation in Canada and its consolidated subsidiaries (or collectively, the "Company").


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(b) Fiscal year
The Company’s fiscal year ends on January 31. References to fiscal 2024 and 2023 refer to the fiscal years ending on January 31, 2024 and January 31, 2023, respectively.
(c) Unaudited interim financial statements
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with 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 October 31, 2023 and the results of its operations, changes in its stockholders' equity and its cash flows for the periods ended October 31, 2023 and 2022. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP 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, 2023.
(d) Network solutions revenue
During the year ended January 31, 2023, the Company relabeled its Life sciences category of revenue presented on its Consolidated Statements of Operations to Network solutions revenue. The Company’s Network solutions revenue includes fees from life sciences and payer clients for delivering direct communications to help activate, engage and educate patients about topics critical to their health using the Phreesia Platform. During the three and nine months ended October 31, 2022, the Company's Network solutions revenue was generated by its life sciences clients. There have been no changes to previously reported revenues.
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, 2023. 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 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 and contingent consideration in business acquisitions, and the realization of deferred tax assets.
(b) Concentrations of credit risk
Financial instruments that 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 and other healthcare services organizations located in the United States as well as pharmaceutical companies. The Company did not have any individual customers that represented more than 10% of total revenues for the three and nine months ended October 31, 2023 and 2022. As


14

of both October 31, 2023 and January 31, 2023, the Company had receivables from at least one entity that accounted for at least 10% of total accounts receivable.
(c) Risks and uncertainties
The Company is subject to a variety of risk factors, including the economy, data privacy and security laws and government regulations. Additionally, the Company is subject to other risks associated with the markets in which it operates including reliance on third-party vendors, partners, and service providers. The Company supplements its workforce with contractors and consultants, including a substantial number of contractors and consultants in international locations. Certain of the Company's service providers, including certain third-party software developers, are located in international locations subject to warfare and/or political and economic instability, such as Ukraine and India. As with any business, operation of the Company involves risk, including the risk of service interruption impacting the operations of the Company's business and the Company's customer’s facilities below expected levels of operation, shut downs due to the breakdown or failure of information technology and communications systems, changes in laws or regulations, political and economic instability, or catastrophic events such as fires, earthquakes, floods, explosions, global health concerns such as pandemics or other similar occurrences affecting the delivery of our productions and services. The occurrence of any of these events could significantly reduce or eliminate revenues generated, or significantly increase the expenses of the Company's operations, adversely impacting the Company’s operating results and the Company's ability to meet the Company's obligations and commitments.
(d) New accounting pronouncements
Impact of recently adopted accounting pronouncements
During the three and nine months ended October 31, 2023, the Company did not adopt any accounting pronouncements that materially impacted the Company's financial statements.
Recent accounting pronouncements not yet adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2023-07, Segment Reporting. The new standard requires enhanced disclosures about significant segment expenses and other segment items and requires companies to disclose all annual disclosures about segments in interim periods. The new standard also permits companies to disclose more than one measure of segment profit or loss, requires disclosure of the title and position of the Chief Operating Decision Maker, and requires companies with a single reportable segment to provide all disclosures required by Topic 280 – Segment Reporting. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. Companies are required to apply ASU 2023-07 retrospectively to all periods presented. The Company is currently evaluating the impact that ASU 2023-07 will have on its financial statements and related disclosures.
There are no other recently issued accounting pronouncements the Company has not yet adopted that will materially impact the Company's consolidated financial statements.
4. Composition of certain financial statement captions
(a) Accrued expenses
Accrued expenses as of October 31, 2023 and January 31, 2023 are as follows:
 October 31, 2023January 31, 2023
Payroll-related expenses and taxes$8,886 $10,345 
Payment processing fees liability5,200 4,796 
Acquisition-related liabilities413 96 
Tax liabilities4,398 1,491 
Information technology6,532 2,249 
Other2,861 2,833 
Total$28,290 $21,810 

(b) Other current liabilities and other long-term liabilities


15

Other current liabilities and other long-term liabilities as of October 31, 2023 were $5,790 and $4,286, respectively. There were no other current liabilities and other long-term liabilities recorded as of January 31, 2023.
Other current liabilities and other long-term liabilities represent liabilities payable to the former equity holders of ConnectOnCall. See Note 15 - Acquisitions for additional information regarding the acquisition of ConnectOnCall.

(c) Property and equipment
Property and equipment as of October 31, 2023 and January 31, 2023 are as follows:
 
Useful Life
 (years)October 31, 2023January 31, 2023
PhreesiaPads and Arrivals Kiosks3$17,976 $17,932 
Computer equipment362,391 54,485 
Computer software
3 to 5
11,474 8,571 
Hardware development3574 529 
Total property and equipment$92,415 $81,517 
Less accumulated depreciation(72,516)(59,847)
Property and equipment — net$19,899 $21,670 
Depreciation expense related to property and equipment amounted to $4,483 and $4,865 for the three months ended October 31, 2023 and 2022, respectively. Depreciation expense related to property and equipment amounted to $13,231 and $13,363 for the nine months ended October 31, 2023 and 2022, respectively.
Assets acquired under finance leases included in computer equipment were $35,250 and $27,813 as of October 31, 2023 and January 31, 2023, respectively. Accumulated amortization of assets under finance leases was $25,773 and $20,657 as of October 31, 2023 and January 31, 2023, respectively.
(d) Capitalized internal use software
For the three months ended October 31, 2023 and 2022, the Company capitalized $5,244 and $5,758, respectively, of costs related to the Phreesia Platform. For the nine months ended October 31, 2023 and 2022, the Company capitalized $15,615 and $18,153, respectively, of costs related to the Phreesia Platform.
During the three months ended October 31, 2023 and 2022, amortization expense related to capitalized internal-use software was $2,192 and $1,476, respectively. During the nine months ended October 31, 2023 and 2022, amortization expense related to capitalized internal-use software was $6,508 and $3,992, respectively.
(e) Intangible assets and goodwill
On June 30, 2023, the Company entered into an agreement to acquire Comsort, Inc. d/b/a MediFind ("MediFind") (the "MediFind Acquisition"). The Company acquired certain intangible assets and goodwill in connection with the MediFind Acquisition. See Note 15 - Acquisitions for additional information regarding the MediFind Acquisition.
On August 11, 2023, the Company entered into an agreement to acquire Access eForms, LLC ("Access") (the "Access Acquisition"). The Company acquired certain intangible assets and goodwill in connection with the Access Acquisition. See Note 15 - Acquisitions for additional information regarding the Access Acquisition.
On October 3, 2023, the Company entered into an agreement to acquire ConnectOnCall.com, LLC ("ConnectOnCall") (the "ConnectOnCall Acquisition"). The Company acquired certain intangible assets and goodwill in connection with the ConnectOnCall Acquisition. See Note 15 - Acquisitions for additional information regarding the ConnectOnCall Acquisition.
The tables set forth below include intangible assets and goodwill acquired in all of the Company's acquisitions.


16

The following presents the details of intangible assets as of October 31, 2023 and January 31, 2023:

Useful Life
 (years)October 31, 2023January 31, 2023
Acquired technology
5 to 7
$9,310 $1,410 
Customer relationship
7 to 10
17,940 6,340 
License156,200 6,200 
Trademarks153,100  
Total intangible assets, gross carrying value$36,550 $13,950 
Less accumulated amortization(4,044)(2,549)
Net carrying value$32,506 $11,401 
The remaining useful life for acquired technology in years was 6.2 and 2.7 as of October 31, 2023 and January 31, 2023, respectively. The remaining useful life for customer relationships in years was 12.6 and 8.3 as of October 31, 2023 and January 31, 2023, respectively. The remaining useful life for the license to the Patient Activation Measure ("PAM"®) in years was 13.1 and 13.8 as of October 31, 2023 and January 31, 2023, respectively. The remaining useful life for the trademarks in years was 14.8 as of October 31, 2023.
Amortization expense associated with intangible assets amounted to $788 and $341 for the three months ended October 31, 2023 and 2022, respectively. Amortization expense associated with intangible assets amounted to $1,495 and $1,028 for the nine months ended October 31, 2023 and 2022, respectively.
The estimated amortization expense for intangible assets for the next five years and thereafter is as follows as of October 31, 2023:
October 31, 2023
2024 (Remaining three months)$882 
Fiscal Years Ending January 31,
20253,481 
20263,450 
20273,157 
2028 - thereafter21,536 
Total$32,506 
The following table presents a roll-forward of goodwill for the nine months ended October 31, 2023:
Balance at January 31, 2023$33,736 
Goodwill acquired during the period ended October 31, 202341,732 
Balance at October 31, 2023$75,468 
For the three months ended October 31, 2023, the Company completed its quarterly triggering event assessments and determined that the decline in the market value of its publicly-traded stock, which resulted in a corresponding decline in its market capitalization, constituted a triggering event. Due to the decline in the Company’s market capitalization during the quarter, the Company has evaluated whether changes in the Company’s market capitalization indicate that the carrying value of goodwill in the Company’s single reporting unit is impaired. As of October 31, 2023 and throughout the three and nine months ended October 31, 2023, the Company’s market capitalization exceeded the carrying value of the Company’s equity by over 100%. As a result, the Company does not believe that changes in the Company’s market capitalization during the three and nine months ended October 31, 2023 indicate that that the carrying amount of the Company’s goodwill is impaired as of October 31, 2023.

(f) Accounts receivable
Accounts receivable as of October 31, 2023 and January 31, 2023 are as follows:


17

 
 October 31, 2023January 31, 2023
Billed$51,593 $51,458 
Unbilled7,402 989 
Total accounts receivable, gross$58,995 $52,447 
Less accounts receivable allowances(1,556)(1,053)
Total accounts receivable$57,439 $51,394 

Activity in the Company's allowance for doubtful accounts was as follows for the nine months ended October 31, 2023:

 October 31, 2023
Balance, January 31, 2023
$1,053 
Bad debt expense312 
Increases due to acquisitions681 
Write-offs and adjustments(490)
Balance, October 31, 2023
$1,556 

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 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.
(g) Prepaid and other current assets
Prepaid and other current assets as of October 31, 2023 and January 31, 2023 are as follows:
 
 October 31, 2023January 31, 2023
Prepaid software and business systems$4,667 $3,426 
Prepaid data center expenses3,375 2,389 
Prepaid insurance1,945 1,552 
Other prepaid expenses and other current assets3,588 3,342 
Total prepaid and other current assets$13,575 $10,709 
(h) Cloud computing implementation costs
The Company enters into cloud computing service contracts to support its sales and marketing, product development and administrative activities. The Company capitalizes certain implementation costs for cloud computing arrangements that meet the definition of a service contract. The Company includes these capitalized implementation costs within Prepaid expenses and other current assets and within other assets on its consolidated balance sheets. Once placed in service, the Company amortizes these costs over the remaining subscription term to the same caption in the consolidated statements of operations as the related cloud subscription. As of both October 31, 2023 and January 31, 2023 capitalized implementation costs for cloud computing arrangements accounted for as service contracts were $1,532. Accumulated amortization of capitalized implementation costs for these arrangements was $917 and $610 as of October 31, 2023 and January 31, 2023, respectively.
(i) Other expense, net
Other expense, net for the three months ended October 31, 2023 and 2022 was $47 and $211, respectively. Other expense, net for the nine months ended October 31, 2023 and 2022 was $39 and $204, respectively. For all periods presented, other expense, net was composed primarily of foreign exchange losses and other miscellaneous expenses.
5. Revenue and contract costs


18

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 healthcare services clients for access to the Phreesia Platform, payment processing fees based on patient payment volume, and fees from life sciences and payer clients for delivering direct communications to patients using the Phreesia Platform.
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 $2,520 and $2,560 for the three months ended October 31, 2023 and 2022, 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 $7,785 and $7,534 for the nine months ended October 31, 2023 and 2022, respectively.

Contract balances
The following table represents a roll-forward of contract assets:
January 31, 2023
$989 
Amount transferred to receivables from beginning balance of contract assets(967)
Contract assets added from acquisitions420 
Contract asset additions, net of reclassification to receivables6,960 
October 31, 2023
$7,402 

The following table represents a roll-forward of deferred revenue:
January 31, 2023
$17,813 
Revenue recognized that was included in deferred revenue at the beginning of the period(14,961)
Deferred revenue added from acquisitions5,665 
Net increase in current period deferred revenue13,614 
October 31, 2023
$22,131 

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 $235 and $413 for the three months ended October 31, 2023 and 2022, respectively. Amortization expense is included in sales and marketing expenses in the accompanying statements of operations and totaled $855 and $1,318 for the nine months ended October 31, 2023 and 2022, 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, 2023
$2,810 
Amortization of deferred contract acquisition costs(855)
Ending balance, October 31, 2023
$1,955 
Deferred contract acquisition costs, current (to be amortized in next 12 months)$777 
Deferred contract acquisition costs, non-current1,178 
Total deferred contract acquisition costs$1,955 


19

6. Finance leases and other debt
As of October 31, 2023 and January 31, 2023, the Company had the following outstanding finance lease liabilities and other debt:
October 31, 2023January 31, 2023
Finance leases$9,933 $7,651 
Financing arrangements3,527 46 
Accrued interest and payments138 200 
Total finance lease liabilities and other debt$13,598 $7,897 
Less - current portion of finance lease liabilities and other debt(6,753)(5,172)
Long-term finance lease liabilities and other debt$6,845 $2,725 

(a) Finance leases
See Note 10 - Leases for more information regarding finance leases.
(b) Financing agreements
On June 8, 2023, the Company entered into a software licensing financing agreement (the "financing agreement") in order to finance its software, equipment and service licenses. As of October 31, 2023, there was $3,527 in outstanding principal and interest due under the financing agreement. The financing agreement requires the Company to pay $123 per month for 36 months beginning August 2023. The effective interest rate on the financing agreement is 10.5% per annum.
(c) Amended and Restated Loan and Security Agreement
On February 28, 2019 (the "Effective Date"), the Company entered into the Amended and Restated Loan and Security Agreement (the "First SVB Facility") that provided for a $20,000 term loan.
On May 5, 2020 (the "Second SVB Effective Date"), the Company entered into the Second SVB Facility. The Second SVB Facility modified the First SVB Facility. The Second SVB Facility provided for a revolving credit facility with an initial borrowing capacity of $50,000. The borrowing capacity could 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 and used the proceeds to repay all amounts due under the First SVB Facility term loan. The Company repaid the balance on the Second SVB Facility during the fiscal year ended January 31, 2021.
On March 28, 2022 (the "Third SVB Effective Date"), the Company entered into a First Loan Modification Agreement to the Second SVB Facility (as amended, the "Third SVB Facility") to increase the borrowing capacity from $50,000 to $100,000 and to reduce the interest rate on the facility. Borrowings under the Third SVB Facility are payable on May 5, 2025. Borrowings under the Third SVB Facility bear interest, which is payable monthly, at a floating rate equal to the greater of 3.25% or the Wall Street Journal Prime Rate minus 0.5%. As of October 31, 2023, the interest rate on the Third SVB Facility was 8.00%. In addition to principal and interest due under the revolving credit facility, the Company is required to pay an annual commitment fee of approximately $250 per year and a quarterly fee of 0.15% per annum of the average unused revolving line under the facility. The Company had $100,000 of availability under the facility as of October 31, 2023.
In the event that the Company terminates the Third SVB Facility prior to May 5, 2024, the Company will be required to pay a termination fee of up to 1.5% of borrowing capacity based on the length of time between termination and maturity. Any Company obligations under the Third SVB Facility are secured by a first priority security interest in substantially all of its assets, other than intellectual property. The Third SVB Facility includes a financial covenant that requires the Company to maintain a minimum Adjusted Quick Ratio as defined in the Third SVB Facility. The Third SVB Facility also 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. Additionally, the Third SVB Facility contains a covenant limiting the amount of cash and cash equivalents the Company can hold outside SVB. The Third SVB Facility also contains customary events of default. The Company was in compliance with all covenants related to the Third SVB Facility as of October 31, 2023.
As of October 31, 2023 and January 31, 2023, there was no debt outstanding related to the Third SVB Facility. As a result, the Company presented all unamortized deferred costs within other assets as of October 31, 2023 and January 31, 2023, respectively. The Company is amortizing the remaining unamortized costs over the remaining term of the Third SVB Facility.


20

Maturities of finance leases and other debt, in each of the next five years and thereafter are as follows:
 TotalFinance LeasesOther Debt
2024 (Remaining three months)$2,069 $1,651 $418 
Fiscal year ending January 31:
20256,198 5,000 1,198 
20264,124 2,794 1,330 
20271,207 488 719 
2028   
Total maturities of finance leases and other debt$13,598 $9,933 $3,665 
The following table presents the components of interest income (expense), net:
Three months ended
October 31,
Nine months ended
October 31,
 2023202220232022
Interest expense (1)
$(517)$(456)$(1,230)$(1,150)
Interest income1,040 517 3,257 622 
Interest income (expense), net$523 $61 $2,027 $(528)
(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.
In connection with the MediFind Acquisition, on June 30, 2023, the Company issued 150,786 shares of common stock, par value $0.01 per share, to the former owners of MediFind as partial consideration to acquire MediFind. On July 3, 2023, the Company filed a prospectus supplement to register the shares with the SEC. See Note 15 - Acquisitions for additional information regarding the MediFind Acquisition.
In connection with the Access Acquisition, on August 11, 2023, the Company issued 1,096,436 shares of common stock, par value $0.01 per share, to the former members of Access as partial consideration to acquire Access. On August 14, 2023, the Company filed a prospectus supplement to register the shares with the SEC. See Note 15 - Acquisitions for additional information regarding the Access Acquisition.
(b) Treasury stock
The Company's equity-based compensation plan allows for the grant of non-vested stock options, restricted stock units ("RSUs") and total shareholder return ("TSR") performance-based stock units ("PSUs") to its employees pursuant to the terms of its stock option and incentive plans (See Note 8). Until September 2023, under the provision of the plans, for RSU and PSU awards, unless otherwise elected, employee participants fulfilled their related income tax withholding obligation by having shares withheld at the time of vesting. The shares withheld were then transferred to the Company's treasury stock at cost.
Beginning in September 2023, employee participants fulfilled their related tax withholding obligation by selling vested shares at the time of vesting in non-discretionary transactions pursuant to the Company’s mandatory sell-to-cover policy (sell-to-cover). The proceeds from the employee participants’ sales of vested shares is remitted to the Company to cover the tax withholding payments to tax authorities. No shares are transferred to the Company’s treasury stock in connection with tax withholdings funded by an employee participant’s sale of vested shares to cover taxes.


21

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, the "2018 Stock Option Plan") 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 of the Board of Directors (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). As the 2018 Stock Option Plan was replaced by the 2019 Plan, all grants of stock options, RSUs and PSUs during the nine months ended October 31, 2023 were made pursuant to the 2019 plan, respectively.
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 was limited to 855,873 shares.
The Company's fiscal 2023 and fiscal 2024 incentive bonuses allow eligible employees to elect to receive all or a portion of their fiscal 2023 and fiscal 2024 incentive compensation in the form of immediately vested restricted stock units instead of cash.
In July 2023, the Board of Directors also adopted the Company’s 2023 Inducement Award Plan (the "Inducement Plan"). The Inducement Plan allows the Compensation Committee of the Board of Directors (the "Compensation Committee") or its delegates to make equity-based incentive awards including stock options, RSUs and PSUs to employees of acquired companies to induce them to join the Company. The total shares of common stock initially reserved under the Inducement Plan was 500,000 shares.
As of October 31, 2023, there are 4,865,943 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 514,045 shares available for future grant pursuant to the ESPP. The ESPP has two six-month offering periods each calendar year beginning in January and July. The ESPP allows eligible employees to purchase shares of the Company’s common stock at a 15% discount through payroll deductions. As of October 31, 2023, there were 24,258 outstanding restricted stock units and 475,742 shares available for future grant under the Inducement Plan.
(b) Summary of stock-based compensation
The following table sets forth stock-based compensation by type of award:

Three months ended
October 31,
Nine months ended
October 31,
 2023202220232022
RSUs$13,402 $10,632 $40,004 $31,333 
Liability awards1,820 1,994 6,623 5,568 
PSUs2,751 1,807 7,146 5,253 
ESPP299 357 954 1,166 
Stock options 333 45 1,207 
Total stock based compensation$18,272 $15,123 $54,772 $44,527 



22

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

Three months ended
October 31,
Nine months ended
October 31,
 2023202220232022
Stock-based compensation expense recorded to additional paid-in capital$16,452 $13,129 $48,149 $38,959 
Stock-based compensation expense recorded to accrued expenses1,820 1,994 6,623 5,568 
Total stock-based compensation$18,272 $15,123 $54,772 $44,527 
Less stock-based compensation expense capitalized as internal-use software(309)(341)(1,023)(1,036)
Stock-based compensation expense per consolidated statements of operations$17,963 $14,782 $53,749 $43,491 

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.
(c) Restricted stock units
The Company has issued restricted stock units to employees and independent directors that vest based on a time-based condition. For RSUs granted to employees 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 year ended January 31, 2023, the Company modified the vesting of RSUs granted subsequent to January 1, 2021 for employees other than its named executive officers listed in its 2022 proxy statement ("2022 NEOs") and other members of its executive management team. Pursuant to the modified vesting schedule, RSUs granted after January 1, 2021 for employees other than 2022 NEOs and other members of its executive management team vest 6.25% each quarter over four years based on continued service. For 2022 NEOs and other members of the Company's executive management team, RSUs granted from January 1, 2022 vest 6.25% each quarter over four years based on continued service. Beginning January 2023, all new RSUs granted generally vest 25% each year over four years based on continued service.
Additionally, at the beginning of each fiscal year, the Company provides certain employees the option to settle their incentive bonus in immediately vested RSUs. During the nine months ended October 31, 2023, the Company issued 339,352 immediately vested RSUs to settle full-year fiscal 2023 share-settled bonus awards. The RSUs granted to settle bonus awards are included in RSUs granted and vested in the table below. See section (g) Liability awards below for additional information regarding share-settled bonus awards.

  Restricted stock units
Unvested, January 31, 20233,917,753 
Granted in nine months ended October 31, 2023(1)
2,135,772 
Vested(1,239,562)
Forfeited and expired (450,626)
Unvested, October 31, 2023
4,363,337 
(1) Includes 24,258 awards granted pursuant to the 2023 Inducement Award Plan.

As of October 31, 2023, there is $113,316 remaining of total unrecognized compensation cost related to these awards. The total unrecognized costs are expected to be recognized over a weighted-average term of 2.68 years.
(d) 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.


23


Stock option activity for the nine months ended October 31, 2023 is as follows:
Number of
options
Weighted-
average
exercise price
Weighted-
average
remaining
contractual life
(in years)
Aggregate 
Intrinsic
value
Outstanding — January 31, 20231,385,193 $6.26 
Granted in nine months ended October 31, 2023
 $ 
Exercised(246,480)$3.34 
Forfeited and expired(12,474)$5.87 
Outstanding and expected to vest — October 31, 2023
1,126,239 $6.90 4.79$7,613 
Exercisable — October 31, 2023
1,126,239 $6.90 4.79$7,613 
Amount vested in nine months ended October 31, 2023
24,565 $13.41 
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 nine months ended October 31, 2023 and 2022 (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 $6,034 and $4,661, respectively.
(e) TSR performance-based restricted stock units (“PSUs”)
The Company grants PSUs to certain members of its management team. PSUs vest over approximately three years from the grant date upon satisfaction of both time-based requirements and market targets based on Phreesia's 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 220% 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 nine months ended October 31, 2023 are as follows:

  Performance stock units
Outstanding, January 31, 2023648,233 
Granted in nine months ended October 31, 2023
13,492 
Vested 
Forfeited and expired (74,472)
Outstanding, October 31, 2023
587,253 
As of October 31, 2023, unrecognized compensation cost related to PSUs was $15,858, to be recognized on a straight-line basis over a weighted average term of 1.8 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. In the U.S., the ESPP is structured as a qualified employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986.


24

During the three and nine months ended October 31, 2023, the Company issued 70,123 shares of common stock under the ESPP. In connection with these issuances, the Company recorded increases of $1,838 to common stock and additional paid-in capital within stockholders' equity. As of October 31, 2023, unrecognized compensation cost related to the ESPP was $186, to be recognized over the next two months.
(g) Liability awards
At the beginning of each year, the Company provides eligible employees the option to elect to receive all or a portion of their incentive compensation in the form of immediately vested restricted stock units instead of cash. Restricted stock units issued to settle liability awards are covered by the 2019 Plan. Share-settled bonus awards will be settled at a value equal to 115% of the bonuses converted. These share-settled bonus awards vest based on the achievement of the Company’s predefined performance targets. As share-settled bonus awards will be settled in a variable number of shares, the Company classifies share-settled bonus awards as liabilities within accrued expenses in the accompanying consolidated balance sheets until they are settled in shares and included in stockholders' equity. During the nine months ended October 31, 2023, the Company settled $8,803 of share-settled bonus awards by issuing 339,352 immediately vested RSUs. See (c) Restricted Stock Units above for additional discussion regarding RSUs.
9. Fair value measurements
The following table presents information about the Company's assets and liabilities that are measured at fair value as of October 31, 2023 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 October 31, 2023
 
Money market mutual funds$71,146 $ $ $71,146 
Total assets$71,146 $ $ $71,146 

The following table presents information about the Company's assets and liabilities that are measured at fair value as of January 31, 2023 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, 2023
 
Money market mutual funds$163,563 $ $ $163,563 
Total assets$163,563 $ $ $163,563 

The carrying value of the Company’s short-term financial instruments, including accounts receivable and accounts payable approximate fair value due to the short-term nature of these instruments. The carrying value of the Company's debt approximates fair value because the interest rates approximate market rates and the debt maturities are relatively short-term.
The Company did not have any transfers of assets and liabilities between levels of the fair value measurement hierarchy during both the three and nine months ended October 31, 2023 and 2022.
10. Leases
(a) Phreesia as Lessee
The Company leases office premises and third-party data center space in the U.S. under operating leases which expire on various dates through March 2027. Certain of these arrangements have escalating rent payment provisions or optional renewal clauses. The Company has also entered into various finance lease arrangements for computer equipment. These agreements are typically three years and are secured by the underlying equipment.


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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, 2023, for operating leases, the weighted-average remaining lease term is 1.4 years and the weighted-average discount rate is 5.2%. As of October 31, 2023, for finance leases, the weighted-average remaining lease term is 1.9 years, and the weighted-average discount rate is 6.1%.
The components of lease expense for the nine months ended October 31, 2023 were as follows:
October 31, 2023
Operating leases:
Operating lease cost$515 
Variable lease cost47 
Total operating lease cost$562 
Finance leases:
Amortization of right-of-use assets$5,117 
Interest on lease liabilities439 
Total finance lease cost$5,556 
The following represents a schedule of maturing lease commitments for operating and finance leases as of October 31, 2023:
October 31, 2023
OperatingFinance
Maturity of lease liabilities
2024 (remaining three months)$228 $1,764 
Fiscal year ending January 31,
2025404 5,343 
202686 2,986 
202742 521 
Thereafter7  
Total future minimum lease payments$767 $10,614 
Less: interest(22)(681)
Present value of lease liabilities$745 $9,933 
Other supplemental cash flow information for the nine months ended October 31, 2023 was as follows:
October 31, 2023
Supplemental cash flow information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash used for operating leases$962 
Operating cash used for finance leases395 
Financing cash used for finance leases5,156 
Total$6,513 
Right-of-use assets obtained in exchange for lease liabilities:
Operating$346 
Finance7,438 
Total$7,784 
(b) Phreesia as Lessor


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In connection with the patient intake and registration process, Phreesia offers its customers the ability to lease PhreesiaPads and Arrivals Kiosks 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, 2023, the Company recognized $2,520 and $7,785, respectively, in subscription and related services revenue related to the leasing of PhreesiaPads and Arrivals Kiosks.
Future lease payments receivable under operating leases were immaterial as of October 31, 2023, except for those with terms of one year or less.
11. Commitments and contingencies
(a) Indemnifications
The Company’s agreements with certain customers include certain provisions for indemnifying customers against liabilities if its services infringe a third party’s intellectual property rights. It is not possible to determine the maximum potential amount under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances that may be involved in each particular agreement. To date, the Company has not incurred any material costs as a result of such provisions and have not accrued any liabilities related to such obligations in its consolidated financial statements.
In addition, the Company has indemnification agreements with its directors and its executive officers that require it, among other things, to indemnify its directors and executive officers for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by any of those persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service as a director or officer, including any action by us, arising out of that person’s services as a director or officer or that person’s services provided to any other company or enterprise at the Company’s request. The Company maintains director and officer insurance coverage that may enable it to recover a portion of any future indemnification amounts paid. To date, there have been no claims under any of its directors and executive officers indemnification provisions.
(b) Legal proceedings
In the ordinary course of business, the Company may be subject from time to time to various proceedings, lawsuits, disputes or claims. Although the Company cannot predict with assurance the outcome of any litigation, the Company does not believe there are currently any such actions that, if resolved unfavorably, would have a material impact on its financial condition, results of operations or cash flows.
(c) Other contractual commitments
Other contractual commitments consist primarily of non-cancelable purchase commitments to support our technology infrastructure as well commitments related to our acquisitions.
During fiscal 2023, the Company signed a finance lease which commenced during the nine months ended October 31, 2023. Total undiscounted payments through the fiscal year ended January 31, 2027 related to the lease of $8,090 were included in other contractual commitments as of January 31, 2023 and were added at present value to finance lease liabilities during the nine months ended October 31, 2023.
During the nine months ended October 31, 2023, the Company entered into a new non-cancelable purchase commitment to support its technology infrastructure. Total undiscounted payments through the fiscal year ended January 31, 2026 are $7,381.
During the nine months ended October 31, 2023, the Company entered into an agreement to acquire 100% of the outstanding equity of ConnectOnCall. In addition to cash paid at closing, consideration transferred to acquire ConnectOnCall included undiscounted payments of $10,937 payable in seven quarterly installments from December 2023 through June 2025. See Note 15 - Acquisitions for additional information regarding the acquisition of ConnectOnCall.


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During the nine months ended October 31, 2023, there were no other significant changes in the Company's material cash requirements as compared to the material cash requirements from known contractual and other obligations described in our Annual Report on Form 10-K for the fiscal year ended January 31, 2023, filed with the SEC on March 23, 2023.
12. Income taxes
For the three and nine months ended October 31, 2023, the Company recorded tax provision of $372 and $1,326, respectively, compared to a tax provision of $206 and $654, respectively, for the corresponding periods in the prior year. The Company's provision for income taxes was 1.3% and 0.5% of loss before income taxes for the nine months ended October 31, 2023 and 2022, respectively. The Company's effective tax rate differs from the U.S. statutory tax rate of 21% primarily because the Company records a valuation allowance against its U.S. deferred tax assets, and due to foreign income tax expense related to its Canadian branch.
Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets and liabilities using statutory rates. Management of the Company has evaluated the positive and negative evidence pertaining to the realizability of its deferred tax assets, including the Company’s history of losses, and concluded that it is more likely than not that the Company will not recognize the benefits for its U.S. deferred tax assets. On the basis of this evaluation, the Company has recorded a valuation allowance against its deferred tax assets that are not more likely than not to be realized at both October 31, 2023 and January 31, 2023.



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13. Net loss per share attributable to common stockholders
(a) Net loss per share attributable to common stockholders
Basic and diluted net loss per share attributable to common stockholders was calculated as follows:

 Three months ended
October 31,
Nine months ended
October 31,
 2023202220232022
Numerator:
Net loss$(31,941)$(40,167)$(106,239)$(138,125)
Denominator:
Weighted-average shares of common stock outstanding, basic and diluted55,251,074 52,606,400 54,139,555 52,294,026 
Net loss per share attributable to common stockholders$(0.58)$(0.76)$(1.96)$(2.64)


(b) Potential dilutive securities
The Company’s potential dilutive securities, which include stock options, restricted stock units, performance stock awards and grants under the Company's ESPP, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The following potential common shares, presented based on amounts outstanding at each period end, were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:
As of October 31,
20232022
Stock options to purchase common stock, restricted stock and performance stock awards6,701,132 6,469,378 
Employee stock purchase plan66,799 76,634 
     Total6,767,931 6,546,012 

14. Related party transactions
For the three months ended October 31, 2023 and 2022, the Company recognized revenue totaling $319 and $170, respectively, for advertisements placed by a pharmaceutical company. For the nine months ended October 31, 2023 and 2022, the Company recognized revenue totaling $868 and $521, respectively, for advertisements placed by that pharmaceutical company. One of the Company's independent members of its board of directors serves on the board of directors for this pharmaceutical company. As of October 31, 2023 and January 31, 2023, accounts receivable from the pharmaceutical company totaled approximately $23 and $339, respectively.
For the three months ended October 31, 2022, the Company recognized general and administrative expenses totaling $77 for software agreements with a software company. For the nine months ended October 31, 2023 and 2022, the Company recognized general and administrative expenses totaling $118 and $297, respectively, for software agreements with that software company. One of the Company's independent members of its board of directors served as the chief executive officer and on the board of directors for this software company until May 2023. This Company is no longer considered a related party subsequent to May 2023. As of January 31, 2023, prepaid expenses and other current assets included approximately $51 of payments made to this software company. The expense and asset amounts presented above include amounts incurred while the entity was a related party.
One of the Company's independent members of its board of directors has served as the chief financial officer of a software company since April 2022. The Company recognized de minimis expenses during both the three and nine months ended October 31, 2023 and 2022 under software agreements with this software company.



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15. Acquisitions
Acquisition of MediFind, Access and ConnectOnCall
On June 30, 2023, the Company entered into an agreement to acquire 100% of the outstanding equity of MediFind for aggregate consideration payable of $8,871 (the "MediFind Acquisition"). A portion of the consideration was paid in cash at closing (subject to a customary working capital adjustment) with the remainder of the consideration settled through the issuance of 150,786 shares of the Company's common stock to certain MediFind stockholders. MediFind is a consumer-facing healthcare product that helps patients - especially those with serious, chronic and rare diseases - find better care faster. The MediFind Acquisition was accounted for as a business combination. The Company acquired MediFind to reinforce its commitment to patient-centered care and expand its offerings to consumers.
On August 11, 2023, the Company entered into the Access Acquisition to acquire 100% of the outstanding equity of Access eForms for aggregate consideration payable of $37,411. A portion of the consideration was paid in cash at closing (subject to a customary working capital adjustment) with the remainder of the consideration settled through the issuance of 1,096,436 shares of the Company's common stock to the holders of the outstanding equity of Access eForms. Access is an innovative electronic forms management and automation provider that helps hospitals across the country streamline workflows, improve compliance and deliver a better patient experience. The Access Acquisition was accounted for as a business combination. The Company acquired Access to enhance and build on its existing functionality in the acute care space and to expand its network of clients and partners.
On October 3, 2023, the Company entered into the ConnectOnCall Acquisition to acquire 100% of the outstanding equity of ConnectOnCall for aggregate consideration payable of $13,946. A portion of the consideration was paid in cash at closing with the remainder of the consideration payable in seven quarterly installments beginning in December 2023. ConnectOnCall is a founder-owned company with an automated medical answering solution that routes and triages after-hours calls and manages high daytime call volumes. The ConnectOnCall solution is built on real-time Electronic Health Record (EHR) integrations, enhancing the control and transparency of patient information for providers or practices when returning calls. The Company acquired ConnectOnCall to expand its offerings to provider organizations, helping them make the call-triaging process more efficient and less expensive.
The following table summarizes the estimated acquisition-date fair value of consideration transferred for each acquisition:

MediFindAccessConnectOnCall
Cash consideration paid to sellers$3,901 $6,766 $3,946 
Equity consideration paid to sellers4,676 30,645  
Liabilities incurred to sellers294  10,000 
Total fair value of acquisition consideration$8,871 $37,411 $13,946 

The acquisition-date fair value of equity consideration transferred was estimated using the closing stock price on the acquisition date for each acquisition. The acquisition-date fair value of liabilities incurred to sellers was estimated based on the timing of payments and an appropriate credit-adjusted discount rate of 9.3% per annum, determined with the assistance of a third-party appraiser. The Company accrues interest on the liability at 9.3% per annum. The Company recorded $76 of interest expense on the liability incurred to sellers during the three months ended October 31, 2023. The total undiscounted liability incurred to the sellers of ConnectOnCall was $10,937.

The following table summarizes the calculation of cash paid for each acquisition, net of cash acquired per the Company's consolidated statement of cash flows for the nine months ended October 31, 2023:

MediFindAccessConnectOnCall
Cash consideration paid to sellers$3,901 $6,766 $3,946 
Less: Cash acquired(231)(80)(23)
Cash paid for acquisitions, net of cash acquired per statement of cash flows$3,670 $6,686 $3,923 


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The purchase price was allocated to the tangible assets acquired, the identifiable intangible assets acquired and the liabilities assumed based on their acquisition-date estimated fair values or other measurement bases specified by ASC 805 - Business Combinations.

The following table summarizes the preliminary allocation of the purchase price to the assets acquired and liabilities assumed at the date of each acquisition:

MediFindAccessConnectOnCall
Cash$231 $80 $23 
Accounts receivable149 2,290 244 
Other current assets722 110 34 
Identified intangible assets acquired2,300 18,300 2,000 
Goodwill6,821 23,006 11,905 
Total assets acquired$10,223 $43,786 $14,206 
Accounts payable(121)(196)(133)
Accrued liabilities(816)(884)(49)
Deferred revenue(292)(5,295)(78)
Deferred income tax liabilities(123)  
Total purchase price$8,871 $37,411 $13,946 

The components of intangible assets acquired in the MediFind Acquisition were as follows:
Estimated Useful Life
(in Years)
Fair Value
Technology7$1,200 
Trademark15700 
Customer relationships10400 
Total identifiable intangible assets acquired$2,300 
The weighted average amortization period for acquired intangible assets as of the date of acquisition is 10 years.
The components of intangible assets acquired in the Access Acquisition were as follows:
Estimated Useful Life
(in Years)
Fair Value
Technology7$5,200 
Trademark152,400 
Customer relationships1510,700 
Total identifiable intangible assets acquired$18,300 
The weighted average amortization period for acquired intangible assets as of the date of acquisition is 13 years.
The components of intangible assets acquired in the ConnectOnCall Acquisition were as follows:
Estimated Useful Life
(in Years)
Fair Value
Technology5$1,500 
Customer relationships15500 
Total identifiable intangible assets acquired$2,000 
The weighted average amortization period for acquired intangible assets as of the date of acquisition is 8 years.
The Company, with the assistance of a third-party appraiser, assessed the fair value of the assets of MediFind, Access and ConnectOnCall. The fair value of the acquired technology and trademark assets were estimated using the relief from royalty method. The fair value of customer relationships was estimated using a multi-period excess


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earnings method. To calculate fair value, the Company used cash flows discounted at a rate considered appropriate given the inherent risks associated with each asset.
The useful lives of the intangible assets were estimated based on the expected future economic benefit of the assets and are being amortized over the estimated useful life in proportion to the economic benefits consumed using the straight-line method. The amortization of intangible assets is not expected to be deductible for income tax purposes.
The goodwill recognized in each of the acquisitions is primarily attributable to expected synergies of the combined businesses driven by integrating the technology into the Phreesia Platform and engaging with patients and providers, as well as the acquisition of an assembled workforce. The tax treatment of goodwill recognized in each acquisition is contingent on the specific structure of the transaction.

During the nine months ended October 31, 2023, the Company incurred $3,115 of acquisition related costs for the MediFind, Access and ConnectOnCall acquisitions. These costs are primarily included within general and administrative expenses in our unaudited consolidated statements of operations.
16. Subsequent events
Subsequent to October 31, 2023, on December 4, 2023, we entered into a new 5-year $50,000 senior secured asset-based revolving credit facility ("Capital One Credit Facility") maturing in December 2028, which includes a swingline sub-limit of at least $5,000 and a letter of credit sub-limit of at least $5,000. The new Capital One Credit Facility was entered into with Capital One, N.A., acting as administrative agent and replaces our previous senior secured revolving credit facility with SVB. The new Capital One Credit Facility will give the Company additional financial flexibility, with attractive terms, through the facility’s five year term. The facility is available to the Company for working capital and general corporate purposes. The Capital One Credit Facility bears interest at a rate per annum based on the Secured Overnight Financing Rate (“SOFR”) or a Base Rate as specified in the Credit Agreement. In addition to principal and interest due under the Capital One Credit Facility, the Company is required to pay an annual fee equal to 0.25% of the unused balance of the facility. Additionally, the Company incurred creditor and third party fees of $778 upon entering into the Capital One Credit Facility. The Company recorded the fees to deferred financing cost asset and will amortize the costs over the term of the Capital One Credit Facility.
The Capital One Credit Facility includes financial covenants including, but not limited to requiring the Company to maintain minimum Consolidated EBITDA, minimum Liquidity, a minimum Consolidated Fixed Charge Coverage Ratio and limiting the amount of cash and cash equivalents the Company holds outside Capital One, each as defined in the Credit Agreement.
On December 4, 2023, the Company also terminated the Third SVB Facility. During the fourth quarter of fiscal 2024, the Company recorded a $1,290 loss on extinguishment to other expense, net for $784 of fees to terminate the Third SVB Facility and to write off $506 of unamortized deferred financing costs in connection with the termination of the Third SVB Facility.


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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our financial statements and related notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2023, filed with the SEC on March 23, 2023. In addition to historical financial information, the following discussion and analysis and information set forth elsewhere in this Quarterly Report on Form 10-Q contain forward-looking statements that involve risks, uncertainties and assumptions. Our actual results could differ materially from those anticipated by these forward-looking statements as a result of many factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this Quarterly Report on Form 10-Q, including those set forth under “Risk Factors” and “Special Note Regarding Forward-Looking Statements.”
Financial Highlights
Total revenue increased 25% to $91.6 million in the three months ended October 31, 2023, as compared with $73.1 million in the three months ended October 31, 2022.
Total revenue increased 28% to $261.3 million in the nine months ended October 31, 2023, as compared with $204.3 million in the nine months ended October 31, 2022.<