Phreesia - Q1 2021
June 9, 2020
Transcript
Operator (participant)
Good morning, ladies and gentlemen, and welcome to Phreesia Fiscal First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. I would now like to introduce Balaji Gandhi, Vice President of Investor Relations for Phreesia. Mr. Gandhi, you may begin.
Balaji Gandhi (VP of Investor Relations)
Thank you, operator. Good morning, and welcome to Phreesia's earnings conference call for the first quarter of fiscal year 2021, which ended on April 30th, 2020. Participating on today's call from Phreesia, our Chief Executive Officer and Co-founder, Chaim Indig, and Chief Financial Officer, Tom Altier. Following prepared remarks from Chaim and Tom, we will conduct a Q&A session. A complete disclosure of our results can be found in our earnings press release issued yesterday evening, as well as in our related Form 8-K submission to the SEC, both of which are available on the investor relations section of our website at ir.phreesia.com. As a reminder, today's call is being recorded, and a replay will be available following the conclusion of the call.
During today's call, we will make forward-looking statements pursuant to the Safe Harbor Provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act, including statements relating to the expected performance of our business, future financial results, our strategy, our partnerships, expected launches of products and services, long-term growth, overall future prospects, and the impact of the COVID-19 pandemic on our business. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those projected or implied during this call, in particular, those described in our risk factors included in our Form 10-Q, which will be filed with the SEC later today. You should not rely on our forward-looking statements as predictions of future events.
All forward-looking statements that we make on this call are based on assumptions and beliefs as of today, and we undertake no obligation to update them except as required by applicable law. We will also refer to certain financial measures not in accordance with generally accepted accounting principles in order to provide additional information to investors. These non-GAAP measures should be considered in addition to and not as a substitute for or an isolation from our GAAP results. A reconciliation of GAAP to non-GAAP results may be found in our earnings press release and supplemental materials, which were furnished through our Form 8-K, filed after the market closed on June 8 with the SEC and may also be found on our investor relations website at ir.phreesia.com. I will now turn the call over to our CEO, Chaim Indig.
Chaim Indig (CEO)
Thank you, Balaji. Good morning, everyone. We hope that everyone listening to today's call is safely adjusting to the challenging guidelines related to the pandemic and are engaged in the activities in your communities that are helping drive much-needed social change. We are participating on the call in three different locations, so we appreciate your patience with us. Let me start by acknowledging all of the healthcare provider organizations and medical professionals for their continued bravery and dedication. We are pleased with our fiscal first quarter results and are proud of our entire team's ability to deliver our results in the challenging pandemic environment. I would like to specifically acknowledge our sales and client services colleagues. These teams exhibited agility and flexibility under rapidly changing circumstances.
Their ability to embrace adversity aligns with Phreesia's mission to create a better, more engaging healthcare experience and is something I admire, particularly as we continue to operate in an uncertain environment into the summer and fall. For the fiscal first quarter, total revenue was $33.4 million, up 18% year-over-year. The average number of provider clients was 1,632, up 5% year-over-year. Average revenue per provider client was $16,735, up 7% year-over-year. Adjusted EBITDA was $1.5 million, up $1.8 million year-over-year. Healthcare providers across the country are beginning to book more appointments. Access to healthcare is not optional. Patients need to be seen by providers, and safety needs to be prioritized. Now I'll turn the call over to Tom.
Thomas Altier (CFO)
Thank you, Chaim, and good morning, everyone. I'll review the income statement, balance sheet, and cash flows for the fiscal first quarter, including some considerations for modeling for the rest of the fiscal year. First, revenue. As Chaim mentioned, total revenue was $33.4 million, up 18% year-over-year. We report our revenue in three line items: subscription and related services, which were $15.6 million in the quarter, up 23% year-over-year. Payment processing fees, which were $11.7 million in the quarter, up 1% year-over-year. And life sciences, which was $6.1 million in the quarter, up 50% year-over-year. Let's start with provider revenue, which combines revenue from subscription and related services and payment processing fees. Provider revenue was $27.3 million, up 13% year-over-year.
The two drivers of the 13% provider revenue growth were average provider client growth and average revenue per provider client. Average provider clients grew 5% year-over-year, and average revenue per provider client grew 7% year-over-year. Average revenue per provider client growth was directly impacted by a decline in patient visits to our provider clients, as the outbreak of COVID-19 resulted in various responses, including government-imposed quarantines. From the middle of March through the end of April, patient visits declined approximately 50% compared to the beginning of March.
The visit decline significantly impacted our payment processing revenue. Consequently, our average revenue per provider client growth was negatively impacted. We estimate that the decline in patient visits negatively impacted provider revenue growth by approximately $3 million in the quarter, and year-over-year average revenue per provider client growth by approximately 13 percentage points.
Patient visit trends across our provider network continue to be below pre-COVID-19 levels. I will now cover Life Sciences revenue, which was $6.1 million, up 50% year-over-year, and our Life Sciences revenue is based largely on the delivery of messages at contracted price per message to targeted patients. Messaging campaigns are sold for a specified number of messages delivered to qualified patients over an expected time frame, and revenue is recognized as the messages are delivered. Strong fiscal first quarter performance was driven by our team successfully selling and expanding some of our current programs. It is also worth noting that we had an easier comparable quarter in Life Sciences, which impacts the year-over-year growth rate. Moving on to expenses. I'll review several expense line items on an adjusted non-GAAP basis, which excludes stock-based compensation expense for each line item.
Please note that a full reconciliation of GAAP to non-GAAP measures, including adjusted EBITDA, is included in our earnings press release and our forms filed with the SEC. Cost of revenue was $4.6 million, or 13.9% of total revenue, which is down 10 basis points year-over-year. Sales and marketing expense was $8.7 million, or 26.1% of total revenue, down 60 basis points year over year. Research and development expense was $4.6 million, or 13.6% of total revenue, down 120 basis points year-over-year. General and administrative expenses was $7.1 million, or 21.3% of total revenue, up 40 basis points year-over-year. As we have previously indicated, this figure will increase as a result of continued ramping of public company expenses.
From a modeling perspective, we expect to see operating leverage in G&A during fiscal 2022. Payment processing expense was $6.8 million, which declined 1% year-over-year due to lower payment processing volume and some lower cost payment routing. It's also worth noting that payment processing revenue was up 1% year-over-year, while expenses were down 1% year-over-year, which is due to a mix of transactions priced with higher per transaction revenue, offset by a decrease in the volume of patient payments. Adjusted EBITDA was $1.5 million, up $1.8 million year-over-year. This increase reflects the combination of higher total revenue and delayed spending and hiring, and lower payment processing expense. Shares outstanding as of April 30th was $37.6 million.
Cash on the balance sheet at April 30th was $90.3 million, flat from January 31, 2020, which includes the benefit of $1.7 million in proceeds from the issuance of common stock options. Cash flow from operations for the quarter was an inflow of $1.9 million versus an inflow of an even $2 million in the prior year quarter. Capital expenditures for the quarter were $3.1 million, up $400,000 year-over-year, and the $3.1 million includes $1.2 million of capitalized software development. In summary, we're proud of our performance in the quarter in spite of the effects of the pandemic, and I think we're ready to take your questions now. Operator?
Operator (participant)
At this time, we will be conducting our question-and-answer session. In order to ask a question, please press star, then the number one on your telephone keypad. In order to allow for as many questions as possible, we ask that you please limit your questions to one question with one related follow-up. You may then reenter the queue for any additional questions. Your first question comes from the line of Anne Samuel with JPMorgan. Anne, your line is open.
Anne Samuel (Executive Director)
Hi, guys. Thanks for taking the question. You spoke on the last call about virtual waiting rooms and other ways to help your patients, you know, feel safe returning. So what kind of demand are you seeing for those products? And is that still within your existing customer base, or are you starting to see maybe demand from, from new customers for that?
Chaim Indig (CEO)
Hi, Anne. Thanks, Annie, for the question. It's mostly been with our existing clients. And it's placed a ton of demands on our organization, setting up those workflows. You know, we turned on two-way chat so that you could actually wait in your car, you know, while you're waiting for the doctor. That's been wildly successful. I personally have used Phreesia's Virtual Waiting Room. My youngest daughter broke her leg about three weeks, I guess five weeks ago at this point. And I went to a Phreesia client, waited in the car, and they texted in a two-way text to check in, and then they told me when it was time to come in, and it was an amazing experience.
We also—I think there was an article that came out yesterday in The Wall Street Journal, which referenced one of our clients using Virtual Waiting Room. That's—and that was, that's a good example of that.
Anne Samuel (Executive Director)
That's great. I went to the doctor this week and waited an hour in the waiting room and wished that they had had the Phreesia Virtual Waiting Room.
Chaim Indig (CEO)
Oh, no.
Anne Samuel (Executive Director)
So I could have sat in my car. My next question is, you know, around the subscription base. You know, you were still able to achieve mid-single-digit growth in provider clients. So is it fair to assume that the sales process saw little impact, or was there some, you know, maybe February outperformance that drove that?
Chaim Indig (CEO)
No, I, I think it would be wrong to say the sales organization hasn't been impacted or our implementation. What we saw, a lot of the quarter was, just carry over from what, you know, so if you think that, most of our clients go live within 90 days, historically from when we've sold them, you know, we, we really worked really hard to get as many clients live, as we always do at the front of the quarter. And then a lot of those clients, we converted over to, what we call ZCI, so Zero Contact Intake, and kept taking them live all throughout the quarter. So a lot of that is the effect of, you know, very strong execution from the implementation team and a strong quarter end in Q4 last year.
Anne Samuel (Executive Director)
That's really helpful. Thanks, guys.
Chaim Indig (CEO)
Cheers.
Operator (participant)
Your next question comes from the line of Ryan Daniels with William Blair. Ryan, your line is open.
Speaker 14
Yeah, good morning. This is Darren for Ryan. Thanks for the questions here. You know, I'm curious, you know, we've heard a lot about, you know, companies focusing on digital patient-focused solutions, things like virtual waiting rooms and intake and telehealth and all this sort of thing. I'm curious if you've seen any early signs of changes in terms of market dynamics or your conversations with providers, specifically wondering if there are maybe any new players that you're starting to hear about in those conversations in this space that maybe you hadn't competed against in the past? And just any color here would be great.
Chaim Indig (CEO)
We In the 15, 16 years that we've been doing Phreesia, we've continuously seen new entrants come into the space and try their hand at what looks like a pretty easy thing to do. What's hard to do is patient intake at scale, and I sort of welcome the idea that there's more companies, you know, sort of making noise in the space because it's sort of rising tide lifts all boats. And most organizations, when they're looking for a solution, tend to look at us at the same time, right? As the market leader. But, you know, healthcare needs innovation, and the more companies investing in that innovation, the better.
Speaker 14
Yeah, got it. Yeah, that's, that's really helpful. And then, you know, maybe just a quick follow-up on the average revenue per provider client in the quarter. Obviously, there were, you know, some headwinds related to COVID-19, but you still saw growth there. I'm curious if you've seen any shifts to the extent that there is growth driving that line. Has there been any shifts in terms of the specific drivers just around whether the sort of balance between expanding and adding incremental seats with your existing base, clients adding more solutions or selling to larger clients overall?
Chaim Indig (CEO)
There's been some shift. I don't think we're prepared to go into detail about that, but that's a great question.
Speaker 14
Got it. Fair enough. All right, thanks a lot.
Chaim Indig (CEO)
Thank you. Be safe.
Operator (participant)
Your next question comes from the line of Stephanie Davis-Demko with SVB Leerink. Stephanie, your line's open.
Stephanie Davis-Demko (Senior Managing Director)
Hey, guys. Thank you for taking my question. Just, following up with the prior sales question from the queue. When you were not able to close a sale this quarter, how much of that would you attribute to a push-out in demand versus a competitive takeaway versus maybe something else?
Chaim Indig (CEO)
I don't think we've seen any change in competitive dynamics. I think mostly we've seen the same thing we've always seen, which is just bandwidth and budget when we haven't won a deal. And I'd say it's probably shifted way more to bandwidth and budget in conversations than traditionally. But, you know, I don't think we've seen something unnaturally happen. I think it's just hard.
Stephanie Davis-Demko (Senior Managing Director)
Right.
Chaim Indig (CEO)
It's hard to make decisions right now in a healthcare and economic environment that's rapidly changing.
Stephanie Davis-Demko (Senior Managing Director)
Yeah, it's tough to make choices in a very uncertain environment. So continuing on that thread with the uncertainty, you've seen some really early utilization improvements. Looking ahead, do you expect any areas where the recovery could be a bit more elongated, such as surgery centers, where it's just it would take a little more time in scheduling, so we could see some plateau in this recovery?
Chaim Indig (CEO)
So I'm sure that you guys have people with, you know, MPHs or, you know, PhDs and MDs that can give you a better view on what's gonna open when. You know, we understand when it's happening, but despite my mother's best desire, I never became a doctor. So I don't think I'm in a position to give a view on, you know, how and when pandemics will change and/or when health policy will change in certain states. I know that people need to get that care, and doctors wanna treat their patients. And you know, we know that PPEs become more widely available, and best practices are starting to change rapidly. So you know, do I think that this is a, this is a need or a want?
I think it's a need, and I think it's gonna happen as soon as, you know, governments, healthcare professionals, and patients feel comfortable about their safety.
Stephanie Davis-Demko (Senior Managing Director)
So maybe putting that another way, looking towards the end of the year, would it be wrong to assume a recovery back to par?
Chaim Indig (CEO)
Stephanie, I don't know. I have no idea. Like, if there's another massive second wave or a third wave, I have absolutely no idea, and I don't wanna predict on it, because that would be a disservice to all those people that have, you know, a lot more, a lot better background in that and to our investors.
Stephanie Davis-Demko (Senior Managing Director)
All right, understood. Thank you, guys.
Chaim Indig (CEO)
Cheers.
Operator (participant)
Your next question comes from the line of Sean Wieland with Piper Sandler. Sean, your line is open.
Sean Wieland (Managing Director and Senior Research Analyst)
Thank you. Good morning. So the numbers were clearly better than than we expected. You braced us last quarter for an air pocket, and maybe we got it in the payment processing business, but you know, clearly it's not as bad as it could have been. So my question is, you know, is this was this market related? You know, was the market. Did the market stay stronger than you anticipated? Were there elements of the model that were more resilient than you anticipated?
Chaim Indig (CEO)
You know, Sean, that's a great question. You know, if I had to put it on one thing, I'd put it on the, you know, just phenomenal execution of all parts of the Phreesia organization, that we were able to come out with product at breakneck speed, such as, you know, the things we do for virtual intake, the things we do for Zero Contact Intake. And those things allowed us to just sort of be top of mind for our implementations that we were kicking off and for our customers, that we were a needed solution. So I.
And then our implementation team just frontloaded as much as possible, and our client success team flipped over hundreds and hundreds and hundreds of practices to all different types of workflows in the middle of taking care of their kids. And we did it with, like, less resources than we probably would have had normally. So I would say it could have gone the other way, and the reason it didn't is just purely the team. Like, and I'm just sort of both thankful and proud of them.
Sean Wieland (Managing Director and Senior Research Analyst)
Okay, so the follow-up to that is, it sounds like, the new client adds in the quarter were mostly signed before the pandemic hit. So what's the cadence here that we should be looking at? If, if we saw an air pocket in the payment processing growth this quarter, you know, is there, is there an air pocket in new client growth to come, and how should we model that in the back half of the year?
Chaim Indig (CEO)
You know, I'm looking. I miss having Tom next to me at the table, because he'd probably be, we'd be communicating.
Sean Wieland (Managing Director and Senior Research Analyst)
There's no winking and nodding going on.
Chaim Indig (CEO)
There's no winking and nodding and Tom telling me what to say. It's what happens when we're all in different states right now. You know, I would say that right now I think we have 6-7, right? The rest have been reallocated to other parts of the organization. Although we are starting to ramp up hiring again to support our clients, and our future prospects, I would say it's not, I'd say our offering is something people want, but it's, you know, I don't think we're gonna see that same type of growth for the next couple quarters that we thought, and it's definitely gonna impact some of the subscription, and frankly, it's gonna impact cash flow.
Sean Wieland (Managing Director and Senior Research Analyst)
Okay. I'm sorry, I gotta ask a follow-up to the follow-up. I didn't understand that. SDRs, can you mention that again?
Chaim Indig (CEO)
Oh, those are our, those are our sales development representatives. So we, you know, those are the people that do most of our prospecting and qualifying and our future sales reps. So it's part of our early career program.
Sean Wieland (Managing Director and Senior Research Analyst)
Okay, you have how many?
Chaim Indig (CEO)
We had 65 people doing it. 65.
Sean Wieland (Managing Director and Senior Research Analyst)
Okay.
Chaim Indig (CEO)
Now we got seven.
Sean Wieland (Managing Director and Senior Research Analyst)
Where did those extra 58 people go?
Chaim Indig (CEO)
We spread them around the company, and they volunteered to do any and all types of jobs, sort of make sure that we could support our clients and move over their workflows. We basically moved them to all different roles in the company, support the organization. And it was important to us and important to them. It's been a great experience.
Sean Wieland (Managing Director and Senior Research Analyst)
All right, thanks for the info.
Chaim Indig (CEO)
Thanks, Matt.
Operator (participant)
Your next question comes from the line of Matthew Gillmor with Baird. Matthew, your line is open.
Matthew Gilmor (Managing Director and Senior Research Analyst)
Hey, thanks for the question. Chaim, you mentioned cash flow and DSOs were up a little sequentially. Was that due to the deferral program that you mentioned last call? And more broadly, could you just give us a sense for the financial health of the client base, and are you seeing any type of uptick with bad debt?
Chaim Indig (CEO)
I'll take the first part, and then I'll pass it to Tom to answer some of it. You know, look, I think, I think healthcare organizations are hurting. One of the reasons why we wanted to aggressively publish that data up till now with the Commonwealth Fund and Harvard, Harvard, is because we wanted to highlight the material impact ambulatory care was, was having by this pandemic. And you could see it in the payment volume, that we make a tiny piece of what they make. So if we're down this much, they are. And so I think all providers right now across the country are generally feeling some type of pain. But we have.
You know, I'll let Tom talk about sort of the days outstanding, and I know that we've seen a fair bit of impact from that. But I think, you know, most doctors went to medical school because they wanted to take care of patients, and I don't think this has deterred them from doing more of that. I think it's just caused them economic hardship, which is very sad, and I hope that as a society, we could support all these healthcare organizations. Tom, you want to answer the second part?
Thomas Altier (CFO)
Matt. Yeah, yeah, Matt, we are seeing some stretching out of payments. It was not unexpected, and we did increase our allowance, you'll see on the balance sheet, a little bit during the period. So we are gonna see a reduction in cash flow from operations in the second quarter as a result of that issue. And receivables did increase, which you've noted on the balance sheet.
Matthew Gilmor (Managing Director and Senior Research Analyst)
Got it. That's helpful. And then as a follow-up, I was hoping you could talk a little bit more specifically on the Life Sciences revenue. You continue to, you know, really meaningfully outperform. I think Tom had mentioned, you know, good momentum with the sales front. I was just hoping you could kind of give us a sense for what's going on. Are you delivering more messages, or do you, you know, just have sort of more opportunities given that the sales are up? Just trying to understand, you know, that dynamic and the sustainability.
Chaim Indig (CEO)
Our, you know, our Life Sciences organization has just done a phenomenal job of supporting their client, of all of our clients, being able to explain and educate the clients on the changing dynamics. Our Life Sciences partners have been wildly supportive of the work we've been doing. You know, just last year, Q1, was frankly lower than we had hoped, but so it was. I don't want to say it was an easier comp, but it was a significantly lower comp. And the team just executed and made sure that we had a seamless Q1, so a lot of the programs that had to be resubmitted and redone just sort of went through, as early as possible, giving us as much headroom as possible for the quarter.
So just yet again, that team, and I think I brought it up last quarter, they just did a really good job of just executing, focusing on our clients, and making sure that we are able to deliver the most valuable messages to the right patients.
Matthew Gilmor (Managing Director and Senior Research Analyst)
Great. Thank you.
Chaim Indig (CEO)
Thank you.
Operator (participant)
Your next question comes from the line of John Ransom with Raymond James. John, your line is open.
John Ransom (Managing Director)
Good morning, everybody. You know, clearly, you've got a piece of your business that's very volume-centric, which is the payment side, and you've got the subscription side of the business, which should be less volume-weighted. But if we think about the subscription business, let's just say hypothetically, visits are down 25% in a given quarter, how should we think about the effect on that business, you know, from a volume standpoint?
Chaim Indig (CEO)
John, uh-
Thomas Altier (CFO)
Chaim, you want me to answer that one?
Chaim Indig (CEO)
Yeah.
John Ransom (Managing Director)
I'm happy to just-
Chaim Indig (CEO)
John, can you repeat the-
John Ransom (Managing Director)
Chaim, you're out of silent.
Chaim Indig (CEO)
No.
John Ransom (Managing Director)
Yeah, so,
Chaim Indig (CEO)
Can you repeat that?
John Ransom (Managing Director)
If we think-
Chaim Indig (CEO)
Second part of the question, sorry.
John Ransom (Managing Director)
Yeah. So how do we think about the sensitivity of the subscription? So, so revenue per. The, the subscription revenue per provider, how is that, if at all, weighted to changes in volume?
Chaim Indig (CEO)
There's some, you know, the overwhelming majority, though, is not as much tied to volume. I'd say, yeah. Tom, did I get that right?
Thomas Altier (CFO)
Yeah, that's correct. Very few customers have a revenue tied to visits. It's generally we're on a per provider, per month revenue basis.
John Ransom (Managing Director)
I know your provider, a provider is not always a provider. A provider could include a large system, or it could be an individual doctor practice. But just at a high level, to use the baseball analogy, what inning are you in, in terms of, you know, up-tiering your customers from, say, the base subscription rate to something, you know, closer to the full monty in terms of your, all your, your full package of services?
Chaim Indig (CEO)
Oh, that's such a new way to ask the question. I don't think we'll ever—I don't think I've ever thought I'd be saying the full monty on an earnings call. So I think the best way to think about that is, you know, we're continuously trying to drive more of our clients to use more parts of our product. And I'd say we're in the very early parts of that for the vast majority of our clients. And frankly, we have parts of our offering that weren't around at the start of this year, such as Zero Contact Intake and Telehealth. So I think what.
John Ransom (Managing Director)
Right.
Chaim Indig (CEO)
We wanna sort of impress upon our investors is that, is something that's been important to us for our entire existence, is that we're gonna keep investing in innovation in healthcare. And so it's not just what we have today, it's what we will have. And we think that's really important for our mission, improving the healthcare experience. And I think the healthcare needs a lot of innovation, whether from us or from other stakeholders. And I just, I think that's important.
John Ransom (Managing Director)
Just the last follow-up, we shouldn't expect when you do your third survey with the Commonwealth Fund, at that time, you might give the market a glimpse of what's happening interquarter with your volume trends?
Chaim Indig (CEO)
I think I'm pretty sure that they're gonna do another, we're gonna do another release with the Commonwealth Fund.
John Ransom (Managing Director)
Mm-hmm.
Chaim Indig (CEO)
Because I think I saw internally a conversation around that, and if that's the case, you know, I know Balaji will file, work with the team, and we'll file an 8-K, and you should be able to see some trends. And we think that's important to drive the conversation on the impact this pandemic is having on the healthcare system and patients.
John Ransom (Managing Director)
Right. Okay, thank you very much.
Chaim Indig (CEO)
Thank you.
Operator (participant)
Your next question comes from the line of Donald Hooker with KeyBanc. Donald, your line is open.
Donald Hooker (Senior Equity Research Analyst)
Great. Good morning, everyone. So just to follow up on the earlier question on the Life Sciences revenues, I think you mentioned, I was scribbling notes down here, but I think you mentioned that there was a nice year-over-year, an easy year-over-year comp. But I guess the truth is even on a rolling four-quarter basis, those revenues have been really strong. Is there any kind of large project? I mean, how many programs are you working on there? Is there anything kind of one times? I know that you've mentioned in the past there's some lumpiness there, but is there any one kind of drug or brand that's maybe driving abnormally strong demand?
Chaim Indig (CEO)
It's a great question. I'm not gonna provide any guidance or view on that, but it's a great question, and I would ask the same kind of one. I would say that we don't provide much visibility on the number of programs we're doing and who we're doing them for. If you're really interested, you should go check into a doctor's office, and if that program is needed for your health, you could definitely see it.
Donald Hooker (Senior Equity Research Analyst)
Okay, fair enough. And then maybe just my one follow-up would be, you know, you come in, we all see the sort of the struggles of ambulatory providers in the U.S. right now. Has there been much need on your behalf to provide any sort of price concessions temporarily? Or, I think Tom mentioned some, maybe some lenient payment terms, but maybe on the revenue line, would there be any sort of concessions there that we should sort of brace ourselves for in the coming months?
Chaim Indig (CEO)
I'll let Tom answer.
Thomas Altier (CFO)
We haven't really. We just tried to be as flexible to our provider organizations and health system clients as possible. You know, I think if you do the right thing and you take the high road, you usually it's the road that's less traveled and the one I'd prefer to be on. So we'll do as much as possible to try to help our clients out, whether it's with product or workflow or implementation or training or pricing and/or deferral. So we try as best as we can. These people are doing really, really important work treating their patients, and I think that we have alignment between our board, our employees, and most of the investors that we've talked to have been not only supportive, but very happy that we're doing this.
Donald Hooker (Senior Equity Research Analyst)
Good. Thank you.
Operator (participant)
Your next question comes from the line of Glenn Santangelo with Guggenheim. Glenn, your line is open.
Glenn Santangelo (Senior Managing Director)
Oh, yeah, thanks for taking my question. Hi, just, I wanted to ask you quickly about the balance sheet. A few minutes ago, you talked about that the company wants to continue to invest in innovation, and I'm kind of curious if any of the dramatic changes in the market are making you rethink some of the strategic priorities or uses for the cash on your balance sheet, maybe with respect to M&A or any new strategic growth opportunities?
Chaim Indig (CEO)
You know, that's a great question. I think, you know, my general view is the, you know, the balance sheet that we have is really there to support our planned growth. You know, we've looked at things over the years. I think our core focus has been continuously innovating and meeting the needs of our clients and investing in, you know, the people we have and will have, and the clients that we will have. You know, M&A is not something that's top of mind, but it's not something that's off the table. It really, if it accelerates product development or adds the right members to the team, it's something we'll consider.
But I feel pretty strongly in our ability to continuously innovate and invest in client growth organically, and it's just been the way we've operated for, you know, 15, 16 years since Evan and I started the company.
Glenn Santangelo (Senior Managing Director)
Oh, okay. Maybe if I could just ask one quick follow-up question on the 5% client growth. It kind of sounds like, asking the question a different way, it kind of sounds like that the result this quarter was really due to strong execution from 4Q and maybe some, you know, good implementation in terms of this quarter. But as we think about the environment having, you know, changed pretty dramatically in mid-March, and you commented that it's impacting the selling process going forward, is it fair to say that we should maybe expect a little bit of an air pocket in terms of client growth, you know, as we look out to fiscal 2Q, just given the environment that we find ourselves in right now?
Chaim Indig (CEO)
Our seasoned IR guy, Balaji, says we shouldn't make those type of forward statements. So I'm looking at him shaking his head dramatically. So I would say that, you know, we had—you know, the team has worked really hard, and we did have a couple decent weeks at the start of Q1. So and, you know, I—it's not just the selling motion, it's, you know, our implementation organization, our customer success team, and the deployment of products that we've had. So I, I'm not gonna comment on air pocket, but I will say, just flat out, this is a, this is a very, very different environment than the one we were in, January and February, March, and, you know, the first couple weeks of March.
Glenn Santangelo (Senior Managing Director)
Okay, thanks for the comments.
Chaim Indig (CEO)
Thank you.
Operator (participant)
Your next question comes from the line of Jamie Stockton with Wells Fargo. Jamie, your line is open.
Jamie Stockton (Analyst)
Hi, good morning. Thanks for taking my questions. I guess maybe the first one, the Commonwealth data, the last release that I saw on that, I think was kind of second week of May data, that was down something like 30% year-over-year, or maybe versus the baseline, I guess. Is there any more recent kind of view of what you guys are seeing that you could give us, you know, closer to, you know, end of May or the first week of June?
Chaim Indig (CEO)
I don't think we're prepared to give any view on volume or how it's structured. If we do, it's gonna be released in conjunction with the Commonwealth Fund and Harvard, and it's really not. We're not doing this to give visibility to our investors. We're doing this to help participate in the policy debate and educate all the stakeholders in what's happening in the healthcare ecosystem, right? And if you guys get benefit from it, then, you know, that's good, good. But it's generally our view that we're gonna publish this in the same way we have been. And when we won't publish it anymore, we won't publish it anymore. But I think we still have it.
Jamie Stockton (Analyst)
Okay.
Chaim Indig (CEO)
I think it's coming out in a couple of weeks. Balaji, is that right?
Balaji Gandhi (VP of Investor Relations)
Yeah, that's right. I think end of June.
Chaim Indig (CEO)
I think they're targeting end of June.
Jamie Stockton (Analyst)
Okay. And then maybe just a quick question on the cost front. So I don't know if Tom wants to take this, or not, but, you know, the, the second quarter should reflect kind of a full quarter of, of, you know, trying to make sure that you guys are doing what you can to keep costs down. I guess I would be curious, you know, I know you, you don't have a ton of visibility into what the revenue is gonna look like, but theoretically, maybe there's a little more on the cost front. From a visibility standpoint, is there, is there anything specifically that we should be watching out for, as, as we kind of model the second quarter, from a cost standpoint?
Chaim Indig (CEO)
Jamie, I think we mentioned on the earlier call that we had frozen hiring, and we're gonna be looking at that again in the second quarter. I think we're gonna be increasing hiring. And, obviously, on travel, I think we're still gonna be highly restricted, so I'm not sure we're gonna see much movement there. But we are gonna see, we should expect some increase in expenses, and we're gonna definitely see a reduction in cash flow from operations in the second quarter.
Jamie Stockton (Analyst)
Okay, thank you.
Operator (participant)
Your next question comes from the line of Sean Dodge with RBC Capital Markets. Sean, your line is open.
Sean Dodge (Equity Research Analyst)
Thanks. Good morning. Maybe, Chaim or Tom, taking a little bit of a longer-term view of Jamie's question. You mentioned restarting hiring. I guess with visit volumes tracking back up again and looking like maybe on a path back to normal, was this a large-scale restart, or how are you thinking about balancing the re-ramping of spending and investing against what, you know, could be still a somewhat depressed revenue environment for the next couple of quarters?
Chaim Indig (CEO)
You know, I think we've decided as an organization to, you know, start rehiring in our early career program. And we have, you know, a whole bunch of people starting in next week in that program. We should expect larger cash flows this fiscal year versus last.
Sean Dodge (Equity Research Analyst)
Mm-hmm.
Chaim Indig (CEO)
I'll let Tom handle that. But one of the things that we found in sort of the long-term growth of Phreesia is that if we don't hire into our early career program now, it has a material, long-lasting effect in the years to come. Those people become, you know, our senior implementation leads in a couple of years, and some of them, like, I've watched them, some of you have met them, but I've watched them start their careers at Phreesia and turn into just these phenomenal leaders and rock stars at our organization. And so a lot of the bet we're making is not just now, it's on our future growth. Tom, you wanna handle the cash outflow issue?
Thomas Altier (CFO)
Yeah, as I mentioned, Sean, we expect cash flow from operations to be negative in the quarter and also for the full year, a bit higher than last year, a higher outflow than last year in terms of your modeling.
Sean Dodge (Equity Research Analyst)
Okay, that's helpful. Thanks. And then, then maybe a quick one on, on the telehealth offering. Are there any updates you can give us on, things like what proportion of your provider clients are, are using the solution, or maybe what, proportion of the payments you processed, during the quarter were derived from telehealth visits?
Chaim Indig (CEO)
I'm not gonna give visibility on the payment flow. I will say the majority of our clients are, you know, so more than 50% of our clients, I believe, approximately, have the telehealth offering.
Sean Dodge (Equity Research Analyst)
Okay.
Chaim Indig (CEO)
That's probably more info than I usually give.
Sean Dodge (Equity Research Analyst)
Thanks.
Operator (participant)
Again, if you would like to ask a question, please press star one on your telephone keypad. Your next question comes from the line of David Larsen with Verity. David, your line is open.
David Larsen (Managing Director)
Hey, can you talk a little bit about your relationship with RCM? And they obviously recently acquired Cerner RevWorks solution or the services tied to that. Like, is there any sort of near-term in-sell opportunity into Cerner's base? And how far along are you with the hospital solution, in an ideal world, like, when would that be up and running? Thanks.
Chaim Indig (CEO)
Those are, those are some great questions. You know, first, I'll, I'll make a comment on, you know, Joe, Joe and his team at, RCM have been, have been great partners. They have been... They're just phenomenal operators, and I think that they're, they have just the ability internally to be able to execute really well, and we're proud to have partnered with them till now and into the future. And we've really done a phenomenal amount of innovation with them. And I'll let them talk about, you know, the Cerner acquisition, because, you know, frankly, they know more about it than I ever will. And so, you know, all I could say there is that it's a, it's a really strong partnership that's just making a material difference to patients and to healthcare systems, and we're, we're really proud of that partnership.
You know, I think Joe and his team have done a phenomenal job, and we're really proud to partner with them. And I can promise you that as we have something to say around the hospitals and the acute space, Balaji will create a slide, and he'll make us talk about it. So that's sort of our view, and, you know, we're sort of stuck to it. We think hospital and acute is really hard. And, you know, we've done a little bit Memorial, which The Wall Street Journal published an article about yesterday. Memorial is using our solution in acute, probably much sooner than we would have anticipated.
So, we think we have something long term that could be of value, and when we have more visibility about it, we think it's our responsibility to educate our investors about that. And until then, we'll sort of punt on it.
David Larsen (Managing Director)
Okay, so Memorial is actually using your solution for acute care intake, you know, at their registrar sites now? It's fully functional?
Chaim Indig (CEO)
That's correct.
David Larsen (Managing Director)
Okay, great. And then with these 58 SDRs, what's keeping them from selling right now? I imagine that you have probably at least one SDR in each state, so they could probably drive to different physician offices. I mean, when, when will they be sort of back, you know, selling to, to doc offices in your mind? And, and, you know, if you have patient volumes have pulled in maybe 20%, I mean, physician offices are still seeing 80% of their workload. There's still activity there. What's preventing them from getting on the road right now and selling? When, when in your mind will they all be back in their roles, you know, operating in a sales capacity?
Chaim Indig (CEO)
I think we'll. So first off, just to clarify, most of them are in the RTP, North Carolina, Research Triangle area, not in the field, and it was mostly phone-based prospecting. You know, I think we'll start slowly ramping them up over the quarter. And a lot of it has to do with, you know, a lot of practices in calling on them. We found that a lot of it just has to do with bandwidth, right? So they still have a tremendous amount of furloughed staff, right? They still. You know, they're getting their volumes back, and just what we have to be thoughtful about is, you know, what and how do they want calls placed in them? Because we're playing a long game here, and a lot of this has to do with reputation.
You know, I've done that job early in my career, and you want to make sure that you're not on the wrong end of too many really angry people when you're cold calling. So we think that it's important, and we'll ramp it up slowly over the next couple of months, and I know those folks are itching to get back on the phones. It is a phenomenal group of individuals.
David Larsen (Managing Director)
Okay, great. And then, just last one, any color around bookings for the quarter or signed contracts that you can share? And if not, no, it's totally understandable.
Chaim Indig (CEO)
That is not something we have or ever will give visibility on, so.
David Larsen (Managing Director)
Okay.
Chaim Indig (CEO)
But it's a great question.
David Larsen (Managing Director)
Okay, thanks very much.
Chaim Indig (CEO)
Cheers. Thank you.
Operator (participant)
This concludes our question and answer session. I will now turn the call back over to Chaim Indig for closing remarks.
Chaim Indig (CEO)
Thank you, everyone, and I really appreciate everyone's interest in Phreesia and your support. We hope that everyone's staying safe and is really advocating for the needed social change that our society needs. I just want to thank all of my peers and teammates at Phreesia for their dedication and hard work. It means, it's the most proud thing to be able to work next to them, so, and I miss them, seeing them in person. Cheers, everyone.
Operator (participant)
Ladies and gentlemen, this concludes today's conference call. On behalf of Phreesia, thank you for participating. You may now disconnect.