Phreesia - Q4 2021
March 31, 2021
Transcript
Operator (participant)
Good morning, ladies and gentlemen, and welcome to the Phreesia fiscal fourth quarter and full year 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, 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 fiscal fourth quarter of 2021, which ended on January 31st, 2021. Participating on today's call from Phreesia, are Chief Executive Officer and Co-founder, Chaim Indig; Chief Financial Officer, Tom Altier; and Senior Vice President of Marketing and Business Development, Michael Davidoff. Following prepared remarks from Chaim, Michael, 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 within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. 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.
Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control, including without limitation, statements about our future financial performance, including our revenue, cash flows, cost of revenue, and operating expenses, our anticipated growth, our predictions about our industry, the impact of the COVID-19 pandemic on our business, and our ability to attract, retain, and cross-sell to healthcare provider clients. These statements are also subject to other risks and uncertainties, including those more fully described in our filings with the SEC, including in our annual report on Form 10-K, that will be filed with the SEC later today. The forward-looking statements made on this call speak only as of the date on which these statements are made.
We undertake no obligation to update and expressly disclaim the obligation to update any forward-looking statements to reflect events or circumstances, or to reflect new information or the occurrence of unanticipated events, except as required by 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 in 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 with our Form 8-K, filed after the market closed on March 30th with the SEC, and may also be found on our investor relations website at ir.phreesia.com.
As a reminder, we are participating on today's call from four different locations, so we appreciate your patience with us. I will now turn the call over to our CEO, Chaim Indig.
Chaim Indig (Co-Founder and CEO)
Thank you, Balaji. Good morning, and thank you for your interest in Phreesia. Our fourth quarter reflects continued solid performance. Total revenue was $41.8 million, up 27% year over year. The average number of provider clients was 1,808, up 13% year over year. Average revenue per provider client was $17,858, up 7% year over year. Life sciences revenue was $9.5 million, up 58% year over year. Adjusted EBITDA was -$85,000, a decline of $1.4 million year over year, reflecting our continued investment in long-term growth. Our performance over the past year was truly a team effort. There are two unique aspects of the past fiscal year that I would like to highlight and acknowledge. First, the transition to remote work.
From the earliest days of the pandemic, everyone at Phreesia has had to adapt to full-time remote work, often in the same living space as their roommates or families who are working or learning remotely as well. This has allowed us to continue to grow our team to over 800 folks who work tirelessly for our clients and their communities. Our team grew 55% in fiscal 2021, with growth spread across all areas of our organization: service and support, sales and marketing, research and development, and G&A. The recruitment and onboarding of hundreds of new team members in the pandemic environment was particularly challenging. There is no playbook to draw from. Our human resources team and managers across the organization adapted to the new environment by testing new approaches to recruitment and onboarding that we believe will strengthen our processes going forward.
We will continue to invest and learn together as we adapt our company to a permanently remote-first environment. Second, the development of new solutions such as our COVID-19 Screener, Intake for Telehealth, and Vaccine Delivery Management, all of which were not part of our near-term product roadmap when we entered fiscal 2021. These modules are helping our clients operate safely and efficiently through the pandemic. We saw significant client growth with our average provider client count in the fourth quarter, increasing by over 200 clients year-over-year. These clients range from small ambulatory practices who are onboarded quickly to large health systems that engaged us and will likely look to expand their relationship with us over time. We will continue to invest across the organization to support our work with all the new and existing clients. Finally, we grew through acquisition.
In October 2020, we integrated two web-based workflow applications co-developed by Geisinger and Merck that have focused on patient communication and medication adherence, respectively. In January 2021, we acquired QDoctor, an innovative company in our space who we have known for six years. Both of these additions to Phreesia were led by our operating executives. I've asked Michael Davidoff, our SVP of Marketing and Business Development, to join us today to provide an overview of the QDoctor acquisition. Michael?
Michael Davidoff (SVP of Marketing and Business Development)
Thank you, Chaim, and good morning, everyone. QDoctor was founded in 2013 by Patrick Randolph. Patrick and his team set out to address the need for providers to reduce patient appointment cancellations and no-shows and ultimately accelerate patient access to care. According to industry data, cancellations, reschedules, and no-shows can reduce a provider's revenue by over 20%. What attracted us to QDoctor was a set of high-value SaaS features that will expand the value of our appointment-based offerings. QDoctor's software is designed to identify patient appointment cancellations and no-shows and automatically fill those gaps in the schedule by pulling forward future patient appointments. We tracked QDoctor's progress in this space for many years and determined that it would take too long to replicate it through internal development.
In addition to QDoctor's strong product offering and cultural fit, roughly 1/3 of QDoctor's clients are existing Phreesia clients, which we believe speaks to the complementary nature of our products. As we indicated in our earnings press release, the total consideration for the acquisition consists of $5.8 million in cash paid on the acquisition date, $2.1 million of liabilities incurred, and $2.2 million in performance-related contingent payments. Over time, we believe the underlying QDoctor technology will enhance our appointment-based solution and the overall value of the Phreesia platform to healthcare providers and patients. I'll now turn the call back to Chaim.
Chaim Indig (Co-Founder and CEO)
Thank you, Michael. Before handing it over to Tom for his final quarterly review of the financials, I would like to acknowledge Tom's contributions to Phreesia. Tom joined us in 2012 and brought with him half a century of experience in public accounting and growing technology businesses. He played an important role in our successful transition from a small venture-backed company to the Phreesia that was introduced to all of you through our IPO in 2019. I speak for the entire Phreesia team, including our board of directors, in thanking Tom for his contributions and wish him and his family all the best as he begins his next chapter in semi-retirement at the end of April. Going forward, we will also benefit from his experience in a new advisory role, and I will continue to enjoy his friendship. Tom?
Tom Altier (CFO)
Thank you, Chaim, and good morning, everyone. I'll review the income statement, balance sheet, and cash flows for the fiscal fourth quarter and update our outlook for fiscal 2022. First, total revenue was $41.8 million, up 27% year-over-year. Subscription and related services revenue was $18.8 million in the quarter, up 25% year-over-year. Payment processing fee revenue was $13.4 million in the quarter, up 15% year-over-year, reflecting a continued recovery in patient visit trends, but still slightly below pre-pandemic levels. Provider revenue, which combines revenue from subscription and related services with payment processing fees, was $32.3 million in the quarter, up 21% year-over-year.
The two drivers of the 21% provider revenue growth in the quarter were average provider client growth, up 13% year-over-year, and average revenue per provider client, up 7% year-over-year. As we indicated last quarter, provider client growth has been trending higher, reflecting increased demand for our offerings. That being said, our land and expand go-to-market strategy tends to result in quarter-to-quarter variability between the contribution of client growth and revenue per client. This has been the case for many years as our historical results show. Life sciences revenue was $9.5 million in the quarter, up 58% year-over-year. Our team continues to execute on closing new business and delivering messages to very targeted patients. Now let's move on to expenses.
I will review several expense line items on an adjusted non-GAAP basis, which excludes stock-based compensation expense from 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 Form 10-K to be filed with the SEC. Cost of revenue was $6.8 million, or 16.2% of total revenue, up 320 basis points year-over-year. The year-over-year trend reflects the ramp-up we discussed last quarter in our client services organization to support our growth. On a sequential quarter basis, cost of revenue as a percentage of revenue was down 10 basis points. Sales and marketing expense was $12 million, or 28.7% of total revenue, up 530 basis points year-over-year.
The increase reflects the accelerated investments we previewed earlier in the fiscal year to support our current and future anticipated growth. Research and development expense was $5.9 million, or 14% of total revenue, up 10 basis points year over year as a percentage of revenue. Note that we expect the pace and level of investment in R&D to accelerate over the next several quarters, and dollars will be allocated across the existing platform as well as into new products and solutions. General and administrative expense was $9.5 million, or 22.8% of total revenue, down 180 basis points year over year as a percentage of revenue. We continue to ramp up public company expenses, particularly in finance and legal, and we expect to begin to see operating leverage in the fourth quarter of fiscal 2022.
Payment processing expense was $7.8 million, up 12% year-over-year. Payment processing margin was 42%, up 120 basis points year-over-year, due to the mix of transaction type and lower cost routing of payments. Longer term, we expect payments margins to return to the 40% range with a quarter-to-quarter variability due to transaction type mix and interchange fees. Adjusted EBITDA was a loss of $85,000, a decline of $1.4 million year-over-year. The decline is largely due to the acceleration in investment across the company, but most notably in sales and marketing in the fourth quarter, as we capture the growth opportunities we are seeing in the market. Shares outstanding as of March 26 was 44.9 million.
Cash on the balance sheet at January 31st was $218.8 million, down $35.3 million from October 31st. However, we paid down our $21 million revolver in the fourth quarter. Cash flow from operations from the quarter was $4.1 million, compared to $1.3 million in the prior year quarter. Capital expenditures for the quarter were $7.5 million, up $4.3 million year-over-year. The significant increase reflects our ramp-up in data center equipment purchases and capitalized software to support our growth. Our outlook for revenue growth in fiscal 2022 remains 20%-25%, which translates into a revenue range of $178 million-$186 million.
We expect our overall cash outflow to increase in fiscal 2022 compared to fiscal 2021, as we continue to ramp up hiring and infrastructure across the organization to support our anticipated growth. In closing, the past eight years with Phreesia have been an incredible journey, and I'd like to thank Chaim and the entire Phreesia team for their partnership and support, and I wish the best to Randy and the finance team members who have been so dedicated to our mission and growth over the years. We're ready to take your questions. Operator?
Operator (participant)
Thank you. 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. Your first question comes from the line of Ryan Daniels with William Blair. Ryan, your line is open.
Jared Haase (Analyst)
Yeah, good morning. This is Jared Haase for Ryan. Thanks for taking the questions. Just wanted to ask maybe a quick one to start on the life sciences revenues. Obviously, that was strong again, both on a year-over-year basis, as well as sequentially versus last quarter. And I think last quarter, you talked about, you know, kind of continuing to make some investments and maybe feeling a little bit better about the team and kind of where that product line is positioned in the marketplace. So just curious if the strength here this quarter has more to do with any sort of seasonality factors, you know, thinking maybe year-end budget flush with pharma clients, or is it really just, you know, kind of continued execution with the sales team and just a really strong demand environment?
Chaim Indig (Co-Founder and CEO)
Good morning. You know, I love talking about our life sciences org. What I'd say is that it's just execution. You know, I wanna, as much as I'd love to be able to point to a one-time, seasonal thing, like, at the end of the day, the team has just been doing a really good job of really focusing on clients and making sure that we deliver phenomenal value and strong ROIs, and are clearly articulating our value.
Jared Haase (Analyst)
Got it. Yeah, thanks for that. That, that's good color. And then, yeah, I guess just maybe a bigger picture question, kind of thinking more longer term. You know, given, you know, all the things that have kind of changed from a demand perspective over the last year or so and, and product lines that you have developed, as well as the pace of hiring, and the way in which you've kind of transformed the cost structure a little bit, is there any reason to think about, you know, any sort of meaningful difference in your longer term, you know, margin targets for the business? Or you still feel like, you know, eventually getting to maybe 20% Adjusted EBITDA margin is the right sort of longer term target?
Chaim Indig (Co-Founder and CEO)
That's still the right target for us. I know—I think the only thing we've done is increase our investment levels to support what we see as our ability to grab unfair share of market. We're very enthused. This is my excited voice. We're very enthused about the reaction and feedback we're getting from our client base, and we're gonna keep leaning in and investing to capture that share.
Jared Haase (Analyst)
Okay, great. Thanks for that.
Chaim Indig (Co-Founder and CEO)
Cheers.
Operator (participant)
Your next question comes from the line of Stephanie Davis with SVB Securities. Stephanie, your line is open.
Stephanie Davis (Senior Managing Director)
Hi, guys. Thank you for taking my questions and congrats on the quarter. So looking at your, your three revenue lines as you look forward to next year, you've got a likely acceleration in your subscription growth because you just had a huge Salesforce investment. You have likely acceleration in payment processing because of easy COVID comps. So that leaves life sciences as the plug to make 20%-25% growth. But all market signals and recent performance there suggest that that shouldn't be decelerating dramatically. So could you help me reconcile that?
Chaim Indig (Co-Founder and CEO)
I can't reconcile your numbers, and I tend not to run the business by plugging. But I will say that we feel that the investments we've made across the board are, are really paying off, and all of our early indicators that we see are very, very positive. And I think life sciences is, our life sciences team is capturing also an unfair share of market gains, too. So we feel good across the board. But that being said, I have no idea what the recovery is gonna look like, and we just know that we're gonna keep supporting our clients any which way possible.
Stephanie Davis (Senior Managing Director)
Maybe asked another way, is there anything that will cause deceleration in that life sciences revenue?
Chaim Indig (Co-Founder and CEO)
I'm sure if you, like, thought enough ways, there's ways you could decelerate it, but we're really focused on continued growing it. I don't know if that... You know, like, I don't really wake up and think about how I could decelerate the business.
Stephanie Davis (Senior Managing Director)
Okay, fair.
Chaim Indig (Co-Founder and CEO)
That's right.
Stephanie Davis (Senior Managing Director)
Then, uh-
Chaim Indig (Co-Founder and CEO)
Like, we're pretty pumped about all—like, just everyone's sort of running hard here, so we're really excited.
Stephanie Davis (Senior Managing Director)
How do you get to only, like, at the midpoint, three points of revenue growth acceleration?
Chaim Indig (Co-Founder and CEO)
The numbers get bigger?
Stephanie Davis (Senior Managing Director)
No, I'm. I get that. The point is the only three points. It's not that three points is so low.
Balaji Gandhi (VP of Investor Relations)
Yeah, I mean, Balaji, Stephanie, I'd just say, you know, that acceleration in and of itself is, you know, a move up from our growth rate historically. So you just have to sort of take it that way.
Stephanie Davis (Senior Managing Director)
Okay, fair. And, a quick follow-up on the QDoctor is, it sounds like there's only a third overlap in your client base. Are you going to use this more as a capabilities expansion, or is there a cross-sell opportunity for, for incremental revenue there? Is that 2/3 that doesn't have it?
Chaim Indig (Co-Founder and CEO)
We both think this is capabilities, and it will allow us to cross-sell other applications. It will fit into applications that we are cross-selling to our client base. You know, it's already integrated, and we've had early success to date already. So it's been good.
Stephanie Davis (Senior Managing Director)
All right. Thank you.
Chaim Indig (Co-Founder and CEO)
Cheers.
Operator (participant)
Your next question comes from the line of Scott Schoenhaus with Stephens. Scott, your line is open.
Scott Schoenhaus (Healthcare IT Equity Research Analyst)
Thank you. Hi, Chaim and team. I wanted to ask you a balance sheet-related question I thought was interesting. Property, plant, and equipment nearly doubled from last quarter. I wanted to see if you could provide more color on what investments you're making there and what that means for your business.
Chaim Indig (Co-Founder and CEO)
We're making, because of the big ramp in volume, we're also making fairly significant investments in data centers. So a lot of that is just to add significantly more capacity.
Scott Schoenhaus (Healthcare IT Equity Research Analyst)
Is that also a sign that you're continuing to succeed upmarket into larger hospital systems, you need these larger data centers or more data centers?
Chaim Indig (Co-Founder and CEO)
Look, to be clear, I think we're succeeding not just in large health systems, in the mid-tier and large ambulatory groups and surgery centers, but frankly, I think the team is doing a phenomenal job across the board. I, I think we've had some really nice wins in all the markets that we've been tackling. I'm, I'm just very pleased. And so we wanna make sure that we continue to invest, to continue to support the market share gains that we're winning.
Scott Schoenhaus (Healthcare IT Equity Research Analyst)
Great. Just a follow-up there. So you're obviously seeing success in selling to, you know, across the board of client base and taking share. How does this - how does the dynamic change between provider-client growth and average revenue per pro- per client, given these larger land and expand opportunities with larger hospital systems? Just to be specific there, the cross-selling and upselling opportunities once you expand into these systems. Is there a way to think about, you know, the average revenue per provider growth kind of accelerating in the back half of the year into, you know, fiscal 2023? Just trying to get more color there.
Chaim Indig (Co-Founder and CEO)
Yeah. I think when you think about one of the things that, that we pointed out, even in our TAM, we didn't think that we were gonna be able to grab as much payment volume in the large hospital system, so you're seeing some of that shift happen. But look, we're all, you know, and we're all- we view those metrics as tightly tied together, both average revenue and revenue per client. Those are metrics that internally, the entire leadership team is strongly tied to.
Scott Schoenhaus (Healthcare IT Equity Research Analyst)
Thanks. Thanks, Chaim.
Chaim Indig (Co-Founder and CEO)
Sure.
Operator (participant)
Your next question comes from the line of Sean Wieland with Piper Sandler. Sean, your line is open.
Sean Wieland (Research Analyst)
Hi, thank you. Good morning. I'd like to better understand, you know, payments up 15%, life sciences revenue up 58%. I would suspect that both of those have at least some correlation to visit volume. Can you discuss what the, you know, the separation there is?
Chaim Indig (Co-Founder and CEO)
There is some correlation to visit volume. You're correct. But the life sciences revenue has other drivers to it, as does the payment volume. You know, since we did see a slight drop in our payer mix was tied to Phreesia. But we've also done a great job of cross-selling more visits to different life sciences customers using our significant investment in data science.
Sean Wieland (Research Analyst)
Okay. So, can you just as a follow-up, you know, what was the overall trend in visit volume for the year across the platform? And how is pricing holding up in the payments business?
Balaji Gandhi (VP of Investor Relations)
Hey, Sean, this is Balaji. Hey, the Commonwealth data, which we've been putting out, I mean, we wanna be clear, we don't disclose visit data as a KPI or anything like that. But you can see, you know, the data from Commonwealth, which spans pretty much the entire fiscal year, that it basically got within low single digits of pre-COVID levels by the end of the year. But overall, I mean, it was clearly down year-over-year. So that helps you. And it's more tied to payments, as Chaim said, than it is to life sciences. There's some nuance to life sciences, but payments, there's much more of a direct impact.
Scott Schoenhaus (Healthcare IT Equity Research Analyst)
Okay. And how about the pricing in the payments business?
Balaji Gandhi (VP of Investor Relations)
Can you be more specific on that?
Sean Wieland (Research Analyst)
Can you characterize the pricing environment in the payments business?
Chaim Indig (Co-Founder and CEO)
It's-
Sean Wieland (Research Analyst)
Your pricing.
Chaim Indig (Co-Founder and CEO)
Sean, I think you're talking about our take rate.
Sean Wieland (Research Analyst)
Yes.
Chaim Indig (Co-Founder and CEO)
Is that correct?
Sean Wieland (Research Analyst)
Yes.
Chaim Indig (Co-Founder and CEO)
Yes, it's been pretty flat, sequentially. It's down, it's down like a hair, but not much sequentially.
Sean Wieland (Research Analyst)
Okay. Thank you very much.
Operator (participant)
Your next question comes from the line of Hannah Baade with D.A. Davidson. Hannah, your line is open.
Hannah Baade (Equity Research Analyst)
Hi, thanks for taking my question. As Phreesia moves upmarket with larger health system clients coming online, putting pressure on the percent of patient volumes processed through Phreesia, can you ballpark where we should expect this percent to moderate?
Balaji Gandhi (VP of Investor Relations)
Can you repeat that, Hannah?
Hannah Baade (Equity Research Analyst)
Yeah. On the 79% this quarter of patient volume processed through Phreesia, obviously as Phreesia moves more upmarket, the larger health system clients coming online, that's gonna put some downward pressure on that statistic. Can you ballpark where we should expect this to moderate as you move more upmarket?
Balaji Gandhi (VP of Investor Relations)
Yeah, I mean, I think, you know, I'll let Chaim and Tom follow up on this one, but it's a function of, you know, just the types of clients we add quarter to quarter.
... Because so there's definitely mix in there, so it's hard for us to, I think, tell you, you know, what the PayFac rate's gonna be. You know, there's a little bit of chicken and egg there, but I think, but I think, and Tom can weigh in here, but that change, the delta in that percentage is a reflection of moving up market and the decline that you saw. Anything you want, you wanna add, Chaim or Tom?
Tom Altier (CFO)
No, I don't think so. As we add health systems, and if they don't take payments, you'll see that decline.
Hannah Baade (Equity Research Analyst)
Okay, thank you. That's very helpful. Just one follow-up. With a recent and likely episodic shift to vaccines at mass vaccination sites, pharmacies, and grocery stores, as opposed to traditional ambulatory care centers, are you seeing any customers impacted in regards to the visit uplift that they might have been expecting specifically for COVID vaccines?
Chaim Indig (Co-Founder and CEO)
I'm not sure I understand the question. Can you try again?
Hannah Baade (Equity Research Analyst)
Yeah, absolutely.
Chaim Indig (Co-Founder and CEO)
Okay.
Hannah Baade (Equity Research Analyst)
Vaccines kind of may shift away from a traditional doctor's office in an outpatient care center to, say, a CVS. Have you seen any customers kind of be impacted in regards to customer revenue they were expecting to get in office, because vaccines have shifted to kind of these external care centers, like a pharmacy?
Chaim Indig (Co-Founder and CEO)
I don't think our clients, and this is conversations we've had with them, are waking up thinking that vaccines are a revenue driver. I think that what we're seeing is they our, our clients and provider groups and health systems are mostly looking at this as, how do they vaccinate their communities as fast and effective as possible? And I, I know of a bunch that are partnering with the pharmacies locally and other organizations. Like, I think the goal, Hannah, is to try to vaccinate the population as effectively as possible, not to think about this as a profit driver. And we don't monetize it in, in a meaningful way.
Hannah Baade (Equity Research Analyst)
Got it. Thanks, guys.
Chaim Indig (Co-Founder and CEO)
Thanks.
Operator (participant)
Next question comes from the line of Ryan McDonald with Needham. Ryan, your line is open.
Ryan MacDonald (Managing Director and Senior Equity Research Analyst)
Yes, good morning. Tom, best of luck in semi-retirement. Great working with you.
Chaim Indig (Co-Founder and CEO)
Thanks.
Ryan MacDonald (Managing Director and Senior Equity Research Analyst)
I guess my first question... Yeah, thanks. My first question is, I guess, for Chaim. You know, obviously seeing some continued strength in new logo growth, curious to see how, hear how the newest group of SDRs that you added in throughout 2020 are impacting that new customer logo growth. How are they ramping in terms of productivity versus your internal expectations?
Chaim Indig (Co-Founder and CEO)
You know, I've been really—I've been very pleased would be an understatement. I sat through one of the weekly demand gen calls last week, and I know Tom sat through a couple of them, too, and they're just doing a good job. They're really able to reach out to people effectively. They're doing their calls effectively. We're seeing good demand gen. We're—I'm—I don't wanna say I'm pleasantly surprised, because I'm not surprised, 'cause we have a phenomenal organization, but they're doing as expected. And we're very excited for the new group of folks that we have on the team.
Ryan MacDonald (Managing Director and Senior Equity Research Analyst)
Great. And as a follow-up to that, as you sit on those types of calls and listen to the dynamics of the market, is there anything that you're seeing in terms of incremental change in whether it's, you know, heightened demand or as your reps are out, you know, talking to prospective customers, is there noise of other vendors sort of in that are in the same markets right now? We've certainly heard a lot of noise from a financing of other vendors in this space, but I'm curious to hear how early stage the market opportunity still is here?
Michael Davidoff (SVP of Marketing and Business Development)
I think, you know, we've always heard noise for 16 years. Everyone's always... I've always thought that, well, this space is easy to be in, and delivering solutions is all it requires is a website or a press release. Our general view is raising money and putting out websites and press releases doesn't create product that drive a phenomenal amount of value.
Ryan MacDonald (Managing Director and Senior Equity Research Analyst)
Mm-hmm.
Chaim Indig (Co-Founder and CEO)
So I think what we're doing is making sure that our customers get products that drive a phenomenal amount of value at great value, and then-
Ryan MacDonald (Managing Director and Senior Equity Research Analyst)
Mm-hmm.
Chaim Indig (Co-Founder and CEO)
rolling out and trusting us even more for more products. And that, that thesis has proved phenomenally well for years, and we're not seeing any change in it. You know, I think what, when we use usage as our North Star, we wanna make sure not that we just get our product sold, but that patients use it, and we transfer the work to the patient, you get this amazing ROI. So I don't, like, I don't think now is any different. I just think that the numbers get bigger and the press releases get louder.
Ryan MacDonald (Managing Director and Senior Equity Research Analyst)
Great. Thanks for the color and, congrats again on a good quarter.
Chaim Indig (Co-Founder and CEO)
Cheers.
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)
Yep, thanks, good morning. Maybe on the acute care opportunity, when we think about, timing and a potential ramp from that, is there anything you can share with us to kind of help better frame that out? And obviously, hospital workflows are a lot more complicated. So is it just a, a lot of, de novo development work you're having to do? Is it a lot more integration work? How far along do you think you are on that? And then I'd imagine sales cycles, sales processes are different, too. Anything, anything just to kind of better frame out timing?
Chaim Indig (Co-Founder and CEO)
... Look, I think we're gonna keep investing. I don't think this is the fifth inning, it's probably closer to the second inning. And, you know, we're seeing real value propositions and wins, and yeah, we're gonna keep investing heavily, in the product, in the workflow, in the integrations, in the people, in the process, and in the value that we provide our clients. If we just keep rinsing and repeating with the same formula, and we keep doing it at scale, I think we're gonna keep having the success that we've had previously and hopefully at even greater degrees.
Sean Dodge (Equity Research Analyst)
Okay, and then,
Chaim Indig (Co-Founder and CEO)
Just to clarify, we don't have any data to say that the sales cycle is longer.
Sean Dodge (Equity Research Analyst)
Okay. Maybe on social determinants, it was about a year ago now, you guys began to highlight the work you were doing there. I think it was initially in North Carolina, building in the ability to screen for those, integrating that into the intake process. Is there any interesting developments, updates you can share there?
Chaim Indig (Co-Founder and CEO)
Yeah, I think we've been doing a bunch of work, and Michael could talk to this also, around vaccine hesitancy in different communities, and understanding vaccine hesitancy, and understanding the impact of the virus on different communities, often tied to their social determinants. But this is an area, this is an area which we have not slowed down our investment, and we think it makes a material difference to healthcare delivery and patients in America. Michael, you want to add to that?
Michael Davidoff (SVP of Marketing and Business Development)
Yes, Chaim, thanks, thanks for the question. I think I would just add that, you know, we're continuing to invest in our clinical team and expanding that group, and they're doing some incredible work with measuring hesitancy and working with our clients to really understand how they can improve the ability of the delivery of the vaccine to groups that just might not be comfortable getting the vaccine right now. So we're, you know, it makes us extremely proud and really speaks to the mission of the company.
Sean Dodge (Equity Research Analyst)
Okay, great. Thanks again.
Operator (participant)
Your next question comes from the line of Daniel Grosslight with Citi. Daniel, your line is open.
Daniel Grosslight (Senior Research Analyst)
Hi, guys. Thanks for taking the question, and congrats to a strong quarter. I just have a quick question on the payment, patient payment volume. If I divide patient payment volume by the average provider client in the quarter, I get a sequential increase versus Q3 of about 1% versus an 8% sequential increase from Q2 to Q3. So, I'm just curious of any trends you've seen recently on the payments, the patient payment volume per provider growth. Was the large sequential increase in Q3 due to a bolus of larger clients coming onboard, et cetera? And how should we think about the growth in patient payment volume per provider for fiscal year 2022?
Chaim Indig (Co-Founder and CEO)
Tom, do you want to get that?
Tom Altier (CFO)
There's a lot in that question, so maybe just to break it down, Daniel. So, and Tom, maybe the first part is, it was sequentially, Daniel, you're trying to understand payment volume trend from ... Was it Q2 to Q3, or Q4 toQ4?
Daniel Grosslight (Senior Research Analyst)
Exactly. So I, I'm trying to understand the patient payment volume per provider client, sequential growth trends, because it, you know, it grew pretty rapidly in 3Q, about an 8% sequential increase per provider, and then slowed to around a 1% sequential increase. Still very, very good relative to historical, but a sequential slowdown. So, I'm just trying to understand the, the trends underlying the sequential growth in payments per provider and how to think about that in, in 2020- fiscal year 2022.
Balaji Gandhi (VP of Investor Relations)
Dan, I think, I think there's probably some seasonal impacts in there and some impacts from our land and expand strategy that make it somewhat difficult to answer that question crisply. You know, the decline in per provider patient payment volume has a lot of factors that go into it, size of the customers, et cetera. So it's tough for me to give you a forecast as to what that's gonna be in the future.
Daniel Grosslight (Senior Research Analyst)
Okay. Okay, understood. All right, and, and then I guess, another question I have is, on the, vaccine rollout, there's been some good press reports on how you've been helping some of your clients with the, the intake process there. And I know you're giving those capabilities away free of charge, similar to what you did, with, with telehealth modules. But I'm curious how you may leverage some of the goodwill or the learnings that you learned, during the vaccine rollout, into, a growth acceleration in, fiscal year 2022, i.e., will this accelerate some of the sales prospects, that you had in the, pipeline?
Chaim Indig (Co-Founder and CEO)
I think it helps us. I think all these things, you know, when you do right by clients, and you build really amazing products that help massive amounts of people, the general view that I have and everyone here has, is positive outcomes usually follow, and that's something we've seen traditionally and untraditionally through our entire existence in 16 years. So it's not a halo. I think we've built some really amazing products that have helped us win clients because of it. We have won clients because of it, and our clients feel really good about us being able to support them through tough times, and that's, you know, that's part of the relationship that we build. So, but also it's just the right thing to do.
You know, I want everyone to understand that we will always endeavor to try to always do the right thing. It's important.
Daniel Grosslight (Senior Research Analyst)
Understood. All right, guys. Thanks.
Operator (participant)
Your final question comes from the line of John Ransom with Raymond James. John, your line is open.
John Ransom (Managing Director)
Good morning. Chaim, I think you need to practice that excited voice a little bit. That wasn't all that excited. But the question I have is recently, Visa, MasterCard talked about maybe bumping up the interchange fee. You know, they pulled back after some political pressure, but just help us size if that does go up, what does that mean for your payments business?
Chaim Indig (Co-Founder and CEO)
Um-
Balaji Gandhi (VP of Investor Relations)
Hey, Chaim, you want me to take this?
Chaim Indig (Co-Founder and CEO)
I do. Well, give him your excited voice first.
Balaji Gandhi (VP of Investor Relations)
Okay.
Chaim Indig (Co-Founder and CEO)
Give him your... Because you were pretty excited about that.
Balaji Gandhi (VP of Investor Relations)
Hey, John, I think they announced about a 10 bps increase in their list prices in January or February. And that's what they backed off on, I assume. That's a rumor. I don't know the exact number, but that's what I read in the press as to what their price increases would have been on a list price basis in April. So that gives you some size on it.
John Ransom (Managing Director)
So, can you translate that to Phreesia revenue in case our calculator down here is broken, if it does get through?
Chaim Indig (Co-Founder and CEO)
It means that we don't have to pass on an increased cost to our providers. So it means that Visa, MasterCard, unfairly taxing healthcare providers in America, just got put on hold for a little bit. It's pretty. It was a good thing.
John Ransom (Managing Director)
Okay.
Chaim Indig (Co-Founder and CEO)
You know, and I think it's really-
John Ransom (Managing Director)
Um.
Chaim Indig (Co-Founder and CEO)
It's great that they have that pressure.
John Ransom (Managing Director)
Okay, gotcha. The other question, and I'll probably be the only guy that doesn't understand this, but could you say again why, as you transition to larger clients, your—that 79% ratio that you referred to, that puts some pressure on that number? Or why is that ratio lower than it is when you're doing mostly smaller doc offices?
Chaim Indig (Co-Founder and CEO)
In the sales cycle, what we've often found is in very large health systems, the treasury group of the large health systems have tight relationships with large banks, and often they give them their credit card processing as part of those relationships. And so it often takes some bit of maneuvering to be able to pry that away from the banks who are unfairly charging and taxing them for it. So that's generally what we've seen, and it's often tied to lending relationships.
John Ransom (Managing Director)
I got you. Okay.
Chaim Indig (Co-Founder and CEO)
Okay.
John Ransom (Managing Director)
You know—
Chaim Indig (Co-Founder and CEO)
Go ahead. John, you there?
Operator (participant)
John, if you would like to press star one to queue up.
Chaim Indig (Co-Founder and CEO)
We left John Ransom.
Operator (participant)
John, line is now open.
John Ransom (Managing Director)
Man, she, she cut me off. Reminds me of home. The jump in SDNR, is that... I'm sorry, marketing, is that mostly just a headcount issue in SDNR, or is there something else going on there?
Chaim Indig (Co-Founder and CEO)
Yep, it is. It costs investing in, you know, that future team.
John Ransom (Managing Director)
Great. Thank you.
Chaim Indig (Co-Founder and CEO)
That's more sales. Thank you.
Operator (participant)
This concludes our question and answer session. I'll now turn the call back over to Chaim Indig for closing remarks.
Chaim Indig (Co-Founder and CEO)
Thank you, everyone, and thank you again, Tom, for your last earnings call, and we appreciate everyone's support, and we'll talk to you in a couple of months. Cheers.
Operator (participant)
Ladies and gentlemen, this concludes today's conference call. On behalf of Phreesia, thank you for participating. You may now disconnect.