Phreesia, Inc. (PHR)·Q2 2025 Earnings Summary

Executive Summary

• Q2 FY2025 delivered 19% YoY revenue growth to $102.1M and improved profitability metrics; Adjusted EBITDA was $6.5M and free cash flow turned positive at $3.7M, marking a key inflection in cash generation .
• Healthcare network scale expanded: AHSCs reached 4,169 (+21% YoY), while Total revenue per AHSC declined 2% YoY to $24,494 due to the accelerated wind‑down of a clearinghouse client; excluding clearinghouse, YoY total revenue per AHSC was flat .
• Guidance: FY2025 revenue maintained at $416–$426M, but Adjusted EBITDA raised to $26–$31M (from $21–$26M), reflecting stronger execution and margin focus; management expects AHSCs ~4,200 in FY2025 and ~4,500 in FY2026, with Total revenue per AHSC increasing in both years .
• Stock reaction catalysts: positive free cash flow, stronger EBITDA outlook, and continued momentum in Network solutions; management emphasized larger deal sizes (~20% higher vs last year) and operating leverage, supporting medium‑term growth confidence .

What Went Well and What Went Wrong

• What Went Well

  • Positive free cash flow for the first time as a public company ($3.7M) and operating cash flow +$11.1M, improving $20.4M YoY; CEO called it “the start of a new era” for deploying internally generated cash .
  • Network solutions revenue grew 23% YoY, continuing to differentiate Phreesia’s offering at the point of care with public health and life sciences partnerships (e.g., vaccination education, AAP MMR campaign) .
  • Operating leverage: Sales & Marketing down $7.1M YoY to $30.2M; Adjusted EBITDA improved to $6.5M from -$11.5M YoY, aided by disciplined expense management and larger deal values (~20% higher) in the pipeline .

• What Went Wrong

  • Clearinghouse client wind‑down pressured Payment processing growth (down ~2% impact to YoY total revenue growth; -9% YoY impact to Payment processing fees growth), and lowered Total revenue per AHSC (-2% YoY) .
  • Take rate declined to 2.86% (vs 2.91% YoY), and Payment processing expense remained high at 66% of Payment processing revenue, constraining Payment processing margins .
  • ConnectOnCall after‑hours service disruption persisted through parts of Q2 (partial restoration in July/August), creating operational effort to remediate, though not material financially per management .

Financial Results

Segment revenue breakdown:

KPIs and payment metrics:

Notes:

• Clearinghouse wind‑down weighed on Payment processing growth and Total revenue per AHSC; management reconciled “Total revenue (excluding clearinghouse)” separately in stakeholder materials .

Guidance Changes

Subsequent update (post‑Q2): In Q3 FY2025, management narrowed FY2025 revenue to $418–$420M and raised FY2025 Adjusted EBITDA to $34–$36M .

Earnings Call Themes & Trends

Management Commentary

• “We achieved another important milestone... by reaching positive cash flow for the first time as a public company. We believe this marks the start of a new era... to utilize internally generated cash to drive stakeholder value.” — CEO, Chaim Indig .
• “We are maintaining our revenue outlook... and updating our adjusted EBITDA outlook for fiscal year 2025 to $26M–$31M... We expect AHSCs ~4,200 in FY2025 and ~4,500 in FY2026, with total revenue per AHSC increasing.” — CFO, Balaji Gandhi .
• “Pipeline win rates consistent, and deal sizes about 20% bigger in the first half of this year versus last year.” — CFO .
• “S&M organization ~500 people; spending ~$120M supports a much bigger revenue base.” — CFO .

Q&A Highlights

• Revenue per AHSC drivers: Larger initial deal scopes and broader suite penetration underpin growth in total value per client; pipeline deal values ~20% higher vs prior year .
• Patient Bill Pay: Leveraging card‑on‑file and digital billing, patients pay faster with less friction; strong initial client reception and measurable improvements .
• Sales & Marketing efficiency: S&M spend steadiness and leverage to support growth ambitions; removal of clearinghouse‑linked S&M costs aided sequential decline .
• MEDITECH alliance: MEDITECH resells a subset; broader integration to roll out over coming years, opening doors to acute market clients .
• Retention and seasonality: Gross revenue retention ~94–96% since IPO; variability and guidance range driven by Network solutions selling cadence in H2 (seasonal concentration) .

Estimates Context

• We attempted to retrieve S&P Global consensus (EPS, revenue, EBITDA, target price) for Q2 FY2025 and adjacent periods, but data was unavailable due to API limits at the time of retrieval. As a result, estimate comparisons are not provided; we will update when S&P Global data can be accessed [SPGI data unavailable].
• In the absence of consensus benchmarking, the quarter’s quality is evidenced by positive free cash flow, raised FY2025 Adjusted EBITDA guidance, and continued Network solutions growth .

Key Takeaways for Investors

• Cash inflection: Positive free cash flow and stronger operating cash flow signal an improving capital efficiency profile and reduced execution risk in funding growth .
• Profitability trajectory: FY2025 Adjusted EBITDA raised ($26–$31M) with evidence of operating leverage in S&M and G&A; supports medium‑term EBITDA scalability .
• Durable growth engine: Network solutions continues to outpace, with public health and life sciences campaigns proving incremental outcomes and broadening monetization .
• Mix headwinds transient: Clearinghouse wind‑down pressured Payment processing and take rate, but impacts are ring‑fenced and should fade over time .
• Pipeline quality: Larger deal scopes (~20% bigger) and broad suite adoption support revenue per AHSC expansion and multi‑product penetration .
• Product momentum: MEDITECH alliance, Patient Bill Pay outcomes, and adherence initiatives strengthen value proposition across intake, payments, and patient activation .
• Near‑term trading: Focus on cash generation and EBITDA beats/raise potential; watch Network solutions selling cadence into H2 and any updates on take rate/Payment processing expense .