Phreesia Inc . (NYSE:PHR), a leading healthcare software company, reported a solid fiscal third quarter of 2024 with a 25% year-over-year increase in total revenue, reaching $91.6 million. Despite the positive performance, the company adjusted its future revenue goals, delaying its $500 million run-rate revenue target to fiscal 2026, citing increased spending concerns and a challenging economic environment. The company also announced the completion of the Connect on Call acquisition, aiming to improve patient and provider communication. In addition, Phreesia secured a new five-year $50 million senior secured revolving credit facility with Capital One, bolstering its financial flexibility.
Key Takeaways
- Phreesia's total revenue for fiscal Q3 2024 hit $91.6 million, marking a 25% increase from the previous year.
- Adjusted EBITDA for the quarter was negative $6.6 million, with an expected annual figure around negative $39 million.
- The acquisition of Connect on Call is set to enhance the patient experience and provider response times.
- Phreesia revised its run-rate revenue goal of $500 million to fiscal 2026 due to economic and market headwinds.
- Fiscal 2024 revenue forecast is set between $353 million and $356 million, with fiscal 2025 expected to see over 20% growth.
- A new credit facility with Capital One has been established to improve financial flexibility.
Company Outlook
Looking ahead, Phreesia projects its fiscal 2024 revenue to fall between $353 million and $356 million, a growth rate of 26% to 27%. The company has also provided guidance for fiscal 2025, with revenue anticipated to be in the range of $424 million to $434 million, representing a growth rate of over 20%. The adjusted EBITDA for the same period is forecasted to be between positive $10 million and $20 million, indicating an optimistic turn towards profitability.
Bearish Highlights
The company has acknowledged the need to delay its target of achieving $500 million in run-rate revenue by one year to fiscal 2026. This decision stems from heightened spending concerns and the current economic climate, which have prompted a more cautious approach to growth.
Bullish Highlights
Phreesia remains confident in its long-term growth, with investments aimed at positioning the company for a 20% growth trajectory beyond fiscal 2025. The Connect on Call acquisition, while currently contributing little revenue per client, is expected to bolster the company's software subscription segment and enhance overall growth in the future.
Misses
The company's payment processing business is growing slower than other revenue lines, with Balaji Gandhi noting that the take rate has fluctuated between 2.8% and 2.9%. Despite experimenting with pricing to gain market share, this segment has not contributed significantly to revenue growth guidance for fiscal 2025.
QA Highlights
In the question and answer segment of the earnings call, Gandhi addressed the pricing strategy for the payment processing business, explaining that the company is continually revisiting pricing strategies to remain competitive. He also discussed the impact of recent acquisitions and promotional trials on the software subscription segment's growth algorithm, noting that while there is a slight negative effect due to low revenue per client from new acquisitions like Connect on Call, the company is still well-positioned to attract customers based on its capabilities and value.
Chaim Indig, closing the call, expressed gratitude for the team's hard work and extended holiday wishes to all participants, reinforcing a positive company culture and commitment to success in the coming year.
InvestingPro Insights
Phreesia Inc. (PHR) has shown some notable movements in its financial metrics and stock performance, which are critical for investors to consider. According to InvestingPro data, the company has a market capitalization of $994.2 million. Despite not being profitable over the last twelve months, as indicated by a negative adjusted P/E ratio of -6.89, Phreesia has demonstrated a robust revenue growth of 28.79% during the same period. This growth is reflective of the company's successful expansion efforts and could be a harbinger of future profitability.
InvestingPro Tips highlight that management's aggressive share buybacks and the company's position of holding more cash than debt on its balance sheet are positive signs for investors. These actions suggest a confident outlook from the company's leadership regarding its financial health and future prospects. Additionally, with 4 analysts having revised their earnings upwards for the upcoming period, there's an optimistic sentiment around the company's ability to navigate through the current economic challenges.
Investors should also note that while Phreesia does not pay a dividend, it has experienced a significant return over the last week, with a 12.46% price total return. This could indicate a turning point for the stock, which has taken a hit over the last six months, with a -46.06% price total return.
For those interested in deeper analysis and more InvestingPro Tips, Phreesia Inc. is featured on InvestingPro with additional insights. Currently, there are more tips available for subscribers, offering a comprehensive look at the company's financial health and market potential. With the special Cyber Monday sale, subscribers can get up to 60% off on an InvestingPro subscription, and using the coupon code sfy23 will grant an additional 10% off a 2-year InvestingPro+ subscription.
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