Phreesia, Inc. (PHR) FY 2025 MD&A

Item 7. Management’s discussion and analysis of financial condition and results of operations

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes and other financial information appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Annual Report on Form 10-K, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Our fiscal year ends January 31. References to fiscal 2025 and 2024 refer to the fiscal years ended January 31, 2025 and 2024, respectively.

Basis of Presentation

This management's discussion and analysis discusses our financial condition and results of operations for the years ended January 31, 2025 and 2024. Please refer to Part II - Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended January 31, 2024 for a comparison of the year ended January 31, 2024 to the year ended January 31, 2023.

Financial Highlights

Fiscal 2025

•Total revenue increased 18% to $419.8 million in fiscal 2025 compared with $356.3 million in fiscal 2024.

•Net loss was $58.5 million in fiscal 2025 compared with $136.9 million in fiscal 2024.

•Adjusted EBITDA was $36.8 million in fiscal 2025 compared with negative $35.4 million in fiscal 2024.

•Cash provided by operating activities was $32.4 million in fiscal 2025 compared with cash used in operating activities of $32.4 million in fiscal 2024.

•Free cash flow was $8.3 million in fiscal 2025 compared with negative $57.5 million in fiscal 2024.

•Cash and cash equivalents was $84.2 million as of January 31, 2025 compared with $87.5 million as of January 31, 2024.

For a reconciliation of Adjusted EBITDA to net loss and a reconciliation of free cash flow to net cash provided by (used in) operating activities, and for more information as to how we define and calculate such measures, see the section below titled “Non-GAAP financial measures.”

Overview

We are a leading provider of comprehensive software solutions that improve the operational and financial performance of healthcare organizations and improve health outcomes by helping patients take a more active role in their care. Phreesia’s mission is to make care easier every day. We have created an integrated and streamlined system that automates data capture and activates patients before, during and after their interaction with their healthcare services provider. Our solutions include SaaS-based integrated tools that manage patient access, registration and payments. We offer tools to communicate with patients about their health that have demonstrated increased rates of preventive care and vaccinations. Additionally, our solutions include clinical assessments to screen patients for a variety of physical, behavioral and mental health conditions, helping providers better understand their patients and connect them to needed services, resulting in improved health outcomes. We also provide life sciences companies, government entities, patient advocacy, public interest and not-for-profit and other organizations with a channel for direct education and communication with patients in a privacy-protected environment. Our solutions also include additional products and services such as the MediFind provider directory, which helps patients find care based on providers' specialty and condition expertise.

We serve an array of healthcare services clients of all sizes across over 25 specialties, ranging from single-specialty practices, including internal and family medicine, urology, dermatology, and orthopedics, to large, multi-specialty groups, and health systems as well as other organizations that provide other types of healthcare-related services. Our network solutions clients include life sciences companies in the pharmaceutical, biotechnology and medical device industries, as well as government entities, patient advocacy, public interest and other not-for-profit organizations seeking to activate, engage and educate patients about topics critical to their health. Our goal is to help patients have more informed conversations to help them make decisions about their care.

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We derive revenue from (i) subscription fees from healthcare services clients for access to our solutions and related professional services fees, (ii) payment processing fees based on levels of patient payment volume processed through our solutions and (iii) fees from life sciences clients and other organizations for delivering direct communications to help activate, engage and educate patients about topics critical to their health using our solutions. We also generate revenue through our additional products and services such as the MediFind provider directory, which helps patients find care based on providers' specialty and condition expertise. We have strong visibility into our business as the majority of our revenue is derived from recurring subscription fees and re-occurring payment processing fees.

We market and sell our products and services to healthcare services prospects throughout the U.S. using a direct sales organization. Our database team is responsible for the hygiene and health of our data and is tasked with validating information by using various tools to enrich it. This data powers our sales development organization. Our marketing team identifies customer profiles, develops content and deploys one-to-many communications to soften the market. This helps prepare our sales development team to engage with new prospective customers. The sales development team creates opportunities and works with the direct sales team to qualify those opportunities. Our sales force executes on these qualified sales leads, partnering with our sales enablement and client services functions to ensure prospects are educated on the breadth of our capabilities and demonstrable value proposition, with the goal of attracting and retaining clients and expanding their use of our solutions over time. Most of our healthcare services customer contracts are structured as annual, auto-renewing agreements. Our sales typically involve competitive processes, and sales cycles have, on average, varied in duration from three months to six months, depending on the size of the potential client. After we secure new deals, our sales team offers additional add-on solutions and services to healthcare services customers, expanding the breadth of solutions provided to clients, which we believe increases customer satisfaction and retention. In addition, through Phreesia University (Phreesia’s in-house training program), live and virtual events, we help our healthcare services clients optimize their businesses and, as a result, support client retention.

We also sell products and services to life sciences and other organizations, healthcare advertising agencies, government entities and advocacy groups through our direct sales and marketing teams. Unlike healthcare services programs, most of the life science campaigns need to be measured and resold each year. Like healthcare services, the marketing team supports net new business and client retention for life sciences by educating ideal customer profiles about the value of Phreesia and the positive impact on health outcomes Phreesia campaigns have on patients.

Since our inception, we have focused substantially all of our sales efforts within the United States. Accordingly, substantially all of our revenue from historical periods has come from the United States, and our current strategy is to continue to focus substantially all of our sales efforts within the United States.

Our revenue growth has been primarily organic and reflects our significant addition of new healthcare services clients. New healthcare services clients are defined as clients that go live in the applicable period and existing healthcare services clients are defined as clients that go live in any period before the applicable period.

Recent developments and current economic conditions

Macroeconomic environment and geopolitical conditions

Our business is directly and indirectly affected by macroeconomic conditions, geopolitical conditions and the state of global financial markets. Geopolitical uncertainty resulting, in part, from the military conflict between Russia and Ukraine and the conflict in the Middle East, as well as other macro-economic conditions, such as the impact of pandemics, changes in interest rates, inflation in the cost of goods, services and labor, or a recession or an economic slowdown in the U.S. or internationally, have contributed to significant volatility and declines in global financial markets. The uncertainty over the extent and duration of the ongoing conflicts and these macroeconomic conditions continues to cause disruptions to businesses and markets worldwide. Additionally, the change in U.S. presidential administration may result in additional geopolitical and macroeconomic uncertainty. While none of these factors individually has had a material impact on our business to date, it is difficult to predict the potential impact these factors may have on our future business results, and each could adversely impact our business operations, financial performance and results of operations.

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Key Metrics

We regularly review the following key metrics to measure our performance, identify trends affecting our business, formulate financial projections, make strategic business decisions and assess working capital needs.

•AHSCs. We define AHSCs as the average number of clients that generate subscription and related services or payment processing revenue each month during the applicable period. In cases where we act as a subcontractor providing white-label services to our partner's clients, we treat the contractual relationship as a single healthcare services client. We believe growth in AHSCs is a key indicator of the performance of our business and depends, in part, on our ability to successfully develop and market our solutions to healthcare services organizations that are not yet clients. We believe growth in AHSCs provides useful information to investors as an important indicator of expected revenue growth. In addition, growth in AHSCs informs our management of the areas of our business that will require further investment to support expected future AHSC growth. For example, as AHSCs increase, we may need to add to our customer support team and invest to maintain effectiveness and performance of our solutions for our healthcare services clients and their patients.

•Healthcare services revenue per AHSC. We define Healthcare services revenue as the sum of subscription and related services revenue and payment processing revenue. We define Healthcare services revenue per AHSC as healthcare services revenue in a given period divided by AHSCs during that same period. We are focused on continually delivering value to our healthcare services clients. We believe that our ability to increase healthcare services revenue per AHSC provides useful information to investors as an indicator of the long-term value of our solutions. Healthcare services revenue per AHSC was $70,961 for the year ended January 31, 2025 compared to $72,215 for the year ended January 31, 2024, a decrease of 2%. The decrease was primarily driven by AHSC growth significantly outpacing growth in payment processing volume and payment processing revenue.

•Total revenue per AHSC. We define Total revenue per AHSC as Total revenue in a given period divided by AHSCs during that same period. Our healthcare services clients directly generate subscription and related services and payment processing revenue. Additionally, our relationships with healthcare services clients who subscribe to our technology give us the opportunity to engage with life sciences companies, government entities, patient advocacy, public interest and not-for-profit organizations who deliver direct communication to patients through our solutions. As a result, we believe that our ability to increase Total revenue per AHSC provides useful information to investors as an indicator of the long-term value of our solutions. Total revenue per AHSC was $99,884 for the year ended January 31, 2025 compared to $98,944 for the year ended January 31, 2024, an increase of 1%. The increase was primarily driven by Network solutions revenue growth that outpaced AHSC growth.

Additional Information

•Patient payment volume. We believe that patient payment volume is an indicator of both the underlying health of our healthcare services clients’ businesses and the continuing shift of healthcare costs to patients. We measure patient payment volume as the total dollar volume of transactions between our healthcare services clients and their patients utilizing our payment platform, including via credit and debit cards that we process as a payment

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facilitator as well as cash and check payments and credit and debit transactions for which we act as a gateway to other payment processors.

•Payment facilitator volume percentage. We define payment facilitator volume percentage as the volume of credit and debit card patient payment volume that we process as a payment facilitator as a percentage of total patient payment volume. Payment facilitator volume is a major driver of our payment processing revenue.

Results of operations

The following tables set forth our results of operations for the periods presented and as a percentage of revenue for those periods:

Components of consolidated statements of operations

Revenue

We generate revenue primarily from providing an integrated SaaS-based software and payment platform for the healthcare industry. We derive revenue from subscription fees and related services generated from our healthcare services clients for access to our solutions, payment processing fees based on the levels of patient payment volume we process, and from fees from life sciences clients and other organizations for delivering direct communications to help activate, engage and educate patients about topics critical to their health.

Our total revenue consists of the following:

•Subscription and related services. We primarily generate subscription fees from our healthcare services clients based on the number of healthcare services clients that subscribe to and utilize our solutions. Our healthcare services clients are typically billed monthly in arrears, though in some instances, healthcare services clients may opt to be billed quarterly or annually in advance. Subscription fees are typically auto-debited from healthcare services clients’ accounts every month. As we target and add larger enterprise healthcare services clients, these clients may choose to contract differently than our typical per healthcare services client subscription model. To the extent we charge in an alternative manner with larger enterprise healthcare services

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clients, we expect that such a pricing model will recur and, combined with our per healthcare services client subscription fees, will increase as a percentage of our total revenue. In addition, we receive certain fees from healthcare services clients for professional services associated with our implementation services as well as travel and expense reimbursements, shipping and handling fees, leasing and sales of hardware (PhreesiaPads and Arrivals Kiosks), on-site support and training.

•Payment processing fees. We generate revenue from payment processing fees based on the number of transactions and the levels of patient payment volume processed through our solutions. Payment processing fees are generally calculated as a percentage of the total transaction dollar value processed and/or a fee per transaction. Credit and debit patient payment volume processed through our payment facilitator model represented 81% and 82% of our patient payment volume in fiscal 2025 and 2024, respectively. The remainder of our patient payment volume is composed of credit and debit transactions for which Phreesia acts as a gateway to another payment processor, and cash and check transactions. Patient payment responsibility typically declines as a share of total spending as the calendar year progresses due to benefit design. Consistent with that trend, payment volume on a per client basis has historically been lower in the second half of our fiscal year as compared to the first half of our fiscal year.

•Network solutions. We generate revenue from life sciences clients and other organizations for delivering direct communications to patients. As we expand our healthcare services client base, we increase the number of new patients we can reach to deliver our direct communications to help activate, engage and educate patients about topics critical to their health on behalf of life sciences clients and other organizations.

Cost of revenue (excluding depreciation and amortization)

Our cost of revenue (excluding depreciation and amortization) primarily consists of labor costs, including salaries, stock-based compensation, benefits and bonuses for implementation and technical support, as well as outside services costs. Cost of revenue (excluding depreciation and amortization) also includes infrastructure costs to operate our solutions such as hosting fees and fees paid to various third-party providers for access to their technology, as well as costs to verify insurance eligibility and benefits.

Payment processing expense

Payment processing expense consists primarily of interchange fees set by payment card networks that are ultimately paid to the card-issuing financial institution, assessment fees paid to payment card networks, and fees paid to third-party payment processors and gateways. Payment processing expense may increase as a percentage of payment processing revenue if card networks raise pricing for interchange and assessment fees or if we reduce pricing to our clients.

Sales and marketing

Sales and marketing expense consists primarily of labor costs, including salaries, stock-based compensation, benefits, bonuses and commission costs for our sales and marketing personnel, as well as outside services costs. Sales and marketing expense also includes costs for advertising, promotional and other marketing activities, as well as certain fees paid to various third-party partners for sales and lead generation. Advertising is expensed as incurred.

Research and development

Research and development expense consists of costs to develop our products and services that do not meet the criteria for capitalization as internal-use software. These costs consist primarily of labor costs, including salaries, stock-based compensation and benefits for our development personnel, as well as outside services costs. Research and development expense also includes third-party partner fees and third-party consulting fees.

General and administrative

General and administrative expense consists primarily of labor costs, including salaries, stock-based compensation and benefits for our executive, finance, legal, security, human resources, information technology and other administrative personnel, as well as outside services costs. General and administrative expense also includes software costs to support our finance, legal and human resources operations, insurance costs as well as fees to third-party providers for accounting, legal and consulting services, costs for various non income-based taxes and software costs.

Depreciation

Depreciation represents depreciation expense for PhreesiaPads and Arrivals Kiosks, data center and other computer hardware, purchased computer software, furniture and fixtures and leasehold improvements.

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Amortization

Amortization primarily represents amortization of our capitalized internal-use software related to our solutions as well as amortization of acquired intangible assets.

Other income (expense), net

Our other income and expense line items consist of the following:

•Other income (expense), net. Other income (expense), net consists of a $2.3 million gain recorded in fiscal 2025 in connection with a settlement with the former equity holders of ConnectOnCall, foreign currency-related gains and losses as well as miscellaneous other income and expense.

•Loss on extinguishment of debt. Loss on extinguishment of debt represents the difference between the amount paid on extinguishment of debt (including any directly related fees) and the net carrying amount of debt being extinguished.

•Interest income. Interest income consists of interest earned on our cash and cash equivalent balances.

•Interest expense. Interest expense consists primarily of the interest incurred on our financing obligations as well as amortization of discounts and deferred financing costs.

Provision for income taxes

Based upon our cumulative pre-tax losses in recent years and available evidence, we have determined that it is more likely than not that substantially all of our U.S. deferred tax assets as of January 31, 2025 will not be realized in the near term. Consequently, we have established a valuation allowance against our deferred tax assets that are not more likely than not to be realized. In future periods, if we conclude we have future taxable income sufficient to realize the deferred tax assets, we may reduce or eliminate the valuation allowance. Provision for income taxes also includes U.S. state and local income taxes and foreign income taxes. We record unrecognized tax benefits as liabilities or as reductions to deferred tax assets and adjust these balances when our judgement changes as a result of the evaluation of new information previously not available.

Comparison of fiscal 2025 versus fiscal 2024

Revenue

•Subscription and related services. Our subscription and related services revenue from healthcare services organizations increased $31.1 million to $196.5 million for fiscal 2025, as compared to $165.4 million for fiscal 2024, primarily due to new healthcare services clients added in fiscal 2025 as well as expansion of and cross-selling to existing healthcare services clients.

•Payment processing fees. Our revenue from patient payments processed through our solutions increased $7.1 million to $101.7 million for fiscal 2025, as compared to $94.6 million for fiscal 2024, due to the addition of new healthcare services clients, which drove increases in patient visits and patient payments processed through our platform. Payment processing fees for the year ended January 31, 2025 were reduced by approximately $6.1 million related to the accelerated wind-down of a relationship with a clearinghouse client.

•Network solutions. Our revenue from life sciences clients and other organizations increased $25.3 million to $121.6 million for fiscal 2025, as compared to $96.3 million for fiscal 2024 due to an increase in engagement, education programs and deeper patient outreach among the existing programs.

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Cost of revenue (excluding depreciation and amortization)

Cost of revenue (excluding depreciation and amortization) increased $5.2 million to $66.2 million for fiscal 2025, as compared to $61.0 million for fiscal 2024. The increase resulted primarily from a $7.7 million increase in other third-party costs driven by growth in revenue, partially offset by a $2.5 million decrease in labor costs.

Stock compensation incurred related to cost of revenue was $4.9 million and $4.6 million for fiscal 2025 and fiscal 2024, respectively.

Payment processing expense

Payment processing expense increased $5.7 million to $68.7 million for fiscal 2025, as compared to $63.0 million for fiscal 2024. The increase resulted primarily from the increase in payment processing fees revenue and patient payments processed through our solutions, each driven by an increase in patient visits over the prior year. Payment processing expense for the year ended January 31, 2025 was reduced by the accelerated wind-down of a relationship with a clearinghouse client.

Sales and marketing

Sales and marketing expense decreased $25.9 million to $121.1 million for fiscal 2025, as compared to $147.0 million for fiscal 2024. The decrease resulted primarily from a $18.0 million decrease in labor costs and a $7.9 million decrease in other third-party sales and marketing costs.

Stock compensation incurred related to sales and marketing expense was $22.0 million and $26.0 million for fiscal 2025 and fiscal 2024, respectively.

Research and development

Research and development expense increased $5.0 million to $117.4 million for fiscal 2025, as compared to $112.3 million for fiscal 2024. The increase resulted primarily from a $3.2 million increase in software costs, a $1.5 million increase in labor costs and a $0.4 million increase in other third-party costs.

Stock compensation incurred related to research and development expense was $15.3 million and $17.4 million in fiscal 2025 and fiscal 2024, respectively.

General and administrative

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General and administrative expense decreased $3.3 million to $76.6 million for fiscal 2025, as compared to $79.9 million for fiscal 2024. The decrease primarily resulted from a $3.1 million decrease in third-party costs associated with prior-year acquisitions, a $0.1 million decrease in other third-party general and administrative expenses and a $0.1 million decrease in labor costs.

Stock compensation incurred related to general and administrative expense was $24.8 million and $23.7 million in fiscal 2025 and fiscal 2024, respectively.

Depreciation

Depreciation expense decreased $3.4 million to $14.2 million for fiscal 2025, as compared to $17.6 million for fiscal 2024. The decrease was primarily attributable to lower data center equipment depreciation.

Amortization

Amortization expense increased $1.8 million to $13.7 million for fiscal 2025, as compared to $11.9 million for fiscal 2024. The increase was primarily driven by higher amortization of capitalized internal-use software development costs as well as amortization of intangible assets acquired during fiscal 2024.

Other income, net

Other income, net was income of $2.0 million for fiscal 2025 as compared to income of less than $0.1 million for fiscal 2024. The increase in other income, net was driven primarily by a $2.3 million gain recorded in connection with a settlement with the former equity holders of ConnectOnCall, partially offset by foreign exchange losses. See Note 4 (b) in Part II - Item 8 of this Annual Report on Form 10-K for additional information regarding the ConnectOnCall settlement. Other income, net for fiscal 2024 was comprised primarily of foreign exchange gains.

Loss on extinguishment of debt

During fiscal 2024, we recorded a $1.1 million loss on extinguishment of debt in connection with the termination of the Third SVB Facility.

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Interest income, net

Interest income, net decreased by $1.9 million to $0.3 million for fiscal 2025, as compared to $2.2 million for fiscal 2024. The decrease is primarily attributable to lower interest income earned from our cash and cash equivalent balances, as well as higher interest expense on our finance leases and other financing obligations.

Provision for income taxes

Provision for income taxes increased by $1.2 million to $2.7 million for fiscal 2025, as compared to $1.5 million for fiscal 2024. The increase in provision for income taxes relates primarily to an increase in Canadian and Indian income tax expense.

Non-GAAP financial measures

Adjusted EBITDA is a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP. Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income or loss or any other performance measure derived in accordance with GAAP, or as an alternative to cash flows from operating activities as a measure of our liquidity. We define Adjusted EBITDA as net income or loss before interest income, net, provision for income taxes, depreciation and amortization, and before stock-based compensation expense, loss on extinguishment of debt and other income, net.

We have provided below a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure. We have presented Adjusted EBITDA in this Annual Report on Form 10-K because it is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget, and to develop short and long-term operational plans. In particular, we believe that the exclusion of the amounts eliminated in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Some of these limitations are as follows:

•Although depreciation and amortization expense are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

•Adjusted EBITDA does not reflect: (1) changes in, or cash requirements for, our working capital needs; (2) the potentially dilutive impact of non-cash stock-based compensation; (3) tax payments that may represent a reduction in cash available to us; or (4) interest income, net; and

•Other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure.

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Because of these and other limitations, you should consider Adjusted EBITDA along with other GAAP-based financial performance measures, including various cash flow metrics, net loss, and our GAAP financial results. The following table presents a reconciliation of Adjusted EBITDA to net loss for each of the periods indicated:

We calculate free cash flow as net cash provided by (used in) operating activities less capitalized internal-use software development costs and purchases of property and equipment.

Additionally, free cash flow is a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by our business that can be used for strategic opportunities, including investing in our business, making strategic investments, partnerships and acquisitions and strengthening our financial position.

The following table presents a reconciliation of free cash flow from net cash provided by (used in) operating activities, the most directly comparable GAAP financial measure, for each of the periods indicated:

Liquidity and capital resources

As of January 31, 2025 and 2024, we had cash and cash equivalents of $84.2 million and $87.5 million, respectively. Cash and cash equivalents consist of money market mutual funds and cash on deposit.

We believe that our existing cash and cash equivalents, along with cash generated in the normal course of business, will be sufficient to meet our needs for at least the next 12 months.

In addition, we also have potential borrowing capacity under our credit agreement subject to certain restrictive covenants.

Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under “Risk Factors.”

In the event that additional financing is required from outside sources, we may be unable to raise the funds on acceptable terms, if at all. If we are unable to raise additional capital when desired, our business, operating results and financial condition could be adversely affected.

Capital One facility

In December 2023, we entered into a 5-year $50 million senior secured asset-based revolving credit facility ("Capital One Credit Facility") maturing in December 2028, which includes a swingline sub-limit of at least $5.0 million and a

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letter of credit sub-limit of at least $5.0 million. The new Capital One Credit Facility was entered into with Capital One, N.A. (“Capital One”) acting as administrative agent and replaces our previous senior secured revolving credit facility with Silicon Valley Bank, which we terminated on the same date. We believe the Capital One Credit Facility will give us additional financial flexibility through fiscal 2028. The facility is available to us for working capital and general corporate purposes.

The obligations under the Capital One Credit Facility are secured by a first priority security interest in substantially all of our tangible and intangible assets, and by pledges of the equity of certain of our U.S. subsidiaries, in each case subject to customary exclusions.

The Capital One Credit Facility includes financial covenants including but not limited to requiring us to maintain minimum Consolidated EBITDA, minimum Liquidity, a minimum Consolidated Fixed Charge Coverage Ratio and limiting the amount of cash and cash equivalents we hold outside Capital One, each as defined in the Credit Agreement. We were in compliance with all covenants related to the Capital One Credit Facility as of January 31, 2025.

We believe that our cash and cash equivalents along with cash generated in the normal course of business are sufficient to fund our operations for at least the next twelve months.

Financing agreements

In June 2023, we entered into a financing agreement to obtain financing for internal-use software and related software support. As of January 31, 2025, there was $1.9 million in outstanding principal and interest due under the agreement. The financing agreement requires us to pay $0.1 million per month for 36 months beginning August 2023. The effective interest rate on the agreement is 10.5% per annum.

Shares issued as consideration for acquisitions

On June 30, 2023, we entered into an agreement to acquire 100% of the outstanding equity of Comsort, Inc. d/b/a MediFind (“MediFind”) for total consideration of $8.9 million, which included the issuance of 150,786 shares of our common stock to certain MediFind stockholders.

On August 11, 2023, we entered into an agreement to acquire 100% of the outstanding equity of Access eForms, LLC (“Access”) for total consideration of $37.4 million, which included the issuance of 1,096,436 shares of our common stock to certain members of Access.

Liabilities issued as consideration for acquisition

In October 2023, we entered into an agreement to acquire 100% of the outstanding equity of ConnectOnCall for total consideration of $13.9 million, including liabilities payable to the sellers. As of January 31, 2024, the Company’s liability for the ConnectOnCall deferred consideration liabilities was $8.7 million. See Note 4 (b) and Note 17 in Part II - Item 8 of this Annual Report on Form 10-K for additional information regarding the liabilities issued as consideration for acquisition.

On January 31, 2025, we and the former equity holders of ConnectOnCall entered into a settlement agreement which resulted in a reduced payment of $5.0 million in full settlement of the deferred consideration liabilities. As of January 31, 2025, the outstanding balance of the deferred consideration liabilities was $0. The settlement agreement was a result of indemnification claims made by us against the former equity holders of ConnectOnCall stemming from our October 2023 agreement to acquire the outstanding equity of ConnectOnCall.

In connection with the settlement, we recorded a gain of $2.3 million within Other income (expense), net. We included the gain as an adjustment to reconcile net loss to net cash provided by operating activities. We presented

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$4.6 million and $0.4 million of the settlement payment within cash used for financing activities and cash provided by operating activities, respectively, in its statement of cash flows for the fiscal year ended January 31, 2025.

The following table summarizes our sources and uses of cash for each of the periods presented:

Operating activities

The primary sources of cash from operating activities are cash received from our customers and interest earned on our money market mutual funds. The primary uses of cash for operating activities are for payroll, payments to suppliers, payments for operating leases, as well as cash paid for interest on our finance leases and other borrowings and cash paid for various sales, property and income taxes.

During the fiscal year ended January 31, 2025, net cash provided by operating activities was $32.4 million, as our cash received from customers in connection with our normal operations exceeded our cash paid to employees and suppliers. During the fiscal year ended January 31, 2024, net cash used in operating activities was $32.4 million, as our cash paid to employees and suppliers exceeded our cash received from customers in connection with our normal operations.

The change in net cash provided by (used in) operating activities was driven primarily by an increase in cash received from customers driven by higher revenues during the year ended January 31, 2025.

Investing activities

During the fiscal year ended January 31, 2025, net cash used in investing activities was $24.1 million, principally resulting from $15.4 million of cash paid for capitalized internal-use software, as well as $8.7 million of purchases of property and equipment, primarily computer equipment.

During the fiscal year ended January 31, 2024, net cash used in investing activities was $39.7 million, including $19.3 million of cash paid for capitalized internal-use software, $14.6 million of cash paid for acquisitions, net of cash acquired, as well as $5.8 million of purchases of property and equipment.

Financing activities

During the fiscal year ended January 31, 2025, net cash used in financing activities was $11.5 million, primarily consisting of $9.0 million used for principal payments on finance leases and financing arrangements, $6.3 million used for principal payments of acquisition-related liabilities and $0.2 million used for debt issuance costs, facility fees and debt extinguishment costs, partially offset by $3.9 million in proceeds from our equity compensation plans.

During the fiscal year ended January 31, 2024, net cash used in financing activities was $17.1 million, primarily consisting of $12.2 million used for treasury stock to satisfy tax withholdings on stock compensation awards, $7.4 million used for principal payments on finance leases and financing arrangements, $2.1 million used for debt issuance costs, facility fees and debt extinguishment costs, and $1.3 million used for principal payments of acquisition-related liabilities, partially offset by $4.2 million in proceeds from our equity compensation plans and $1.7 million constructive financing related to our software financing arrangement.

Material Cash Requirements

Our material cash requirements relate to human capital, contractual purchase commitments, leases and financing arrangements. Refer to Note 4 - Composition of certain financial statement accounts in Part II - Item 8 of this Annual Report on Form 10-K for additional information on accrued payroll related liabilities. Refer to Note 6 - Finance leases and other debt, Note 10 - Leases and Note 11 - Commitments and contingencies in Part II - Item 8 of this Annual Report on Form 10-K for additional information on cash requirements for leases, financing arrangements and contractual purchase commitments.

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Critical accounting policies and estimates

The preparation of the consolidated financial statements in conformity with GAAP requires us to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the balance sheet date, as well as reported amounts of revenue and expenses during the reporting period. Our most significant estimates and judgments involve revenue recognition, the fair value of assets acquired in business combinations, capitalized internal-use software, income taxes, and valuation of our stock-based compensation. Actual results may differ from these estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

We believe that the accounting policies described below involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

Revenue recognition

We account for revenue from contracts with clients by applying the requirements of Topic 606, which includes the following steps:

•Identification of the contract, or contracts, with a client

•Identification of the performance obligations in a contract

•Determination of the transaction price

•Allocation of the transaction price to the performance obligations in the contract

•Recognition of revenue when, or as, performance obligations are satisfied

Revenues are recognized when control of these services is transferred to our clients, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.

We believe the areas in which we apply significant judgements when determining revenue recognition relate to the identification of distinct performance obligations, the assessment of the standalone selling price (“SSP”) for each performance obligation identified, the determination of the amount of variable consideration to include in the transaction price of our contracts with customers and the determination of whether we are the principal or the agent for certain performance obligations.

Determination of Performance Obligations

A performance obligation is a promise in a contract with a customer to transfer products or services that are distinct. Our contracts with customers may include multiple promises to transfer services to a customer. Determining whether products and services are distinct performance obligations that should be accounted for separately or combined as a single performance obligation may require significant judgment that requires us to assess the nature of the promise and the value delivered to the customer.

Our subscription and related services revenue includes certain fees from clients for professional services associated with implementation services.

In determining whether professional services for implementation are distinct, we consider the following factors for each professional services agreement: availability of the services from other vendors, the nature of the professional services and the complexity of interfaces created between systems.

We determined that the majority of implementation services were not distinct from the related subscription service because they are proprietary such that they cannot be performed by another entity, because we generally do not sell professional services on a stand-alone basis, and because they are integral to the customer’s ability to derive the intended benefit of the subscription service, indicating that the implementation services and related subscription are inputs to a combined output.

Determination of Standalone Selling Prices

We allocate the transaction price of our customer contracts to the performance obligations within those contracts based on the relative SSP of the performance obligations.

The SSP is the price that we would sell a product separately to a customer. The best evidence of this is an observable price from stand-alone sales of that product to similarly situated customers. However, as we do not typically transfer our performance obligations on a standalone basis, but rather we transfer bundles of performance

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obligations, we use an adjusted market assessment approach to estimate the price a customer would be willing to pay for our performance obligations using historical price information as priced in previous bundled contracts.

In determining SSPs, we stratify the population of customer transactions by product, type, size of customer and geographic area. We typically establish a range of SSPs for each of our performance obligations.

The prices we charge for digital messaging solutions provided to life sciences companies have historically been highly variable. We consider pricing to be highly variable if we have a history of selling the services at a wide range of prices to similar customers in similar geographic areas within the same time periods. As the pricing of our digital messaging solutions has historically been highly variable, we use the residual method to estimate the SSP of performance obligations for digital messaging solutions. We estimate the residual SSP of our digital messaging solutions as the total transaction price of the customer contract less the SSPs of the remaining performance obligations pursuant to the contract.

Variable Consideration

We estimate the transaction price at contract inception, including any variable consideration, and we update the estimate each reporting period for any changes in circumstances. When determining the transaction price, we assume the products will be transferred to the customer based on the terms of the existing contract and our assumption does not take into consideration the possibility of a contract being canceled, renewed, or modified.

We occasionally provide credits to customers representing adjustments to the transaction price. Known and estimable credits and adjustments represent a form of variable consideration, which are estimated at contract inception and generally result in reductions to revenues recognized for a particular contract. These estimates are updated at the end of each reporting period as additional information becomes available. We estimate the amount of variable consideration based on its expected probability-weighted value or its most likely amount. We include variable consideration in the transaction price to the extent it is probable there will not be a significant reversal of revenue when the uncertainty with respect to the variable consideration is resolved. We believe that there will not be significant changes to our estimates of variable consideration as of January 31, 2025.

Principal vs Agent Considerations

As part of our revenue recognition process, we evaluate whether we are the principal or agent for the performance obligations in our contracts with customers. When we determine that we are the principal for a performance obligation, we recognize revenue for that performance obligation on a gross basis. When we determine that we are an agent for a performance obligation, we recognize revenue for that performance obligation net of the related costs. In determining whether we are the principal or the agent, we evaluate whether we have control of the services before we transfer the services to the customer by considering whether we are primarily obligated for transferring the services to the customer, whether we have inventory risk for the services before the services are transferred to the customer, and whether we have latitude in establishing prices. We recognize payment processing fees collected from customers as revenue on a gross basis because, as the merchant of record, we control the services before delivery to the customer, we are primarily responsible for the delivery of the services to our customers, we have latitude in establishing pricing with respect to the customer and other terms of service, we have sole discretion in selecting the third-party to perform the settlement, and we assume the credit risk for the transaction processed. We also have the unilateral ability to accept or reject a transaction based on our established criteria.

Business combinations

We use our best estimates and assumptions to accurately assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. With the assistance of third-party appraisers, we assess the fair value of the assets acquired in business combinations. The fair value of the acquired licenses and technology was estimated using the relief from royalty method. The fair value of customer relationships was estimated using a multi period excess earnings method. To calculate fair value, we used cash flows discounted at a rate considered appropriate given the inherent risks associated with each client grouping. Our estimates are inherently uncertain and subject to refinement. During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. We continue to collect information and reevaluate these estimates and assumptions quarterly and record any adjustments to our estimates to goodwill provided that we are within the measurement period. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations.

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In connection with the ConnectOnCall acquisition, we recorded deferred consideration liabilities within other current liabilities and other long-term liabilities for amounts payable to the selling shareholders in seven quarterly installments through June 2025. The fair value of our deferred consideration liabilities was determined based on a discount cash flow approach, using the pre-tax cost of debt of 9.3%. In connection with the acquisition of ConnectOnCall, we recorded deferred consideration liabilities with an acquisition-date fair value of $10.0 million. On January 31, 2025, we and the former equity holders of ConnectOnCall entered into a settlement agreement which resulted in a reduced payment of $5.0 million in full settlement of the deferred consideration liabilities. As of January 31, 2025, the outstanding balance of the deferred consideration liabilities was $0. The settlement agreement was a result of indemnification claims made by us against the former equity holders of ConnectOnCall stemming from our October 2023 agreement to acquire the outstanding equity of ConnectOnCall. The principal portion of payments of the deferred consideration liabilities are financing payments of acquisition-related liabilities in our accompanying consolidated statements of cash flows.

Capitalized internal-use software

We capitalize certain costs incurred for the development of computer software for internal use. These costs relate to the development of our solutions. We capitalize the costs during the development of the project, when it is determined that it is probable that the project will be completed, and the software will be used as intended. Costs related to preliminary project activities, post-implementation activities, training and maintenance are expensed as incurred. Internal-use software is amortized on a straight-line basis over its estimated useful life, which is generally three to five years. We evaluate the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. We exercise judgment in determining the point at which various projects may be capitalized, in assessing the ongoing value of the capitalized costs and in determining the estimated useful lives over which the costs are amortized. To the extent that we change the manner in which we develop and test new features and functionalities related to our solutions, assess the ongoing value of capitalized assets or determine the estimated useful lives over which the costs are amortized, the amount of internal-use software development costs we capitalize and amortize could change in future periods.

Stock-based compensation for market-based performance stock units ("PSUs")

We granted market-based PSUs during fiscal 2023, 2024 and 2025.

PSUs vest in between 0% and 220% of the number of PSUs originally granted based on our total stockholder return ("TSR"), relative to a peer group of companies on the Russell 3000 stock index. PSUs granted during fiscal 2025, 2024 and 2023 vest in a maximum of 220% of the number of PSUs originally granted. We estimate the fair value of the PSUs using a Monte Carlo Simulation model which projects TSR for Phreesia and each member of the peer group over a performance period of approximately three years. The most critical and judgmental assumptions used in the Monte Carlo Simulation to estimate the fair value of the PSUs are set forth below:

•Correlation coefficient: The correlation coefficient measures the correlation of our stock to the stock of the companies in the peer group. This coefficient is used to project the performance of our stock against our peers to estimate projected performance under the plan.

•Expected volatility: For PSUs granted during the years ended January 31, 2025, 2024 and 2023, the expected volatility is based on the historical volatility of our stock price over a term commensurate with the simulation term assumption.

We recognize the grant-date fair value of stock-based awards issued as compensation expense on a straight-line basis over the requisite service period, which is generally the vesting period of the award.

Recent accounting pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2023-07, Segment Reporting. The new standard requires enhanced disclosures about significant segment expenses and other segment items and requires companies to disclose all annual disclosures about segments in interim periods. The new standard also permits companies to disclose more than one measure of segment profit or loss, requires disclosure of the title and position of the Chief Operating Decision Maker (“CODM”), and requires companies with a single reportable segment to provide all disclosures required by Topic 280 – Segment Reporting. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. Companies are required to apply ASU 2023-07 retrospectively to all periods presented. We adopted ASU 2023-07 for annual periods beginning in the

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fiscal year ending January 31, 2025. We plan to adopt ASU 2023-07 for interim periods beginning in the fiscal year ending January 31, 2026. The disclosure changes that resulted from the adoption of ASU 2023-07 did not materially impact its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The new standard requires companies to disclose disaggregated information related to income taxes paid and the effective tax rate. The provisions of ASU 2023-09 are effective for annual periods beginning after December 15, 2024; early adoption is permitted for annual statements. We plan to adopt ASU 2023-09 for annual periods beginning in the fiscal year ending January 31, 2026. We are currently evaluating the impact that ASU 2023-09 will have on our financial statements and related disclosures. We do not expect the disclosure changes that result from the adoption of ASU 2023-09 to materially impact our consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The new standard requires companies to disclose disaggregated information about certain income statement expense line items. The provisions of ASU 2024-03 are effective for annual periods beginning after December 15, 2026, and interim reporting periods in fiscal years beginning after December 15, 2027. Early adoption is permitted. We plan to adopt ASU 2024-03 for annual periods beginning in the fiscal year ending January 31, 2028 and for interim periods beginning in the fiscal year ending January 31, 2029. We are currently evaluating the impact that ASU 2024-03 will have on our financial statements and related disclosures. We do not expect the disclosure changes that result from the adoption of ASU 2024-03 to materially impact our consolidated financial statements.

See Note 3 - Summary of significant accounting policies in Part II - Item 8 of this Annual Report on Form 10-K for a discussion of recent accounting pronouncements.