Phreesia Inc Aktie

Good evening, ladies and gentlemen, and welcome to Phreesia First Quarter Fiscal 2027 Earnings Conference Call. At this time, all participants are in a listen-only mode. We will provide instructions for the question-and-answer session to follow. First, I would like to introduce Balaji Gandhi, Phreesia's Chief Financial Officer.

Mr. Gandy, you may begin.

Thank you, operator. Good evening, and welcome to Prisa's Earnings Conference Call for the First Quarter of Fiscal 2027, which ended on April 30, 2026. Joining me on today's call is Jim Indig, our Chief Executive Officer. A more complete discussion of our results can be found in our earnings press release and in our related Form 8-K submission to the SEC, including our quarterly stakeholder letter, both issued after the markets closed today. These documents are available on the Investor Relations section of our website at ir.friga.com. As a reminder, today's call is being recorded, and a replay will be available on our Investor Relations website at ir.freta.com following the conclusion of the call.

During today's call, we may make forward-looking statements, including statements regarding trends, our anticipated growth, our strategies, predictions about our industry, and the anticipated performance of our business, including our outlook and visibility regarding future financial results. Forward-looking statements are subject to various risks and uncertainties and other factors that may cause our actual results, performance or achievements to differ materially from those described in our forward-looking statements. Such risks are described more fully in our earnings press release, our stakeholder letter and our risk factors included in our SEC filings, including in our quarterly report on Form 10-Q that will be filed with the SEC tomorrow.

The forward-looking statements made on this call will be based on our current views and expectations and speak only as of the date on which the statements are made. We undertake no obligation to update and expressly disclaim the obligation to update these forward-looking statements to reflect events or circumstances after the date of this call or to reflect new information or the occurrence of unanticipated events. We may also refer to certain financial measures not in accordance with generally accepted accounting principles, such as adjusted EBITDA and free cash flow 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 release and stakeholder letter, which were furnished with our Form 8-K after the markets closed today with the SEC and may also be found on our Investor Relations website at ir.fresia.com.

I will now turn the call over to our CEO, Chaim Indig.

Good evening, and thank you all for joining our first quarter fiscal 2027 earnings call. Before I hand it out to Balaji to provide some highlights on our financial results and outlook, I want to take a moment to recognize the people make for you what it is. Our team has shown up with real commitment, not just this quarter but through a sustained period of transformation that required a lot of grids, a lot of trust and difficult decisions. I am both grateful for the people who are on the team and excited about what we're building together.

We've done serious foundational work over the last few years. on our infrastructure, our security, our operational discipline, and it's paying off. We believe we are a unique company in our space due to our scale, experience and profitability. We believe we have a unique opportunity to tap into these strengths to play our best game over the next several years. The key factors are shaping our positive outlook. First, we're always striving to set the pace on patient intake by offering what we see as the most differentiated solution in our targeted markets and by making sure our clients feel that difference. That means continuing to bring front-end solutions that improve provider test flow and enable meaningful patient and provider engagement on behalf of our network solution clients.

Second, we're prioritizing bringing Access One's financing solution to more of our base clients and integrating Axis 1 into our pay network flow. We believe this can improve cash flow for our health care provider clients and unlock a new level of quiet loyalty and retention. And third, AI is fundamentally changing what's possible for us at scale in ways that I expect will show up clearly in our near-term and long-term results. I'm excited about what our team can accomplish together by leveraging our client relationships, our capital and our ideas.

I'll now turn the call over to Balaji.

Thank you, Jim. Let me start with a few highlights from our first quarter fiscal 2027 results, and then I'll move into our outlook for the full fiscal year 2027. For the first quarter of fiscal year 2027, revenue was $130.9 million, up 13% year-over-year. Year-over-year growth was led by Payment Solutions at 40% and followed by Network Solutions at 15%. The 40% year-over-year Payment Solutions growth reflects the fact that the prior year period included no contribution from Access One as the acquisition closed in our fourth quarter of fiscal year 2026.

Adjusted EBITDA was $30.5 million compared to $20.8 million in the same period in the prior year. representing an adjusted EBITDA margin of 23%. First quarter average healthcare services clients, or AHSC, reached 4,700, an increase of 50 from the prior quarter and an increase from 297 or 7% year-over-year. These results were in line with our expectations. First quarter total revenue per HIC was $27,811 and up 6% year-over-year. Net income was $3 million in the quarter compared to a net loss of $3.9 million in the same period in the prior year, representing our third consecutive quarter of positive net income.

We are also introducing 2 new metrics this quarter, total managed payments and Payment Solutions revenue rate. Total managed payments combines our legacy patient payment volume with Access One's managed portfolio of cardholder receivables, giving investors a single view of the scale of our payments ecosystem. Payment Solutions revenue rate consists of our total Payment Solutions revenue divided by total managed payments, demonstrating how changes in volume and portfolio size translate into revenue.

Total managed payments were $1.786 billion in the first quarter of fiscal 2027, and our Payment Solutions revenue rate was 2.3%. For more information on these metrics, please refer to our earnings press release and stakeholder letter. Now turning to the balance sheet and cash flow updates. On March 13, we completed the refinancing of our bridge loan. We repaid all outstanding indebtedness under the bridge loan using $92 million of borrowings from a new 5-year $275 million senior secured revolving credit facility with Capital One, maturing on March 13, 2031.

The unused borrowing capacity is available for working capital, capital expenditures, acquisitions and general corporate purposes. Cash, cash equivalents and restricted cash as of April 30, 2026, were $76.4 million compared to $73.8 million at January 31, 2026. At April 30, 2026, $1.7 million of our restricted cash was included with other long-term assets. We ended the first quarter with $84 million of borrowings outstanding on our new Capital One credit facility, reflecting an $8 million paydown during the quarter. Net cash provided by operating activities was $23.9 million in the quarter, an improvement of $9.1 million year-over-year.

Free cash flow was $16.4 million, an improvement of $8.9 million year-over-year. We expect that quarter-to-quarter operating cash flow and free cash flow performance will fluctuate based on a variety of factors, including the specific timing of invoicing and payments, which you can see in working capital, along with CapEx. Additionally, on April 30, we expanded Access One's securitization facility with PNC Bank and extended the term through April 2029. This development reinforces our investment thesis behind the Access 1 acquisition in 2 key ways. First, we increased the facility limit from $200 million to $300 million. giving us greater capacity to offer Access ONE solutions to our clients.

Second, the amendment also expanded our ability to offer upfront funding to noninvestment-grade clients. Many of Frigo's clients are not investment grade, and we are excited to offer them financing solutions that drive cash flow improvement. Now transitioning to our financial outlook for fiscal year 2027. Our fiscal 2027 outlook is unchanged from what we provided in March. We're maintaining our revenue outlook for fiscal year 2027, we expect revenue to be in the range of $510 million to $520 million. As we noted last quarter, Network Solutions clients are committing lower spend levels for the second half of fiscal 2027 than we had anticipated last December.

Certain clients are committing fewer dollars due to brand-specific dynamics, including the impact of regulatory policies. Though we do not believe these developments are signaling a structural shift in demand for Africa solutions. There is now more variability in our internal network solutions revenue forecasting, particularly in the second half of each fiscal year. Our visibility into revenue across other parts of the business is generally consistent with our views in March 2026. The revenue range provided for fiscal 2027 assumes approximately $37 million of contribution from Access One and no additional revenue from potential future acquisitions completed between now and January 31, 2027.

We are maintaining our adjusted EBITDA outlook for fiscal 2017 and we expect adjusted EBITDA to be in the range of $125 million to $135 million in addition to our continued belief in the operating leverage embedded within our model, -- we have more recently identified opportunities to reduce our reliance on manual processes across Fresia, including through the adoption of artificial intelligence. In May 2026, subsequent to quarter end, we implemented a restructuring plan, intended to reduce operating expenses and better align our cost structure with our current business priorities.

The plan is expected to result in meaningful annualized run rate expense savings which were reflected in our adjusted EBITDA outlook provided on March 30, 2026. We are maintaining our expectations for AHSC growth in the mid-single-digit percentage range and we're maintaining our outlook for total revenue per AHSC to grow in the low single-digit percentage range for fiscal 2021. We I would like to join him in recognizing the significant contributions from everyone at Phreesia to our solid financial profile.

Operator, I think we can now open up the lines for the Q&A session.

[Operator Instructions] Your first question comes from the line of Sean Dodge with BMO Capital Markets. Please go ahead.

Maybe just on Access One, Balaji, you said the new agreement with PMC, there's 2 dimensions to it. You can -- you expanded the size of the facility, but now you can also offer to other types of providers. How should we think about like what that means kind of incrementally or quantitatively for the excess 1 opportunity over the next couple of years, the cross-selling into free base, like how meaningfully can that start to contribute? And then as you sell into these other types of providers or the economics of those different than what like a typical legacy Access -- on client would be? .

Yes. Thanks, Sean. There's a lot in there. I'll try to hit on all those. So first of all, just stepping back, this is an area that Phreesia has been thinking about entering for many, many years. And I think 1 of the areas why we're interested is because of our base of clients that are in a lot of these medical specialties and are noninvestment grade. So this was definitely an important milestone to get to. And we think there's other sources of capital as we continue to penetrate this part of the market. Probably a little bit early to talk about like how the economics might differ. But at the end of the day, I think we just keep pointing to some of the prepared remarks and what's in the letter, which is we're trying to drive cash flow improvement for these health care providers. And this just gives us more capital and opens up the addressable market into our base, which we have a long history of working with a lot of these clients. So there's a lot of trust built there as well. .

Your next question comes from the line of Stan Berenstein with Wells Fargo.

Just wanted to maybe ask more holistically, obviously, your growth engine is shifting a bit away from subscription towards payments and network. Can you just maybe talk about what changes are you making to your sales and marketing teams to kind of pivot and drive growth in other areas of your business? And how is the go-to-market different from where it was a year ago?

Yes. Thanks, Dan. So I think 1 important way to think about all this is region has always been a product-led growth organization. So it does always start with the product. And I think if you think about on the provider part of this, there's the software that we implement and the clients benefit from. I think you're referring to the monetization of it, which is clearly shifting -- we have been talking about this for, I think, at least 2 years of this philosophy of better, faster and cheaper in terms of the software for our provider clients this is deliberately moderating subscription pricing to keep retention strong, drive the downstream economics in Payments and Network Solutions.

So you're seeing some sequential moves generally, what you'd expect with that strategy in the sequential change in subscription revenue. In terms of the go-to-market, it's still very product-oriented. So -- we build a lot of new capabilities. Our team implements them. And our sales motion is very much still trying to get those products in the hands of the providers to drive value. It's just the monetization that is shift.

Your next question comes from the line of Scott Schoenhaus with KeyBanc.

I guess my question will be on the Network Solutions. You mentioned in the investor letter, about seeing some strength with the newly launched provider product. Maybe we could touch more on that, what's basically embedded in your guidance? I know you're talking about continued caution around the back half set up. But you can dive deeper on what you're seeing on the new Provider Connect side of things.

Sure. Thanks, Scott. I think there's 2 different threads here on all things network solutions. I think -- we spent a lot of time both this quarter and last quarter talking about what's happening in fiscal '27 as it relates to the demand and end markets. I think way down below that underneath is this new area that we're pretty excited about, that we just launched earlier this fiscal year, working from a base of 0 in fiscal '20. .

We're very excited about it. We've had a lot of wins and a lot of momentum. There is some contribution from that built into our fiscal 2017 guidance. But really, I think the way to think about it is it gives us a runway for fiscal '28, '29, '30, where we're not just relying on the patient Connect side of things, but on a provider connecting things. So the team did an excellent job of getting that launched, and I think there's a lot of good momentum there.

Your next question comes from the line of Brian Ken kilo with Jefferies. Please go ahead.

Maybe just a quick question. It looks like labor cost efficiency efficiencies and RN sales and marketing in Q1 showed up even before the restructuring. So -- was there any risk that happened in Q1? And then after this, how do we think about the ability for Parisian to drive margin expansion going forward as you grow revenues? And are there more cost efficiency opportunities longer term?

Yes. Let me just sort of make sure I understood that. So I think 1 question you're talking about is was there anything in Q1 that contributed to margin improvement, any changes that were happening. And then two, I think you're asking more forward-looking. So in terms of like just stepping back, I mean, I think as many of you on the call can probably appreciate. We put a lot of capital to work into the business 4 or 5 years ago. And I think we've had a lot of these calls talking about operating leverage. And so we're constantly looking at areas to drive efficiency, but we also made that upfront investment that we thought we'd get years of productivity from.

So that's really, I think, Brian, the answer on your first part of the question, nothing to call out of the ordinary. Obviously, the announcement we made in May was a little -- was different, which is why it was called out and presented the way it was. But I think Q1, nothing to call out. Going forward, I think our outlook -- financial outlook assumes continued improvement throughout the year on margins. I don't think we're going to talk beyond that. But to get to the place we are, we feel very good where we have a lot of optionality and paths to kind of driving more growth in the business and having pretty good margins.

Your next question comes from the line of Jared Hass with William Blair. Please go ahead.

Yes. In the letter, you also talked about some investments in clinical integrations to sort of better support the oncology or the other specialty providers so I just wanted to hear a little bit more, I guess, just number one, where you're seeing the biggest opportunity for investment for that specific segment of the market. And then I'd love to hear a little bit about -- I think you sort of flagged the you need workflows associated with those types of providers. So where does Phreesia kind of fit into that and where there might be some differentiation to help address those challenges? .

Yes. Thanks, Jared. So I mean, this is something we do call out from time to time in our letters because when you think about the flywheel of the business and what we talked about in the go-to-market motion and how we monetize products, our alignment with the right specialties is really valuable to our network solutions team as they offer products like Patient Connect and Provider Connect. So we can drive a lot of value for the providers. We can drive a lot of value for the various brands that we work with.

I think Targa's -- I think we sort of created this category I think in Jim's opening remarks, we talked about just how patient intake has evolved. -- as Frisia has been throughout its 20-plus year history. So I think what you should think about is just we're constantly kind of the pace car and setting the standard there. And when we work with a lot of these specialties, I think we can really differentiate how information is collected and integrated across the systems.

Your next question comes from the line of Ryan MacDonald with Needham.

Maybe 2 on the Networking Solutions business. I realize you didn't change any of the guidance on the top line for the full year, but just curious how conversations are evolving as you're heading into the back half of the year about potential sort of unlocking the incremental budget on the Patient Connect side. And on provider can, given it's such a new solution in the marketplace, what opportunities are you potentially seeing to be included into some of that late year innovation spend on newer solutions in the market that could create some potential upside ?

Yes. Thanks, Ryan. You got a lot in there. I think on -- in terms of the second half of the year, I mean, I think it sort of speaks for itself. There's we had our last earnings call for the fiscal year end on March 30, so not a lot of time has passed. I don't think we have really anything worth sharing here, which is obviously why we maintain the revenue guidance for the year. So we'll provide updates as the year goes by. I think we will know incrementally some more in September when we report the fiscal second quarter, but nothing really to call out since March. I think you asked some questions about new product and innovation. And I think what you should really just think about is we're constantly trying to have a lot of value where we can deliver the right kind of messages to patients to impact their outcomes.

On the provider side, there's a lot of friction in the providers. So we're not creating products that are like inventing problems. We hear a lot of feedback from our clients, and we're just trying to build products that address some real needs. And again, we're fortunate enough to have different ways of monetizing those products.

Your next question comes from the line of Jeff Garro with Stephens.

Yes. Good afternoon. Thanks for taking I'll ask another 1 on the product side, and I'll try to kind of lump in provider connect with voice AI. Curious to get an update on voice AI specifically and then just to tie it back to that provider on product, the general momentum trying to create more engagement with providers as you release more kind of features and functionality and software products that pertain more to them versus the patient or more administrative staff.

Yes. So in terms of just products, I mean, look, there's a lot of work and effort similar to Access, I think entering space has been something people at Fresh been working on for many, many years. So we're very excited to get this launched and get it off the ground. There -- I think you should assume we're always thinking about other opportunities to engage with the provider directly, Jeff. But I think right now, if we can be successful in provider Connect, I think it will be -- translate very well financially and 1 more importantly for our clients. .

Your next question comes from the line of Daniel Grosslight with Citi. Please go ahead.

Network Solutions was a bit stronger than we expected this quarter. I know there's a lot of variability coming into the second half of the year. But I'm curious if this quarter outperformed your expectations? Or was it roughly in line with what you were -- what's in your internal model? And then also, I guess, related to that curious on how GLPs are performing relative to your expectations. I think last quarter, you had kind of called it out as a bit of a bad guide, but not as much as other factors. But given we've ramped up a bit on the oral side, would love to get an update on how GLPs are performing too. .

Yes. So first, with the quarter on Network Solutions, very much in line with what we had a shout out to a lot of folks at Frisia and the team in terms of, I think, Daniel, we've talked to you about this. There's a lot of different moving parts into how we run these campaigns and how they're paced -- we don't -- we're not trying to optimize things for a quarter, yet we're a public company, and there's the realities of we want to set expectations that we can deliver on.

So all that considered was very much in line. As far as the second question, I mean, I don't think we want to get into specific things about clients or specific programs. I think just the commentary we made about generally the demand environment and generally, how we see things for the year applies for a lot of different areas. I don't if you want to give any specific stuff.

Your next question comes from the line of GilendraSingh with Truth Securities.

I wanted to touch on the subscription business this quarter, and I understand a tough year-over-year comp, but I'm still struggling to figure out why there was a 6% sequential decline in subscription business. And related to that, given where you're starting the year for this business, do you still expect subscription business to grow low single digit because that will imply some pickup from Q1 trends. Could you give us comfort around subscription business and where you expect that?

Sure. Thanks, Glenda. So all of this sort of thinking in the different revenue lines is reflected in how we built up our fiscal '27 outlook. And so we're not going to get into revenue by revenue outlook and we provide outlook for the whole business, and that's -- we think that actually works against how we run the business. What we can tell you is that the strategy is embedded in the numbers. We feel good about where total revenue per AHSC is headed for the year.

And as far as your comment about like sort of where we sort of started in the first quarter, it's very much part of the way we sort of see the year playing out. And we have, again, we're fortunate enough to have different paths getting to that outlook, which is $510 million to $520 million for the year.

Your next question comes from the line of Steven Valiquette with Mizuho Securities.

So most of my good questions have been asked already. It's kind of more of a housekeeping 1 also on the subscription and related services revenue. Can you just remind us -- you mentioned the nonrecurring revenue in the fiscal first quarter of last year. But for the rest of the quarters, are there any other nonrecurring revenues, either up or down that we need to think about? Or do you have more lean comparisons quarterly for the rest of this year versus the quarter last year? .

Yes. Thanks, Steve. There's -- I mean, we called that out last year, and obviously, it impacts this year from year-over-year comp. There's always like a couple of million bucks in the related services component. It was just more pronounced last year and impact of the comps this year. But there's nothing else. I think if you looked over our 28 quarters of being public. I think we've called out related services 3x. So I don't think there's anything to think about the rest of the year.

Your next question comes from the line of Jessica Tassan with Piper Sandler. .

So I appreciate the revenue mix shift to networking payments on a per ASC basis, but I'm just curious whether you think about the current subscription revenue per AHS -- does that kind of reflect the floor? Or yes, does that reflect the floor on kind of how AHSC perceives the value of their subscription products? Or should we expect kind of that there may be continual moderation? .

Yes. Thanks, Jess. I'm going to repeat 3 words that we say a lot better, faster, cheaper. We think that's just the way -- that's where the puck is headed. We felt that way for several years. And so it does make it very hard to translate what a subscription dollar per client meets to the value the client is getting. We want to make sure they're getting a lot of value for it. But for us, we sort of flip it around internally and don't think about it as different business lines and just think about the total dollars that can come in. So I think we're providing an outlook for the year. I think we try to be as helpful as we can around the modeling -- so I don't want to put ourselves to commit to like whether there's a floor or ceiling, but we're not optimizing for that revenue line specifically. And generally, this is trending in a direction we've expected. .

Your next question comes from the line of Ryan Halsted with RBC.

Obviously strong growth in the Payment Solutions business. Any color you can provide just around sort of the broader environment and how you're seeing that translate to this business, specifically around utilization trends, just generally more cost burden being borne by consumers and whether you're seeing that as a driver as well as greater out-of-pocket or lack of insurance? Just any other color around some of the experience you're seeing in that segment and the results you had for the quarter.

Yes. Thanks, Ryan. I would say all of the above. I mean a lot of the points you made are really what we're seeing, what I is very interested in getting deeper into this space. I think it really does start with cash flow, though. And the ability for a health care provider, I think as many of you know, to be able to just convert cash in their business, huge amount of labor expenses a lot of supplies, et cetera, is a big deal. And so that's a huge value prop. I think the shift in terms of more dollars being borne by the patient. That's been happening for years and it continues. So again, you can almost say like the consumer is like sort of a bigger payer category in general. .

Your next question comes from the line of Richard Close with Canaccord Genuity. Richard.

Maybe on subscription, as it relates to HSE, you reiterated AHS see growth in the mid-single digits. Can you talk a little bit about that number on a gross versus net basis. Just trying to get a sense of maybe churn that's going on? And your thoughts on excess 1, how much maybe that helps the potential churn going forward?

Yes. Thanks, Richard. Look, you -- I mean I think we've shared the net number. You've got a lot of data over time. It's interesting. One thing to take away is that it's an average, right, the A and AOC -- and we're pretty encouraged by the team's start to the year with 50 average clients in the way -- if you read our footnotes and stuff, how we calculate that, that's very encouraging with a lot of our go-to-market motions. And so I think that's a net number.

So we added more than we lost, and the net of it is $50 million I think on your second part of your question yes, we think the value proposition with Access 1 and now being able to even extend that reach into our base clients can absolutely be something that can strengthen the relationship we have with them and strengthen retention.

Your next question comes from the line of Gene Mannheimer from Freedom Capital Markets.

Just on the note on the Access One, you've owned it for 6 months now. How would you raise that transaction in terms of meeting expectations? I know it's early days. And the second part of the question would be -- can you quantify for us the savings you expect from the restructuring plan that you implemented this month?

Thanks, Gene. It's big. The savings generated are baked into our outlook for the year, we're not going to break out a specific contribution from that, but it's something we planned for. On Access 1, I mean, just maybe just take a step back. They operate 2 complementary programs, funded receivables that represent roughly 40% of the portfolio. And then an unfunded portion that's about 60%, where providers retain the receivables, and we are in the servicing fee that composition and strategy continues to evolve.

But I'd say, generally, in front of even this expansion of our relationship with PNC, we're pretty pleased. This was the largest acquisition Price's ever done. There's a lot of work to be done. But I think where we are right now, we're pretty pleased to be here with a lot of the milestones that we've hit.

There are no further questions at this time. I will now turn the call over to Hy Mendig, CEO, for closing remarks. Please go ahead. .

Thanks, everyone, for joining the call today. Thank you, Balaji, for doing a wonderful job of answering questions, and everyone on the Free team for a very good strong quarter. We'll talk to you again in 90 days.

This concludes today's call. Thank you for attending. You may now disconnect.

Good evening, ladies and gentlemen, and welcome to the Phreesia Fourth Quarter Fiscal 2026 Earnings Conference Call.

[Operator Instructions]

First, I would like to introduce Balaji Gandhi, Phreesia's Chief [ Financial Officer]. Mr. Gandhi, you may begin.

Thank you, operator. Good evening, and welcome to Phreesia's Earnings Conference Call for the Fourth Quarter of Fiscal 2026, which ended on January 31, 2026. Joining me on today's call is Chaim Indig, our Chief Executive Officer. A more complete discussion of our results can be found in our earnings press release and in our related Form 8-K submission to the SEC, including our quarterly stakeholder letter, both issued after the markets closed today. These documents are available on the Investor Relations website at ir.phreesia.com.

As a reminder, today's call is being recorded, and a replay will be available on our Investor Relations website at ir.phreesia.com following the conclusion of the call. During today's call, we may make forward-looking statements, including statements regarding trends, our anticipated growth, our strategies, predictions about our industry and the anticipated performance of our business, including our outlook regarding future financial results.

Forward-looking statements are subject to various risks, uncertainties and other factors that may cause our actual results, performance or achievements to differ materially from those described in our forward-looking statements. Such risks are described more fully in our earnings press release, our stakeholder letter and our risk factors included in our SEC filings, including in our annual report on Form 10-K that will be filed with the SEC tomorrow. The forward-looking statements made on this call will be based on our current views and expectations and speak only as of the date on which the statements are made. We undertake no obligation to update and expressly disclaim the obligation to update these forward-looking statements to reflect events or circumstances after the date of this call or to reflect new information or the occurrence of unanticipated events.

We may also refer to certain financial measures not in accordance with generally accepted accounting principles, such as adjusted EBITDA and free cash flows 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 release and stakeholder letter, which we furnished with our Form 8-K filed after the market closed today, the SEC and may also be found on our Investor Relations website at ir.phreesia.com. I will now turn the call over to our CEO, Chaim Indig.

Thank you for joining our fourth quarter and fiscal year 2026 Earnings Call. Fiscal year 2026 was a pivotal year in Phreesia's evolution, one defined by deliberate choices and disciplined execution. The decisions we made this year are the ones we made on our own terms, and we believe they will compound in our favor over the next several years and beyond. I want to start by recognizing the Phreesia team, key product launches, client success stories, our largest acquisition and our achievement of key financial milestones are among the accomplishments the team contributed throughout the year. I want to thank everyone on the team for their dedication to Phreesia's mission, vision and values. This year, we crossed several critical financial milestones out of our internal targets. We surpassed $100 million in adjusted EBITDA, [ approx ] $50 million in free cash flow. And for the first time in our history as a publicly traded company, we delivered positive GAAP net income for a full fiscal year. Each of these is a meaningful milestone on its own. Together, they reflect a company that has made a calculated bets executed against them and is now scaling from a position of genuine financial strength.

I want to take a moment to reflect on 2 growth initiatives we discussed on our last call, provider financing and HCP marketing because both made meaningful progress this year. On provider financing, the acquisition of AccessOne has been central to our strategy. We have now been operating in the business for several months, and our investment thesis has only been reinforced.

Patient financial responsibility continues to rise in this country. Providers need tools to convert patient receivables into predictable cash flow. AccessOne gives us a market-leading solution to address that need at scale. AccessOne is performing in line with our expectations, and we are actively working to expand our access to capital for our securitization programs so we can bring AccessOne solutions to a greater portion of our provider network. We are excited about the loan runway ahead.

On HCP marketing in early March, we announced the launch of Provider Connect, a first-of-its-kind offering for health care provider marketers. This is a natural extension of what we have built with Patient Connect, one of the most trusted and effective point-of-care media offerings in the industry. Provider Connect brings the same proven playbook real care and carers, patient-level relevance and privacy at the center to the provider side of the equation. We believe our ability to align both sides of the care conversation is something no one else in the market can do as comprehensively as Phreesia and we are excited to build on this foundation in fiscal 2027. We entered fiscal 2027 having built the financial profile we intend to build, one that gives us the flexibility to pursue opportunities on offense and the resilience to absorb challenges without altering our course. AccessOne and ECP are 2 of the opportunities we've discussed and we look forward to sharing more of them as well as other opportunities for growth and market extension.

I also want to put our results in context. We are growing in a tough market. The health care industry is facing adversity, we are seeing challenges in FDA guidelines, insurance coverage, patient utilization and provider reimbursement. We believe our emphasis on building products that address access, affordability and outcomes with revenue generation tilted towards financial services and consent-driven patient engagement position us to be an enduring platform. Segments of the life sciences industry are facing challenges, and we are seeing this reflected in our shorter visibility into spending commitments from certain pharmaceutical manufacturers in our Network Solutions business.

This is an external dynamic, not a reflection of Phreesia's competitive position or the underlying demand for what we offer. While we do not believe this reflects a structural shift in demand for Phreesia offers, it is creating more variability in our financial forecast, and we are reflecting that in our updated fiscal 2027 outlook that Balaji will walk through. AI is also playing an increasingly important role in how we operate. We are using AI, not just in the products we deliver to clients, but internally to automate manual processes, reduce our reliance on outsourced resources and drive greater efficiency across the business. This is a meaningful contributor to our margin expansion and when we expect to continue to benefit from as we scale.

We believe we are building the right company for this moment. One positioned to grow on its own terms as intelligence becomes embedded in how health care operates. Before handing it over to Balaji, I want to stress that our company is stronger than ever because of the decisions we've made, sometimes difficult ones. Our financial profile is strong, and we have a great team of leaders and a significant bench strength behind them. We entered this fiscal year with several key priorities, positioning AccessOne for growth, scaling our HCP marketing offering and continuing to infuse AI into the Phreesia operating model.

We believe these initiatives, combined with the discipline that has defined our recent performance put us in a very strong position to take advantage of the multiple growth opportunities that lie ahead. A more modest revenue growth year does not change our trajectory. It reflects a specific external dynamic in 1 part of our business. We believe the underlying platform is stronger than it has ever been. I'll now turn it over to Balaji to walk through the Q4 results and our fiscal 2027 outlook.

Thank you, Chaim. Let me start with a few highlights from our fourth quarter and fiscal year 2026 results, and then I'll move into our outlook for fiscal 2027. For the fourth quarter of fiscal year 2026, revenue was $127.1 million, up 16% year-over-year with growth led by Payment Solutions following the acquisition of AccessOne. Excluding the AccessOne acquisition, revenue was up 7% year-over-year. Adjusted EBITDA was $29.4 million compared to $16.4 million in the same period in the prior year, representing an adjusted EBITDA margin of 23%. Fourth quarter average healthcare services clients, or AHSCs, reached 4,658, an increase of 138% from the prior quarter. 80 of these AHSCs were contributed to the AccessOne acquisition. These results were in line with our expectations.

Fourth quarter total revenue per AHSC was $27,279, up 8% year-over-year. There are several important financial milestones and developments included in our stakeholder letter, earnings release and 10-K filing that are worth highlighting.

2026 was an important year for Phreesia's evolution as a profitable company. For the first year ever, we achieved positive net income and earnings per share. Over the past several years, we have made very intentional decisions around capital allocation to accelerate our path to GAAP profitability because we have believed it will become increasingly important to the investment community. Cash flow continues to improve. In the fourth quarter, net cash provided by operating activities was $33.7 million, up $17.4 million year-over-year. Free cash flow was $28.5 million, up $19.3 million year-over-year, our strongest quarterly free cash flow to date. The year-over-year improvements in operating cash flow and free cash flow were driven primarily by changes in working capital and operating cash flows provided by AccessOne.

Cash and cash equivalents as of January 31, 2026, were $73.8 million compared to $84.2 million at January 31, 2025. Finally, before moving into our fiscal year 2027 outlook, let me review our recently completed refinancing subsequent to the end of fiscal year 2026. On March 13, we completed a refinancing of our bridge loan. We repaid all outstanding indebtedness under the bridge loan using $92 million of borrowings from a new 5-year $275 million senior secured revolving credit facility with Capital One, maturing on March 13, 2031. This replaces both the bridge loan and the prior ABL facility. The unused borrowing capacity is available for working capital, capital expenditures, permitted acquisitions and general corporate purposes. With the refinancing complete, we intend to prioritize allocation of capital to areas that we believe can enhance long-term shareholder value, which may include the paydown of long-term debt investment to support revenue growth acceleration and share repurchases as appropriate.

Now transitioning to our financial outlook for fiscal year 2027. We've had several developments in recent weeks that drove our updated financial outlook for fiscal year 2027, which I will review and provide the reasons behind them. We are lowering our revenue outlook for fiscal year 2027. We now expect revenue to be in the range of $510 million to $520 million compared to our prior range of $545 million to $559 million. As we discussed in December, we are experiencing shorter visibility into spending commitments by certain pharmaceutical manufacturers. Over the past several weeks, we have seen even lower levels of dollars committed by certain Network Solutions clients for the second half of the fiscal year.

As Chaim mentioned, we do not believe these developments are signaling a structural shift in demand for Phreesia solutions. However, there's now more variability in our Network Solutions revenue forecasting particularly in the second half of each year. Our visibility into revenue across other parts of the business is generally consistent with our views in December 2025. Our new revenue range assumes no additional revenue from potential future acquisitions completed between now and January 31, 2027. We are maintaining our adjusted EBITDA outlook of $125 million to $135 million for fiscal year 2027. It is worth noting that we are holding our adjusted EBITDA outlook even as we reduce our revenue range or a reflection of the operating leverage we have built and our ability to respond quickly with further efficiency gains.

In addition to our continued confidence in the operating leverage embedded in our model, we have more recently identified significant opportunities to reduce our reliance on manual processes across Phreesia through the adoption of artificial intelligence. Initially, we expect to see efficiencies in our utilization of outsourced resources. We are maintaining our expectation for AHSC growth in the mid-single-digit percentage range in fiscal 2027. We are updating our outlook for total revenue per AHSC to a low single-digit percentage range compared to our low double-digit range previously, reflecting the Network Solutions headwinds I just described. Operator, I think we can now open up the lines for the Q&A session.

[Operator Instructions]

And our first question comes from the line of Sean Dodge with BMO Capital Markets.

Yes. Maybe just starting with the dynamics in the Network Solutions end market. And just to kind of clarify the change in the guidance. Balaji, you framed it as having a lot of visibility to what clients are going to spend I guess is this across all clients there? Or is it just a [ subset of it ] -- I mean, then I also like how -- like what base do you think those budgets are or their intentions are at this point? Is there a chance that they come back in a few months and increase their second half spending commitments? Or are those pretty firm at this point?

Yes, Sean, this is Balaji. Thanks for the question. So I'll answer your second one first. It is very fluid. And I think that's one of the things we're trying to establish here is it's very early in the fiscal year, but we wanted to share this development with you now. But there's lots of activity that's happening in here. In fact, just getting updates in real time, things are going well in the fiscal first quarter. But we just think it's these shifting dynamics put us in a position where we think we want to be transparent and give you updates as the year goes on.

So now pivoting to your -- the first part of your question, it is not broad-based. It is in specific brand and therapeutic areas. I'll give you just a couple of examples of things we're seeing that warrants this change. vaccines. I don't think that should be a surprise to anyone on the call, but clearly, vaccine spending and targeted marketing around that has been pulled back. So that's been one area just generally public health with agencies in the federal government. We're also an area of growth for us in the past and we've written about in some of our letters. And that's also been an area. So those are just 2 examples. There's certainly a couple of others. But this is not a broad based. And I think as, even Chaim said in his opening remarks, not something that's happening specifically but happening on a macro basis in a couple of different areas.

And our next question comes from the line of Ryan Daniels with William Blair.

I'll continue down the network solutions path. Can you talk a little bit more about what you're assuming this year for Provider Connect. I'm just curious if you think that's going to be a contributor as you look towards more HCP marketing versus traditional D2C and potentially how weak the guidance could have been if you didn't have a novel product offering to offset some of that weakness?

Yes. Sure, Ryan. Very little. Very early days. still something we're very excited about. But this change in our revenue outlook has nothing to do with anything that's going on with something very small. In fact, again, that's obviously a very small base. the launch went well, and we do see some upside there. But for this conversation, it's very small.

And our next question comes from the line of Jeff Garro with Stephens.

I'll continue on our [indiscernible] solutions. Balaji, you didn't mention price negotiations, most [indiscernible] pricing or through some of the legislation, certain high-volume drugs getting their prices renegotiated with Medicare. So I wanted to check in on that factor and how that's impacting your pharma clients budgeting and your outlook in turn.

Yes. I mean we didn't mention that, and that's not really what we're tying it to, I think, on the earlier question around different therapeutic areas and some regulatory activity. that's what we pointed to. But Jeff, it probably is -- it doesn't help with other topics.

And our next question comes from the line of Jailendra Singh with Truist Securities.

I want to focus on the EBITDA guidance. I mean you talked about AI efficiency gains, but can you be more specific [indiscernible] sort of that? What kind of cost actions are you implementing which is resulting in your EBITDA target still being unchanged, especially with revenue down $35 million, $39 million and majority of that cut coming into your higher-margin business. Just trying to better understand how much of the cost reduction is temporary in nature versus structural. And just give us a little bit more color on the cost initiatives.

Yes. Thanks, Jailendra. So here's -- I think just one way to think about this topic. If you just followed us, which I know you have over the past several years, we certainly put a lot of capital investment into the business. And our view has always been that we should become more efficient and drive more margin expansion in the business. and I think that continues. And that's what affords us to be able to continue to have the outlook for adjusted EBITDA that we do here. Separately, I think the comments around AI are -- I mean, again, probably not a secret to anyone on this call, but there have been some pretty big releases and developments that we are seeing is revolutionary in terms of how it can impact our business operationally, I think we did talk about manual processes. And I think we mentioned in the letter also specifically that some areas around outsourcing manual processes that we think we can drive a lot of efficiency through initially. But again, I'll just point you back to the numbers in the last 3 -- really almost 4 years that we've always looked for ways to drive margin in the business.

And our next question comes from the line of Brian Tanquilut with Jefferies.

This is Cameron on for Brian. I wanted to dig more into that EBITDA guidance a little further. When you're thinking about sales and marketing, and R&D spend. Are you expecting those to be up year-over-year still? Or is that part of that EBITDA margin improvement as well?

Yes. I mean we haven't given very like specific guidance around those specific lines. But I think, again, we've talked historically about our expense base and there being a lot of room for margin expansion. I think what we've said over the past year is the progression of that, you saw gross margin improve then you saw G&A improve, then you saw sales and marketing improve as a percentage of revenue. And we said R&D should probably be a bigger contributor of margin expansion or expense ratio improvement in fiscal '27. The others should also improve, but not much as R&D.

And our next question comes from the line of Jessica Tassan with Piper Sandler.

Can you maybe help us understand just on the payment side, the facilitator percent and volume variability in FY '26, just what's going on to cause the facilitator volume to go from 82% in first half to 85% 3Q, 84% in 4Q? And then just do you expect payment processing revenue to grow outside of AccessOne in FY '27.

Yes, Jess. I think on the payment facilitator percentage, there's just certainly some client activity there where we've had some better attach rate. I don't think there's anything particularly noteworthy there. I think consistent with what we said for a few years, we have tried to focus on payback and adding new clients where we can benefit from all the different products we can offer them. And then on payments, nothing different on what we talked about in December, we expect it to grow year-over-year exclusive of AccessOne and that contribution. And I think it will -- I don't think we've given a specific number, but I think it should -- it will grow in the single digits.

And our next question comes from the line of Ryan MacDonald with Needham & Company.

In terms of AccessOne, you talked about your investment thesis has been reinforced over the past several months and positioning AccessOne for growth is obviously a key initiative for fiscal '27. Can you talk about -- a bit more about your priorities there as you're looking to drive growth? Is it more focused on a tighter integration and cross-selling opportunities between AccessOne and core Phreesia or more looking for ways to augment AccessOne as a stand-alone business unit? And how dependent is getting that -- expanding your current access to capital for AccessOne to driving growth in that business in fiscal '27?

Yes. Thanks, Ryan. So first of all, this isn't a very established franchise in the space, which is the reason we made the acquisition. So we expect to grow the products that we acquired based on that track record, et cetera, et cetera. Obviously, we're going to put more resources around it within Phreesia we already have. As far as the importance of expanding the capital base to bring it to our base. That is also super important. And if you think about just sort of the progression, we closed the acquisition in November. First order of business was you wanted to move quickly on financing it. We had the bridge loan. We went in and refinanced that. Now we've got a good long-term credit facility, and we paid down the bridge, and we'll continue to pay down debt. The next quarter very quickly behind it, which we've been very active on is expanding the capital base to bring us to Phreesia [indiscernible] so statement for that, that will be another milestone we'll keep an eye on.

And our next question comes from the line of Richard Close with Canaccord Genuity.

On subscription pricing in the letter, you talked about optimizing client retention and also adoption. Just curious how much of that is really focused on retention and if you are seeing any increased pressures of current clients looking to change?

Yes, Richard, I think this has also been a pretty consistent theme for us. I think Chaim, a lot of times, will talk to investor meetings about better, faster, cheaper in terms of what our products need to do. So I'd say it's very offensive on our part, making sure that we're improving our existing product, giving our clients more product, but we are completely comfortable and have conviction that we should be providing more value, and that's why we think will drive more revenue growth in the other 2 revenue lines. But I'd say it's more really proactive in OpEx about our part. We think it gives us a competitive advantage.

And our next question comes from the line of Stan Berenshteyn with Wells Fargo Securities.

So back to network, if we think about the revenue that remains within the guidance that you've updated, are there any brands that are driving an outsized contribution to the revenue expectations? I'm just trying to think about revenue concentration, if there's anything to call out there?

Yes. Stan, I think what you asked was about the existing -- the revenue that's built into our existing revenue outlook. Nothing particularly noteworthy there in terms of concentration. And again, going back, I think, to the original question of this call. I mean, what we want to do is be able to update you as we go through the year as we have more visibility. So by no means are we trying to suggest that the year is done, and this is how we see revenue, but we think this is the right way to communicate for the rest of the year.

And our next question comes from the line of Joseph Vruwink with Baird.

I wanted to ask about how you see AI changing the competitive landscape within the software business. I think patient intake is one of those categories where it's actually fairly common to use a specialist provider like Phreesia alongside maybe your EHR or Practice solution. Do you see AI capabilities, and you alluded to how Phreesia's benefiting itself from AI capabilities are the big kind of platform companies able to do that as well and maybe change the competitive dynamic?

This is Chaim. We actually think that it's allowing us to increase the breadth of offerings that we can offer our clients. What we've seen in the market dynamics is really the scope of the value we could provide is increasing at a -- frankly, at such a rapid pace that our clients are more than excited about what we're able to offer. So I think that look, health care has a lot of room for continuous improvement and value for the patients and providers. And we think that we're well suited given the contextual information that we have and our long history of providing value to the patient and the provider or we think that there is a lot more value that we can continue to provide to our clients beyond where we traditionally have played.

And our next question comes from the line of Steven Valiquette with Mizuho Securities.

I guess also I have a question here on the Network Solutions. Your comments around the vaccines was helpful. I guess I'm curious also from a therapeutic perspective, but possible, curious to hear more on just GLP-1 drugs as a category, especially with some big FDA approvals on oral formulation in the first half of the year. So I guess the question is really from a high level, are oral GLP-1s or GLP-1s more in the good guy camp for you for your fiscal '27 relative to your prior expectations? Are they kind of a bad guy relative to the prior? Or no change? Just curious on that class in particular in this is kind of a big driver of variability for this year.

Yes, Steve, thanks for the question. On the margin, they're in the bad guy category as you would characterize it and amongst the other issues with vaccine and public health that you mentioned earlier.

Our next question comes from the line of Scott Schoenhaus with KeyBanc.

Balaji, I think in your prepared remarks, you mentioned that the visibility or the commitments from pharma worsened in the last few weeks. Wondering if you could provide any more color there. I know your provider connect is fairly new, but are you seeing the same levels of that sort of erosion in commitments on the provider Connect side as to Patient Connect? And then, in general, do you expect to see more or less or equal visibility from pharma budgets on provider Connect versus patient Connect?

Yes. Thanks, Scott. So first of all, the commentary about recent updates, it has been all around Patient Connect. I think as we mentioned earlier, I mean provider Connect still very, very early. In fact, if anything, the news has been more positive fiscal year-to-date, and we've had a lot of good news coming out of clients, and we're all very excited about it. But again, it's inconsequential in terms of the magnitude of the numbers still and has some room for upside. So I can't -- I'm not sure, Scott, if I remembered the rest of your question, so maybe you can jump back in the queue.

And our next question comes from the line of Daniel Grosslight with Citigroup.

If you allocate the entire guidance reduction to Network Solutions, it seems like we're looking at kind of a high single digit, low double digit -- sorry, high single digit, low double-digit year-over-year reduction in revenue. I just want to make sure I'm thinking about that correctly for Network Solutions. And then from a [indiscernible] cadence perspective, it sounded like 1Q was actually pretty strong relative to your expectations. So can you just walk us through how we should think about the quarterly cadence of Network Solutions or at least how it's contemplated in your guidance? And then lastly, you've previously ranked the growth of these 3 segments. I think you've previously said it's kind of Network Solutions first, then organic payments and then in subscription. I'm just curious if once we get around all of this disruption, how we should be thinking about the growth rate of the 3 segments longer term?

Sure. So we do continue to believe that you should stack rank the contribution just on a normalized basis. But this year is clearly so far shaping up to be a little bit differently. I think as far as the year-over-year comparisons you did, again, without giving specific line item kind of outlooks here. I think you'd say you should take away that the low end of the total revenue range implies it's going to be down a few points and the high end would imply it's about flat.

And our next question comes from the line of Ryan Halsted with RBC Capital Markets.

Maybe just a follow-up on the AccessOne question. So you've obviously been having a lot of progress in scaling the business. I guess how should we think about the next phases of scaling AccessOne in that are you expanding kind of you're -- within your footprint and kind of identifying where you're currently maybe have some existing competencies and -- or are you kind of broadening into new footprints? And then how should we think about that in terms of maybe start-up costs or other types of incremental costs to really further scale this?

Yes. It's both, first of all. So it's -- think about it as the capital base as we expand, will allow us to bring more of those solutions to Phreesia's existing clients. We also see opportunities that is completely greenfield outside of the areas we play today and they sort of think about a broader health care provider ecosystem. So it's both. Again, I think that was the only question. Try to write these as we go here.

And our next question comes from the line of Clark Wright with D.A. Davidson.

You made a comment during the prepared remarks about the visibility into other revenue segments being consistent with December 2025 in the comments you made then. Could you maybe just provide additional details on what's going on in the payments business in terms of AccessOne as we look through the financials of how you grow that with additional -- the additional credit facility that you've had and where do you see the potential opportunities primarily through new logos? Or is it cross-selling in the existing base?

So -- and again, we assumed nothing in terms of growth in our fiscal '27 outlook when we laid it out back in December, and that continues today. In terms of the opportunities, there's net new opportunities, there's expansion opportunities within AccessOne's legacy client base with [indiscernible] Phreesia. And then I think last, which is where this soon-to-be expanded capital base that we're working on will allow us to bring us to other Phreesia.

And our next question comes from the line of John Ransom with Raymond James.

If I think about the strategy over the past couple of years, it was to drive growth among providers that had higher prescription dispensing rates in order to drive network solutions. Just in light of what's happening with pharma, is that strategy being rethought? Or do you think this is just a speed bump?

Yes, John, speed bump is sort of a short answer. We still have a lot of conviction there. We think we have a very differentiated value proposition in terms of being able to provide valuable content to patients. So nothing has changed there and increasingly providers level.

And our next question comes from the line of Gene Mannheimer with Freedom Capital Markets.

Just thinking about your prepared remarks, you're holding the EBITDA guidance steady despite the revenue reduction. And I understand about the continuing margin expansion and efficiencies that you're driving. But I mean, why not bias your EBITDA guidance toward the lower end of the range, unless you have such confidence in meeting or exceeding that range.

Yes. I mean, Gene, I think we've been public for almost 7 years, and we've tried to provide information as we know it and where we have conviction. So I think you should just sort of take that as -- how we feel about that.

[Operator Instructions]

And we do have a follow-up question from Jailendra Singh with Truist Securities.

I just want to see if you can follow up. If you can kind of give some more color on why do you think the oral GLP-1 launching is a bad guy for Network Solutions next year? Just could you clarify this comment, Balaji?

Yes. I didn't hear anything about world specifically. I thought it was more of a broader comment around FDA activity and the general category. So there's nothing about the response that is specific to oral.

And we have a follow-up question from Ryan MacDonald with Needham & Company.

Thanks for time on the second one. Balaji, maybe if you could just clarify, as we think about the flow of network solutions throughout the year, is Network Solutions starting off at a lower base than what you expected in Q1 of fiscal '27? Because you also said -- I guess you said Q1 is going better than expected? Or are we looking at really like sort of the lack of visibility means that Network Solutions revenues are sort of down in second half relative to first half and sort of little impact to the first half expectations?

That's generally we should take away the latter part of what you said, Ryan, but here's the thing. I think we've tried to explain this to you. There's -- it is very complex. There's a lot of different moving parts and data that goes into our ability to reach the right patient with the right message. So there's a lot of pacing involved too. But generally speaking, our view here is it's around the second half of the year, not the first half.

And with no further questions, I will now turn the conference back over to Mr. Chaim Indig for closing remarks.

I'd like to thank everyone for joining us for the fiscal Q4 2026 earnings call. And I want to thank my teammates for a really strong year, and I look forward to the year ahead. And everyone know, I hope enjoys spring, talk to you in a couple of months.

And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.

Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Phreesia Third Quarter Fiscal 2026 Earnings Conference Call.

[Operator Instructions] Thank you. And I would now like to turn the conference over to Balaji Gandhi, Chief Financial Officer. You may begin.

Thank you, operator. Good morning, and welcome to Phreesia's earnings conference call for the third quarter of fiscal 2026, which ended on October 31, 2025. Joining me on today's call is Chaim Indig, our Chief Executive Officer.

A more complete discussion of our results can be found in our earnings press release and in our related Form 8-K submission to the SEC, including our quarterly stakeholder letter, both issued after the markets closed today. These documents 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 on our Investor Relations website at ir.phreesia.com following the conclusion of the call.

During today's call, we may make forward-looking statements, including statements regarding trends, our anticipated growth, our strategies, predictions about our industry and the anticipated performance of our business, including our outlook regarding future financial results and acquisitions.

Forward-looking statements are subject to various risks and uncertainties and other factors that may cause our actual results, performance or achievements to differ materially from those described in our forward-looking statements. Such risks are described more fully in our earnings press release, our stakeholder letter and our risk factors included in our SEC filings, including in our quarterly report on Form 10-Q that will be filed with the SEC tomorrow.

The forward-looking statements made on this call will be based on our current views and expectations and speak only as of the date on which the statements are made. We undertake no obligation to update and expressly disclaim the obligation to update these forward-looking statements to reflect events or circumstances after the date of this call or to reflect new information or the occurrence of unanticipated events.

We may also refer to certain financial measures not in accordance with generally accepted accounting principles, such as adjusted EBITDA and free cash flows 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 release and stakeholder letter, which were furnished with our Form 8-K filed after the market closed today with the SEC and may also be found on our Investor Relations website at ir.phreesia.com.

I will now turn the call over to our CEO, Chaim Indig.

Thank you, Balaji, and good evening, everyone. Thank you for joining our third quarter fiscal 2026 earnings call. I'm very proud and thankful of our team, the work they do for our clients and their contribution to another solid quarter of growth and profitability. Balaji will review some of the highlights of our results and update our outlook. Before I hand it off to Balaji, I'd like to frame our view of Phreesia's next 3 years for all of you.

Today, we have a large network of health care providers, who rely on Phreesia's products and services. We also have new emerging products that extend our reach in ways that is consistent with our mission to make care easier every day. We believe these emerging products will enable us to sustain growth and enhance stakeholder value. I'd like to highlight 2 of the product areas we are excited about.

First, provider financing. It's no secret that patient financial responsibility has been rising in this country, and we expect this trend to continue. People can't afford to pay their bills all at once. Our platform has enabled us to track this trend for years. For health care providers, this means more patient balances go unpaid, payment cycles get longer and providers carry more financial risk. Hospitals and health systems have seen the number of days cash on hand declined by 28% since 2022.

As a result, providers need tools to convert patient receivables into predictable cash flow. Patient balances often take years to resolve, which creates working capital pressure for providers. Our financing solutions improved days cash on hand and decrease days outstanding. Financing or payment plan programs can significantly improve the patient experience and affordability and decreases the need to use credit cards or a home equity line.

Our expansion into the provider financing market through the acquisition of AccessOne helps us solve this large and growing problem with a market-leading solution. We believe we have a new growth lever to complement our existing solutions for providers and are excited about this opportunity.

The second emerging market for us is Health Care Provider or HCP marketing. HCP engagement is a natural extension of the offering that works so well to engage patients. We help providers and life sciences partners engage patients just before key visits, where important health decisions are made, supporting behavioral change in positive measurable outcomes.

Now we're extending that same proven playbook to engage health care providers in addition to patients. This positions Phreesia to participate in a multibillion dollar HCP digital marketing opportunity, while leveraging the trusted relationships and infrastructure we've already built.

Our approach differentiates Phreesia by closing the loop between patient and provider engagement. Because we're embedded in clinical workflows, we help coordinate consumer and HCP messaging, ensuring that both are prepared for upcoming appointments, reaching physicians with relevant evidence based information before they see the right patient, not weeks or months later.

Our ability to align both sides of the care conversation is something we believe no one else in the market can do as comprehensively as Phreesia. Our acquisitions are central to our ability to understand, reach and engage health care providers. MediFind brings deep insights into appointments with active providers in specialty care patterns, helping us identify when specific clinicians need information about specific conditions or treatments based on their upcoming appointments.

ConnectOnCall. Now PhreesiaOnCall, along with our voice AI capabilities, allow us to introduce high-value enrollments directly into the provider workflow. Together, these assets create a premium endemic offering and help us reach a broad set of providers in the natural flow of care, not just when they're off the clock. This new initiative plays into our strength.

We have 2 decades of experience working with thousands of provider organizations in the top 10 pharma companies, earning a reputation for performance, compliance and truly consultative partnerships. By making HCP activation available within that same trusted ecosystem and centered on real care encounters we believe it will deepen our relationship with both providers and life sciences clients while adding a durable, differentiated revenue stream to Phreesia's growth story.

We look forward to updating you on these 2 important initiatives when we speak on 2026. I'll now turn it over to Balaji to walk through the Q3 results, our updated outlook for fiscal 2026 and an initial view into fiscal 2027.

Thank you, Chaim. Let me start with a quick review of our fiscal third quarter. Total revenue was $120.3 million a 13% increase year-over-year. Adjusted EBITDA was $29.1 million, an increase of $19 million year-over-year and $7 million quarter-over-quarter. We achieved another major milestone this quarter with our adjusted EBITDA margin reaching an all-time high of 24%, representing an improvement of 5 percentage points quarter-over-quarter and 15 percentage points year-over-year.

For fiscal third quarter G&A expense line included a onetime G&A tax benefit, which increased adjusted EBITDA by $900,000. Third quarter Average Healthcare Services Clients or AHSCs came in at 4,520, an increase of 53 from the prior quarter. This performance was in line with our expectations and we believe we are on track to reach 4,500 Average Healthcare Services Clients or AHSCs for the full fiscal year.

Meeting this target implies adding approximately 70 clients in the fiscal fourth quarter, excluding the impact from the AccessOne acquisition. Total revenue per AHSC was $26,622, up 6% year-over-year. The steady year-over-year increase in total revenue per AHSC is consistent with our expectations and a key element of our growth strategy that we have been discussing for several quarters.

We are pleased with the continued progress of this metric as it has returned to the levels as seen in the third quarter of fiscal 2022 and reflects our focus on improving returns on investment and attach rates of our collective offerings across our 3 revenue streams. Net income remained positive at $4.3 million this quarter, representing our second consecutive quarter of delivering positive net income.

Our fiscal third quarter results reflect the continued momentum in both our revenue growth and operating leverage. I'm incredibly proud of the team's disciplined execution and focus, which again enabled us to deliver strong financial performance, while staying true to our mission and values. I also want to acknowledge all the Phreesians played a role in successfully closing the AccessOne acquisition, and I joined Chaim in welcoming our new colleagues from AccessOne.

Now turning to the balance sheet and cash flow. We ended the quarter with $106.4 million in cash and cash equivalents. This compares to $98.3 million in the prior quarter. Operating cash flow was $15.5 million, up $9.7 million year-over-year. Free cash flow was $8.8 million, up $7.2 million year-over-year. We have now achieved positive operating cash flow and free cash flow for 5 consecutive quarters. We expect the magnitude of improvement on a quarter-to-quarter basis to vary based on specific timing of invoicing and payments, which you can see in working capital, along with CapEx.

A footnote on the balance sheet. As you look ahead to the fourth quarter, the AccessOne purchase price was funded with approximately $53 million of cash and a $110 million secured bridge loan entered into on the closing date of the acquisition. You can find more information about our bridge loan in our 8-K filing from November 12. We expect to refinance or replace the bridge loan with a long-term credit facility.

Before moving into our updated financial outlook for fiscal 2026 and new outlook for fiscal 2027, let me provide a few highlights on AccessOne. AccessOne provides financing solutions that help health care providers reduce patient accounts receivable and accelerate cash flow. Its technology integrates directly into provider workflows, giving providers the tools to offer flexible payment solutions to their patients.

We expect AccessOne will add approximately 80 AHSC on an annualized basis. AccessOne manages a portfolio of approximately $450 million and providers typically operate under either a funded or an unfunded model. In the funded model, providers receive cash upfront. In the unfunded model, providers are paid as patients make payments.

In both models, the health care provider retains most of the financial risk, not AccessOne. The funded model is offered to clients through AccessOne's relationship with PNC Bank. Across these models, AccessOne generates a blended take rate that averages 4% to 12% on its managed portfolio, depending on the type of provider and the mix between funded and unfunded programs.

Operating costs, including those associated with the PNC Bank relationship, range from 65% to 75% of revenue. Now transitioning to our updated financial outlook. Let's start with fiscal 2026. We are updating our revenue outlook for our fiscal year 2026 to a range of $479 million to $481 million compared to our prior range of $472 million to $482 million.

The updated outlook includes approximately $7.5 million of revenue contribution from AccessOne between the close date and our fiscal year-end date. The update reflects our latest views on AccessOne's performance, since the closing on November 12 and the progress we have made to date in the selling season for network solutions. We are updating our adjusted EBITDA outlook for fiscal year 2026 to a range of $99 million to $101 million, an increase from our prior range of $87 million to $92 million.

This revised outlook includes the expected adjusted EBITDA contribution from AccessOne from the date of closing through the end of our fiscal year. We want to remind you from a modeling perspective, as you think about the quarter-over-quarter progression of adjusted EBITDA -- at the third quarter includes a onetime G&A expense tax benefit of $900,000, and the fiscal fourth quarter is typically burdened by higher payroll taxes as we begin the new calendar year.

We are updating our outlook for AHSCs to approximately 4,515 for the full fiscal year 2026, up from our prior expectation of 4,500. This revised outlook reflects the addition of approximately 15 AHSCs from AccessOne between the close date and our fiscal year-end. Additionally, we continue to expect total revenue per AHSC in fiscal '26 to increase from fiscal 2025.

Moving on to fiscal 2027 consistent with our prior years, we are introducing our early outlook on revenue, adjusted EBITDA, AHSCs and revenue per AHSC for fiscal year 2027. For fiscal year 2027, we expect revenue to be in the range of $545 million to $559 million. We anticipate that AccessOne will contribute approximately 6.5% of our fiscal 2027 total revenue outlook.

We expect adjusted EBITDA for fiscal 2027 to be in the range of $125 million to $135 million. In fiscal 2027, we expect AHSC to grow in the mid-single-digit percentage range and total revenue per AHSC to grow double-digit percent.

Operator, I think we can now open up the lines for the Q&A session.

[Operator Instructions] And our first question comes from the line of Sean Dodge with BMO Capital Markets.

Congratulations on the quarter and on closing the acquisition. Chaim, you mentioned the new emerging solution areas that will help to continue driving higher revenue per AHSC. On AccessOne, maybe just anything more you can share on the growth potential for that business, specifically over the next couple of years and how you can accelerate it?

And how much room is left to continue expanding within their existing base? And then maybe anything that you need to kind of change about that before you can start cross-selling it into the legacy Phreesia base? When does that become an opportunity?

So we're really excited to be able to take this to some of our base clients. Right now, the product is -- is really not suited for the vast majority of our clients. So it will need some work and investment before we can take it to the vast majority of our base just because of the facility. And Balaji you can answer more questions about that.

But Look, we think that we plan on investing in go-to market. And I think it's a really strong product offering that has for years been underinvested in go-to-market. And some of those had to do with the dynamics of the market and the company itself. And we expect over the next couple of quarters to start investing into its go-to-market motion. And both for new clients and existing clients.

And Sean, I'll just add that investment that Chaim talking about that's baked into our outlook for 2027. And a lot of that is just resources we have within the company. And obviously, the ones that are coming over with the acquisition or have come over with the acquisition. And then just around growth, I mean, the question itself. I think this is the largest acquisition we've done -- this is something we think over multi-years will contribute a lot.

We acquired it with that thesis. We wouldn't read too much into what's implied in the '27 guidance in revenue. It's just if you do an acquisition, you closed in November, it's the responsible thing to do is just set the bar, where we have, and we have very high expectations for it.

And our next question comes from the line of Scott Schoenhaus with KeyBanc Capital Markets.

I guess 1 for Balaji really quickly and then 1 for the team. But first on the financing Balaji, you mentioned you're going to refinance or take on a new loan. Can you maybe provide more color there on what you're seeing in the marketplace and what you expect?

And then maybe for Haym and Balaji, this mid-single-digit AHSC growth for next year. Maybe talk about your go-to-market strategy in terms of what is -- what products -- what your core products are you going to market to drive that growth? And then how do you think about that growth holistically with this new marketing opportunity.

Okay. I'll start on the financing. So we are already pretty actively looking at replacing the bridge, and we just wanted to be positioned to move really quickly on the acquisition, but moving quickly to have something long term in place, and you should be hearing about that in the next few months. In terms of the appetite out there, there's a lot of demand to do something with us.

I think we were very intentional about doing an acquisition of this size and financing it this way for a long time based on our free cash flow and our EBITDA. So we feel pretty good about all that. Chaim, you want to add...

Yes. And then from a go-to-market motion, look, we -- they have 2 very different go-to-market teams on the provider side we're seeing still a lot of demand for intake and a lot of our new AI offerings are driving a lot of uptick in inbound very specifically our voice AI workflows and applications. It's a new modality on the same platform. So we're seeing a lot of demand for it.

And then on our -- the Network Solutions side, Patient Connect has been very successful, and we expect that to be continued growth, but some of the newer offerings such as post-script engagement, and now the interest we've been getting in our HCP offering has been really exciting.

And our next question comes from the line of Jailendra Singh with Truist Securities.

Thanks for all the color on the fiscal '27 outlook. If I got my math right, your fiscal '27 revenue guidance implies around 8% to 10% core organic growth number I know you guys have talked about double-digit core growth, so that would be at the high end of that guide.

Can you share some color around how you're thinking of core growth in 3 business at, at least directionally compared to your expectation of fiscal '26 I was more focused on network solution because are you still in the middle selling season, how much visibility do you have, what level of question you're building in? Just give us some flavor around that and what is built in that 8% to 10% number.

Sure. And so just philosophically, as you know, for several years, we provide an outlook for the next fiscal year before the current 1 is even over. I think we've gotten good feedback about that. And what that requires us to do is make a lot of assumptions around things like the selling season while they're still going on.

So I think even outside of that, still a couple of weeks left here, Jailendra, I think we could comfortably say that we're in a similar situation we were last year at this time. And if you think about the growth in the business outside of what we've told you is coming from AccessOne, network solutions would be growing the fastest.

And I think payment processing, you could expect to grow second and subscription third. And I think what you should take away from that is A lot of the commentary Chaim had about our HCP products. And earlier in the year, we talked about post-script engagement and appointment readiness. We expect to monetize a lot of the products for providers increasingly in Network Solutions. So that we should take away.

Our next question comes from the line of Brian Tanquilut with Jefferies.

Maybe Balaji, just as I think about margins, obviously, strong margin performance in the quarter. You've done a good job there. So -- as I look at the guidance for next year, showing about 450 bps of margin expansion. How should I think about the drivers of that and just the sustainability of kind of like squeezing margins here and there over the next few years?

Yes. I mean, I think the team has done an outstanding job of being very good stewards of capital. This is something we really prioritized in the company for the last several years. I think you're comparing year-over-year. I mean we've already hit a pretty good margin here in the third quarter we just released.

I think what we want to balance is growth and margin. Your takeaway should be, we want to always do better than we say in terms of growth and always get better in terms of margin. So I think that outlook sort of reflects the opportunity to do both. I think G&A, we've always talked about G&A is generally an area we can get a lot of leverage on based on the investments we've made there. But I think we'll continue to invest in sales and marketing and R&D so long as there's growth to support it.

And our next question comes from the line of Ryan Daniels with William Blair.

I wanted to dig a little bit more into the new HCP marketing initiative. And I'm curious, I guess, twofold. 1, have you actively started to sell that for the 2026 season? And kind of what's been the reception from pharma clients and then second, when you think about that, are you seeing or do you anticipate that it will be all incremental dollars? Or do you think any of your kind of D2C dollars from the pharma companies could shift into HCP such that's not 100% incremental?

So yes, we have started for select clients, allowing them to start piloting the offering in the new year. So we have been selling it for certain key clients. And there has been a lot of demand, and we expect to start treating those programs on in the new fiscal year.

And then in terms of is it incremental dollars we do think it is, generally speaking, DGC budgets and HCP budgets are very different. So we believe this is a -- and I think we sort of -- we've been out there in the market explaining to some of our holders that this is new TAM.

And our next question comes from the line of Ryan MacDonald with Needham & Company.

Balaji, maybe for you, just wanted to ask about the updated '26 guidance. I know you called out $7.5 million of -- in fourth quarter from AccessOne, yes, we've only increased the guidance range at the midpoint by about $3 million -- is there sort of a $4.5 million hole that we're refilling here?

Or anything we should be concerned about, I guess, within the core subscription or network solutions business. And how is that sort of impacting your outlook of either of those segments kind of heading into '27?

I was trying to do the math, Ryan, that you just did. Are you -- maybe just repeat that. I couldn't figure out the $4 million that you said.

Yes. So our prior guidance range was $472 million to $482 million. So we're taking a $477 million midpoint -- now the midpoint goes to $480 million in the updated guidance. And so up by $3 million at the midpoint, but you've got a $7.5 million revenue contribution from AccessOne. That wasn't in the prior guidance. So just wondering sort of what's the -- I guess, the difference there on the adding $7.5 million, but only increasing the guide by about $3 million at the midpoint.

Correct. Okay. Got it. That's helpful. yes, that's -- a lot of that is just being a bit more measured around network solutions. I don't think it's a surprise probably to anyone on this call, that there's a lot of decisions and a lot of fluidity out there, and we're in the selling season.

So just given where we are, I think we wanted to be a bit more measured on network solutions, if you had to allocate that $4 million somewhere we say it's mostly there. And by the way, there's a lot of timing and visibility that we'll get, but I don't think it's anything to read into about next year.

And our next question comes from the line of Richard Close with Canaccord Genuity.

Congratulations on the acquisition in the quarter. Just curious if you guys could talk a little bit more about AccessOne, the funded and unfunded, how we think about like the demand in various products or those offerings? And then just like how you expect any type of seasonality in that business in terms of selling new customers and et cetera?

So I'll give you -- Richard, what you're bringing up is something we've really liked about this platform is the flexibility they have in having a variety of different ways to service the needs of their client. We actually found it to be the most -- there's a couple of different offerings in the space. And when we looked at them, what we found about AccessOne was most advanced technology with by far the most scale and flexibility. So in all of our experience in working with health care clients is they want different things based on their needs.

And with the AccessOne portfolio, whether it's funding or partial funding or full funding, the platform gives us the flexibility to meet them, where they need that help. And we feel like it's -- gives us the flexibility to have a multitude of offerings to help them increase their cash flow, specifically cut the days outstanding. We expect over the next couple of years to learn a lot about each offering to resonate, which sets of clients. And I'm sure we'll be back talking about that as we see growing the marketplace, and we're pretty excited about it.

And as far as seasonality measured, I think our go-to-market will probably be similar to how we position ourselves with providers. So from that motion, I don't think you should see anything different. However, we'll learn this as we go, Richard. But I think you could see more chunkiness in terms of how this revenue drops and when we do expand or land a new client, and we'll obviously communicate that as that happens, which we expect it to.

And our next question comes from the line of Daniel Grosslight with Citi.

Balaji, I wanted to go back to the commentary you made around the fluidity in the network solution selling season this year. Is any of that due to just unknowns around how DTC advertising large is going to develop given just some of the political issues around that? And what gives you confidence that this fluidity is just really going to happen in fiscal '26 and what really impact fiscal '27?

Yes. Thanks, Daniel. So a couple of points there. First of all, yes, it is around the DTC topic, and I think that's why we're being a bit more measured. I think 1 earlier comment we made was as we sit here today on December 8, we're in a similar place we were last year at this time, but the numbers get bigger and the dollars are bigger. So that's 1 thing to consider.

And then as far as just our positioning, and I think we've been talking about this in the past, when you think about our product and how we lead with permission and the value we bring to our life sciences clients and the return on value they see from that, we think we're very well positioned long term with the commentary and regulatory information that's come out of the administration so far.

In fact, we agree with a fair amount of that. So we think that's good and we think we're on the right side of where they're trying to go. But that said, we've got to get through the next several weeks to have a little more visibility. So that's why we made the comments we did.

And our next question comes from the line of Jeff Garro with Stephens.

I want to go back to the HCP opportunity and maybe ask about MediFind a little bit more specifically. We saw a recent partnership announcement between 2 provider directories that, to some extent, compete with each other and to some extent, compete with MediFind. So I was hoping you could update us on MediFind's tractions and Phreesia MediFind's competitive advantages from offering an integrated platform connecting providers with scheduling and other patient engagement capabilities.

Jeff, we're curious what partnership you're talking about -- do you mind sharing it because I don't think we're familiar with it.

Health grades is going to be using Zocdoc's scheduling capabilities.

Got it. Got it.

We weren't aware of that. And we don't see it as being very competitive in the marketplace. What we've heard from a lot of specialists is that they're not in need of paying for leads -- and that's an impact, a lot of them think that it's just unethical and wrong. And so what our view on that has been for some time, is how do we help the right patients find the right doctors, not just the doctors that are willing to pay to get product placement in a directory.

And so we've really focused our effort on driving and becoming the go-to source for the top specialists to be found by providers. And what we're pretty excited about is that by building it into the Phreesia platform, we're seeing just a phenomenal amount of uptick in volume usage, and we expect to keep investing heavily into this platform for some period of time.

And our next question comes from the line of John Ransom with Raymond James.

Just looking at the Q3 EBITDA outperformance and the guide for 2027, what would you say because the jump in -- I know there's seasonality in payroll taxes, but the jumping all point seems a bit stronger than the implied guide. So any comments there other than the $900,000 you mentioned?

Yes. So there's -- well, there's 2 items, John, there's the payroll taxes that our bad guy in Q4 just seasonality. And then we had that $900,000 good guy in Q3. So I think if you sort of have to use both of those, but I think it implies a little bit of improvement. But I think to the earlier comment I think question we had, we're certainly trying to leave ourselves some room to continue to perform there. And we expect that margin to get better. Is that helpful?

And marketing spend was the big variance in our model. So maybe in your guide, what are you contemplating for year-over-year marketing spend growth?

I think you should expect marketing dollars to go up. I think we've got, obviously, a lot of growth initiatives that Chaim spoke about earlier. So as a dollar amount, I think you should expect marketing dollars to go up.

And our next question comes from the line of Jessica Tassan with Piper Sandler.

And congrats on the close of AccessOne. Can you all elaborate a little bit on how PhreesiaOnCall allows you to enter the provider workflow and surface educational content to the HCP just kind of mechanically, how does that work? And then can you just remind us how much of Network Solutions revenue typically books ahead of the start of the calendar year versus upsold or cross-sold intra-year and whether FY '26 is tracking consistent with historical experience?

So we are testing different types of ad formats. And obviously, it's still early into PhreesiaOnCall. And so there will be ads in certain parts of the product where they're not creating any obtrusive workflow for the provider. Is just in the natural act of using the product. So we're in the process of testing those with our customers now in pilot.

So I think it's the early days are early, Jeff. And -- but on the early tests that we have seen, we feel pretty confident they'll be very effective.

And then yes, I mean just we typically enter a calendar year because remember, a lot of those clients in the Network Solutions revenue are upper in the calendar year. So when you typing enter calendar year with about 60% to 70% visibility.

And our next question comes from the line of Joe Vruwink with Baird.

Maybe a super quick answer. But going back to Jailendra's question earlier, he was asking about organic growth in FY '27. And Balaji, you mentioned network fastest payment second, subscription third I just wanted to clarify if that's the organic rank ordering because I guess it's not intuitive to me why payments would be growing faster than subs next year.

Correct. Jailendra's question was specifically excluding AccessOne, which is why we answered it that way. I haven't done the math here, but I think it would either be neck and neck or payments would be faster with AccessOne. I can follow up with you later, but that was specifically about organic.

And our next question comes from the line of Clark Wright with D.A. Davidson.

A lot of might have been answered, but wanted to real quick touch on if you can help us really understand the assumptions behind the fiscal 2027 top line outlook and the mix that you're seeing right now between the growth in account of AHSCs versus the total revenue per AHSC? And if that -- the assumptions you've made includes AccessOne with those figures?

Yes, it does. And I think, again, short cut math here is there's -- we use this average convention in the AHSC. So it's approximately 80, and we're still just closing November for AccessOne. If it's about 80 for a year, we're saying about 15 of it will fall into our fiscal '26. So really about 65 will fall into fiscal '27.

So that's about 1 point of growth. So when we put in our letter mid-single-digit AHSC growth, you could say about 1 point contribution coming from AccessOne in there.

[Operator Instructions] Our next question comes from the line of Jailendra Singh with Truist Securities.

I'm curious with shares trading at these valuation levels. What are your thoughts on returning shareholders some value via share buyback program and if that would even be a consideration in light of all the investment opportunities you are focused on?

It would absolutely be a consideration. I think we did get approval to pursue that last year or earlier this fiscal year, actually. And I think now with this debt facility in place for AccessOne, we think the best use of free cash flow is to retire that debt. But -- and we also have other areas we want to invest in.

But Jailendra has absolutely been part of our thinking for several years now to try to take advantage of market dislocation. Obviously, right now, priority is the debt, but it's definitely 1 of our priorities.

With no additional questions, I will now turn the conference back over to Chaim Indig for closing remarks.

I want to thank everyone for joining us for our earnings call, and I wish everyone a happy holidays and a great new year, and I'll see you all in the new year. Thank you very much.

And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.

Good morning, ladies and gentlemen, and welcome to the Phreesia Second Quarter Fiscal 2026 Earnings Call. [Operator Instructions]

First, I would like to introduce Balaji Gandhi, Chief Financial Officer. Mr. Gandhi, you may begin.

Thank you, operator. Good morning, and welcome to Phreesia's Earnings Conference Call for the Second Quarter of Fiscal 2026, which ended on July 31, 2025. Joining me on today's call is Chaim Indig, our Chief Executive Officer. A more complete discussion of our results can be found in our earnings press release and in our related Form 8-K submission to the SEC, including our quarterly stakeholder letter, both issued after the markets closed today. These documents are available on the Investor Relations section of our website at ir.frisa.com. As a reminder, today's call is being recorded. and a replay will be available on our Investor Relations website at ir.fresia.com following the conclusion of the call.

During today's call, we may make forward-looking statements, including statements regarding trends, our anticipated growth, our strategies, predictions about our industry and the anticipated performance of our business, including our outlook regarding future financial results and acquisitions. Forward-looking statements are subject to various risks, uncertainties and other factors that may cause our actual results, performance or achievements to differ materially from those described in our forward-looking statements. Such risks are described more fully in our earnings press release, our stakeholder letter and our risk factors included in our SEC filings, including in our quarterly report on Form 10-Q that will be filed with the SEC tomorrow.

The forward-looking statements made on this call will be based on our current views and expectations and speak only as of the date on which the statements are made. We undertake no obligation to update and expressly disclaim the obligation to update these forward-looking statements to reflect events or circumstances after the date of this call or to reflect new information or the occurrence of unanticipated events.

You may also refer to certain financial measures not in accordance with generally accepted accounting principles, such as adjusted EBITDA and free cash flows 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 release and stakeholder letter which were furnished with our Form 8-K filed after the market closed today with the SEC and may also be found on our Investor Relations website at ir.fresio.com.

I will now turn the call over to our CEO, Chaim Indig.

Thank you, Balaji, and good evening, everyone. Thank you for joining our second quarter fiscal year 2026 earnings call. I'd like to begin with some exciting news. Earlier today, Phreesia announced a definitive agreement to acquire Access One for $160 million. Accessone is a market leader in health care provider financing serving many of the nation's largest health systems. We have followed accessone's progress over many years and admired its approach to addressing a critical gap in care that is consistent with our mission of making care easier every day. Accessone will expand our addressable market by roughly $6 billion and strengthen our ability to help providers improve collections while preserving patient trust. We believe this acquisition is a natural extension of our payment strategy and will complement Phreesia's existing products. Balaji will provide some details on the transaction. We look forward to welcoming the accessone team to Phreesia following the close of the transaction.

I am also proud to share that Phreesia achieved an important milestone in the second quarter. For the first time in our history, we were net income positive. As with all of our milestones, achieving positive net income does not represent a finish line. However, this milestone does give us all a great sense of pride and accomplishment in that it captures the power of our unique business and financial model and our team's ongoing commitment to being good stewards of capital.

Before turning the call over to Balaji, I would like to congratulate my Co-Founder, Evan Roberts; and David Linetsky, on being named President of Provider Solutions and Network Solutions, respectively. These titles reflect their leadership of the provider and network solutions teams, meeting the needs of our clients and executing on our mission, vision and values. Evan and David are also invaluable baud partners to me, and I am pleased to share their titles with you.

I'll now turn it over to Balaji to provide some additional details on the accessone transaction and provide a review of our results and updated outlook.

Thank you, Chaim. First, I also want to congratulate Evan and David on their new titles.

Now for some details on the accessone transaction. As outlined in our press release and stakeholder letter, the purchase price for accessone is $160 million in cash. Phreesia intends to finance the acquisition through a combination of cash from our balance sheet and a new fully committed bridge loan facility. The transaction is expected to close during the third quarter or early fourth quarter of Phreesia's 2026 fiscal year, subject to customary closing conditions and regulatory approvals. We currently expect accessone to contribute approximately $35 million in annualized revenue and approximately $11 million in annualized adjusted EBITDA. Once the acquisition is closed, we plan to update our fiscal 2026 outlook to reflect the expected contribution to our results. Overall, we believe this transaction will strengthen Phreesia's financial profile, add profitable growth and enhance our ability to support clients with innovative payment solutions. We look forward to closing the transaction and working with the accessone team.

I would also like to touch on our updated total addressable market. The accessone acquisition is expected to expand our addressable market by about $6 billion by extending our reach in the payment solutions space. We also increased our network solutions TAM by $6 billion as we expect to be able to draw from a larger pool of life sciences marketing dollars as our products become more ubiquitous across our network. Combined, the expansion of our payments and network solutions addressable market is expected to increase our TAM to approximately $24 billion from approximately $10 billion.

Now let me provide a few comments around our second quarter results. Total revenue was $117.3 million, an increase of 15% year-over-year. We are very pleased with our performance on the top line. We ended with average health care services clients of 4,467, an increase of 56 AHCs from the prior quarter and 298 in the prior year. This result was in line with our expectations. Total revenue for average health care services clients was $26,249, up 7% year-over-year and flat quarter-over-quarter, also in line with our expectations.

Moving on to profitability. As Chaim mentioned, we achieved another major milestone this quarter with net income of $700,000, our first ever positive net income quarter. Adjusted EBITDA was $22 million, an increase of $16 million year-over-year, with an adjusted EBITDA margin of 19%.

Now turning to the balance sheet and cash flow. We ended the quarter with $98.3 million in cash and cash equivalents. This compares to $90.9 million in the prior quarter. Operating cash flow was $14.8 million, up $3.8 million year-over-year. Free cash flow was $9.6 million, up $6 million year-over-year. We have now achieved positive operating cash flow and free cash flow for 4 consecutive quarters. We expect that the magnitude of cash flow improvement on a quarter-to-quarter basis to vary based on specific timing of invoicing and payments, which you can see in working capital, along with CapEx.

Our second quarter results reflect the continued strength of our operating leverage and revenue growth. I would like to thank the entire Phreesia team for being able to balance the priorities associated with our mission and values and being good stewards of capital, which helped us to achieve positive net income for the first time in our history.

Transitioning now to our financial outlook for fiscal 2026. We are maintaining our revenue outlook for fiscal year 2026 at a range of $472 million to $482 million. We are updating our adjusted EBITDA outlook for fiscal year 2026 to a range of $87 million to $92 million from a previous range of $85 million to $90 million. That's a $2 million increase at the top and bottom ends of the previous range. We are reiterating our outlook on AHSCs to reach approximately 4,500 in fiscal year 2026 and for total revenue per AHSC to increase in fiscal 2026 compared to fiscal 2025. As I mentioned earlier, we expect to update our fiscal 2026 financial outlook following the close of the accessone transaction.

Operator, we can now begin the Q&A session.

[Operator Instructions] Your first question comes from the line of Jared Haase with William Blair.

Congrats on the deal. Maybe I'll just ask the first 1 on Access one. I would love to hear a little bit more just how that deal developed over time and I guess what gives you the comfort that this is the right asset and the right market for what seems like a fairly large-scale deal relative to what you've done in the past?

Yes. So look, we've been looking at the space for years. We've known this company for many, many years and a lot of the executives there. We felt a lot of comfort just having watched it. Look, it's a part of the market we haven't been able to play because of both product and regulatory requirements. And it's something our customers have said would really be beneficial to them. So we feel pretty good about that. We also -- like frankly, we think it aligns really well with our mission of making care easier every day. And so we like all the pieces sort of came together and when it became available, we moved pretty aggressively. But it's something we've been watching and paying attention on 3 years. And so it wasn't a last-minute decision. It was actually something we talked about as a team for years.

And we thought it was something in our arsenal that frankly would just make a lot of sense to the patients that we serve and the providers we serve. .

Your next question comes from the line of Jailendra Singh with Truth Securities.

Congrats on excess 1 deal, but I want to ask about the Phreesia voice AI product you guys launched during the quarter. It seems like a pretty exciting product for both patients and providers. But can you help us better understand how this product will drive opportunities in Network Solutions business because that's where you are increasing the TAM pretty substantially, just given all the incumbent players in SCP Pharma marketing? Just explain to us like what gives you confidence in terms of getting some traction in that market.

Yes. Thanks, Jailendra. We did want to take the opportunity to talk about this product because we're very excited about it. It's off to a great start. I think as we've talked about really over several years now, we think about the business holistically, these products that we introduced in the market when they benefit providers and benefit patients, there are opportunities that creates more engagement opportunities for our Network Solutions revenue. This is just 1 example.

We also want to take the opportunity to explain that sizing and the TAM that's been increased. I don't -- I wouldn't read too much into the timing of the 2 being linked. It's probably something we would have introduced earlier, and we're choosing to do it now.

We are very excited about this product, Jailendra. It's growing rapidly, our providers are getting -- what the feedback we're getting from this product from the provider network is like nothing I've seen ever before. So we're really excited and that the investments we're making in it, these -- a lot of these are investments we've been making for quite some time, and now we feel more comfortable talking about them as it's really -- this product has been potting across the network. We expect to hear more and more applications around voice eye in the coming quarters.

Your next question comes from the line of Jeff Garro with Stephens Inc.

Yes. Maybe we'll stick with voice AI. And want to ask where this product sits between a call center type answering service and a nurse triage line and related sounds like it can handle some clinical questions, but do you think it can handle more clinical questions in time?

So the answer is, yes, we think it will. And we think it's really it's not like. I know today, it is also already providing massive value to doctors, right? They're using it. The feedback is phenomenal from the providers that are using it. And yes, it's also helping call center folks. It's helping prescription refills, it's helping with appointment booking. It is rapidly helping all of our clients in all different types of scenarios. And I'm so working excited about this product. And it's something that's been rolling out in the network for quite some time. We're now we're just excited that we get to talk about it.

Your next question comes from the line of Richard Close with Canaccord Genuity.

Congratulations on the quarter and the acquisition. Just on the new products, voice AI, the AI referrals and the auto network tags. I'm just curious, are all 3 on this no risk, no cost model right now here initially? And then how long do you think that will be until some of these new products, new functionality? Can begin to be a positive driver to the revenue per AHSC, just curious.

So we believe very strongly as a company that when you have good products, the products should themselves. And so yes, we let all of our products at any time, any 1 -- any 1 of our clients could use them at no cost. And we expect over time, all of these products will have a material impact on our revenue. right. And frankly, it also just had a material impact on the revenue and the productivity of our clients, which also flows through to our core value proposition. So I am not worried about them in the near future having an impact on our financials as they're already having an impact on the financials for our clients.

And Richard, just in terms of the actual flow through, I don't think any of this is different than some of the products we introduced 2021, 2022, 2023, where it's contributing today and the total revenue per AHSC growth that you're seeing is sort of that waterfall effect, and this will be no different. And that's sort of -- it's a big strength of Phreesia's business model.

Your next question comes from the line of Scott Schoenhaus with KeyBanc Capital Markets.

Congrats on the quarter and acquisition. So you reported a healthy 25% growth rate in Network Solutions. Access One expands your team in life sciences. It seems like just from a quick glance, Accesn is already embedded in health systems with specialty network groups. Maybe you could just walk through the opportunities on the Network Solutions side. It seems like you've now more touch points with patients in the payment process, multiple points of engagement and maybe you can drive more incremental revenue opportunities in network solutions via this acquisition. So just help us walk through those opportunities, please?

Yes. So Scott, let me correct you on 1 thing, and hopefully, this is a little clear. The -- we see the accessone acquisition aligned with the increase in the TAM in our Payment Solutions category, which is about $6 billion. And I read the whole footnote and back up to the TAM for you, but I think you can go look it up yourself. But really, that's how you should think about accessone in terms of the near-term opportunity for us. And they were -- I think we talked about in the press release and in the letter, -- they do have a great footprint and work closely with lots of great partners in the health system space but also with other types of medical groups.

Your next question comes from the line of Jessica Tassan with Piper Sandler.

Congrats on the deal. On the accessone, just the payment extensions to patients. Can you help us understand who bears risk for those dollars as you wait to collect.

Sure. Thanks, Jess. So this is really important. You have to understand this. We are not the risk bearer in this relationship. And so we're able to offer our -- the provider clients of accessone or I should say, accessone is able to offer their clients a more robust payment offering and payment plan offering. The capital, there's an important partner in this relationship and there are press releases that you could look up from 2023. And that partner is PNC Bank, obviously, 1 of the largest banks in the country. So the risk is actually shared between PNC Bank and the provider itself. And you should think about us as really helping drive a lot more better solutions to patients in a pretty technology first way.

Your next question comes from the line of Ryan MacDonald with Needham & Company.

Maybe on accessone, how should we think about the mix of revenue between sort of just pure interest being collected from payment plans relative to, say, fees charged for the 0% interest rate plan they're offering. And then as we think about the cross-sell opportunity once the acquisition is integrated here, do you think there is a near-term opportunity to sort of cross-sell accessone into your core base or move more of your core subscription offerings, core product offerings up into the health system base that accessone is already serving?

Yes. So first of all, just to reiterate, we're excited about this and excited to talk about it today, but transaction hasn't closed. So I think we're more than happy to talk a lot more about some of our plans, but we have to get to close this transaction first. So hopefully, everyone appreciates that.

Your next question comes from the line of Daniel Grosslight with Citi.

I want to go back to some of your new product development, specifically your AI initiatives. If I look back a few quarters ago, most of your AI initiatives were internal in nature, improving operating leverage, et cetera. Now you're actually shipping monetizable external-facing AI products. So as you make that shift from internal facing to external product shipping. How are you thinking about the balance between investing in AI for internal improvement versus external product development? What does the product road map look like in the future? It sounds like you're most excited about voice AI, but I'm sure there's many more products you guys are having in the pipeline.

And then finally, how do you intend to price these new products similar to the non-AI products? Or will they be priced at a premium?

Sorry. There's a lot of questions. We got to limit it to 1 question. And if you have more, you can come back to it. But why don't I start with, we've been investing in both internal and external facing tools. I don't think the answer is 1 or the other. I think now we just feel more comfortable talking about them publicly. These are things that we've been rolling out to our clients for some time. And look, I think our general view is like lean in first and making sure that the product is really valuable.

And when you provide a ton of value to clients, and they're appreciative of it, and they see it, it's like monetizing it becomes an afterthought. And we're generally focused first on building amazing products and making them very valuable to our clients. And then after that, the dollars generally have flown. So we expect to continue to invest both in internal use and external. But I think we're now comfortable saying like we have multiple sets of AI products that have been actively -- they are actually being used by our clients across the board. And we are monetizing them today.

The next question comes from the line of Steven Valiquette with Mizuho Securities.

So another question here on the pending accessone acquisition. I guess, within the class industry rankings, which I know are not critical. It looks like they ranked the #3 or #4 in the patient financing services category over the past couple of years. But really, my question is really just about their market share I guess some of those other players. The $35 million in revenue seems kind of low within a $6 billion TAM I'm not sure if that's the right way to think about market share or not, but just curious to get thoughts on just market share and positioning relative to the size of other players in that space.

Yes, Steven, thanks for the question. And again, we're trying to be as helpful as we can because when we're excited about this, but it's also the largest acquisition we've done to date, but also have to be kind of respectful of the process and get to the other side of things before we could talk more about it. But you've got to sort of back up on the TAM in the TAM slide and you've got the revenue. So I think you can do some math there yourself.

And we expect to continue to invest in the platform in the product.

Absolutely.

Your next question comes from the line of Brian Tanquilut with Jefferies.

Just maybe a question on sales and marketing. Obviously, that continues to go down. So just curious how much more runway do you think we can bring that down both on a dollar basis versus a percentage of revenue?

Yes. I mean I think what we've seen there, and we've talked a lot about this, just the productivity we've gotten, but also the type of the profile of clients that we're trying to add on the provider side. But also just continue to get a lot of deepening relationships and new ones on the Network Solutions side. So we're getting good productivity. But I think we both like to remind people that we are investing pretty significantly in sales and marketing in the dollar amount. -- and you should expect it to kind of be in these levels, but we're getting some good productivity there.

Your next question comes from the line of Eugene Mannheimer with Freedom Capital Markets.

And congrats guys on the good numbers this quarter. Just revisiting accessone, I know you say you're somewhat limited in what you can talk about. But historically, can you talk about the growth rate of the company in the last couple of years? And whether you think that you can accelerate it as part of the free portfolio. .

I think what we can say, Gene, is like we didn't acquire it to kind of not grow it and -- and obviously, I mentioned we're also going to invest in it. We're not going to be able to provide historical numbers on that. The company has a good reputation. And as Chaim said, we followed it for a long time. But we absolutely intend to invest in and grow that.

Your next question comes from the line of Richard Close with Canaccord Genuity.

For the follow-up. Baja, I wanted to go back to Jailendra's question on Network Solutions TAM because I guess I just don't understand why voice AI specifically drives such a large increase in TAM of like $6 billion. So is there any way you can provide some examples or maybe more thoughts on that TAM growth?

Yes. So Richard, first of all, I think you know sort of how we operate. We want to be really thoughtful about what we share. There's competitive reasons, et cetera. But I think to the specific question around the TAM. The point I think we're trying to make with Jailendra was that -- that opportunity in the new TAM is big in and of itself. It's not exclusive to the voice AI product. We think that could be 1 area that could help us penetrate it, but there will be others that you will hear about. So you're getting sort of the opportunity set first, and I think in our fashion, you'll hear you'll hear more about other ones in the future. That's about all we can say.

Your next question comes from the line of Jeff Garro with Stephens Inc.

I want to make sure we hit Network Solutions and an updated discussion on visibility the rest of the year and progress to date on the upsell season for pharma advertising. .

Yes, I can start, and Chaim can throw anything in. It's still early, Jeff, in that sort of in the calendar. But I think things are off to a good start, a long way to go. I think we can say that as we sit here today, we're in a similar place we were last year at this time, the data that we look at. And we'll sort of give you updates along the way, and the next 1 will be in December.

Your next question comes from the line of Steven Valiquette with Mizuho Securities. Please go ahead.

Yes, my follow-up question was just sort of touched on a little bit, but I was just curious, again, with the Network Solutions as far as the reacceleration of growth there. Is there any color on whether you were going to be able to add more pharma brands or maybe just better revenue per pharma brand? Just curious if you could provide any more color just from that direction as far as that reacceleration or maybe something else altogether, but just curious to hear about more of the drivers of the reacceleration of growth.

Yes. And so let me -- there's sort of 2 pieces to that, Steven. So 1 is, yes, I mean, obviously, our relationships have grown. But there's also just the campaigns that we've sold into the year that we're just pacing throughout the year. And I think that's something that came up in a lot of the follow-ups from last quarter that we expected to see the growth that we saw in the first quarter, and we expected to see the growth we saw in the second quarter. But as we sort of look at these things over the course of the year and why we don't guide on a quarterly basis on that. But I don't think you should -- I don't know if acceleration is really the way to think about it. But the team is performing really well, and so good about where we are.

Your next question comes from the line of Gene Mannheimer with Freedom Capital Markets.

I just wanted to ask if you can share what is the customer overlap, say, between Phreesia's intake solutions and accessone's customers?

So yes. So Gene, again, got to be careful and wait until we close on more detail, but we thought about this topic and that it would be helpful to you. So obviously, we shared 1 in the press release, and that was intentional. And there's a client mentioned there. But there are others, and that was another reason we have some familiarity in history with the company from following it for many years is that we do have overlapping customers. I think when we closed the transaction, we'll incorporate that into our AHSC count.

Your next question comes from the line of Ryan MacDonald with Needham & Company.

I take a second crack at 1 here too as well. Maybe just to talk about the AI competitive landscape. Chaim, did you say in 1 of your earlier responses that you are monetizing AI solutions at the moment? And -- if so, I'd just be curious, now that we're seeing larger platform vendors like Epic starting to release some of their AI functionality, Doximity taking various AI functionality and sort of building it in and offering it for free. Can you just talk about sort of what the evolution here is within your customer base on willingness to pay for AI functionality and sort of what the runway is here for monetization of those features?

I think the market is massive, right? When we talk to customers, it's not our solution. It's the -- this is game changing and we see it ourselves, right? We're able to do things that people always frankly dreamed about or could never even imagine dreaming about. The idea of like being able to answer a phone call and help someone schedule a visit is pretty game-changing right? So we think the market is massive. And frankly, we have, yes, to very clearly say we have and are monetizing this product today, and we expect to continue to monetize it and it is growing rapidly.

Your next question comes from the line of Richard Close with Canaccord Genuity.

On the R&D leverage I say we don't give you chances. All right. So you cited repurposing tools to revenue-generating activities. Can you go into any more detail what exactly that was? And can that continue going forward? .

No, that was that was like very much like a one-off sort of thing that we wanted to call out. And again, similar to the earlier question about sales and marketing, I mean, we're getting lots of productivity. Sometimes you're getting productivity in different areas. But -- but again, we're investing a lot in R&D, and that's going to continue, but that was -- we just wanted to call out that nuance in the quarter. .

Richard, here I thought you were going to ask about Sesame Street.

There are no further questions at this time. I will now turn the call back over to Chaim Indig for closing remarks. Please go ahead.

Thank you, everyone, for joining our earnings call. We look forward to talking to everyone again in 90 days, and I hope everyone has a great. Have a great day.

Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.

Good morning, ladies and gentlemen, and welcome to the Phreesia's First Quarter Fiscal 2026 Earnings Conference Call. [Operator Instructions]

First, I would like to introduce Balaji Gandhi, Phreesia's Chief Financial Officer.

Mr. Gandhi, you may begin.

Thank you, operator.

Good morning, and welcome to Phreesia's earnings conference call for the first quarter of fiscal 2026, which ended on April 30, 2025. Joining me on today's call is Chaim Indig, our Chief Executive Officer. A more complete discussion of our results can be found in our earnings press release and in our related Form 8-K submission to the SEC, including our quarterly stakeholder letter, both issued before the markets opened today. These documents 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 on our Investor Relations website at ir.phreesia.com following the conclusion of the call. During today's call, we may make forward-looking statements, including statements regarding trends, our anticipated growth, our strategies, predictions about our industry and the anticipated performance of our business, including our outlook regarding future financial results.

Forward-looking statements are subject to various risks, uncertainties and other factors that may cause our actual results, performance or achievements to differ materially from those described in our forward-looking statements. Such risks are described more fully in our earnings press release, our stakeholder letter and our risk factors included in our SEC filings, including in our quarterly report on Form 10-Q that will be filed with the SEC later today. The forward-looking statements made on this call will be based on our current views and expectations and speak only as of the date on which the statements are made.

We undertake no obligation to update and expressly disclaim the obligation to update these forward-looking statements to reflect events or circumstances after the date of this call or to reflect new information or the occurrence of unanticipated events. We may also refer to certain financial measures not in accordance with generally accepted accounting principles, such as adjusted EBITDA and free cash flows 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 release and stakeholder letter, which were furnished with our Form 8-K filed before the markets opened with the SEC and may also be found on our Investor Relations website at ir.phreesia.com.

I will now turn the call over to our CEO, Chaim Indig.

Thank you, Balaji, and good morning, everyone.

Thank you for joining our first quarter of fiscal 2026 earnings call. I'd like to thank and congratulate all of my Phreesia colleagues for a strong start to the fiscal year. Balaji will cover the results and update outlook. First, I'd like to provide a few insights into where we are in our positioning for the future. Our focus remains to continuously deliver valuable and scalable products that drive meaningful outcomes for patients and providers.

Products such as appointment readiness, post-script engagement and enhanced bill pay were developed and introduced with long-term value in mind and are already showing measurable impact across the network. AI is being integrated across all aspects of our organization and our current and future products. We believe we are well positioned to continue to grow our network through product-led growth. Through our strong balance sheet and growing free cash flow, we are also well positioned to allocate capital in ways that drive long-term shareholder value.

I'll now turn it over to Balaji to review our results and updated outlook.

Thank you, Chaim.

Let me begin with a review of our first quarter financial performance, and we'll then dive into our outlook for fiscal year 2026. Revenue was $115.9 million, an increase of 15% year-over-year. We ended the quarter with average health care services clients of 4,411, an increase of 70 from the prior quarter and 346 from the prior year. Total revenue per average health care services clients was $26,283, up 6% year-over-year and up 4% quarter-over-quarter. Moving on to profitability. Adjusted EBITDA was $20.8 million, an increase of 16.7% year-over-year with an adjusted EBITDA margin of 18%. Now turning to the balance sheet and cash flow. We ended the quarter with $90.9 million in cash and cash equivalents. This compares to $84.2 million in the prior quarter. We maintained positive operating cash flow and positive free cash flow for the fourth consecutive quarter.

Operating cash flow remained positive at $14.9 million, up $15.6 million year-over-year. Free cash flow remains positive at $7.5 million in the quarter, up $13.7 million year-over-year. We expect that the magnitude of improvement on a quarter-to-quarter basis to vary based on specific timing of invoicing and payments, which you can see in the working capital, along with capital expenditures. Our first quarter results demonstrate our team's focus on growing our network, expanding our offerings and driving operating leverage. As our cash position continues to grow, we will remain opportunistic and flexible in our approach to deploying cash to profitable growth and value-enhancing opportunities as they arise. I would like to thank all of my Phreesia teammates for their contributions.

Transitioning to our financial outlook for fiscal 2026. We are maintaining our revenue outlook for the fiscal year 2026 at a range of $472 million to $482 million. We are updating our adjusted EBITDA outlook for fiscal year 2026 to a range of $85 million to $90 million from a previous range of $78 million to $88 million. That's a $4.5 million increase from the prior guidance midpoint. The revenue range provided for fiscal 2026 assumes no additional revenue from potential future acquisitions completed between now and January 31, 2026. We are reiterating our outlook on AHSCs to reach approximately 4,500 in fiscal 2026 and for total revenue per AHSC to increase in fiscal 2026 compared to fiscal 2025.

Operator, I think we can now open up the lines for the Q&A session.

Your first question comes from Anne Samuel with JPMorgan.

Congrats on the terrific quarter.

Maybe just starting with Network Solutions. You continue to see really, really nice growth there. And I was hoping maybe you could just speak to what your conversations with customers have been like in the current environment. And is there just any hesitancy around decision-making like we've heard from others, realizing that you've been more resilient, I would say, than others because through some of the prior macro volatility that we've seen. So just curious to hear any thoughts on how you're thinking about the line in the current environment.

Yes, Annie, thanks for the question.

I think this is probably something we've talked about the entire time we go public. I mean it's really just a testament to the team we have. We have a great team from all aspects of the life sciences. And I think the other thing is if you think about Chaim's opening remarks, us being a product-led company, it really does also start with the product development end. And so having those products and then having the Network Solutions team that can go out and deliver the product and sell it is really what's driving that result. So nothing really new to report, but yes, nice to see those results in the quarter.

Your next question comes from Jailendra Singh with Truist Securities.

This is Jailendra Singh from Truist. So congrats on a strong quarter.

I want to stay on the macro topic. I mean you touched on Pharma Solutions and Network Solutions business. But also, any thoughts on the providers market? I mean, clearly, those guys are also immune to all the recent developments. Keeping that in mind, how have your conversations evolved with these clients over the past couple of months? And are you capturing any incremental uncertainty in your outlook in any way?

So yes, just so I make sure we understand the question, Jailendra. You're asking about the provider end market and just how the conversations have been?

Yes. Yes.

I'll start and if Chaim wants to add anything, you can. Again, probably not a whole lot new there. I mean, really driving the product. And I think Phreesia over its history has always had a focus on trying to build and deliver products that are driving a lot of value. And that's usually where a lot of the conversations are anchored around. I don't think things are easier, harder. I mean it's always been a competitive market. All the opportunities are competitive for us, and that continues. But I think the thing we want you to take away is just the products we have and the value they bring. And I think you can see it in our results that we're still adding a lot of new clients and generating a lot of revenue off of the existing ones.

Your next question comes from Jessica Tassan with Piper Sandler.

So can you maybe talk about just the visibility that your Network Solutions customers have into ROI, campaign success, how much flexibility they kind of have to titrate up or down campaigns or maybe switch types of media? Just interested in like what data they have on what time frame and then sort of to what degree are they able to amend or modify campaigns in real time?

Jess, it's Chaim. We -- almost all of our campaigns with life sciences clients have to go through an MLR process or medical legal review. So -- and it's like that for everyone in the industry. And then those get submitted with FDA. So all of our programs, yes, they can titrate up and down depending on the different streams, and we run thousands of streams of different programs throughout a year. And we pace them based on both the appropriate patient and the needs of the pharmaceutical or biotech company or life sciences company that we work with. And often throughout the year, as dollars become available, they'll often titrate them higher. And we're more often than not the platform that is the receiver of dollars throughout the year just because of our very strong ROI and our ability to deliver results. And frankly, the fact that our scale keeps growing.

Balaji made me speak. He says I never speak anymore on earnings calls.

Your next question comes from Richard Close with Canaccord Genuity.

Congratulations on a great quarter.

Maybe talk a little bit about sales and marketing and the G&A lines. Obviously, great performance there in the first quarter. I was curious if there's anything specific to call out. And then as we think about the rest of the year, maybe anything to keep in mind as we progress through the remaining quarters?

Yes. Thanks, Richard.

I think you were probably one of the people maybe if you go back 3 or 4 years when we made the big upfront investment, Richard, you remember a lot of the sort of math sort of thinking around returns that we would get on all those investments and payback periods and how we -- our view was we could grow into them over time. I think what you're seeing is just that. And I think you're seeing it in the numbers. I think it's a testament again to the team because we made a lot of those upfront investments.

We've obviously continuously made changes to how the team is composed and how the go-to-market is and introduce some new products along the way. But I think it really does just go back to getting a really good return on that. I think our revenue and EBITDA -- adjusted EBITDA outlook for the year, you can back into what the expense trend is going to be. I don't think it's going to be particularly different within any of these line items, sort of flattish.

Your next question comes from John Ransom with RJF.

Just wondering as your financial position is getting a little better day by day, are there any kind of potential capital deployments that might make the bar today that maybe wouldn't have been there a year ago or so? And also, just like are there any end markets that you think are kind of -- if we want to get into this end market, it's more of a buy versus build?

Yes. That's a good question, John. And yes, you see the cash balance continuing to grow now. I think philosophically, if you're talking about inorganic opportunities, nothing's really changed. We evaluate lots of opportunities. We do it as a team. There's lots of different people at Phreesia who bring up different ideas that we evaluate. We've done a few of them, as you've seen over the years. I think it's all in the -- sort of through the lens of buy, build or rent. And so there's things that we do in our business that we rent. Obviously, we've built a lot, but the acquisitions we've made, it's just sort of -- there's an equation you got to run through how long would it take to build it, how much would it cost? And those are the kind of things that we've pursued and we'll continue to.

I think we obviously have more capital to deploy, but that doesn't mean the way we look at opportunity is going to be any different. We'll continue to look at them, but don't feel the need to do anything differently just because we have more capital.

And if you had to go back and look at your acquisitions to date, which one would kind of stand out as the star and which one would say maybe that those did not meet our expectations?

It's like a portfolio, John, and we like them all, but they definitely all have different time horizons and when we thought they would contribute. So every -- if you just think about it as the portfolio, everything is contributing in the way we wanted it to. Obviously, we talked about publicly the last -- the setback we had with the acquisition we did on ConnectOnCall, but it's really -- our team did a great job getting that restored and back out in the market. So that probably cost us some time, and that's probably the only one I'd call out.

I'm sad that Chaim didn't say anything, but I'll get over it.

Balaji was excited to answer that question. He did a great job.

Your next question comes from Daniel Grosslight with Citi.

On the strong quarter here. I wanted to focus on the pavement segment. Volume was particularly strong this quarter. I was curious if the later flu season had any kind of outsized impact this quarter or if there were any other tailwinds this quarter to call out?

Probably just first thing, Daniel, on that, just repeat what we probably said the last multiple calls, which is there's not a lot of fluctuation from things that are other than weather or just sort of the way the days fall on a calendar based on utilization in an office days in the calendar. Those are really it. The one thing that you should be aware of is we did introduce our bill pay product, our patient bill pay product last year. And so that continues to get traction in the market. And the way that works is providers utilizing that product, we believe the way it drives to our business is more volume. So that -- we expect that to contribute. I don't think in the first quarter, that was anything material to call out.

Your next question comes from William Jellison with D.A. Davidson.

Pressing rewind real quick. If we look at the fiscal '25 10-K, it actually showed Phreesia adding quite a bit of net new talent to the organization last year, most of which was international. As we sit here today, I was wondering if you could help us understand a bit better Phreesia's labor strategy moving forward and how we connect those dots to the kind of expense trajectory we've seen over the last several quarters.

Yes. William, you may have been newer to the story at that time, but the language in the 10-K you're referencing was a consolidation really that we did at the very beginning of the fiscal year. We had always had folks we work with in India and we consolidated that as Phreesia India. So you saw them drop into the headcount number as a consolidation.

Your next question comes from Ryan MacDonald with Needham & Company.

Congrats on a great quarter.

I wanted to get your thoughts on the proposed no handouts for Drug Advertisements Act. It aims to eliminate the tax deduction that pharma companies can claim on direct-to-consumer advertising. I'm just curious if, one, if the proposed legislation is coming up in conversations with your pharma customers at all? Is it resulting in any sort of incremental review on the ROI that Phreesia would generate if sort of the tax deduction for them is eliminated? And do you think that this is troublesome for the business? Or does it create incremental opportunity that maybe pharma companies move from lower ROI direct-to-consumer channels into Phreesia as you think about later this year and into next year?

Yes. Thanks, Ryan.

Look, as you know, there's always legislation floating around topics like this. There's bills that have been introduced this year, including the one you referred to. There's really nothing new to update there, and we would always take the practice of waiting until something happened. But I think what's probably more important to your question is just thinking about our platform and the value we bring to clients, which is very differentiated. Our platform delivers personalized health content on principles of privacy and consent. And so we feel really good about that value proposition, and there's really nothing new to report on that for the legislation.

Your next question comes from Jeff Garro with Stephens.

I want to return to the Network Solutions business and talk about the seasonality of that business. Maybe you could remind us what you typically see from Q4 to Q1 in a year and how that played out this year? And then is there any expectation that the rest of the year Network Solutions revenue plays out at a different seasonality cadence than what you've seen historically?

Yes. Thanks, Jeff.

So I think the first thing just to make sure we bring up is the visibility we have into the year is the same as it was last year at this time. I think we wouldn't think about it as seasonality so much as if you think about Chaim's answer to an earlier question around value and how we work with our life sciences clients. It's really -- there's pacing of certain programs that can cause fluctuations month-to-month or quarter-to-quarter. And I think that's some of what you see, especially as the numbers get bigger for us and the revenue gets a lot larger. But no, nothing really to call out beyond that.

Your next question comes from Scott Schoenhaus with KeyBanc.

Close enough. Balaji, great quarter. I guess my question, I want to steer away from Network Solutions and focus in on subscription. Even if we back out that onetime $1 million benefit from the extra services for one client, we get to a pretty healthy 3.5% growth rate on the revenue per provider client stat. And that's the best growth rate we've seen since 2021. Maybe talk about -- this is either for Chaim or Balaji. Maybe talk about how you're seeing the ramp on your modules. You announced last quarter some modules. You're finally monetizing the Phreesia on call this year, which you weren't able to do last year. Maybe can you talk about the ramp in the modules and what you're seeing in terms of client traction?

Yes. I mean, Scott, you see it in the numbers, and I think that's how we've always tried to articulate it. And when you look at the total revenue per client, as you pointed out, it's now started to tick up. It's a reflection of exactly that, all those products that have been introduced causing some lift. There's still expansion happening within base clients as well. And then our focus on net new being clients where there's more dollars associated with those clients when we land with a shorter payback period. So it's really all of the above. And I think if you just look at the flow of products, it would be unfair to really call out one. I think in the letters in the last couple of quarters, we've highlighted 3 products, and it's really all those 3, if you wanted to ask about new products.

Your next question comes from Jared Haase with William Blair.

Maybe we'll circle back to AI. And I think this has come up on some of the recent calls as well. But number one, just curious if there's any, I guess, incremental to your thinking about the competitive landscape, especially thinking about the potential for new entrants, raising venture capital or things like that. And then I'm also curious, are you seeing any changes in customer behavior around AI? So thinking is AI maybe becoming a bigger part of RFP processes? Or are you even seeing incremental dollars or budget capacity available for AI use cases? Just would love to unpack that a little bit more.

Yes. So what I would say is that AI is allowing people to do things that weren't -- we weren't able to do before, and we're seeing the same thing in our products. So we're seeing AI be like to both change how we run our business, but also in the products we roll out, allowing us to do things that 20 years ago, Evan and I could barely even dream about being able to deploy. And so I think it's giving us a new tool in the toolbox, but clients don't buy AI, right? What they buy is solutions to really complex problems. And what we're seeing, frankly, I think what we're seeing a lot of is really a derivation to more trusted partner, right? So I don't -- I think after sort of the COVID boom, a lot of provider groups got really burned by smaller VC-backed businesses that really pivoted strategies a couple of dozen times and often just didn't have the capital to invest appropriately.

And we're seeing a lot of those customers really come back to us and say, we don't really want to bet on a 10-person company that promises us the world. But AI is enabling us to do things within the Phreesia platform and across our network that we are very excited for and it's driving massive value for our clients, and we think over a very near term, a return for our investors.

Your next question comes from Aaron Kimson with Citizens JMP.

You disclosed in the subsequent events section of the 10-K that on March 13, the Board approved a share repurchase plan for up to 2.5 million shares of common stock. Can you talk about the motivation for the repurchase authorization, the dynamics, whether it's 10b5-1, you have a higher degree of discretion and how you're thinking about utilizing repurchases now that you're consistently generating cash?

Yes. Thanks, Aaron. And that was right after we reported last. So that is a new event. And it really, you should just think about it as being opportunistic. Our share price has been very volatile over the time we've been public. And I think as a cash-generating company with a lot of capital, we just thought it was sort of good housekeeping to have that in place to be opportunistic around the ability to do that if there was some real market dislocation in the share price, got to a level where we wanted to step in. But I don't think there's anything to read into it in terms of some regular sort of change to how we think about capital allocation.

Your next question comes from Gene Mannheimer with Freedom Capital Markets.

Nice quarter, great EBITDA. I wanted to just comment on your improvement in free cash flow last few quarters, really positive. How should we think about cash conversion rates going forward? And follow-up is with respect to payment processing revenue, we saw that typical seasonality in Q1 due to more out of pockets. How should we think about the cadence of that revenue for the rest of the year? Would it be similar to prior?

Yes, Gene, can you repeat the second question again?

Yes. Payment processing revenue, we saw a nice seasonal bump up, I guess, due to deductible resets and more out of pockets. Is that kind of the right cadence to think about the rest of the year? Would it be -- would it track similar to prior years?

Yes. Okay. Great. So on your first question, I think it's a bit of a transitional year with the ramp in cash flow with CapEx not ramping as much. So there's a little bit of distortion there. What we can tell you is if you think about conversion of operating cash flow to free cash flow in fiscal '26, it should resemble what you saw in the first quarter for the rest of the year. I think that conversion starts to -- as the operating cash flow gets higher, there's more flow-through in fiscal '27. So hopefully, that's helpful.

And then on your second question, it's -- yes, I mean, there's -- look, there's some noise around the pandemic years. And then outside of that, it's -- there's a step-up in the beginning of the calendar year, which for us includes 1 month of our previous fiscal year in January. There's a bump there, and then it sort of flattens out if you look at the trend in payments over previous years, and that should continue again this year.

Your next question comes from Richard Close with Canaccord Genuity.

Just on MediFind, it was good to see that get called out here. I'm curious your thoughts in terms of where you think you are in terms of monetizing the offering. And then the visits that you talk about in terms of the people that click on the ads are actually going and visiting, scheduling a visit. I'm curious, are those scheduled -- those visits scheduled with like Phreesia customers? Or how should we think about that?

Yes. So on the first question, it's -- think about it as the first inning, Richard. And so I think we have been clear that MediFind is contributing revenue and additional revenue from when we acquired it, which is nice to see. So it's headed in the right direction. and we've invested some capital into it, but it's still very early. And yes, I mean, one of the reasons we were excited about the opportunity to acquire it was that with our -- the size of our network growing, it does enable patients to schedule visits with providers when they find one on the MediFind platform.

People -- look, it's a problem throughout the country. People need help finding the right type of providers to deliver the right type of care. And we think MediFind is a key solution to that problem across the continuum of care. And the feedback we get from patients and providers has been overwhelmingly strong. And we expect -- we think this is a very, very big problem one where we think we're -- frankly, we're halfway through the first inning. So we expect to continue to invest in this over the next -- over the coming years, but it also become a contributor over the coming years to our business. And I'm sure we'll talk more about it in the coming years.

Your final question comes from Joe Vruwink with Baird.

Not to make too much out of the nonrecurring revenue bump to 1Q, but to the extent you took on some extra work maybe in support of a unique client opportunity, I wanted to ask if the nature of engagements are maybe changing for Phreesia where you start to rethink about supporting customer success. And really, I guess the heart of the question is with the type of opportunity that is higher ROI and quicker payback, does that account demand something differently from Phreesia or just generally speaking, as part of the planning and go-live event?

Yes. No, thanks, Joe. And look, I think the way you should read into this is that's actually -- and it's disclosed in all of our 10-Ks over the years, that is the related services component of that revenue line, and it's always been there. We just think it's good practice when you have a quarter to just call something like that out to be helpful to people to really unpack what's going on in the business. But there's no -- there's not like a shift happening underneath. And it's really -- I mean, again, consistent with just trying to add a lot of value to clients. That was an existing client and we were able to get that done quickly in the quarter. So kudos to the team for moving quickly around that. But nothing to call out. We just -- again, just trying to be helpful.

That will conclude our question-and-answer session. And I will now turn the call back over to Chaim Indig for closing remarks.

Thank you, everyone, for joining our Q1 earnings call. I hope everyone is doing well, and we'll see, hopefully, most of you in the coming months, and we'll talk to you again in about 90 days.

Cheers.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.