Phreesia Inc

1. Background and liquidity

(a) Background

Phreesia, Inc. (the "Company") is a leading provider of comprehensive software solutions that improve the operational and financial performance of healthcare organizations and improve health outcomes by helping patients take a more active role in their care. The Company’s solutions include SaaS-based integrated tools that manage patient access, registration and payments. Additionally, the Company has tools to communicate with patients about their health, which have demonstrated increased rates of preventive care and vaccinations. Additionally, Phreesia's solutions include clinical assessments to screen patients for a variety of physical, behavioral and mental health conditions, helping providers to better understand their patients and connect them to needed services, resulting in improved health outcomes. The Company also provides life sciences companies, health plans and other organizations, patient advocacy, public interest and other not-for-profit organizations with a channel for direct communication with patients. Phreesia’s solutions also include additional products and services such as the MediFind provider directory, which helps patients find care based on providers’ specific clinical expertise. Phreesia offers its healthcare services clients the ability to lease tablets ("PhreesiaPads") and on-site kiosks ("Arrivals Kiosks") along with their monthly subscription. The Company was formed in May 2005.

(b) Liquidity

Since the Company commenced operations, it has not generated sufficient revenue to meet its operating expenses and has continued to incur significant net losses. To date, the Company has primarily relied upon the proceeds from issuances of common stock, debt and preferred stock to fund its operations as well as sales of Company products and services in the normal course of business. Management believes that net losses and negative cash flows will continue for at least the next year.

Management believes that the Company’s cash and cash equivalents at October 31, 2024, along with cash generated in the normal course of business and available borrowing capacity under its revolving credit facility with Capital One (the “Capital One Credit Facility”), are sufficient to fund its operations for at least the next 12 months.

The Company may seek to obtain additional financing, if needed, to successfully implement its long-term strategy.

2. Basis of presentation

(a)Consolidated financial statements

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and regulations of the Securities and Exchange Commission ("SEC") regarding quarterly financial reporting and include the accounts of Phreesia, Inc., its branch operation in Canada and its consolidated subsidiaries (or collectively, the "Company").

(b)Fiscal year

The Company’s fiscal year ends on January 31. References to fiscal 2025 and 2024 refer to the fiscal years ending on January 31, 2025 and January 31, 2024, respectively.

(c) Unaudited interim financial statements

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with GAAP and applicable rules and regulations of the SEC regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the accompanying unaudited interim consolidated financial statements reflect all adjustments, which include normal recurring adjustments, necessary for the fair statement of the Company’s interim financial position as of October 31, 2024 and the results of its operations, changes in its stockholders' equity and its cash flows for the periods ended October 31, 2024 and 2023. The results for the interim periods are not necessarily indicative of results to be expected for the full year, any other interim periods, or any future year or period. The Company’s management believes that the disclosures herein are adequate to make the information presented not misleading when read in conjunction with the audited financial statements and accompanying notes for the fiscal year ended January 31, 2024.

3. Summary of significant accounting policies

The Company’s significant accounting policies are disclosed in the audited financial statements for the fiscal year ended January 31, 2024. Since the date of those audited financial statements, there have been no material changes to the Company’s significant accounting policies, including the status of recent accounting pronouncements, other than those detailed below.

(a)Use of estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and assumptions on historical experience, known trends and events and various other market-specific factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments. Although management believes its estimates and assumptions are reasonable under the circumstances at the time they are made, they are based upon information available at the time they are made. Management evaluates the estimates and assumptions on an ongoing basis and, if necessary, makes adjustments. Actual results could differ from those estimates made under different assumptions or circumstances. The most significant assumptions and estimates relate to the allowance for doubtful accounts, capitalized internal-use software, the determination of the useful lives of property and equipment, the fair value of securities underlying stock-based compensation, the fair value of identifiable assets and liabilities and contingent consideration in business acquisitions, and the realization of deferred tax assets.

(b)Concentrations of credit risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable and settlement assets. The Company’s cash and cash equivalents are held by established financial institutions. The Company does not require collateral from its customers and generally requires payment within 30 to 60 days of billing. Settlement assets are amounts due from well-established payment processing companies and normally takeone ortwo business days to settle, which mitigates the associated risk of concentration. The Company utilizesone third-party payment processor.

The Company’s customers are primarily physician’s offices and other healthcare services organizations located in the United States as well as pharmaceutical companies. The Company did not have any individual customers that represented more than 10% of total revenues for the three months ended October 31, 2024 and 2023. As of both October 31, 2024 and January 31, 2024, the Company had receivables from at least one entity that accounted for at least 10% of total accounts receivable.

(c)Risks and uncertainties

The Company is subject to a variety of risk factors, including the economy, data privacy and security laws and government regulations. Additionally, the Company is subject to other risks associated with the markets in which it operates, including reliance on third-party vendors, partners, and service providers. The Company supplements its workforce with contractors and consultants, including a substantial number of contractors and consultants in international locations. Certain of the Company's service providers, including certain third-party software developers, are located in international locations subject to warfare and/or political and economic instability, such as Ukraine and India. As with any business, operation of the Company involves risk, including the risk of service interruption impacting the operations of the Company's business and the Company's customer’s facilities below expected levels of operation, shut downs due to the breakdown or failure of information technology and communications systems, changes in laws or regulations, political and economic instability, or catastrophic events such as fires, earthquakes, floods, explosions, global health concerns such as pandemics or other similar occurrences affecting the delivery of our productions and services. The occurrence of any of these events could significantly reduce or eliminate revenues generated, or significantly increase the expenses of the Company's operations, adversely impacting the Company’s operating results and the Company's ability to meet the Company's obligations and commitments.

(d)Foreign currency

The functional currency of the Company’s subsidiaries and branch in the U.S. and Canada is the US Dollar. The functional currency of the Company’s subsidiary in India is the Indian Rupee. For subsidiaries with functional currencies other than the US Dollar, the Company translates the functional currency financial statements into US Dollars using the exchange rates at the balance sheet date for assets and liabilities, the period average exchange rates for revenues and expenses, and the historical exchange rates for equity transactions. The effects of foreign currency translation adjustments are recorded as accumulated other comprehensive loss within stockholders’ equity in the Company’s consolidated balance sheets. Foreign currency transaction gains and losses to re-measure monetary assets and liabilities into each entity’s functional currency are included in Other (expense) income, net.

(e)New accounting pronouncements

Impact of recently adopted accounting pronouncements

During the three and nine months ended October 31, 2024, the Company did not adopt any accounting pronouncements that materially impacted the Company's financial statements.

Recent accounting pronouncements not yet adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2023-07, Segment Reporting. The new standard requires enhanced disclosures about significant segment expenses and other segment items and requires companies to disclose all annual disclosures about segments in interim periods. The new standard also permits companies to disclose more than one measure of segment profit or loss, requires disclosure of the title and position of the Chief Operating Decision Maker (“CODM”), and requires companies with a single reportable segment to provide all disclosures required by Topic 280 – Segment Reporting. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. Companies are required to apply ASU 2023-07 retrospectively to all periods presented. The Company plans to adopt ASU 2023-07 for annual periods beginning in the fiscal year ending January 31, 2025 and for interim periods beginning in the fiscal year ending January 31, 2026. The Company is currently evaluating the impact of adoption of ASU 2023-07 on its consolidated financial statements. The Company does not expect the disclosure changes that result from the adoption of ASU 2023-07 to materially impact its consolidated financial statements.

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

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

There are no other recently issued accounting pronouncements the Company has not yet adopted that will materially impact the Company's consolidated financial statements.

4. Composition of certain financial statement captions

(a) Accrued expenses

Accrued expenses as of October 31, 2024 and January 31, 2024 were as follows:

(b) Other current liabilities and other long-term liabilities

Other current liabilities as of October 31, 2024 and January 31, 2024 were $7,130 and $5,875, respectively. Other long-term liabilities as of October 31, 2024 and January 31, 2024 were $133 and $2,857, respectively.

Other current liabilities and other long-term liabilities primarily represent deferred consideration liabilities payable to the former equity holders of ConnectOnCall.com, LLC (“ConnectOnCall”) that the Company acquired during the year ended January 31, 2024. Deferred consideration liabilities are payable through June 30, 2025. Accordingly, as of October 31, 2024, all deferred consideration liabilities were classified as other current liabilities.

(c) Property and equipment

Property and equipment as of October 31, 2024 and January 31, 2024 were as follows:

Depreciation expense related to property and equipment amounted to $3,566 and $4,483 for the three months ended October 31, 2024 and 2023, respectively. Depreciation expense related to property and equipment amounted to $11,011 and $13,231 for the nine months ended October 31, 2024 and 2023, respectively.

Property and equipment - net and related depreciation expense includes assets acquired under finance leases. Assets acquired under finance leases included in computer equipment were $48,960 and $35,250 as of October 31, 2024 and January 31, 2024, respectively. Accumulated amortization of assets under finance leases was $32,687 and $27,399 as of October 31, 2024 and January 31, 2024, respectively. See Note 10 - Leases for additional information regarding finance leases.

(d) Capitalized internal use software

For the three months ended October 31, 2024 and 2023, the Company capitalized $8,237 and $5,244, respectively, of costs related to the Company’s solutions. For the nine months ended October 31, 2024 and 2023, the Company capitalized $12,625 and $15,615, respectively, of costs related to the Company’s solutions.

During the three months ended October 31, 2024 and 2023, amortization expense related to capitalized internal-use software was $5,162 and $2,192, respectively. During the nine months ended October 31, 2024 and 2023, amortization expense related to capitalized internal-use software was $7,441 and $6,508, respectively.

(e) Intangible assets and goodwill

The following presents the details of intangible assets as of October 31, 2024 and January 31, 2024:

The weighted average remaining useful life for acquired technology in years was 5.3 and 6.0 as of October 31, 2024 and January 31, 2024, respectively. The remaining useful life for customer relationships in years was 11.8 and 12.4 as of October 31, 2024 and January 31, 2024, respectively. The remaining useful life for the license to the Patient Activation Measure ("PAM"®) in years was 12.1 and 12.8 as of October 31, 2024 and January 31, 2024, respectively. The remaining useful life for the trademarks in years was 13.8 and 14.5 as of October 31, 2024 and January 31, 2024, respectively.

Amortization expense associated with intangible assets for the three months ended October 31, 2024 and 2023, was $1,740 and $788, respectively. Amortization expense associated with intangible assets for the nine months ended October 31, 2024 and 2023, was $2,611 and $1,495, respectively.

The estimated amortization expense for intangible assets for the next five years and thereafter was as follows as of October 31, 2024:

There wereno changes to the Company's goodwill balance during the nine months ended October 31, 2024. The Company didnot record any impairments of goodwill during the three and nine months ended October 31, 2024 or 2023.

(f) Accounts receivable

Accounts receivable as of October 31, 2024 and January 31, 2024 were as follows:

Activity in the Company's allowance for doubtful accounts was as follows for the nine months ended October 31, 2024:

The Company’s allowance for doubtful accounts represents the current estimate of expected future losses based on prior bad debt experience as well as considerations for specific customers as applicable. The Company's accounts receivable are considered past due when they are outstanding past the due date listed on the invoice to the customer. The Company writes off accounts receivable and removes the associated allowance for doubtful accounts when the Company deems the receivables to be uncollectible.

(g) Prepaid and other current assets

Prepaid and other current assets as of October 31, 2024 and January 31, 2024 were as follows:

(h) Cloud computing implementation costs

The Company enters into cloud computing service contracts to support its sales and marketing, product development and administrative activities. The Company capitalizes certain implementation costs for cloud computing arrangements that meet the definition of a service contract. The Company includes these capitalized implementation costs within prepaid expenses and other current assets and within other assets on its consolidated balance sheets. Once placed in service, the Company amortizes these costs over the remaining subscription term to the same caption in the consolidated statements of operations as the related cloud subscription. Capitalized implementation costs for cloud computing arrangements accounted for as service contracts were $1,532 as of October 31, 2024 and January 31, 2024, respectively. Accumulated amortization of capitalized implementation costs for these arrangements were $1,329 and $1,021 as of October 31, 2024 and January 31, 2024, respectively.

5. Revenue and contract costs

The Company generates revenue primarily from providing integrated SaaS-based software and payment solutions for the healthcare industry. The Company derives revenue from subscription fees and related services generated from the Company’s healthcare services clients for access to the Company’s solutions, payment processing fees based on patient payment volume, and fees from life sciences and payer clients for delivering qualified direct communications to patients who voluntarily opt in to receive this type of engagement using the Company’s solutions.

The amount of subscription and related services revenue recorded pursuant to ASC 842 for the leasing of the Company’s PhreesiaPads and Arrivals Kiosks was $2,395 and $2,520 for the three months ended October 31, 2024 and 2023, respectively. The amount of subscription and related services revenue recorded pursuant to ASC 842 for the leasing of the Company’s PhreesiaPads and Arrivals Kiosks was $7,107 and $7,785 for the nine months ended October 31, 2024 and 2023, respectively.

Contract balances

The following table represents a roll-forward of contract assets:

The following table represents a roll-forward of deferred revenue:

Cost to obtain a contract

The Company capitalizes certain incremental costs to obtain customer contracts and amortizes these costs over a period of benefit of approximately three tofive years. The Company determined the period of benefit by taking into consideration its customer contracts, its technology and other factors. Amortization expense is included in sales and marketing expenses in the accompanying consolidated statements of operations and totaled $1,322 and $235 for the three months ended October 31, 2024 and 2023, respectively. Amortization expense is included in sales and marketing expenses in the accompanying consolidated statements of operations and totaled $1,706 and $855 for the nine months ended October 31, 2024 and 2023, respectively. The Company periodically reviews these deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit. During the three months ended October 31, 2024, the Company updated its estimate of the period of benefit from five years tothree years for certain deferred contract acquisition costs. The Company recorded $1,163 of additional amortization during the three months ended October 31, 2024 to amortize deferred contract amortization costs over their updated remaining period of benefit. There wereno impairment losses recorded during the periods presented.

The following table represents a roll forward of deferred contract acquisition costs:

6. Finance leases and other debt

As of October 31, 2024 and January 31, 2024, the Company had the following outstanding finance lease liabilities and other debt:

(a) Finance leases

See Note 10 - Leases for more information regarding finance leases.

(b) Financing agreements

On June 8, 2023, the Company entered into a software licensing financing agreement (the "financing agreement") in order to finance its software and service licenses. As of October 31, 2024, there was $2,237 in outstanding principal and interest due under the financing agreement. The financing agreement requires the Company to pay $123 per month for 36 months beginning August 2023. The effective interest rate on the financing agreement is 10.5% per annum.

(c) Amended and Restated Loan and Security Agreement with Silicon Valley Bank (“SVB”)

On February 28, 2019 (the "Effective Date"), the Company entered into the Amended and Restated Loan and Security Agreement (the "First SVB Facility") that provided for a $20,000 term loan.

On May 5, 2020 (the "Second SVB Effective Date"), the Company entered into the Second Amended and Restated Loan and Security Agreement (the “Second SVB Facility”) to modify the First SVB Facility. The Second SVB Facility provided for a revolving credit facility with an initial borrowing capacity of $50,000.

On March 28, 2022 (the "Third SVB Effective Date"), the Company entered into a First Loan Modification Agreement to the Second SVB Facility (as amended, the "Third SVB Facility") to increase the borrowing capacity from $50,000 to $100,000 and to reduce the interest rate on the facility. Borrowings under the Third SVB Facility were payable on May 5, 2025. Borrowings under the Third SVB Facility bore interest, which was payable monthly, at a floating rate equal to the greater of 3.25% or the Wall Street Journal Prime Rate minus 0.5%. In addition to principal and interest due under the revolving credit facility, the Company was required to pay an annual commitment fee of approximately $250 per year and a quarterly fee of 0.15% per annum of the average unused revolving line under the facility.

On December 4, 2023, the Company terminated the Third SVB Facility.

(d) Capital One Credit Agreement

On December 4, 2023, the Company entered into a Credit Agreement (the "Credit Agreement") for a new 5-year $50,000 senior secured asset-based revolving credit facility ("Capital One Credit Facility") maturing in December 2028, which includes a swingline sub-limit of at least $5,000 and a letter of credit sub-limit of at least $5,000. The Capital One Credit Facility was entered into with Capital One, N.A. (“Capital One”), acting as administrative agent and replaced our previous senior secured revolving credit facility with SVB. The Capital One Credit Facility gives the Company additional financial flexibility, through the facility’sfive year term. The facility is available to the Company for working capital and general corporate purposes. The Capital One Credit Facility bears interest at a rate per annum based on the Secured Overnight Financing Rate (“SOFR”) or a Base Rate as specified in the Credit Agreement. As of October 31, 2024, the interest rate on the Capital One Credit Facility was 7.9%. In addition to principal and interest due under the Capital One Credit Facility, the Company is required to pay an annual fee equal to 0.25% of the unused balance of the facility. Additionally, the Company incurred creditor and third party fees of $778 upon entering into the Capital One Credit Facility. The Company recorded the fees to deferred financing costs, included within other assets on its consolidated balance sheets, and will amortize the costs over the term of the Capital One Credit Facility.

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

The Capital One Credit Facility includes financial covenants including, but not limited to, requiring the Company to maintain minimum Consolidated EBITDA, minimum Liquidity, a minimum Consolidated Fixed Charge Coverage Ratio a restriction on the amount of dividends and limiting the amount of cash and cash equivalents the Company holds outside Capital One, each as defined in the Credit Agreement. The Company was in compliance with all covenants related to the Credit Agreement as of October 31, 2024.

Maturities of finance leases and other debt, in each of the next five years and thereafter, are as follows:

The following table presents the components of interest income, net:

7. Stockholders' Equity

(a) Common stock

The Company closed its initial public offering (“IPO”) on July 22, 2019 and filed an Amended and Restated Certificate of Incorporation authorizing the issuance of up to 500,000,000 shares of common stock, par value $0.01 per share.

In connection with the acquisition of Comsort, Inc. d/b/a MediFind ("MediFind") on June 30, 2023, the Company issued 150,786 shares of its common stock to the former owners of MediFind as partial consideration to acquire MediFind. On July 3, 2023, the Company filed a prospectus supplement to register the shares with the SEC.

In connection with the acquisition of Access eForms, LLC ("Access") on August 11, 2023, the Company issued 1,096,436 shares of its common stock to the former members of Access as partial consideration to acquire Access. On August 14, 2023, the Company filed a prospectus supplement to register the shares with the SEC.

(b) Treasury stock

The Company's equity-based compensation plan allows for the grant of non-vested stock options, restricted stock units ("RSUs") and total shareholder return ("TSR") performance-based stock units ("PSUs") to its employees pursuant to the terms of its stock option and incentive plans (See Note 8). Until September 2023, under the provision of the plans, for RSU and PSU awards, unless otherwise elected, employee participants fulfilled their related income tax withholding obligation by having shares withheld at the time of vesting. The shares withheld were then transferred to the Company's treasury stock at cost.

Beginning in September 2023, employee participants fulfilled their related tax withholding obligation by selling vested shares at the time of vesting in non-discretionary transactions pursuant to the Company’s mandatory sell-to-cover policy (sell-to-cover). The proceeds from the employee participants’ sales of vested shares is remitted to the Company to cover the tax withholding payments to tax authorities. No shares are transferred to the Company’s treasury stock in connection with tax withholdings funded by an employee participant’s sale of vested shares to cover taxes.

(c) Accumulated other comprehensive loss

Activity in accumulated other comprehensive loss was as follows for the nine months ended October 31, 2024:

There wasno balance or activity in accumulated other comprehensive loss prior to January 31, 2024. The amounts set forth in the table above are presented net of tax. There wereno amounts reclassified from accumulated other comprehensive loss into net loss during the nine months ended October 31, 2024.

8. Equity-based compensation

(a) Equity award plans

In January 2018, the Board of Directors adopted the Company’s 2018 Stock Option Plan (as amended, the "2018 Stock Option Plan"), which provided for the issuance of options to purchase up to 3,048,490 shares of the Company’s common stock to officers, directors, employees, and consultants. The option exercise price per share is determined by the Board of Directors based on the estimated fair value of the Company’s common stock.

In June 2019, the Board of Directors adopted the Company’s 2019 Stock Option and Incentive Plan (the "2019 Plan"), which replaced the 2018 Stock Option Plan upon the completion of the IPO. The 2019 Plan allows the Compensation Committee of the Board of Directors (the "Compensation Committee") to make equity-based incentive awards including stock options, RSUs and PSUs to the Company’s officers, employees, directors, and consultants. The initial reserve for the issuance of awards under this plan was 2,139,683 shares of common stock. The initial number of shares reserved and available for issuance automatically increased on February 1, 2020 and automatically increases each February 1 thereafter by 5% of the number of shares of common stock outstanding on the immediately preceding January 31 (or such lesser number of shares determined by the Compensation Committee). As the 2018 Stock Option Plan was replaced by the 2019 Plan, all grants of stock options, RSUs and PSUs during the nine months ended October 31, 2024 were made pursuant to the 2019 plan, respectively.

In June 2019, the Board of Directors also adopted the Company’s 2019 Employee Stock Purchase Plan (the "ESPP"), which became effective immediately prior to the effectiveness of the registration statement for the Company’s initial public offering. The total shares of common stock initially reserved under the ESPP was limited to 855,873 shares.

The Company's incentive bonuses allow eligible employees to elect to receive all or a portion of their incentive compensation in the form of immediately vested restricted stock units instead of cash.

In July 2023, the Board of Directors also adopted the Company’s 2023 Inducement Award Plan (the “Inducement Plan”). The Inducement Plan allows the Compensation Committee of the Board of Directors (the "Compensation Committee") or its delegates to make equity-based incentive awards including stock options, RSUs and PSUs to employees of acquired companies to induce them to join the Company. The total shares of common stock initially reserved under the Inducement Plan was 500,000 shares.

As of October 31, 2024, there were 5,868,930 shares available for future grant pursuant to the 2019 Plan after factoring in the automatic increase that occurs on February 1 of each fiscal year, as well as an additional 338,064 shares available for future grant pursuant to the ESPP. The ESPP hastwo six-month offering periods each calendar year beginning in January and July. The ESPP allows eligible employees to purchase shares of the Company’s common stock at a 15% discount through payroll deductions. As of October 31, 2024, there were 14,191 outstanding restricted stock units and 485,809 shares available for future grant under the Inducement Plan.

(b) Summary of stock-based compensation

The following table sets forth stock-based compensation by type of award:

The following table sets forth the presentation of stock-based compensation in the Company's financial statements:

The Company has not recognized, and does not expect to recognize in the foreseeable future, any tax benefit related to employee stock-based compensation expense. During the nine months ended October 31, 2024, the Company reduced stock compensation expense by $1,130, for improbable-to-probable modifications of stock compensation awards.

(c) Restricted stock units

The Company has issued RSUs to employees and independent directors that vest based on a time-based condition. RSUs granted to employees vest over four years based on a variety of vesting schedules, including quarterly, annually, and 10/20/30/40 (10% afterone year,20% aftertwo years,30% after three years and 40% after four years). RSUs granted during fiscal 2024 generally vest annually, and RSUs granted during fiscal 2025 generally vest following a 10/20/30/40 vesting schedule.

Additionally, at the beginning of each fiscal year, the Company provides eligible employees the option to settle their incentive bonus in immediately vested RSUs. During the nine months ended October 31, 2024, the Company issued 406,427 immediately vested RSUs to settle full-year fiscal 2024 share-settled bonus awards. The RSUs granted to settle bonus awards are included in RSUs granted and vested in the table below. See section (g) Liability awards below for additional information regarding share-settled bonus awards.

As of October 31, 2024, there was $82,270 remaining of total unrecognized compensation cost related to these awards. The total unrecognized costs are expected to be recognized over a weighted-average term of 2.51 years.

(d) Stock options

Options granted under the equity award plans have a maximum term often years and vest over a period determined by the Board of Directors (generally four years from the date of grant or the commencement of the grantee’s employment with the Company). Options generally vest 25% at theone-year anniversary of the grant date, after which point they generally vest pro rata on a monthly basis.

Stock option activity for the nine months ended October 31, 2024 is as follows:

The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company’s estimated stock price at the time of exercise and the exercise price, multiplied by the number of related in-the-money options) that would have been received by the option holders had they exercised their options at the end of the period. This amount changes based on the market value of the Company’s common stock. The total intrinsic value of options exercised for the nine months ended October 31, 2024 and 2023 (based on the difference between the Company’s estimated stock price on the exercise date and the respective exercise price, multiplied by the number of options exercised), was $2,304 and $6,034, respectively.

As of October 31, 2024 and January 31, 2024, all compensation cost related to stock options issued to employees had been recorded and there wasno unrecognized compensation cost remaining related to stock options issued to employees.

(e) TSR performance-based stock units (“PSUs”)

The Company grants PSUs to certain members of its management team. PSUs vest over approximately three years from the grant date upon satisfaction of both time-based requirements and market targets based on Phreesia's TSR relative to the TSR of each member of the Russell 3000 Index (the "Peer Group"). Depending on the percentage level at which the market-based condition is satisfied, the number of shares vesting could be between 0% and 220% of the number of PSUs originally granted. To earn the target number of PSUs (which represents 100% of the number of PSUs granted), the Company must perform at the 60 th percentile, with the maximum number of PSUs earned if the Company performed at least at the 90 th percentile. If Phreesia's TSR for the performance period is negative, the maximum number of PSUs that can be earned will be capped at 100%.

The Company estimated the fair value of the PSUs using a Monte Carlo Simulation model that projected TSR for Phreesia and each member of the Peer Group over the performance period. The Company recognizes the grant date fair value of PSUs as compensation expense over the vesting period.

Market-based PSU activity for the nine months ended October 31, 2024 was as follows:

As of October 31, 2024, unrecognized compensation cost for the PSUs was $19,444, to be recognized over a weighted average remaining vesting period of 2.0 years, subject to the participants' continued employment with the Company.

(f) Employee stock purchase plan

The ESPP is a compensatory plan because it provides participants with terms that are more favorable than those offered to other holders of the Company's common stock. Employees purchase shares at the lesserof (1)85% of the closing stock price on the first day of the offering period or (2)85% of the closing stock price on the last day of the offering period. The ESPP is structured as a qualified employee stock purchase plan under Section 423 of the U.S. Internal Revenue Code of 1986.

During the three and nine months ended October 31, 2024, the Company issued 89,220 shares of common stock under the ESPP. In connection with these issuances, the Company recorded increases of $1,608 to common stock and additional paid-in capital within stockholders' equity. As of October 31, 2024, unrecognized compensation cost related to the ESPP was $159, to be recognized over the nexttwo months.

(g) Liability awards

At the beginning of each year, the Company provides eligible employees the option to elect to receive all or a portion of their incentive compensation in the form of immediately vested restricted stock units instead of cash. Restricted stock units issued to settle liability awards are covered by the 2019 Plan. Share-settled bonus awards will be settled at a value equal to 115% of the cash bonuses. These share-settled bonus awards vest based on the achievement of the Company’s predefined performance targets. As share-settled bonus awards will be settled in a variable number of shares, the Company classifies share-settled bonus awards as liabilities within accrued expenses in the accompanying consolidated balance sheets until they are settled in shares and included in stockholders' equity. The Company’s share-settled bonus awards are settled semiannually. During the nine months ended October 31, 2024, the Company settled $9,071 of share-settled bonus awards by issuing 406,427 immediately vested RSUs. See (c) Restricted Stock Units above for additional discussion regarding RSUs.

9. Fair value measurements

The following table presents information about the Company's assets and liabilities that are measured at fair value as of October 31, 2024 and indicates the classification of each item within the fair value hierarchy:

The following table presents information about the Company's assets and liabilities that are measured at fair value as of January 31, 2024 and indicates the classification of each item within the fair value hierarchy:

The carrying value of the Company’s short-term financial instruments, including accounts receivable and accounts payable approximate fair value due to the short-term nature of these instruments. As of October 31, 2024, the carrying value of the Company's debt and deferred consideration liabilities approximated fair value because the interest rates approximated market rates and the related maturities are relatively short-term.

The Company did not have any transfers of assets and liabilities between levels of the fair value measurement hierarchy during the nine months ended October 31, 2024 and 2023.

10. Leases

(a) Phreesia as Lessee

The Company leases third-party data center space and office space in the U.S. under operating leases that expire on various dates through March 2027. Certain of these arrangements have escalating rent payment provisions or optional renewal clauses. The Company has also entered into various finance lease arrangements for computer equipment. These agreements are typically three years and are secured by the underlying equipment.

The Company has also entered into various finance lease arrangements for computer equipment. These agreements are typically fortwo tothree years and are secured by the underlying equipment.

For office leases and leased equipment, the Company has elected the practical expedient to not separate lease and non-lease components, and as such, the variable lease cost primarily represents variable payments such as common area maintenance, utilities and equipment maintenance.

As of October 31, 2024, for operating leases, the weighted-average remaining lease term was 1.8 years and the weighted-average discount rate is 7.9%. As of October 31, 2024, for finance leases, the weighted-average remaining lease term was 2.3 years, and the weighted-average discount rate is 7.9%.

The components of lease expense for the nine months ended October 31, 2024 were as follows:

Amortization of right-of-use assets for finance leases is included within depreciation expense on the Company's consolidated statements of operations.

The following represents a schedule of maturing lease commitments for operating and finance leases as of October 31, 2024:

Other supplemental cash flow information for the nine months ended October 31, 2024 was as follows:

(b) Phreesia as Lessor

In connection with the patient intake and registration process, Phreesia offers its customers the ability to lease PhreesiaPads and Arrivals Kiosks along with their monthly subscription. These rentals fall under the guidance of ASC 842. The Company elected the practical expedient to not separate lease and non-lease components. More specifically, all contractual hardware maintenance is included with the hardware lease components. The leases contain no variable lease payments, no options to extend the lease that are reasonably certain to be exercised, and do not give the lessee an option to purchase the hardware at the end of the lease term. Additionally, the lease term does not represent a major part of the remaining economic life of the assets, and the present value of the lease payments does not equal or exceed substantially all of the fair value of the assets. As a result, all leased hardware in the SaaS arrangements are classified as operating leases.

During the three and nine months ended October 31, 2024, the Company recognized $2,395 and $7,107, respectively, in subscription and related services revenue related to the leasing of PhreesiaPads and Arrivals Kiosks.

Future lease payments receivable under operating leases were immaterial as of October 31, 2024, except for those with terms of one year or less.

11. Commitments and contingencies

(a) Indemnifications

The Company’s agreements with certain customers include certain provisions for indemnifying customers against liabilities if its services infringe a third party’s intellectual property rights. It is not possible to determine the maximum potential amount under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances that may be involved in each particular agreement. To date, the Company has not incurred any material costs as a result of such provisions and has not accrued any liabilities related to such obligations in its consolidated financial statements.

In addition, the Company has indemnification agreements with its directors and its executive officers that require it, among other things, to indemnify its directors and executive officers for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by any of those persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service as a director or officer, including any action by us, arising out of that person’s services as a director or officer or that person’s services provided to any other company or enterprise at the Company’s request. The Company maintains director and officer insurance coverage that may enable it to recover a portion of any future indemnification amounts paid. To date, there have been no claims under any of the Company’s directors and executive officers indemnification provisions.

(b) Legal proceedings

In the ordinary course of business, the Company may be subject from time to time to various proceedings, lawsuits, disputes or claims. Although the Company cannot predict with assurance the outcome of any litigation, the Company does not believe there are currently any such actions that, if resolved unfavorably, would have a material impact on its financial condition, results of operations or cash flows.

(c) Other contractual commitments

Other contractual commitments consist primarily of non-cancelable purchase commitments to support our technology infrastructure as well commitments related to our acquisitions.

During the second quarter of fiscal 2025, the Company signedtwo non-cancelable purchase commitments to support its technology infrastructure that commenced during the three months ended October 31, 2024. Total undiscounted payments for the agreements through the fiscal year ending January 31, 2028 related to the agreements are $9,594.

During fiscal 2024, the Company signed a finance lease that commenced during the nine months ended October 31, 2024. Total undiscounted payments through the fiscal year ending January 31, 2028 related to the lease of $7,413 were included in other contractual commitments as of January 31, 2024 and were added at present value to finance lease liabilities during the nine months ended October 31, 2024.

During the second quarter of fiscal 2025, the Company signed a finance lease that commenced during the three months ended October 31, 2024. Total undiscounted payments through the fiscal year ending January 31, 2028 related to the lease of $7,731 were added at present value to finance lease liabilities during the nine months ended October 31, 2024.

During the nine months ended October 31, 2024, there were no other significant changes in the Company's material cash requirements as compared to the material cash requirements from known contractual and other obligations described in our Annual Report on Form 10-K for the fiscal year ended January 31, 2024, filed with the SEC on March 15, 2024.

12. Income taxes

For the three and nine months ended October 31, 2024, the Company recorded a tax provision of $442 and $1,702, respectively, compared to a tax provision of $372 and $1,326, respectively, for the corresponding periods in the prior year. The Company's provision for income taxes was 3.4% and 1.3% of loss before income taxes for the nine months ended October 31, 2024 and 2023, respectively. The Company's effective tax rate differs from the U.S. statutory tax rate of 21% primarily because the Company records a valuation allowance against its U.S. deferred tax assets, and due to foreign income tax expense related to its Canadian branch and its subsidiary in India.

Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets and liabilities using statutory rates. Management of the Company has evaluated the positive and negative evidence pertaining to the realizability of its deferred tax assets, including the Company’s history of losses, and concluded that it is more likely than not that the Company will not recognize the benefits for its U.S. deferred tax assets. On the basis of this evaluation, the Company has recorded a valuation allowance against its deferred tax assets that are not more likely than not to be realized at both October 31, 2024 and January 31, 2024.

13. Net loss per share attributable to common stockholders

(a) Net loss per share attributable to common stockholders

Basic and diluted net loss per share attributable to common stockholders was calculated as follows:

(b) Potential dilutive securities

The Company’s potential dilutive securities, which include stock options, RSUs, PSUs and grants under the Company's ESPP, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The following potential shares of common stock, presented based on amounts outstanding at each period end, were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

14. Related party transactions

For the three months ended October 31, 2024 and 2023, the Company recognized revenue totaling $326 and $319, respectively, for advertisements placed by a pharmaceutical company. For the nine months ended October 31, 2024 and 2023, the Company recognized revenue totaling $997 and $868, respectively, for advertisements placed by a pharmaceutical company. One of the Company's independent members of its board of directors serves on the board of directors for this pharmaceutical company. As of October 31, 2024 and January 31, 2024, accounts receivable from the pharmaceutical company totaled approximately $160 and $416, respectively.

For the nine months ended October 31, 2023, the Company recognized general and administrative expenses totaling $118 for software agreements with a software company. One of the Company's independent members of its board of directors served as the chief executive officer and a member of the board of directors for this software company until May 2023. This company is no longer considered a related party subsequent to May 2023. The expense amounts presented above include amounts incurred while the entity was a related party.

One of the Company's independent members of its board of directors has served as the chief financial officer of a software company since April 2022. The Company recognized de minimis expenses during both the three and nine months ended October 31, 2024 and 2023 under software agreements with this software company.

15. Acquisitions

Acquisitions of MediFind, Access and ConnectOnCall

On June 30, 2023, the Company entered into an agreement to acquire 100% of the outstanding equity of MediFind for aggregate consideration payable of $8,871 (the "MediFind Acquisition"). A portion of the consideration was paid in cash at closing (subject to a customary working capital adjustment) with the remainder of the consideration settled through the issuance of 150,786 shares of the Company's common stock to certain stockholders of

MediFind. MediFind is a consumer-facing healthcare product that helps patients - especially those with serious, chronic and rare diseases - find better care faster. The MediFind Acquisition was accounted for as a business combination. The Company acquired MediFind to reinforce its commitment to patient-centered care and expand its offerings to consumers.

On August 11, 2023, the Company entered into an agreement to acquire 100% of the outstanding equity of Access for aggregate consideration payable of $37,411 (the “Access Acquisition”). A portion of the consideration was paid in cash at closing (subject to a customary working capital adjustment) with the remainder of the consideration settled through the issuance of 1,096,436 shares of the Company's common stock to the holders of the outstanding equity of Access. Access is an innovative electronic forms management and automation provider that helps hospitals across the country streamline workflows, improve compliance and deliver a better patient experience. The Access Acquisition was accounted for as a business combination. The Company acquired Access to enhance and build on its existing functionality in the acute care space and to expand its network of clients and partners.

On October 3, 2023, the Company entered into an agreement to acquire 100% of the outstanding equity of ConnectOnCall for aggregate consideration payable of $13,946 (the “ConnectOnCall Acquisition”). A portion of the consideration was paid in cash at closing with the remainder of the consideration payable inseven quarterly installments beginning in fiscal year 2024. The first installment was paid in January 2024. ConnectOnCall is an automated medical answering solution that routes and triages after-hours calls and manages high daytime call volumes. The ConnectOnCall solution is built on real-time Electronic Health Record (“EHR”) integrations, enhancing the control and transparency of patient information for providers or practices when returning calls. The Company acquired ConnectOnCall to expand its offerings to provider organizations, helping them make the call-triaging process more efficient and less expensive.

The following table summarizes the estimated acquisition-date fair value of consideration transferred for each acquisition:

The acquisition-date fair value of equity consideration transferred was estimated using the closing stock price on the acquisition date for each acquisition. The acquisition-date fair value of liabilities incurred to sellers was estimated based on the timing of payments and an appropriate credit-adjusted discount rate of 9.3% per annum, determined with the assistance of a third-party appraiser. The Company accrues interest on the liability at 9.3% per annum. For the three and nine months ended October 31, 2024, the Company recorded interest expense on the liability incurred to sellers of $159 and $522, respectively, compared to interest expense of $76 and $76, respectively for the corresponding periods in the prior year.

The following table summarizes the calculation of cash paid for each acquisition, net of cash acquired per the Company's consolidated statement of cash flows for the nine months ended October 31, 2023:

The purchase price was allocated to the tangible assets acquired, the identifiable intangible assets acquired and the liabilities assumed based on their acquisition-date estimated fair values or other measurement bases specified by ASC 805 - Business Combinations.

The following table summarizes the final allocation of the purchase price to the assets acquired and liabilities assumed at the date of acquisition:

The components of intangible assets acquired in the MediFind Acquisition were as follows:

The weighted average amortization period for acquired intangible assets as of the date of the acquisition is 10 years.

The components of intangible assets acquired in the Access Acquisition were as follows:

The weighted average amortization period for acquired intangible assets as of the date of acquisition is 13 years.

The components of intangible assets acquired in the ConnectOnCall Acquisition were as follows:

The weighted average amortization period for acquired intangible assets as of the date of acquisition is 8 years.

The Company, with the assistance of a third-party appraiser, assessed the fair value of the assets of MediFind, Access, and ConnectOnCall. The fair value of the acquired technology and trademark assets were estimated using the relief from royalty method. The fair value of customer relationships was estimated using a multi-period excess earnings method. To calculate fair value, the Company used cash flows discounted at a rate considered appropriate given the inherent risks associated with each asset.

The useful lives of the intangible assets were estimated based on the expected future economic benefit of the assets and are being amortized over the estimated useful life in proportion to the economic benefits consumed using the straight-line method. The amortization of intangible assets is not expected to be deductible for income tax purposes.

The goodwill recognized in each of the acquisitions is primarily attributable to expected synergies of the combined businesses driven by integrating the license and technology into our solutions and engaging with patients and providers, as well as the acquisition of an assembled workforce. The goodwill recognized for the Access and ConnectOnCall acquisitions is expected to be tax deductible. The goodwill recognized for the MediFind acquisition is not expected to be tax deductible.

During the nine months ended October 31, 2023, the Company incurred $3,115 of acquisition related costs for the MediFind, Access and ConnectOnCall acquisitions. These costs are primarily included within General and administrative expenses in our consolidated statements of operations.