Phreesia Inc Stock

Good evening, ladies and gentlemen, and welcome to the Phreesia Second Quarter Fiscal 2027 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 second quarter of fiscal 2027, which ended on July 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 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 and visibility 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 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 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 filed after the close 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 second quarter fiscal year 2027 earnings call. We delivered a solid fiscal second quarter with revenue growth and profitability expansion in line with our expectations. We generated positive operating and free cash flow again this quarter, which together with available cash, allowed us to reduce debt principal by over $23 million while maintaining a healthy cash balance.

Balaji will cover the results and our outlook. We believe we are uniquely positioned in the market through our diverse set of product offerings to drive meaningful value to every patient visit in the U.S. AccessOne is an important extension of our value proposition because health care consumers are bearing a greater share of the ever-growing cost of health care. We've heard from our clients and many other providers across the country that the need for humane and predictable financing solution for health care consumers has never been greater.

Provider Connect, our newest Network Solutions offering, also extends our value proposition and addressable market. Momentum for this new product continues to build. In the GLP-1 category, a 4-month study showed a 4% incremental lift in new-to-brand prescriptions versus a matched control group and more than 1,000 new patient starts. I am proud of our team's commitment to our mission and values.

Now I'll turn it over to Balaji to walk through Q2 results and our fiscal 2027 outlook.

Thank you, Chaim. Let me begin with a review of our second quarter financial performance, and we'll then dive into our outlook for fiscal year 2027. Revenue for the second quarter was $129.5 million, an increase of 10% year-over-year. On a sequential basis, total revenue declined approximately 1% from the first quarter, driven primarily by our legacy payment processing revenue.

As a reminder, given the seasonality in our payment processing business associated with the reset of health plan deductibles, payment processing revenue is typically highest during the first fiscal quarter of each year. We ended the quarter with average health care services clients of 4,744, an increase of 36 from the prior quarter and 277 from the prior year. Client additions in the quarter were in line with our expectations and consistent with our full year outlook for AHSC growth in the mid-single-digit percentage range. Total revenue per AHSC was $27,289, up 4% year-over-year.

On a sequential basis, total revenue per AHSC declined approximately 2%, reflecting the payment processing seasonality I just described, along with continued growth in our client base. Moving on to profitability. Adjusted EBITDA was $32.9 million, an increase of $10.8 million year-over-year with an adjusted EBITDA margin of 25% Net income was $1.9 million compared to net income of $700,000 in the prior year period, representing our fifth consecutive quarter of positive net income. Total managed payments were $1.626 billion in the quarter, and our Payment Solutions revenue rate was 2.4%.

Now turning to the balance sheet and cash flow updates. We ended the quarter with $74.6 million in cash, cash equivalents and restricted cash. This compares to $76.4 million in the prior quarter. We delivered our ninth consecutive quarter of positive operating cash flow and free cash flow. Operating cash flow was $18.3 million, up $3.5 million year-over-year. Free cash flow was $13.8 million, up $4.2 million year-over-year. This cash flow, together with available cash, allowed us to reduce debt principal by over $23 million while maintaining a healthy cash balance.

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 working capital along with CapEx. Our second quarter results demonstrate our team's focus on growing our network, expanding our offerings, driving operating leverage and strengthening our balance sheet. I'd like to acknowledge the entire Phreesia team for their contributions.

Transitioning to our outlook for fiscal 2027. We are maintaining our revenue outlook for fiscal 2027 at a range of $510 million to $520 million. The revenue range provided for fiscal 2027 assumes approximately $37 million of contribution from AccessOne and no additional revenue from potential future acquisitions completed between now and January 31, 2027.

We are maintaining our adjusted EBITDA outlook for fiscal 2027 at a range of $125 million to $135 million. The restructuring plan we implemented in May is expected to result in meaningful annualized run rate expense savings, which were reflected in the outlook we provided on March 30 and reaffirmed on May 27. We are maintaining our expectation for AHSC growth in the mid-single-digit percentage range and for total revenue per AHSC growth in the low single-digit percentage range in fiscal 2027.

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.

Maybe just starting on AccessOne. Last quarter, you all talked about the changes you made to your securitization facility and how that enables you to offer the upfront funding to other non-investment-grade clients. Just any updates you can share on how selling into this kind of new part of the base is going? And then maybe just how the process of restarting the AccessOne selling motion just in general is going?

Yes. Thanks, Sean. This is Balaji. I'll start and kick it over to Chaim to add anything. We're feeling really good about this acquisition. I think better now than at the time when we closed the acquisition. We've got lots of conversations, both internally and externally around the value proposition, specifically to that segment of the market that you cited. And so obviously, these things do take time, but I'd say the progress we've made over the past several months, you mentioned it starts with the securitization expansion. And then it's just really go-to-market and product fit, everything like that. I'm looking at Chaim.

I agree. We are seeing some early wins in the market. And hopefully, in the next couple of quarters, we'll be talking about this a lot more, but we are starting to see wins in the market, and we're really excited. The whole team is -- we're getting very, very positive feedback from clients around the offering. So existing clients. So we are very excited. We think this is going to be a growth lever over the next couple of years. So stay tuned.

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

Congrats on the quarter. This is Cameron on for Brian. Could you guys talk a little bit about what you're seeing in Network Solutions, particularly the areas you called out earlier in the year that you were having a lack of visibility in? Has anything changed there? And just any update you could give us there?

Sure. So first of all, as you saw in a lot of our materials that we released tonight, we're speaking to total revenue. And so if you just sort of step back and think about where we are from a revenue perspective, it's pretty much the same place from a total revenue perspective. Underneath, we have seen a lot of progress on the second half in Network Solutions. In terms of business activity. The team has done an excellent job. I think our new products like Provider Connect are resonating. So I think we're pretty encouraged by where we are today relative to 90 days ago or even 180 days ago.

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

I guess sticking with network, you called out in the prepared remarks that you saw a GLP-1 campaign that you tested and generated positive ROI. Can you just comment on how that pilot went? Did it convert any follow-on contract or any expanded opportunities as a result of the results that you saw in the pilot?

Yes. Thanks, Stan. And yes, we did mention that in our letter, and it did -- the answer is yes, it did help convert some new business activity and relates to the prior question, too.

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

So our question is maybe can you help us understand your exposure to kind of EHRs that have a competitive check-in management solution? And I think the AHSC growth continues to be really impressive to us. So just interested to know, are these new sales occurring in providers whose EHR does not offer a check-in management solution? Or just maybe can you update us on how you are selling into new AHSCs just given the kind of changing competitive dynamics on the virtual intake management?

Sure. One of the greatest hits questions we've received for 7 years. And I think the only kind of correction maybe we would make to your question, Jess, is, I think you said changing dynamics, and this has pretty much been sort of a normal dynamic for the entire history of the company. And I think we're trying to be very clear about where we differentiate ourselves from a product perspective, from a go-to-market perspective, how we work with clients, et cetera.

So there's really nothing new to call out, but they are all competitive with us, and that's just the nature of the space. And I think as we've talked about for the last several years now, we do lean into different markets really based on the economic profile. That is a big influence in how we make decisions. But again, nothing really new to report there.

I would probably add that the team is doing just really just great job, and our clients seem to be very, very happy as I spend a lot of time with them.

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

You guys had a nice quarter in Network Solutions. Anything specific to call out there if it indeed is maybe a little bit from Provider Connect early traction? And then between the 2 budgets between Provider Connect and your legacy D2C, are there anything notable in terms of the macro or the backdrop between those 2 that's evolving or changing?

I mean just the earlier question around as the year has progressed, we've had some nice wins that the team has done an excellent job. And I think you just point out the aspect of our business model, part of the reason the team is able to do an excellent job is because we're also adding more footprint on the provider side. So those things go together. So all that continues to have good momentum.

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

I want to focus a little bit on the subscription offering and really the pricing within subscription. I know there's a deliberate effort on your end to kind of moderate price a little bit to encourage more downstream revenue from your HSCs. I'm curious if you can maybe provide a little bit more guidance on how we should be thinking about pricing within the subscription offering and then on a sequential basis for the remainder of the year, if we should kind of think about that line item as flat sequentially in 3Q and 4Q?

So I'll let Balaji answer the question with specifics on how to think about it. But I think what we're seeing now is providers are under a significant amount of strain with a lot of the changes happening across the payer. And as we've always said throughout our history, one of our North Stars is just making sure that we could be great partners to those providers that are serving American patients. And so we're acutely aware of having to provide as much value to them right now while they are facing severe economic strain because of the changes in the payer dynamics.

Yes. And I think to Chaim's point, you have lots of data on this now over the years. I remember him saying almost the same thing during the pandemic and obviously, a different set of challenges then. And what we did in terms of how we work with clients then, we're pretty happy with those results. So I think this is a very similar situation. And then, Daniel, just to be helpful on the modeling side, I think if you just sort of listen to the commentary here, we're maintaining our revenue. If you took some of that revenue in the second half out of subscription, and we do have a little bit more clarity on the second half on Network Solutions, you could bump that up. But I think overall, nothing has really changed from a total revenue perspective and things are going in the direction we anticipated.

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

Congrats on a nice quarter. Maybe to discuss sort of the product strategy and R&D investment that you're making for the provider practices and new features and functionality. It seems like with Plan Match and sort of expansion of capabilities around eligibility and verification that you're sort of continuing to round out, let's call it, the front end of the revenue cycle there. I think you offer payment estimation and coordination of benefits now.

How do you think about sort of additional expansion into areas like prior authorization, given it's a high-value problem. You talked about providers being under a lot of financial strain. And if you look at that area, is there a way to monetize that it's more directly monetizable for Phreesia when the provider benefits and sort of shifting the pricing model over time?

Look, Romeela (sic) [ Ryan ], I think what you highlighted, you did a great job of highlighting some of the things that have been just wildly well received by our client base as of late. And I think the front-end revenue cycle is an area that it just has a lot of room for continuous improvement. And we expect to continue to help our clients out. We're not going to comment on some of the new products that we are coming out with, but we are very excited about our ability to help providers run their practices in the most thoughtful and efficient manner while helping them with their revenue cycle and all their other operational needs. So we are doubling down and continuing our commitment in providing phenomenal tools to providers that help them help their patients.

Yes. The only thing I was going to add is, Ryan, the AccessOne thesis was really exactly an extension of everything you articulated.

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

Congratulations on the quarter. Just maybe on the AI front and maybe diving a little bit deeper into Ryan's last question. But like on the payment side, whether it's your patient payments, your legacy offerings or like with AccessOne, how are you thinking the opportunity to inject AI functionality into that drive greater engagement with patients? Just a little open-ended question, but curious on your thoughts.

I think we are very thoughtful. So obviously, we're embracing AI across our organization, and it's had meaningful impact on all aspects of how we operate, run and build product at Phreesia inclusive of selling product, supporting it for our clients. And as I think about new products that we're building, there are ones such as voice AI that change how the providers are engaging with their patients. There's things like Plan Match that allow them to do things that were just human in the loop before we're automating how they understand and pick the right plan.

And those are things that, frankly, were just hard to imagine doing in a non-AI world. And as we keep investing in new products in and around Network Solutions and around payments and around workflow, our realization is that AI is not just a way of thinking, it's allowing us to do things that, frankly, are -- were beyond the scope of imagination even 3 to 5 years ago.

And empowering our team to be able to think that way has opened up massive opportunities and given us the ability to test out those opportunities and those ideas in a much faster, more cost-effective manner. And we've seen that throughout the operations of the business where we were able to produce things, put it out there, see this reaction and at the same time, then very effectively let's scale it if it does make sense.

So AI has frankly changed the playing field. And from my own personal perspective, it made me more excited about Phreesia and what lays in front of us and the opportunity set than I would say, ever in our history. And I think we're well positioned as an organization to not only continue to grow, but frankly, in the future, I think, accelerate our growth.

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

This is Peyton Engel on for Jailendra. I just wanted to hit on the EBITDA performance in the quarter. It was another solid quarter on the EBITDA line. So I just want to get your thoughts on why you guys decided to maintain the EBITDA guidance there. Does that primarily reflect the continued prudence around Network Solutions revenue and the mix with that? Or is there anything you want to call out incremental that you are expecting in the second half why you guys decided to maintain?

Yes, Peyton, I'd say it's a host of things. I think that we have been -- our team has done an excellent job and been very disciplined about expense management and around return on investment. And I think we've shown that over time, we want to leave ourselves room to make investments for growth and we've done that for many, many years. It's that. It's -- the revenue mix piece is sensitive. That's another component of this.

AI is another one. I mean, as you probably know from following other companies, it is a very dynamic and fluid time, and we're in the early innings of our AI deployment. And so we also want to be kind of prudent about how we share that as well. So it's all of those things, but nothing inconsistent with how we've thought about investments in the past.

Your next question comes from the line of Alexei Gogolev with JPMorgan.

This is Destiny Jackson on for Alexei. As you moderate your subscription pricing to drive downstream payments and network growth, how are retention and attach rates evolving? And how should we think about the long-term mix shift in revenue per client?

You might have to repeat that. There are like a bunch of things in there, Destiny, if you repeat that question.

As you moderate the subscription pricing to drive down the payments and network growth, just how are you thinking -- what are you seeing in terms of retention and attach rates in terms of how are they evolving and then the long-term mix shift in revenue per client?

Yes. What we'd say there is we holistically think about total revenue. I think we've been clear about that. And I think Chaim's point earlier about really working with our clients through the operating environment they're in is what really rules the day. And I think we're going to continue to communicate with all of you about total revenue, thinking about total revenue per client.

I think you'll see the mix fluctuate. I think that's just something that we think is okay and is a sign of our diversity and our business model. So I would just say fluctuation more than anything else. and we'll try to get in front of that as much as we can with all of you.

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

Maybe a question regarding your Payment Solutions business. Any color on macro trends into patient volumes from your perspective of facilitating 180 million visits. And then I know, obviously, you mentioned that the deductibles reset last quarter. Just any visibility into pace of how patients are kind of getting through their deductibles into the back half of your year?

Yes. I mean I think we look at all this data very carefully and do a lot of trending. I think we did talk about earlier this year there being a little bit more weakness even beyond seasonality, but nothing really notable to call out in the second quarter as it relates to volume trends or as it relates to deductible sort of reset trends. So nothing to call out.

We have now reached the end of the Q&A. I will now pass the call off to Chaim for closing remarks.

I'd like to thank everyone for joining us for another earnings call, and we'll talk to you all in 90 days. And if you have any questions, please feel free to reach out to Balaji [email protected] or myself. Thank you, everyone, and have a great evening.

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.