Ladies and gentlemen, thank you for standing by and welcome to the Phreesia Fiscal Fourth Quarter 2022 Earnings 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, Senior Vice President of Investor Relations for Phreesia. Mr. Gandhi, you may begin..

Thank you, operator. Good morning, and welcome to Phreesia's earnings conference call for the fiscal fourth quarter of 2022, which ended on January 31, 2022. Joining me on today's call are Chaim Indig, our Chief Executive Officer and Co-Founder; and Randy Rasmussen, our Chief Financial Officer.

A 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 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 include 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 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 market closed on March 30 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..

Hi. Thanks, everyone. Thanks for participating from -- for joining us. You'll notice that Balaji didn't say we're at 3 different locations. They came over as we do this call together, really good to see Randy and Balaji in person. And I hope everyone had a chance to read our Stakeholder Letter, which was put out. So I guess we'll take the first question..

[Operator Instructions]. Your first question comes from the line of Anne Samuel with JPMorgan..

Congrats on a great quarter, and thanks for putting out a long-term target. Appreciate it. As we look at the growth over the next 3 years, I was hoping maybe you could provide a little bit of color on how we should think about the split between provider client growth and revenue per provider client.

Because historically, you've said new clients should grow at about a 5% rate with revenue per provider client at mid-teens to get to that 20%, but the split has been a little bit different recently.

So should we think about it maybe as a bump in clients early on and then later on, the revenue per provider client will catch up as those clients expand?.

Anne, I think -- when you think about it, we have table in the quarterly letter that shows, over time, have the average revenue per client has continually gone up. I think when we look at it, our main selling motion is land and expand.

So sometimes, there's timing between quarters where we land a client and the client number goes up, and then it follows up as we expand into that -- in that healthcare client and move the revenue up. And I think in a period where we've done a lot of investment, I think there's higher client growth than we have seen in prior periods.

And so I think on a quarterly basis, you'll see that average revenue per provider client vary a little bit, but over the long run to rise year-over-year..

That's helpful.

And then I guess just on the spending for this year, how should we think about the cadence? Should we think about it as perhaps higher initially, kind of as you are continuing to spend and as you move towards profitability, kind of coming down? Or do we -- should we think about it as kind of evenly spread throughout this year?.

I think when you look at it, when we look kind of back at previous history, we were profitable historically. There were 3 years after we went public, where we were putting a positive adjusted EBITDA every year. In '21 is really where we decided there's this great market opportunity and we should really invest in people.

And most of that investment was in the last fiscal year that we had in '22. So most of the hiring and expense adds has already been done, and we feel like we're in a really strong position to reach the $0.5 billion target that we have for 2025. So when you look at the year of fiscal '23, what you're really seeing is a full year of expense.

So we're not necessarily adding large numbers of additional resources or increasing expenses. It's more of the rise from a relative year-over-year because there's 12 months of expenses included in the '23 numbers..

Your next question comes from the line of Sean Dodge with RBC Capital Markets..

This is Thomas Kelliher on for Sean. I had a question on subscription pricing.

Did those existing contracts have any sort of pricing mechanisms built in, that’s related to inflationary pressures or otherwise? Or is that something maybe exclusively negotiated during contract renewals or just with new clients?.

I mean it's typical for us to include language in there that gives us the ability to raise prices as contracts renew year-over-year. So generally, yes, we do have those type of provisions that allow us to increase price over time..

Okay. Good.

And then on life sciences, I guess, how are you allocating those investment dollars there in that business? And I guess, where do you see the most opportunity going forward within that segment?.

So maybe I didn't totally understand the question.

So can you reframe it, so I understand this time?.

Yes. Just I assume life science is receiving some of the kind of same investments..

Yes….

I guess where is the focus there? Are there more newer products and services or capabilities, a bigger sales force or just anything to kind of help doing that?.

All right. I'm going to wax on for a little bit here about our life sciences team. They are -- it is just doing -- the team is just amazing, okay? So David has done an amazing job. We have leaders that have been called out in the industry.

We're not just excited about product, which I'm going to talk about in a minute, I'll talk about our Insights product, which has just won best product of the year from PM360, is that right?.

Yes..

Best new product. It's just -- I was with our life sciences team last week at their offsite meeting. And just the energy and the organization is just amazing.

And we are going to keep investing there as we invest all throughout the organization, but really just the performance and the collaboration that they have as a team has just been wonderful to just be part of. And I'm pretty excited about the leadership there. And we're going to keep investing. We're proud of what they're doing..

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

So interested if you could maybe call out the TAM opportunity across subscription, payments and life sciences revenue lines in the payer market? I think you guys reaffirmed the roughly $9 billion TAM in the deck today.

So just how do we think about the incremental opportunity that you see as you broaden your market to payers?.

So I think we're still in the early days of that -- of the payer market. We have payer clients now. Some of our provider clients have, frankly, turned into payers over the last couple of years.

I think we've all seen the market evolve and some of the change in language is also a representation that a lot of our clients have started to take on risk and ensure members. At the same time, that we've also increased our offering to the payer market.

So you could expect us as we have -- as the investments start to point in the direction of where we're -- what the market looks like, you could expect us to come back to market and articulate sort of that -- what we think the opportunity is and what our go-to-market will be in that. Balaji is pretty good at making us do that over time..

That's helpful -- yes, I think that's really helpful.

I guess just a quick follow-up would be, do you need any incremental products? Or are you just selling essentially the same stack or suite into that market, at least as you think about it today?.

So we -- so why don't I take a step back, which is we're continuously, and we have for 17 years as an organization, investing in both our existing products and new products. I think all good technology companies are investing in new products for their existing and new users at all time, and we're committed to doing that.

If we're not investing in new products, we might as well just call it a day, right? So expect us to continue as we have both for pre-public and post-public and investing in new products. Some are the ones pretty excited about that we've come out with. We're going into new markets around acute.

We've come out with our Connect offering, super pumped at our Insights offering. So we expect to both sell existing products into that market and new products..

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

Yes, I had a couple of questions. First of all, congratulations on a strong year. But questions with respect to the new client growth, obviously, you pointed out the 200-plus clients in the fourth quarter was almost as much as fiscal, I think, '19 and '20..

Is that so?.

2-year period -- yes. So I'm curious about looking forward, though, do you think the pipeline is strong enough to support similar type of growth that you guys just reported in the fourth quarter? Or any perspective there would be helpful..

Yes. I mean I think if you look at our target of $0.5 billion in 2025, I mean, that implies 27% to 29% annual growth. And as I said, we made a decision in '21 to put significant investment in the business, and we're seeing results from that.

And that's really what gives us some level of comfort to put it out a target like that because we do continue to see client adds and success in those organizations..

Richard, this is Balaji. Just on your comment about client growth, I think one of the other things we just said in the letter is we think we've got multiple paths to get there. And I think, Randy, to your question just talked about sort of the cadence and the growth you see with land and expand.

So I wouldn't look at any quarter as a reflection of how it might go in the future..

Okay. That's fair. Appreciate that. So on the life sciences, I think it's great. You guys had -- I think you called out like 1 million patient surveys or you've surveyed more than 1 million patients in calendar. So as we think about fiscal '23, obviously, I think the new budgets for marketing by pharma that set as you enter the new calendar year.

I'm just curious your thoughts, obviously, with significantly higher number of provider clients, you're going to have that many more patient interaction. So the demand, I suspect for your life sciences business would be significantly higher as well.

Any comments that you can provide in terms of the budgets that you've seen for your life sciences clients? How we should think about that in terms of maybe year-over-year growth here for fiscal '23?.

Richard, just -- you're asking about the -- how budgets in life sciences customers impact our -- like outlook, growth outlook?.

Not as much as the growth outlook. It's just the pharma budgets are -- marketing budgets are set for like the calendar year, right? So when it begins January, I think the timing typically is. And obviously, you've grown the client base significantly, and you're going to have that many more patient interactions.

I suspect that life science companies would be increasing potentially their budgets, they're allocating to someone like Phreesia.

Are you seeing that?.

I think I could say comfortably that we expect to do better this year than we did last year. .

Okay. .

And of course, Richard, our efforts are really high.

Like Balaji, is like we're going to work really hard at managing, right? So, how did I do? That’d be okay?.

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

I was hoping you could put a little bit of a finer point on expense growth in fiscal '23 and beyond. So if I look at the noncash expenses, per full-time employee, we've obviously seen a pretty dramatic increase this quarter, and that's carrying over to fiscal '23.

But outside of just headcount adds and salary, are you seeing any structural shift in how you're managing that expense side of the ledger, i.e., are you having to invest more in product development as you enter into some of these newer markets like the payer market or as you get bigger into the health system market? Curious why we are seeing such a dramatic shift, not just in headcount, but in noncash expense per FTE?.

I think when you're looking at noncash expense, are you talking about like stock compensation?.

Sorry, expenses excluding noncash expense..

Okay. I mean -- I think....

Sorry, go ahead..

…estimate right? I think G&A is a good example where as we've looked out and said what is the growth opportunity and what size of the company are we going to be and making sure that we have scale to reach that, we made a significant investment over the past couple of years.

And I think as we articulated in the quarterly letter, we feel like we've achieved -- G&A is a good example of that, where we've achieved the level of staffing and systems and investment that we've made to support a company that reaches this $500 million run rate business.

So from the perspective of more growth, I think it would be -- it's minimal from this perspective because much of the investment is there. And I think what we're really looking for in the years beyond fiscal '23 is operational leverage on that investment, which improves our efficiency across the board..

Okay.

But there's nothing, I guess, structural in how you're thinking about investing in new verticals and product development that's causing this pretty dramatic increase in expenses per FTE, right?.

No. We were profitable. We like being profitable. We expect to get back to profitable..

Yes, makes sense. And then on the payment processing expense, that came in a little bit higher than historically around 61-ish percent of payment processing revenue versus historically, it's been around 58%.

Is there anything that's causing this increase in payment processing expense specifically?.

I mean I think there's always a little bit of mix, how cards are processed. I think there's also fluctuations sometimes in visit volumes that can impact that quarter-over-quarter as that business grows -- as you're aware, Visa and Mastercard have also announced the price increase. So we see some fluctuation in that over time.

But then we also have the ability in our contracts to raise price..

It's those fancy rewards cards that are killing us, man, right, rewards card..

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

A couple for me.

Can you help us tease out the effect of Insignia on both revenue and members? What -- how much that helped in the quarter?.

Yes. I think when we announced Insignia last quarter, it's not material to the results from a revenue perspective. I mean you can see that the purchase price, it is a small tuck-in acquisition. So it doesn't really impact our outlook significantly..

Okay. Second question, I mean, if we just do the simplistic analysis of SDRs to next 12-month revenue, I mean, you more than doubled your SDR force from July of '20 to July '21.

And yet you're calling for a nice uptick in revenue, but it looks like the revenue per SDR would have to drop pretty meaningfully to just grow top line acceleration by 500 bps when you're more than doubling the SDR.

So can you kind of help me understand the relationship between revenue and SDR count? And is there something structural where that correlation, which is pretty tight for a couple of years, is kind of broken down?.

I mean I think from the perspective, right, the SDRs are the generation. So it's really at the beginning of the revenue cycle. I think one thing to keep in mind is that we've made significant investments in the last year, and we are seeing 12 months of that expense.

So I think you see a dip in productivity when you're looking at revenue per headcount statistics or revenue per cost. But I think that dip is temporary, as efficiency -- those resources are in place. They've been working for 12 months and they become more productive, but there's already a period of time where you're onboard training.

I think it's kind of normal to see a temporary dip in the statistics..

Okay. And I know you've never grown out that path. And then lastly, I mean, we've learned that you've onboarded Tenet Healthcare as a hospital client. I guess I would have thought that might have engendered a press release and a little bit of a marketing opportunity for you.

So what's your philosophy? Was that something they ask you not to do? Or is it just you guys are quite modest and want to keep your light under a bushel?.

I don't -- I think what's important is not putting out press releases, it's doing good work for our clients, John.

And the work generally over 17 years has paid off immensely, right? Like we tended to -- when we put out press releases, it's usually because we get asked to do, right? I generally believe in a philosophy that we should just do wonderful things for all of our stakeholders.

And over time, it always works out positively, right? And frankly, I love that our clients are positively talking about us publicly and privately. But you could....

Let me speak to the mayors of the same and set those free sale promotions. I think we need to talk more about that..

Right, you're not the only parent who are marketing, it drives us crazy but it's -- we've definitely increased our conversations about a lot of what we're doing with our clients on a lot of the social media outlets, which I personally am not really on. They'll be it..

I look forward to your Instagram page. Thank you..

Your next question comes from the line of Stephanie Davis with SVB Leerink..

This is Joy Zhang on for Stephanie. I wanted to circle back to the payer market question again.

So I was hoping if you can give more color on what exactly some of the new solutions look like and what process you're tackling? And also, how much of those products leveraging the capabilities you've required from this now?.

So Joy, just to be clear, are you asking about the Insignia acquisition?.

I think you mentioned earlier that there'll be new products in addition to the Insignia Health acquisition, as you expand into the payer market..

Yes. I'm sure -- like there will be, and there are. And I think we're in the early days of it.

Philosophically, our thesis is as we have a better understanding of what those products -- how we're going to take them to market, we're ready to talk about our early adopters and some of our later stage adopters, then we usually are more public about what those products do and I promise you Balaji -- unlike press release, Balaji may talk about this.

So it's just a little early right now for us to be talking about it, but we're really excited about what the team is doing there. But I think it's a little too early for us to share too much about it. But obviously, we -- it's an area we're investing in..

Yes. No, that makes a lot of sense. I understand it's early days. And I guess as a follow up to that -- go on..

But one other thing. We’re very excited about some of the work that Dr. Hibbard and the team have been doing around the patient activation measure.

And we think that, that is a -- it's not just an important instrument in -- from a payer standpoint, I think it's just an important instrument generally for healthcare folks to be able to understand how we as patients are activated in their health care.

And I think that that's something that there's hundreds of research studies on, and we're really excited to be able to really expand the footprint and the knowledge base around patient activation..

Got it. Very helpful. And as a follow-up, your $0.5 billion target for FY '25. Obviously, you’re flexing quarterly run rate of $125 million. This would imply kind of a significant step-up from FY '24 numbers and I think it implies something like 40% plus growth.

So can you maybe just reconcile that level of acceleration with your long-term growth target of 20% to 25%?.

Well, I think what we've previously communicated, right, that our long-term growth rate was 20% to 25%. So when you look at the $0.5 billion run rate in 2025, that implies 27% to 29%. So we did significantly increase our growth rate into the high 20s..

Yes. And Joy, I think we've also said that there's a long-term growth through 2025. But given the investment levels we're making, we made in fiscal '22, there could be periods where it's higher. And I think the $500 million is indicative of that. But I don't know the percentage you threw out that doesn't sound 40% doesn't seem to make sense.

I think Randy's math is probably closer, but sort of pass on what quarter in '25 you got $500 million..

Your next question comes from the line of Glen Santangelo with Jefferies..

I just want to follow up on a couple of the questions that have already been asked because I think what we're all trying to really wrap our heads around is we're seeing expenses tick up at a very accelerated rate here at the same time that revenue growth is decelerating pretty sharply.

And I think we're having trouble sort of reconciling why that's the case. And then if you look at sort of the fiscal '25 guidance you've now provided, right, I mean we're looking at 27% to 29% revenue growth next year, but then you got to step up at least to the mid-30s in '24 and '25 to get to $500 million by the end of the year.

So revenue growth dips, then it reaccelerates and we don't really have great visibility on the expense base in '24 and '25.

So as we think about this path to return to profitability is the expense base in fiscal '23 is that the number? Or will there be continued investments in fiscal '24? Because the way the release reads, it's a little bit unclear that we're going to approach profitability in 2025.

Could you give us any more color on the trends as we think of the 3-year view?.

I know, Glen, and I'm very excited that you asked me the question. But I'm going to hand the baton over to Randy because he is probably going to do a better job of answering it than me.

Is that cool?.

Yes, that's fine. I'll take the answer from anybody..

All right, Randy go ahead..

Glen, so I think if you look at fiscal '23, as we mentioned in the quarterly letter, that's really the low watermark. And we have done the math. And that investment has set us up to reach the $0.5 billion goal in 2025. So you know what that means is that we're not planning a lot of expense acceleration.

And what you're seeing in '23 is really the investment that we've already made, but we made it in the latter half of the last fiscal year. So the increase from '22 to '23 is really the impact of having a full 12 months of those expenses.

So from a operating leverage perspective, we don't feel like we have to make significant investments to achieve those growth rates. So that's where the approach to profitability in 2025 comes from..

Okay. So that's helpful.

So basically, the run rate in '23, that's like a reasonable run rate within reason to think about for fiscal '24 and '25, so we can model the leverage off that, right? Is that correct?.

Yes. I think from an expense perspective, the '23 is a good number. Of course, we continue to make investments, but not at the rate that we made in this last fiscal year where we did a lot of additional headcount hiring. I think that moderates significantly in '23..

And Randy, if I could just maybe ask you one quick follow-up on the balance sheet. So you got $314 million in cash, and I saw you increased your revolver up to $100 million. So let's just say a little over $400 million in capacity, right? I mean you guided EBITDA down, let's call it, $150 million.

Help us think about not only just a return to adjusted EBITDA profitability, but really a return to positive cash flow, right? Do you think you have been cash between what you have on hand and the $100 million revolver to make it to positive cash flow before having to raise capital from somewhere else?.

Yes. And I think if you look at the $314 million that we have on the balance sheet, we feel like we have a very strong position in our balance sheet. The -- we did raise the line of credit from $50 million to $100 million. And we haven't been using that so that we have the full capacity of that line.

So I think in -- for fiscal '23, we're very comfortable with the strength of our balance sheet and being able to fund the business..

Right.

But I guess the question was, can you make it to '25 with the cash you have?.

Yes. I mean I think from the perspective, we're not really giving explicit guidance way out on that basis. But I think we feel comfortable with the balance sheet of this year..

And Glen to say the term approach profitability and I think all of Randy's comments about expenses growth decelerating and revenue growth accelerating from the historical. I think you could probably put some estimates together and see how much cash we probably need in the business, but I don't think we can comment specifically on your question..

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

I first wanted to start on the MEDITECH and Cerner integrations and validations.

Can you just discuss the opportunity that partnering with these additional vendors creates, especially as you're going after sort of the upper end of the market with the health systems and hospitals? And perhaps how that can unlock the opportunity versus what you were doing previously?.

I think I've been pretty consistent in saying, eventually we got to be everywhere, right? That's sort of our goal. And we started this 17 years ago to build a small business.

So look, we -- as much as we compete with pretty much every EMR vendor, we're also partnered with almost all of them or we work with them or we integrate with them in a collaborative way and work with their -- are interchanging and interoperable with them, and we're committed to always doing that.

And I think this is a view that we've been having success in those markets. And we just want to make sure that the integration is like how our clients want to be and we look forward to working with them. Like they've been great so far..

Excellent. Then my follow-up is on the life sciences business. And I know we've talked about it a little bit here. But as we think about the trajectory of the end market and the shift towards digital marketing spend, we've obviously seen a multiyear pull forward in the investments there.

And so as you're thinking about expectations for fiscal '23, what sort of moderation in spend are you expecting in the movement of that spend over the digital channels in the implied sort of assumptions for this year? And what are I guess, are you hearing from your clients from that perspective? Are we still very early innings? Or is this an instance where we saw really aggressive pull forward and that now they're satisfied with kind of the levels we're at?.

So I think all claims are different. And I think what -- in working with and talking with our clients and our team that work with them all the time, all of them are consistently looking at what programs and partners drive a phenomenal amount of value.

And during the shift, like the rapid shift during COVID, there was a lot of programs that were run, including ours, that provided a huge amount of value. And if they provide a huge amount of value, you tend to do more of that, right? And I'm sure that there was a bunch of programs digital or non that didn't provide a lot of value.

And they probably won't do more of those. But I think sort of putting a bucket under a one size fits all, like do I think we're going back to the day of as many pharma sales reps calling on doctors? No. I -- that's my opinion and the data seems to correlate to that.

But do I think that a lot of the investments in products that have been made and new tactics, if they bear fruit, you're going to keep doing more of it.

So I don't know if I -- it sort of -- I don't know if you know I'm from Edmonton, right? So very dig into mind is you skate to where the puck is going, right? So sort of view like no one's putting that genie back in the bottle..

I guess would you say that in those conversations, like are you seeing instances where now these vendors are starting to talk about consolidating spend against those more effective channels that you talked about?.

I do think that there's more spend continuously going towards channels that have proved to be very effective, which -- the data show we are one of those very, very attractive channels.

And not only are we one of those attractive channels, we are one of those channels -- one of the few channels with broad scale to reach a -- to reach those patients and help them understand the therapies available to them. And learn more about the therapies that they are on.

So we're pretty -- we are very excited about continued investment in this area..

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

This goes back to John and Glen's questions a little bit. But the incremental revenue you've been adding kind of per expense dollar has been really efficient for the last few years now. If I just think about the EBITDA guide, it would seem more growth is possible if I just keep efficiency ratios the same.

I guess what are the puts and takes? You talked about onboarding a lot of new hires.

But as they ramp and become productive, that would seem to health efficiency I guess, what are some of the considerations? Or is just more growth possible, but maybe just seem to get a little deeper into the year, a touch to get?.

I think we need to get further into the year to see how some of these investments pay off before, I would say that. But I also think -- which is also -- I think we have telegraphed really important -- wages have gone up, right? And we want to be an employer of choice at all times.

And part of that thesis is making sure that we pay and like our total compensation level for our teammates is good, right? I think in life, you sort of get what you pay for, and we want to make sure we get the best. And I think we have a lot of the best.

And so I do think that has played into some of the efficiency levels, but I also think that now that we understand what that looks like, as an organization, we have to make sure that we get back to the place where we feel the investment level should be. And it'll take a couple of quarters, but I feel pretty good about it..

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

I guess a lot of the big picture ones are asked, so I'll go to some nuances.

Looking to get an update on what the traction has been with Connect, are you seeing more growth there? And is it really focused more on the core of the plus offerings and broadens the network today that you've been able to develop?.

It's growing -- I'd say some of the metrics that we're looking at right now, so we're pretty excited about the offering, Ryan. And it’s growing very quickly.

The thing we look at, which is probably hard to factor the days of like how we've always thought about our business is not the size of the network, but how much usage and volume are we putting through it, and we're seeing volume increase pretty rapidly.

I'm not -- just the same reason I'm not excited about press releases, I'm not excited about lots of product that doesn't get used. I care about whether the products we build and deploy and invest in, get heavily -- like are heavily used by all the stakeholders.

And internally, we often call it utilization, but although we're moving more and more towards activation is the terminology that we use. So we think it's more appropriate. But it's going -- it's in the markets and in a lot of the markets it's in. It's growing fairly rapidly..

Okay. That's helpful. And then I noticed you guys are offering a free trial of your services, I think, through June. And I'm curious if you've done that before and if that's a big demand stimulator.

And if so, what the conversion rates have looked like from offering a free service to paying clients?.

I think -- yes, we do often, for a lot of our products and both for new and existing clients, we'll often test out different promotions. And we'll do them at different times of the year for different types of products in different markets.

And generally speaking, we have an analytics team that looks at sort of the uptick, and how it's going and what the sensitivity is on it. And I would say that if the team is running a promotion and it's probably adopted, it's probably effective and it's working. And if it doesn't work, then they tend not to do that promotion or offers.

And I don't think it's like -- I will say that it's not like offering until June or it's -- there's continuously rolling different types of things that they look at for different segments of the market, and they try to use as much as you can, data, to decide what's working in the not.

And it's really about making sure that people understand the things that we do and how they could drive a huge amount of value to their organizations and patient -- and value to their patients.

I think, Randy?.

Yes. I think one thing that we look at, too, is what are the retention rates of new clients. And we included that in the quarterly letter, right? On a revenue basis, it's approximately 95%. And on a client basis, it's 90%.

So we find as we're acquiring customers, they're staying with us and times of the utilization and the activation of our product as high as these customers..

Yes. Understood. And then maybe a final one I'll ask here is a bit of a big picture question. We've discussed this in the past. But if we think of macro drivers, obviously, there's labor shortages, which are likely to continue, and you can help with that. There's the kind of movement to digital front door, and you can help with that.

There's the need to drive activation and bring patients back into the care workflow post COVID. So a lot of things moving the market, and that's probably what's driving a lot of your growth in investment.

But I'm curious if there's any one trend that you see as most significant and sustainable when you speak to your clients, it's really pushing them towards your solution?.

So Ryan, I think one of the things that I -- and we have talked about this over the years, and I think what are the benefits that has sustained our growth for all these years is that our acknowledgment that it's not a one size fits all. I even often says there's no silver bullets for anything.

It's just making sure that we continuously deliver a phenomenal amount of value for all of our stakeholders. And if we think about our products and our team and all the things we do, it becomes very fulfilling when you know that you might go in -- a client might start using us for one reason.

And over time, the value proposition won't shift, it will just grow. And that, to me, is sort of a hallmark of what makes a great business.

And that's also why our -- we thought about it as we were writing our stakeholder letter, why was it important for us to disclose some of our retention metrics because we think it's important for all of our stakeholders to understand that the investments we're making are really for that long-term value and for our clients and their patients.

But I also would say like as you think about value propositions, it's not the same for everyone. For some people, it's labor; for others, it's cash flow; for others, they have to solve a clinical problem. And we're how they do it..

All right. Appreciate all that. And congrats to David and all the life sciences success, in particular, have been really outperforming our thoughts..

Yes. That team is just doing great..

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

So the French word segue, we're going to just have a beatable segue into life science. So you guys -- I'm old enough to remember that you used to kind of direly talk about life science being this forever flat business, and now it's not. And you've raised the team.

But is there kind of for us to look out, is there a simple correlation we can draw between your labels among your provider group and your life science revenue? Or is it -- is what's driving the growth of something different than that? But I would think the more providers that you add, the more eyeballs for TV ads and the more money you can make.

But can you kind of help us out with sort of some simple correlations there?.

Well, so your correlation that you are making is wildly important. The network has grown significantly. And I think we've -- we did want to like paint that picture for a reason. So that has, without question, given us -- we're scaled, right? So we have a broad reach. We're able to segment appropriately.

We invested significantly in data science and being able to understanding segment population better, we invested in just a phenomenal team, but we've also invested in new products like our Insights product, right? Like that allows -- gives us and our clients much better visibility and understanding about what consumers are saying and why things -- what matters to them, why they matter, and that's been a really powerful tool in our arsenal to be able to demonstrate significant value to our clients.

And I think we link to it in our -- John, I don't know if you ever -- did you see the Insights report yet? Like the example we put out about migraine?.

Yes..

That stuff just isn't easily accessible to a lot of people, and we've made it accessible to our clients. And we're pretty excited because what that also does is demonstrates the depth of understanding we have about issues..

Again, a good segue, like to spread the ginger. The -- there are a number of companies who are trying to capture this digital move by big pharma from running midnight ads on TV channels, hoping to catch one fish to much more targeted ads.

Do you have a perspective of what Phreesia brings to the table when you're talking to a manufacturer versus some of your able competitors who kind of come at it maybe a little different way?.

Look, I think the -- so I think that there's different parts of the marketing funnel, and there's some tactics that are used to sort of get people into an office, right? There are some tactics that are used to get you to do switch messaging. And what we really talk about is we know who the -- when we engage a patient, it's a patient.

You don't have to guess, right? We don't talk about as consumer marketing. We talk -- because the only people we really reach are patients and they've opted in for us to deliver a very targeted message that because of the information we have relevant to their healthcare.

And when you deliver something that's opted in and relevant and it's at the right time, it's wildly effective in being able to engage those patients in their care.

And what we've been able to demonstrate is that, that engagement is -- has a very strong ROI, and we're able to do it at scale and reach patients that would otherwise be pretty hard for these organizations to be able to reach right before they are about to see a care provider..

So I will say it's much nicer having Randy and Balaji here. We're doing it all together. So thank you, everyone, for participating. And I think I do like the evening call more than first thing in the morning. So maybe we'll make this how we roll moving forward. Thanks, everyone. And talk to you all soon..

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