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

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes and other financial information appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Annual Report on Form 10-K, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Our fiscal year ends January 31. References to fiscal 2022, 2021, and 2020 refer to the fiscal years ended January 31, 2022, 2021, and 2020, respectively.

Basis of Presentation

This management's discussion and analysis discusses our financial condition and results of operations for the years ended January 31, 2022 and 2021. Please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended January 31, 2021 for a comparison of the year ended January 31, 2021 to the year ended January 31, 2020.

Financial Highlights

Fiscal 2022

•Total revenue increased 43% to $213.2 million in fiscal 2022, compared with $148.7 million in fiscal 2021.

•Net loss was $118.2 million in fiscal 2022, compared with $27.3 million in fiscal 2021.

•Adjusted EBITDA was negative $59.0 million in fiscal 2022, compared with positive $3.8 million in fiscal

2021.

•Cash used in operating activities was $74.7 million in fiscal 2022, compared with cash provided by operating activities of $2.9 million in fiscal 2021.

•Free cash flow was negative $105.5 million in fiscal 2022 compared with negative $15.7 million in fiscal 2021.

•Cash and cash equivalents was $313.8 million as of January 31, 2022, compared with $218.8 million as of January 31, 2021.

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

Overview

We are a leading provider of comprehensive software solutions that improve the operational and financial performance of healthcare organizations by activating patients in their care to optimize patient health outcomes. As evidenced in industry survey reports from KLAS, we have been recognized as a leader based on our integration capabilities with healthcare services client organizations, the broad adoption of our patient intake functionalities, our response to the COVID-19 pandemic and by overall client satisfaction. Through our SaaS-based technology platform, which we refer to as the Phreesia Platform or our Platform, we offer healthcare services clients a robust suite of integrated solutions that manage patient access, registration, payments and clinical support. Our Platform also provides life sciences companies, patient advocacy, public interest and other not-for-profit organizations with a channel for targeted and direct communication with patients.

We serve an array of healthcare services clients of all sizes across over 25 specialties, ranging from single-specialty practices, including internal and family medicine, urology, dermatology, and orthopedics, to large, multi-specialty

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groups, health systems as well as regional and national payers and other organizations that provide other types of healthcare-related services. Our life sciences revenue is generated from clients in the pharmaceutical, biotechnology and medical device industries as well as patient advocacy, public interest and other not-for-profit organizations seeking to activate, engage and educate patients about topics critical to their health.

We derive revenue from (i) subscription fees from healthcare services clients for access to the Phreesia Platform and related professional services fees, (ii) payment processing fees based on levels of patient payment volume processed through the Phreesia Platform and (iii) fees from life sciences companies to deliver marketing content to patients using the Phreesia Platform. We have strong visibility into our business as the majority of our revenue is derived from recurring subscription fees and re-occurring payment processing fees.

We market and sell our products and services to healthcare services clients throughout the United States using a direct sales organization. Our demand generation team develops content and identifies prospects that our sales development team researches and qualifies to generate high-grade, actionable sales leads. Our direct sales force executes on these qualified sales leads, partnering with client services to ensure prospects are educated on the breadth of our capabilities and demonstrable value proposition, with the goal of attracting and retaining clients and expanding their use of our Platform over time. Most of our Platform solutions are contracted pursuant to annual, auto-renewing agreements. Our sales typically involve competitive processes and sales cycles have, on average, varied in duration from three months to six months, depending on the size of the potential client. In addition, through Phreesia University (Phreesia’s in-house training program), events, client conferences and webinars, we help our healthcare services clients optimize their businesses and, as a result, support client retention.

We also sell products and services to pharmaceutical brands and advertising agencies through our direct sales and

marketing teams.

Since our inception, we have not marketed our products internationally. Accordingly, substantially all of our revenue from historical periods has come from the United States, and our current strategy is to continue to focus substantially all of our sales efforts within the United States.

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

Investments in Growth

During the fiscal year ended January 31, 2022, we accelerated hiring and overall investments across all areas of Phreesia to prepare for our anticipated growth in clients and use of our platform. In fiscal 2023 and thereafter, we expect growth in our team and compensation to moderate.

Recent developments

COVID-19

In March 2020, the World Health Organization declared the ongoing outbreak of a novel strain of coronavirus, or COVID-19, a pandemic. There continues to be uncertainty as to the duration and extent to which the global COVID-19 pandemic, as well as the emergence of new variants, may adversely impact our business operations, financial performance, and results of operations, as well as macroeconomic conditions, at this time.

Acquisitions

On December 3, 2021, we acquired Insignia Health, LLC ("Insignia"), for cash consideration of $37.2 million. Insignia provides coaching and education solutions based on Insignia's exclusive worldwide license to the Patient Activation Measure ("PAM"®). We acquired Insignia to enable us to understand and engage patients in more personalized ways based on their level of activation.

On January 8, 2021, we acquired QueueDr Inc ("QueueDr"), a SaaS technology company. Over time, we believe the underlying QueueDr technology will enhance our appointments solutions and the overall value of the Phreesia

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platform to healthcare services clients. The total consideration for the acquisition consists of $5.8 million in cash, $2.1 million of liabilities incurred and $2.2 million in performance-related contingent payments.

See Note 16 - Acquisitions in Part II - Item 8 of this Annual Report on Form 10-K for additional information regarding the acquisitions of Insignia and QueueDr.

Silicon Valley Bank Facility

On March 28, 2022, we entered into the First Loan Modification Agreement to the Second Amended and Restated Loan and Security Agreement (the “Second SVB Facility”) with Silicon Valley Bank (“SVB”) (as amended, the "Third SVB Facility") to increase the borrowing capacity from $50.0 million to $100.0 million. The Third SVB Facility also reduced the interest rate to the greater of 3.25% or the Wall Street Journal Prime Rate minus 0.5%, amended the annual commitment fees to approximately $0.3 millionper year and amended the quarterly fee to 0.15% per annum of the average unused revolving line under the facility.

Key Metrics

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

For the fiscal years ended January 31, Change

Key Metrics:

Healthcare services clients (average over period) 2,074 1,711 363 21 %

Phreesia remains focused on building secure and reliable products that derive a strong return on investment for our clients and implementing them with speed and ease. This strategy continues to enable us to grow our network of healthcare services clients. With the expansion of our operations in the payer market in the fourth quarter of fiscal 2022, we have renamed our key metric "provider clients (average over period)" to "healthcare services clients (average over period)". We have also renamed our key metric "average revenue per provider client" to "average revenue per healthcare services client." While we believe the contribution of payers (including payer clients added in connection with the acquisition of Insignia) has not yet been material to our business, we intend to grow our footprint with payers and organizations who provide other types of healthcare-related services, and we believe it is an appropriate time to broaden the definition of these key metrics.

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

•Average revenue per healthcare services client. We define average revenue per healthcare services client as the total subscription and related services and payment processing revenue generated from healthcare services clients in a given period divided by the average number of healthcare services clients that generate revenue each month during that same period. We are focused on continually delivering value to our healthcare services clients and believe that our ability to increase average revenue per healthcare services client is an indicator of the long-term value of the Phreesia platform.

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Additional Information

For the fiscal years ended January 31, Change

Payment facilitator volume percentage 79 % 81 % (2) % (2) %

•Patient payment volume. We believe that patient payment volume is an indicator of both the underlying health of our healthcare services clients’ businesses and the continuing shift of healthcare costs to patients. We measure patient payment volume as the total dollar volume of transactions between our healthcare services clients and their patients utilizing our payment platform, including via credit and debit cards that we process as a payment facilitator as well as cash and check payments and credit and debit transactions for which Phreesia acts as a gateway to other payment processors.

•Payment facilitator volume percentage. We define payment facilitator volume percentage as the volume of credit and debit card patient payment volume that we process as a payment facilitator as a percentage of total patient payment volume. Payment facilitator volume is a major driver of our payment processing revenue. We anticipate that our payment facilitator volume percentage will decline slightly over time as we increase our penetration of larger health systems that are less likely to use Phreesia as a payment facilitator.

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Results of operations

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

For the fiscal years ended January 31, For the fiscal years ended January 31,

Revenue

Expenses

Other (expense) income, net (78) 1 — % — %

Interest (expense) income, net (1,084) (1,573) (1) % (1) %

Total other (expense) income, net (1,162) (1,572) (1) % (1) %

Provision for income taxes (182) (49) — % — %

Components of statements of operations

Revenue

We generate revenue primarily from providing an integrated SaaS-based software and payment platform for the healthcare industry. We derive revenue from subscription fees and related services generated from our healthcare services clients for access to the Phreesia Platform, payment processing fees based on the levels of patient payment volume processed through the Phreesia Platform, and from digital marketing revenue from life sciences companies to reach, educate and communicate with patients when they are most receptive and actively seeking care.

Our total revenue consists of the following:

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

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In addition, we receive certain fees from healthcare services clients for professional services associated with our implementation services as well as travel and expense reimbursements, shipping and handling fees, sales of hardware (PhreesiaPads and Arrivals Kiosks), on-site support and training.

•Payment processing fees. We generate revenue from payment processing fees based on the number of transactions and the levels of patient payment volume processed through the Phreesia Platform. Payment processing fees are generally calculated as a percentage of the total transaction dollar value processed and/or a fee per transaction. Credit and debit patient payment volume processed through our payment facilitator model represented 79% and 81% of our patient payment volume in fiscal 2022 and 2021, respectively. The remainder of our patient payment volume is composed of credit and debit transactions for which Phreesia acts as a gateway to another payment processor, and cash and check transactions. Utilization trends have been dynamic through the pandemic, diverging from our pre-pandemic seasonality. We expect the environment to remain dynamic through fiscal year 2023.

•Life sciences. We generate revenue from the sale of digital marketing solutions to life sciences companies. As we expand our healthcare services client base, we increase the number of new patients we can reach to deliver targeted marketing content on behalf of our life sciences clients.

Cost of revenue (excluding depreciation and amortization)

Our cost of revenue primarily consists of personnel costs, including salaries, stock-based compensation, benefits and bonuses for implementation and technical support, and infrastructure costs to operate our Platform such as hosting fees and fees paid to various third-party providers for access to their technology, as well as costs to verify insurance eligibility and benefits.

Payment processing expense

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

Sales and marketing

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

Research and development

Research and development expense consists of costs to develop our products and services that do not meet the criteria for capitalization as internal-use software. These costs consist primarily of personnel costs, including salaries, stock-based compensation, benefits and bonuses for our development personnel. Research and development expense also includes third-party partner fees and third-party consulting fees, offset by any internal-use software development cost capitalized during the same period.

General and administrative

General and administrative expense consists primarily of personnel costs, including salaries, stock-based compensation, bonuses and benefits for our executive, finance, legal, security, human resources, information technology and other administrative personnel. General and administrative expense also includes software costs to support our finance, legal and human resources operations, insurance costs as well as fees to third-party providers for accounting, legal and consulting services, costs for various non income-based taxes and allocated overhead. We expect general and administrative expense to continue to increase in absolute dollars as we grow our operations and continue to operate as a public company, although we expect such expense to begin to decline as a percentage of total revenue over time.

Depreciation

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

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Amortization

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

Other (expense) income, net

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

•Other (expense) income, net. Other (expense) income, net consists of foreign currency-related losses and gains and other miscellaneous (expense) income.

•Interest income. Interest income consists of interest earned on our cash and cash equivalent balances. Interest income has not been material to our operations to date.

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

Provision for income taxes

Based upon our cumulative pre-tax losses in recent years and available evidence, we have determined that it is more likely than not that certain deferred tax assets as of January 31, 2022 will not be realized in the near term. Consequently, we have established a valuation allowance against our net deferred tax assets totaling approximately $97.3 million and $54.6 million as of January 31, 2022 and 2021, respectively, to recognize only the portion of the deferred tax asset that is more likely than not to be realized. In future periods, if we conclude we have future taxable income sufficient to realize the deferred tax assets, we may reduce or eliminate the valuation allowance.

Comparison of fiscal 2022 versus fiscal 2021

Revenue (in thousands)

Fiscal years ended January 31,

•Subscription and related services. Our subscription and related services revenue from health services organizations increased $26.5 million to $95.5 million for fiscal 2022, as compared to $69.0 million for fiscal 2021, primarily due to new health services clients added in fiscal 2022 as well as expansion of and cross-selling to existing health services clients.

•Payment processing fees. Our revenue from patient payments processed through the Phreesia Platform increased $15.3 million to $65.2 million for fiscal 2022, as compared to $49.9 million for fiscal 2021, due to the addition of more healthcare services clients, expansion of existing healthcare services clients, as well as the reduced impact of COVID-19, which had decreased patient visits in fiscal 2021.

•Life sciences. Our revenue from life science clients for digital marketing increased $22.8 million to $52.5 million for fiscal 2022, as compared to $29.7 million for fiscal 2021 due to an increase in new digital marketing solutions programs and deeper patient outreach among the existing programs.

Cost of revenue (excluding depreciation and amortization)

Fiscal years ended January 31,

(in thousands) 2022 2021 $ Change % Change

Cost of revenue (excluding depreciation and amortization) increased $19.2 million to $42.7 million for fiscal 2022, as compared to $23.5 million for fiscal 2021. The increase resulted primarily from a $13.4 million increase in employee compensation costs driven by higher compensation for existing employees and increased headcount, as well as increases in expenses related to the expansion of our data centers, all driven by client growth.

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Stock compensation incurred related to cost of revenue was $2.1 million and $0.6 million for fiscal 2022 and fiscal 2021, respectively.

Payment processing expense

Fiscal years ended January 31,

(in thousands) 2022 2021 $ Change % Change

Payment processing expense increased $9.8 million to $38.7 million in fiscal 2022, as compared to $28.9 million for fiscal 2021. The increase resulted primarily from an increase in patient payments processed through the Phreesia Platform driven by an increase in patient visits over the prior year.

Sales and marketing

Fiscal years ended January 31,

(in thousands) 2022 2021 $ Change % Change

Sales and marketing expense increased $63.4 million to $106.4 million for fiscal 2022, as compared to $43.0 million for fiscal 2021. The increase was primarily attributable to a $54.1 million increase in total compensation and benefits costs driven by higher compensation for existing employees and increased headcount, a $6.4 million increase in third-party marketing and advertising costs, as well as higher software expenses.

Stock compensation incurred related to sales and marketing expense was $12.5 million and $3.5 million for fiscal 2022 and fiscal 2021, respectively.

Research and development

Fiscal years ended January 31,

(in thousands) 2022 2021 $ Change % Change

Research and development expense increased $29.6 million to $52.3 million for fiscal 2022, as compared to $22.6 million for fiscal 2021. The increase resulted primarily from a $19.8 million increase in total compensation costs driven by higher compensation for existing employees and increased headcount, a $6.3 million increase in outside services costs, as well as higher software costs.

Stock compensation incurred related to research and development expense was $6.0 million and $2.0 million in fiscal 2022 and fiscal 2021, respectively.

General and administrative

Fiscal years ended January 31,

(in thousands) 2022 2021 $ Change % Change

General and administrative expense increased $28.2 million to $68.7 million for fiscal 2022, as compared to $40.5 million for fiscal 2021. The increase resulted primarily from a $17.8 million increase in total compensation and benefits costs driven by higher compensation for existing employees and increased headcount to support our growth as a public company, a $4.2 million increase in outside services costs, as well as a $2.4 million increase in software costs and higher costs for non-income based taxes, recruiting and equipment.

Stock compensation incurred related to general and administrative expense was $15.7 million and $7.4 million in fiscal 2022 and fiscal 2021, respectively.

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Depreciation

Fiscal years ended January 31,

(in thousands) 2022 2021 $ Change % Change

Depreciation expense increased $5.2 million to $15.0 million for fiscal 2022, as compared to $9.8 million for fiscal 2021. The increase was primarily attributable to higher data center depreciation.

Amortization

Fiscal years ended January 31,

(in thousands) 2022 2021 $ Change % Change

Amortization expense increased $0.2 million to $6.3 million for fiscal 2022, as compared to $6.1 million for fiscal 2021. The increase was primarily driven by higher amortization of acquired intangible assets.

Other (expense) income, net

Fiscal years ended January 31,

(in thousands) 2022 2021 $ Change % Change

Other (expense) income, net $ (78) $ 1 $ (79) (7,900 %)

Other (expense) income, net changed by $0.1 million to expense of $0.1 million for fiscal 2022 as compared to income of less than $0.1 million for fiscal 2021.

Interest (expense) income, net

Fiscal years ended January 31,

(in thousands) 2022 2021 $ Change % Change

Interest expense, net decreased $0.5 million to $1.1 million for fiscal 2022, as compared to $1.6 million for fiscal 2021. The decrease is primarily attributable to lower average debt balances due to repayment of debt with the proceeds of our equity offerings, as well as higher average cash balances.

Provision for income taxes

Fiscal years ended January 31,

(in thousands) 2022 2021 $ Change % Change

Provision for income taxes increased by $0.1 million to $0.2 million for fiscal 2022, as compared to less than $0.1 million for fiscal 2021. Provision for income taxes relates primarily to utilization of Canadian net operating loss carryforwards and state income taxes.

Non-GAAP financial measures

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

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amortization, and before stock-based compensation expense, change in fair value of contingent consideration liabilities and other expense (income), net.

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

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

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

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

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

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

For the fiscal years ended January 31,

Interest expense (income), net 1,084 1,573

Provision for income taxes 182 49

Change in fair value of contingent consideration liabilities 258 71

Other expense (income), net 78 (1)

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

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

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

For the fiscal years ended January 31,

Net cash (used in) provided by operating activities $ (74,710) $ 2,890

Less:

Capitalized internal-use software (12,385) (7,334)

Purchases of property and equipment (18,420) (11,241)

Liquidity and capital resources

On October 23, 2020, we completed a follow-on offering of our common stock, in which we issued and sold 5,750,000 shares of common stock at an issuance price of $32.00 per share resulting in net proceeds of $174,800, after deducting underwriting discounts and commissions, and before deducting third-party offering costs of $290.

On April 12, 2021, we completed a follow-on offering of our common stock. In connection with this offering, we issued and sold 5,175,000 shares of common stock at an issuance price of $50.00 per share resulting in net proceeds of $245,813, after deducting underwriting discounts and commissions.

As of January 31, 2022 and 2021, we had cash and cash equivalents of $313.8 million and $218.8 million, respectively. Cash and cash equivalents consist of money market accounts and cash on deposit.

We believe that our existing cash and cash equivalents, along with our available financial resources from our credit facility, will be sufficient to meet our needs for at least the next 12 months. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under “Risk factors.”

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

Silicon Valley Bank facility

Second Amended and Restated Loan and Security Agreement

On May 5, 2020, we entered into the Second SVB Facility. The Second SVB Facility provided for a revolving line of credit of up to $50.0 million (with options to increase up to $65.0 million). We transferred the $20.0 million outstanding balance on a previous SVB Facility, the First SVB Facility term loan, plus related prepayment fees, into the revolving credit borrowings outstanding under the Second SVB Facility. As of January 31, 2022, the interest rate on the Second SVB Facility was 4.5%. Borrowings under the Second SVB Facility were payable on May 5, 2025. We repaid the outstanding balance on the Second SVB Facility in January 2021. As of January 31, 2022 and 2021, we had no outstanding balance on the Second SVB Facility and $50.0 million of available borrowings under the facility. We were in compliance with all covenants related to the Second SVB Facility as of January 31, 2022.

Third SVB Facility

On March 28, 2022, we entered into the Third SVB Facility to increase the borrowing capacity from $50.0 million to $100.0 million. The Third SVB Facility also reduced the interest rate to the greater of 3.25% or the Wall Street Journal Prime Rate minus 0.5%, amended the annual commitment fees to approximately $0.3 million per year and amended the quarterly fee to 0.15% per annum of the average unused revolving line under the facility.

In the event that we terminate the Third SVB Facility prior to the Maturity Date and do not replace the facility with another SVB facility, we are required to pay a termination fee equal to $0.2 million plus a percent of total borrowing capacity, both of which would be reduced based on the amount of time elapsed before the termination.

Any of our obligations under the Third SVB Facility are secured by a first priority security interest in substantially all of our assets, other than intellectual property. The Third SVB Facility includes a financial covenant that requires us to maintain a minimum Adjusted Quick Ratio, as defined in the Third SVB Facility.

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

Fiscal years ended January 31,

Cash (used in) provided by operating activities $ (74,710) $ 2,890

Cash used in investing activities (65,228) (25,085)

Net increase in cash and cash equivalents $ 95,031 $ 128,466

Operating activities

The primary source of cash from operating activities is cash received from our customers. The primary uses of cash

for operating activities are for payroll, payments to suppliers and employees, payments for operating leases, as well as cash paid for interest on our finance leases and other borrowings and cash paid for various sales, property and income taxes.

During the fiscal year ended January 31, 2022, cash used in operating activities was $74.7 million, as our cash paid to employees and suppliers exceeded our cash received from customers.

During the fiscal year ended January 31, 2021, cash provided by operating activities was $2.9 million, as our cash received from customers exceeded our cash paid to employees and suppliers in connection with our normal operations.

The change in cash used in operating activities was driven primarily by higher employee compensation costs, primarily due to higher employee headcount as well as an increase in compensation costs for existing employees, partially offset by an increase in cash received from customers driven by higher revenues.

Investing activities

During the fiscal year ended January 31, 2022, cash used in investing activities was $65.2 million, principally resulting from $34.4 million of net cash paid for the acquisition of Insignia, $18.4 million of purchases of property and equipment, principally driven by the purchase of data center equipment, as well as $12.4 million of cash paid for capitalized internal-use software.

During the fiscal year ended January 31, 2021, cash used in investing activities was $25.1 million, principally resulting from capital expenditures, the bulk of which consists of hardware used by clients and the purchase of data center equipment of $11.2 million, capitalized internal-use software costs of $7.3 million and $6.5 million used for the acquisition of QueueDr, net of cash acquired.

Financing activities

During the fiscal year ended January 31, 2022, net cash provided by financing activities was $235.0 million, primarily consisting of $245.8 million in proceeds from the April 2021 offering of our common stock, net of underwriters' discounts and commissions, and $6.9 million in proceeds from our equity compensation plans, partially offset by $9.0 million used for treasury stock to satisfy tax withholdings on stock compensation awards, $5.3 million used for principal payments on finance leases and financing arrangements and $3.3 million used for payments of acquisition-related liabilities.

During the fiscal year ended January 31, 2021, net cash provided by financing activities was $150.7 million, consisting of $174.8 million in proceeds from the October 2020 offering of our common stock, net of underwriters' discounts and commissions, $4.4 million in proceeds from the issuance of common stock upon the exercise of stock options as well as $2.0 million in proceeds from an insurance financing arrangement, partially offset by $20.7 million used to repay the outstanding principal balance of the Second SVB Facility, $5.0 million used for treasury stock to satisfy tax withholdings on stock compensation awards, $4.3 million used for principal payments on finance leases and financing arrangements, $0.4 million used for debt and equity issuance and offering costs and $0.2 million for loan facility fee payments. The lender fees incurred in connection with the Second SVB Facility were transferred into the principal balance of the Second SVB Facility. We have included the transfer of the balance of the First SVB

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Facility and the fees that were transferred in connection with the Second SVB Facility within the supplemental non-cash investing and financing information on our consolidated statements of cash flows included in Part II, Item 8 of this Annual Report on Form 10-K.

Material Cash Requirements

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

Critical accounting policies and estimates

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

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

Revenue recognition

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

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

•Identification of the performance obligations in a contract.

•Determination of the transaction price.

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

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

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

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

Determination of Performance Obligations

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

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

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

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

Determination of Standalone Selling Prices

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

The SSP is the price that we would sell a product separately to a customer. The best evidence of this is an observable price from stand-alone sales of that product to similarly situated customers. However, as we do not typically transfer our performance obligations on a standalone basis, but rather we transfer bundles of performance obligations, we use an adjusted market assessment approach to estimate the price a customer would be willing to pay for our performance obligations using historical price information as priced in previous bundled contracts, our cost structure and our expectations for profit margins.

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

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

Variable Consideration

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

We occasionally provide credits to customers representing adjustments to the transaction price. Known and estimable credits and adjustments represent a form of variable consideration, which are estimated at contract inception and generally result in reductions to revenues recognized for a particular contract. These estimates are updated at the end of each reporting period as additional information becomes available. We estimate the amount of variable consideration based on its expected probability-weighted value or its most likely amount. We include variable consideration in the transaction price to the extent it is probable there will not be a significant reversal of revenue when the uncertainty with respect to the variable consideration is resolved. We believe that there will not be significant changes to our estimates of variable consideration as of January 31, 2022.

Principal vs Agent Considerations

As part of our revenue recognition process, we evaluate whether we are the principal or agent for the performance obligations in our contracts with customers. When we determine that we are the principal for a performance obligation, we recognize revenue for that performance obligation on a gross basis. When we determine that we are an agent for a performance obligation, we recognize revenue for that performance obligation net of the related costs. In determining whether we are the principal or the agent, we evaluate whether we have control of the services before we transfer the services to the customer by considering whether we are primarily obligated for transferring the services to the customer, whether we have inventory risk for the services before the services are transferred to the customer, and whether we have latitude in establishing prices. We recognize payment processing fees collected from customers as revenue on a gross basis because, as the merchant of record, we control the services before delivery to the customer, we are primarily responsible for the delivery of the services to our customers, we have latitude in establishing pricing with respect to the customer and other terms of service, we have

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sole discretion in selecting the third party to perform the settlement, and we assume the credit risk for the transaction processed. We also have the unilateral ability to accept or reject a transaction based on our established criteria.

Business combinations

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

Where applicable, the consideration transferred for business combinations includes the acquisition date fair value of contingent consideration. In connection with the QueueDr acquisition, we recorded contingent consideration liabilities within accrued expenses for amounts payable to the selling shareholders based on collections from QueueDr customers. The fair value of our contingent consideration liabilities was determined using a Monte-Carlo simulation which uses estimated cash flows and likelihoods of contract cancellation to estimate the expected payout based on collections and active status of the underlying customer contracts. The fair value of our contingent consideration liabilities was determined based on inputs which are not readily available in public markets. Therefore, we categorized the liabilities as Level 3 in the fair value hierarchy. In connection with the acquisition of QueueDr, we recorded contingent consideration liabilities with an acquisition-date fair value of $2,240. During the fiscal years ended January 31, 2021 and 2022, we paid a total of $2,574 to settle the contingent consideration liabilities, which represented the maximum amount payable for the contingent consideration liabilities. Changes in the fair value of contingent consideration liabilities are included in general and administrative expense in the accompanying consolidated statements of operations.

Capitalized internal-use software

We capitalize certain costs incurred for the development of computer software for internal use pursuant to ASC Topic 350-40, Intangibles—Goodwill and Other—Internal use software. These costs relate to the development of our Phreesia Platform. We capitalize the costs during the development of the project, when it is determined that it is probable that the project will be completed, and the software will be used as intended. Costs related to preliminary project activities, post-implementation activities, training and maintenance are expensed as incurred. Internal-use software is amortized on a straight-line basis over its estimated useful life, which is generally three to five years. We evaluate the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. We exercise judgment in determining the point at which various projects may be capitalized, in assessing the ongoing value of the capitalized costs and in determining the estimated useful lives over which the costs are amortized. To the extent that we change the manner in which we develop and test new features and functionalities related to our solutions, assess the ongoing value of capitalized assets or determine the estimated useful lives over which the costs are amortized, the amount of internal-use software development costs we capitalize and amortize could change in future periods.

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Income taxes

An asset and liability approach is used for financial accounting and reporting of current and deferred income taxes. Deferred income tax assets and liabilities are computed for temporary differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future. Such deferred income tax asset and liability computations are based on enacted tax laws and rates applicable to periods in which the differences are expected to affect taxable income or loss. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. We follow ASC 740, Accounting for Uncertainty in Income Taxes. ASC 740 clarifies the accounting for uncertainty in income taxes recognized in a company’s consolidated financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in the interim periods, disclosure, and transition.

We have accumulated U.S. federal and state net operating loss carryforwards of approximately $332.5 million, and $199.1 million as of January 31, 2022 and 2021, respectively. These carryforwards will begin to expire in 2025. As of January 31, 2022, our foreign branch had net operating loss carryforwards of approximately $1.9 million, which may be available to offset future income tax liabilities and will expire beginning in 2030.

In assessing the realizability of the net deferred tax asset we consider all relevant positive and negative evidence in determining whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The realization of the gross deferred tax assets is dependent on several factors, including the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards.

Due to uncertainty regarding the ability to realize the benefit of U.S. deferred tax assets primarily relating to net operating loss carryforwards, we have established valuation allowances to reduce deferred the U.S. deferred tax assets to an amount that is more likely than not to be realized. On the basis of this evaluation, we have recorded valuation allowances of $97.3 million and $54.6 million as of January 31, 2022 and 2021.

Under Section 382 of the Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50% change by value in its equity ownership over a three-year period), the corporation’s ability to use its pre-ownership change net operating loss carryforwards and other pre-ownership change tax attributes to offset its post-change income may be limited. As of January 31, 2022, we have U.S. net operating loss carryforwards of approximately $332.5 million. We have completed a Section 382 study and, as a result of the analysis, it is more likely than not that we have experienced an "ownership change". We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership. Accordingly, if we earn net taxable income, it is more likely than not that our ability to use our pre-ownership change net operating loss carryforwards to offset U.S. federal taxable income will be subject to limitations, which could potentially result in increased future tax liability.

We review and evaluate tax positions in major jurisdictions and determine whether we record unrecognized tax benefits as reductions of deferred tax assets or as liabilities in accordance with ASC 740 and adjust these unrecognized tax benefits when our judgment changes as a result of the evaluation of new information not previously available. We recognize interest and penalties related to uncertain tax positions in income tax expense. There was no outstanding balance for unrecognized tax benefits as of January 31, 2022.

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

We recognize the grant-date fair value of stock-based awards issued as compensation expense on a straight-line basis over the requisite service period, which is generally the vesting period of the award. We granted market-based PSUs during fiscal 2022.

Each award vests in zero to two shares of common stock based on our total stockholder return (TSR), relative to a peer group of companies on the Russell 3000 stock index. We estimate the fair value of the PSUs using a Monte Carlo Simulation model which projects TSR for Phreesia and each member of the peer group over a performance period of approximately three years. The most critical and judgmental assumptions used in the Monte Carlo Simulation to estimate the fair value of the PSUs are set forth below:

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

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•Expected volatility: The expected volatility is based on historical volatilities of peer companies within our industry which were commensurate with the simulation term assumption.

Recent accounting pronouncements

There are no recently issued accounting pronouncements that we have not yet adopted that will materially impact our consolidated financial statements.

See Note 3 to our Consolidated financial statements of this Annual Report on Form 10-K for a discussion of recent accounting pronouncements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We have operations both within the United States and in Canada, and we are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate and foreign exchange risks.

Interest rate risk

Our cash and cash equivalents consist primarily of money market accounts and cash on deposit. The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. Because our cash equivalents have a short maturity, our portfolio’s fair value is relatively insensitive to interest rate changes. We do not believe that an increase or decrease in interest rates of 100 basis points would have a material effect on our operating results or financial condition. In future periods, we will continue to evaluate our investment policy in order to ensure that we continue to meet our overall objectives.

Foreign currency exchange risk

We have foreign currency risks related to our expenses denominated in Canadian dollars, which are subject to fluctuations due to changes in foreign currency exchange rates. Additionally, fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our statements of operations. We have entered into foreign currency forward contracts as economic hedges to minimize those fluctuations. We have not designated our foreign currency forward contracts as hedges as defined in GAAP. To date, foreign currency transaction gains and losses have not been material to our financial statements. As of January 31, 2022, no foreign currency forward contracts remained outstanding.

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Item 8. Consolidated Financial Statements and Supplementary Data

PHREESIA, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets as of January 31, 2022 and 2021 75

Notes to Consolidated Financial Statements 80

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Phreesia, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Phreesia, Inc. and subsidiaries (the Company) as of January 31, 2022 and 2021, the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the three-year period ended January 31, 2022, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended January 31, 2022, in conformity with U.S. generally accepted accounting principles.

We also were engaged to audit, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 31, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 3 to the consolidated financial statements, the Company has changed its method of accounting for leases as of February 1, 2020, due to the adoption of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842).

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Identification of performance obligations for larger enterprise healthcare services contracts

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As discussed in Note 5 to the consolidated financial statements, the Company executes contracts that may include various combinations of performance obligations related to software, hardware, and services comprised of customized solutions, on-site support and training, as well as different contract terms. When these contracts are executed or modified, the Company performs a detailed evaluation to identify the performance obligations in the contract. During the year ended January 31, 2022, the Company recognized $95,514 thousand of subscription and related services revenue, a portion of which related to larger enterprise healthcare services clients that may choose to contract differently than typical customers that use a per provider subscription model.

We identified the evaluation of the Company’s identification of performance obligations for larger enterprise healthcare services contracts that were entered into or modified during the year as a critical audit matter. Specifically, for certain contracts with larger enterprise healthcare services clients, evaluating the Company’s determination of distinct performance obligations required challenging auditor judgment due to the varying nature of the underlying promises and the associated contract terms.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s revenue recognition process, including an internal control related to the Company’s identification of performance obligations in larger enterprise healthcare services contracts entered into or modified during the year.

For larger enterprise healthcare services contracts that were entered into or modified during the year ended January 31, 2022, we (1) read the contracts to understand their terms and conditions and (2) evaluated the identification of performance obligations in each arrangement by considering the nature of the promises within the contract and whether they were distinct from other promised goods and services. For a sample of invoices, we compared the invoiced items to a performance obligation identified in the contract by the Company.

Evaluation of acquisition-date fair value of acquired intangible assets

As discussed in Note 16 to the financial statements, on December 3, 2021, the Company acquired Insignia Health, LLC (“Insignia”) in a business combination. The fair value of the total consideration for the acquired business was $37,208 thousand, of which $6,200 thousand was allocated to acquired Patient Activation Measure (“PAM”) License intangible asset and $4,500 thousand was allocated to customer relationships intangible asset. Fair values of the acquired PAM License and customer relationships intangible asset are estimated using valuation models with assistance from a third-party appraiser.

We identified the evaluation of the fair value of the PAM License and customer relationships intangible asset acquired in the Insignia business combination as a critical audit matter. There was a high degree of subjectivity in evaluating the discounted cash flows used to measure the acquisition-date fair value of the intangible assets. Specifically, the measurement of the fair value of the intangible assets was sensitive to possible changes in the following internally developed assumptions:

• forecasted revenue growth rates used to measure the PAM License intangible asset

• forecasted earnings before interest, taxes, depreciation, and amortization (EBITDA) margins used to measure the customer relationships intangible asset

• estimated royalty rate in the relief from royalty method used to measure acquired PAM License intangible asset

• estimated discount rate used to measure the PAM License intangible asset and customer relationships intangible asset.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s acquisition-date valuation process, including controls related to the assumptions noted above. We evaluated the Company’s forecasted revenue growth assumptions related to the PAM License intangible asset by comparing the forecasted revenue growth rates to those of the Company’s peers. We evaluated the Company’s EBITDA margin assumptions related to customer relationships by comparing them to EBITDA margin assumptions of the Company’s peers and to historical EBITDA margin achieved. In addition, we involved valuation professionals with specialized skills and

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knowledge, who assisted in:

• recalculating an estimate of the acquired PAM License intangible asset fair value using the Company’s forecasted cash flows, discount rate and royalty rate, and comparing the result to the Company’s fair value estimate

• evaluating the Company’s estimated royalty rate, by comparing the rate to publicly available third-party market data for comparable entities

• recalculating an estimate of the customer relationships intangible asset fair value using the Company’s forecasted cash flows and discount rate, and comparing the result to the Company’s fair value estimate

• evaluating the Company’s discount rate by performing a parallel analysis using inputs and assumptions deemed reasonable and comparing the results used to the appraiser’s calculation.

/s/ KPMG LLP

We have served as the Company’s auditor since 2019.

Philadelphia, Pennsylvania

March 31, 2022

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors

Phreesia, Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited Phreesia, Inc. and subsidiaries' (the Company) internal control over financial reporting as of January 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of January 31, 2022 and 2021, the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the three-year period ended January 31, 2022, and the related notes (collectively, the consolidated financial statements), and our report dated March 31, 2022 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

Philadelphia, Pennsylvania

March 31, 2022

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Phreesia, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share data)

January 31,

Assets

Current:

Deferred contract acquisition costs 1,642 1,693

Prepaid expenses and other current assets 11,043 7,254

Operating lease right-of-use assets 2,337 2,654

Deferred contract acquisition costs 2,437 1,248

Liabilities and Stockholders’ Equity

Current:

Current portion of finance lease liabilities and other debt 5,821 4,864

Current portion of operating lease liabilities 1,281 1,087

Long-term finance lease liabilities and other debt 7,423 6,471

Operating lease liabilities, non-current 1,276 1,899

Long-term deferred revenue 65 —

Commitments and contingencies (Note 11)

Stockholders’ Equity:

Total Liabilities and Stockholders’ Equity $ 494,476 $ 326,666

See notes to consolidated financial statements.

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Phreesia, Inc.

Consolidated Statements of Operations

(in thousands, except share and per share data)

For the fiscal years ended January 31,

Revenue:

Expenses:

Cost of revenue (excluding depreciation and amortization) 42,669 23,461 16,831

Other (expense) income, net (78) 1 (1,023)

Change in fair value of warrant liability — — (3,307)

(Provision for) benefit from income taxes (182) (49) 1,780

Preferred stock dividends paid — — (14,955)

Accretion of redeemable preferred stock — — (56,175)

See notes to consolidated financial statements.

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Phreesia, Inc.

Consolidated Statements of Stockholders’ Equity (Deficit)

(in thousands, except share data)

Stockholders’ equity

Common stock

Shares Amount Additionalpaid-incapital Accumulateddeficit Treasury stock Total

Stock-based compensation expense — — 6,177 — — 6,177

Issuance of common stock warrants — — 833 — — 833

Payment of preferred stock dividends (See Note 7) — — (14,955) — — (14,955)

Cashless exercise of common stock warrants 168,862 2 — — — 2

Treasury stock from vesting of restricted stock units — — — — (399) (399)

Stock-based compensation expense — — 13,489 — — 13,489

Cashless exercise of common stock warrants 60,338 1 (1) — — —

Stock-based compensation expense — — 29,668 — — 29,668

See notes to consolidated financial statements

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Phreesia, Inc.

Consolidated Statements of Cash Flows

(in thousands)

For the fiscal years ended January 31,

Operating activities:

Change in fair value of warrants liability — — 3,307

Amortization of deferred financing costs and debt discount 288 389 445

Loss on extinguishment of debt — — 1,073

Cost of Phreesia hardware purchased by customers 672 762 741

Deferred contract acquisition costs amortization 2,211 2,025 1,977

Non-cash operating lease expense 1,004 1,766 —

Change in fair value of contingent consideration liabilities 258 — —

Changes in operating assets and liabilities, net of acquisitions:

Net cash (used in) provided by operating activities (74,710) 2,890 826

Investing activities:

Acquisitions, net of cash acquired (34,423) (6,510) —

Financing activities:

Payment of preferred stock dividends — — (14,955)

Payment of offering costs — (290) (6,217)

Proceeds from employee stock purchase plan 1,979 — —

Insurance financing agreement — 2,009 —

Principal payments on financing agreements (1,039) (1,691) —

Debt issuance costs — (69) (112)

Loan facility fee payment (125) (225) —

Financing payments of acquisition-related liabilities (3,286) — —

Proceeds from revolving line of credit — — 9,876

Payments of revolving line of credit — (20,663) (17,676)

Proceeds from term loan — — 20,000

Repayment of term loan and loan payable — — (21,042)

Debt extinguishment costs — — (300)

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Supplemental information of non-cash investing and financing information:

Capitalized software acquired through vendor financing $ — $ 174 $ —

Cashless transfer of lender fees through increase in debt balance $ — $ 406 $ —

Issuance of warrants related to debt $ — $ — $ 833

Receivables for cash in-transit on stock option exercises $ 169 $ 915 $ —

Cashless exercise of common stock warrants $ — $ 3,060 $ 3,530

Capitalized stock based compensation $ 489 $ — $ —

Cash paid for:

Income taxes $ 49 $ 64 $ —

See notes to consolidated financial statements

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Phreesia, Inc.

Notes to Consolidated Financial Statements

(in thousands, except share and per share data)

1. Background and liquidity

(a) Background

Phreesia, Inc. (the "Company") is a leading provider of comprehensive software solutions that improve the operational and financial performance of healthcare organizations by activating patients in their care to optimize patient health outcomes. Through the SaaS-based technology platform (the "Phreesia Platform" or "Platform"), the Company offers healthcare services clients a robust suite of integrated solutions that manage patient access, registration, payments and clinical support. The Company’s Platform also provides life sciences companies, patient advocacy, public interest and other not-for-profit organizations with a channel for targeted and direct communication with patients. In connection with the patient intake and registration process, Phreesia offers its healthcare services clients the ability to lease tablets ("PhreesiaPads") and on-site kiosks ("Arrivals Kiosks") along with their monthly subscription. The Company was formed in May 2005, and has several offices in the U.S. and Canada. The Company completed an initial public offering ("IPO") in July 2019.

During fiscal 2021, the Company changed its headquarters from New York, New York to Raleigh, North Carolina.

b) Liquidity

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

Management believes that the Company’s cash and cash equivalents at January 31, 2022, along with cash generated in the normal course of business, and available borrowing capacity under its Second Amended and Restated Loan and Security Agreement (the "Second SVB Facility") with Silicon Valley Bank ("SVB") (Note 6), are sufficient to fund its operations for at least the next 12 months.

On March 28, 2022, the Company entered into the First Loan Modification Agreement to the Second SVB Facility (as amended, the "Third SVB Facility"), to increase the available borrowing capacity to $100.0 million from $50.0 million.

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

2. Basis of presentation

(a) Consolidated Financial Statements

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

(b)Fiscal year

The Company’s fiscal year ends on January 31. References to fiscal 2022, 2021 and 2020, refer to the fiscal years ended January 31, 2022, 2021 and 2020, respectively.

3. Summary of significant accounting policies

(a) Use of estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The most significant

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assumptions and estimates relate to the allowance for doubtful accounts, capitalized internal-use software, the determination of the useful lives of property and equipment, the fair value of securities underlying stock-based compensation, the fair value of identifiable assets and liabilities and contingent consideration in business acquisitions, and the realization of deferred tax assets.

(b) Revenue recognition

The Company evaluates its contractual arrangements to determine the performance obligations and transaction prices. Revenue is allocated to each performance obligation and recognized when the related performance obligations are satisfied. See Note 5 for additional information regarding ASC 606, Revenue from Contracts with Customers, as well as for additional details about the Company's products and service lines.

(c) Concentrations of credit risk

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

The Company’s customers are primarily physician’s offices and other healthcare services organizations located in the United States as well as pharmaceutical companies. The Company did not have any individual customers that represented more than 10% of total revenues for the years ended January 31, 2022 and January 31, 2021. As of January 31, 2022, the Company had receivables from one entity that accounted for at least 10% of total accounts receivable.

(d) Risks and uncertainties

Risks Related to the COVID-19 Pandemic

In March 2020, the World Health Organization declared the ongoing outbreak of a novel strain of coronavirus ("COVID-19") a pandemic. There continues to be uncertainty as to the duration and extent to which the global COVID-19 pandemic, as well as the emergence of new variants, may adversely impact the Company's business operations, financial performance, and results of operations, as well as macroeconomic conditions, at this time.

Other Risks and Uncertainties

The Company is subject to a variety of risk factors, including the economy, data privacy and security laws and government regulations. Additionally, the Company is subject to other risks associated with the markets in which it operates including reliance on third party vendors, partners, and service providers. Certain of the Company's service providers, including certain third-party software developers, are located in international locations subject to warfare and/or political and economic instability, such as Russia, Ukraine and India. As with any business, operation of the Company involves risk, including the risk of service interruption impacting the operations of our business and our customer’s facilities below expected levels of operation, shut downs due to the breakdown or failure of information technology and communications systems, changes in laws or regulations, political and economic instability, or catastrophic events such as fires, earthquakes, floods, explosions, global health concerns such as pandemics or other similar occurrences affecting the delivery of our productions and services. The occurrence of any of these events could significantly reduce or eliminate revenues generated, or significantly increase the expenses of our operations, adversely impacting the Company’s operating results and our ability to meet our obligations and commitments. See Note 6 - Finance leases and other debt, for a summary of our contractual commitments as of January 31, 2022.

(e) Cost of revenue (excluding depreciation and amortization)

Cost of revenue (excluding depreciation and amortization) primarily consists of personnel expenses for implementation and technical support, costs to verify insurance eligibility and benefits, infrastructure costs for operation of our SaaS-based Phreesia Platform such as hosting fees and certain fees paid to various third party providers for the use of their technology. Personnel expenses consist of salaries, benefits, bonuses and stock-based compensation.

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(f) Payment processing expense

Payment processing expense consists primarily of interchange fees set by payment card networks that are ultimately paid to the card-issuing financial institution, and assessment fees paid to payment card networks that are ultimately paid to third-party payment processors and gateways.

(g) Sales and marketing

Sales and marketing expense consists primarily of personnel costs, including salaries, benefits, bonuses, stock-based compensation and commission costs for our sales and marketing personnel. Sales and marketing expense also include costs for advertising, promotional and other marketing activities, as well as certain fees paid to various third-party partners for sales lead generation. Advertising is expensed as incurred. Advertising expense was $4,007, $558 and $251 for the fiscal years ended 2022, 2021 and 2020, respectively.

(h) Research and development

Research and development expense consists of costs for the design, development, testing and enhancement of the Company’s products and services and are generally expensed as incurred. These costs consist primarily of personnel costs, including salaries, benefits, bonuses, and stock-based compensation for our development personnel. Research and development expense also includes product management, life sciences analytics costs, third-party partner fees and third-party consulting fees, offset by any internal-use software development cost capitalized during the same period.

(i) General and administrative

General and administrative expense consists primarily of personnel costs, including salaries, benefits, bonuses, and stock-based compensation for our executive, finance, legal, human resources, information technology, and other administrative personnel. General and administrative expense also includes consulting, legal, security, accounting services and allocated overhead.

(j)Depreciation

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

(k) Amortization

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

(l) Cash and cash equivalents

The Company considers all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents. The Company's money market account meets the definition of cash equivalents.

(m) Settlement assets

Settlement assets represent amounts due from the Company’s payment processor for customer electronic processing transactions. Settlement assets are typically settled within one to two business days of the transaction date.

(n) Settlement obligations

Settlement obligations represent amounts due to customers for electronic processing transactions that have not been funded by the Company due to timing of settlement from the Company’s payment processor.

(o) Accounts receivable

Accounts receivable represent trade receivables, net of allowances for doubtful accounts. The Company estimates the allowance for doubtful accounts as its current estimate of expected credit loss over the life of the instrument. The Company determines the allowance based on historical trends of accounts receivable balances that have been written off and specific account analysis of at-risk customers, the length of time accounts are past due, a customer's current ability to pay its obligations to the Company, the condition of the industry as a whole, as well as expected

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future changes in credit losses. Accounts receivable are written off at the point that internal collections efforts have been exhausted. As of January 31, 2022 and 2021, the Company has reserved $863 and $699, respectively, for the allowance for doubtful accounts.

Account receivable also includes unbilled accounts receivable (see Contract Balances in Note 5).

(p) Property and equipment

Property and equipment, including PhreesiaPads and Arrivals Kiosks, are stated at cost less accumulated depreciation. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the related assets. The estimated useful lives of the Company’s property and equipment have been estimated to be between three and seven years, with the useful lives of leasehold improvements being the shorter of the useful life of the asset or the life of the underlying lease. Maintenance and repair costs are charged to operations as incurred while expenditures for major improvements are capitalized.

Upon sale or disposition of property and equipment, the cost and related accumulated depreciation are removed from their respective accounts and any gain or loss is reflected in the statements of operations.

(q) Capitalized internal-use software

The Company capitalizes certain costs incurred for the development of computer software for internal use pursuant to ASC 350-40, Intangibles—Goodwill and Other—Internal use software. These costs relate to the development of its Phreesia Platform. The Company capitalizes the costs during the development of the project, when it is determined that it is probable that the project will be completed, and the software will be used as intended. Costs related to preliminary project activities, post-implementation activities, training and maintenance are expensed as incurred. Internal-use software is amortized on a straight-line basis over its estimated useful life, which is generally three to five years. Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. The Company exercises judgment in determining the point at which various projects may be capitalized, in assessing the ongoing value of the capitalized costs and in determining the estimated useful lives over which the costs are amortized. To the extent that the Company changes the manner in which it develops and tests new features and functionalities related to its solutions, assesses the ongoing value of capitalized assets or determines the estimated useful lives over which the costs are amortized, the amount of internal-use software development costs the Company capitalizes and amortizes could change in future periods. Refer to Note 4(c) for further detail on internal-use software costs capitalized during the period.

(r) Business combinations

The Company uses its best estimates and assumptions to accurately assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. The Company’s estimates are inherently uncertain and subject to refinement. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. The Company continues to collect information and reevaluate these estimates and assumptions quarterly and records any adjustments to its preliminary estimates to goodwill provided that the Company is within the measurement period. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statement of operations.

When applicable, the consideration transferred for business combinations includes the acquisition-date fair value of contingent consideration. Changes in the fair value of contingent consideration liabilities are included in general and administrative expense in the accompanying consolidated statements of operations.

(s) Goodwill and intangible assets

Goodwill represents the excess of the consideration transferred over the fair value of the underlying net tangible and intangible assets acquired and liabilities assumed in connection with business combinations accounted for using the acquisition method of accounting. Goodwill is not amortized, but instead goodwill is required to be tested for impairment annually and under certain circumstances. We perform such testing of goodwill in the fourth quarter of each fiscal year, or as events occur or circumstances change that would more likely than not reduce the fair value below its carrying amount.

The testing of goodwill is performed at the reporting unit level. The Company’s reporting unit is the same as its operating segment. The test begins with a qualitative assessment to determine whether it is “more likely than not”

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that the fair value of the reporting unit is less than its carrying amount. If it is concluded that it is “more likely than not” that the fair value of a reporting unit is less than its carrying amount, the Company performs a quantitative goodwill impairment test by calculating the fair value of the reporting unit and comparing that fair value to the carrying value of the reporting unit. If the estimated fair value of the reporting unit is less than its carrying amount, the Company records a goodwill impairment to reduce the carrying amount of goodwill by the amount by which the fair value of the reporting unit is less than its carrying amount.

All other intangible assets associated with purchased intangibles, consisting of customer relationships, acquired technology and acquired licenses, are stated at cost less accumulated amortization and are amortized on a straight-line basis over their estimated remaining economic lives.

(t) Long-lived assets

Long-lived assets, such as property and equipment, intangible assets, capitalized internal-use software and operating lease right-of-use assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares the undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. There were no impairment charges recognized during any of the periods presented.

(u) Income taxes

An asset and liability approach is used for financial accounting and reporting of current and deferred income taxes. Deferred income tax assets and liabilities are computed for temporary differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future. Such deferred income tax asset and liability computations are based on enacted tax laws and rates applicable to periods in which the differences are expected to affect taxable income or loss. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. The Company follows the guidance in ASC 740, Accounting for Uncertainty in Income Taxes. ASC 740 clarifies the accounting for uncertainty in income taxes recognized in a Company’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in the interim periods, and disclosure.

The Company reviews and evaluates tax positions in its major jurisdictions and determines whether or not there are uncertain tax positions that require financial statement recognition and the recording of a tax liability or the reduction of a tax asset. The Company would recognize tax related interest and penalties, if applicable, as a component of its provision for income taxes.

(v) Segment information

Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assessing performance. The Company defines the term “chief operating decision maker” to be its Chief Executive Officer. The Company’s Chief Executive Officer reviews the financial information presented on an entire company basis for purposes of allocating resources and evaluating our financial performance. Accordingly, we have determined that we operate in a single reportable operating segment. Additionally, substantially all of the Company's revenues and long-lived assets are located in the U.S. Since the Company operates in one operating segment and substantially all of the Company's revenues and long-lived assets are located in the U.S., all required financial segment information can be found in the consolidated financial statements.

(w) Stock-based compensation

The Company has stock-based compensation plans under which various types of equity-based awards are granted, including stock options, restricted stock units ("RSUs"), performance-based RSUs, and market-based performance stock units ("PSUs"). The compensation for the stock-based awards is recognized in accordance with ASC 718, Compensation — Stock Compensation, which requires that compensation cost be recognized for awards based on the grant-date fair value of the award. That cost is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the award. For performance-based RSUs, the number of shares

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expected to vest is estimated at each reporting date based on management's expectations regarding the relevant performance criteria.

The fair value of stock options is estimated at the time of grant using the Black-Scholes option pricing model, which requires the use of inputs and assumptions such as the exercise price of the option, expected term, risk-free interest rate, expected volatility and dividend yield, and the value of the Company's common stock (which is estimated for awards granted prior to our IPO). The Company does not estimate forfeitures in recognizing stock-based compensation expense. The fair value of the RSUs is equal to the fair value of the Company's common stock on the grant date of the award. The fair value of market-based PSUs is estimated at the time of grant using a Monte Carlo simulation which compares Phreesia's projected total shareholder return ("TSR") to the projected TSR of the Russell 3000 Index (the "Peer Group") and estimates the value of shares to be issued based on the vesting conditions of the PSUs. The Monte Carlo simulation requires the use of inputs and assumptions such as the grant-date closing stock price, simulation, expected volatility, correlation coefficient to the Russell 3000 Index, risk-free interest rate and dividend yield.

During fiscal 2022, the Company activated the Phreesia, Inc. 2019 Employee Stock Purchase Plan ("ESPP" or "the Plan"). The Company will record compensation expense based on the grant date fair value per award granted multiplied by the number of awards granted to the employee for the purchase period. The number of awards granted to the employee for the purchase period is equal to the expected employee contributions divided by 85% of the closing stock price on the offering date.

For liability-classified performance based stock bonus awards, the Company offered eligible employees the option to elect to receive their year-end performance bonus in stock. Bonuses settled in stock are accounted for as stock-based compensation awards vesting based on a performance condition and are classified as liabilities because they represent a liability settled in a variable number of shares.

See Note 8 - Equity Based Compensation, for additional information on stock-based compensation.

(x) Fair value of financial instruments

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for the sale of an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are required to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market.

Level 3—Unobservable inputs which are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

(y) Equity offering costs

The Company capitalizes certain legal, accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs will be recorded in stockholders’ equity as a reduction of additional paid-in capital generated as a result of the offering. Should the equity financing no longer be considered probable of being consummated, all deferred offering costs would be charged to operating expenses in the consolidated statement of operations.

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(z) Foreign currency

The Company has a branch office in Canada that provides operational support. The functional currency of the Company’s foreign branch is the U.S. dollar. Accordingly, assets and liabilities of the Company’s foreign branch are re-measured into U.S. dollars at the exchange rates in effect at the reporting date with differences recorded as transaction gains and losses within other (expense) income, net.

(aa) New accounting pronouncements

Impact of recently adopted accounting pronouncements

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The update creates an exception to the recognition and measurement principles in ASC 805, Business Combinations. The amendments require an acquirer to recognize and measure contracts assets and liabilities related to customer contracts acquired in a business combination under the guidance in ASC 606, Revenue from Contracts with Customers, rather than using fair value. The Company adopted the new guidance for the fiscal year ended January 31, 2022 and applied the new guidance to the acquisition of Insignia Health, LLC, ("Insignia") which occurred during the year ended January 31, 2022. For the acquisition of Insignia, the Company recognized and measured acquired deferred revenue in accordance with ASC 606. The Company measured acquired deferred revenue as if the Company had originated the related acquired customer contracts. In accordance with practical expedients available in ASU 2021-08, the Company reflected in acquired deferred revenue the aggregate effect of all contract modifications that occurred prior to the acquisition date, and the Company determined the standalone selling price of each performance obligation included in acquired deferred revenue as of the acquisition date. The effect of applying the practical expedients was not significant. See Note 16 - Acquisitions for additional information regarding the acquisition of Insignia.

On February 1, 2020, the Company adopted ASU No. 2016-02, Leases (Topic 842) which requires lessees to record most leases on their balance sheets but to recognize the expenses in their statement of operations in a manner similar to the prior standard. Topic 842 states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term.

The Company adopted the new lease guidance using a modified retrospective transition method applied to those leases which were not completed as of February 1, 2020. As a result, the Company was not required to adjust its comparative period financial information for effects of the standard or make the new required lease disclosures for the periods before the date of adoption.

The Company elected the "package of practical expedients", which permits the Company not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight practical expedient.

The new standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption for all of its leases. This means, for those leases that qualify, the Company will not recognize right-of-use assets or lease liabilities, including existing short-term leases as of the transition date. The Company also elected the practical expedient to not separate lease and non-lease components for its office and computer equipment leases.

Upon adoption of Topic 842 the Company recognized operating lease right-of-use assets and operating lease liabilities related to its office leases of $2,741 and $2,928, respectively. The Company’s accounting for lessee finance and all lessor leases remains substantially unchanged from legacy guidance. The standard did not have a significant impact on the Company's statements of operations or statements of cash flows. No adjustment to accumulated deficit was recorded because the adoption did not change the Company's net assets.

Recent accounting pronouncements not yet adopted

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

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4. Composition of certain financial statement captions

(a) Accrued expenses

Accrued expenses at January 31, 2022 and 2021 are as follows:

January 31,

Payroll-related expenses and taxes $ 10,780 $ 8,946

Payment processing fees liability 3,502 2,853

Acquisition-related liabilities 96 3,386

Accrued expenses for payroll-related expenses and taxes include approximately $7.5 million of liabilities expected to be settled in shares. See Note 8 - Equity-based compensation for additional information.

(b) Property and equipment

Property and equipment at January 31, 2022 and 2021 are as follows:

Useful life(years) January 31,

Depreciation expense related to property and equipment amounted to $14,985, $9,770 and $8,753 for the fiscal years ended January 31, 2022, 2021 and 2020, respectively.

Assets acquired under finance leases included in computer equipment were $27,310 and $19,933 at January 31, 2022 and 2021, respectively. Accumulated amortization of assets under finance lease was $15,025 and $10,389 at January 31, 2022 and 2021, respectively.

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(c) Capitalized internal-use software

For the fiscal years ended January 31, 2022, 2021 and 2020, the Company capitalized $12,830, $7,663 and $5,852 of costs related to the Phreesia Platform, respectively.

During the fiscal years ended January 31, 2022, 2021 and 2020 amortization expense of capitalized internal-use software was $5,664, $5,884 and $4,933, respectively.

(d) Intangible assets and goodwill

The following presents the details of intangible assets as of January 31, 2022 and January 31, 2021.

Useful Life January 31,

Total intangible assets, gross carrying value $ 13,950 $ 3,250

Less accumulated amortization (1,178) (525)

The remaining useful life for acquired technology in years is 3.5 and 4.4 as of January 31, 2022 and 2021, respectively. The remaining useful life for customer relationships in years is 9.2 and 7.7 as of January 31, 2022 and 2021, respectively. The remaining useful life for the license to the Patient Activation Measure ("PAM"®) in years is 14.8 as of January 31, 2022. Refer to Note 16 for details of intangible assets acquired in connection with the acquisition of QueueDr and Insignia.

Amortization expense associated with intangible assets for the fiscal years ended January 31, 2022, 2021 and 2020 was $653, $254 and $238, respectively.

The estimated amortization expense for intangible assets for the next five years and thereafter is as follows as of January 31, 2022:

The following table presents a roll-forward of goodwill for the years ended January 31, 2020, 2021 and 2022:

Goodwill acquired during the year ended January 31, 2021 8,057

Goodwill acquired during the year ended January 31, 2022 25,314

The Company did not record any impairments of goodwill during the years ended January 31, 2022, 2021 or 2020. Additions to goodwill during the year ended January 31, 2022 are net of a $96 measurement period adjustment for the QueueDr acquisition.

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(e) Accounts receivable

Accounts Receivable as of January 31, 2022 and 2021 are as follows:

January 31,

Less accounts receivable allowances (863) (699)

Activity in our allowance for doubtful accounts was as follows for the years ended January 31, 2021 and 2022:

Bad debt expense 454

Write-offs and adjustments (698)

Bad debt expense 212

Write-offs and adjustments (48)

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

(f) Prepaid and other current assets

Prepaid and other current assets as of January 31, 2022 and 2021 are as follows:

January 31,

Prepaid software and business systems $ 3,738 $ 2,322

Prepaid PhreesiaPads — 18

Other prepaid expenses and other current assets 2,151 2,392

Total prepaid and other current assets $ 11,043 $ 7,254

(g) Cloud computing implementation costs

The Company enters into cloud computing service contracts to support its sales and marketing, product development and administrative activities. Subsequent to the adoption of ASU 2018-15 in May 2020, the Company capitalizes certain implementation costs for cloud computing arrangements that meet the definition of a service contract. The Company includes these capitalized implementation costs within Prepaid expenses and other current assets and within other assets on its consolidated balance sheets. Once placed in service, the Company amortizes these costs over the remaining subscription term to the same caption in the statements of operations as the related cloud subscription. Capitalized implementation costs for cloud computing arrangements accounted for as service contracts were $1,514 as of January 31, 2022. Accumulated amortization of capitalized implementation costs for these arrangements was $199 as of January 31, 2022.

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(h) Other (expense) income, net

Other (expense) income, net for the year ended January 31, 2022 was expense of $78, driven by foreign exchange losses, partially offset by other miscellaneous income. Other (expense) income, net for the year ended January 31, 2020 was expense of $1,023 and was composed primarily of loss on extinguishment of debt of $1,073.

5. Revenue and Contract Costs

The Company generates revenue primarily from providing an integrated SaaS-based software and payment platform for the healthcare industry. The Company derives revenue from subscription fees and related services generated from the Company’s healthcare services clients for access to the Phreesia Platform, payment processing fees based on patient payment volume, and fees from life sciences companies to deliver marketing content to its patients using the Phreesia Platform.

The Company accounts for revenue from contracts with customers by applying the requirements of ASC 606. Accordingly, the Company determines revenue recognition through the following steps:

•identification of the contract, or contracts, with a customer;

•identification of the performance obligations in the contract;

•determination of the transaction price;

•allocation of the transaction price to the performance obligations in the contract; and

•recognition of revenue when, or as, the Company satisfies a performance obligation.

Revenues are recognized when control of these services is transferred to the Company’s customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those services.

The majority of the Company’s contracts with customers contain multiple performance obligations. For these contracts, the Company accounts for individual performance obligations separately when they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. The Company determines the standalone selling prices based on our overall pricing objectives, taking into consideration market conditions and other factors, including other groupings such as customer type.

(a) Subscription and related services

In most cases, the Company generates subscription fees from clients based on the number of healthcare services clients that utilize the Phreesia Platform and subscription fees for the Company’s self-service intake tablets (PhreesiaPads), on-site kiosks (Arrivals Kiosks) and any other applications. The Company’s healthcare services clients are typically billed monthly in arrears, though in some instances healthcare services clients may opt to be billed quarterly or annually in advance. Subscription fees are typically auto-debited from client’s accounts every month. Revenue for healthcare services client subscriptions is recognized over the term of the respective healthcare services client contract. The Company’s subscription arrangements are considered service contracts, and the customer does not have the right to take possession of the software. Revenue for related services is recognized as it is delivered if the services are distinct from the subscription service and is recognized over the remaining non-cancelable subscription term if it is not distinct from the subscription service. In certain arrangements, the Company leases its PhreesiaPads and Arrivals Kiosks through operating leases to its customers. Accordingly, these revenue transactions are accounted for using ASC 842, Leases.

The amount of subscription and related services revenues recorded pursuant to ASC 842 for the leasing of the Company’s PhreesiaPads and Arrivals Kiosks was $6,489, $6,312 and $5,985 for the years ended January 31, 2022, 2021 and 2020, respectively.

In addition, subscription and related services includes certain fees from clients for professional services associated with implementation services as well as travel and expense reimbursements, shipping and handling fees, sales of hardware (PhreesiaPads and Arrivals Kiosks), on-site support and training. Certain professional services for implementation are not distinct from Phreesia’s Platform and are therefore recognized over the term of the contract. Revenue from sales of Phreesia hardware and training are recognized in the period they are delivered to clients.

(b) Payment processing fees

The Company generates revenue from payment processing fees based on the levels of patient payment volume resulting from credit and debit card transactions (dollar value and number of card transactions) processed through Phreesia’s payment facilitator model. Payment processing fees are generally calculated as a percentage of the total

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transaction dollar value processed and/or a fee per transaction. The remainder of patient payment volume is composed of credit and debit card transactions for which Phreesia acts as a gateway to payment processors, and cash and check transactions.

The Company recognizes the payment processing fees when the transaction occurs (i.e., when the processing services are completed). The transaction amount is collected from the cardholder’s bank via the Company’s third party payment processing partner and the card networks. The transaction amount is then remitted to its customers approximately two business days after the transaction occurs. At the end of each month, the Company bills its customers for any payment processing fees owed per its customer contractual agreements. Similarly, at the end of each month, the Company remits payments to third-party payment processors and financial institutions for interchange and assessment fees, processing fees, and bank settlement fees.

The Company acts as the merchant of record for its customers and works with payment card networks and banks so that its customers do not need to manage the complex systems, rules, and requirements of the payment industry. The Company satisfies its performance obligations and therefore recognizes the transaction fees as revenue upon completion of a transaction. Revenue is recognized net of refunds, which arise from reversals of transactions initiated by the Company’s customers.