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A Quick Pricing Update On Phreesia’s Upcoming IPO

Illustration of piles of gold coins to represent money

Morning Markets: Yet another tech-ish IPO is making steps towards getting out.

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This week Phreesia filed an updated S-1 with a pricing range, bringing the IPO of the New York-based healthcare technology provider closer to execution.

Phreesia, born in 2005, has raised a known $92.6 million according to Crunchbase data, including a $17 million venture round that took place in November 2017. We’re unsure of what price the company was valued at during the 2017 transaction, but we can get a handle on what the company is hoping for, in valuation terms, with its IPO.

According to Phreesia’s S-1/A filing, the firm is targeting a $15 to $17 per-share range for its debut. Given its provided post-IPO share count, the firm is targeting a $528 million to $598 million valuation interval.

That is, quite obviously, not the largest IPO that we’ve seen this year. I would actually hazard that it is one of the smallest. But, not every company filing has to be a decacorn, and not every firm going out needs to be as rich as Slack. Let’s take a quick peek at Phreesia, and just how big it is.

What Phreesia Does

I wasn’t sure, so I went to its filing and read its own words. Here’s how the company kicks off what it sells:

We are a leading provider of comprehensive solutions that transform the healthcare experience by engaging patients in their care and enabling healthcare provider organizations to optimize operational efficiency, improve profitability and enhance clinical care.

That says nothing, of course, but later on, Phreesia notes that it sells a SaaS service called “Phreesia Platform” that deals with “patient intake” and “payments.” That is simple enough.

According to Phreesia’s website, the firm handles $1.4 billion in payments per year, across 70 million “patient intakes” over the same time interval. I presume that the firm doesn’t handle payment for every visit it provides intake for, given that that would value the average medical visit at $20.

Not in America, ladies and gentlemen.

But on the topic of America, one of Phreesia’s abilities, apart from “Patient Activation” and “Analytics and Reports,” is dubbed “Revenue Cycle.” Ah yes, the real circle of life in American healthcare.

Sticking to the topic of money, let’s talk about Phreesia’s own.

Financial Notes

Phreesia is a SaaS-focused company that generates nearly as much money from “payment processing fees” as it does from “subscription and related services.” The company’s total revenue grew from $79.8 million to $100.0 million in its last two fiscal years (ending January 31, 2018 and January 31, 2019, respectively).

In its most recent quarter (ending April 30, 2019), Phreesia put up $28.3 million in revenue, up just under 22 percent compared to the year-ago period. It managed an operating loss of $4.3 million against that sum, which worsened to a net loss of $6.7 million when more expenses were counted. Taking into account other, share-based costs (“Accretion of redeemable preferred stock”) the firm lost a far-sharper $14.6 million in the three-month period.

Turning to self-reported non-GAAP metrics, Phreesia detailed a falling net retention rate (111 percent to 107 percent over its January 2018 and January 2019 fiscal years, respectively), and a decline into negative EBITDA when comparing its most recent quarter to its more-profitable year-ago equivalent. Those numbers are going backwards.

As you can likely infer from the above, Phreesia is a bit of a puzzle. Its modest revenue growth stapled to, depending how you measure them, mild to worrisome losses, are hard to price. Recall that the firm is targeting a price as high as $598 million, which feels high for a firm that is not even growing 25 percent yearly.

So, why are we talking about the company? Because when the market is hot, all sorts of firms try to go out while they can. I’d guess that that is what Phreesia is up to here.

Phreesia is expected to price on July 17 and trade on July 18. More when we have it.

Illustration: Li-Anne Dias.

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