Good morning, ladies and gentlemen. And welcome to the Phreesia’s Fiscal Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. I would now like to introduce Balaji Gandhi, Vice President, Investor Relations for Phreesia. Mr. Gandhi, you may begin.

Thank you, Operator. Good morning. And welcome to Phreesia’s earnings conference call for the third quarter of fiscal year 2021, which ended on October 31, 2020. Participating on today’s call from Phreesia are Chief Executive Officer and Co-Founder, Chaim Indig; and Chief Financial Officer, Tom Altier; and Senior Vice President, Human Resources, Amy VanDuyn. Following prepared remarks from Chaim, Amy and Tom, we will conduct a Q&A session. A complete disclosure of our results can be found in our earnings press release issued yesterday evening, as well as in our related Form 8-K submission to the SEC, both of which are available on the Investor Relations section of our website at ir.phreesia.com. As a reminder, today’s call is being recorded and a replay will be available following the conclusion of the call. During today’s call, we will make forward-looking statements pursuant to the Safe Harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act, including statements relating to the expected performance of our business, future financial results, our strategy, our partnerships, expected launches of products and services, long-term growth, overall future prospects, including our revenue, costs of revenue and operating expenses, our business outlook for the fiscal years ended January 31, 2021, and 2022, and the impact of the COVID-19 pandemic on our business. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those projected or implied during this call. In particular, those describe in our risk factors included in our Form 10-Q, which will be filed with the SEC later today. You should not rely on our forward-looking statements as predictions of future events. All forward-looking statements that we make on this call are based on assumptions and beliefs as of today and we undertake no obligation to update them as required by applicable law. We will also refer to certain financial measures not in accordance with Generally Accepted Accounting Principles in order to provide additional information to investors. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. A reconciliation of GAAP to non-GAAP results may be found in our earnings release and supplemental materials, which were furnished with our Form 8-K filed after the market closed on December 8th with the SEC. It may also be found on our Investor Relations website at ir.phreesia.com. As a reminder, we are participating on today’s call from four different locations. So we appreciate your patience with us. I will now turn the call over to our CEO, Chaim Indig.

Thank you, Balaji. Good morning, everyone. We hope you are safely navigating the pandemic. Our third quarter results reflect solid performance across our organization. For the fiscal third quarter, total revenue was $38.5 million, up 17% year-over-year. The average number of provider clients was 1,737, up 10% year-over-year. Average revenue per provider client was $17,490, up 5% year-over-year. Life Sciences revenue was $8.1 million, up 21% year-over-year. Adjusted EBITDA was $1.2 million, down approximately $1.8 million year-over-year, reflecting our continued investment in the long-term growth. I want to take a moment to recognize our team’s continued commitment to our clients and their communities throughout the pandemic. In November, their performance was recognized by KLAS Research. In a report based on the firsthand perspective of Phreesia’s clients through the pandemic KLAS rated our patient intake management solution with the highest overall score and the highest COVID-19 response rating amongst 10 vendors evaluated. Specifically, Phreesia was recognized for having the broadest deepest adoption of our various functionalities, including pre-registration, clinical screenings, payments, and eligibility and benefits. I would like to acknowledge our entire team for this latest third-party validation of their important work and the value it brings to healthcare providers across the country. Now turning to an important and planned leadership transition at Phreesia. In conjunction with our earnings report yesterday, we issued a press release announcing the planned transition of our CFO role from Tom Altier to Randy Rasmussen in May 2021. Since joining Phreesia in 2012, Tom has had a meaningfully positive impact across the organization. His impact goes well beyond our strong financial performance and deep into our culture. Tom is retiring from the CFO post after a long and successful career. We are thrilled that he will stay on as a trusted advisor to the executive team.…

Thank you, Chaim, and good morning, everyone. At Phreesia we recognize that our ability to execute on our mission of creating a better more engaging healthcare experience relies on recruiting and retaining individuals, who are committed to and aligned with that mission. We are committed to creating a diverse equitable and inclusive environment for all regions. As we organize our efforts to begin to publish ESG data, our leadership team and Board determine that gender equality should be the first area we address. We will continue to prioritize and invest in our inclusive culture, Board representation, pathways to leadership for women, pay equity and strong family leave policies. After researching the universe of reported gender equality data, we determined that in order to provide objective, transparent and comparable data, we would follow a widely known and accepted framework for reporting, the Bloomberg Gender Equality Index. Here are some highlights from the Phreesia 2020 Gender Equality Report covering our fiscal year ending January 31, 2020. Women make up 50% of our employee base, 44% of employees in our top take quartile are women, 42% of senior management are women, 56% of middle or upper management are women, 49% of revenue producing roles are held by women, 51% of employees promoted during the fiscal year were women and 91% of women who return from parental leave between February ‘18 and January ‘19, remained employed 12 months after their return. Please note that this data covers all of our U.S. employees and excludes about a third of our employee population who are based in Canada. The full 2020 Phreesia Gender Equality Report is available on the About Us section of our Investor Relations website at ir.phreesia.com. The data and the report covers all of the information required by Bloomberg for inclusion in its Gender Equality Index, which is updated annually. We encourage you to review the report and follow-up with Balaji if you have any questions. I will now turn the call over to Tom.

Thank you, Amy, and good morning, everyone. I will review the income statement, balance sheet and cash flows for the fiscal third quarter and comment on our outlook for the remainder of fiscal 2021 and fiscal 2022. First, revenue in the third quarter. Total revenue was $38.5 million, up 17% year-over-year. Subscription and related services revenue was $17.5 million in the quarter, up 20% year-over-year, primarily due to new provider clients and expansion of existing provider clients. Payment processing fee revenue was $12.9 million in the quarter, up 12% year-over-year, as patient visit trends recovered to pre-pandemic levels during the month of September and were sustained through the end of the quarter. Provider revenue, which combines revenue from subscription and related services and payment processing fees was $30.4 million, up 16% year-over-year. The two drivers of the 16% provider revenue growth were average provider client growth up 10% year-over-year and average revenue per provider client up 5% year-over-year. Our client growth was stronger than recent quarters reflecting increased demand for our offerings. Life Science was $8.1 million in the quarter, up 21% year-over-year. Our Life Science results reflect both strong execution on delivering more messages for existing campaigns and solid demand for new campaigns. Moving on to expenses, I will review several expense line items on an adjusted non-GAAP basis which excludes stock compensation expense from each line item. Please note that for a full reconciliation of GAAP to non-GAAP measures including the adjusted EBITDA is included in our earnings press release and our Form 10-Q to be filed with the SEC. Cost of revenue was $6.3 million or 16.3% of total revenue, up 310 basis points year-over-year and reflecting our continued ramp-up in the client services organization during the quarter to support our growth. Sales and marketing expense was…

Thank you. [Operator Instructions] Your first question comes from the line of Anne Samuel with JPMorgan. Anne, your line is open.

Hi. First I’d like to offer my congratulations to Tom on your upcoming retirement.

Thanks, Anne.

You have recently quantified the acute market opportunity in some of your presentations and I was just wondering how we should think about, how that’s going to contribute to growth going forward? Is that part of why you think you can exceed 20% next year or should we just think about this is more providing a longer tail for growth?

Anne, the way we have been talking about is, it is one of our growth drivers and it gives us a little bit more comfort in being able to provide guidance moving forward. But it -- this to us is a multiyear driver of growth, not just next year. So I think this helps us continuously hit our growth objectives, while providing for a comprehensive solution to a broader set of clients.

That’s great. And then maybe one more, the competition of your provider growth was just a little different this quarter. You saw really strong growth and provider clients, but the revenue provider client was just a little bit lower than historical. So I was just wondering is that maybe COVID or is there any nuance to that?

The way I like to think about it is, our sales team and our implementation team just really focused on getting out in front of people that needed our solution. And we are really heads down and focused on getting Phreesia in the hands of providers and patients that needed to be able to do their jobs to treat patients and we had an unexpectedly strong quarter on provider growth.

Great. Well, congrats on the nice quarter guys.

Thank you. Good luck.

Your next question comes from the line of Ryan Daniels with William Blair. Ryan, your line is open.

Yeah, guys. Thanks for taking the question. I guess one is just around the increasing R&D spend. Can you highlight any particular areas in the existing products suite or maybe moving into acute that you are focused on investing in on a go-forward basis?

I -- hey, Ryan. I think the best way for us to think about it is, we will continuously communicate to all of our investors and the market where we are actively investing. And as we have visibility, as we have clients in those -- in using those products. As we understand how will we add value and drive ROI, we are continuously committed to informing our investor base on those new products and we will only do it after we have people using the product, right? It’s really…

Okay.

… across all the areas that we have been actively communicating.

Okay. Fair enough. And then as we look out to the coming fiscal year, obviously nice that you guys are willing to provide the 20% to 25% guidance. So a couple of questions on that. Number one is, what are the underlying assumptions in the market, is that just kind of pre-pandemic normalcy in your customer base. And number two, just what gives you the comfort, even before the fiscal year ran to provide that guidance, is it just the strength in new implementations, et cetera? Thanks.

We -- when you talk about guidance, you are talking about next year or just some clarification, Ryan, are you talking about for the end of the year or…

For ‘20….

For 2021?

Yeah.

For 2022. Okay.

2022 the 20% to 25% guidance?

Look, we think it’s really important for us as an organization to be able to set the appropriate expectations and guide rails around growth. We have also very clearly articulated that there are some COVID disclosures. So I can’t tell you what will happen with COVID in the future. But we think we have provided ample disclosures should that provided any massive change. Balaji, did I answer that properly?

Yes. Yes. Our guidance is not sort of some kind of prognostication on the pandemic. It’s just based on what we know now?

Okay. And if I can squeeze one more and just Tom first congratulations and then -- any color…

Thank you.

… more view on the retirement and just how long you are going to stay on as an advisor? Thanks and congrats.

Thanks, Ryan. Yeah. I will be CFO until May 1st and planning on staying on as an advisor. I don’t want to say indefinitely but for a certain period of time. We haven’t worked it out exactly yet. I am just real confident that Randy is going to be able to take the reins of the CFO position. He has a lot of experience in public companies including SAP and Metadata, and he’s been -- he will have two 10-Ks under his belt and I am very confident of his abilities in going forward. So we are really looking forward to the transition.

Your next question comes from the line of Sean Wieland with Piper Sandler. Sean, your line is open.

Hi. Thank you. I will add my semi-congrats to Tom for your semi-retirement. Tom, are you going to be signing the 10-K and…

Yes.

Okay. And with you staying on for a little while, is that going to be a full-time role or part time?

I think it’s part time special projects that kind of thing.

Got it. All right. And then so my question is, in the payments margins, you cited investments as we capture growth opportunities -- oh, I am sorry. I got two calls going on here. Decline in payment margins investments as we capture growth opportunities. What investments and what growth opportunities are you seeing in the market?

Wait. So was that for our call or for the other call.

Yeah. That was for your call.

Okay. Just checking. So look we are investing across the Board, right? Our general thesis is, we want to capture unfair share of market. We see a fair bit of demand and so we are hiring as, in our SDR program we are hiring. We are growing our sales organization. Our implementation teams, our customer success teams and very specifically our engineering teams, and all of the -- all the resources to support those, we expect all of those parts of our organization to materially grow significantly.

Awesome. Thank you.

Thank you.

Your next question comes from the line of Donald Hooker with KeyBanc. Donald, your line is open.

Great. Good morning. So, I guess, I will push my luck here a little bit and ask this question you may not answer, but I will take a shot. Last quarter you provided a little bit of an update in quantification of your exposure to the hospital space. I mean, I saw you had a very nice net client add on the quarter. I mean, are we seeing -- can you maybe give us a little bit of quantification in terms of what hospitals are as a percent of your client base or revenues or anything there, because it sounds like an interesting opportunity to lay it out, I am sure it’s small but just curious.

So, what I will say is that, our sales organization has been doing a phenomenal job as has our all the other parts that are working with and implementing on our hospital opportunities. And our crack communications team, who I know is listening right now, will absolutely communicate where appropriate any of our hospital wins. They are in charge. They are not Tom or I in how we communicate any of the successes we have in the hospital space.

Okay. Fair enough. And maybe again you might not want to answer these questions. I am going to push on some details, but that’s fine I understand. But it’s been a tumultuous market obviously for your clients. The physician practice is out there. It feels like things are getting better. Can you maybe update us directionally or with numbers or whatever you are willing to do in terms of how your clients in terms of revenue retention, attrition, anything like that, obviously, a great revenue growth net. But just curious if -- just given all the changes in the marketplace that you are selling into, how some of those typical metrics are holding up attrition and revenue retention?

So, look, I want to be very thoughtful, because our clients as much as they focus or they have to pay attention to revenue. The thing that they are most focused on right now is treating their patients. And as much as for the last quarter when we reported a lot of visits have come back. I think a lot of them are acutely aware of their communities in the rise of COVID-19 in their communities and the impact it’s having on their patient populations. So I think their number one focus is organization is making sure they think about and treat their patients where appropriate in all environments. And that’s a very tough situation and I am very lucky that I get to work with organizations like that and being able to care for patients and I know everyone else at Phreesia feels the same that it is very much mission aligned. Tom, if you want to talk about anything else around that?

Yeah. Just specifically to answer the question, we are not seeing any significant difference in the rev retention numbers as a result of COVID.

Okay. Thank you so much and congrats, Tom. Bye.

Yeah. Thank you.

Your next question comes from the line of Ryan MacDonald with Needham. Ryan, your line is open.

Good morning. Thanks for taking my questions, and Tom, congratulations. I guess just starting out. You talked about patient visit volumes obviously trending back to pre-pandemic levels through the end of the quarter. We would just be curious to understand what you are seeing sort of through the month of November to the extent you can provide some clarity, as we are starting to see shutdowns again with another wave of cases coming?

Why don’t I -- Tom I will jump in and you could clarify? I don’t think we provide any level of near-term updates on visit volume on this -- in this forum. If we do, we have our team that works closely with the Commonwealth Fund and the Harvard -- and Harvard on publishing and it’s all focused on shaping the public policy debate. So just from our standpoint, I think, we haven’t and we will continue to not give color on visit volume in real time in this forum.

Sounds good. And as a follow-up or maybe a different view on sort of as you are looking into calendar ‘21, we are a couple months away obviously from -- hopefully from the mass distribution of the vaccine. Assuming that sort of hospitals and clinics providers are the ones that are managing the distribution. Is there an emerging use case or demand for the Phreesia platform and zero contact intake to help manage, obviously, probably, we see a sort of a strong increase in patients visiting clinics and hospitals to help manage the flow of patients during that distribution process at all? Thanks.

So, I will say that, we have been and will continue to work actively with the breadth of our clients including some of the major health systems and states that have been mandated with responsibility with some of the vaccine distribution. I know of our teams working with those clients. And anything we can do, we are committed to helping our clients help their patients and that’s always been part of our mandate as an organization and it’s what gets us excited to do the things we do every day. So I -- and I wouldn’t pencil in any type of revenue opportunity on that. I would pencil in that this company continues to do the things they say they are going to do, which is drive towards a mission.

Thanks.

Your next question comes from the line of Stephanie Davis with SVB Leerink. Stephanie, your line is open.

Thank you. Tom congrats on a well-deserved retirement. Randy congrats…

Thank you.

…on new seat and Chaim, biggest congratulations for getting out of a New York City lease, not an easy feat. So good work there. Now, you have been putting up consistent outperformance in the Life Sciences business for a few quarters now. I was hoping we could take a step back and see if there’s any dramatic changes that’s accelerated your traction there, either in the market or in your offering?

So, why don’t I first clarify, we did not get out of our New York City lease. We have just let it expire and we hadn’t signed a new lease, because we hadn’t found space that was cost effective for us before the pandemic hit. But just want to clarify we are not -- we didn’t get out of it and our landlords have been wonderful for the decade that we were there. So when it comes to Life Sciences. I think we communicated this on previous calls. We have continuously increased our investment with the Life Sciences team and that team has done just a wonderful job of being very collaborative with our Life Sciences clients being able to provide a phenomenal amount of value throughout not just this pandemic but pre-pandemic and building trust relationships with new and existing clients. We have also significantly invested in it and we expect that to be an area of continued investment in the future across the spectrum of that organization from sales to content creation to data science and product. So we are very pleased with the results that that team has continuously put out and the impact it has on our mission and the company culture.

And is it safe to read through given this outperformance during lower visit volumes during the pandemic that as things start to go back to normal next year you could see even further of an uptick there?

I don’t think in this world anything is safe. So what I can say is I feel very comfortable that we have a phenomenal group of people that will continue to do their best to deliver great product and a great value and drive great results for our clients. And if we continue to do -- if we as an organization continue to do the right thing and drive towards our mission, I think, we are in the best shape that any company could be.

Sounds good. Thank you.

Thank you.

Your next question comes from the line of John Ransom with Raymond James. John, your line is open.

Good morning. I am not on any other calls. But have you…

All right. Good morning, John.

Okay. Good morning. So Life Sciences we heard some feedback that maybe that business won’t be flat for the next 50 years. So you are a little more optimistic there. So what’s the change?

Well, I can’t commit on the next 50 years, because I think Tom will be 131 at that point. What would you -- how old would you be at that point, Tom?

That’s…

Probably 100 or less, probably 110, so I am not….

121.

All right. Tom will be 121. All right. So look what I can say is that we had a thesis that if we made the right investments with the right team and leadership, we would be able to produce results. When we got comfortable that we were producing some of those results with David at the helm and a lot of the investments we made. We felt more comfortable being able to talk about it a little bit more to the public markets. And what I will say is, we are going to keep making those investments, because we think that it returns very well to us and our investors and to our clients. So I will guess communicate that we will continue to make investments when we think that that capital will return to us in the investor base.

Okay.

Your next question comes from the line of Hannah Baade with D.A. Davidson. Hannah, your line is open.

Hi. Thanks for taking the question and I extent my congrats to Tom on retirement as well. As you enter the acute care market, could you compare and contrast the length of the sales cycles between ambulatory and acute? And have you devoted SDRs solely to the acute sales motion?

So what we have done is, we -- and I have communicated this in the past, is we mostly focused on health systems that have both hospitals and acute facilities in ambulatory. And we have SDRs that are focused on calling on those health systems. We believe in the early stages of the hospital market, we are mostly going to be focused on hospitals where we have or could have ambulatory footprint also, a -- creating a common front door for that patient experience.

Great. Thank you. And obviously, you have an incredibly strong cash balance sheet post the follow on. Could you provide some clarity on your plans to use this and if your overall capital allocation strategy has shifted in any regard since the IPO? Thank you.

Well, I am still cheap and I will probably always stay cheap. So from a capital allocation, we still think about it very like each dollar being very precious to us and we want to allocate it appropriately. And so, in general view we have as an organization is, is it going to materially return value to us and our clients and our investor base, and our employee population. And if it does those things and helps with the mission then we feel comfortable utilizing it in the near-term. I think, we -- Tom has communicated that we will increase our investments across the Board and then, I think, that’s all I can say about that. Well, that answers is that right?

Yeah. I think that’s an appropriate answer.

Okay.

Your next question comes from the line of Sean Dodge with RBC Capital. Sean, you line is open.

Thanks. Good morning. Maybe on the provider, Tom, you have highlighted the strength. Can you give us a sense of those new ones you added in the quarter, what proportion came from the existing clients that you are expanding in and how many were net new or I guess and I will call like new logos for you?

Well, so why don’t I provide some clarification? Those would be all new logos. So if you add to that number, it is a new client. So it wouldn’t be an expand client. That -- am I providing enough color?

No. Okay. That’s a good clarification. So you have got a -- I don’t know, a multi-site, multi-specialty practice, if you add one site that’s one, if you add all eight sites that’s still one, but that’s just accretive to the average revenue for that client. Is it…

Yeah.

… my interpretation correct?

You got it.

Okay.

Yeah.

Got it. Okay.

That just the interpretation site, I think, we actually sold it out in a bunch of our documents too.

Got it. Okay.

Tom, is that right?

Yeah. Yeah. That’s correct.

You can actually see it in the S1. I think there is a whole section on explaining exactly what that metric is.

All right. Then the lease expiration, can you give us a sense of the savings you have realized there and then it looks like the lease for the Ontario offices also expires in 2021. It is virtualization New York something we should expect maybe happen more company-wide or is this just specific to New York?

Yeah. So I would not pencil in any savings, because based on the research that Amy, myself and a bunch of other executives have done, going virtual shouldn’t be viewed as a cost savings metric. It should be viewed as a way to operationalize and run your business. We do expect to spend some of that money and bring in collaborate -- bring our people together and collaborating. I don’t think the goal is, this is a no way shape or form at cost saving move. It is a move on how we operate the company during this period. And you should expect a change in our lease footprint in Ottawa moving forward. But we will probably still have a physical presence there for a bunch of legal reasons and I think our people there do need to actually go in first, some people need to go into a footprint. Amy, did I get that right?

Yes. That was a great response.

Okay. All right. Thank you.

Thank you.

Your next question comes from line of Scott Schoenhaus with Stephens. Scott, your line is open.

Thank you. Hey, Chaim and team. My first question is on your current sales pipeline, if you could provide us the proverbial color there? If your sales team also had to realign strategies to go after a certain mix of clients as a result of COVID and the now the pending vaccine? Thanks.

So what I can say about our sales pipeline is I am ever really ever going to give information about it. But I can say our sales team is doing a phenomenal job at working with prospects and existing clients on making sure that they are talking about and articulating and helping them in any way shape or form through the sales process. And it is a phenomenal sales organization that when I was starting my career, I would have beg to join. And if any of folks that would love to join the phenomenal sales organization please send them to Balaji, because we are actively recruiting and it is a great place for people to grow their career.

Great. Just a follow-up and it’s kind of a follow-up question on the guidance for your -- out year fiscal ‘22 revenue growth. Could you provide any color time on more broadly maybe on the mix between provider client versus revenue provider growth in that growth rate that you guided to? Thanks for the time and congrats Tom on the retirement as well.

Thank you.

No problem. I would actually let Tom answer that question, because I think it’s his turn.

Yeah. So we did have outsize provider client growth in the third quarter. I think your question was around fiscal ‘22 and I would expect the growth percentages to moderate back toward what we were doing pre-pandemic, maybe not all the way there but head in that direction. So if that answers your question.

It does. Great. Thank you.

Thanks.

And hey, Tom, just to maybe clarify a little bit more on that question, could we see some fluctuation in terms of quarter-to-quarter?

Yeah. Yeah. You are going to see some fluctuations quarter-to-quarter, as Balaji mentioned.

Your next question comes from the line of David Larsen with BTIG. David, your line is open. David, if you are on mute, please unmute. Your line is open.

Sorry about that. Congratulations on a pretty good quarter, guys. Can you maybe talk about your sales force? How many sales guys do you have now? I know some of them were kind of focusing on other areas of the business during the pandemic, are they all now sort of fully ramped back up? Thanks.

No problem. So, first, I want to clarify, we have both sales guys and sales women in our organization and Amy could happily give information on our view on gender diversity if you ask her about it. And the sales organization has -- we did actually move a bunch of the folks that were doing cross-sell into the new sales team, just because of prioritization and focus of our clients. So, hey, Tom, how many sales people do we got now?

Yeah. We are -- excluding SDRs, we are about 40 right now.

Yeah. And I think we are at 100-ish SDRs and we don’t really hire those roles in December for obvious holiday reasons.

Okay. And then can you maybe just talk a little bit about pricing, obviously, not getting too specific. But I mean it looks like your payment processing fees, pretty good sequential increase despite the concerns around COVID subscription-related services. There was talk about a potential air pocket earlier in the year. It looks like there’s no air pocket. So are you getting any pushback on pricing at all or not really and folks just sort of want to implement this and deploy and be as productive as possible.

So the way I like to think about it is like, is the pre-pandemic slide at least once a week -- every week for years. I like to think about it as when the pilot gets on and says we might be hitting an air pocket, a really good pilot likes to try to fly around those air pockets to create as little amount of turbulence as possible. And what we have done is tried to steer around as much as possible, while be able to deliver as much value to our client base as possible. And so what we are continuously doing is moving around where the team is focused on. We have very tight operational meetings and a phenomenal group of operators in the organization that are continuously on a weekly basis watching how we are doing and continuously figuring out and titrating where to put the appropriate resources. And I think that’s the benefit of having a tenured management organization that understands the team and I don’t think we would be where we are with such -- without such an amazing group of senior leadership.

Okay. And then just with respect to pricing, like are you seeing any other solutions built within other ambulatory EMR products that are now competing with fears that are putting downward pressure on price or is that or have you not really seen that?

I think we have and always will see competing solutions, especially when you have most of the market just being paper. But we haven’t seen that cause massive downward price pressure. The thing that’s probably affecting price pressure pricing more than anything else is just the realities of what’s happening in the world and I don’t think -- and I don’t even see that as being the biggest something that we have encountered heavily.

Thanks so much. Appreciate it.

Your next question comes from the line of Daniel Grosslight with Citi. Daniel, your line is open.

Hi, guys. Thanks for taking the questions here. Obviously a pretty phenomenal result in terms of the number of providers added this quarter. I was wondering if you can provide a little more detail on those providers. Are these folks that you had had initial conversations with kind of earlier in the year and just held off on really pulling the trigger because of COVID and now they are doing it or are these conversations that more recently started? And going forward into 2022, do you expect most of the ads for providers still to be folks that you had started conversations with during the pandemic and just held off on buying a new solution?

So I like to think of the world as, we are always talking to as many practices and health systems and groups as possible and we have been talking to them for 16 years. And we are communicating with them through all different channels and sometimes it’s with SCR and sometimes it’s with our marketing tools and it’s not if, it’s just when they become Phreesia clients. And so, some of these folks we have been talking to for a decade, some of them we have been talking to for three months and it spans the gamut of size, complexity. But we are -- our goal is to actively be in front of as many groups as possible, in many different ways as possible as cost effectively. And you have our commitment that we are going to keep doing that and that allows us to continuously titrate and make sure that we are able to do as much as we can for those practices.

Got it. Okay. And on the increased investments that you are going to make going forward, how much of that do you expect will flow through the income statement and how much will be will be capitalized?

Tom?

Yeah. You have got both components. I can’t give you an exact breakdown. The capitalized costs will be mostly data center. But -- and capitalized software costs. So those are the two big cap expenditures going forward. But the rest will flow through the income statement.

Okay. But we should see a step up in CapEx going forward?

Yeah. You are going to see it in data center and in caps off from both of them.

Yeah. Got you. Okay. Thanks. And I will add my congrats to Tom on your retirement and Randy on your expanded role. Thanks guys.

Thanks a lot. Appreciate it.

Sure.

And we have time for one more question. We do have a follow-up from John Ransom with Raymond James. John, your line is open.

Hey. Just to go back one more Tom on Phreesia hospital ground. Maybe you put your finger on what’s changed the hiring that I am exciting about the opportunities move really quickly. And I don’t know you guys are mostly circle back, so can you kind of put your finger on what’s changed? And secondly, are these hospitals are coming from locations where you are already generally intakes are there and you are fully positioned those [inaudible] versus you ran additional?

So if I -- you trailed off John a little bit at the end. So I think what I heard was that, are we mostly selling to hospitals that are already ambulatory clients? Is that right? And is the…

Yeah.

…sales type…

Is this better. I take off my little headset…

A lot better. I could hear you now.

Yeah.

That’s great.

Yeah. So the two things, what do you think changed? I mean something kind of changed over the summer where the opportunity accelerated. And then secondly are these new friends and new places are these mostly warm leads from places where you are already handling the physician side of it?

These are -- so what I will say is, they are mostly places, where we have had success on the physician side and that’s where we tend -- we are tending to focus. And I don’t know if I want to say that it’s accelerated or not accelerated in the hospital environment. I think we are just now ready to talk about it. We have been investing in it for years and we…

Yeah.

… expect to continue to invest great amounts for years to come in the future. And I think the hospital space is a really tough space but one that the patient experience and intake and everything around that has a ton of areas of improvement. We are really excited to be able to be working with clients in that space.

Great. That’s all for me. Thank you.

Great.

This concludes our question-and-answer session. I will now turn the call back over to Chaim Indig for closing remarks.

I just want to say congratulations to Tom and Randy, and wish everyone on this call with listening a happy holidays and a happy New Year and to please stay safe and I can’t wait to see all of you hopefully in the New Year well vaccinated. All right everyone. Have a great one.

Ladies and gentlemen, this concludes today’s conference call. On behalf of Phreesia, thank you for participating. You may now disconnect.