Phreesia, Inc (PHR) Q4 2021 Earnings Call Transcript

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Phreesia, Inc (PHR -5.12%)
Q4 2021 Earnings Call
Mar 31, 2021, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and welcome to the Phreesia Fiscal Fourth Quarter and Full-Year 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.

Balaji Gandhi -- Senior Vice President, Investor Relations

Thank you, operator. Good morning, and welcome to Phreesia's earnings conference call for the fiscal fourth quarter of 2021, which ended on January 31, 2021. Participating on today's call from Phreesia are Chief Executive Officer and Co-Founder, Chaim Indig; Chief Financial Officer, Tom Altier; and Senior Vice President of Marketing and Business Development, Michael Davidoff. Following prepared remarks from Chaim, Michael and Tom, we will conduct a Q&A session.

The 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 within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements.

Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control, including, without limitation, statements about our future financial performance, including our revenue, cash flows, cost of revenue and operating expenses, our anticipated growth, our predictions about our industry, the impact of the COVID-19 pandemic on our business, and our ability to attract, retain and cross-sell to healthcare provider clients.

These statements are also subject to other risks and uncertainties, including those more fully described in our filings with the SEC, including in our Annual Report on Form 10-K that will be filed with the SEC later today. The forward-looking statements made on this call speak only as of the date on which these statements are made. We undertake no obligation to update and expressly disclaim the obligation to update any forward-looking statements to reflect events or circumstances, or to reflect new information or the occurrence of unanticipated events except as required by 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 press release and supplemental materials, which were furnished with our Form 8-K filed after the market closed on March 30th with the SEC, and 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.

Chaim Indig -- Chief Executive Officer and Board Member

Thank you, Balaji. Good morning, and thank you for your interest in Phreesia. Our fourth quarter reflects continued solid performance. Total revenue was $41.8 million, up 27% year-over-year. The average number of provider clients was 1,808, up 13% year-over-year. Average revenue per provider client was $17,858, up 7% year-over-year. Life sciences revenue was $9.5 million, up 58% year-over-year.

Adjusted EBITDA was negative $85,000, a decline of $1.4 million year-over-year, reflecting our continued investment in long-term growth. Our performance over the past year was truly a team effort. There are two unique aspects of the past fiscal year that I would like to highlight and acknowledge.

First, the transition to remote work. From the earliest days of the pandemic, everyone at Phreesia has had to adapt to full-time remote work, often in the same living space as their roommates or families who are working or learning remotely as well. This has allowed us to continue to grow our team to over 800 folks who worked tirelessly for our clients and their communities.

Our team grew 55% in fiscal 2021, with growth spread across all areas of our organization, service and support, sales and marketing, research and development, and G&A. The recruitment and onboarding of hundreds of new team members in the pandemic environment was particularly challenging. There is no playbook to draw from. Our human resources team and managers across the organization adapted to the new environment by testing new approaches to recruitment and onboarding that we believe will strengthen our processes going forward. We will continue to invest and learn together as we adapt our Company to a permanently remote-first environment

Second, the development of new solutions, such as our COVID-19 screener, intake for telehealth, and vaccine delivery management, all of which were not part of our near-term product roadmap when we entered fiscal 2021. These modules are helping our clients operate safely and efficiently through the pandemic. We saw significant client growth with our average provider client count in the fourth quarter increasing by over 200 clients year-over-year. These clients range from small ambulatory practices, who are on-boarded quickly to large health systems that engaged us and will likely look to expand their relationship with us over time. We will continue to invest across the organization to support our work with all the new and existing clients.

Finally, we grew through acquisition. In October 2020, we integrated two web-based workflow applications co-developed by Geisinger and Merck that focus on patient communication and medication adherence, respectively. In January 2021, we acquired QueueDr, an innovative company in our space who we have known for six years. Both of these additions to Phreesia were led by our operating executives.

I have asked Michael Davidoff, our SVP of Marketing and Business Development, to join us today to provide an overview of the QueueDr acquisition. Michael?

Michael Davidoff -- Senior Vice President, Marketing and Business Development

Thank you, Chaim, and good morning, everyone. QueueDr was founded in 2013 by Patrick Randolph. Patrick and his team set out to address the need for providers to reduce patient appointment cancellations and no-shows, and ultimately accelerate patient access to care. According to industry data, cancellations, reschedules and no-shows can reduce a provider's revenue by over 20%

What attracted us to QueueDr was the set of high-value SaaS features that will expand the value of our appointments-based offering. QueueDr's software is designed to identify patient appointment cancellation and no-shows, and automatically fill those gaps in the schedule by pulling forward future patient appointments. We tracked QueueDr's progress in this space for many years and determined that it would take too long to replicate it through internal development.

In addition to QueueDr's strong product offering and cultural fit, roughly one-third of QueueDr's clients are existing Phreesia clients, which we believe speaks to the complementary nature of our product.

As we indicated in our earnings press release, the total consideration for the acquisition consists of $5.8 million in cash paid on the acquisition date, $2.1 million of liabilities incurred, and $2.2 million in performance-related contingent payment. Over time, we believe the underlying QueueDr technology will enhance our employment-based solution and the overall value of the Phreesia platform to healthcare providers and patients.

I'll now turn the call back to Chaim.

Chaim Indig -- Chief Executive Officer and Board Member

Thank you, Michael. Before handing it over to Tom for his final quarterly review of the financials, I would like to acknowledge Tom's contributions to Phreesia. Tom joined us in 2012 and brought with him half a century of experience in public accounting and growing technology businesses. He played an important role in our successful transition from a small venture-backed company to the Phreesia that was introduced to all of you through our IPO in 2019.

I speak for the entire Phreesia team, including our Board of Directors, in thanking Tom for his contributions and wish him and his family all the best as he begins his next chapter in semi-retirement at the end of April. Going forward, we will also benefit from his experience in a new advisory role, and I will continue to enjoy his friendship. Tom?

Tom Altier -- Chief Financial Officer

Thank you, Chaim, and good morning, everyone. I'll review the income statement, balance sheet and cash flows for the fiscal fourth quarter, and then update our outlook for fiscal 2022.

First, total revenue was $41.8 million, up 27% year-over-year. Subscription and related services revenue was $18.8 million in the quarter, up 25% year-over-year. Payment processing fee revenue was $13.4 million in the quarter, up 15% year-over-year, reflecting a continued recovery in patient visit trends, but still slightly below pre-pandemic levels.

Provider revenue, which combines revenue from subscription and related services with payment processing fees, was $32.3 million in the quarter, up 21% year-over-year. The two drivers of the 21% provider revenue growth in the quarter were average provider client growth of 13% year-over-year and average revenue per provider client up 7% year-over-year.

As we indicated last quarter, provider client growth has been trending higher reflecting increased demand for our offerings. That being said, our land and expand go-to-market strategy tends to result in quarter-to-quarter variability between the contribution of client growth and revenue per client. This has been the case for many years as our historical results show.

Life sciences revenue was $9.5 million in the quarter, up 58% year-over-year. Our team continues to execute on closing new business and delivering messages to very-targeted patients.

Now, let's move on to expenses. I will review several expense line items on an adjusted non-GAAP basis, which excludes stock-based compensation expense from each line item. Please note that a full reconciliation of GAAP and non-GAAP measures, including adjusted EBITDA, is included in our earnings press release and our Form 10-K to be filed with the SEC.

Cost of revenue was $6.8 million or 16.2% of total revenue, up 320 basis points year-over-year. The year-over-year trend reflects the ramp-up we discussed last quarter in our client services organization to support our growth. On a sequential quarter basis, cost of revenue as a percentage of revenue was down 10 basis points.

Sales and marketing expense was $12 million or 28.7% of total revenue, up 530 basis points year-over-year. The increase reflects the accelerated investments we previewed earlier in the fiscal year to support our current and future anticipated growth.

Research and development expense was $5.9 million or 14% of total revenue, up 10 basis points year-over-year as a percentage of revenue. Note that we expect the pace and level of investment in R&D to accelerate over the next several quarters, and dollars will be allocated across the existing platform as well as into new products and solutions.

General and administrative expense was $9.5 million or 22.8% of total revenue, down 180 basis points year-over-year as a percentage of revenue. We continued to ramp up public company expenses, particularly in finance and legal, and we expect to begin to see operating leverage in the fourth quarter of fiscal '22.

Payment processing expense was $7.8 million, up 12% year-over-year. Payment processing margin was 42%, up 120 basis points year-over-year due to the mix of transaction type and lower cost routing of payments. Longer term, we expect payments margins to return to the 40% range with a quarter-to-quarter variability due to transaction-type mix and interchange fees.

Adjusted EBITDA was a loss of $85,000, a decline of $1.4 million year-over-year. The decline is largely due to the acceleration of investment across the Company, but most notably in sales and marketing in the fourth quarter as we capture the growth opportunities we are seeing in the market.

Shares outstanding as of March 26th was 44.9 million. Cash on the balance sheet at January 31st was $218.8 million, down $35.3 million from October 31st. However, we paid down our $21 million revolver in the fourth quarter. Cash flow from operations from the quarter was $4.1 million compared to $1.3 million in the prior-year quarter.

Capital expenditures for the quarter were $7.5 million, up $4.3 million year-over-year. The significant increase reflects our ramp up in data center equipment purchases and capitalized software to support our growth.

Our outlook for revenue growth in fiscal '22 remains 20% to 25%, which translates into a revenue range of $178 million to $186 million. We expect our overall cash outflow to increase in fiscal '22 compared to fiscal '21, as we continue to ramp up hiring and infrastructure across the organization to support our anticipated growth.

In closing, the past eight years with Phreesia have been an incredible journey and I'd like to thank Chaim and the entire Phreesia team for their partnership and support, and I wish the best to Randy and the finance team members who have been so dedicated to our mission and growth over the years.

We're ready to take your questions. Operator?

Questions and Answers:

Operator

Thank you. At this time, we will be conducting our question-and-answer session. [Operator Instructions] Your first question comes from the line of Ryan Daniels with William Blair. Ryan, your line is open.

Jared Haase -- William Blair -- Analyst

Yeah. Good morning. This is Jared Haase in for Ryan. Thanks for taking the questions. Just wanted to ask maybe a quick one to start on the life sciences revenue. Obviously, that was strong again, both on a year-over-year basis as well as sequentially versus last quarter. And I think last quarter you talked about kind of continuing to make some investments. So, maybe feeling a little bit better about the team and then kind of where that product line is positioned in the marketplace.

So just curious if the strength here this quarter has more to do with any sort of seasonality factors, thinking maybe year-end budget flush with pharma clients? Or is it really just kind of continued execution with the sales team, and then just a really strong demand environment?

Chaim Indig -- Chief Executive Officer and Board Member

Good morning. And I love talking about our life sciences org. What I'd say is that it's just execution. I want to -- as much as I'd love to be able to point to a one-time seasonal thing like at the end of the day, the team has just been doing a really good job of really focusing on clients and making sure that we deliver phenomenal value and strong ROIs, and are clearly articulating our value.

Jared Haase -- William Blair -- Analyst

Got it. Yeah. Thanks for that. And that's good color. And then I guess just maybe a bigger picture question, kind of thinking more longer term. Given all the things that have kind of changed from a demand perspective over the last year or so and the product lines that you have developed, as well as the pace of hiring and the way in which you've kind of transformed the cost structure a little bit, is there any reason to think about any sort of meaningful difference in your longer-term margin targets for the business, or do you still feel like eventually getting to maybe 20% adjusted EBITDA margin is the right sort of longer-term target?

Chaim Indig -- Chief Executive Officer and Board Member

That's still the right target for us. I know -- I think the only thing we've done is increased our investment levels to support what we see as our ability to grab unfair share of market. We're very enthused. This is my excited voice. We're very enthused about the reaction and feedback we're getting from our client base, and we're going to keep leaning in, in investing to capture that share.

Jared Haase -- William Blair -- Analyst

Okay. Great, thanks for that.

Chaim Indig -- Chief Executive Officer and Board Member

Cheers.

Operator

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

Stephanie Davis -- SVB Leerink -- Analyst

Hi, guys. Thank you for taking my questions, and congrats on the quarter.

Chaim Indig -- Chief Executive Officer and Board Member

Thanks.

Stephanie Davis -- SVB Leerink -- Analyst

So looking at your three revenue lines as you look forward to next year, you've got likely acceleration in your subscription growth because you just had a huge sales force investment, you have likely acceleration in payment processing because of these COVID comps. So that leaves life sciences as the plug to make 20% to 25% growth, but all market signals and recent performance there suggest that that shouldn't be decelerating dramatically. So could you help me reconcile that?

Chaim Indig -- Chief Executive Officer and Board Member

I can't reconcile peer numbers and I cannot run the business by plugging, but I will say that we feel that the investments we've made across the board are really paying off. And all of our early indicators that we see are very, very positive. And I think life sciences is -- our life sciences team is capturing also an unfair share of market gains too. So we feel good across the board. But that being said, I have no idea what the recovery is going to look like, and we just know that we're going to keep supporting our clients in which way possible.

Stephanie Davis -- SVB Leerink -- Analyst

Maybe asked another way, is there anything that will cause a deceleration in our life sciences revenue?

Chaim Indig -- Chief Executive Officer and Board Member

I'm sure if you like thought enough ways, there is ways you could decelerate it, but we're really focused on it -- on continue to growing it. I don't know if that -- I don't really wake up and think about how I could decelerate the business.

Stephanie Davis -- SVB Leerink -- Analyst

Okay. Fair.

Chaim Indig -- Chief Executive Officer and Board Member

Is that...

Stephanie Davis -- SVB Leerink -- Analyst

No. No.

Chaim Indig -- Chief Executive Officer and Board Member

Like we're pretty pumped about all -- like just everyone's sort of running hard here. So we're really excited.

Stephanie Davis -- SVB Leerink -- Analyst

So how do you get to only -- at the midpoint, 3 points of revenue growth acceleration?

Chaim Indig -- Chief Executive Officer and Board Member

The numbers get bigger.

Stephanie Davis -- SVB Leerink -- Analyst

No, I get that. The point is the only 3 points. It's not that 3 points is irrelevant.

Balaji Gandhi -- Senior Vice President, Investor Relations

Yeah. I mean -- this is Balaji, Stephanie. I'd just say that acceleration in and of itself is a move up from our growth rate historically. So I guess you would have to just sort of take it that way.

Stephanie Davis -- SVB Leerink -- Analyst

Okay, fair. And a quick follow-up on the QueueDr. It sounds that there is only a third overlap in your client base. Are you going to use this more as a capabilities expansion or is there a cross-sell opportunity for incremental revenue there with[Phonetic] that two-thirds that doesn't have it?

Chaim Indig -- Chief Executive Officer and Board Member

We both bring business capabilities and it will allow us to cross-sell other applications -- it will fit into applications that we are cross-selling to our client base. It's already integrated. We've had early success to-date already. So it's been good.

Stephanie Davis -- SVB Leerink -- Analyst

All right. Thank you.

Chaim Indig -- Chief Executive Officer and Board Member

Cheers.

Operator

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

Scott Schoenhaus -- Stephens -- Analyst

Thank you. Hi, Chaim and team. I wanted to ask you a balance sheet-related question I thought was interesting. Property, plant and equipment nearly doubled from last quarter. I wanted to see if you could provide more color on what investments you're making there and what that means for your business?

Chaim Indig -- Chief Executive Officer and Board Member

We're making -- because of the big ramp in volume, we're also making fairly significant investments in data centers. So a lot of that is just to add significantly more capacity.

Scott Schoenhaus -- Stephens -- Analyst

And is that also a sign that you're continuing to succeed upmarket into larger hospital systems as you need these larger data centers or more data centers?

Chaim Indig -- Chief Executive Officer and Board Member

Look, to be clear, I think, we're succeeding not just in large health systems, in the mid-tier and large ambulatory groups, in surgery centers. And frankly, I think the team is doing a phenomenal job across the board. And I think we've had some really nice wins in all of the markets that we've been tackling. I'm just very pleased. And so we want to make sure that we continue to invest to continue to support the market share gains that we're winning.

Scott Schoenhaus -- Stephens -- Analyst

Great. Just a follow-up there. So, you are obviously seeing success in selling to across the board of client base and taking share. How does this -- how does the dynamic change between provider client growth and average revenue per client given these large -- larger land and expand opportunities with large hospital systems? Just to be specific here, the cross-selling and up-selling opportunities once you expand into these systems. Is there a way to think about the average revenue per provider growth and it's accelerating in the back half of the year into fiscal '23? Just trying to get more color there.

Chaim Indig -- Chief Executive Officer and Board Member

Yeah. I think when you think about one of the things that we pointed out even in our TAM, we didn't think that we are going to be able to grab as much payment volume in the large hospital systems. So you're seeing some of that shift happen. But, look, we're all -- and we view those metrics as tightly tied together, both average revenue and revenue per client. Those are metrics that internally the entire leadership team is strongly tied to.

Scott Schoenhaus -- Stephens -- Analyst

Thanks, Chaim.

Chaim Indig -- Chief Executive Officer and Board Member

Cheers.

Operator

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

Sean Wieland -- Piper Sandler -- Analyst

Right. Thank you. Good morning. I'd like to better understand, payments up 15%, life science revenue up 58%. I would suspect that both of those have at least some correlation to visit volume. Can you discuss what the separation there is?

Chaim Indig -- Chief Executive Officer and Board Member

They are -- there is some correlation to visit volume, you're correct. But the life sciences revenue has other drivers to it as does the visit -- as does the payment volume. Since we did see a slight drop in our -- where the PayFac was the -- was tied to Phreesia. But we've also done a great job of cross-selling more visits to different life sciences customers using our significant investment in data science.

Sean Wieland -- Piper Sandler -- Analyst

Okay. Can you just -- as a follow-up, what was the overall trend in visit volume for the year across the platform? And how is pricing holding up in the payments business?

Balaji Gandhi -- Senior Vice President, Investor Relations

Hey, Sean. This is Balaji. Hey. The Commonwealth data, which we've been putting out, I mean, we want to be clear, we don't disclose visit data as a KPI or anything like that. But you can see the data from Commonwealth which spans pretty much the entire fiscal year that basically got within low-single digits of pre-COVID levels by the end of the year. But overall, I mean, it was clearly down year-over-year.

So I don't know if that helps you, and it's more tied to payment as Chaim said than it is to life sciences. There is some nuances in life sciences, but payments, there is much more of a direct impact.

Sean Wieland -- Piper Sandler -- Analyst

Okay. And how about the pricing in the payments business?

Balaji Gandhi -- Senior Vice President, Investor Relations

Maybe you can get more specific on that?

Sean Wieland -- Piper Sandler -- Analyst

Can you characterize your -- the pricing environment in the payments business?

Chaim Indig -- Chief Executive Officer and Board Member

It's...

Sean Wieland -- Piper Sandler -- Analyst

Pricing...

Chaim Indig -- Chief Executive Officer and Board Member

Sean, I think you're talking about our take rate. Is that correct?

Sean Wieland -- Piper Sandler -- Analyst

Yes.

Chaim Indig -- Chief Executive Officer and Board Member

Yes. It's been pretty flat sequentially. It's down like a hair, but not much sequentially.

Sean Wieland -- Piper Sandler -- Analyst

Okay. Thank you very much.

Operator

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

Hannah Baade -- D.A. Davidson -- Analyst

Hi. Thanks for taking my question. As Phreesia moved upmarket with larger health system clients coming online putting pressure on the percent of patient volumes processed through Phreesia, can you ballpark where we should expect this percent to moderate?

Michael Davidoff -- Senior Vice President, Marketing and Business Development

Can you repeat that, Hannah?

Hannah Baade -- D.A. Davidson -- Analyst

Yeah. On the 79% this quarter patient volume processed through Phreesia, obviously, as Phreesia moves more upmarket, the larger health system clients coming online, that's going to put some downward pressure on that statistic. Can you ballpark where we should expect this to moderate as we move more upmarket?

Michael Davidoff -- Senior Vice President, Marketing and Business Development

Yeah. I mean, I think, I will let Chaim and Tom dwell up on this one. But it's a function of just the types of clients we add quarter to quarter and the type of growth we get. So there is definitely mix in there. So it's hard for us to, I think, tell you what the PayFac rate is going to be. It's a little bit of a chicken and egg there. But I think, and Chaim and Tom can weigh in here, but that change, the delta in that percentage, is a reflection of moving upmarket into the decline that you saw. Anything you want to add, Chaim or Tom?

Tom Altier -- Chief Financial Officer

No, I don't...

Chaim Indig -- Chief Executive Officer and Board Member

No, I don't think so. As we add health systems and if they don't take payments, you'll see that decline.

Hannah Baade -- D.A. Davidson -- Analyst

Okay. Thank you. That's very helpful. And just one follow-up. With the recent and likely episodic shift to vaccines, mass vaccination sites, pharmacies and grocery stores as opposed to traditional ambulatory care centers, are you seeing any customers impacted in regards to the visit uplift that they might have been expecting specifically for COVID vaccines?

Michael Davidoff -- Senior Vice President, Marketing and Business Development

I am not sure I understand the question. Can you try...

Hannah Baade -- D.A. Davidson -- Analyst

Yeah, absolutely. As vaccines kind of may shift away from a traditional doctor's office and an outpatient care center to say a CVS, have you seen any customers kind of be impacted in regards to customer revenue they're expecting to get in office because vaccines have shifted to kind of these external care centers like pharmacies?

Michael Davidoff -- Senior Vice President, Marketing and Business Development

I don't think our clients, and this is conversations we've had with them, are waking up thinking that vaccines are a revenue driver. I think that what we're seeing is they -- our clients and provider groups and health systems are mostly looking at this as how do they vaccinate their communities as fast and effective as possible. And I know a bunch that are partnering with the pharmacies locally and other organizations. So I think the goal, Hannah, is to try to vaccinate the population as effectively as possible, not to think about this as a profit driver. And we don't monetize it in any meaningful way.

Hannah Baade -- D.A. Davidson -- Analyst

Got it. Thanks, guys.

Michael Davidoff -- Senior Vice President, Marketing and Business Development

Thanks.

Operator

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

Ryan MacDonald -- Needham -- Analyst

Yes. Good morning, Tom, best of luck in semi-retirement. Great working with you.

Tom Altier -- Chief Financial Officer

Thanks. [Speech Overlap].

Ryan MacDonald -- Needham -- Analyst

My first question -- yeah, thanks. My first question is, I guess, for Chaim. Obviously, seeing some continued strength in new logo growth, curious to see here how the newest group of SDRs that you added in throughout 2020 are impacting that new customer logo growth, how are they ramping in terms of productivity versus your internal expectations?

Chaim Indig -- Chief Executive Officer and Board Member

I've been really -- I've been very pleased would be an understatement. I sat through one of the weekly demand gen calls last week and I know Tom sat through a couple of them too. And they're just doing a good job. They're really able to reach out to people effectively, they're doing their calls effectively, we're seeing good demand gen. We're -- I don't want to say I am pleasantly surprised because I am not surprised because we have a phenomenal organization, but they're doing this as expected. And we're very excited for the new group and the folks that we have on the team.

Ryan MacDonald -- Needham -- Analyst

Great. And as a follow-up to that, as you sit on those types of calls and listen to the dynamics of the market, is there anything that you're seeing in terms of incremental change in whether it's heightened demand or as your reps are out talking to prospective customers, is there a noise of other vendors sort of in -- that are in the same markets right now? We've certainly heard a lot of noise from financing of other vendors in this space, but I'm curious to hear how early stage is the market opportunity here.

Chaim Indig -- Chief Executive Officer and Board Member

Yeah. I still think -- we've always heard noise for 16 years, everyone's always -- have always thought that this space is easy to be in and delivering solutions as all it requires is a website or a press release. A general view is raising money and putting out websites and press releases doesn't create product to drive a phenomenal amount of value.

So I think what we're doing is making sure that our customers get products that drive a phenomenal amount of value, great value and then rolling out and trusting us even more for more products. And that thesis has proved phenomenally well for years and we're not seeing any change in that.

I think what -- when we use usage as our Northstar, we want to make sure not that we just get our products sold, but that patients use it. And we transfer the work to the patient, you get this amazing ROI. So like, I don't think now is any different. I just think that the numbers get bigger and the press releases get louder.

Ryan MacDonald -- Needham -- Analyst

Great. Thanks for the color, and congrats again on a good quarter.

Chaim Indig -- Chief Executive Officer and Board Member

Cheers.

Operator

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

Sean Dodge -- RBC Capital Markets -- Analyst

Yes. Thanks and good morning. Maybe on the acute care opportunity, when we think about timing and a potential ramp for that, is there anything to share with folks to kind to help better frame that out?

And obviously, hospital workflows are a lot more complicated. So is there just a lot of de novo development work you're having to do? Is there a lot more integration work? How far along do you think you are on that? And then I would imagine sales cycles -- sales processes are different too. Anything just to kind of better frame out timing?

Chaim Indig -- Chief Executive Officer and Board Member

Look, I think we're going to keep investing. I don't think this is the fifth inning. It's probably close to the second inning. And we are seeing real value propositions and wins. And yeah, we're going to keep investing heavily in the product, in the workflow, in the integrations, in the people, in the process, and in the value that we provide our clients. And if we just keep rinsing and repeating with the same formula and we keep doing it at scale, I think we're going to keep having the success that we've had previously and hopefully at even greater degrees.

Sean Dodge -- RBC Capital Markets -- Analyst

Okay. And then...

Chaim Indig -- Chief Executive Officer and Board Member

And just to clarify, I don't -- we don't have any data to say that the sales cycle is longer.

Sean Dodge -- RBC Capital Markets -- Analyst

Okay. On -- maybe on social determinants, it was about a year ago now you guys began to highlight the work you're doing there. I think it was initially in North Carolina, building in the ability to stream for those, integrating them with the intake process. Is there any interesting developments updates you can share there?

Chaim Indig -- Chief Executive Officer and Board Member

Yeah. I think we just did a -- we have been doing a bunch of work and Michael could talk to this also around vaccine hesitancy in different communities and understanding vaccine hesitancy, understanding the impact of the virus on different communities, often tied to their social determinants. But this is an area which we have not slowed down our investment, and we think it makes a material difference to healthcare delivery and patients in America. Michael, you want to add to that?

Michael Davidoff -- Senior Vice President, Marketing and Business Development

Yeah, Chaim. Thanks for the question. I think I would just add that we're continuing to invest in our clinical team and expanding that group, and they are doing some incredible work with measuring hesitancy and working with our clients to really understand how they can improve the ability of the delivery of the vaccine to groups that just might not be comfortable getting the vaccine right now. So we are -- it makes us extremely proud, and those speaks to the mission of the Company.

Sean Dodge -- RBC Capital Markets -- Analyst

Okay. Great. Thanks again.

Operator

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

Daniel Grosslight -- Citi -- Analyst

Hi, guys. Thanks for taking the question and congrats to a strong quarter. I just have a quick question on the payment -- patient payment volume. If I divide patient payment volume by the average provider client in the quarter, I get a sequential increase versus 3Q of about 1% versus an 8% sequential increase from 2Q to 3Q. So I'm just curious of any trends you've seen recently on the payment -- the patient payment volume per provider growth? Was the large sequential increase in 3Q due to a bolus of larger clients coming aboard, etc.? And how should we think about the growth in patient payment volume per provider for fiscal year 2022?

Chaim Indig -- Chief Executive Officer and Board Member

Tom, you want to get that?

Balaji Gandhi -- Senior Vice President, Investor Relations

Yeah. There's a lot in that question, so maybe just to break it down, Daniel. So -- and Tom, maybe the first part is, it was sequentially, Daniel, you are trying to understand payment volume trend from -- was it 2Q to 3Q or 3Q to 4Q?

Daniel Grosslight -- Citi -- Analyst

Exactly. So I'm trying to understand the patient payment volume per provider client sequential growth trends because it grew pretty rapidly in 3Q, about an 8% sequential increase per provider and then slowed to around a 1% sequential increase. Still very, very good relative to historical, but a sequential slowdown. So I'm just trying to understand the trends underlying the sequential growth in payments per provider and how to think about that in fiscal year 2022?

Tom Altier -- Chief Financial Officer

Daniel, I think there is probably some seasonal impacts in there and some impacts from our land and expand strategy that make it somewhat difficult to answer that question crisply. The decline in per provider patient payment volume has a lot of factors that go into it, size of the customers, etc. So it's tough for me to give you a forecast as to what that's going to be in the future.

Daniel Grosslight -- Citi -- Analyst

Okay. Okay. Understood. All right. And then I guess another question I have is, on the vaccine rollout, there has been some good press reports on how you have been helping some of your clients with the intake process there. And I know you're giving those capabilities away free of charge similar to what you did with telehealth modules. But I'm curious how you may leverage some of the goodwill or the learnings that you learned during the vaccine rollout into a growth acceleration in fiscal year 2022, i.e., will this accelerate some of the sales prospects that you had in the pipeline?

Tom Altier -- Chief Financial Officer

I think it helps us. I think all of these things -- when you do right by clients and you build really amazing products that help massive amounts of people, the general view that I have and everyone here has is the positive outcomes usually follow, and that's something we've seen traditionally and untraditionally through our entire existence in 16 years. So we -- it's not a halo. I think we've built some really amazing products that have helped us win clients because of it.

We have won clients because of it. And our clients feel really good about us being able to support them through tough times. And that's part of relationship that we build. So -- but also it's just the right thing to do. And I want everyone to understand that we will always endeavor to try to always do the right thing. It's important.

Daniel Grosslight -- Citi -- Analyst

Understood. All right, guys. Thanks.

Operator

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

John Ransom -- Raymond James -- Analyst

Yeah. Good morning. Chaim, I think you need to practice that excited voice a little bit. That was not all that excited. But the question I have is recently Visa and Mastercard talked about maybe bumping up the interchange fee. They pulled back after some political pressure. But just help us size, if that does go up, what does that mean for your payments business?

Tom Altier -- Chief Financial Officer

Hey, Chaim, you want me to take this?

Chaim Indig -- Chief Executive Officer and Board Member

I do. But give in your excited voice first. Given -- because you are pretty excited about that.

Tom Altier -- Chief Financial Officer

Hey, John. I think they announced about a 10 bp increase in their list prices in Feb --January or February, and that's what they backed off on, I assume. Now, that's a rumor. I don't know the exact number, but that's what I read in the press as to what their price increases would have been on a list price basis in April. So that gives you some side of that on it.

John Ransom -- Raymond James -- Analyst

So can you translate that to Phreesia revenue because our calculator down here is broken, if it does get through?

Chaim Indig -- Chief Executive Officer and Board Member

It means that we don't have to pass on an increased cost to our providers. So it means that Visa and Mastercard unfairly taxing healthcare providers in America just got put on hold for a little bit. It's pretty -- it was a good thing. I think it's really -- it's great that they have that pressure.

John Ransom -- Raymond James -- Analyst

Okay. Got you. The other question, and I'll probably be the only guy that doesn't understand this, but could you say again why as you transition to larger clients your -- that 79% ratio that you referred that put some pressure on that number, why is that ratio lower than it is what you're doing mostly with smaller doctors?

Chaim Indig -- Chief Executive Officer and Board Member

In the sales cycle, what we've often found is, in very large health systems, the treasury group of the large health systems have tight relationships with large banks, and often they give them their credit card processing as part of those relationships. And so it often takes some bit of maneuvering to be able to pry that away from the banks who are unfairly charging and taxing them for it. So that's generally what we've seen and it's often tied to lending relationships.

John Ransom -- Raymond James -- Analyst

I got you. Okay.

Chaim Indig -- Chief Executive Officer and Board Member

Okay.

John Ransom -- Raymond James -- Analyst

And you know...

Chaim Indig -- Chief Executive Officer and Board Member

Go ahead. John, you there?

Operator

[Operator Instructions].

Chaim Indig -- Chief Executive Officer and Board Member

We left John Ransom...

Operator

John, line is now open.

John Ransom -- Raymond James -- Analyst

Actually, you've got me off. [Indecipherable] The jump in SD&R is that -- I am sorry marketing, is that mostly just the headcount issue in SD&R? Is there something else going on there?

Chaim Indig -- Chief Executive Officer and Board Member

Yeah. It is. It's us investing in that future team.

John Ransom -- Raymond James -- Analyst

Great, thank you.

Chaim Indig -- Chief Executive Officer and Board Member

I guess, more sales. Thank you.

Operator

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

Chaim Indig -- Chief Executive Officer and Board Member

Thank you, everyone, and thank you again Tom for your last earnings call. And we appreciate everyone's support and we'll talk to you in a couple of months. Cheers.

Operator

[Operator Closing Remarks]

Duration: 48 minutes

Call participants:

Balaji Gandhi -- Senior Vice President, Investor Relations

Chaim Indig -- Chief Executive Officer and Board Member

Michael Davidoff -- Senior Vice President, Marketing and Business Development

Tom Altier -- Chief Financial Officer

Jared Haase -- William Blair -- Analyst

Stephanie Davis -- SVB Leerink -- Analyst

Scott Schoenhaus -- Stephens -- Analyst

Sean Wieland -- Piper Sandler -- Analyst

Hannah Baade -- D.A. Davidson -- Analyst

Ryan MacDonald -- Needham -- Analyst

Sean Dodge -- RBC Capital Markets -- Analyst

Daniel Grosslight -- Citi -- Analyst

John Ransom -- Raymond James -- Analyst

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