Phreesia, Inc.PHR
Phreesia, Inc. Commitments Disclosure
Commitments and contingencies
(a) Indemnifications
The Company’s agreements with certain customers include certain provisions for indemnifying customers against liabilities if its services infringe a third-party’s intellectual property rights. It is not possible to determine the maximum potential amount under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances that may be involved in each particular agreement. To date, the Company has not incurred any material costs as a result of such provisions and has not accrued any liabilities related to such obligations in its consolidated financial statements.
In addition, the Company has indemnification agreements with its directors and its executive officers that require it, among other things, to indemnify its directors and executive officers for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by any of those persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service as a director or officer, including any action by us, arising out of that person’s services as a director or officer or that person’s services
provided to any other company or enterprise at the Company’s request. The Company maintains director and officer insurance coverage that may enable it to recover a portion of any future indemnification amounts paid. To date, there have been no claims under any of the Company’s directors and executive officers indemnification provisions.
(b) Legal proceedings
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.
We are involved in legal proceedings from time to time that arise in the normal course of business. In the opinion of management, such routine claims and lawsuits are not significant, and we do not expect them to have a material adverse effect on our business, financial condition, results of operations, or liquidity, except as noted below.
On May 12, 2024, we learned of a cybersecurity incident impacting the ConnectOnCall service, an application created by a subsidiary we acquired in October 2023. All systems have been restored, and we believe that we maintain a sufficient level of insurance coverage related to such events, and the related incremental costs incurred to date are not material.
On December 24, 2024, a putative class action complaint was filed against ConnectOnCall.com, LLC and Phreesia, Inc., in the United States District Court for the Eastern District of New York (the “ConnectOnCall Case”). The plaintiff purports to represent a nationwide class of all individuals in the United States who allegedly had personally identifiable information stolen because of the ConnectOnCall incident. The plaintiff asserts a variety of common law claims seeking monetary damages, disgorgement and restitution, attorneys’ fees, interest, and injunctive relief related to the incident.
Around the same time as the ConnectOnCall Case was filed, 12 additional putative class action complaints arising from the ConnectOnCall incident were filed in the United States District Court for the Eastern District of New York—against ConnectOnCall.com, LLC, Phreesia, Inc., or a combination of both—purporting to represent the same nationwide class of individuals and asserting substantially the same claims. Motions have been granted to consolidate the 13 filed cases.
We expect to incur legal and professional services expenses associated with this litigation in future periods. We will recognize these expenses as services are received, net of probable insurance recoveries. While a loss from these matters is reasonably possible, we cannot reasonably estimate a range of possible losses at this time, as the proceedings remain in the early stages, alleged damages have not been specified, there is uncertainty as to the likelihood of the cases being certified or the ultimate size of any class if certified, and there are significant factual and legal issues to be resolved. We have not recorded a loss contingency liability for the above litigation as of January 31, 2025.
(c) Other contractual commitments
Other contractual commitments consist primarily of non-cancelable purchase commitments to support our technology infrastructure. Future minimum payments under our non-cancelable contractual commitments as of January 31, 2025 are presented in the table below.
| Purchase obligations | |||||
| Fiscal year ending January 31, | |||||
| 2026 | $ | 7,898 | |||
| 2027 | 5,281 | ||||
| 2028 | 2,280 | ||||
| 2029 | 742 | ||||
| Total | $ | 16,201 | |||
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About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.