Phreesia, Inc.PHR
Phreesia, Inc. Income Taxes Disclosure
Income taxes
The Company recorded a tax benefit of $11,246 and tax expense $2,716 and $1,543, for the years ended January 31, 2026, 2025 and 2024, respectively. The Company's tax benefit and tax expense was 125.8%, 4.9% and 1.1% of loss before income taxes for the years ended January 31, 2026, 2025 and 2024, respectively. For the year ended January 31, 2026, the Company's effective tax rate differs from the U.S. statutory tax rate of 21% primarily because the Company records a valuation allowance against its U.S. deferred tax assets, due to the release of valuation allowance attributable to taxable temporary differences recorded in connection with the acquisition of
AccessOne, and due to foreign income tax expense related to its Canadian branch and its subsidiary in India. For the years ended January 31, 2025 and 2024, the Company's effective tax rate differs from the U.S. statutory tax rate of 21% primarily because the Company records a valuation allowance against its U.S. deferred tax assets and due to foreign income tax expense related to its Canadian branch and its subsidiary in India.
Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets and liabilities using statutory rates. Management of the Company has evaluated the positive and negative evidence pertaining to the realizability of its deferred tax assets, including the Company’s history of losses, and concluded that it is more likely than not that the Company will not recognize the benefits for the majority of its deferred tax assets. On the basis of this evaluation, the Company has recorded a valuation allowance against its deferred tax assets that are not more likely than not to be realized at both January 31, 2026 and 2025.
The following table sets forth the Company’s income (loss) before income taxes disaggregated between domestic and foreign for fiscal 2026, 2025 and 2024:
| Fiscal years ended January 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| Domestic | $ | (13,505) | $ | (63,782) | $ | (138,629) | |||||||||||
| Foreign | 4,565 | 7,971 | 3,287 | ||||||||||||||
| Total loss before income taxes | $ | (8,940) | $ | (55,811) | $ | (135,342) | |||||||||||
The Company's income tax provision consisted of the following for fiscal 2026, 2025 and 2024:
| Fiscal years ended January 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| Current tax | |||||||||||||||||
| Federal | $ | — | $ | — | $ | — | |||||||||||
| State | 356 | 102 | 76 | ||||||||||||||
| Foreign | 1,669 | 2,400 | 1,239 | ||||||||||||||
| Deferred tax | |||||||||||||||||
| Federal | (12,581) | 214 | 38 | ||||||||||||||
| State | 903 | — | — | ||||||||||||||
| Foreign | (1,593) | — | 190 | ||||||||||||||
| Total provision for income taxes | $ | (11,246) | $ | 2,716 | $ | 1,543 | |||||||||||
The Company adopted ASU No. 2023-09 on a prospective basis effective February 1, 2025. A reconciliation of the statutory U.S. federal rate and effective rate for the year ended January 31, 2026, after the adoption of ASU 2023-09, is as follows:
| Fiscal years ended January 31, 2026 | |||||||||||
| Amount | % | ||||||||||
| Federal income tax benefit at statutory rate | $ | (1,877) | 21 | % | |||||||
| State and local tax, net of federal benefit | 994 | (11) | % | ||||||||
| Foreign tax effects | |||||||||||
| India | 68 | (1) | % | ||||||||
| Canada | (275) | 3 | % | ||||||||
| Federal tax credits | (1,034) | 12 | % | ||||||||
| Changes in valuation allowances on federal deferred tax assets | (18,857) | 211 | % | ||||||||
| Effect of nontaxable or non-deductible items on federal income taxes | |||||||||||
| Stock based compensation | 5,056 | (57) | % | ||||||||
| Transaction Cost | 1,730 | (19) | % | ||||||||
| Capitalized Internal-Use Software | 2,049 | (23) | % | ||||||||
| Section 162(m) | 656 | (8) | % | ||||||||
| Other | 125 | (1) | % | ||||||||
| Changes in unrecognized tax benefits | 119 | (1) | % | ||||||||
| Benefit for income taxes | $ | (11,246) | 126 | % | |||||||
The majority of effect of state and local income taxes presented is generated by Texas.
The following table sets forth the Company’s income taxes paid by major jurisdiction for fiscal 2026 (in thousands):
| Fiscal years ended January 31, 2026 | |||||
Federal | $ | — | |||
| State and local | |||||
Texas | 7 | ||||
| Total state and local | 7 | ||||
| Foreign | |||||
India | 516 | ||||
Canada | 1,374 | ||||
| Total foreign | 1,890 | ||||
| Total income taxes paid | $ | 1,897 | |||
A reconciliation of the statutory U.S. federal income tax rate to the Company's effective tax rate for fiscal 2025 and 2024 prior to the adoption of ASU 2023-09 is as follows:
| Fiscal years ended January 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Federal income tax benefit at statutory rate | 21 | % | 21 | % | |||||||
| State and local tax, net of federal benefit | 4 | % | 3 | % | |||||||
| Permanent differences | 1 | % | — | % | |||||||
| Equity compensation | (6) | % | — | % | |||||||
| Foreign taxes | (3) | % | (1) | % | |||||||
| Other | — | % | — | % | |||||||
| Change in valuation allowance | (22) | % | (24) | % | |||||||
| Effective income tax rate | (5) | % | (1) | % | |||||||
The significant components of the Company's deferred tax assets and liabilities as of January 31, 2026 and 2025 are as follows:
| January 31, | ||||||||||||||
| Deferred tax assets: | 2026 | 2025 | ||||||||||||
| Net operating loss carryforwards | $ | 170,985 | $ | 160,998 | ||||||||||
| Stock based compensation | 12,125 | 9,495 | ||||||||||||
Accruals, reserves, and other expenses(1) | 3,809 | 3,129 | ||||||||||||
| Disallowed interest expense | — | 969 | ||||||||||||
| Depreciation and amortization | — | 1,412 | ||||||||||||
Capitalized R&D Expense(1) | 23,835 | 23,897 | ||||||||||||
| Cardholder Receivable | 15,779 | — | ||||||||||||
| Other | 109 | — | ||||||||||||
| Total deferred tax assets | $ | 226,642 | $ | 199,900 | ||||||||||
| Less: valuation allowance | (176,652) | (188,712) | ||||||||||||
| Net deferred tax assets | $ | 49,990 | $ | 11,188 | ||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Depreciation and amortization | $ | (7,741) | $ | — | ||||||||||
| Intangible assets | (12,818) | (340) | ||||||||||||
Capitalized internal-use-software(1) | (14,623) | (11,074) | ||||||||||||
| Due to Healthcare Provider | (15,660) | — | ||||||||||||
Other(1) | (2,053) | (258) | ||||||||||||
| Total deferred tax liabilities | $ | (52,895) | $ | (11,672) | ||||||||||
| Net deferred tax liabilities | $ | (2,905) | $ | (484) | ||||||||||
(1) Prior year amounts have been reclassified to conform to the current year presentation. | ||||||||||||||
The net deferred tax liabilities amounts presented above are presented in the consolidated balance sheet as long-term deferred tax assets of $1,593 and $0 as of January 31, 2026 and 2025, respectively, and long-term deferred tax liabilities of $4,498 and $484 as of January 31, 2026 and 2025, respectively.
The Company has accumulated a U.S. Federal net operating loss carryforward of approximately $587,240 and $596,509 as of January 31, 2026 and 2025, respectively. This carryforward may be available to offset future U.S. Federal income tax liabilities and began expiring in 2025. As of January 31, 2026, the Company's foreign branch had no net operating loss carryforwards. The Company’s unutilized research and development tax credit carryforwards may be carried forward for a period of up to 20 years.
Due to the uncertainty regarding the ability to realize the benefit of the U.S. deferred tax assets primarily relating to net operating loss carryforwards, valuation allowances have been established to reduce the U.S. deferred tax assets to an amount that is more likely than not to be realized.
On the basis of this evaluation, as of January 31, 2026 and 2025, the Company recorded a valuation allowance of $176,652 and $188,712, respectively, to recognize only the portion of the deferred tax asset that is more likely than not to be realized. The $12,060 decrease in the valuation allowance recorded during the fiscal year ended January 31, 2026 relates primarily to a $13,069 release of valuation allowance for Phreesia. AccessOne’s federal deferred tax liabilities are a source of income for the Company’s historic federal deferred tax assets and are offset by the Company’ deferred tax assets resulting in the release of valuation allowance to the extent of such offset outside of acquisition accounting.
Under Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change” (generally defined as a greater than 50% change by value in its equity ownership over a three-year period), the corporation’s ability to use its pre-ownership change net operating loss carryforwards and other pre-ownership change tax attributes to offset its post-change income may be limited. As of January 31, 2026, the Company has U.S. net operating loss carryforwards of approximately $587,240. The Company has completed a Section 382 study through January 31, 2026 and as a result the analysis identified ownership changes on November 30, 2006, February 2, 2009 and April 30, 2020. The ownership change in 2006 resulted in approximately $316 of NOLs that
were generated in 2005 and 2006 that have or will expire unutilized due to Section 382 annual limitations. As such, these NOLs have been removed from the deferred tax asset table. The ownership change in 2009 resulted in limitation of approximately $12,388 of NOLs but as of 2024 became fully available for use. The ownership change in 2020 resulted in limitation of approximately $136,020 of NOLs but as of 2023 became fully available for use.
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal, state, and foreign jurisdictions, where applicable. The Company’s tax years are still open from 2021 to present and, to the extent utilized in future years' tax returns, net operating loss carryforwards at January 31, 2026 will remain subject to examination until the respective tax year is closed.
The Company records unrecognized tax benefits as liabilities or as reductions to deferred tax assets and adjusts these balances when its judgment changes as a result of the evaluation of new information previously not available. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of January 31, 2026 the Company has reduced the balance of deferred tax assets for $1,910 of unrecognized tax benefits. The Company’s unrecognized tax benefits would not affect the effective tax rate if recognized because the Company has a valuation allowance against the majority of its U.S. deferred tax assets. As of January 31, 2026, the Company had no accrued interest or penalties related to uncertain tax positions.
The following is a roll-forward of the Company's total gross unrecognized tax benefits for fiscal 2026:
| Balance, January 31, 2023 | $ | — | |||
| Increases for income tax positions related to prior years | 844 | ||||
| Increases for income tax positions related to current years | 396 | ||||
Balance, January 31, 2024 | $ | 1,240 | |||
| Increases for income tax positions related to prior years | — | ||||
| Increases for income tax positions related to current years | 365 | ||||
Balance, January 31, 2025 | $ | 1,605 | |||
| Increases for income tax positions related to prior years | — | ||||
| Increases for income tax positions related to current years | 305 | ||||
Balance, January 31, 2026 | $ | 1,910 | |||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Mar 31, 2026 | Showing above |
| 2025 | Mar 13, 2025 | |
| 2024 | Mar 15, 2024 | |
| 2023 | Mar 23, 2023 | |
| 2022 | Mar 31, 2022 | |
| 2021 | Mar 31, 2021 | |
| 2020 | Apr 23, 2020 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.