Phreesia, Inc.PHR
Phreesia, Inc. Stock Compensation Disclosure
Equity-based compensation
(a) Equity award plans
In January 2018, the Board of Directors adopted the Company’s 2018 Stock Option Plan as amended, (the "2018 Stock Option Plan") which provided for the issuance of options to purchase up to 3,048,490 shares of the Company’s common stock to officers, directors, employees, and consultants. The option exercise price per share is determined by the Board of Directors based on the estimated fair value of the Company’s common stock.
In June 2019, the Board of Directors adopted the Company’s 2019 Stock Option and Incentive Plan (the "2019 Plan"), which replaced the 2018 Stock Option Plan upon the completion of the IPO. The 2019 Plan allows the Compensation Committee of the Board of Directors (the "Compensation Committee") to make equity-based incentive awards including stock options, RSUs and PSUs to the Company’s officers, employees, directors, and consultants. The initial reserve for the issuance of awards under this plan was 2,139,683 shares of common stock. The initial number of shares reserved and available for issuance automatically increased on February 1, 2020 and automatically increases each February 1 thereafter by 5% of the number of shares of common stock outstanding on the immediately preceding January 31 (or such lesser number of shares determined by the Compensation Committee). As the 2018 Stock Option Plan was replaced by the 2019 Plan, all grants of stock options, RSUs and PSUs during the years ended January 31, 2025, 2024 and 2023 were made pursuant to the 2019 plan, respectively.
In June 2019, the Board of Directors also adopted the Company's 2019 Employee Stock Purchase Plan (the "ESPP"), which became effective immediately prior to the effectiveness of the registration statement for the Company’s initial public offering. The total shares of common stock initially reserved under the ESPP was limited to 855,873 shares.
The Company's incentive bonuses allow eligible employees to elect to receive all or a portion of their incentive compensation in the form of immediately vested restricted stock units instead of cash.
In July 2023, the Board of Directors also adopted the Company’s 2023 Inducement Award Plan (the “Inducement Plan”). The Inducement Plan allows the Compensation Committee of the Board of Directors (the "Compensation Committee") or its delegates to make equity-based incentive awards including stock options, RSUs and PSUs to employees of acquired companies to induce them to join the Company. The total shares of common stock initially reserved under the Inducement Plan was 500,000 shares.
As of January 31, 2025, there are 5,120,841 shares available for future grant pursuant to the 2019 Plan after factoring in the automatic increase that occurs on February 1 of each fiscal year, as well as an additional 279,958 shares available for future grant pursuant to the ESPP. The ESPP has two six-month offering periods each calendar year beginning in January and July. The ESPP allows eligible employees to purchase shares of the Company’s common stock at a 15% discount through payroll deductions. As of January 31, 2025, there were 12,747 outstanding restricted stock units and 482,658 shares available for future grant under the Inducement Plan.
(b) Summary of stock-based compensation
The following table sets forth stock-based compensation by type of award:
| For the fiscal years ended January 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| RSUs | $ | 44,696 | $ | 53,474 | $ | 42,214 | |||||||||||
| PSUs | 13,174 | 9,206 | 7,282 | ||||||||||||||
| Liability awards | 9,316 | 9,047 | 7,641 | ||||||||||||||
| ESPP | 1,149 | 1,256 | 1,521 | ||||||||||||||
| Stock options | 2 | 45 | 1,489 | ||||||||||||||
| Total stock-based compensation | $ | 68,337 | $ | 73,028 | $ | 60,147 | |||||||||||
The following table sets forth the presentation of stock-based compensation in the Company's consolidated financial statements:
| For the fiscal years ended January 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Stock-based compensation expense recorded to additional paid-in capital | $ | 59,021 | $ | 63,981 | $ | 52,506 | |||||||||||
| Stock-based compensation expense recorded to accrued expenses | 9,316 | 9,047 | 7,641 | ||||||||||||||
| Total stock-based compensation | $ | 68,337 | $ | 73,028 | $ | 60,147 | |||||||||||
| Less: stock-based compensation expense capitalized as internal-use software | (1,362) | (1,415) | (1,372) | ||||||||||||||
| Stock-based compensation expense per consolidated statements of operations | $ | 66,975 | $ | 71,613 | $ | 58,775 | |||||||||||
The Company has not recognized and does not expect to recognize in the foreseeable future, any tax benefit related to employee stock-based compensation expense. During the year ended January 31, 2025, the Company reduced stock compensation expense by $1,333, for improbable-to-probable modifications of stock compensation awards.
(c) Restricted stock units
The Company has issued RSUs to employees and independent directors that vest based on a time-based condition. RSUs granted to employees prior to January 2021, pursuant to a time-based condition, 10% of the restricted stock units vest after one year, 20% vest after two years, 30% vest after three years and 40% vest after four years (“10/20/30/40”). The restricted stock units expire seven years from the grant date.
During the year ended January 31, 2023, the Company modified the vesting of RSUs granted subsequent to January 1, 2021 for employees other than its named executive officers listed in its 2022 proxy statement ("2022 NEOs") and other members of its executive management team. Pursuant to the modified vesting schedule, RSUs granted after January 1, 2021 for employees other than 2022 NEOs and other members of its executive management team, vest 6.25% each quarter over four years based on continued service. For 2022 NEOs and other members of the Company's executive management team, RSUs granted from January 1, 2022 through December 31, 2022 vest 6.25% each quarter over four years based on continued service. RSUs granted during fiscal 2024 vest 25% each year over four years based on continued service and RSUs granted during fiscal 2025 generally vest following a 10/20/30/40 vesting schedule.
Additionally, at the beginning of each fiscal year, the Company provides certain employees the option to settle their incentive bonus in immediately vested RSUs. RSUs granted to settle bonus awards are included in RSUs granted and vested in the table below. See section (g) Liability awards below for additional information regarding share-settled bonus awards.
| Restricted stock units | |||||
| Unvested, January 31, 2022 | 3,133,839 | ||||
Granted during year | 2,907,838 | ||||
| Vested | (1,626,679) | ||||
| Forfeited and expired | (497,245) | ||||
| Unvested, January 31, 2023 | 3,917,753 | ||||
Granted during year (1) | 2,419,679 | ||||
| Vested | (1,912,432) | ||||
| Forfeited and expired | (624,790) | ||||
| Unvested, January 31, 2024 | 3,800,210 | ||||
Granted during year | 2,135,391 | ||||
| Vested | (1,897,716) | ||||
| Forfeited and expired | (439,937) | ||||
Unvested, January 31, 2025 | 3,597,948 | ||||
(1) Includes 24,125 awards granted pursuant to the 2023 Inducement Award Plan. | |||||
As of January 31, 2025, there is $79,743 remaining of total unrecognized compensation costs related to these awards. The total unrecognized costs are expected to be recognized over a weighted-average term of 2.6 years.
For the years ended January 31, 2025, 2024 and 2023, the weighted average grant date fair value of restricted stock units granted was $21.93, $29.08 and $26.79 respectively.
(d) Stock options
Options granted under the equity award plans have a maximum term of ten years and vest over a period determined by the Board of Directors (generally four years from the date of grant or the commencement of the grantee’s employment with the Company). Options generally vest 25% at the one-year anniversary of the grant date, after which point they generally vest pro rata on a monthly basis.
Stock option activity for the fiscal years ended January 31, 2025, 2024 and 2023 is as follows:
| Number of options | Weighted- average exercise price | Weighted- average remaining contractual life (in years) | Aggregate intrinsic value | ||||||||||||||||||||
| Outstanding — January 31, 2022 | 1,705,150 | $ | 6.01 | ||||||||||||||||||||
| Granted during the year | — | $ | — | ||||||||||||||||||||
| Exercised | (311,743) | $ | 4.92 | ||||||||||||||||||||
| Forfeited and expired | (8,214) | $ | 4.68 | ||||||||||||||||||||
Outstanding and expected to vest — January 31, 2023 | 1,385,193 | $ | 6.26 | 5.06 | $ | 43,341 | |||||||||||||||||
| Outstanding — January 31, 2023 | 1,385,193 | $ | 6.26 | ||||||||||||||||||||
| Granted during the year | — | $ | — | ||||||||||||||||||||
| Exercised | (249,247) | $ | 3.42 | ||||||||||||||||||||
| Forfeited and expired | (12,508) | $ | 5.87 | ||||||||||||||||||||
Outstanding and expected to vest — January 31, 2024 | 1,123,438 | $ | 6.89 | 4.54 | $ | 20,884 | |||||||||||||||||
| Outstanding — January 31, 2024 | 1,123,438 | $ | 6.89 | ||||||||||||||||||||
| Granted during the year | — | $ | — | ||||||||||||||||||||
| Exercised | (220,523) | $ | 4.64 | ||||||||||||||||||||
| Forfeited and expired | (3,534) | $ | 20.67 | ||||||||||||||||||||
Outstanding and expected to vest — January 31, 2025 | 899,381 | $ | 7.39 | 3.66 | $ | 18,952 | |||||||||||||||||
Exercisable — January 31, 2025 | 899,381 | $ | 7.39 | 3.66 | $ | 18,952 | |||||||||||||||||
Amount vested during year ended January 31, 2025 | — | $ | — | ||||||||||||||||||||
The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company’s estimated stock price at the time of exercise and the exercise price, multiplied by the number of related in-the-money options) that would have been received by the option holders had they exercised their options at the end of the period. This amount changes based on the market value of the Company’s common stock. The total intrinsic value of options exercised for the years ended January 31, 2025, 2024 and 2023 (based on the difference between the Company’s estimated stock price on the exercise date and the respective exercise price, multiplied by the number of options exercised), was $4,210, $6,059 and $6,970, respectively.
As of January 31, 2025, all compensation cost related to stock options issued to employees has been recorded and there is no unrecognized compensation cost remaining related to stock options issued to employees.
(e) TSR performance-based stock units ("PSUs")
The Company grants PSUs to certain members of its management team. PSUs vest over approximately three years from the grant date upon satisfaction of both time-based requirements and market targets based on Phreesia's TSR relative to the TSR of each member of the Russell 3000 Index (the "Peer Group"). Depending on the percentage level at which the market-based condition is satisfied, the number of shares vesting could be between 0% and 220% of the number of PSUs originally granted. PSUs granted during the years ended January 31, 2025, 2024 and 2023 vest in a maximum of 220% of the number of PSUs originally granted. To earn the target number of PSUs (which represents 100% of the number of PSUs granted), the Company must perform at the 55th percentile for PSUs granted in fiscal 2025 and the 60th percentile for PSUs granted in fiscal 2024 and 2023, with the maximum
number of PSUs earned if the Company performed at least at the 90th percentile. If Phreesia's TSR for the performance period is negative, the maximum number of PSUs that can be earned will be capped at 100%.
The Company estimated the fair value of the PSUs using a Monte Carlo Simulation model that projected TSR for Phreesia and each member of the Peer Group over the performance period. The Company recognizes the grant date fair value of PSUs as compensation expense over the vesting period.
The fair value of the PSUs granted during the fiscal years ended January 31, 2025, 2024 and 2023, respectively, was estimated using the following assumptions:
| Fiscal years ended January 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Correlation coefficient | 0.5305 | 0.5238 | 0.4957 | ||||||||||||||
| Valuation date stock price | $ | 25.19 | $ | 22.94 | $ | 35.41 | |||||||||||
| Simulation term | 3.0 years | 3.0 years | 3.0 years | ||||||||||||||
| Volatility | 64.18 | % | 64.58 | % | 64.98 | % | |||||||||||
| Risk-free rate | 4.24 | % | 4.05 | % | 3.84 | % | |||||||||||
| Dividend yield | — | % | — | % | — | % | |||||||||||
Weighted average fair value of grants | $ | 42.86 | $ | 36.42 | $ | 56.52 | |||||||||||
Market-based PSU activity for the years ended January 31, 2025, 2024 and 2023 are as follows:
| Performance stock units | |||||
| Outstanding, February 1, 2022 | 396,216 | ||||
| Granted during the year ended January 31, 2023 | 255,572 | ||||
| Vested | — | ||||
| Forfeited and expired | (3,555) | ||||
| Outstanding, February 1, 2023 | 648,233 | ||||
| Granted during the year ended January 31, 2024 | 576,680 | ||||
| Vested | (67,251) | ||||
| Forfeited | (117,443) | ||||
| Outstanding, February 1, 2024 | 1,040,219 | ||||
Granted during the year ended January 31, 2025 | 434,269 | ||||
| Vested | (255,269) | ||||
| Forfeited | (14,248) | ||||
Outstanding, January 31, 2025 | 1,204,971 | ||||
During the fiscal year ended January 31, 2025, the PSUs granted in fiscal 2022 vested at a 53.50% payout based upon the relative TSR performance achieved during the performance period, which was approved by the Company’s Board of Directors.
As of January 31, 2025, unrecognized compensation cost for the PSUs was $34,528, to be recognized over a weighted average remaining vesting period of 2.4 years, subject to the participants' continued employment with the Company.
(f) Employee stock purchase plan
The ESPP is a compensatory plan because it provides participants with terms that are more favorable than those offered to other holders of the Company's common stock. Employees purchase shares at the lesser of (1) 85% of the closing stock price on the first day of the offering period or (2) 85% of the closing stock price on the last day of the offering period. The ESPP is structured as a qualified employee stock purchase plan under Section 423 of the U.S. Internal Revenue Code of 1986.
The fair value of shares granted under the ESPP during the year ended January 31, 2025 was estimated using a Black-Scholes pricing model with the following assumptions:
| Year ended January 31, 2025 | Year ended January 31, 2024 | Year ended January 31, 2023 | |||||||||||||||
Risk-free interest rate | 4.74 | % | 5.30 | % | 3.68 | % | |||||||||||
Expected dividends | none | none | none | ||||||||||||||
Expected term (in years) | 0.49 years | 0.49 years | 0.47 years | ||||||||||||||
Volatility | 52.96 | % | 62.41 | % | 74.78 | % | |||||||||||
During the fiscal years ended January 31, 2025, 2024 and 2023, the Company issued 158,262, 141,121 and 162,154 shares of common stock, respectively, for the ESPP. In connection with these issuances, during the years ended January 31, 2025, 2024 and 2023 the Company recorded increases of $2,819, $3,235 and $3,470, respectively, to additional paid-in capital within stockholders' equity. As of January 31, 2025, unrecognized compensation cost related to the ESPP was $463, to be recognized over the next five months.
(g) Liability awards
At the beginning of each year, the Company provides eligible employees the option to elect to receive all or a portion of their incentive compensation in the form of immediately vested restricted stock units instead of cash. Restricted stock units issued to settle liability awards are covered by the 2019 Plan. Share-settled bonus awards will be settled at a value equal to 115% of the cash bonuses. These share-settled bonus awards vest based on the achievement of the Company’s predefined performance targets. As share-settled bonus awards will be settled in a variable number of shares, the Company classifies share-settled bonus awards as liabilities, within accrued expenses in the accompanying consolidated balance sheets until they are settled in shares and included in stockholders' equity. The Company's share-settled bonus awards are settled semiannually. During the year-ended January 31, 2025, the Company settled $9,071 of share-settled bonus awards by issuing 406,427 immediately vested RSUs. See (c) Restricted Stock Units above for additional discussion regarding RSUs.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.