DocGo Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. DocGo provides ambulance transportation and mobile health services in the U.S. and U.K. The comparable 2021 periods predate the November 2021 business combination; the filing accounts for it as a reverse recapitalization.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $109.5m | $62.2m | $227.4m | $111.6m |
| Operating income (loss) | $7.5m | $0.3m | $17.6m | ($1.6m) |
| Net income (loss), consolidated | $11.8m | $0.1m | $21.1m | ($1.9m) |
| Net income (loss) attributable to DocGo stockholders | $12.7m | ($1.6m) | $23.4m | ($3.3m) |
| Operating cash flow | Not stated separately | Not stated separately | $30.2m | ($1.1m) |
- Revenue rose 76% in Q2 and 104% for the first half. Mobile Health drove growth: revenue increased 163% in Q2 and 178% in the first half. Transportation Services revenue declined 23% in Q2, but increased 4.8% for the first half.
- Gross margin, calculated from reported revenue and cost of revenue, was approximately 35.9% in Q2 versus 34.0%; for the first half it was 34.8% versus 31.1%. Cost of revenue excludes depreciation and amortization. Management cited improved Mobile Health economics, partly offset by higher labor, fuel, supplies and insurance costs. Transportation cost of revenue as a share of segment revenue worsened, partly due to lower project-based standby revenue.
- Operating margin was approximately 6.8% in Q2 versus 0.4%; first-half operating margin was 7.7% versus negative 1.4%. Earnings included non-operating gains of $3.0m from warrant remeasurement and $1.4m from finance lease remeasurement.
- At June 30, cash and cash equivalents were $198.1m and restricted cash was $10.3m. Current assets were $275.7m, current liabilities $57.9m, and working capital approximately $217.7m. The current ratio was approximately 4.8x.
- Reported debt included about $1.0m outstanding on a revolving line of credit and $1.6m of notes payable. Finance lease liabilities were $7.9m and operating lease liabilities $4.1m. The company also reported a $10.5m warrant liability. The filing describes minimal debt, but lease obligations are material relative to borrowings.
- First-half investing cash use was $2.0m; financing activities provided $1.1m. Cash and restricted cash increased $29.4m during the half. Operating cash flow benefited from collections on prior-period receivables; management cautioned that working-capital timing can require use of existing cash.
Changes, outlook and risks
- Mobile Health represented $87.3m of Q2 revenue and $177.4m for the first half, compared with $33.2m and $63.8m, respectively, in 2021. Management estimated COVID-19 testing revenue at about $28m in Q2 and $66m in the first half of 2022; it noted that attribution is difficult because of bundled customer contracts.
- Transportation trip volume grew about 5% in both the quarter and first half. Average trip price increased to $360 in Q2 from $305, and to $357 for the first half from $294. Emergency deployment revenue fell to $2.0m in Q2 from $10.2m, as prior-year projects wound down.
- The company expects cash, operating cash flows and an available credit line to cover operating requirements for at least the next 12 months. It provided no specific revenue or earnings guidance. Management expected inflation to moderate from first-half levels but remain elevated; it warned that higher-than-anticipated inflation could pressure margins and cash flows.
- Inflation had increased wages, fuel and supply costs, and management said it generally could not pass those increases to customers in the short term. Other identified risks include dependence on licensing and market entry, availability and cost of healthcare labor, customer and payer mix, reimbursement and regulatory changes, acquisitions, and uncertain future effects of COVID-19.
- Customer concentration is notable: two customers accounted for approximately 30% and 17% of sales, respectively, and 15% and 12% of net receivables. The filing does not make clear whether the sales percentages refer to the quarter or first half.
- A $1.0m proposed settlement of wage-and-hour class and PAGA claims remained subject to court approval. Management said ordinary-course legal matters were not expected to materially affect the financial statements. The company also disclosed requests for information and investigations may arise in the ordinary course.
- After quarter-end, DocGo acquired Government Medical Services for $19m cash on July 6 and Exceptional Medical Transportation for $6.4m cash on July 13. It also agreed to finance six U.K. ambulances for approximately £0.6m. The acquisitions’ accounting allocations were still being finalized.
- The company authorized a $40m share repurchase program, expiring November 24, 2023; it repurchased 70,000 shares for about $0.5m in Q2, leaving approximately $39.5m authorized. Repurchases are discretionary and may be suspended or discontinued.
Important facts for investors to verify
- Whether Mobile Health growth, including COVID-related demand, can be sustained as testing demand and customer contracts change.
- Customer concentration, receivable collection trends, bad-debt allowance and the working-capital cash conversion behind reported operating cash flow.
- Segment profitability and corporate-cost allocation: Transportation Services reported an operating loss of $19.5m in Q2, while Mobile Health reported operating income of $27.0m.
- How inflation, subcontracted labor, fuel, supplies and insurance costs affect future margins, and whether pricing or reimbursement can offset them.
- Cash use and funding needs following the two post-quarter acquisitions, the share repurchase program and ongoing lease commitments; confirm the availability and terms of the revolving credit line.
- Final purchase accounting for the acquisitions and court approval or changes to the $1.0m proposed settlement.