Doximity, Inc. — Form 10-Q Summary
Business context and reporting period
Reports the three months ended June 30, 2023, Doximity’s fiscal first quarter of 2024; comparisons are with the three months ended June 30, 2022. Doximity operates a digital platform for U.S. medical professionals and earns most revenue from subscription Marketing and Hiring Solutions sold mainly to pharmaceutical companies and health systems.
Financial and operating highlights
| Metric | Q1 FY2024 | Prior-year quarter |
|---|---|---|
| Revenue | $108.5 million | $90.6 million |
| Gross profit / margin | $95.3 million / 88% | $77.6 million / 86% |
| Operating income | $29.7 million | $21.7 million |
| Net income / diluted EPS | $28.4 million / $0.13 | $22.4 million / $0.10 |
| Adjusted EBITDA / margin | $46.6 million / 43% | $33.5 million / 37% |
| Operating cash flow / free cash flow | $57.2 million / $55.6 million | $44.8 million / $42.6 million |
Revenue grew 20% year over year, primarily from subscription revenue, which increased $17.5 million. Management attributed $4.7 million of that increase to new subscription customers and $12.8 million to existing customers, including a 26% increase in average revenue per existing Marketing Solutions customer. Subscription customers generated approximately 93% of quarterly revenue.
Cash and cash equivalents were $306.7 million and marketable securities were $566.4 million at June 30, totaling $873.2 million. The balance sheet reports no borrowings or debt line. Total liabilities were $162.7 million, including $98.3 million of current deferred revenue. Management said existing cash and securities should meet working-capital and capital needs for at least 12 months. Cash increased $148.7 million during the quarter, mainly reflecting maturities and sales of marketable securities; financing cash outflows included $21.8 million of repurchases and $5.4 million of AMiON contingent consideration payments.
Material changes versus the prior-year quarter
- Revenue rose 20%; gross margin increased to 88% from 86%, as revenue growth outpaced cost of revenue growth.
- Net income increased 27%. Other income rose to $4.8 million from $0.8 million, primarily from higher interest income. The effective tax rate was 17.7%, compared with 0.5%, reflecting higher pretax income, lower deductions from stock-option activity, and lower R&D tax credits.
- Adjusted EBITDA margin rose to 43% from 37%. This is a non-GAAP measure and should be considered alongside GAAP results.
- Net revenue retention declined to 118% from 139%, despite an increase in customers with trailing 12-month subscription revenue above $100,000, from 264 to 296. Those customers represented about 88% of trailing 12-month revenue.
- Stock-based compensation increased to $14.0 million from $9.5 million.
Outlook, commentary, and risks
- No specific revenue or earnings guidance is provided. Management expected gross margin to remain relatively steady in the near term, with quarter-to-quarter fluctuations possible. It expected certain operating expense categories to rise in absolute dollars; the subsequent workforce action may affect that outlook.
- On August 8, 2023, after quarter-end, Doximity announced a reduction of approximately 100 employees, about 10% of its workforce. It estimated charges of $8–10 million, including $4–5 million expected to be paid in cash; most charges were expected in fiscal Q2 2024, with the reduction substantially complete by fiscal Q3 2024.
- Investment securities had $16.6 million of unrealized losses at June 30. The company reported no credit losses and said it did not intend to sell the securities and was more likely than not to hold them until maturity or recovery of cost. A hypothetical 100-basis-point rate increase would have reduced the market value of cash equivalents and securities by $3.7 million.
- AMiON acquisition earn-out liability was $16.1 million at June 30, including a $6.0 million payment during the quarter. The filing also cites contractual commitments, including a $3.6 million remaining noncancelable U.S. News minimum guarantee and a $5.2 million web-hosting commitment, each expected to be paid within one year.
- Management reported no known legal matters expected to have a material adverse effect and no material changes to the risk factors in its latest 10-K. Risks discussed include competition, macroeconomic conditions, privacy and data security, regulation, and interest-rate exposure. The filing says disclosure controls were effective at the reasonable-assurance level.
Important facts for investors to verify
- Whether 118% net revenue retention stabilizes or declines further, and how customer expansion and new-customer additions develop.
- Whether the workforce reduction delivers intended savings and whether final charges and timing remain within the $8–10 million estimate.
- Trends in stock-based compensation, sales and marketing spending, and GAAP profitability alongside adjusted EBITDA.
- Cash and securities composition, interest-rate sensitivity, and progress on the $232.9 million remaining share-repurchase authorization.
- AMiON earn-out payments and performance-linked obligations, and the timing of customer billings and deferred revenue.