DocGo Inc. — FY2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022; filed March 14, 2023. DocGo provides medical transportation and in-person mobile healthcare services in the U.S. and U.K. Its two segments are Mobile Health and Transportation Services.
Financial results and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $440.5 million | $318.7 million |
| Cost of revenues | $285.8 million | $209.0 million |
| Gross profit and margin | $154.7 million; 35.1% | $109.7 million; 34.5% |
| Operating income and margin | $21.8 million; 5.0% | $15.4 million; 4.8% |
| Consolidated net income | $30.7 million | $19.2 million |
| Net income attributable to DocGo stockholders | $34.6 million; $0.34 per basic and diluted share | $23.7 million; $0.30 basic and $0.25 diluted per share |
| Cash from operating activities | $28.9 million | Used $1.9 million |
| Cash and cash equivalents at year-end | $157.3 million | $175.5 million |
| Working capital | $170.9 million | $198.1 million |
Revenue increased 38%. Mobile Health generated $325.9 million (74% of revenue), up 39%; Transportation generated $114.6 million (26%), up 36%. Transportation trips rose 20% to 216,009, and average trip price increased from $301 to $380. Government contract work represented approximately 64% of revenue, and one customer represented approximately 35% of sales.
Cost of revenue grew 37%, slightly slower than revenue; reported cost of revenue declined to 64.9% of sales from 65.5%. Labor, including subcontracted labor, was approximately 69% of revenue, versus 60% in 2021. Operating cash flow improved, but working-capital changes reduced cash generation. Investing activities used $38.4 million, principally for acquisitions; financing activities used $6.2 million. Cash declined by $15.0 million when restricted cash is included.
At year-end, DocGo had $1.9 million of notes payable and no borrowings under its $90 million revolving credit facility. The facility matures in 2027, is secured by substantially all company assets, and includes financial covenants; it provides potential capacity to request an additional $50 million subject to lender approval. Finance and operating lease liabilities were $8.6 million and $9.4 million, respectively. Current assets were $271.1 million and current liabilities $100.2 million.
Material changes and unusual items
- Mobile Health grew despite sharply declining COVID-19 testing revenue: estimated COVID testing revenue fell from approximately $110 million in 2021 to $75 million in 2022, with activity dropping substantially in the second half and described as insignificant by year-end.
- Transportation revenue benefited from recovering volumes, new markets, acquisitions, higher-acuity services, and higher average trip prices. Medicare ambulance reimbursement increased 5.1% in 2022; an additional 8.7% increase took effect January 1, 2023.
- DocGo completed five acquisitions in 2022 for stated total consideration of approximately $69.1 million. Acquisition-related cash spending was approximately $33.0 million; the consideration also included deferred and contingent amounts.
- The company recorded a $7.9 million income tax benefit, primarily reflecting release of valuation allowances on deferred tax assets. It also reported a $1.6 million bargain-purchase gain, a $1.4 million finance-lease remeasurement gain, and a $2.9 million noncash goodwill impairment.
- Ambulnz Health ceased operations and entered a California assignment for the benefit of creditors on February 3, 2023. Its assets and liabilities were classified as held for sale at year-end; the filing reports a $2.9 million goodwill impairment related to the unit.
- The company repurchased 536,839 shares for approximately $3.7 million in 2022; approximately $36.2 million remained under the $40 million authorization at year-end. No cash dividends have been declared or are planned in the foreseeable future.
Outlook, commentary, and risks
Management expects demand for Mobile Health to benefit from continued interest in care outside traditional facilities and expects Transportation volumes to benefit from demographic trends. It expects COVID testing to remain an insignificant share of revenue. No specific consolidated revenue or earnings guidance is provided in the supplied filing text. Management said operating expenses are expected to remain around 25%–30% of revenue in coming quarters and anticipated inflation to moderate, while remaining above historical levels. It stated cash, expected operating cash flows, and available credit should cover operating requirements for at least the next 12 months.
Key risks include the expiration or termination of contracts, customer and government funding concentration, declining COVID-related revenue, labor availability and wage inflation, limited ability to pass through higher costs, reimbursement and collections exposure, acquisition integration and execution, and extensive healthcare, privacy, and corporate-practice-of-medicine regulation. Inflation and fuel costs pressured margins; management noted fixed-price arrangements can limit recovery of cost increases. DocGo also identified cybersecurity, clinical and transportation liability, and partner-dependence risks.
The filing reports a $1.0 million liability for a proposed settlement of California wage-and-hour class and PAGA claims; final approval was scheduled for April 28, 2023. The auditor issued an unqualified opinion on the financial statements. Management concluded disclosure controls and internal control over financial reporting were effective at year-end; the auditor did not attest to internal control effectiveness because DocGo was an emerging growth company.
Most important facts for investors to verify
- Whether Mobile Health growth can replace COVID testing revenue as that business continues to fade, and how sustainable non-COVID contracts are.
- Exposure to the largest customer (35% of sales and 45% of net receivables) and to government contracts (approximately 64% of revenue), including renewal, termination, and payment terms.
- Cash conversion and receivables collection: receivables increased to $103.0 million, and operating cash flow remained below reported net income.
- Acquisition integration, deferred and contingent consideration, and the effect of the Health liquidation and related claims on results and cash needs.
- Whether labor, fuel, and other cost pressures can be controlled or passed through, and whether the revolving facility’s covenants remain comfortably met.
- The tax benefit’s nonrecurring nature and the assumptions supporting recognition of deferred tax assets; also monitor the pending California settlement and regulatory matters.