Doximity Announces Fiscal 2023 Second Quarter Financial Results

Q2 total revenues of $102.2 million, up 29% year-over-year
Q2 operating cash flow of $39.5 million, up 106% year-over-year
Q2 free cash flow of $37.7 million, up 109% year-over-year

SAN FRANCISCO--(BUSINESS WIRE)--Doximity, Inc. (NYSE: DOCS), the leading digital platform for U.S. medical professionals, today announced results for the fiscal 2023 second quarter ended September 30, 2022.

“We were pleased to beat on both our top and bottom lines while delivering our first nine-figure revenue quarter,” said Jeff Tangney, co-founder and CEO at Doximity. "Our telehealth platform grew to a record 370,000 quarterly active clinicians. We will continue to invest in building tools to help physicians save time, so they can provide better care for their patients.”

Fiscal 2023 Second Quarter Financial Highlights

All comparisons, unless otherwise noted, are to the three months ended September 30, 2021.

• Revenue: Revenue of $102.2 million, versus $79.4 million, an increase of 29% year-over-year.

• Net income and non-GAAP net income: Net income of $26.3 million, versus $36.1 million, representing a margin of 26%, versus 45%. Non-GAAP net income of $36.2 million, versus $41.6 million, representing a margin of 35%, versus 52%.

• Adjusted EBITDA: Adjusted EBITDA of $46.0 million, versus $32.8 million, an increase of 40% year-over-year, representing adjusted EBITDA margins of 45%, versus 41%.

• Net income per share and non-GAAP net income per share: Diluted net income per share was $0.12, versus $0.17, while non-GAAP diluted net income per share was $0.17, versus $0.19.

• Operating cash flow and free cash flow: Operating cash flow of $39.5 million, versus $19.2 million, and free cash flow of $37.7 million, versus $18.1 million.

Financial Outlook

Doximity is providing guidance for its fiscal third quarter ending December 31, 2022 as follows:

• Revenue between $110.7 million and $111.7 million.

• Adjusted EBITDA between $47.7 million and $48.7 million.

Doximity is reiterating its guidance for its fiscal year ending March 31, 2023 as follows:

• Revenue between $424.0 million and $432.0 million.

• Adjusted EBITDA between $178.0 million and $186.0 million.

Stock Repurchase Program

The board of directors of Doximity authorized another program to repurchase up to $70 million of the Company’s Class A common stock. The repurchases are expected to be executed from time to time over the next 12 months, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans.

Conference Call Information

Doximity will host a webcast today at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to discuss these financial results. To listen to a live audio webcast, please visit the Company’s Investor Relations page at https://investors.doximity.com. The archived webcast will be available on the Company’s Investor Relations page shortly after the call.

About Doximity

Founded in 2010, Doximity is the leading digital platform for U.S. medical professionals. The Company's network members include over 80% of U.S. physicians across all specialties and practice areas. Doximity provides its verified clinical membership with digital tools built for medicine, enabling them to collaborate with colleagues, stay up to date with the latest medical news and research, manage their careers and on-call schedules, and conduct virtual patient visits. Doximity's mission is to help doctors be more productive so they can provide better care for their patients. For more information, visit www.doximity.com.

Forward-Looking Statements

Statements we make in this press release may include statements which are not historical facts and are considered forward-looking within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act, which are usually identified by the use of words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “seeks,” “should,” “will,” and variations of such words or similar expressions. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act and are making this statement for purposes of complying with those safe harbor provisions. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in or suggested by those forward-looking statements are reasonable, we can give no assurance that the plans, intentions, expectations, or strategies will be attained or achieved. Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors including (i) the timing and scope of anticipated stock repurchases; (ii) the impact of the COVID-19 pandemic (including the impact to our industry or on our customers’ industries, impact on general economic conditions, and government responses, restrictions, and actions related to the pandemic); (iii) our ability to retain existing members or add new members to our platform and maintain or grow their engagement with our platform; (iv) our ability to attract new customers or retain existing customers; (v) the impact of our prioritization of our members’ interests; (vi) breaches in our security measures or unauthorized access to members’ data; (vii) our ability to maintain or manage our growth, and other risks and factors that are beyond our control including, without limitation, those set forth in the section entitled “Risk Factors” in the Annual Report on Form 10-K that was filed with the SEC on May 27, 2022. Additional information will be provided in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2022. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could cause actual results to differ materially from those contained in our forward-looking statements. The forward-looking statements made in this press release relate only to management’s beliefs and assumptions as of this date. We assume no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

DOXIMITY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
	September 30, 2022			March 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	73,674		$	112,809
Marketable securities		676,317			685,304
Accounts receivable, net		79,236			81,073
Prepaid expenses and other current assets		15,691			19,439
Deferred contract costs, current		2,999			5,512
Total current assets		847,917			904,137
Property and equipment, net		11,647			8,488
Deferred income tax assets		50,583			48,558
Operating lease right-of-use assets		14,894			1,087
Intangible assets, net		34,232			7,909
Goodwill		67,940			18,915
Other assets		1,130			2,263
Total assets	$	1,028,343		$	991,357
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,106		$	463
Accrued expenses and other current liabilities		26,408			25,270
Deferred revenue, current		89,616			84,907
Operating lease liabilities, current		1,013			642
Total current liabilities		118,143			111,282
Deferred revenue, non-current		166			78
Operating lease liabilities, non-current		14,625			447
Contingent earn-out consideration liability, non-current		15,422			—
Other liabilities, non-current		1,023			956
Total liabilities		149,379			112,763
Stockholders' Equity
Preferred stock		—			—
Common stock		192			192
Additional paid-in capital		730,582			702,589
Accumulated other comprehensive loss		(21,559	)		(15,294	)
Retained earnings		169,749			191,107
Total stockholders' equity		878,964			878,594
Total liabilities and stockholders’ equity	$	1,028,343		$	991,357

DOXIMITY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
	Three Months Ended September 30,					Six Months Ended September 30,
	2022		2021			2022		2021
Revenue	$	102,185	$	79,350		$	192,824	$	152,019
Cost of revenue^(1)		13,210		8,951			26,287		16,937
Gross profit		88,975		70,399			166,537		135,082
Operating expenses^(1):
Research and development		19,104		15,460			38,126		28,701
Sales and marketing		29,021		21,161			57,155		40,532
General and administrative		8,749		8,827			17,473		16,023
Total operating expenses		56,874		45,448			112,754		85,256
Income from operations		32,101		24,951			53,783		49,826
Other income, net		908		420			1,712		465
Income before income taxes		33,009		25,371			55,495		50,291
Provision for (benefit from) income taxes		6,710		(10,717	)		6,813		(12,119	)
Net income	$	26,299	$	36,088		$	48,682	$	62,410
Undistributed earnings attributable to participating securities		—		—			—		(18,326	)
Net income attributable to Class A and Class B common stockholders, basic and diluted	$	26,299	$	36,088		$	48,682	$	44,084
Net income per share attributable to Class A and Class B common stockholders:
Basic	$	0.14	$	0.19		$	0.25	$	0.32
Diluted	$	0.12	$	0.17		$	0.23	$	0.27
Weighted-average shares used in computing net income per share attributable to Class A and Class B common stockholders:
Basic		193,137		186,171			193,042		137,154
Diluted		213,949		216,672			214,452		166,066

(1) Costs and expenses include stock-based compensation expense as follows:
	Three Months Ended September 30,				Six Months Ended September 30,
	2022		2021		2022		2021
Cost of revenue	$	2,392	$	793	$	4,514	$	1,061
Research and development		2,862		1,859		5,414		2,829
Sales and marketing		3,982		1,866		7,056		2,894
General and administrative		2,117		2,154		3,875		5,015
Total stock-based compensation expense	$	11,353	$	6,672	$	20,859	$	11,799

DOXIMITY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
	Three Months Ended September 30,						Six Months Ended September 30,
		2022			2021			2022			2021
Cash flows from operating activities
Net income	$	26,299		$	36,088		$	48,682		$	62,410
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,589			1,158			4,959			2,311
Deferred income taxes		—			—			105			—
Stock-based compensation, net of amounts capitalized		11,353			6,672			20,859			11,799
Non-cash lease expense		551			286			952			569
Amortization of premium on marketable securities, net		1,218			1,264			2,673			1,561
Loss (gain) on sale of marketable securities		463			(72	)		500			(70	)
Amortization of deferred contract costs		2,072			2,452			4,839			5,656
Other		37			288			7			195
Changes in operating assets and liabilities, net of effect of acquisition:
Accounts receivable		(3,339	)		(9,978	)		2,194			(5,556	)
Prepaid expenses and other assets		2,405			(14,867	)		3,651			(17,728	)
Deferred contract costs		(1,476	)		(1,483	)		(2,342	)		(2,975	)
Accounts payable, accrued expenses and other liabilities		1,635			1,478			(4,474	)		(780	)
Deferred revenue		(4,280	)		(3,967	)		1,872			(4,427	)
Operating lease liabilities		(13	)		(167	)		(211	)		(638	)
Net cash provided by operating activities		39,514			19,152			84,266			52,327
Cash flows from investing activities
Cash paid for acquisition		—			—			(53,500	)		—
Purchases of property and equipment		(766	)		(200	)		(1,476	)		(241	)
Internal-use software development costs		(1,051	)		(900	)		(2,466	)		(1,671	)
Purchases of marketable securities		(82,307	)		(1,088,768	)		(91,177	)		(1,156,143	)
Maturities of marketable securities		16,167			24,787			24,438			35,551
Sales of marketable securities		49,434			531,076			64,158			531,076
Net cash used in investing activities		(18,523	)		(534,005	)		(60,023	)		(591,428	)
Cash flows from financing activities
Proceeds from issuance of common stock upon initial public offering after deducting underwriting discounts and commissions		—			—			—			553,905
Proceeds from issuance of common stock upon exercise of stock options and common stock warrants		2,570			2,323			5,584			5,060
Proceeds from issuance of common stock in connection with the employee stock purchase plan		2,341			—			2,341			—
Taxes paid related to net share settlement of equity awards		(1,152	)		(56	)		(1,261	)		(56	)
Repurchase of common stock		(61,168	)		—			(70,042	)		(2,698	)
Payments of deferred offering costs		—			(2,214	)		—			(3,982	)
Net cash provided by (used in) financing activities		(57,409	)		53			(63,378	)		552,229
Net increase (decrease) in cash and cash equivalents		(36,418	)		(514,800	)		(39,135	)		13,128
Cash and cash equivalents, beginning of period		110,092			594,321			112,809			66,393
Cash and cash equivalents, end of period	$	73,674		$	79,521		$	73,674		$	79,521

Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States (“GAAP”), the Company uses the following non-GAAP measures of financial performance:

• Non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, non-GAAP net income, non-GAAP net income margin, and non-GAAP basic and diluted net income per common share: We exclude the effect of stock-based compensation expense, amortization of acquired intangible assets, change in fair value of contingent earn-out consideration liability, and expenses associated with acquisitions from non-GAAP gross profit, non-GAAP gross margin and non-GAAP operating income. Non-GAAP net income and non-GAAP net income margin are further adjusted for estimated income tax on such adjustments. We calculate income taxes on the adjustments by applying an estimated annual effective tax rate to the adjustments. Non-GAAP basic and diluted net income per common share is non-GAAP net income attributable to common stockholders divided by the weighted average number of shares. For both basic and diluted non-GAAP net income per share, the weighted average shares we use in computing non-GAAP net income per share is equal to our GAAP weighted average shares. Non-GAAP gross margin represents non-GAAP gross profit as a percentage of revenue and non-GAAP net income margin represents non-GAAP net income as a percentage of revenue.

• Adjusted EBITDA and adjusted EBITDA margin: We define adjusted EBITDA as net income before interest, income taxes, depreciation, and amortization, and as further adjusted for acquisition and other related expenses, stock-based compensation expense, change in fair value of contingent earn-out consideration liability, and other income, net. Net income margin represents net income as a percentage of revenue and adjusted EBITDA margin represents adjusted EBITDA as a percentage of revenue.

• Free cash flow: We calculate free cash flow as cash flow from operating activities less purchases of property and equipment and internal-use software development costs.

We use these non-GAAP financial measures internally for financial and operational decision-making purposes and as a means to evaluate period-to-period comparisons. Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures and should be read only in conjunction with our condensed consolidated financial statements prepared in accordance with GAAP. Our presentation of non-GAAP financial measures may not be comparable to similar measures used by other companies. We encourage investors to carefully consider our results under GAAP, as well as our supplemental non-GAAP information and the reconciliation between these presentations, to more fully understand our business. Please see the tables included at the end of this release for the reconciliation of GAAP to non-GAAP results.

Key Business Metrics¹

• Net revenue retention rate: Net revenue retention rate is calculated by taking the trailing 12-month (“TTM”) subscription-based revenue from our customers that had revenue in the prior TTM period and dividing that by the total subscription-based revenue for the prior TTM period. Our net revenue retention rate compares our subscription revenue from the same set of customers across comparable periods, and reflects customer renewals, expansion, contraction, and churn. Our net revenue retention rate is directly tied to our revenue growth rate and thus fluctuates as that growth rate fluctuates.

• Customers with trailing 12-month subscription revenue greater than $100,000: The number of customers with TTM subscription revenue greater than $100,000 is a key indicator of the scale of our business, and is calculated by counting the number of customers that contributed more than $100,000 in subscription revenue in the TTM period. Our customer count is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity.

^1 The metric excludes the impact of the AMiON acquisition, which closed on April 1, 2022, including customers of, and subscription revenue generated from, the AMiON on-call scheduling and messaging application and was immaterial to the periods presented.

Reconciliation of GAAP to Non-GAAP Financial Measures

The following tables reconcile the specific items excluded from GAAP metrics in the calculation of non-GAAP metrics for the periods shown below:

	Three Months Ended September 30,						Six Months Ended September 30,
		2022			2021			2022			2021
	(unaudited)
	(in thousands, except percentages)
Net income	$	26,299		$	36,088		$	48,682		$	62,410
Adjusted to exclude the following:
Acquisition and other related expenses		—			—			30			—
Stock-based compensation		11,353			6,672			20,859			11,799
Depreciation and amortization		2,589			1,158			4,959			2,311
Provision for (benefit from) income taxes		6,710			(10,717	)		6,813			(12,119	)
Change in fair value of contingent earn-out consideration liability		(40	)		—			(94	)		—
Other income, net		(908	)		(420	)		(1,712	)		(465	)
Adjusted EBITDA	$	46,003		$	32,781		$	79,537		$	63,936
Revenue	$	102,185		$	79,350		$	192,824		$	152,019
Net income margin		26	%		45	%		25	%		41	%
Adjusted EBITDA margin		45	%		41	%		41	%		42	%

	Three Months Ended September 30,						Six Months Ended September 30,
		2022			2021			2022			2021
	(unaudited)
	(in thousands)
Net cash provided by operating activities	$	39,514		$	19,152		$	84,266		$	52,327
Purchases of property and equipment		(766	)		(200	)		(1,476	)		(241	)
Internal-use software development costs		(1,051	)		(900	)		(2,466	)		(1,671	)
Free cash flow	$	37,697		$	18,052		$	80,324		$	50,415
Other cash flow components:
Net cash used in investing activities	$	(18,523	)	$	(534,005	)	$	(60,023	)	$	(591,428	)
Net cash provided by (used in) financing activities	$	(57,409	)	$	53		$	(63,378	)	$	552,229

	Three Months Ended September 30,						Six Months Ended September 30,
		2022			2021			2022			2021
	(unaudited)
	(in thousands, except per share data and percentages)
GAAP cost of revenue	$	13,210		$	8,951		$	26,287		$	16,937
Adjusted to exclude the following:
Stock-based compensation		(2,392	)		(793	)		(4,514	)		(1,061	)
Amortization of acquired intangibles		(137	)		—			(273	)		—
Non-GAAP cost of revenue	$	10,681		$	8,158		$	21,500		$	15,876
GAAP gross profit	$	88,975		$	70,399		$	166,537		$	135,082
Adjusted to exclude the following:
Stock-based compensation		2,392			793			4,514			1,061
Amortization of acquired intangibles		137			—			273			—
Non-GAAP gross profit	$	91,504		$	71,192		$	171,324		$	136,143
GAAP gross margin		87	%		89	%		86	%		89	%
Non-GAAP gross margin		90	%		90	%		89	%		90	%
GAAP research and development expense	$	19,104		$	15,460		$	38,126		$	28,701
Adjusted to exclude the following:
Stock-based compensation		(2,862	)		(1,859	)		(5,414	)		(2,829	)
Non-GAAP research and development expense	$	16,242		$	13,601		$	32,712		$	25,872
GAAP sales and marketing expense	$	29,021		$	21,161		$	57,155		$	40,532
Adjusted to exclude the following:
Stock-based compensation		(3,982	)		(1,866	)		(7,056	)		(2,894	)
Amortization of acquired intangibles		(1,061	)		(265	)		(2,124	)		(530	)
Change in fair value of contingent earn-out consideration liability		40			—			94			—
Non-GAAP sales and marketing expense	$	24,018		$	19,030		$	48,069		$	37,108
GAAP general and administrative expense	$	8,749		$	8,827		$	17,473		$	16,023
Adjusted to exclude the following:
Acquisition and other related expenses		—			—			(30	)		—
Stock-based compensation		(2,117	)		(2,154	)		(3,875	)		(5,015	)
Non-GAAP general and administrative expense	$	6,632		$	6,673		$	13,568		$	11,008
GAAP operating expense	$	56,874		$	45,448		$	112,754		$	85,256
Adjusted to exclude the following:
Acquisition and other related expenses		—			—			(30	)		—
Stock-based compensation		(8,961	)		(5,879	)		(16,345	)		(10,738	)
Amortization of acquired intangibles		(1,061	)		(265	)		(2,124	)		(530	)
Change in fair value of contingent earn-out consideration liability		40			—			94			—
Non-GAAP operating expense	$	46,892		$	39,304		$	94,349		$	73,988
GAAP operating income	$	32,101		$	24,951		$	53,783		$	49,826
Adjusted to exclude the following:
Acquisition and other related expenses		—			—			30			—
Stock-based compensation		11,353			6,672			20,859			11,799
Amortization of acquired intangibles		1,198			265			2,397			530
Change in fair value of contingent earn-out consideration liability		(40	)		—			(94	)		—
Non-GAAP operating income	$	44,612		$	31,888		$	76,975		$	62,155
GAAP net income	$	26,299		$	36,088		$	48,682		$	62,410
Adjusted to exclude the following:
Acquisition and other related expenses		—			—			30			—
Stock-based compensation		11,353			6,672			20,859			11,799
Amortization of acquired intangibles		1,198			265			2,397			530
Change in fair value of contingent earn-out consideration liability		(40	)		—			(94	)		—
Income tax effect of non-GAAP adjustments^(1)		(2,627	)		(1,457	)		(4,870	)		(2,589	)
Non-GAAP net income	$	36,183		$	41,568		$	67,004		$	72,150
Non-GAAP net income margin		35	%		52	%		35	%		47	%
GAAP undistributed earnings attributable to participating securities	$	—		$	—		$	—		$	(18,326	)
Impact on undistributed earnings attributable to participating securities due to non-GAAP adjustments		—			—			—			(2,055	)
Non-GAAP undistributed earnings attributable to participating securities	$	—		$	—		$	—		$	(20,381	)
Non-GAAP net income	$	36,183		$	41,568		$	67,004		$	72,150
Non-GAAP undistributed earnings attributable to participating securities		—			—			—			(20,381	)
Non-GAAP net income attributable to Class A and Class B stockholders, basic and diluted	$	36,183		$	41,568		$	67,004		$	51,769
Weighted-average shares used in computing net income per share attributable to Class A and Class B common stockholders:
Basic		193,137			186,171			193,042			137,154
Diluted		213,949			216,672			214,452			166,066
Non-GAAP net income per share attributable to Class A and Class B stockholders:
Basic	$	0.19		$	0.22		$	0.35		$	0.38
Diluted	$	0.17		$	0.19		$	0.31		$	0.31

^(1)	For the three and six months ended September 30, 2022 and 2021, management used an estimated annual effective non-GAAP tax rate of 21.0%.