Doximity Announces Fiscal 2023 Third Quarter Financial Results

Total revenues of $115.3 million, up 18% year-over-year
Operating cash flow of $48.7 million, up 78% year-over-year
Free cash flow of $47.5 million, up 85% 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 third quarter ended December 31, 2022.

“Our clinical workflow tools saw record use last quarter, including our telehealth platform which served 375,000 unique active clinicians,” said Jeff Tangney, co-founder and CEO at Doximity. “We’re proud to help more physicians be more mobile and more productive than ever before.”

Fiscal 2023 Third Quarter Financial Highlights

All comparisons, unless otherwise noted, are to the three months ended December 31, 2021.

• Revenue: Revenue of $115.3 million, versus $97.9 million, an increase of 18% year-over-year.

• Net income and non-GAAP net income: Net income of $33.5 million, versus $55.6 million, representing a margin of 29.0%, versus 56.9%. Non-GAAP net income of $45.8 million, versus $63.6 million, representing a margin of 39.7%, versus 65.0%.

• Adjusted EBITDA: Adjusted EBITDA of $55.5 million, versus $47.0 million, an increase of 18% year-over-year, representing adjusted EBITDA margins of 48.2%, versus 48.0%.

• Net income per share and non-GAAP net income per share: Diluted net income per share was $0.16, versus $0.26, while non-GAAP diluted net income per share was $0.22, versus $0.29.

• Operating cash flow and free cash flow: Operating cash flow of $48.7 million, versus $27.3 million, an increase of 78% year-over-year, and free cash flow of $47.5 million, versus $25.6 million, an increase of 85% year-over-year.

Financial Outlook

Doximity is providing guidance for its fiscal fourth quarter ending March 31, 2023 as follows:

• Revenue between $109.6 million and $110.6 million.

• Adjusted EBITDA between $45.2 million and $46.2 million.

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

• Revenue between $417.7 million and $418.7 million.

• Adjusted EBITDA between $180.2 million and $181.2 million.

Doximity is providing preliminary guidance for its fiscal year ending March 31, 2024 as follows:

• Revenue of greater than $500 million.

• Adjusted EBITDA margin of 43% or greater.

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 December 31, 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)
	December 31, 2022			March 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	136,454		$	112,809
Marketable securities		664,511			685,304
Accounts receivable, net		74,862			81,073
Prepaid expenses and other current assets		17,120			19,439
Deferred contract costs, current		5,572			5,512
Total current assets		898,519			904,137
Property and equipment, net		11,519			8,488
Deferred income tax assets		40,338			48,558
Operating lease right-of-use assets		14,357			1,087
Intangible assets, net		33,034			7,909
Goodwill		67,940			18,915
Other assets		1,380			2,263
Total assets	$	1,067,087		$	991,357
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,604		$	463
Accrued expenses and other current liabilities		33,151			25,270
Deferred revenue, current		69,671			84,907
Operating lease liabilities, current		1,458			642
Total current liabilities		105,884			111,282
Deferred revenue, non-current		140			78
Operating lease liabilities, non-current		14,181			447
Contingent earn-out consideration liability, non-current		15,625			—
Other liabilities, non-current		1,083			956
Total liabilities		136,913			112,763
Stockholders' Equity
Preferred stock		—			—
Common stock		193			192
Additional paid-in capital		745,506			702,589
Accumulated other comprehensive loss		(18,742	)		(15,294	)
Retained earnings		203,217			191,107
Total stockholders' equity		930,174			878,594
Total liabilities and stockholders’ equity	$	1,067,087		$	991,357

DOXIMITY, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited)
	Three Months Ended December 31,					Nine Months Ended December 31,
		2022		2021			2022		2021
Revenue	$	115,262	$	97,876		$	308,086	$	249,895
Cost of revenue^(1)		13,526		11,085			39,813		28,022
Gross profit		101,736		86,791			268,273		221,873
Operating expenses^(1):
Research and development		20,519		16,225			58,645		44,926
Sales and marketing		33,220		25,698			90,375		66,230
General and administrative		9,513		9,079			26,986		25,102
Total operating expenses		63,252		51,002			176,006		136,258
Income from operations		38,484		35,789			92,267		85,615
Other income, net		2,461		20			4,173		485
Income before income taxes		40,945		35,809			96,440		86,100
Provision for (benefit from) income taxes		7,477		(19,838	)		14,290		(31,957	)
Net income	$	33,468	$	55,647		$	82,150	$	118,057
Undistributed earnings attributable to participating securities		—		—			—		(21,866	)
Net income attributable to Class A and Class B common stockholders, basic and diluted	$	33,468	$	55,647		$	82,150	$	96,191
Net income per share attributable to Class A and Class B common stockholders:
Basic	$	0.17	$	0.30		$	0.43	$	0.62
Diluted	$	0.16	$	0.26		$	0.38	$	0.53
Weighted-average shares used in computing net income per share attributable to Class A and Class B common stockholders:
Basic		192,805		188,372			192,963		154,289
Diluted		212,065		216,396			213,656		182,905

(1) Costs and expenses include stock-based compensation expense as follows (in thousands):

	Three Months Ended December 31,				Nine Months Ended December 31,
		2022		2021		2022		2021
Cost of revenue	$	2,695	$	1,912	$	7,209	$	2,973
Research and development		4,002		2,035		9,416		4,864
Sales and marketing		4,856		2,681		11,912		5,575
General and administrative		2,431		3,206		6,306		8,221
Total stock-based compensation expense	$	13,984	$	9,834	$	34,843	$	21,633

DOXIMITY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
	Three Months Ended December 31,						Nine Months Ended December 31,
		2022			2021			2022			2021
Cash flows from operating activities
Net income	$	33,468		$	55,647		$	82,150		$	118,057
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,616			1,361			7,575			3,672
Deferred income taxes		9,287			(31,972	)		9,392			(31,972	)
Stock-based compensation, net of amounts capitalized		13,984			9,834			34,843			21,633
Non-cash lease expense		538			288			1,490			857
Amortization of premium on marketable securities, net		471			1,302			3,144			2,863
Loss on sale of marketable securities		593			595			1,093			525
Amortization of deferred contract costs		1,518			1,710			6,357			7,366
Other		790			(73	)		797			120
Changes in operating assets and liabilities, net of effect of acquisition:
Accounts receivable		3,997			(14,021	)		6,191			(19,579	)
Prepaid expenses and other assets		(1,727	)		10,722			1,924			(7,003	)
Deferred contract costs		(4,067	)		(3,697	)		(6,409	)		(6,672	)
Accounts payable, accrued expenses and other liabilities		7,197			8,872			2,723			8,093
Deferred revenue		(19,970	)		(13,111	)		(18,098	)		(17,538	)
Operating lease liabilities		2			(173	)		(209	)		(811	)
Net cash provided by operating activities		48,697			27,284			132,963			79,611
Cash flows from investing activities
Cash paid for acquisition		—			—			(53,500	)		—
Purchases of property and equipment		(204	)		(611	)		(1,680	)		(852	)
Internal-use software development costs		(1,012	)		(1,065	)		(3,478	)		(2,736	)
Purchases of marketable securities		(39,080	)		(115,772	)		(130,257	)		(1,271,915	)
Maturities of marketable securities		10,576			6,066			35,014			41,617
Sales of marketable securities		43,024			85,862			107,182			616,938
Net cash provided by (used in) investing activities		13,304			(25,520	)		(46,719	)		(616,948	)
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		1,871			4,174			7,455			9,234
Proceeds from issuance of common stock in connection with the employee stock purchase plan		—			—			2,341			—
Taxes paid related to net share settlement of equity awards		(1,092	)		(380	)		(2,353	)		(436	)
Repurchase of common stock		—			—			(70,042	)		(2,698	)
Payments of deferred offering costs		—			—			—			(3,982	)
Net cash provided by (used in) financing activities		779			3,794			(62,599	)		556,023
Net increase in cash and cash equivalents		62,780			5,558			23,645			18,686
Cash and cash equivalents, beginning of period		73,674			79,521			112,809			66,393
Cash and cash equivalents, end of period	$	136,454		$	85,079		$	136,454		$	85,079

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 December 31,						Nine Months Ended December 31,
		2022			2021			2022			2021
	(unaudited)
	(in thousands, except percentages)
Net income	$	33,468		$	55,647		$	82,150		$	118,057
Adjusted to exclude the following:
Acquisition and other related expenses		—			—			30			—
Stock-based compensation		13,984			9,834			34,843			21,633
Depreciation and amortization		2,616			1,361			7,575			3,672
Provision for (benefit from) income taxes		7,477			(19,838	)		14,290			(31,957	)
Change in fair value of contingent earn-out consideration liability		417			—			323			—
Other income, net		(2,461	)		(20	)		(4,173	)		(485	)
Adjusted EBITDA	$	55,501		$	46,984		$	135,038		$	110,920
Revenue	$	115,262		$	97,876		$	308,086		$	249,895
Net income margin		29.0	%		56.9	%		26.7	%		47.2	%
Adjusted EBITDA margin		48.2	%		48.0	%		43.8	%		44.4	%

	Three Months Ended December 31,						Nine Months Ended December 31,
		2022			2021			2022			2021
	(unaudited)
	(in thousands)
Net cash provided by operating activities	$	48,697		$	27,284		$	132,963		$	79,611
Purchases of property and equipment		(204	)		(611	)		(1,680	)		(852	)
Internal-use software development costs		(1,012	)		(1,065	)		(3,478	)		(2,736	)
Free cash flow	$	47,481		$	25,608		$	127,805		$	76,023
Other cash flow components:
Net cash provided by (used in) investing activities	$	13,304		$	(25,520	)	$	(46,719	)	$	(616,948	)
Net cash provided by (used in) financing activities	$	779		$	3,794		$	(62,599	)	$	556,023

	Three Months Ended December 31,						Nine Months Ended December 31,
		2022			2021			2022			2021
	(unaudited)
	(in thousands, except per share data and percentages)
GAAP cost of revenue	$	13,526		$	11,085		$	39,813		$	28,022
Adjusted to exclude the following:
Stock-based compensation		(2,695	)		(1,912	)		(7,209	)		(2,973	)
Amortization of acquired intangibles		(137	)		—			(410	)		—
Non-GAAP cost of revenue	$	10,694		$	9,173		$	32,194		$	25,049
GAAP gross profit	$	101,736		$	86,791		$	268,273		$	221,873
Adjusted to exclude the following:
Stock-based compensation		2,695			1,912			7,209			2,973
Amortization of acquired intangibles		137			—			410			—
Non-GAAP gross profit	$	104,568		$	88,703		$	275,892		$	224,846
GAAP gross margin		88.3	%		88.7	%		87.1	%		88.8	%
Non-GAAP gross margin		90.7	%		90.6	%		89.6	%		90.0	%
GAAP research and development expense	$	20,519		$	16,225		$	58,645		$	44,926
Adjusted to exclude the following:
Stock-based compensation		(4,002	)		(2,035	)		(9,416	)		(4,864	)
Non-GAAP research and development expense	$	16,517		$	14,190		$	49,229		$	40,062
GAAP sales and marketing expense	$	33,220		$	25,698		$	90,375		$	66,230
Adjusted to exclude the following:
Stock-based compensation		(4,856	)		(2,681	)		(11,912	)		(5,575	)
Amortization of acquired intangibles		(1,061	)		(265	)		(3,185	)		(795	)
Change in fair value of contingent earn-out consideration liability		(417	)		—			(323	)		—
Non-GAAP sales and marketing expense	$	26,886		$	22,752		$	74,955		$	59,860
GAAP general and administrative expense	$	9,513		$	9,079		$	26,986		$	25,102
Adjusted to exclude the following:
Acquisition and other related expenses		—			—			(30	)		—
Stock-based compensation		(2,431	)		(3,206	)		(6,306	)		(8,221	)
Non-GAAP general and administrative expense	$	7,082		$	5,873		$	20,650		$	16,881
GAAP operating expense	$	63,252		$	51,002		$	176,006		$	136,258
Adjusted to exclude the following:
Acquisition and other related expenses		—			—			(30	)		—
Stock-based compensation		(11,289	)		(7,922	)		(27,634	)		(18,660	)
Amortization of acquired intangibles		(1,061	)		(265	)		(3,185	)		(795	)
Change in fair value of contingent earn-out consideration liability		(417	)		—			(323	)		—
Non-GAAP operating expense	$	50,485		$	42,815		$	144,834		$	116,803
GAAP operating income	$	38,484		$	35,789		$	92,267		$	85,615
Adjusted to exclude the following:
Acquisition and other related expenses		—			—			30			—
Stock-based compensation		13,984			9,834			34,843			21,633
Amortization of acquired intangibles		1,198			265			3,595			795
Change in fair value of contingent earn-out consideration liability		417			—			323			—
Non-GAAP operating income	$	54,083		$	45,888		$	131,058		$	108,043
GAAP net income	$	33,468		$	55,647		$	82,150		$	118,057
Adjusted to exclude the following:
Acquisition and other related expenses		—			—			30			—
Stock-based compensation		13,984			9,834			34,843			21,633
Amortization of acquired intangibles		1,198			265			3,595			795
Change in fair value of contingent earn-out consideration liability		417			—			323			—
Income tax effect of non-GAAP adjustments^(1)		(3,276	)		(2,121	)		(8,146	)		(4,710	)
Non-GAAP net income	$	45,791		$	63,625		$	112,795		$	135,775
Non-GAAP net income margin		39.7	%		65.0	%		36.6	%		54.3	%
GAAP undistributed earnings attributable to participating securities	$	—		$	—		$	—		$	(21,866	)
Impact on undistributed earnings attributable to participating securities due to non-GAAP adjustments		—			—			—			(2,436	)
Non-GAAP undistributed earnings attributable to participating securities	$	—		$	—		$	—		$	(24,302	)
Non-GAAP net income	$	45,791		$	63,625		$	112,795		$	135,775
Non-GAAP undistributed earnings attributable to participating securities		—			—			—			(24,302	)
Non-GAAP net income attributable to Class A and Class B stockholders, basic and diluted	$	45,791		$	63,625		$	112,795		$	111,473
Weighted-average shares used in computing net income per share attributable to Class A and Class B common stockholders:
Basic		192,805			188,372			192,963			154,289
Diluted		212,065			216,396			213,656			182,905
Non-GAAP net income per share attributable to Class A and Class B stockholders:
Basic	$	0.24		$	0.34		$	0.58		$	0.72
Diluted	$	0.22		$	0.29		$	0.53		$	0.61

⁽¹⁾ For the three and nine months ended December 31, 2022 and 2021, management used an estimated annual effective non-GAAP tax rate of 21.0%.