Doximity, Inc. Q1 FY2024 earnings

Doximity's fiscal 2024 first quarter, which ended June 30, 2023, delivered growth across the income statement. Revenue reached $108.5 million, up 19.7% from $90.6 million in the prior-year quarter. Gross profit rose 22.9% to $95.3 million, and gross margin was 87.9%, up 2.3 percentage points from 85.6%. Operating income climbed 36.9% to $29.7 million, and operating margin was 27.4%, up 3.4 percentage points from 23.9%. Net income increased 26.9% to $28.4 million, while diluted earnings per share rose to $0.13 from $0.10. On a non-GAAP basis, net income was $40.6 million and diluted earnings per share was $0.19.

Cash generation stayed strong. Operating cash flow was $57.2 million, up 27.8% from $44.8 million. Capital expenditures fell to $0.07 million from $0.71 million, a decline of 90.1%. Deferred revenue, the current portion, rose 4.7% to $98.3 million from $93.9 million. Adjusted EBITDA, a non-GAAP measure, was $46.6 million, up 39%, for a margin of 42.9% versus 37.0%. Non-GAAP net income carried a margin of 37.5% versus 34.0%, and non-GAAP gross margin was 90.3% versus 88.1%. Free cash flow was $55.6 million, up 31% from $42.6 million. Free cash flow is a different measure from operating cash flow, since it subtracts purchases of property and equipment and internal-use software development costs.

Engagement held up. More than 525,000 unique providers used Doximity's workflow tools in the quarter, and the network covers over 80% of U.S. physicians. Customers with trailing 12-month subscription revenue above $100,000 numbered 296, a count management describes as growing steadily. That cohort produced approximately 88% of revenue for the trailing 12-month period ended June 30, 2023. The net revenue retention rate was 118%, compared with 139% a year earlier. Subscription customers generated approximately 93% of quarterly revenue, and average revenue per existing Marketing Solutions customer increased 26%. Headcount grew 4% in research and development, 6% in sales and marketing, and 9% in general and administrative.

Guidance covers two horizons. For the fiscal second quarter ending September 30, 2023, Doximity guided revenue between $108.5 million and $109.5 million and adjusted EBITDA between $44 million and $45 million. For the full fiscal year ending March 31, 2024, the company revised revenue guidance to between $452 million and $468 million and adjusted EBITDA guidance to between $193 million and $209 million. Management also announced a workforce reduction on August 8, 2023 that removes roughly 100 employees, or 10% of the workforce. The expected restructuring charge is $8 million to $10 million, most of it in the second quarter of fiscal 2024, with the reduction substantially complete by the third quarter of fiscal 2024.

The risks are familiar for a platform of this scale. Macroeconomic uncertainty and pandemic-related disruption could slow customer spending. Doximity must keep members engaged, add new ones, and retain customers. Putting member interests first can conflict with commercial goals. Security breaches or unauthorized access to member data remain a threat. Competition is intense and the environment changes quickly, and managing growth is another challenge. The company may also need to raise additional equity or debt if conditions demand it. The timing and scope of stock repurchases adds a further variable for the share count.