Doximity, Inc. Q1 FY2025 earnings

Doximity opened fiscal 2025 with gains across the income statement. Revenue for the quarter ended June 30, 2024 was $126.7 million, up 16.8% from the prior-year quarter. Gross profit of $113.1 million rose 18.7%, and gross margin reached 89.3%, up 1.4 percentage points. Operating income climbed 55.1% to $46.1 million, lifting operating margin to 36.4%, a gain of 9.0 percentage points. Net income of $41.4 million rose 45.7%, and diluted EPS of $0.21 was up 61.5%.

Non-GAAP results tracked the same path. Adjusted EBITDA was $65.9 million, up 42%, for a 52.0% margin, against 42.9% a year earlier. Non-GAAP net income was $55.9 million, and non-GAAP diluted EPS was $0.28, compared with $0.19. Stock-based compensation of $17.1 million explains much of the distance between GAAP and non-GAAP profit.

Cash generation was the soft spot. Operating cash flow fell 27.9% to $41.2 million, and free cash flow was $39.5 million, down 29%. The MD&A attributes the decline to a $19.4 million increase in accounts receivable from the timing of billings and collections, a $12.9 million decrease in accounts payable, accrued expenses and other liabilities tied to the timing of transferable tax credit payments, and a $1.4 million rise in deferred contract costs. Those outflows were partly offset by a $10.5 million decrease in prepaid expenses and other assets and a rise in deferred revenue from the timing of customer billings and program launches. Deferred revenue on the balance sheet stood at $102.9 million, up 4.7%.

Engagement stayed central to the story. A record 590,000 unique providers used the company's AI, telehealth, messaging and scheduling tools during the quarter. The count of customers with at least $500,000 in trailing 12-month subscription revenue grew to 102 from 88, and that group produced roughly 82% of revenue in the 12 months ended June 30, 2024. Net revenue retention was 114%, versus 118% a year earlier, and about 95% of revenue came from subscription customers. The MD&A points to expansion of existing accounts as the main driver, with spending by existing Marketing Solutions customers up about 19%, alongside $13.2 million from the expansion of existing customers and $5.5 million from new subscription customers.

Management issued guidance for the fiscal second quarter ending September 30, 2024 and for the full fiscal year ending March 31, 2025. Both periods carry outlooks for revenue and adjusted EBITDA. Adjusted EBITDA is guided to between $62.5 million and $63.5 million for the quarter and between $248.5 million and $257.5 million for the year.

The risk list is broad. It names macroeconomic uncertainty, the ability to keep existing members and add new ones, the ability to attract and retain customers, the consequences of prioritizing member interests, breaches of security measures or unauthorized access to member data, and the ability to manage growth. The MD&A flags one more: a tax rule requiring research and development spending to be capitalized and amortized may weigh on operating cash flow in future periods, and Congress may or may not change it.

Capital return also shaped the quarter. The board authorized a $500 million repurchase program on May 1, 2024, and the company retired 281,570 Class A shares for $7.9 million under it, leaving $492.1 million available as of June 30, 2024. Cash, cash equivalents and marketable securities totaled $750.5 million at quarter end, which the MD&A says should fund working capital and capital expenditure needs for at least the next 12 months.