Summary
Doximity reported fiscal 2023 second quarter revenue of $102.2 million, up 28.8% from the prior-year quarter. That was the company's first nine-figure revenue quarter. Gross profit rose 26.4% to $89.0 million. Operating income rose 28.7% to $32.1 million. Net income moved in the opposite direction, falling 27.1% to $26.3 million, and diluted EPS fell 29.4% to $0.12. Gross margin was 87.1%, down 1.6 percentage points from the prior-year quarter. Operating margin was 31.4%, flat versus the prior-year quarter. The company's GAAP profitability narrowed even as revenue and operating income grew, a pattern tied to items below the operating line and to a higher tax provision.
Cash generation was stronger. Operating cash flow rose 106.3% to $39.5 million. Capital expenditures were $0.77 million, up 283.0% from the prior-year quarter. Free cash flow, which is a non-GAAP measure, was $37.7 million, up 109%. Adjusted EBITDA, also non-GAAP, rose 40% to $46.0 million, with a 45% margin versus 41%. Non-GAAP net income was $36.2 million, compared with $41.6 million. Deferred revenue, current portion, was $89.62 million, up 13.9% from the prior-year quarter.
Operationally, Doximity said its telehealth platform reached a record 370,000 quarterly active clinicians. Customers with trailing 12-month subscription revenue greater than $100,000 accounted for approximately 87% of revenue for the trailing 12 months ended September 30, 2022. Net revenue retention rate was 128% as of September 30, 2022, compared with 173% a year earlier. Management said revenue growth came from new subscription customers and expansion of existing customers. Average revenue per existing Marketing Solutions customer rose 25% in the quarter. About 93% of quarterly revenue came from subscription customers.
Guidance points to continued revenue growth. For the fiscal third quarter ending December 31, 2022, Doximity guided revenue between $110.7 million and $111.7 million and adjusted EBITDA between $47.7 million and $48.7 million. For the full fiscal year ending March 31, 2023, the company reiterated revenue guidance of $424.0 million to $432.0 million and adjusted EBITDA guidance of $178.0 million to $186.0 million. The board authorized another program to repurchase up to $70 million of Class A common stock over the next 12 months. The prior $70 million program was completed during the six months ended September 30, 2022.
Risks remain familiar. Management listed the timing and scope of stock repurchases, the COVID-19 pandemic, the ability to retain existing members or add new members, the ability to attract or retain customers, the prioritization of member interests, security breaches or unauthorized access to member data, and the ability to maintain or manage growth. The company also said it will cease to be an emerging growth company as of March 31, 2023. Doximity noted that COVID-19 has not had a material adverse impact on its financial condition or results of operations to date, but it said the future impact is uncertain.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $102.2M | $90.6M | +12.7% | $79.3M | +28.8% |
| Gross profit | $89.0M | $77.6M | +14.7% | $70.4M | +26.4% |
| Gross margin | 87.1% | 85.6% | +1.5 pp | 88.7% | -1.7 pp |
| Research & development | $19.1M | $19.0M | +0.4% | $15.5M | +23.6% |
| Sales & marketing | $29.0M | $28.1M | +3.2% | $21.2M | +37.1% |
| General & administrative | $8.7M | $8.7M | +0.3% | $8.8M | -0.9% |
| Total operating expenses | $56.9M | $55.9M | +1.8% | $45.4M | +25.1% |
| Operating income (loss) | $32.1M | $21.7M | +48.1% | $25.0M | +28.7% |
| Operating margin | 31.4% | 23.9% | +7.5 pp | 31.4% | -0.0 pp |
| Net income (loss) | $26.3M | $22.4M | +17.5% | $36.1M | -27.1% |
| Net margin | 25.7% | 24.7% | +1.0 pp | 45.5% | -19.7 pp |
| Diluted EPS | $0.12 | $0.10 | +$0.02 | $0.17 | -$0.05 |
Risks
MD&A reports net revenue retention rate decreased to 128% at September 30, 2022 from 173% at September 30, 2021, and risk factors state the company expects its revenue growth rate to decline. Historical growth is not indicative of future revenue growth.
Gross margin declined to 87.1% in FY2023 Q2 from 88.7% in FY2022 Q2, and net income fell 27.1% to $26.3 million despite revenue rising 28.8% to $102.2 million. MD&A attributes cost increases to headcount growth and the U.S. News partnership, and risk factors warn net income and adjusted EBITDA margins may decrease as the company grows.
Customers with at least $100,000 of revenue accounted for approximately 87% of revenue for the trailing twelve months ended September 30, 2022, and that customer cohort grew to 291 from 235. Risk factors note revenue is relatively concentrated within a small number of key customers, and loss of one or more could slow revenue growth or cause revenue to decline.
Risk factors state the company has observed increased economic uncertainty in the United States and abroad and that customers may reduce spending, delay purchases, or seek extended billing terms or pricing discounts in response to a potential global recession. This could limit growth and negatively affect operating results and financial condition.
The company is subject to stringent and changing laws related to privacy, data protection, and healthcare, including HIPAA as a Business Associate, the CCPA and CPRA, the TCPA, and state fee-splitting laws. Failure to comply could lead to significant fines, penalties, contract invalidation, or changes to business practices.
MD&A reports income tax expense of $6.7 million for the three months ended September 30, 2022 compared to an income tax benefit of $10.7 million for the same period in 2021, primarily driven by decreased tax deductions from stock option activities. This swing contributed to net income declining 27.1% year over year.
Risk factors state the company expects increasing competition in the market for its solutions, including from larger technology companies such as LinkedIn, Facebook, Google, and Twitter for medical professional members, and from American Well, Teladoc Health, and Zoom for telehealth. Increased competition could cause pricing pressure, loss of market share, or decreased member engagement.
Risk factors state competition for qualified employees is intense, especially in the San Francisco Bay Area, and the company must offer highly competitive compensation packages. MD&A shows stock-based compensation expense rose to $11.4 million in FY2023 Q2 from $6.7 million in FY2022 Q2, and full-time equivalent headcount grew from 887 at March 31, 2022 to 953 at September 30, 2022.
The company completed the AMiON acquisition on April 1, 2022, and MD&A reports related amortization expense increases in sales and marketing. Risk factors list integration risks including failure to integrate personnel and technologies, unanticipated costs, and impairment of acquired goodwill.
Risk factors state the telehealth market is immature and volatile, and increased demand during COVID-19 may decline. If the market does not develop as expected or if reimbursement parity is rolled back, usage of the company's network could be negatively impacted.
Risk factors note that if Marketing Solutions customers reallocate a significant portion of their budgets back to in-person marketing after the pandemic, the company's growth could decline in future periods. Hiring Solutions have also been negatively impacted by the pandemic.
The company processes sensitive health information and protected health information, and risk factors state cyber-attack risk may be elevated due to the COVID-19 outbreak and the conflict in Ukraine. A Security Breach could lead to regulatory investigations, litigation, negative publicity, and financial loss.
The dual class structure gives holders of Class B common stock approximately 88% of voting power as of September 30, 2022, concentrating control with executive officers and directors. This limits or precludes other stockholders' ability to influence corporate matters.
SaaS KPIs
All quarters →Adjusted EBITDA Margin
Free Cash Flow
Adjusted EBITDA
Net Revenue Retention
Summary, forecast, risks and KPIs are extracted from Doximity, Inc.'s SEC filings for Q2 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.