Doximity, Inc. Q2 FY2024 earnings

Doximity's fiscal 2024 second quarter revenue rose to $113.6 million from $102.2 million a year earlier, an increase of 11.2%. Gross profit was $100.9 million, up 13.3% from the prior-year quarter, and gross margin improved to 88.8% from 87.1%. Operating income increased 5.3% to $33.8 million, but operating margin slipped to 29.7% from 31.4%. Net income climbed 16.4% to $30.6 million, and diluted EPS rose to $0.15 from $0.12. For the first half of fiscal 2024, revenue was $222.1 million, up 15.2% from $192.8 million, while net income was $59.0 million, up 21.2% from $48.7 million. The company also reported current deferred revenue of $91.4 million, up 2.0% from $89.6 million.

Engagement remained the core operational highlight. Management said over 550,000 unique providers used its generative AI, telehealth, messaging, and scheduling workflow tools during the quarter. The company counted 290 customers with trailing 12-month subscription revenue of at least $100,000, and those customers represented about 88% of revenue for the trailing 12 months ended September 30, 2023. Net revenue retention rate was 114%, down from 128%. Subscription revenue drove most of the top-line gain, helped by new subscription customers and expansion of existing customers. Average revenue per existing Marketing Solutions customer rose 17%, and roughly 94% of quarterly revenue came from subscription customers.

The quarter also included a restructuring plan. In August 2023, the company reduced its workforce by 10%. Non-GAAP net income was $45.6 million, versus $36.2 million, and non-GAAP diluted EPS was $0.22, versus $0.17. Adjusted EBITDA was $54.2 million, versus $46.0 million, an increase of 18%, with an adjusted EBITDA margin of 47.7%, versus 45.0%. Operating cash flow, a GAAP measure, was $12.9 million, down 67% from $39.5 million. Free cash flow, a non-GAAP liquidity measure, was $11.6 million, down 69% from $37.7 million. Capital expenditures were $0.04 million, down 94.6% from $0.77 million.

Guidance covers the fiscal third quarter and the full fiscal year. For the quarter ending December 31, 2023, Doximity guided revenue between $127 million and $128 million and adjusted EBITDA between $61 million and $62 million. For the full fiscal year ending March 31, 2024, revenue guidance is between $460 million and $472 million, and adjusted EBITDA guidance is between $207 million and $219 million. The board authorized another program to repurchase up to $70 million of Class A common stock over the next 12 months. All prior repurchase programs were completed as of October 2023. Under its repurchase programs, the company had repurchased and retired 8,723,200 shares of Class A common stock for an aggregate purchase price of $207.5 million as of September 30, 2023, and $63.7 million remained available, excluding commissions and excise taxes.

Risks are visible in the cash flow and retention trends. Operating cash flow fell sharply in the quarter, and the company noted that the Tax Cuts and Jobs Act of 2017 requirement to capitalize and amortize research and development expenditures could reduce cash flows from operating activities by approximately $15.7 million in the fiscal year ending March 31, 2024. Net revenue retention rate declined to 114% from 128%. The filing also points to macroeconomic uncertainty, the ability to retain or add members and customers, security breaches, and the challenge of managing growth. The restructuring plan reduced headcount by 10% in August 2023. Doximity's results still rely on pharmaceutical manufacturers and healthcare systems for the bulk of revenue, so any slowdown in customer spending or renewals would matter.