Doximity (NYSE:DOCS) Exceeds Q3 Expectations But Stock Drops 10.1%

Kayode Omotosho /
2024/02/08 4:11 pm EST

Healthcare professional network Doximity (NYSE:DOCS) reported Q3 FY2024 results beating Wall Street analysts' expectations, with revenue up 17.4% year on year to $135.3 million. Revenue guidance for the full year also exceeded analysts' estimates but next quarter's guidance of $116.4 million was less impressive, coming in 1.4% below expectations. It made a non-GAAP profit of $0.29 per share, improving from its profit of $0.22 per share in the same quarter last year.

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Doximity (DOCS) Q3 FY2024 Highlights:

  • Revenue: $135.3 million vs analyst estimates of $127.5 million (6.1% beat)
  • EPS (non-GAAP): $0.29 vs analyst estimates of $0.24 (23% beat)
  • Revenue Guidance for Q4 2024 is $116.4 million at the midpoint, below analyst estimates of $118.1 million
  • Free Cash Flow of $48.73 million, up from $11.62 million in the previous quarter
  • Gross Margin (GAAP): 91%, up from 88.3% in the same quarter last year
  • Market Capitalization: $5.09 billion

"We’re proud to deliver another quarter of double-digit engagement growth across our entire platform, with a beat and raise on both our top and bottom lines,” said Jeff Tangney, co-founder and CEO of Doximity.

Founded in 2010 and named for a combination of “docs” and “proximity”, Doximity (NYSE: DOCS) is the leading social network for U.S. medical professionals.

Healthcare And Life Sciences Software

The coronavirus pandemic has underscored the importance of high-quality health infrastructure in times of crisis. Coupled with intense competition between drugmakers and the growing volume of data in the health care sector, demand for data management solutions in the healthcare space is expected to remain strong in the years ahead.

Sales Growth

As you can see below, Doximity's revenue growth has been strong over the last two years, growing from $97.88 million in Q3 FY2022 to $135.3 million this quarter.

Doximity Total Revenue

This quarter, Doximity's quarterly revenue was once again up 17.4% year on year. We can see that Doximity's revenue increased by $21.67 million quarter on quarter, which is a solid improvement from the $5.14 million increase in Q2 2024. Shareholders should applaud the re-acceleration of growth.

Next quarter's guidance suggests that Doximity is expecting revenue to grow 4.9% year on year to $116.4 million, slowing down from the 18.5% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 7.2% over the next 12 months before the earnings results announcement.

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Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Doximity's free cash flow came in at $48.73 million in Q3, roughly the same as last year.

Doximity Free Cash Flow

Doximity has generated $161.6 million in free cash flow over the last 12 months, an eye-popping 34.7% of revenue. This robust FCF margin stems from its asset-lite business model, scale advantages, and strong competitive positioning, giving it the option to return capital to shareholders or reinvest in its business while maintaining a healthy cash balance.

Key Takeaways from Doximity's Q3 Results

We enjoyed seeing Doximity exceed analysts' revenue expectations this quarter and produce strong free cash flow. On the other hand, its revenue guidance for next quarter missed analysts' expectations. Docs was priced for perfection and the company is down 10.1% on the results and currently trades at $25.39 per share.

So should you invest in Doximity right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

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