Doximity (NYSE:DOCS) Exceeds Q3 Expectations But Stock Drops 15.7%

Kayode Omotosho /
2023/02/09 4:07 pm EST

Healthcare professional network Doximity (NYSE:DOCS) reported Q3 FY2023 results that beat analyst expectations, with revenue up 17.8% year on year to $115.3 million. However, guidance for the next quarter was less impressive, coming in at $110.1 million at the midpoint, being 9.89% below analyst estimates. Doximity made a GAAP profit of $33.5 million, down on its profit of $55.6 million, in the same quarter last year.

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Doximity (DOCS) Q3 FY2023 Highlights:

  • Revenue: $115.3 million vs analyst estimates of $111.5 million (3.4% beat)
  • EPS (non-GAAP): $0.22 vs analyst estimates of $0.17 (27.9% beat)
  • Revenue guidance for Q4 2023 is $110.1 million at the midpoint, below analyst estimates of $122.2 million
  • Free cash flow of $47.5 million, up 26% from previous quarter
  • Gross Margin (GAAP): 88.3%, in line with same quarter last year

“Our clinical workflow tools saw record use last quarter, including our telehealth platform which served 375,000 unique active clinicians,” said Jeff Tangney, co-founder and CEO at Doximity.

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

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 exceptional over the last two years, growing from quarterly revenue of $58.7 million in Q3 FY2021, to $115.3 million.

Doximity Total Revenue

This quarter, Doximity's quarterly revenue was once again up 17.8% year on year. We can see that revenue increased by $13.1 million in Q3, up on $11.5 million in Q2 2023. While we've no doubt some investors are looking for higher growth, it's good to see that quarterly revenue growth is re-accelerating.

Guidance for the next quarter indicates Doximity is expecting revenue to grow 17.6% year on year to $110.1 million, slowing down from the 40.4% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 24.1% over the next twelve months.

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Cash Is King

If you have followed StockStory for a while, you know that we put an emphasis on cash flow. Why, you ask? We believe that in the end cash is king, as you can't use accounting profits to pay the bills. Doximity's free cash flow came in at $47.5 million in Q3, up 85.4% year on year.

Doximity Free Cash Flow

Doximity has generated $172.7 million in free cash flow over the last twelve months, an impressive 43% of revenues. This robust FCF margin is a result of Doximity asset lite business model, scale advantages, and strong competitive positioning, and provides it the option to return capital to shareholders while still having plenty of cash to invest in the business.

Key Takeaways from Doximity's Q3 Results

With a market capitalization of $7.17 billion Doximity is among smaller companies, but its more than $801 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

It was good to see Doximity outperform Wall St’s revenue expectations this quarter. That feature of these results really stood out as a positive. On the other hand, it was unfortunate to see that Doximity's revenue guidance for the full year missed analysts' expectations and the revenue guidance for the next quarter missed analysts' expectations. Overall, this quarter's results could have been better. The company is down 15.7% on the results and currently trades at $30.71 per share.

Doximity may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.