Doximity (NYSE:DOCS) Reports Bullish Q3, Stock Soars

Radek Strnad /
2022/02/08 4:06 pm EST
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Healthcare professional network Doximity (NYSE:DOCS) reported results ahead of analyst expectations in the Q3 FY2022 quarter, with revenue up 66.7% year on year to $97.8 million. The company expects that next quarter's revenue would be around $89.5 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. Doximity made a GAAP profit of $55.6 million, improving on its profit of $17.2 million, in the same quarter last year.

Is now the time to buy Doximity? Access our full analysis of the earnings results here, it's free.

Doximity (DOCS) Q3 FY2022 Highlights:

  • Revenue: $97.8 million vs analyst estimates of $86.2 million (13.4% beat)
  • EPS (non-GAAP): $0.29 vs analyst estimates of $0.12 ($0.17 beat)
  • Revenue guidance for Q4 2022 is $89.5 million at the midpoint, roughly in line with what analysts were expecting
  • Free cash flow of $25.6 million, up 41.8% from previous quarter
  • Net Revenue Retention Rate: 171%, in line with previous quarter
  • Gross Margin (GAAP): 88.6%, up from 86.5% same quarter last year

"We had a strong Q3 led by our existing clients as our net revenue retention rate hit 171%," said Jeff Tangney, co-founder & 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 incredible over the last year, growing from quarterly revenue of $58.7 million, to $97.8 million.

Doximity Total Revenue

This was another standout quarter with the revenue up a splendid 66.7% year on year. On top of that, revenue increased $18.5 million quarter on quarter, a very strong improvement on the $6.68 million increase in Q2 2022, and a sign of re-acceleration of growth, which is very nice to see indeed.

Guidance for the next quarter indicates Doximity is expecting revenue to grow 34.2% year on year to $89.5 million, slowing down from the 83.4% 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 25.7% over the next twelve months.

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Product Success

One of the best things about software as a service businesses (and a reason why they trade at such high multiples) is that customers tend to spend more with the company over time.

Doximity Net Revenue Retention Rate

Doximity's net revenue retention rate, an important measure of how much customers from a year ago were spending at the end of the quarter, was at 171% in Q3. That means even if they didn't win any new customers, Doximity would have grown its revenue 71% year on year. Despite the recent drop that is still an absolutely exceptional retention rate, meaning Doximity's software is extremely successful with their customers who are rapidly expanding the use of it across their organizations.

Key Takeaways from Doximity's Q3 Results

With a market capitalization of $9.09 billion Doximity is among smaller companies, but its more than $765.5 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

We were impressed by how strongly Doximity outperformed analysts’ revenue expectations this quarter. And we were also excited to see the really strong revenue growth. Zooming out, we think this was a fantastic quarter that should have shareholders cheering. The company is up 6.08% on the results and currently trades at $52.83 per share.

Doximity may have had a good quarter, so should you 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.