Doximity's (NYSE:DOCS) Q1 Sales Top Estimates But Stock Drops 17.5%

Jabin Bastian /
2022/08/04 4:06 pm EDT

Healthcare professional network Doximity (NYSE:DOCS) beat analyst expectations in Q1 FY2023 quarter, with revenue up 24.7% year on year to $90.6 million. However, guidance for the next quarter was less impressive, coming in at $100 million at the midpoint, being 4.79% below analyst estimates. Doximity made a GAAP profit of $22.3 million, down on its profit of $26.3 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) Q1 FY2023 Highlights:

  • Revenue: $90.6 million vs analyst estimates of $89.6 million (1.1% beat)
  • EPS (non-GAAP): $0.14 vs analyst estimates of $0.11 (28.5% beat)
  • Revenue guidance for Q2 2023 is $100 million at the midpoint, below analyst estimates of $105 million
  • The company dropped revenue guidance for the full year, from $456 million to $428 million at the midpoint, a 6.14% decrease
  • Free cash flow of $42.6 million, roughly flat from previous quarter
  • Gross Margin (GAAP): 85.5%, down from 89% same quarter last year

"We're pleased that a record number of physicians, NPs, and PAs used our Doximity Dialer over 200,000 times per workday last quarter to reach and provide more convenient care for their patients," 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 year, growing from quarterly revenue of $72.6 million, to $90.6 million.

Doximity Total Revenue

This quarter, Doximity's quarterly revenue was once again up a very solid 24.7% year on year. But the revenue actually decreased again in Q1 by $3.01 million, compared to $4.22 million decrease in Q4 2022. While one-off fluctuations don't always have to be concerning, we have no doubt that shareholders would like to see the revenue rebound soon.

Guidance for the next quarter indicates Doximity is expecting revenue to grow 26% year on year to $100 million, slowing down from the 75.8% 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 34.6% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Cash Is King

If you follow 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 $42.6 million in Q1, up 31.7% year on year.

Doximity Free Cash Flow

Doximity has generated $131.1 million in free cash flow over the last twelve months, an impressive 36.2% 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 Q1 Results

With a market capitalization of $8.12 billion Doximity is among smaller companies, but its more than $776.2 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

Doximity delivered solid revenue growth this quarter. On the other hand, it was unfortunate to see that Doximity's revenue guidance for the full year missed analyst's expectations. Overall, it seems to us that this was a complicated quarter for Doximity. The company is down 17.5% on the results and currently trades at $33.16 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.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

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