Healthcare professional network Doximity (NYSE:DOCS) reported results ahead of analysts' expectations in Q2 CY2024, with revenue up 16.8% year on year to $126.7 million. Guidance for next quarter's revenue was also optimistic at $127 million at the midpoint, 2.5% above analysts' estimates. It made a non-GAAP profit of $0.28 per share, improving from its profit of $0.13 per share in the same quarter last year.
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Doximity (DOCS) Q2 CY2024 Highlights:
- Revenue: $126.7 million vs analyst estimates of $119.9 million (5.7% beat)
- Adjusted Operating Income: $64.41 million vs analyst estimates of $53.6 million (20.2% beat)
- EPS (non-GAAP): $0.28 vs analyst estimates of $0.23 (24.4% beat)
- Revenue Guidance for Q3 CY2024 is $127 million at the midpoint, above analyst estimates of $123.9 million
- The company lifted its revenue guidance for the full year from $512 million to $518.5 million at the midpoint, a 1.3% increase
- Gross Margin (GAAP): 89.3%, up from 87.9% in the same quarter last year
- Free Cash Flow of $39.54 million, down 36.5% from the previous quarter
- Market Capitalization: $4.73 billion
“We were pleased to deliver strong profits and record engagement last quarter, as we beat 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 26.6% annualized revenue growth over the last three years has been solid, and its sales came in at $126.7 million this quarter.
This quarter, Doximity's quarterly revenue was once again up 16.8% year on year. On top of that, its revenue increased $8.62 million quarter on quarter, a strong improvement from the $17.23 million decrease in Q1 CY2024. This is a sign of acceleration of growth and very nice to see indeed.
Next quarter's guidance suggests that Doximity is expecting revenue to grow 11.8% year on year to $127 million, in line with the 11.2% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 5.6% 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 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 has shown terrific cash profitability, driven by its lucrative business model and cost-effective customer acquisition strategy that enable it to stay ahead of the competition through investments in new products rather than sales and marketing. The company's free cash flow margin was among the best in the software sector, averaging an eye-popping 32.9% over the last year.
Doximity's free cash flow clocked in at $39.54 million in Q2, equivalent to a 31.2% margin. The company's cash profitability regressed as it was 20.1 percentage points lower than in the same quarter last year, but we wouldn't read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends are more important.
Key Takeaways from Doximity's Q2 Results
We enjoyed seeing Doximity exceed analysts' revenue expectations this quarter. We were also glad next quarter's revenue guidance came in higher than Wall Street's estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock traded up 16.8% to $29.99 immediately following the results.
Doximity may have had a good quarter, but does that mean you should invest 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.